eClockspeed-based Principles
for Supply Chain Design*
Professor Charles Fine
Massachusetts Institute of Technology
Sloan School of Management
Cambridge, Massachusetts 02142
January 2001
charley@mit.edu
http://www.clockspeed.com
Tel: 1-617-253-3632, Fax: 1-617-258-7579
*Based in part on Clockspeed: Winning Industry Control in the Age of Temporary Advantage,
by Charles H. Fine, Persues Books, 1999.
*
c MIT
2000
clockspeed.com
eClockspeed-based Principles
for Value Chain Design
*
c MIT
2000
clockspeed.com
1. Fruit Flies & Temporary Advantage
(defs, Intel, dependence, Helix, acceleration)
2. Supply Chain Design & 3-DCE
(architectures, dependencies, core comps,
make/buy, mapping, decision process)
3. eBusiness Phenomena:
Business Model Innovation
(e-tailing, B2B=mkts+e2e+NPD,
CPM, free info flow)
*
Value Chain Design in a Fast-Clockspeed World:
Study the Industry Fruitflies
c MIT
2000
clockspeed.com
Evolution in
the natural world:
Evolution in
the industrial world:
FRUITFLIES
evolve faster than
MAMMALS
evolve faster than
REPTILES
INFOTAINMENT evolves faster
THE KEY TOOL:
Cross-SPECIES
Benchmarking
of Dynamic Forces
than
MICROCHIPS evolve faster than
AUTOS evolve faster than
AIRCRAFT evolve faster than
MINERAL EXTRACTION
THE KEY TOOL:
Cross-INDUSTRY
Benchmarking
of Dynamic Forces
INDUSTRY CLOCKSPEED IS A COMPOSITE: *
OF PRODUCT, PROCESS, AND ORGANIZATIONAL
CLOCKSPEEDS
c MIT
2000
clockspeed.com
Automobile INDUSTRY CLOCKSPEED
THE
Automobile
product technology
THE
Automobile
PRODUCTION
PROCESS
process technology
THE
Automobile
MANUFACTURING
COMPANY
organization
Automobile CLOCKSPEED IS A MIX OF
ENGINE, BODY & ELECTRONICS
*
c MIT
2000
clockspeed.com
Automobile
ENGINE
BODY
ELECTRONICS
slow clockspeed
medium clockspeed
fast clockspeed
ISSUE: MOST AUTO FIRMS OPERATE AT
ENGINE OR BODY CLOCKSPEEDS; IN THE
FUTURE THEY WILL NEED TO RUN
AT ELECTRONICS CLOCKSPEED.
*
MIT
The Strategic Leverage of Supply Chain Design:c2000
Who let Intel Inside?
clockspeed.com
1980: IBM designs a product, a process, & a supply chain
Customers
Intel
IBM
Intel Inside
Microsoft
The Outcome:
A phenomenonally successful product design
A disastrous supply chain design (for IBM)
LESSONS FROM A FRUIT FLY:
THE PERSONAL COMPUTER
*
c MIT
2000
clockspeed.com
1. BEWARE OF INTEL INSIDE
(Regardless of your industry)
2. MAKE/BUY IS NOT ABOUT WHETHER IT IS
TWO CENTS CHEAPER TO OUTSOURCE
3. SUPPLY CHAIN DESIGN CAN DETERMINE
THE FATE OF COMPANIES AND INDUSTRIES,
AND OF PROFIT AND POWER
4. THE LOCUS OF SUPPLY CHAIN CONTROL
CAN SHIFT IN UNPREDICTABLE WAYS
*
Vertical Industry Structure
with Integral Product Architecture
c MIT
2000
clockspeed.com
Computer Industry Structure, 1975-85
IBM
DEC
BUNCH
All Products
All Products
All Products
Microprocessors
Operating Systems
Peripherals
Applications Software
Network Services
Assembled Hardware
(A. Grove, Intel; and Farrell, Hunter & Saloner, Stanford)
*
c MIT
2000
clockspeed.com
Horizontal Industry Structure
with Modular Product Architecture
Computer Industry Structure, 1985-95
Microprocessors
Operating Systems
Intel
Intel
Mac
Moto
Microsoft
Peripherals
HP IntelEpson
Applications Software
Microsoft
etc
TI
AMD etc
Mac Unix
Mac
Seagate
Lotus Novell
TIetcetcetc
etc
Network Services
AOL/Netscape Microsoft EDS etc
etc
Assembled Hardware
HP Compaq IBM
Dell
(A. Grove, Intel; and Farrell, Hunter & Saloner, Stanford)
etc
etc
*
THE DYNAMICS OF PRODUCT ARCHITECTURE
c MIT
2000
AND INDUSTRY STRUCTURE:
clockspeed.com
THE DOUBLE HELIX
NICHE
COMPETITORS
INTEGRAL PRODUCT
VERTICAL INDUSTRY
MODULAR PRODUCT
HORIZONTAL INDUSTRY
TECHNICAL
ADVANCES
HIGHDIMENSIONAL
COMPLEXITY
ORGANIZATIONAL
RIGIDITIES
SUPPLIER
MARKET
POWER
PRESSURE TO
DIS-INTEGRATE
PRESSURE TO
INTEGRATE
PROPRIETARY
SYSTEM
PROFITABILITY
Fine & Whitney, “Is the Make/Buy Decision Process a Core Competence?”
