Supply Chain Management

Chapter -01

Managing Chain

introducing

SCM
mks mks@mdi.ac.in
http://www.mks507.vistapane l.net

Operations Management Area Management Development Institute-Gurgaon

Prof. Manoj K Srivastava

Part

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Teaser

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1. 2. 3. 4.

Top 20 Supply Chains

5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

2009

17. 18. 19. 20.

Apple Procter & Gamble Cisco Systems Wal-Mart Stores Dell PepsiCo Samsung Electronics IBM Research In Motion Amazon.com McDonalds Microsoft The Coca-Cola Company Johnson & Johnson Hewlett-Packard Nike Colgate-Palmolive Intel Nokia Tesco

Source: AMR research, 2009 http://www.amrresearch.com

If Supply Chain Management is the answer.. What is the question?

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Why Implementing Supply Chain?

Quantit y?

Sp ee ? d

V ar y? iet

Time Produc t Volum e Flexibil Mix

Delivery Reliability

ity

Delivery Time Lead time

Place

Invent ory Level

The right

Product

The right

Quantity

The right

Time

The right

Price

The right

Store

The right

Customer

Higher

Profits

Forecast ing

Locati on

Desig n Qualit y

Deliv ery

Reac h

Cost

Fit

Direction for Business Innovation

Products: Platforms: Solutions: Customers: Revenue Model: Processes: Value Chain: Channels: Networking: R&D: Create new products and services Create modular platforms and strategic control points End-to-end solution for customers Find new customer segments or unmet customer needs Change how you get paid Innovate on operating processes Change position or scope of value chain participation Change the way you source & ship products Change how you go to market with your products Change how you connect with customers or products Create new technologies, materials, products or processes

Customer Experience: Change how customers interact with you

Logistics/Supply Chain:

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Understand it

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Todays Challenges

To achieve economies of scale and scope Costs are significant To improve business focus and expertise Customer Expectations are increasing Supply and Distribution Lines are lengthening with complexity Adds Significant Customer value Customers Increasingly Want Quick & Customised Response

A supply chain consists of the flow of products and services from:

entitiesactivitiesproblem spots linkages? Connected by transportation and storage activities, and Integrated through information, planning, and integration activities

Raw materials manufacturers Intermediate products manufacturers End product manufacturers Wholesalers and distributors and Retailers

SCM is a set of approaches

n

To

integrate Suppliers, Manufacturing Centers , Warehouses, distributed

Dist. Centers, Retail Outlets

n

Merchandise is produced &

n
n

Right quantities, to right locations, at right time

are unlimitedresources not..? Aimwishes : To minimize system-wide cost, are while satisfying service level requirements

Some more definitions of SCM

Oliver and Webber (1982)

SCM covers the flow of goods from supplier through manufacturing and distribution channels to end user.
Jones and Riley (1987)

SCM techniques deal with the planning and control of total materials flow from suppliers to through end users.
Christopher (1992)

SCM is the management of a network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer.
Ayers (2000)

SCM is the design, maintenance and operation of supply chain processes for satisfaction of end users.
Sunil Chopra and Peter Meindl (2001)

SCM involves the management of flows between and among stages in a supply chain to maximize total profitability.

Vehicle Repair
Raw material Supplier Component Supplier Vehicle Manufacturer Spares Distributor Service Centre [Retailer] Customer

Pest Control

Raw material Supplier

Pest control products Manufacturer

Pest control products Distributor

Maintenance Company [Retailer]

Customer

Electricity
Water [Nature]
Generating Station [Producer]

Home Customer Distribution Company [Retailer] Commercial Customer Industrial Customer

Fuel Supplier

3rd Tier Supplier

2nd Tier Supplier

1st Tier Supplier

1st Tier Customer

2nd Tier Customer

3rd Tier Customer

Oil Compa ny

Upstream
Farm er

Chemic al Proces sor

Cereal Manufact urer

Focal Company

Internal

Downstream

Flour Cereal Grocery Reta Consu customer / consumer / client Proces Manufact Distribu il mer sor urer tor Groc manage relationship with whom.in which er order? CRM??? Supply Chain: Manufacturing Example Fore st Lumb er Provi der Corrugate d Manufact urer Products and Services Cash Information Deman dSuppl y

CUSTOMER CONSUMER
CRM??? CLIENT understand context and hence the relative preference accordingly.

