Universidad Autonoma De Nuevo Leon

Facultad de Contaduria Publica y

Administracion

Operations Management

Chapter 10: Supply Chain

Strategy.

Arturo Alejandro Flores Quiones

1551427
Group 4Ei
Teacher Armando Escamilla

18/04/2016

Supply Chain Strategy

Supply chain management is to apply a total systems approach to managing the entire flow of
information, materials, and services from raw materials suppliers through factories and
warehouses to the end customer. The term supply chain comes from a picture of how
organizations are linked together as viewed from a particular company.
Many companies are achieving significant competitive advantage by the way they configure and
manage their supply chain operations, Dell computer for example, skis the distribution and retail
steps typical of a manufacturing companys supply chain.

Measuring Supply Chain Performance

One view of the supply chain is centered on the inventories that are positioned in the system.
Two common measures to evaluate supply chain efficiency are inventory turnover and weeksof-supply. These essentially measure the same thing and mathematically are the inverse of one
another. Inventory turnover equals cost of goods sold divided by the average aggregate
inventory value.
The costs of gold are the annual cost for a company to produce the goods or services provided
to customers; it is sometimes referred to as the cost of revenue. The average aggregate
inventory value is the total value for all items held in inventory for the firm valued at cost. It
includes the raw material, work-in-process, finished goods, and the distribution inventory
considered owned by the company.
In many situations, particularly when distribution inventory is dominant, weeks of supply is the
preferred measure. This is a measure of how many weeks worth of inventory is in the system at
a particular point in time.

Supply Chain Design Strategy

The retailers orders to the wholesaler display greater variability than the end-customer sales;
the wholesalers orders to the manufacturer show even more oscillations, and, finally, the
manufacturers orders to its suppliers are the most volatile. The phenomenon of variability
magnification as we move from the customer to the producer in the supply chain is the often
referred to as the bullwhip effect.
Functional products include the staples that people buy in a wide range of retail outlets, such as
grocery stores and gas stations. Because such as products satisfy basic needs, which do not
change much over time, they have stable, predictable demand and long life cycles.
Innovative products typically have life cycle of just a few months. Imitators quickly erode the
competitive advantage that innovative products enjoy, and companies are forced to introduce a
steady stream of newer innovations.

Outsourcing
Outsourcing is the act of moving some of a firms internal activities and decision responsibility to
outside providers. The terms of the agreement are established in a contract. Outsourcing goes
beyond the more common purchasing and consulting contracts because not only are the
activities transferred, but also resources that make the activities occur, including people,
facilities, equipment, technology, and other assets, are transferred. The responsibilities for
making decisions over certain elements of the activities are transferred as well. Taking complete
responsibility for this is a specialty of contract manufacturers such as Flextronics and Solectron.
Logistics is a term that refers to the management functions that support the complete cycle of
material flow: from the purchase and internal control of production materials; to the planning and
control of work-in-process; to the purchasing, shipping, and distribution of the finished product.

Design for Logistics

The logistics interface with procurement and manufacturing, as well as with engineering
and marketing, can be greatly enhanced by incorporating a concept known as design
for logistics into the early phases of product development. This concept involves
consideration of material procurement and distribution costs during the product design
phase. Given the heavy emphasis on minimizing inventory and handling in efficient
supply chains, how a product is designed and the designed and the design of the
components and materials themselves can have a significant impact on the cost to
deliver the product. In a particular, product packaging and transportation requirements
need to be incorporated into the design process.

Value Density (Value per Unit of Weight)

A common and important decision is how an item should be shipped. The way an item is
shipped is referred to as the transportation mode. There are five basic modes of transportation:
highway, rail, water, pipeline, and air. Each mode has its own advantages and limitations.
Although it may seem oversimplified, the value of an item per pound of weight- value density- is
an important measure when deciding where items should be stocked geographically and how
they should be shipped. The basic methodology of building a spreadsheet that allows the tradeoff to be studied is sound and can be applied no matter what exact details are needed to
explore these alternatives.

Global Sourcing
Companies that face such diverse sourcing, production, and distribution decisions need to
weigh the costs associated with materials, transportation, production, warehousing, and
distribution to develop a comprehensive network designed to minimize costs. Of course this
network must be designed with consideration of outscoring alternative as described earlier in
this chapter.