THE DOUBLE HELIX
IN OTHER INDUSTRIES
*
c MIT
2000
clockspeed.com
• TELECOMMUNICATIONS-– “MA BELL” was Vertical /Integral
– BABY BELLS & LONG LINES & CELLULAR are
Horizontal/Modular
– Today’s AT&T going back to Vertical /Integral
• AUTOMOTIVE-– Detroit in the 1890’s was Horizontal/Modular
– Ford & GM in the mid 1900’s were Vertical /Integral
– Today’s Auto Industry is going back to Horizontal/Modular
• TELEVISION-– RCA was Vertical /Integral
– 1970’S THROUGH 1990’S were Horizontal/Modular
– Today’s media giants are going back to Vertical /Integral
• BICYCLES-– Safety Bikes to 1890’s boom to Schwinn to Shimano Inside
*
Controlling the Chain Through Distribution:
c MIT
2000
clockspeed.com
The End of P&G Inside ?
Controlling the Channel Through Closeness to Customers:
consumer research, pricing, promotion, product development
Customers
Retailer
Retailer
Retailer
P&G
Controlling the Chain Through Distribution:
Beware of Walmart Outside
*
c MIT
2000
clockspeed.com
Controlling the Channel Through Closeness to Customers:
Chain Proximity
Customers
WalMart
Retailer
Retailer
P&G
Retailer
WalMart Private Label
*
Battle for Channel Control c MIT
2000
Proprietary Systems v. Closeness to Customersclockspeed.com
Customers
Compaq
AMD
Nexgen
Dell
Gateway
Intel
Volatility Amplification in “The Bullwhip Effect” and*c MIT
Clockspeed Amplification in “The Speedup Effect” 2000
clockspeed.com
Customer
Retailer
Distributor
Factory
Tier 1
Equipment
Inventories & Orders fluctuate more
as you look upstream, tough on suppliers, but
Web Site
Developer
PC Maker
Chip maker
Equipment
Maker
Clockspeeds accelerate as you head downstream,
closer to the final customer
Media Supply Chains:
An Industry at Lightspeed
Customers
The box
The Pipe
Phone network:
-copper
-fiber optics
Telephone
Personal
Computer
Television
VCR
Pager
Local
Area
Networks
Cable
Networks
Airwaves:
-broadcast TV
-cellular tel
-satellite/microwave
Retail Outlets
for CD’s, tapes, print:
-Blockbuster
-Seven-Eleven
*
c MIT
2000
clockspeed.com
The Content
Video/Audio:
Movies & Art
& News &
Sports
Print:
newspapers &
magazines &
books
Communication:
voice & video
& email
Education
Shopping
Internet, et al
*
ALL COMPETITIVE ADVANTAGE
IS TEMPORARY
c MIT
2000
clockspeed.com
Ford in the late 1910’s and early 1920’s
GM in the 1950’s and 1960’s
IBM in the 1970’s
Microsoft in the 1990’s
The Greeks, The Romans,
The Ottomans, The Huns
The Yankees, The Cowboys,
The Celtics, The Canadiens
The faster the clockspeed, the shorter the reign
eClockspeed-based Principles
for Value Chain Design
*
c MIT
2000
clockspeed.com
1. Fruit Flies & Temporary Advantage
(defs, Intel, dependence, Helix, acceleration)
2. Supply Chain Design & 3-DCE
(architectures, dependencies, core comps,
make/buy, mapping, decision process)
3. eBusiness Phenomena: Business Model Innov.