THE FOCAL COMPANY'S ALTERNATIVES FOR INVOLVEMENT WITH LINK 2

Alternative 1)
Company B Link 2 Focal Company Link 1 Company A Link 2 Company B Integrate with and actively manage Link 2.

Alternative 2)
Monitor the procedures of Company A and Company B for integrating and managing Link 2.

When to monitor when to let them own.. When Link to dictate? Company 2
B

Alternative 3)

Not involved, leave the integration and management up to Company A and Company B.

Imm. Suppliers

The Firm

Imm. Customer

Supply Chain

Extended Supply Chain

2nd Tier Suppliers 1st Tier Suppliers

The Firm

can we manage ultimate supply chain?

1st Tier Customer

2nd Tier Customer

Ultimate Supply Chain

nth Tier 2nd Tier .... Suppliers Suppliers .. 1st Tier Suppliers

The Firm

1st Tier Customer

2nd Tier nth Tier .... Customer Customer ..

Supply Chains Components

u

The supply chain involves three segments:

n n n

Upstream, where sourcing or procurement from external suppliers occur Internal, where packaging, assembly, or manufacturing take place Downstream, where distribution or dispersal take place, frequently by external distributors.

in which industry, which segment to be focused more? movement of information and money and the procedures supporting the
movement of a product or a service.

Organizations and individuals are also part of the chain

Supply Chain Flows

Supply chain refers to the flow of materials, information, payments, and services from raw material suppliers, through factories and warehouses (Value Chain), to the final consumer (Demand Chain).
It includes tasks such as purchasing, payment flow, materials handling, production planning & control, logistics & warehousing, inventory control, and distribution. When it is managed electronically it is referred to as an e-supply chain.
u

Supply Chain Flows

Materials flows are all physical products, new materials, and supplies that flow along the speed?... chain. flow quantum?... precedence? Information flows relates to all data associated with demand, shipments, orders, returns and schedules. Financial flows include all transfers of money, payments, credit card information, payment schedules, e-payments and credit-related data.

UPSTREAM

INTERAL

DOWNSTREAM

why it should not be termed as demand chain management?

Supply Chain

Value Chain

Demand Chain

Most companies are working to create seamless processes within their own four walls. (47%) Many companies house SCM in purchasing & focus on integration with Key Suppliers first-tier suppliers (34%)

The Firm
Purchasing Production Marketing R&D Logistics

Common

The Firm

Supply Chain Integration

but

Some companies house SCM in The Firm Key Customer marketing & focus on rare makes a difference. integration key customers. (11%) needs a delicate balance among with sensitive

Few companies systematically integrate up & downstream Key Suppliers (8%)

relations?
The Firm Key Customer

Suppliers

Key Suppliers

The Firm Key Customer

Customer
Rare

Collaboration from suppliers' supplier to customers' customer is a vision not yet fully realized!!!

Customer requirements 100 Product/ service appropriate?

N 20 80 Y

From the customers perspective 8% satisfaction From the operations perspective 90% satisfaction N 40 N Y 1 10 Y 9 N 10 Y N

Customer satisfaction 8

N 10 70 Y N 50 Y 20 Customer orders?

Product/ service available?

N 1 8 Y

Meets price and delivery requirements?

10 1 making false impressionpromotion tactics? Produced as promised? 9 Y N 1 8 Y

Taking a customer perspective of supply performance can lead to very different conclusions

Received as promised?

