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Segmentation Strategies

Discuss about the Structuring and Segmentation Supply Base for Fairprice Company.

Fairprice is arguably the largest supermarket chain in Singapore being a cooperative of National Trades Union Congress. With approximately 100 supermarkets across the island and 50 outlet stores in the company supply chain, Fairprice boosts as the first successful organization in the country to start and develop a fresh food distribution center. Its operations are supported by a central distribution system that achieves efficiencies through the distribution and supply chain channels (Selldin, E., & Olhager, 2007). Fairprice Company has aligned its operations with suppliers which significantly contribute to the reduction of production cost, improve quality of the products offered, and speed daily operations. The organization procurement framework has facilitated it to simplify its operations and finally deliver greater value to the final consumers (Ritchie & Brindley, 2007). This paper examines a detailed analysis of the acquisition framework that Fairprice utilizes in its different categories of products to enhance efficiency and effectiveness.

The giant supermarket chain ensures that it brings on board suppliers who can provide the outsourced services at the appropriate cost, timely deliveries, and high quality products. Further, it partakes to carry a precise analysis to know the number of suppliers that can optimally serve its needs (Ritchie & Brindley, 2007). The main source of value results from the economies of scale the company enjoys. Segmentation is a highly vital concept to Fairprice since it enhances its efficiency and flexibility with its various suppliers (Tummala & Schoenherr, 2011). The organization uses the following strategies to segment its supply base. 

Fairprice applies this method in technological applications with many potential variants. It usually focuses on the volume mix, life cycle variability and the pricing of inputs from suppliers (Selldin & Olhager, 2007). The approach utilizes the ability of the clients willing to make an extra payment to acquire innovative products it offers. 

The approach is aimed at enabling the company to examine the potential risks that it may face in the supply chain and propose ways to reduce the impact of the risks if they occur. The method necessitates Fairprice to have a fallback plan in case of unexpected occurrences in the location of the major suppliers of its crucial material inputs, for instances in case of floods and earthquakes, mitigation approaches will ensure the supply chain is not interrupted (Ritchie, B., & Brindley, 2007). The company firstly identifies the needs of its end users and puts them into groups by a similarity of needs. Next, the entity develops supply chains that fit the various client needs.  The company is in charge of product ideation, designing of the various products development and creation of new products (Rao & Goldsby, 2009). Most of its activities are guided by the current consumer needs. PC Magazine. Fundamentally, the organization remains sensitive to the needs and preferences of its customers so that its rivals do not gain mileage from its weakness in customer responsiveness. This is possible through continuous research and development to be the leader in inventing the latest products and services that anticipate the needs of the market.

Purchasing Strategies Used

Fairprice utilizes this method in structuring the framework of a supplier from the production point of view. This strategy is helpful in attaining synergies from multi-divisions of the organization's supply chain operations through the technology platform which enables efficiency and real-time performance (Narasimhan, Kim, &Tan, 2008). The company has also invested in the mobile technology to run various applications and multi-tasking of services efficiently.

The framework relies majorly on the geographical and political nature of the existing market set-up. Different market channels have different features (Rao & Goldsby, 2009). The approach employed by Fairprice is determined by the market nature, consumer requirements, and demand patterns. All this is aimed at reduction of production cost through supplier lag and lead to an increase in profit (Tummala & Schoenherr, 2011). Additionally, there are peculiarities experienced in the channels of distribution destined to these markets, example road conditions’ and topography of the markets which informs the organization on the appropriate logistical measures to employ.

Purchasing Strategies at Fairprice applies to arrive at cost-effective purchasing decisions are as discussed below. The company applies this strategy to ensure it brings on efficient board vendors who will provide quality goods at an appropriate time under the spelled out supply agreement.

NTUC Fairprice ensures it procures from a mix of vendors who can provide their supplies at the best prices and terms agreed. Here, it does away with all those suppliers who do not meet the price and quality requirements (Narasimhan et al., 2008). This approach will go a long way to sustain the position of the firm of being the market leader in providing quality fresh food supplies in the market.

