Supply chain strategies

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1 Supply chain strategies Roberto Pinto Dipartimento di Ingegneria Gestionale, dell Informazione e della Produzione (DIGIP) Università di Bergamo Le principali business challenge di oggi Globalizzazione Volatilità (prezzi, domanda, tassi di cambio, instabilità politica ) Aumento del costo del lavoro Legislazione ambientale e attenzione alla sostenibilità Diminuzione della vita commerciale dei prodotti Aumento della varietà Aumento del potere e della competenza dei clienti Frammentazione delle supply chain Tecnologia 2 1

2 Come affrontare queste sfide? Competitive strategy:defines the set of customer needs that the company seeks to satisfy through its s and services La competitive strategy è definitasullabase di come iclientiprioritizzanole dimensionidi costo, delivery time, gamma, qualità Value proposition (VP) VP differenti richiedono SC differenti 3 Dimensione del valore per il cliente Innovazione Prezzo Servizi aggiuntivi Puntualità della consegna Gamma e disponibilità Relazione, esperienza Brand Design In generale, nessuna aziende può dominare ed essere leader su tuttele dimensionidel valore Le aziende devono necessariemente concentrarsi su alcune dimensioni 4 2

3 Qualche esempio 5 Qualche esempio Adapted from: Simchi-Levi, D. (2010) Company Value proposition Strategic needs Zara High fashion content at reasonableprice, frequent collections refresh Speed to market, localion, the company owns all of its retailing, designing and manufacturing operations GAP Fashion, casual, High volumes, low ion costs Dell experience and customization Configure-to-order, flexibility Apple innovation Focuson design, outsourced manufacturing and logistics Wal-mart Everyday low pricing Cost efficiency Amazon selection and availability Efficient and reliable order fulfillment, efficient distribution system 6 3

4 Come affrontare queste sfide? Clienti differrenti richiedono SC differenti customer segmentation Prodotti differrenti richiedono SC differenti segmentation 7 segmentation Divisionedeiclientiin un numerodiscretodi gruppi. Ognigruppocontieneclienticon caratteristiche omogenee L offertavienedefinitain base al gruppocui è destinata L obiettivo è di estrarre ilmassimovaloreda ciascun gruppo Spoiler warning: this topic may be further addressed in Marketing courses Market Segments Different customers require different supply chains customer segmentation Different s require different supply chains Different characteristics push the strategy in different directions Segmentation 8 4

5 segmentation Spoiler warning: this topic may be further addressed in Marketing courses Different customers require different supply chains customer segmentation Different s require different supply chains Different characteristics push the strategy in different directions Un segmentodi mercatodeveessere: Measurable Accessible by communication and distribution channels Different in its response to a marketing mix Durable, not changing too quickly Substantial enough to be profitable Le principali dimensioni di segmentazione: Geographic Segmentation Psychographic Segmentation Demographic Segmentation Behavioral Segmentation 9 segmentation Spoiler warning: this topic may be further addressed in Marketing courses Different customers require different supply chains customer segmentation Different s require different supply chains Different characteristics push the strategy in different directions Esempio: the clothes and fashion industry Fashion addict: customers that like to shop for the latest trends Sale shopper: more sensitive to price, look for discounts Brand loyal: still price-sensitive, are also motivated by other factors and loyal to the brand Ogni segmento dovrà essere servito con un offerta appropriata 10 5

6 segmentation Spoiler warning: this topic may be further addressed in Marketing courses Ancheiprodottipossonoesseredivisiin segmenti, a seconda dei bisogni dei clienti che vanno a soddisfare Different customers require different supply chains customer segmentation Different s require different supply chains Different characteristics push the strategy in different directions Esempio: car segments in Europa Mini cars Small cars Medium cars Large cars Executive cars Luxury cars Sport coupés Multi purpose cars Sport utility cars (including offroad vehicles) 11 La giustasc per ogniprodotto Different customers require different supply chains customer segmentation Different s require different supply chains Different characteristics push the strategy in different directions Functional s Functional s require efficient SC processes Satisfy basic needs Needs do not change much over time Stable demand High competition Low margins Innovative s Innovative s require responsive SC processes Provide innovative functionalities Differentiation attractsmore customers High margins Competitors react Unstable demand 12 6

7 La giustasc per ogniprodotto Different customers require different supply chains customer segmentation Different s require different supply chains Different characteristics push the strategy in different directions Un prodottopuòesseredefinitofunzionaleo Innovativo Functional Innovative life cycle Long (several years) Medium to short (from few monthsor week to oneyear) Contribution margin Low(5% to 20%) High (20% to 60%) variety Low High Forecast accuracy High Low Stock out rate Low High Lead time for MTO Long (weeks or months) Short (few days) Source: Fisher, Come affrontare queste sfide? Supply chain strategy:determines which processes should be performed in order to pursue the competitive strategy in the most effective way Include decisionicirca le scorte, I trasporti, le operations, il flusso di informazioni 14 7

