Managing Supply Chains

Session 2

Prepared by Saroop Anwer

BS Computer Science MS Business Management Ph. D Scholar Supply Chain Management

Learning Objectives
1. Principles of Supply Chain Management

2. Generalized Supply Chain Model

3. Drivers of Supply Chain Management 4. Process view of a supply chain 5. Achieving strategic fit 6. Strategic scope of the company

Principles of SCM
Delight the customer with profits Develop superior service chain capabilities Create collaborative demand management and forecasting Strategically manage source of supply Develop a supply-chainwide technology strategy Use common performance measures/report cards

Various books 3

Generalized Supply Chain Model

Relationship Management Information, Product, Service, Financial and Knowledge Flows

M A T E R I A L S

SUPPLIER NETWORK INTEGRATED ENTERPRISE DISTRIBUTIVE NETWORK

E N D C O N S U M E R S

Procurement

Distribution

Manufacturing

Capacity, Information, Core Competencies, Capital and Human Resources Supply Chain Logistics Management, First Edition. Bowersox, Closs, and Cooper. Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

A Framework for structuring Drivers

Competitive Strategy Supply Chain Strategy Efficiency Supply chain structure Logistical Drivers Facilities Inventory Transportation Responsiveness

Information

Sourcing Cross Functional Drivers

Pricing

Process View of a Supply Chain

Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in anticipation of a customer order (push)
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Cycle View of Supply Chains

Customer
Customer Order Cycle

Retailer
Replenishment Cycle

Distributor
Manufacturing Cycle

Manufacturer
Procurement Cycle

Supplier
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Push/Pull View of Supply Chains

Procurement, Manufacturing and Replenishment cycles
Customer Order Cycle

PUSH PROCESSES

PULL PROCESSES

Customer Order Arrives

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Push/Pull View of Supply Chain Processes

Supply chain processes fall into one of two categories depending on the timing of their execution relative to customer demand Pull: execution is initiated in response to a customer order (reactive) Push: execution is initiated in anticipation of customer orders (speculative) Push/pull boundary separates push processes from pull processes
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Decision Phases of a Supply Chain

Supply chain strategy or design Supply chain planning Supply chain operation

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How is Strategic Fit Achieved?

Step 1: Understanding the customer and supply chain uncertainty Step 2: Understanding the supply chain Step 3: Achieving strategic fit

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Achieving Strategic Fit

Understanding the Customer
Lot size Response time Service level Product variety Price Innovation

Implied Demand Uncertainty

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Levels of Implied Demand Uncertainty

Predictable supply and demand Predictable supply and uncertain demand or uncertain supply and predictable demand or somewhat uncertain supply and demand Highly uncertain supply and demand

Salt at a supermarket

An existing automobile model

A new communication device

Figure 2.2: The Implied Uncertainty (Demand and Supply) Spectrum

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Step 2: Understanding the Supply Chain

How does the firm best meet demand? Dimension describing the supply chain is supply chain responsiveness Supply chain responsiveness -- ability to
respond to wide ranges of quantities demanded meet short lead times handle a large variety of products build highly innovative products meet a very high service level
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Understanding the Supply Chain: CostResponsiveness Efficient Frontier

Responsiveness
High

Low

Cost
High Low
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Step 2: Understanding the Supply Chain

There is a cost to achieving responsiveness Supply chain efficiency: cost of making and delivering the product to the customer Increasing responsiveness results in higher costs that lower efficiency Second step to achieving strategic fit is to map the supply chain on the responsiveness spectrum

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Responsiveness Spectrum
Highly efficient Somewhat efficient Somewhat responsive Highly responsive

Integrated steel mill

Hanes Apparel

Most automotive Production Delivering a large variety of products in a couple of weeks

Dell

Production scheduled weeks or months in advance with little variety or flexibility

A traditional make to stock manufacturer with production lead time of several weeks

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Step 3: Achieving Strategic Fit

Step is to ensure that what the supply chain does well is consistent with target customers needs All functions in the value chain must support the competitive strategy to achieve strategic fit Two key points
there is no right supply chain strategy that is always right. there is a right supply chain strategy for a given competitive strategy

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Achieving Strategic Fit Shown on the Uncertainty/Responsiveness Map

Responsive supply chain

Responsiveness spectrum

Efficient supply chain Certain demand Implied uncertainty spectrum Uncertain demand
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Efficient & Responsive Supply Chains

Efficient
Primary goal Product design strategy Pricing strategy Mfg strategy Inventory strategy Lowest cost Min product cost Lower margins High utilization Minimize inventory

Responsive
Quick response Modularity to allow postponement Higher margins Capacity flexibility Buffer inventory Aggressively reduce even if costs are significant Speed, flexibility, quality Greater reliance on responsive (fast) modes
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Lead time strategy Reduce but not at expense of high cost Supplier strategy Transportation strategy Cost and low quality Greater reliance on low cost modes

Other Issues Affecting Strategic Fit

Multiple products and customer segments Product life cycle Competitive changes over time

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Strategic Scope: Intra-company Intra-operation Scope

Suppliers Manufacturer Distributor Competitive Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Retailer Customer

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Strategic Scope: Intra-company Intra-functional Scope

Suppliers Manufacturer Distributor Competitive Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Retailer Customer

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Strategic Scope: Intra-company Inter-functional Scope

Suppliers Manufacturer Distributor Competitive Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Retailer Customer

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Strategic Scope: Inter-company Inter-functional Scope

Suppliers Manufacturer Distributor Competitive Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Retailer Customer

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