(e-tailing, B2B=mkts+e2e+NPD, CPM, free info flow,
SUPPLY CHAIN DESIGN:
Three Components
*
c MIT
2000
clockspeed.com
1. Insourcing/OutSourcing
(The Make/Buy or Vertical Integration Decision)
2. Supplier Selection
(Choice of suppliers and partners for the chain)
3. The Contractual Relationship
(Arm’s length, joint venture, long-term contract,
strategic alliance, equity participation, etc.)
IMPLEMENTATION OF SUPPY CHAIN DESIGN: *c MIT
2000
EMBED IT IN 3-D CONCURRENT ENGINEERINGclockspeed.com
Recipe, Unit Process
PRODUCT
Performance
Specifications
PROCESS
Technology, &
Process Planning
Details,
Strategy
Product Architecture,
Make/Buy components
Time, Space, Availability
SUPPLY CHAIN
Manufacturing System,
Make/Buy processes
ARCHITECTURES IN 3-D
INTEGRALITY VS. MODULARITY
Integral product architectures feature
close coupling among the elements
- Elements perform many functions
- Elements are in close spacial proximity
- Elements are tightly synchronized
- Ex: jet engine, airplane wing, microprocessor
Modular product architectures feature
separation among the elements
- Elements are interchangeable
- Elements are individually upgradeable
- Element interfaces are standardized
- System failures can be localized
-
Ex: stereo system, desktop PC, bicycle
*
c MIT
2000
clockspeed.com
SUPPLY CHAIN ARCHITECTURE
*
c MIT
2000
clockspeed.com
Integral supply-chain architecture
features close proximity among its elements
- Proximity metrics: Geographic, Organizational
Cultural, Electronic
- Example: Toyota city
- Example: Ma Bell (AT&T in New Jersey)
- Example: IBM mainframes & Hudson River Valley
Modular supply-chain architecture features multiple,
interchangeable supplier and standard interfaces
- Example: Garment industry
- Example: PC industry
- Example: General Motors’ global sourcing
- Example: Telephones and telephone service
DESIGNING ARCHITECTURES FOR *c MIT
2000
clockspeed.com
PRODUCTS & SUPPLY CHAINS:
THE NEED FOR ALIGNMENT
SUPPLY CHAIN (Geog., Organ., Cultural, Elec.)
ARCHITECTURE
INTEGRAL
PRODUCT
ARCHITECTURE Jet engines
INTEGRAL
MODULAR
Microprocessors
Mercedes vehicles
Automotive
Supplier Parks
MODULAR
Polaroid
Nortel
Personal Computers
Bicycles
Chrysler Vehicles
Cisco
DESIGNING ARCHITECTURES FOR
PRODUCTS & SUPPLY CHAINS:
MODULARITY VS. OPENNESS
*
c MIT
2000
clockspeed.com
ARCHITECTURAL
PROPRIETARINESS
CLOSED
ARCHITECTURAL
STRUCTURE
INTEGRAL
Pentium Chip
Mercedes Vehicles
SAP ERP
OPEN
Linux
Palm Pilot
IBM Mainframes
software & accessories
MODULAR Microsoft Windows Phones & service
Chrysler Vehicles Web-based ERP
In/Outsourcing: Sowing the Seeds
of Competence Development to develop
dependence for knowledge or dependence for
capacity
Amount of
Work Outsourced
+
Supplier
Capability
Amount of Work
Done In-house
+
Amount of
Supplier
Learning
+
c MIT
2000
clockspeed.com
Independence
Dependence
knowledge
+/or supply
*
+
knowledge
+/or supply
Internal
Capability
+
Amount of
Internal
Learning
+
Dynamics between New Projects
and Core Capability Development
CORE
CAPABILITIES
*
c MIT
2000
clockspeed.com
NEW PROJECTS
(New products,
new processes,
new suppliers)
Leonard-Barton, Wellsprings of Knowledge
Technology Dynamics in the Aircraft Industry:
LEARNING FROM THE DINOSAURS
*
c MIT
2000
clockspeed.com
+
Japanese
appeal as
subcontractors
U.S. firms’
appeal as
subcontractors
+
+
Boeing outsources
Japanese
Industry
Autonomy
to Japan
(Mitsubishi Inside?)
