Chapter 1 Strategic Framework of Supply Chain Management

Views:
 
Category: Education
     
 

Presentation Description

No description available.

Comments

Presentation Transcript

Supply Chain Management:

Supply Chain Management Nischal Thapa

Operations and Supply Chain Management:

Operations and Supply Chain Management Unit 1: Strategic Framework of Supply Chain Management Unit 2: Designing the Supply Chain Management Unit 3: New Product Design, Planning Demand and Supply in Supply Chain Management Unit 4: Logistics Operations Management in Supply Chain Unit 5: Cross-Functional Management in Supply Chain 11/11/2014 Nischal Thapa - OSCM 2

Strategic Framework of Supply Chain Management:

Chapter One Strategic Framework of Supply Chain Management 11/11/2014 Nischal Thapa - OSCM 3

Strategic Framework of Supply Chain Management:

Strategic Framework of Supply Chain Management Introduction of SCM Objectives of SC Importance in Decision Making Decision Phases of SCM Process View of SCM Competitive and Supply Chain Strategies 11/11/2014 Nischal Thapa - OSCM 4

Introduction of Supply Chain Management:

Introduction of Supply Chain Management 11/11/2014 Nischal Thapa - OSCM 5 Profitability of the company? Where does the money go?

What is a Supply Chain?:

1- 6 What is a Supply Chain? All stages involved, directly or indirectly, in fulfilling a customer request Includes manufacturers, suppliers, transporters, warehouses, retailers, and customers Typical supply chain stages: customers, retailers, distributors, manufacturers, suppliers All stages may not be present in all supply chains(e.g ., no retailer or distributor for Dell)

Objectives of Supply Chain Management:

Objectives of Supply Chain Management Objective is to maximize the overall value generated The value a supply chain generates is the Value = Final Product Worth to customer – Cost incurred in Supply Chain 11/11/2014 Nischal Thapa - OSCM 7

Importance in Decision Making:

Importance in Decision Making Low Levels of Defects Proper Cash Flow Management (Inv., Receivables and Payables) Negative CCC (ICP, RCP, and ACP) Walmart : Cluster of Stores around a Distribution Center Dell (Sophisticated information exchange): Minimum Inventory to No Inventory, cutting down middlemen Computers from Austin with Monitors from Mexico Inability of webstores to compete with department stores Synergic Effect 11/11/2014 Nischal Thapa - OSCM 8

Decision Phases of SCM:

Decision Phases of SCM Phase 1 : Supply Chain Strategy or Design Phase 2: Supply Chain Planning Phase 3: Supply Chain Operation 11/11/2014 Nischal Thapa - OSCM 9

Phase 1: Supply Chain Strategy or Design:

Phase 1: Supply Chain Strategy or Design 11/11/2014 Nischal Thapa - OSCM 10 Long Term in Nature What it involves: Outsource or in-house Location and capacities of production and warehousing facilities Products to be manufactured or stored at various locations The modes of transportation to be used Type of information system to be utilized. It is based on: Strategic Objectives Increasing Supply Chain Surplus Marketing and Pricing Plan

Phase 2: Supply Chain Planning:

1- 11 Phase 2: Supply Chain Planning Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Starts with a forecast of demand in the coming year

Phase 2: Supply Chain Planning:

1- 12 Phase 2: Supply Chain Planning Planning decisions: Which markets will be supplied from which locations Planned buildup of inventories Subcontracting, backup locations Inventory policies Timing and size of market promotions Must consider in planning decisions demand uncertainty, exchange rates, competition over the time horizon

Phase 3: Supply Chain Operation:

1- 13 Phase 3: Supply Chain Operation Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and operating policies are determined Goal is to implement the operating policies as effectively as possible Allocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment orders Much less uncertainty (short time horizon)

Process View of SCM:

Process View of SCM 11/11/2014 Nischal Thapa - OSCM 14

Process View of a Supply Chain:

1- 15 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)

Cycle View of Supply Chains:

1- 16 Cycle View of Supply Chains Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle Customer Retailer Distributor Manufacturer Supplier

Cycle View of a Supply Chain:

1- 17 Cycle View of a Supply Chain Each cycle occurs at the interface between two successive stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributor-manufacturer) Procurement cycle (manufacturer-supplier) Figure 1.3 Cycle view clearly defines processes involved and the owners of each process. Specifies the roles and responsibilities of each member and the desired outcome of each process.

