Supply Chain Enablers
•
•
•
•
Organizational Infrastructure
Information Technology
Strategic Alliance
Human Resource Management
Supply Chain Enablers
4
3.5
Ranking (4 is Highest Importance)
3
2.5
2
1.5
1
0.5
0
Organizational
Infrastructure
Technology
Supply Chain Enablers
Stategic
Alliance
Human Resource
Management
Organizational Infrastructure
• Coherent business strategy that aligns
business units towards same goals – 32%
• Formal process-flow methodologies to enable
the SCM improvements – 15%
• People committed to and responsible for
cross-functional processes – 14%
• Right process metrics identified to guide
operating units’ performance toward strategic
organizational SCM objective - 13%
Information Technology
• Operations, marketing , & logistics data
coordinated within the company – 30%
• Data readily available to managers, not
embedded in legacy system – 27%
• Operations, marketing, & logistics data
coordinated between companies – 18%
• Linking SCM to ERP systems – 10%
Strategic Alliance
• Expectations clearly stated, understood, and
agreed upon up front – 48%
• Collaborating on supply chain and product
service strategies – 18%
• Top management of partnering companies
interface on a regular basis – 9%
• Top management communicate why strategic
alliances are important and should be
pursued – 8%
Human Resource Management
Enablers
• Source, hire, and select skilled and quality
people at all management levels – 27%
• Find change agents to champion SCM
implementation – 27%
• Compensation and incentives in place for SCM
performance – 14%
• Finding the internal process facilitators
knowledgeable in SCM – 13%
• Appropriate job description and
responsibilities – 12%
Drivers of Supply Chain
Performance
Efficiency
Responsiveness
Supply chain structure
Inventory
Transportation
Facilities
Drivers
Information
Considerations for Supply Chain
Drivers
Driver
Efficiency
Responsiveness
Inventory
Cost of holding
Availability
Transportation
Consolidation
Speed
Facilities
Consolidation /
Proximity /
Dedicated
Flexibility
What information is best suited for
each objective
Information
Functional vs. Innovative Products:
Differences in Demand
Functional
(Predictable)
Innovative
(unpredictable)
Product life cycle
More than 2 years
3 months to 1 years
Contribution margin
5% to 20%
20% to 60%
Product variety
Low (10 to 20
variants per category)
High (often millions of
variants per category
Forecast accuracy
(margin of error)
10%
40% to 100%
Average stockout rate
1% to 2%
10% to 40%
Average forced
markdown
0%
10% to 25%
Delivery Lead time
6 months to 1 year
1 day to 2 week
Physically Efficient vs. Market-Responsive
Supply Chain
Physically Efficient
Process
Market-Responsive
Process
Primary purpose
Supply predictable
Respond quickly to
demand efficiently at the unpredictable demand to
lowest possible cost
minimize stockouts, forced
markdowns, and obsolete
inventory
Manufacturing focus
Maintain high average
utilization rate
Deploy excess buffer
capacity for flexibility
Inventory strategy
Generate high turns &
lower inventory cost
Deploy significant buffer
stock of all stock items
Lead-time focus
Shorten lead time at low
cost
Invest in ways to reduce
lead time
Approach to choosing
suppliers
Select primarily for cost
and quality
Select primarily for speed,
flexibility, and quality
Product-design strategy
Maximize performance at Use modular design to
minimum product cost
postpone product
differentiation
Efficiency-Responsiveness Framework
of Supply Chain
Functional Product
Innovative Products
Efficient
Supply Chain
Responsive
Supply Chain
Match
Mismatch
Mismatch
Match
Zone of strategic fit in supply chain
Responsive Supply
Chain
Responsiveness
Spectrum
Zone of
Strategic Fit
Efficient
Supply Chain
Certain
Demand
Implied
Uncertainty
Spectrum
Uncertain
Demand
Achieving Strategic Fit
• Understanding the Customer
– Lot size
– Response time
– Service level
– Product variety
– Price
– Innovation
Implied
Demand
Uncertainty
The Value Chain: Linking Supply
Chain and Business Strategy
Business Strategy
New Product Marketing
Strategy
Strategy
New
Product
Development
Supply Chain Strategy
Marketing
and
Operations Distribution
Sales
Service
Finance, Accounting, Information Technology, Human Resources
Flows in a Supply Chain
Information
Product
Customer
Funds
Sequential Optimization vs.
Global Optimization
Sequential Optimization
Procurement
Planning
Manufacturing
Planning
Distribution
Planning
Demand
Planning
Global Optimization
Supply Contracts/Collaboration/Information Systems and DSS
Procurement
Planning
Manufacturing
Planning
Source: Duncan McFarlane
Distribution
Planning
Demand
Planning
Order Size
The Dynamics of the Supply Chain
Customer
Demand
Distributor Orders
Retailer Orders
Production Plan
Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
Order Size
The Dynamics of the Supply Chain
Customer
Demand
Production Plan
Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998