+
Japanese
industry
size &
capability
+
-
U.S.
industry
size &
capability
SOURCEABLE ELEMENTS
*
c MIT
2000
clockspeed.com
SUPPLY CHAIN ELEMENTS
ENGINEERING
ASSY
TEST
CONTROLLER
VALVETRAIN
BLOCK
SUBSYSTEMS
I4
V6
V8
PRODUCTS
*
c MIT
Strategic Make/Buy Decisions:
2000
Assess Critical Knowledge & Product Architecture clockspeed.com
ITEM IS INTEGRAL
ITEM IS MODULAR
DEPENDENT FOR
KNOWLEDGE
& CAPACITY
A
POTENTIAL
OUTSOURCING
TRAP
WORST
OUTSOURCING
SITUATION
DEPENDENT FOR
CAPACITY ONLY
BEST
OUTSOURCING
OPPORTUNITY
CAN
LIVE
WITH
OUTSOURCING
INDEPENDENT FOR
KNOWLEDGE & CAPACITY
OVERKILL
IN
VERTICAL
INTEGRATION
BEST
INSOURCING
SITUATION
Adapted from Fine & Whitney, “Is the Make/Buy Decision Process a Core Competence?”
*
Strategic Make/Buy Decisions:
Also consider Clockspeed & Supply Base Capability
Clockspeed
Fast Slow
Adapted from C. Fine, Clockspeed, Chapter 9
Be Suppliers Ov
erst
k
Few
Many
I
ill
Few Many n
Fast Slow
INDEPENDENT FOR
KNOWLEDGE & CAPACITY
Clockspeed
Fast Slow
Clockspeed
Suppliers
Few Many
W
or
Suppliers
INTEGRAL
Clockspeed
Be
st
O
Few Many ut
Watch
it!
Fast Slow
Suppliers
Few Many
OK
st
Suppliers
Fast Slow
Clockspeed
OK
O
Few Many ut
Clockspeed
MODULAR
DEPENDENT FOR
CAPACITY ONLY
Suppliers
Tr
ap
DEPENDENT FOR
KNOWLEDGE & CAPACITY
Fast Slow
c MIT
2000
clockspeed.com
Strategic Sourcing Assessment
requires evaluation of five key criteria
Customer
Importance:
u
• High
• Medium
• Low
Technology
Clockspeed:
• Fast
• Medium
• Slow
*
c MIT
2000
clockspeed.com
High customer importance and fast clockspeed
means more strategic
u
Competitive position is critical for
assessing value of outsourcing
Competitive
Competitive
Position:
Position:
• Advantage
Advantage
• Parity
Parity
•• Disadvantage
Disadvantage
u
Supply Base Capability
must be present for
successful outsourcing
Capable Suppliers:
• None
• Few
• Many
Architecture:
u
Degree of modularity affects
significantly the ease of
outsourcing
• Integral
• Modular
Model Developed by PRTM, Inc., GM Powertrain & Clockspeed, Inc.
Possible Decisions
(Knowledge & Supply):
• Insource
• Outsource
• Partner/Acquire
• Partial Insource
• Partial Outsource
• Invest
• Spin Off
• Develop Suppliers
Sourcing Strategy Decision Tree High Customer Importance Path
High Customer Importance Path
Fast
Strong
Competitive
Position?
High
Technology
Clockspeed?
Weak
None
Suppliers?
Few
?
Modular
Integral
Integral
Minimal
Outsource
- Equity /
Acquire
Minimal
Outsource Equity/Acqui
re & Partner
Capable
Suppliers ?
Many
Minimal
Outsource
Few
Suppliers?
Minimal
Invest for
Modular
Outsource - Few
Architecture?
Parity,
Maintain
Develop
Architecture
Integral
Internal
Suppliers
?
