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Impact of Unauthorized Distributors on the Supply Chain and Financial Performance of Companies
KTH, School of Industrial Engineering and Management (ITM), Production Engineering.
2009 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Global supply chains, shorter product life cycles, and technological innovation have made supply chain management a critical issue for firm’s success. By improving service and reducing costs, efficient supply chain management brings companies competitive advantage and helps them to outperform their competitors.Due to tight supply or unfavorable conditions, Original Equipment Manufacturer (OEM) might occasionally find itself in a situation where it is not able or willing to source its required raw material form authorized channel. In this case, OEM options narrow down to waiting until the item become available in authorized channel (backlogging its customer orders), sourcing from unauthorized channel, or cancelling customer orders. Each one of these scenarios causes particular consequences.

Main objective of this study is to clarify the consequences of sourcing form unauthorized distributors on the supply chain performance and its financial performance of OEM. Study is composed of a qualitative phase and a quantitative phase. During each phase, a proper set of supply chain metrics and financial measures are employed to understand the effects of sourcing from unauthorized distributors and counterfeits parts. In both phases, SCOR model is used as a reference for supply chain metrics as well as to understand the supply chain processes.

Based on the study results, there is obviously a trade-off involved in sourcing from unauthorized channel. It may help the OEM in some respects; however, it may pose a risk to the OEM performance at the same time. Particular circumstance of each business is a key factor to determine the effects. Among the factors studied, raw material quality, sourcing volume, and accusation price are the most important ones respectively. The most influential factor is raw material quality and it mostly outweighs the effect of the unauthorized distributors’ lower prices. It implies that lower prices should not be the sole incentive to source from unauthorized channel. Concerning all factors is a must. In case that OEM decide to source from unauthorized channel, proper risk mitigation methods should be employed to reduce the risk of receiving low quality articles.

Place, publisher, year, edition, pages
2009. , 32 p.
, Degree Project in Production Engineering Management, Second Level, 402
National Category
Engineering and Technology
URN: urn:nbn:se:kth:diva-101114OAI: diva2:546511
Subject / course
Production Engineering
Educational program
Master of Science - Production Engineering and Management
Available from: 2012-08-23 Created: 2012-08-23 Last updated: 2012-08-23Bibliographically approved

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