Within the firm

INPUT
Value Added Process

Supplier Performance =

Actual Inputs Expected Inputs Input Used Input Available Actual Outputs Inputs Used Actual Outputs Planned Outputs Actual Inputs Expected Inputs

EFFICIENCY
Utilization =

OUTPUT

EFFECTIVENES S PERFORMANCE Productivi ty

Productivity =

Outside the firm

OUTCOME

impact assessment analysis

EFFICACY

Performance =

IMPACT

Customer Satisfaction =

Source: Mentzer, J. T., Supply Chain Management, Response Books,

managing so many flowsyet at the time they are needed..

Automotive Supply Chain

Porters Value Chain Model

buyers mkt vs sellers mktshrinking profit margins?

The Activity System

Primary and Support Activities

is it not blurring boundaries of concepts in present?

Historical Evolution of the Supply Chain

u

First Revolution:

(Ford Motor Co. 19101920)

Single product, that is, no product variety Vertical integration

Second Revolution: (Toyota Motor Co. 19601970) always existed a leader there Wide Variety to make footprint on sand of supply chain Long-term relationship with suppliers landscape ? Third Revolution: (Dell Computers 1995Current)

Customized products Medium-term relationship with suppliers Suppliers have to maintain technology and cost leadership

1. 2. 3. 4. 5. 6.

7.

learn what constitutes in total known as Product Design and New Product supply chain management ?
Introduction Service and After Sales Support Reverse Logistics and Green Issues Outsourcing and Strategic Alliances Metrics and Incentives Global Issues.

Location Transportation and Logistics Inventory and Forecasting Marketing and Channel Restructuring Sourcing and Supplier Management Information and Electronic Mediated Environments

Major Issues in SCM

8. 9. 10. 11. 12.

Source: Pyke, D.F., A Framework for Teaching Supply Chain

Views of Supply Chain

u

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 n in response to a customer order (pull) n in anticipation of a customer order (push)

basis of viewswhyhow

Cycle View of Supply Chains

u

Each cycle occurs at the Custo interface between two successive stages mer Customer Order Cycle n Customer order cycle (customer-retailer) Reta n Replenishment cycle Replenishment Cycle iler (retailer-distributor) n Manufacturing cycle be synchronized them. Distrib can they (distributorquanitywisetimewise.anticipationwise? utor Manufacturing manufacturer) Cycle n Procurement cycle Manufact (manufacturerurer Procurement Cycle supplier)
size of order predictability of orders

Supp Cycle view clearly defines processes involved and the owners of each lier process.
Specifies the roles and responsibilities of each member and the desired

In Push systems, work release is based on downstream demand forecasts

Keeps inventory to meet actual demand Acts proactively Making generic job application resumes today
Produces using a forecast of sales and moves them to points of sale where they are stored as finished goods inventory.

In Pull systems, work release is based on actual demand will you push the rope or pull it? or the actual status of depends the downstream customers
May cause long delivery lead times Acts reactively Making a specific resume for a company after talking to the recruiter

produces only in response to customer demand signals

Push/Pull View of Supply Chains

Procurement, Manufacturing, Replenishment cycles Customer Order cycles

PUSH PROCESSES

Push/Pul l Boundar y

Custo mer

Order Arrives

PULL PROCESSES

Supply Chain Push-Pull Systems and Boundaries

Where to pin decoupling point ?

Supply Chain Macro Processes in a Firm

u

Supply chain processes discussed in the two views can be classified into
n n n

Supplier Relationship Management (SRM) Internal Supply Chain Management (ISCM) Customer Relationship Management (CRM)

Integration among the above three macro processes is critical for effective and successful supply chain management

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Role of Logistics in Supply Chain

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Logistics Defined Logistics Management is that part of Supply Chain Management

that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements.
Four Subdivisions of Logistics u Business logistics u Military logistics u Event logistics u Service logistics

Value-Added Roles of Logistics The five principal types of economic utility which add value to a product or service : Form Time Place Quantity Possession

what?
where? when?

why?
How much?