Mostly
Knowledge
Outsource
(possibly
Integral
- Specify &
develop
Modular
Integrate
suppliers)
Partial
Partial
Outsour
Outsource
Outsource
Partial ce (less
Invest
in
All
Outso integral
Outsource
Internal
urce compon Outsource
All
Capability
All
ents)
Modular
Architecture
Architecture?
Minimal
Outsource Equity /
Acquire and
Partner
Low
Competitive
Position?
None Capable Many
Minimal
Outsource Minimal
Invest
Outsource
- Invest
c MIT
2000
clockspeed.com
Slow
Strong
Weak
Customer
Importance
?
*
None Capable
Many
Model Developed by PRTM, Inc., GM Powertrain & Clockspeed, Inc.
*
Sourcing Strategy Decision Tree Low Customer Importance Path
High
Customer
Importance?
Fast
Competitive
Position?
Strong
Non
Capable Many
e
Suppliers?
Architecture
Modular
?
Integral
Minimal
Outsourc
eDevelop
Suppliers
Architecture
?
Minimal
Outsourc
eMaintain
Modular
Partial
Outsource
Partial
Outsource
Low Customer Importance Path
Technology Slow
Clockspeed?
Weak
Minimal
Outsource Develop
Suppliers
Integral
Low
StrongCompetitive Weak
Position?
None Capable Many
Suppliers?
Fe
w
Outsource
All
c MIT
2000
clockspeed.com
None Capable Many
Suppliers?
Few
Outsourc
e All
Mostly
Outsource,
Develop
More
Suppliers
and/or
Some
Integration
Capability
Few
Architecture
Modular
Modular Architecture
?
?
Integral
Spin-off
Minimal
and
Outsourc
Develop
eSupplier
Minimal Develop
s
Outsourc Suppliers
Partial
eOutsourc
Maintain
e
and
Develop
Suppliers
Integral
Model Developed by PRTM, Inc., GM Powertrain & Clockspeed, Inc.
None
Capable
Suppliers?
Develop
Outsource Suppliers
and
All
Outsourc
e
Many
Few
Outsource
All
Develop
Suppliers
and
Outsourc
e All
Data is still
preliminary
*
Actual knowledge work compared to
outcome of Decision Framework
c MIT
2000
clockspeed.com
0%
50%
100%
0%
Percentage of
Knowledge Work that
Should be Controlled
100%
Percentage of Knowledge Work Currently Done
No
Outsourcing
Minimal
OutsourceEquity/Acquire
Minimal & Partner
OutsourceMaintain
Internal
Knowledge
Partial
Outsource
Mostly
Outsource Specify &
Integrate
Mostly
Outsource Develop More
Suppliers
Spin-off and
Develop
Suppliers
Outsource All
Model Developed by PRTM, Inc., GM Powertrain & Clockspeed, Inc.
Every decision requires qualitative and *
quantitative analysis to reach a conclusion
c MIT
2000
clockspeed.com
Knowledge
High
Supply
Qualitative
Value
Qualitative
Strategic
Model
Improve
Economics
Strategic
Importance
Divest/
Outsource
Customer
Importance:
• High
• Medium
• Low
• Fast
• Medium
• Slow
Harvest
Investment
Low
Technology
Clockspeed:
Invest &
Build
Competitive
Position:
• Advantage
• Parity
• Disadvantage
Low
Quantitative
Value
Capable Suppliers:
• None
• Few
• Many
Possible Decisions:
• Integral
• Modular
• Insource
• Outsource
• Partner/Acquire
• Partial Insource
• Partial Outsource
• Invest
• Spin Off
• Develop Suppliers
Engine A
EVA
AS-IS
AS-IS
EVA
COGS
Taxes
BIC
AS-IS
AS-IS
BMK
BIC
NOPAT
Engine B
EVA
GMPT
EVA
Revenue
−.
BIC
AS-IS
PBIT
BIC
AS-IS
Engines
EVA
BIC
Architecture:
High
Quantitative
Financial Model
(Economic
Value Added)
Model Developed by PRTM, Inc., GM Powertrain & Clockspeed, Inc.
Net Assets
BMK
WACC
AS-IS
BIC
BMK
AS-IS
Working
Capital
+.
