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    Supply Chain in Banking Industry

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    Compare and contrast supply chain practices in the banking industry, both domestic and global. (Centralized and Decentralized).

    Using cost-benefit analysis, explain and recommend changes

    Analyze the ethics implications of your recommendations.

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    Solution Preview

    STEP 1

    Compare and contrast supply chain practices in the banking industry.

    1. Decentralization and centralization: On practice in the banking industry to decentralize the procurement process, the local bank manager is responsible for recruitment of personnel, purchase of computers and software, management consultancy services, advertising and labor. Often he has administrative staff that assists him, especially if the branch is large. There is also an administrative officer who doubles up as the purchase manager. The head office issues directives and sends forms that are to be used for purchases and control is exercised through the internal audit department, budgetary approvals and post hoc assessments of purchases.

    2. On the other hand there are some banks that thrive on centralizing their purchase function. The rationale is that clubbing together purchases and centralizing the purchase functions allows for consolidation of purchases leading to economies in purchases. The centralized function claims that supply chain becomes a crucial strategic vehicle for the achievement of the bank's objectives. There are several difficulties with regards to such purchases, there has to be a large and well paid staff maintained just for making the purchases, reducing the number of suppliers often makes such banks victims of artificial monopsony, there is lack of flexibility in the purchase process, having a fixed set of suppliers leads to higher prices being paid for cheaply available local products. Finally, centralized purchases neutralize any advantages that the banks may have in making excellent local purchases. On presumption is that centralized purchases in banks improves control and reduces subornation. This argument does not hold water because the control systems in decentralized purchasing can be made equally efficient.

    STEP 2

    The cost-benefit analysis can be viewed in this manner.

    Decentralization of the supply chain practices leads to flexibility, compatibility with ...