The approach requires the various vendors feeding NTUC Fairprice with the various inputs to ensure they are of high quality and have Zero errors (Manuj & Mentzer, 2008). This method emphasizes on the continuous improvement of the quality of inputs for the same to be achieved with the outputs. Hence suppliers that do not meet the zero error requirements are phased out.

NTUC Fairprice obtains materials from various subsidiaries based in different continents. This is done to benefit from the reduced production cost in these countries especially in China and India (Wagner & Bode, 2008). The company although should be on the lookout and develop mitigation measures incase these regions are hit with natural calamities as they will paralyze operations (Lo & Power, 2010). The method calls for diversification of supply chain to cushion losses from such shortcomings.

Advantages of Fairprice's Segmentation Supply Base Strategies

NTUC Fairprice sources from different supplies across the world irrespective of the country of origin (Manuj & Mentzer, 2008). The sole requirement to make it as one of their vendors is the provision of quality products at the required time.

  • Vendor development approach

It is where NTUC Fairprice partners with the vendor to improve the quality of the design and meet the requirements of the final consumer (Wagner & Bode, 2008). The giant retailer engages in this approach in instances where it needs to get customer tailored fulfillment developed by different suppliers. The advantages NTUC Fairprice has gained form segmentation supply base strategys

  • The strategy breakdown complex global supply chain goals and objectives to clear roadmap defined by performance metrics.
  • The approach generates sufficient information to aid in decision-making process in the organization.
  • Supply base segmentation increases the team flexibility.
  • Proper segmentation aligns supply chain resources with specific needs.

Conclusion

Supply chain structure and segmentation are vital in organizations as it plays a critical role in ensuring companies achieve supplier flexibility in their operations. With an appropriate segmentation structure, Fairprice boosts of extensive information regarding the costs of various inputs, the time the deliveries are to be developed as well as exposing the risks of the company.  This process is vital as it will enable the company to develop mitigation procedures to the risks. All this will go a long way in ensuring the client needs are met and continuous profit of the enterprise. The purchasing strategies employed by the organization enables the company carries out continuous production through using error-free inputs supplied at the required time. Finally, possessing an effective procurement strategies mix will allow the company makes best decisions regarding suppliers to use in supply chain process.

References

Lo, S.M., & Power, D., (2010). An empirical investigation of the relationship between product nature and supply chain strategy. Supply Chain Management: an International Journal, 15(3), pp. 87-97

Manuj, I., & Mentzer, J. T. (2008). Global supply chain risk management strategies. International Journal of Physical Distribution & Logistics Management, 38(3), pp. 192-223.

Manuj, I., & Mentzer, J. T. (2008). Global supply chain risk management. Journal of business logistics, 29(1), pp. 133-155.

Narasimhan, R., Kim, S. W., &Tan, K. C., (2008). An empirical investigation of supply chain strategy typologies and relationships to performance. International Journal of Production Research, 46 (18), pp. pp. 5231-5259

Rao, S., & Goldsby, T. J. (2009). Supply chain risks: a review and typology. The International Journal of Logistics Management, 20(1), pp. 97-123.

 Ritchie, B., & Brindley, C. (2007). Supply chain risk management and performance: A guiding framework for future development. International Journal of Operations & Production Management, 27(3), pp. 303-322.

Ritchie, B., & Brindley, C. (2007). Supply chain risk management and performance: A guiding framework for future development. International Journal of Operations & Production Management, 27(3), pp. 303-322.

Selldin, E., & Olhager, J., (2007). Linking products with supply chains: testing Fisher’s model.

Supply Chain Management: An International Journal. 12 (1), pp. 42–51

Tummala, R., & Schoenherr, T. (2011). Assessing and managing risks using the supply chain risk management process (SCRMP). Supply Chain Management: An International Journal, 16(6), pp. 474-483.

Wagner, S. M., & Bode, C. (2008). An empirical examination of supply chain performance along  several dimensions of risk. Journal of business logistics, 29(1), pp. 307-325.

Cite This Work

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[Accessed 26 February 2024].

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