BMK
X
BIC
−.
AS-IS
Transmissions
EVA
AS-IS
Capital
Charge
AS-IS
.
.
.
Fixed
Assets
Application of the Sourcing Model depends on
*
c MIT
integrality/modularity among Product, Process, & Supply
2000
clockspeed.com
product
knowledge
integral with
process
knowledge?
YES
NO
NO
Product/
process
knowledge
integral with
manufacturing
supply?
NO
NO
Product
Knowledge
Process
Knowledge
YES
NO
YES
Manufacturing
Supply
process
knowledge
integral with
manufacturing
supply?
SUPPLY CHAIN DESIGN IS
THE ULTIMATE CORE COMPETENCY
*
c MIT
2000
clockspeed.com
Since all advantages are temporary,
the only lasting competency is to continuously
build and assemble capabilities chains.
KEY SUB-COMPETENCIES:
1. Forecasting the dynamic evolution of market
power and market opportunities
2. Anticipating Windows of Opportunity
3. 3-D Concurrent Engineering:
Product, Process, Supply Chain
CAPABILITIES
Fortune Favors the Prepared Firm
PROJECTS
PROCESS FOR
SUPPLY CHAIN DESIGN
*
c MIT
2000
clockspeed.com
1. Benchmark the Fruit Flies
DOUBLE
HELIX
2. Map your Supply Chain
-Organizational Supply Chain
BOEING
-Technology Supply Chain
-Competence Chain
3. Dynamic Chain Analysis
at each node of each chain map
4. Identify Windows of Opportunity
5. Exploit Competency Development Dynamics
with 3-D Concurrent Engineering
CAPABILITIES
PROJECTS
*
Supply Chain Mapping
c MIT
2000
clockspeed.com
Organizational Supply Chain
Chrysler
Eaton
casting
supplier
clay
supplier
Technology Supply Chain
engines
valve lifters
casting
manufacturing
process
clay
chemistry
Capability Chain
Supply Chain Management
Quality assurance
NVH engineering
R&D
Underlying Assumption: You have to draw
the maps before you can assess their dynamics.
Product
Design
Architect.
Detailed Modular
Perform.
vs.
Specs
Integral
& Funct.
- Focus
- Architecture
- Technology
Process
Unit
Mfg.Syst
Processes Functnl
Tech.
Cellular.
& Equip.
*
Supply Chain
c MIT
2000
clockspeed.com
S.C.
Architect.
Orgs Set
& Alloc.
of Tasks
Logistics
& Coord
System
Auton vs.
Integrated
A 3-D CE decision model
illustrating the imperative
of concurrency
*
Components of Product, Process, and
Supply Chain Strategy
c MIT
2000
clockspeed.com
Pr
od
t
c
u
s
s
e
• Customer Needs
• Market Segments
• Product Architecture
P
c • Mission Statement
o
r
• Operating Objectives
• Policies & Procedures
-Structural: Bricks, Tech, Org
-Infrastructural:
HR, Business Processes
n
i
a 1. Sourcing: Make/Buy
p
u
S
y
l
p
h
C
2. Supplier Selection
3. Relationship Design
(spot, alliance, equity, etc.)
4. Logistics System Design
5. Inventory management Policies
6. Supplier Management
7. Supply Chain Architecture
Internet Era Phenomena:
eCompetition in Business Model Design
*
c MIT
2000
clockspeed.com
E-tailing:
Attack: Amazon, Webvan
Defend: Walmart.com, Ford.com, Office Depot.com
B2B:
E2E integration: Cisco, Dell
Marketplace Creation:eSteel, Ariba, Freemarkets, Covisint
Product Development: Cisco
Customer as Product Manager:
Product Innovation/Pricing/Design/Spec/Tracking/Delivery:
Dell, Herman Miller, Reflect, iMotors, Fedex, Priceline
Free & Open Digital Content:
Constructive Collaboration : Linux, Lego, Palm Pilot
“Anarchistic Constructive” Conversation: Cluetrain
Ubiquitous Sharing/Theft: Napster, FreeNet, Gnutella
Patterns in
eBusiness Disruption
B2C
B2B
E2E
*
c MIT
2000
clockspeed.com
Disruption
Defense
New Value
Add/Collab.