Mass Costumization
The term mass customization has been used to describe the ability of a company to
deliver highly customized products and services to different costumers around the
world. The key to mass-customizing effectively is postponing the task of differentiating a
product for a specific customer until the latest possible point in the supply network. In
order to do this, companies must rethink and integrate the designs of their products, the
processes used to make and deliver those products, and the configuration of the entire
supply network. Buy adopting such a comprenhensive approach, companies can
operate at maximum efficiency and quickly meet customers orders with a minimum
amount of inventory.

Conclusion
Supply chain management is important in business today. The term supply chains
comes from a picture of how organizations are linked together as viewed from a
particular company. Many companies have enjoyed significant success due to unique
ways in which they have organized their supply chains.
Measures of supply chain efficiency are inventory turnover and weeks of supply.
Efficient processes should be used for functional products and responsive processes for
innovative important to the operational success of company.
Companies that face diverse sourcing, production, and the distribution decisions need
to weigh the cost associated with materials, transportation, production, warehousing,
and distribution to develop a comprenhensive network designed to minimize costs.

Discussion Questions
1. What recent changes have caused supply chain management to gain
importance?
Globalization and the new internet era made supply chains expand to new
horizons and ideas, creating a big network of supply chains that are
interconnected around the globe, so the importance of a lean supply chain these
days is an essential thing cause is the motor of the great economies.
2. With so much productive capacity and room for expansion in the United States,
why would a company based in the United States chose to purchase items from
a foreign firm?
Maybe you will have so much capacity at the U.S but the costs are expensive,
this concept is called comparative advantage, either make the products here, do
it where is cheaper and make what you can do better here to compensate both
things, being efficient and making profits.
3. Describe the differences between functional and innovative products
A functional product helps to make a simple function, to improve a specifically
need, in the other hand a innovative product help solve the need but also
improves the efficiency of the product adding new features and options to the
customer.
4. What are characteristics of efficient, responsive, risk-hedging, and agile supply
chains? Can a supply chain be both efficient and responsive? Risk hedging and
agile?
The supply chain characteristics vary depending on the industry, and in other
hand by their leaders, which decide when and how change the things, but there
are 4 types, an efficient supply chain, a risk hedging supply chain, the responsive
supply chain and the agile supply chain, this four types vary from company to
company depending on the products or their processes but can be combined
through the process to become a good strategy.
5. As a supplier. Which factors about a buyer would you consider to be important in
setting up a long-term relationship?
When setting up a long-term relationship with the customer you have to think
about the pricing, the type of customer, the location of their facilities, the past
agreements or forecast to study their demand, then also work together with him
to improve the relationship through time, in a win-win negotiation both will have
advantages to gain a major profit.
6. For the value density problem in example 10.2, what would the effect be if a
competing firm offers you a similar service for 10 percent less than Federal
Expresss rates.
That price would change the products that we can transport by air, giving us
more options to transport it without losing much money and gaining time to keep
producing our items, I think that would be a comparative advantage to the
company.
7. What are the advantages of using the postponement strategy?

Is the term used to describe the delay of the process step that differentiates the
product to as late in the supply chain as possible, as the process arent very
important to the final process.
8. Describe how outsourcing works. Why would a firm want to outsource?
Is the act of moving some of moving some of a firms internal activities and
decision responsibility to outside providers, the terms of agreement are prestablished in a contract, a firm will want to outsource to start a venture in another
country, to train the new employees, or just to move on to another culture without
loose the brand style.
9. What is so different about Li & Fungs approach to working with their customers?
Would this approach work with functional products like toothpaste and
basketballs?
The manners to work with their customers are very impressive, helping them
earn a lot of benefits from them and also giving them the trust to maintain the
flow of raw materials, products, machinery, helping the business grow in big
numbers and innovating, this would work in another products only if the principles
are well concerned, giving the exact amount of importance to the small thing to
the bigh things to make the business grow in a good way.
10. What are the basic building blocks of an effective mass customization program?
What kind of companywide cooperation is required for a successful mass
customization program?
The key to mass-customizing effectively is postponing the task of differentiating a
product for a specific customer until the latest possible point in the supply
network, companies must rethink and integrate the designs, that together form
the basic building blocks that are:
A product should be designed so it consists of independent modules that can be
assembled into different dorms of the product easily and inexpensively.
Manufacturing and service processes should be designed so that they consist of
independent modules that can be moved or rearranged easily to support different
distribution network designs.
The supply network should be designed to provide two capabilities, first it must
be able to supply the basic product to the facilities performing the customization
in a cost-effective manner, second it must have the flexibility and the
responsiveness to take individual customers orders and deliver the finished,
customized good quickly.