While form and possession utility are not specifically related to logistics, neither would be possible without getting the right items needed for consumption or production to the right place at the right time and in the right condition at the right cost. These "five rights of logistics," credited to E. Grosvenor Plowman, are the essence of the two utilities provided by logistics: time and place utility.

Logistics in the Firm: Factors Affecting the Cost and Importance of Logistics
Competitive Relationships n Inventory / order cycle length. n Inventory / lost sales effect n Transportation / lost sales effect Product Relationships n Product dollar value / logistics costs. n Weight density / logistics costs. n Susceptibility to loss & damage / logistics costs. Spatial Relationships

Inventory / lost sales effect

Inventory/order cycle length

1
Inventory level

Transportation/lost sales effect

Weight density / logistics costs

Product dollar value / logistics costs

Susceptibility to loss & damage/logistics costs

Spatial Relationships:
Spatial Relationships are extremely significant to logistics is spatial relationships, the location of fixed points in the logistics system with respect to demand and supply points. Spatial relationships are very important to transportation costs, since these costs tend to increase with distance.

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Type of Supply Chain

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Typology of Supply Chain

On the basis of decoupling point (ETO, MTO, ATO, MTS) supply chain Push vs. Pull supply chain Lean vs. Agile supply chain Efficient vs. Responsive supply chain

P:D ratios and differences

P-time (Production time)
The time it takes to pass a product or service through supply chain including the time needed to procure the longest lead time parts and the total manufacturing time

P-time = customer raises order

customer

deliver product to

D-time (Demand time)

The time for which a customer is willing to wait to have their demand fulfilled Short D-times face increased supply chain challenges compared with those who have long D-times.

[expected minimum, expected D-time maximum]

P:D ratios and differences

Practices to cope when P-time D-time

Control Simplify

Optimizing throughput and improving process capability Untangling process flows and reducing product complexity straightening process flows and reducing batch sizes Improving communications and implementing teams Adding customer-specific parts as late as possible Using robots and IT systems

Compres s Integrate

Coordina te Automat

On the basis of OPP / Decoupling point

Source Make Supplier Raw Material
Customer Decoupling Point Customer Decoupling Point

Assemble WIP
Customer Decoupling Point

Deliver Finished Goods

ETO

MTO
Schedule Orders

ATO
Schedule Modules

MTS
Schedule Finished Goods

Long

Customer Lead Time

Short

Design Lead Time

Customer receives product

Procurement Lead Time Production Lead Time Delivery Lead Time Order Lead Time

Fab

Assembly MTS MTS ATO MTO MTO ETO

Stocked Locally Stocked Centrally

Stocked Materials Purchased Materials

Total Fulfillment Lead Time Lon g Short

Push-Pull Strategy

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Push / Pull Boundary

Furniture SC

Grocery SC

Traditional PC Industry

Dell - the Pull-Push boundary

PC SUPPLY CHAINS
Customer Customer Virtual Integration

Distributi on Channels Manufact urer Suppliers

PUL L PUS H
Suppliers

Dell

PUL L PUS H

Typical PC Supply Chain (Compaq, HP, IBM, etc.)

Dell Supply Chain

Efficient supply chain

Parts replenishment made on forecast

Responsive supply chain

ATO

MTS

Assembly made on accurate customer demands

Lean vs Agile Strategy

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Supply chain dynamics Supply chains with different end objectives need to be managed in different ways
Match product characteristics with supply chain characteristics

Designing the Supply Chain

Efficient supply chains are designed for efficiency and low cost by minimizing inventory and maximizing efficiencies in process flow. (Lean) Responsive supply chains focus on flexibility and responsive service and are able to react quickly to changing market demand and requirements. (Agile)

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Functional products
Predictable Few changes Low variety Price stable Long lead-times Low margin

