Operations and Supply Chain

Management

Dr. Muhammad Saeed Shahbaz

Master in Business Administration

(Executive) (66) 3A and 6 A
 Supply chain drivers

Supply chain surplus = Customer Value – Supply

Chain Cost

Efficiency Vs Responsiveness

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Company’s supply chain achieve the balance
between responsiveness & efficiency that
best meets the needs of the company
competitive strategy
Logistical drivers:
• • Facilities
• • Inventory
• • Transportation
Cross-functional drivers:
• • Information
• • Sourcing
• • Pricing 5
 Drivers of
Supply Chain
How to achieve

Supply chain structure

Efficiency Responsiveness

Logistical
1. Inventory 2. Transportation 3. Facilities
Drivers

Cross-
Functional
4. Information 5. Sourcing 6. Pricing Drivers
 Faciliti
es is stored, assembled, or
Places where inventory
fabricated.

Facility are the actual physical locations in

the supply chain network where product are
stored, assembled or fabricated. The two major
types of facilities are :
• Manufacture/Repair Sites
• Storage (warehouse, distribution) Sites
• Example : Toyota and Honda

• Product Focus:
A factory that takes a product focus performs
the range of different operations required to
make a given product line from fabrication of
different product parts to assembly of these parts.
• Functional focus:
A functional focus approach concentrates on 7
performing just a few operations such as only
• Location
• centralization (efficiency) vs.
decentralization (responsiveness)
• Capacity (flexibility versus efficiency)
• Manufacturing methodology (product
focused versus process focused)
• Warehousing methodology (SKU (Stock
Keeping Unit) storage, job lot storage,
cross-docking)
• Overall trade-off: Responsiveness versus
efficiency
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Inventory

• raw materials, WIP, finished goods

within a supply chain

• Transit Stock / Pipeline

inventory
• Cycle stock
• Safety Stock
• Anticipation Inventory
• Hedge inventory
• Seasonal Inventory

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Components of Inventory
Decisions
• Convenience: Cycle inventory
• No customer buys eggs one by one
• Unstable demand: Seasonal inventory
• Bathing suits
• computer sales
• Seasonal Inventory: This is inventory
that is built up in anticipation of
predictable increases in demand that
occur at certain times of the year.
• Randomness: Safety inventory
• Pipeline inventory
• Work in process or transit 11
Transportation
• Air
• Truck
• Rail
• Ship
• Pipeline
• Electronic

• moving inventory from point to

point in a supply chain
• combinations of transportation
modes and routes
• Faster transportation allows
greater responsiveness but lower
efficiency
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Components of
Transportation Decisions
• Mode of transportation:
• air, truck, rail, ship, pipeline,
electronic transportation
• vary in cost, speed, size of shipment,
flexibility
• Route and network selection
• route: path along which a product
is shipped
• network: collection of locations
and routes
• In-house or outsource 3-14
 Informati
on
data and analysis regarding inventory,
transportation, facilities throughout
the supply chain
potentially the biggest driver of supply
chain performance

• Role in the supply chain

• Connector between the various stages in the
supply chain
• Integration to create synergies is a central theme
in supply chain management
• Crucial to daily operation of each stage in a
supply chain 15
• 1. Coordinating daily activities related to the
functioning of other supply chain drivers:
facility, inventory & transportation.
• 2. Forecasting & planning to anticipate& meet
future demands. Available information is used
to make tactical forecasts to guide the
setting of monthly & quarterly production
schedules & time table
• 3. Enabling technologies: many technologies
exist to share & analyze information in the
supply chain. Managers must decide which
technologies to use & how to integrate these
technologies into their companies like
internet, ERP, RFID. 3-16
 Sourci
ng
• functions a firm performs and functions
that are outsourced
• Supplier selection, single vs. multiple
suppliers, contract negotiation

• In-House or outsource: The most

significant sourcing decision for a firm is
whether to perform a task in-house or
outsource it to a third party. This
decision should be driven in part by its
impact on the total supply chain
profitability.
• Supplier selection: It must be decided on
the number of suppliers they will have for
a particular activity. The must then
identify the criteria along which 17
 Pricing

• Price associated with goods and

services provided by a firm to the
supply chain

Fixed Price versus Menu pricing: A firm

must decide whether it will charge a
fixed price for its supply chain activities
or have a menu with prices that vary
with some other attribute, such as
response time or location of delivery.

• Pricing determines the amount to charge

customers in a supply chain 18
Considerations for Supply
Chain Drivers
Driver Efficiency Responsiveness

1. Inventory Cost of holding Availability

2. Transportation Consolidation Speed

3. Facilities Consolidation / Proximity /

Dedicated Flexibility
4. Information Low cost/slow/no High cost/
duplication streamlined/reliable
5. Sourcing Low cost sources Responsive sources

6. Pricing Constant price Low-high price

Obstacles to Achieving
Strategic Fit
• Major Obstacles to Achieving Fit:
Size
• Brick & Mortar vs. Online
• Regular stores vs. Discount Outlets
• Major obstacles to achieving fit:
Change
• Increasing variety of products
• Decreasing product life cycles
• Increasingly demanding customers
• Fragmentation of supply chain
ownership
• Globalization
• Difficulty executing new strategies
3-20
Thank you very much

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