Push/Pull View of Supply Chains:

1- 18 Push/Pull View of Supply Chains Procurement, Manufacturing and Replenishment cycles Customer Order Cycle Customer Order Arrives PUSH PROCESSES PULL PROCESSES

Push/Pull View of Supply Chain Processes:

1- 19 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 View of Supply Chain Processes:

1- 20 Push/Pull View of Supply Chain Processes Useful in considering strategic decisions relating to supply chain design – more global view of how supply chain processes relate to customer orders The relative proportion of push and pull processes can have an impact on supply chain performance

Competitive and Supply Chain Strategies :

Competitive and Supply Chain Strategies 11/11/2014 Nischal Thapa - OSCM 21

Competitive and Supply Chain Strategies:

2- 22 Competitive and Supply Chain Strategies Competitive strategy: defines the set of customer needs a firm seeks to satisfy through its products and services Product development strategy: specifies the portfolio of new products that the company will try to develop Marketing and sales strategy: specifies how the market will be segmented and product positioned, priced, and promoted Supply chain strategy: determines the nature of material procurement, transportation of materials, manufacture of product or creation of service, distribution of product Consistency and support between supply chain strategy, competitive strategy, and other functional strategies is important

Value Chain Analysis:

Value Chain Analysis 11/11/2014 Nischal Thapa - OSCM 23 Primary Activities Operations After Sale Services Marketing and Sales Distribution New Product Development Support Activities: Finance Accounting Information Technology Human Resources

The Value Chain: Linking Supply Chain and Business Strategy:

2- 24 The Value Chain: Linking Supply Chain and Business Strategy

Achieving Strategic Fit:

2- 25 Achieving Strategic Fit Introduction How is strategic fit achieved? Other issues affecting strategic fit

Achieving Strategic Fit:

2- 26 Achieving Strategic Fit Strategic fit: Consistency between customer priorities of competitive strategy and supply chain capabilities specified by the supply chain strategy Competitive and supply chain strategies have the same goals A company may fail because of a lack of strategic fit or because its processes and resources do not provide the capabilities to execute the desired strategy Example of strategic fit -- Dell

How is Strategic Fit Achieved?:

2- 27 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

Step 1: Understanding the Customer and Supply Chain Uncertainty:

2- 28 Step 1: Understanding the Customer and Supply Chain Uncertainty Identify the needs of the customer segment being served Quantity of product needed in each lot Response time customers will tolerate Variety of products needed Service level required Price of the product Desired rate of innovation in the product

Step 1: Understanding the Customer and Supply Chain Uncertainty:

2- 29 Step 1: Understanding the Customer and Supply Chain Uncertainty Overall attribute of customer demand Demand uncertainty: uncertainty of customer demand for a product Implied demand uncertainty: resulting uncertainty for the supply chain given the portion of the demand the supply chain must handle and attributes the customer desires

Step 1: Understanding the Customer and Supply Chain Uncertainty:

2- 30 Step 1: Understanding the Customer and Supply Chain Uncertainty Implied demand uncertainty also related to customer needs and product attributes Table 2.1 Figure 2.2 Table 2.2 First step to strategic fit is to understand customers by mapping their demand on the implied uncertainty spectrum

Achieving Strategic Fit:

2- 31 Achieving Strategic Fit Understanding the Customer Lot size Response time Service level Product variety Price Innovation Implied Demand Uncertainty

Impact of Customer Needs on Implied Demand Uncertainty :

2- 32 Impact of Customer Needs on Implied Demand Uncertainty Customer Need Causes implied demand uncertainty to increase because … Range of quantity increases Wider range of quantity implies greater variance in demand Lead time decreases Less time to react to orders Variety of products required increases Demand per product becomes more disaggregated Number of channels increases Total customer demand is now disaggregated over more channels Rate of innovation increases New products tend to have more uncertain demand Required service level increases Firm now has to handle unusual surges in demand

Levels of Implied Demand Uncertainty:

2- 33 Levels of Implied Demand Uncertainty

Correlation Between Implied Demand Uncertainty and Other Attributes (Table 2.2):

2- 34 Correlation Between Implied Demand Uncertainty and Other Attributes (Table 2.2) Attribute Low Implied Uncertainty High Implied Uncertainty Product margin Low High Avg. forecast error 10% 40%-100% Avg. stockout rate 1%-2% 10%-40% Avg. forced season-end markdown 0% 10%-25%

Step 2: Understanding the Supply Chain:

2- 35 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

Step 2: Understanding the Supply Chain:

2- 36 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 Figure 2.3: cost-responsiveness efficient frontier Figure 2.4: supply chain responsiveness spectrum Second step to achieving strategic fit is to map the supply chain on the responsiveness spectrum