Nature of demand

Innovative products
Unpredictable Many changes High variety Price markdowns Short lead-times High margin

Supply chain Respon Efficie objectives Low throughput times Low cost sive nt

Minimum inventory

Low-cost suppliers

High utilization

Lean supply chain management Mismatch

Deployed inventory

Flexible suppliers

High utilization

Agile Mismatch supply chain management

Matching the supply chain with market requirements

Low implied demand uncertainty

Somewhat certain demand Established goods: e.g. soap powder

Somewhat uncertain demand

High implied demand uncertainty

Purely functional: e.g. petrol

New models of existing goods: Entirely new product: e.g. fashion item e.g. new TV set

Highly efficient

Somewhat efficient Traditional apparel manufacturer

Somewhat responsive Vertically integrated apparel manufacturer

Highly responsive Quick response manufacturer of fashion apparel

Textile mill

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Product Characteristics

C am pbell's Soup L ife cycle C ontribution m argin V ariety Forecast error Stock -out rate Forced m arkdow ns M ake -to-order L T

Fashion

A pparel

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Product Life-Cycle: Soup

1969

1979

1989

1999

2009
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Product Life-Cycle: Fashion

Fall

Winter

Spring
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Margins?

<
Retail Price: $1.39 Retail Price: $139.50
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Variety? New Design?

<
Unchanged over years, only 5% Differed in color, size, style, etc., 95% new
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Forecasting Error?

<
Highly predictable, service level of 98% High forecast error, 40-100% error
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Stockout Rate?

<
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Markdowns?

<
Rare Deep discount in the end of the season
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Two Types of Products

Functional Products (Soup) Demand Uncertainty Life Cycle Risk of Obsolescence Profit Margin Variety Demand volume Low (forecast error) Long Low Low Low High Innovative Products (Fashion clothing) High (forecast error) Short High High High Low

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Efficient vs Responsive

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ENVIRONMENTS BEST SUITED FOR EFFICIENT AND RESPONSIVE SUPPLY CHAINS

Factor Demand Efficient Supply Chains Predictable, low forecast errors Low cost Competitive priorities New-service/product introduction Contribution margins Product variety consistent quality on-time delivery Infrequent Low Low Responsive Supply Chains Unpredictable, high forecast errors Development speed, fast delivery times Customization, volume flexibility variety, top quality Frequent High High

Factor

Efficient Supply Chains

Responsive Supply Chains

Operation strategy

Make-to-stock or standardized Make-to-order, or customized service or services or products; emphasize high products; emphasize variety volumes Low High If needed to enable fast delivery time Shorten aggressively Emphasize fast delivery time, customization, variety, volume flexibility, top quality

Capacity cushion

Inventory investment Low; enable high inventory turns Lead time Shorten, but do not increase costs

Supplier selection

Emphasize low prices, consistent quality, on-time delivery

Lean vs Agile

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Distinguishing attributes Typical products Marketplace demand Product variety Product life cycle Customer drivers Profit margin Dominant costs Stockout penalties Purchasing policy Information enrichment Forecasting mechanism 3/23/13

Lean supply Commodities Predictable Low Long Cost Low Physical costs Long-term contractual Buy materials Highly desirable Algorithmic

Agile supply Fashion goods Volatile High Short Availability High Marketability costs Immediate and volatile Assign capacity Obligatory Consultative

Characteristic Logistics focus Partnerships Key measures Process focus Logistics planning Volumes Key drivers

Lean Eliminate waste Long-term, stable Output measures like productivity and cost

Agile Customers and markets Fluid clusters Measure capabilities, and focus on customer satisfaction

Work standardization, conformance Focus on operator self-management to to standards maximize autonomy Stable, fixed periods Predictable volumes and usage patterns Instantaneous response Unpredictable volumes and usage patterns

Economies of scale - high volumes, Ability to deliver - short and reliable lead low cost Consolidation of global times volumes Ability to respond at short notice Low - generic items High - customized items Close to the integration centre - search for responsiveness

Customisation

Supplier positioning Anywhere - search for low costs

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Part

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Supply Chain Strategy

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CUSTOMER ACCEPTANCE CRITERIA

What to focus? Need or Requirement?

