Objectives of Chapters1, 2, 3

Transcription

1 Objectives of Chapters1, 2, 3 Building a Strategic Framework to Analyze a SC: (Ch1,2,3) Ch1 Define SC, expresses correlation between SC decisions and a firms performance. Ch2 Relationship between SC strategy and Competitive strategy, and the concept of strategic fit, Ch3 SC drivers and performance metrics 3-1

2 Supply Chain Management (3rd Edition) Chapter 3 Supply Chain Drivers and Metrics 3-2

3 Outline Drivers of supply chain performance A framework for structuring drivers Facilities Inventory Transportation Information Sourcing Pricing Obstacles to achieving fit 3-3

4 Drivers of Supply Chain Performance Three logistical drivers: Facilities» places where inventory is stored, assembled, or fabricated» Two major types: production sites and storage sites» Decision regarding their role, location, capacity and flexibility have to be made Inventory» raw materials, WIP, finished goods within a supply chain» inventory policies have to be decided Transportation» moving inventory from point to point in a supply chain» Many combinations of transportation modes and routes 3-4

5 Drivers of Supply Chain Performance Three cross-functional drivers: 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» Affect the behavior of the buyer 3-5

6 Drivers of Supply Chain Performance Cross-functional drivers have become more important in increasing the SC surplus. These drivers do not act independently but interact with each other to determine the overall SC performance. Drivers have to be structured appropriately to provide the desired level of responsiveness/efficiency. 3-6

7 A Framework for Structuring Drivers Com petitive Strategy Supply Chain Strategy Efficiency Supply chain structure Logistical Drivers R esponsiveness F acilities Inventory Transportation Inform ation Sourcing Pricing Cross Functional Drivers 3-7

8 Facilities Role in the supply chain Role in the competitive strategy Components of facilities decisions 3-8

9 Facilities Role in the supply chain the where of the supply chain Location to and from which inventory is transported manufacturing or storage (warehouses) Role in the competitive strategy economies of scale (efficiency priority) larger number of smaller facilities (responsiveness priority) Example 3.1: Toyota and Honda 3-9

10 Components of Facilities Decisions Role Production facilities: Flexible vs. dedicated, Product focused vs. functional focused. Warehouses and DCs: Cross-docking vs. Storage facilities Location centralization (efficiency) vs. decentralization (responsiveness) other factors to consider (e.g., macroeconomic factors, quality of workers, cost of facility, availability of infrastructure, tax effects ) Capacity (flexibility versus efficiency) Overall trade-off: Responsiveness versus efficiency 3-10

11 Inventory Role in the supply chain Role in the competitive strategy Components of inventory decisions 3-11

12 Inventory: Role in the Supply Chain Inventory exists because of a mismatch between supply and demand Source of cost and influence on responsiveness Impact on material flow time: time elapsed between when material enters the supply chain to when it exits the supply chain throughput» rate at which sales to end consumers occur» I = DT (Little s Law)» I = inventory; D = throughput; T = flow time» Example» Inventory and flow time are synonymous in a supply chain 3-12

13 Inventory: Role in Competitive Strategy 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 Example 3.2 Nordstrom 3-13

14 Components of Inventory Decisions Cycle inventory Average amount of inventory used to satisfy demand between shipments Depends on lot size Trade-off between ordering cost and cost of holding large inventory. Safety inventory inventory held in case demand exceeds expectations, to counter uncertainty. costs of carrying too much inventory versus cost of losing sales Seasonal inventory inventory built up to counter predictable variability in demand cost of carrying additional inventory versus cost of flexible production Level of Product Availability Fraction of demand that is served on time from product held in inventory Overall trade-off: Responsiveness versus efficiency more inventory: greater responsiveness but greater cost less inventory: lower cost but lower responsiveness 3-14

15 Transportation Role in the supply chain Role in the competitive strategy Components of transportation decisions 3-15

16 Transportation: Role in the Supply Chain 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 Dell example 3-16

17 Transportation: Role in the Competitive Strategy 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) Can also consider both inventory and transportation to find the right balance Example 3.3: Laura Ashley 3-17

18 Components of Transportation Decisions Mode of transportation selection air, truck, rail, ship, pipeline, electronic transportation vary in cost, speed, size of shipment, flexibility Route and network design network: collection of transportation modes, locations and routes route: path along which a product is shipped Direct supply vs. intermediate consolidation points Supply and Design points to be included in a single run Set of transportation modes to be used In-house or outsource Overall trade-off: Responsiveness versus efficiency 3-18

19 Information Role in the supply chain Role in the competitive strategy Components of information decisions 3-19

20 Information: Role in the Supply Chain 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 system, warehouse mgt system 3-20

21 Information: Role in the Competitive Strategy Allows supply chain to become more efficient and more responsive at the same time (reduces the need for a trade-off) Information technology What information is most valuable? Example 3.5: Dell 3-21

22 Components of Information Decisions Push (MRP) versus pull (demand information transmitted quickly throughout the supply chain) Coordination and information sharing Forecasting and aggregate planning Enabling technologies EDI Standards to electronically exchange info between and within businesses Internet communication between and within stages of the SC ERP systems real time transactional tracking within and across SC stages Supply Chain Management software Analytical decision support of information from ERP RFID a RF tag applied to items for tracking Overall trade-off: Responsiveness versus efficiency 3-22

