Supply Chain

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					Supply Chain
Supply Chain Options
Suppliers   Plants   Customers


   S1
              P1        C1

   S2
              P2        C2

   S3

              P3        C3

   S4
   Supply Chain Strategies

• Low Cost
  single supply chain for all products and customers
• Differentiation
  unique supply chains by product or customer groups
• Responsiveness
  customer focused, information technology for speed and
  reengineering, advanced logistics planning
• Portfolio Approach
  supply chain platforms (analogy: manufacturing cells)
   Customers and capabilities

• Understanding the customer and supply
  chain uncertainty
• Understanding the supply chain
  capabilities
• Achieving strategic fit
  – Redesign the supply chain
  – Alter strategy
  Causes of demand variations
• Quantity of the product needed in each lot
• Response time that customers are willing
  to tolerate
• Variety of products needed
• Service level required
• Price of the product
• Desired rate of innovation in the product
    Implied demand uncertainties
Customer Needs                              Implied Demand Uncertainty

Range of quantity required       Increases because a wider range of the quantity
   increases                         required implies greater variance in demand
Lead time decreases              Increases because there is less time in which to react
                                     to orders
Variety of products required     Increases because demand per product becomes more
   increases                         disaggregate
Number of channels for product Increase because the total customer demand is now
   acquisition increases             disaggregated over more channels
Rate of innovation increases     Increases because new products tend to have more
                                     uncertain demand
Required service level increases Increase because the firm now has to handle unusual
                                     surges in demand
      Supply uncertainty

Supply Source Capability       Supply Uncertainty

Frequent breakdowns                 Increases
Unpredictable and low yields        Increases
Poor quality                        Increases
Limited supply capacity             Increases
Inflexible supply capacity          Increases
Evolving production process         Increases
       Efficiency/responsiveness
Highly efficient     Integrated steel mills: Production scheduled
                        weeks or months in advance with little variety
                        or flexibility

Somewhat efficient   Hanes apparel: A traditional make-to-stock
                       manufacturer with production lead time of
                       several weeks

Somewhat             Most automotive production: Delivering a large
  responsive           variety of products in a couple of weeks


Highly responsive    Dell: Custom-made PCs and servers in a few
                       days
                Supply Chain Matching
                Functional   Innovative
                 Products     Products
Supply Chain
  Efficient



                              Mismatch
                Match
 Supply Chain
  Responsive




                Mismatch     Match
Supply Chain Dynamics

   2-tier Supply Chain


Manufacturer          Retailer   Consumer




   Bull-Whip Effect
Supply Chain Dynamics
           Causes of Bullwhip

•   Number of tiers in supply chain
•   Order arrival lead time
•   Forecast variations
•   Order batching
•   Capacity constraints
•   Price increase
     Elements of strategy

• Structure and Ownership
• Infrastructure and Process Alignment
• Sustaining advantage
      Structure & Ownership
• Supply chains for individual products (multiple
  markets)
  – Saturn car, collaborative product design, outsourcing
• Supply chains for individual markets (multiple
  products)
  – Geographical region (China), customer segments,
    logistics
• Product and Process Matching
• Channel Design
  – Business models
Electronic proximity
             Business model
• Partners
  – PC Supplier
  – Ford Motor Company
  – Ford Employees
  – Buyer-Club
  – Vendors in Buyer-Club
                   The model
• PC Associates acquire PCs at a discount
• PCs are given to Ford for its employees free of charge
• Ford pays $25 per month for Internet access per
  employee, but charges $5 per month from the
  employees
• Employees belong to the buyer-club on the PCA web
  page
• Vendors join the buyer-club to take advantage of
  economies of scale. Buyers are given Price Discounts
• Buyer-Club profits are shared three ways: Vendors,
  PCA, and Ford
           Process Alignment
• Managing Material Flow
  – demand assessment, inventory location and
    sharing, supplier contracts
• Coordination and Control
  – monitoring and accountability, troubleshooting
• Managing Flow of Information
  – routing, access and transparency, distributed-
    databases, strategic/operational
• Leveraging Connectivity
  – EDI/shareware/Intranet, online learning,
    transaction-speed, waste-reduction
Telecommunication Supply Chain
                               Switching/     Access
 Backbones        Protocols                                   Services
                                Routers      Providers


                                             Local Phone
                                                                 Data
 Telepony                                     Company
                   ATM          Circuit
 Wireless                                    Cellular Phone     Fax
                                               Company
                  Frame                                                  Customer
  Optical         Relay                        Cable
                                                                Audio
                                              Company

                                Packet
  Cable                                         Direct         Video
                   Internet
                                                 Internet
 Private                                         Access
 Network                                        Providers



             Figure 9.17: Telecommunication Industry: Supply
                          Chain for Total Customer Solution
       Sustaining Advantage
• Agility/responsiveness
  – inventory network and transshipment
  – modular product design
  – restructuring
• Redesigning the chain
  – information technology and logistics
  – changes in customer preferences
  – new in-house capabilities or acquisitions
  – experience curve, environment scanning

				
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