Fitting the SC to the customer or vice versa?

u

Understand the customer Wishes

Understand the Capabilities of your SC Match the Wishes with the Capabilities

Challenge: How to meet n extensive Wishes with n limited Capabilities?

Achieving Strategic Fit:

u u

Fit SC to the customer Understanding the Customer

n n n n n n n

Consistent SCM and Competitive strategies

Range of demand, pizza hut stable Production lot size, seasonal products Response time, organ transplantation Service level, product availability Product variety Innovation Accommodating poor quality

Implied (Demand) Uncertainty for SC

Implied trouble for SC

Issues Affecting Strategic Fit Multiple products and customer segments

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
Shift from responsiveness to efficiency

Competitive changes over time

increased emphasis on variety Internet

The Strategic Fit

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Understanding the Supply Chain: Cost-Responsiveness Efficient Frontier

Hig h
DELL

Responsivene ss

Ef Fr ficie on n tie cy r

WAL-MART

Lo w Hig h

Cost

(Efficiency)

Lo w

Achieving Strategic Fit Uncertainty/Responsiveness Map

Responsive supply chain
Companies try to move Zone of Strategic fit

INTRODUCTION

High Cost

Responsiveness spectrum

of it e F n Zo egic at r t S
MATURING COMMODITY

Efficient supply chain

Low Cost Implied uncertainty spectrum Uncertain demand

Certain demand

The Strategic Fit Framework

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A Framework for Structuring Drivers

for achieving strategic fit in Supply Chain Strategy

Competitive Strategy Supply Chain Strategy

Efficiency

Supply Chain Structure

Transportation Information

Responsiveness

Facilities

Inventory

Sourcing

Pricing

Cross functional drivers

The role of Information

Information exchange is necessary for the most extensive modes of coordination sought in contemporary supply chains. It allows the supply chain to improve simultaneously its efficiency and responsiveness. Information-related decisions

Push vs. pull Extent and modes of information sharing and coordination Forecasting and Aggregate Planning schemes Pricing and revenue management policies Enabling Technologies:

Electronic Data Interchange (EDI): Enables paperless transactions, primarily for backend operations of the SC. The Internet and the WWW. Enterprise Resource Planning (ERP): enables transactional tracking and global visibility of information in the SC. Supply Chain Management (SCM) software: decision support tools.

Drivers of Supply Chain Performance

Facilities places where inventory is stored, assembled, or fabricated production sites and storage sites Inventory raw materials, WIP, finished goods within a supply chain inventory policies Transportation moving inventory from point to point in a supply chain combinations of transportation modes and routes Information data and analysis regarding inventory, transportation, facilities throughout the supply chain potentially the biggest driver of supply chain performance Sourcing functions a firm performs and functions that are outsourced Pricing Price associated with goods and services provided by a firm to the supply chain

Facilities

Role in the supply chain

Components of facilities decisions

the where of the supply chain manufacturing or storage (warehouses)

Location

Role in the competitive strategy

centralization (efficiency) vs. decentralization (responsiveness) other factors to consider (e.g., proximity to customers)

economies of scale (efficiency priority) larger number of smaller facilities (responsiveness priority)

Capacity (flexibility versus efficiency) Manufacturing methodology (product focused versus process focused) Warehousing methodology (SKU storage, job lot storage, cross-docking)

Inventory
Unexpected changes in customer demand (always hard to predict, and uncertainty is growing)

Types of Inventory
Cycle inventory

Average amount of inventory used to satisfy demand between shipments Depends on lot size inventory held in case demand exceeds expectations costs of carrying too much inventory versus cost of losing sales inventory built up to counter predictable variability in demand cost of carrying additional inventory versus cost of flexible production Takes advantage of bargains.

