GLOBAL SUPPLY-CHAIN MANAGEMENT

Sameer Mathur, Ph.D.

Agenda
3 Qualities of Top Supply Chains 6 Key Supply Chain Activities Pull versus Push Supply-Chains 3 Components of Supply-Chain Management Supply-Chain Network Structure Supply-Chain Business Processes Managing Supply-Chain Activities Supply-Chain Agility and Resiliency Making Supply-Chain Adaptable Supply-Chain Alignment

Sameer Mathur
smathur.com

Asst. Professor (Marketing) 2009 2013

Ph.D. and M.S. (Marketing) 2003 2009

Supply Chain Networks

Individual companies no longer compete as autonomous entities but as supply-chain networks.

Supply-chain management (SCM): cooperation of

intra and intercompany integration and management.

Top Performing Supply Chains

3 DISTINCT QUALITIES

Agile enough to readily react to sudden changes

in demand or supply.

Adapt over time as market structures and

environmental conditions change.

Align the interests of all members of the supplychain network in order to optimize performance.

6 Key Supply-Chain Activities

Production planning
Purchasing Materials management

Distribution
Customer service Sales forecasting

*These processes are critical to the success of manufacturers, wholesalers, or service providers alike.

Supply Chains: From Push to Pull

Traditional Push model
Raw materials supplier
Manufacturer Distributor Retailer Consumer

Raw materials supplier

Retailer

Consumer

Manufacturer

Distributor

From Push to Pull

Supply Chains: From Push to Pull

Push Model Traditional manufacturers, suppliers, distributors, and marketers have most of the power Pull Model
Driven by e-commerce and internet Less product-centric More focused on the consumer A shift in power from suppliers to consumers

Zaras Global Business Model

Explosive growth worldwide 266 new Zara locations in first 9 months of 2009 (90 of which were in Asia)

Zaras Global Business Model

Encourages occasional shortages to give its products an air of exclusivity. Prefers to follow trends: Fashion at an affordable price. Does not collaborate with big name designers or use multimillion-dollar advertising campaigns.

Zaras Global Business Model

Inditex headquarters Arteixo, Spain
Centralized design, production, distribution

Balance between flexibility and cost: fashion items made by company-owned factories in Spain Concentrated activities in 11,000-square-foot hall where tightly synchronized teams work Managed to release one of hottest trends in just 4 weeks in 2006!

Mini-case: Zara

Supply-Chain Management (SCM)

Three Principle Components 1. Supply-chain network structure 2. Developing supply-chain business processes 3. Managing the supply-chain activities

Supply-Chain Network Structure

Consists of the member firms and the links between these firms

Primary members: carry out value-adding activities

Supporting members: provide resources, knowledge etc for primary members

ex. companies that supply production equipment, print marketing brochures, provide administrative assistance

Supply-Chain Network Structure

Horizontal: number of tiers across the supply chain

Raw material suppliers Company A Company B

Manufacturers Company C Company D

Distributor Company E

Retailer Company F

Vertical: number of companies at each tier.

Horizontal Position: where a company lies between supply chain endpoints.

Supply-Chain Network Structure

Three Structural Dimensions:
Horizontal: number of tiers across the supply chain; long versus short
Vertical: number of suppliers or customers represented within each tier; narrow versus wide The companys horizontal position within the supply chain is near the initial supplier, near the ultimate customer, or somewhere in between

Supply-Chain Business Processes

Business processes: Activities that produce value. Managements task: Integrate these business processes into value delivery network
Customer Relationship Management Managing Returns Customer Service Management

Product Development & Commercialization

Demand Managemen t

Procurement

Order Fulfillment
Manufacturin g Flow Management

Managing the Supply-Chain Activities

Supply-chain management function
a Functional structure a Process structure

The number of business processes that is critical or beneficial to integrate and manage between companies will likely vary.