Understanding the Supply Chain: Cost-Responsiveness Efficient Frontier:

2- 37 Understanding the Supply Chain: Cost-Responsiveness Efficient Frontier High Low Low High Responsiveness Cost

Step 3: Achieving Strategic Fit:

2- 38 Step 3: Achieving Strategic Fit Step is to ensure that what the supply chain does well is consistent with target customer’s needs Fig. 2.5: Uncertainty/Responsiveness map Fig. 2.6: Zone of strategic fit Examples: Dell, Barilla

Responsiveness Spectrum (Figure 2.4):

2- 39 Responsiveness Spectrum (Figure 2.4) Integrated steel mill Dell Highly efficient Highly responsive Somewhat efficient Somewhat responsive Hanes apparel Most automotive production

Achieving Strategic Fit Shown on the Uncertainty/Responsiveness Map (Fig. 2.5):

2- 40 Achieving Strategic Fit Shown on the Uncertainty/Responsiveness Map (Fig. 2.5) Implied uncertainty spectrum Responsive supply chain Efficient supply chain Certain demand Uncertain demand Responsiveness spectrum Zone of Strategic Fit

Step 3: Achieving Strategic Fit:

2- 41 Step 3: Achieving Strategic Fit All functions in the value chain must support the competitive strategy to achieve strategic fit – Fig. 2.7 Two extremes: Efficient supply chains (Barilla) and responsive supply chains (Dell) – Table 2.3 Two key points there is no right supply chain strategy independent of competitive strategy there is a right supply chain strategy for a given competitive strategy

Comparison of Efficient and Responsive Supply Chains (Table 2.4):

2- 42 Comparison of Efficient and Responsive Supply Chains (Table 2.4) Efficient Responsive Primary goal Lowest cost Quick response Product design strategy Min product cost Modularity to allow postponement Pricing strategy Lower margins Higher margins Mfg strategy High utilization Capacity flexibility Inventory strategy Minimize inventory Buffer inventory Lead time strategy Reduce but not at expense of greater cost Aggressively reduce even if costs are significant Supplier selection strategy Cost and low quality Speed, flexibility, quality Transportation strategy Greater reliance on low cost modes Greater reliance on responsive (fast) modes

Other Issues Affecting Strategic Fit:

2- 43 Other Issues Affecting Strategic Fit Multiple products and customer segments Product life cycle Competitive changes over time

Multiple Products and Customer Segments:

2- 44 Multiple Products and Customer Segments Firms sell different products to different customer segments (with different implied demand uncertainty) The supply chain has to be able to balance efficiency and responsiveness given its portfolio of products and customer segments Two approaches: Different supply chains Tailor supply chain to best meet the needs of each product’s demand

Product Life Cycle:

2- 45 Product Life Cycle The demand characteristics of a product and the needs of a customer segment change as a product goes through its life cycle Supply chain strategy must evolve throughout the life cycle Early: uncertain demand, high margins (time is important), product availability is most important, cost is secondary Late: predictable demand, lower margins, price is important

Product Life Cycle:

2- 46 Product Life Cycle Examples: pharmaceutical firms, Intel As the product goes through the life cycle, the supply chain changes from one emphasizing responsiveness to one emphasizing efficiency

Competitive Changes Over Time:

2- 47 Competitive Changes Over Time Competitive pressures can change over time More competitors may result in an increased emphasis on variety at a reasonable price The Internet makes it easier to offer a wide variety of products The supply chain must change to meet these changing competitive conditions

Expanding Strategic Scope:

2- 48 Expanding Strategic Scope Scope of strategic fit The functions and stages within a supply chain that devise an integrated strategy with a shared objective One extreme: each function at each stage develops its own strategy Other extreme: all functions in all stages devise a strategy jointly Five categories: Intracompany intraoperation scope Intracompany intrafunctional scope Intracompany interfunctional scope Intercompany interfunctional scope Flexible interfunctional scope

Different Scopes of Strategic Fit Across a Supply Chain:

2- 49 Different Scopes of Strategic Fit Across a Supply Chain

Summary of Learning Objectives:

2- 50 Summary of Learning Objectives Why is achieving strategic fit critical to a company’s overall success? How does a company achieve strategic fit between its supply chain strategy and its competitive strategy? What is the importance of expanding the scope of strategic fit across the supply chain?

PowerPoint Presentation:

11/11/2014 Nischal Thapa - OSCM 51

PowerPoint Presentation:

11/11/2014 Nischal Thapa - OSCM 52

PowerPoint Presentation:

11/11/2014 Nischal Thapa - OSCM 53

authorStream Live Help