23 Sourcing Role in the supply chain Role in the competitive strategy Components of sourcing decisions 3-23

24 Sourcing: Role in the Supply Chain Set of business processes required to purchase goods and services in a supply chain Supplier selection, single vs. multiple suppliers, selection criteria, contract negotiation 3-24

25 Sourcing: Role in the Competitive Strategy Sourcing decisions are crucial because they affect the level of efficiency and responsiveness in a supply chain In-house vs. outsource decisions- improving efficiency and responsiveness Example 3.6: Cisco 3-25

26 Components of Sourcing Decisions In-house versus outsource decisions Supplier evaluation, selection and negotiation Procurement process Overall trade-off: Increase the supply chain profits with little risk 3-26

27 Pricing Role in the supply chain Role in the competitive strategy Components of pricing decisions 3-27

28 Pricing: Role in the Supply Chain Pricing determines the amount to charge customers for goods and services Pricing strategies can be used to match demand and supply Pricing affects significantly the level and type of demand that the SC will face. 3-28

29 Sourcing: Role in the Competitive Strategy Firms can utilize optimal pricing strategies to improve efficiency and responsiveness Low and steady price and low product availability; varying prices by response times Example 3.7: Amazon 3-29

30 Components of Pricing Decisions Pricing and economies of scale Everyday low pricing versus high-low pricing Fixed price versus menu pricing Overall trade-off: Increase the firm profits 3-30

31 Wal-Mart Example Competitive strategy: Wal-Mart aims to be a reliable, low-cost retailer for a wide variety of mass-consumption goods. SC strategy: Efficiency with an adequate level of responsiveness. Inventory: low level of inventory through cross-docking efficiency Transportation: Wal-Mart runs its own fleet responsiveness. Facilities: Centrally located DCs within its network of stores Efficiency. Information: Large investment to share information across the SC all the way to the suppliers Responsiveness and Efficiency. Sourcing: Different sources for different product Efficiency through economies of scale. Pricing: EDLP Low variability in demand, enable efficiency. 3-31

32 Obstacles to Achieving Strategic Fit Increasing variety of products Decreasing product life cycles Increasingly demanding customers Fragmentation of supply chain ownership Globalization Difficulty executing new strategies 3-32

33 Summary What are the major drivers of supply chain performance? What is the role of each driver in creating strategic fit between supply chain strategy and competitive strategy (or between implied demand uncertainty and supply chain responsiveness)? What are the major obstacles to achieving strategic fit? In the remainder of the course, we will learn how to make decisions with respect to these drivers in order to achieve strategic fit and surmount these obstacles 3-33

34 Case Study: Seven-Eleven Japan Co. 1. A CONVENIENCE STORE CHAIN ATTEMPTS TO BE RESPONSIVE AND PROVIDE CUSTOMERS WHAT THEY NEED, WHEN THEY NEED IT, WHERE THEY NEED IT. WHAT ARE SOME DIFFERENT WAYS THAT A CONVENIENCE STORE SUPPLY CHAIN CAN BE RESPONSIVE? WHAT ARE SOME RISKS IN EACH CASE? 2. SEVEN-ELEVEN'S SUPPLY CHAIN STRATEGY IN JAPAN CAN BE DESCRIBED AS ATTEMPTING TO MICRO-MATCH SUPPLY AND DEMAND USING RAPID REPLENISHMENT. WHAT ARE SOME RISKS ASSOCIATED WITH THIS CHOICE? 3. WHAT HAS SEVEN-ELEVEN DONE IN ITS CHOICE OF FACILITY LOCATION, INVENTORY MANAGEMENT, TRANSPORTATION, AND INFORMATION INFRASTRUCTURE TO DEVELOP CAPABILITIES THAT SUPPORT ITS SUPPLY CHAIN STRATEGY IN JAPAN? 3-34

35 Case Study: Seven-Eleven Japan Co. 4. SEVEN-ELEVEN DOES NOT ALLOW DIRECT STORE DELIVERY IN JAPAN, WITH ALL PRODUCTS FLOWING THROUGH ITS DISTRIBUTION CENTER. WHAT BENEFIT DOES SEVEN-ELEVEN DERIVE FROM THIS POLICY? WHEN IS DIRECT STORE DELIVERY MORE APPROPRIATE? 5. WHAT DO YOU THINK ABOUT THE 7DREAM CONCEPT FOR SEVEN-ELEVEN JAPAN? FROM A SUPPLY CHAIN PERSPECTIVE IS IT LIKELY TO BE MORE SUCCESSFUL IN JAPAN OR THE UNITED STATES? WHY? 6. SEVEN-ELEVEN IS ATTEMPTING TO DUPLICATE THEIR SUCCESSFUL JAPANESE SUPPLY CHAIN STRUCTURE IN THE UNITED STATES WITH THE INTRODUCTION OF CDCS. WHAT ARE THE PROS AND CONS OF THIS APPROACH? KEEP IN MIND THAT STORES ARE ALSO REPLENISHED BY WHOLESALERS AND DSD BY MANUFACTURERS. 7. THE UNITED STATES HAS FOOD SERVICE DISTRIBUTORS LIKE MCLANE THAT ALSO REPLENISH CONVENIENCE STORES. WHAT ARE THE PROS AND CONS TO HAVING A DISTRIBUTOR REPLENISH CONVENIENCE STORES VERSUS A COMPANY LIKE SEVEN-ELEVEN MANAGING ITS OWN DISTRIBUTION FUNCTION? 3-35