8 SC efficienti e responsive Different customers require different supply chains customer segmentation Different s require different supply chains Different characteristics push the strategy in different directions Efficient supply chain Responsive supply chain Purpose Manufacturing focus Inventory strategy Lead time focus Approach to supplier selection Supply predictable demand efficiently at the lowest possible cost Maintain high average utilization rate Generate high turnsand minimize inventory Shortenleadtimeaslong asit doesn t increase cost Low cost suppliers Respondquicklyto unpredictable demand to minimize stock outs Deploy excess buffer capacity Deploysignificant buffer stock of components and finished goods Invest aggressively in reducing lead time Fast, reliable, flexible suppliers Source: Fisher, Strategic fit Competitive strategy e supply chain strategy devono essere allineate, perseguendo gli stessi obiettivi Il termine Strategic fit fa riferimento alla consistenza e coerenza tra le priorità dei clienti (competitive strategy) è le capacitàdellasupply chain (SC strategy) 16 8

9 Strategic fit Efficient SC OK MISMATCH Responsive SC MISMATCH OK Functional Innovative Source: Fisher (1997) 17 SC operation strategies It is important to define HOW and WHEN execute the SC processes SC operation strategy Before the orders arrive PUSH strategy After the orders arrive PULL strategy 18 9

10 PUSH-PULL operation strategy at a glance interface ion Receive order Forecastthe demand Forecastthe demand Design/ engin. Procure materials Deliver Pure PULL Procure materials Store Sell Deliver Pure PUSH Procure materials and store comp. Receive order Deliver Hybrid PUSH-PULL 19 PUSH-PULL operation strategy at a glance interface ion Receive order Forecastthe demand Forecastthe demand Design/ engin. Procure materials Deliver waiting time Procure materials Store Sell Procure materials and store comp. Receive order Deliver Deliver Pure PULL Pure PUSH Hybrid PUSH-PULL 20 10

11 SC operation strategies PUSH strategy ion and distributiondecisions are based on long-term forecast Leverages economies of scale, and pools risks of forecast Usually slow toreact to demand changes, because of the inventory in the «pipeline» Risk of obsolescence Risk of bullwhip effect PULL strategy ion and distributiondecisions are demand-driven Companydoes not hold any inventory, and respond to each specific order Requires fast information flow mechanisms Difficult to implement when lead times are long Difficult to take advantage of economies of scale 21 SC operation strategies PUSH supply chain Efficient supply chain The customer is NOT willing to wait for the ion of the goods PULL supply chain The customer is willing to wait for the ion of the goods Responsive supply chain Efficient supply chain Hybrid supply chain Responsive supply chain The customer is willing to wait for a portion of the time required for the ion of the goods 22 11

12 PUSH-PULL operation strategy Order Decoupling Point (CODP) or PUSH-PULL boundary Suppliers PUSH strategy PULL strategy s Low uncertainty Economies of scale Cost efficiency Works with long lead times High variability Speed and flexibility (responsiveness) Postponement Maximize customer response Best with short lead times 23 PUSH-PULL operation strategy: drivers High Adapted from: Simchi-Levi, D. (2010) Demand uncertainty PULL PUSH-PULL PUSH-PULL PUSH Low Low Importanceof economies of scale High 24 12

13 PUSH-PULL operation strategy: drivers High Adapted from: Simchi-Levi, D. (2010) Demand uncertainty PULL PUSH-PULL PUSH-PULL PUSH Low Lead times allowed by the customers Long Short 25 Summary of drivers for operation strategy selection Demand uncertainty (Forecast accuracy) Importance of economies of scale lead time vs customer waiting time Moreover: variety Risk of obsolescence Cost of lost sales Cost of inventory Required service level Rate of innovation / lifecycle length 26 13

14 Other strategies and their alignment The competitive strategy and the supply chain strategymust be aligned with each other, and with other strategies in the company, such as: New development strategies Marketing and sales strategy ICT strategy Finance strategy Human resource strategy 27 References Chopra, S., Meindl, P. (2010). Supply Chain Management (4 th edition), Pearson Fisher, M.L. (1997). What is the right Supply Chain for your? Harvard business Review Simchi-Levi, D. (2010). Operations Rules, The MIT Press 28 14

15 Credits CELS University of Bergamo Roberto Pinto Ph.D Logistics and Supply Chain Specialist

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