AMAZON
WEBVAN
iMOTORS
WALMART
FORD
CVS
LIVING.COM
REFLECT.COM
ARRIBA
FREEMARKETS
COVISINT
iPAPER
DELL
NAPSTER
FORD OTD
HERMAN
MILLER
CISCO PDT DEV
LINUX
LEGO
Categorizing Business Webs:
What are the dimensions?
*
c MIT
2000
clockspeed.com
(adapted from Digital Capital, Tapscott, Ticoll, & Lowy, HBSP, 2000)
VALUE INTEGRATION
CONTROL
SELFORGANIZING
LOW
HIGH
Yahoo! Classifieds
Linux
Palm Pilot
Nasdaq
Human Genome Project
Ebay
Amex
AOL
AT&T
USAir Fedex
Amazon
HIERARCHICAL Travelocity
Walmart
E-Trade
Cisco
Dell
P&G Ford
Cisco’s E2E Integration for
Fulfillment & Product Development
c MIT
2000
clockspeed.com
• New product development on-line
with supply base
• Technology Supply Chain Design:
Innovation through Acquisition
Customers
Order info
flows direct to
Cisco and suppliers
*
Cisco
Finished Product flows
direct to customer via
logistics supplier
Contract
Manufacturers
• Single enterprise information system
• Dynamic replenishment, direct
fulfillment, merge in transit
• Customer orders through Cisco
Connection online
Component
Suppliers &
Distributors
*
Cisco’s Value Chain Design
Product
Design
c MIT
2000
clockspeed.com
Process
Design
• minimal prototype iteration
• shared product databases
• highly modular products
• joint with suppliers
• orders go from CCO website to CM’s
• products go from CM’s to customer
via logistics supplier
• order & forecast data online to
supply chain
• innovation through acquisition
• outsourced manufacturing (e.g., Solectron)
• outsourced logistics (e.g., Fedex)
• independent for knowledge in IT system
Supply Chain
Design
*
c MIT
Auto Example: Three Technological Disruptions
2000
clockspeed.com
Each could trigger structural change
Internet-driven eBusiness
Value Chain Restructurings & Disintermediation, B2B marketplace,
Build-to-Order Systems, Modularity & Outsourcing,
Customer Configuration (B2C), End-to-End (E2E) integration
Telematics
Services for
Safety, Navigation, Concierge, Productivity, & Entertainment
Value Chain Implications, e.g., “Nokia & Sprint Inside”
Vehicle Architecture (Open vs. Closed), Revenue Model Impacts
Powertrain Innovations
Hybrid & Fuel Cell Technologies as potentially disruptive and
re-inforcing of industry de-verticalization
*
Supply Chain Design is the Ultimate Core Competency:
c MIT
2000
Competency of passing judgement on all other competencies
clockspeed.com
CHARLIE FINE, MIT SLOAN SCHOOL,
CLOCKSPEED, PERSEUS BOOKS, 1998.
http://web.mit.edu/ctpid/www/people/Fine.html
QUESTIONS
Benchmark the Fruit Flies
• Beware of Intel Inside
• SC control point unstable
(comp, assem, distrib)
• SC structures oscillate
-- int/int or mod/mod
• Cisco is open & modular: PDT & SC
• Dependence/Independence has
positive feedback
•Projects feed capabilities & vice-versa
•eBusiness accelerates Clockspeeds
•All Advantage is Temporary
•Align Architectures in Pdt, Proc, & SC
• Does Amazon need Warehouses?
• Or should they buy Fedex?
• Can Delphi be the Cisco of mobile media?
• Can Ford be the Dell of Cars?
• Is Dell done innovating?
• How can P&G get tree-to-toilet
time down to seven days?
• What comes after open & modular?
• When will brick/click integration pay?
• When not?
ral
eg
Int
al/
ic
ert
Product
V
DOUBLE
Process
BOEING
Dependency
HELIX
r
dula
Hor
izo
/Mo
ntal
CAPABILITIES
PROJECTS
Supply Chain
*
All Conclusions are Temporary
c MIT
2000
clockspeed.com
Clockspeeds are increasing almost everywhere
eCommerce is a clockspeed driver
Supply chain design is a key competency
Study of eFlies can help with crafting strategy