Short product life cycles Product proliferation

Safety inventory

Seasonal inventory

Uncertain supply
Quantity Quality Costs Delivery time

Opportunistic Inventory:

Inventory exists because of a mismatch between supply and demand Source of cost and influence on responsiveness If you move your inventory faster, you dont need as much inventory (inventory velocity) If responsiveness is a strategic competitive priority, a firm can locate larger amounts of inventory closer to customers If cost is more important, inventory can be reduced to make the firm more efficient Trade-off: More inventory increases responsiveness, less inventory increases efficiency (reduces cost).

Shortage

Excess

Transportation

Moves the product between stages in the supply chain Impact on responsiveness and efficiency Faster transportation allows greater responsiveness but lower efficiency Also affects inventory and facilities

If responsiveness is a strategic competitive priority, then faster transportation modes can provide greater responsiveness to customers who are willing to pay for it Can also use slower transportation modes for customers whose priority is price (cost)

Mode(s) of Transportation

Air: fastest but most expensive Truck: Relatively quick, inexpensive and very flexible mode Rail: Inexpensive mode to be used for large quantities Ship: Slowest but often the most economical Pipeline: Used (primarily) for oil and gas Electronic transportation: for goods as music and movies

Route and Network Selection

route: path along which a product is shipped network: collection of locations and routes

Insource or Outsource to some 3PL provider

Transportation Networks

Information

Push (MRP) versus pull (demand information transmitted quickly throughout the supply chain) Coordination and information sharing Forecasting and aggregate planning Extent and modes of information sharing and coordination Pricing and revenue management policies Enabling technologies EDI Internet ERP systems Supply Chain Management software

The connection between the various stages in the supply chain allows coordination between stages Crucial to daily operation of each stage in a supply chain: e.g., production scheduling, inventory levels Allows supply chain to become more efficient and more responsive at the same time (reduces the need for a trade-off)

Sourcing

Pricing

Set of business processes required to purchase goods and services in a supply chain Supplier selection, single vs. multiple suppliers, contract negotiation

Pricing strategies can be used to match demand and supply Firms can utilize optimal pricing strategies to improve efficiency and responsiveness Low price and low product availability; vary prices by response times Pricing and economies of scale Everyday low pricing versus highlow pricing Fixed price versus menu pricing

In-house vs. outsource Supplier evaluation and selection Procurement process

Considerations for Supply Chain Drivers

Driver Inventory Transportation Facilities Information Efficiency (Cost)
Cost of holding Consolidation Consolidation/Dedicated Low cost/slow

Responsiveness
Availability Speed Proximity / Flexibility High cost/streamlined/ reliable

Strategic Scope

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Expanding Strategic Scope

u

Scope of strategic fit

n n n

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:
n n n n n

Intracompany intraoperation scope Intracompany intrafunctional scope Intracompany interfunctional scope Intercompany interfunctional scope Flexible interfunctional scope

Strategic Scope: Intracompany Intraoperation Scope

Supplie rs Competitive Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Manufactu rer Distribut or Retail er Custom er

Strategic Scope: Intracompany Intrafunctional Scope

Supplie rs Competitive Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Manufactu rer Distribut or Retail er Custom er

Strategic Scope: Intracompany Interfunctional Scope

Suppli ers Competitiv e Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Manufact urer Distribu tor Retail er Custom er

Strategic Scope: Intercompany Interfunctional Scope

Suppli ers Competitive Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Manufact urer Distribu tor Retail er Custo mer

Different Scopes of Strategic Fit Across a Supply Chain

Suppli ers Competitive Strategy Product Dev. Strategy Supply Chain Strategy Marketing Strategy Manufact urer Distribu tor Retail er Custo mer

Intracompa ny interfuncti onal

Intercomp any interfunct ional

Intracompan y intrafunctio nal

Intracomp any intraopera tion