Managing the Supply-Chain Activities

With the shift from push to pull, SCM has changed - the integration of e-commerce has produced: Greater cost efficiency Distribution flexibility Better customer service The ability to track and monitor shipments

Supply-Chain Agility and Resiliency

Differentiate best companies from rivals. More critical in recent years because sudden shocks to supply chains have become more frequent.

Supply-Chain Agility and Resiliency

Help supply chains recover more quickly from such sudden setbacks.

Key to increasing agility and resilience is building flexibility into the supply-chain structure, processes, and management.

Making Supply Chains Adaptable

Focus Competing basis
Creating supply chains Focus that deliver goods and services to consumers as quickly and inexpensively as possible. A focus on efficiency is not enough agility is a key factor. A focus on efficiency is not enough agility is a key factor. Invest in state-ofthe art technologies. Employ metrics and reward systems. Aimed at boosting supply-chain performance. Able to add and delete products and services as customer needs change. Able to adapt their supply chains to changes in technology and capitalize on new ideas.

Operational excellence

Companies

Customer intimacy Product leadership

Making Supply Chains Adaptable

All companies must align the interests of all the firms in the supply network so that companies optimize the chains performance when they maximize their interests.

Nikon, with the help of UPS, focuses on Supply-Chain Innovation

Needed to redesign distribution network. Decided to outsource this task to UPS Supply Chain Solutions.

MANUFACTURING CENTRES
South Korea Japan

RETAILERS
North America

Indonesia

Caribbean Products are shipped from manufacturing Latin centres to UPS America HQ in Louisville, They are then Kentucky kitted and distributed to retailers

The Result

Digital cameras are Nikons fastest-growing product category Improved supply chain performance & customer service From manufacturing facility to retailer in as little as 2

days

Accurate & timely information throughout supply chain

Supply-Chain Alignment
Goal: Interests of all supply
chain members should be aligned.
Otherwise supply chain performance will be affected. Roles & responsibilities must be carefully defined.

Creating Supply-Chain Alignment

Ways to Align
Risks, costs, and rewards must be equitably shared

Equal access to information along the supply chain is crucial

Use of intermediaries may help ensure interests are aligned

Creating Supply-Chain Alignment

Prerequisite: availability of information - so that all the companies in a supply chain have equal access to forecasts, sales data, and plans. Next: partner

roles and responsibilities must be carefully defined so that there is

no scope for conflict.

Finally: align incentives so that when companies try to maximize returns, they also maximize the supply chains performance.

Nestl
Worlds largest food company $70 billion in annual sales Operations in 200+ countries; 511 factories; 247,000 employees

127,000 different products

In other words, thousands of supply chains!

Nestl Pieces Together its Global Supply Chain

Launched GLOBE (Global Business Excellence) Program aimed at a single set of procurement, distribution, and sales management systems Three baseline goals: harmonize processes standardize data standardize systems

Nestl Pieces Together its Global Supply Chain

Goal: Single

procurement, distribution, sales management system for all 200+ countries

Before: 14 separate SAP systems Cost: $2-4 billion Timeline: 3.5 years

A truly global firm: the first company to operate in hundreds of countries in the same manner as if it operated in one.

Summary
Today, companies compete as Supply-Chain Networks instead of autonomous entities The switch from push to pull models Top-performing supply chains possess: agility, adaptability, alignment. Supply chain Management (SCM) has 3 principle components: Supply-chain network structure

Developing supply-chain business processes

Managing the supply chain activities

Summary
The best companies create supply chains that can respond to sudden and unexpected changes in markets = agility and flexibility are helpful qualities. Companies competing on the basis of operational effectiveness, customer intimacy, or product leadership have different focuses in order to adapt their supply networks. Leading companies aim to align the interests of all the firms in their supply chain with their own to maximize the chains performance.

Summary
3 Qualities of Top Supply Chains 6 Key Supply Chain Activities Pull versus Push Supply-Chains 3 Components of Supply-Chain Management Supply-Chain Network Structure Supply-Chain Business Processes Managing Supply-Chain Activities Supply-Chain Agility and Resiliency Making Supply-Chain Adaptable Supply-Chain Alignment

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