278. O you who believe! Be afraid of Allâh and give up
what remains (due to you) from Ribâ (usury) (from now
onward), if you are (really) believers.
279. And if you do not do it, then take a notice of war
from Allâh and His Messenger but if you repent, you shall
have your capital sums. Deal not unjustly (by asking more
than your capital sums), and you shall not be dealt with
unjustly (by receiving less than your capital sums).
280. And if the debtor is in a hard time (has no money),
then grant him time till it is easy for him to repay, but if
you remit it by way of charity, hat is better for you if you
did but know.
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Supply Chain
Strategies
2
Supply-Chain Strategies
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•
•
•
•
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Supply-Chain Management Defined
Understanding Your Industry Model
Business Alignment
Defining Supply Chain Excellence
SCM Ground Rules
A Multi-Disciplinary Approach
 Operations, Finance, IT & eOPS
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What is Supply-Chain
Management?
• Supply-chain is a term that describes
how organizations (suppliers,
manufacturers, distributors, and
customers) are linked together.
• Supply-chain management is a total
system approach to managing the entire
flow of information, materials, and
services from raw-material suppliers
through factories and warehouses to the
end customer.
4
Supply Chain Management
Evolution

Historical operational stages:

From disconnected.




Exclusively focus on growth/cost.
Separately managed functions.
Internal performance measurements.
To integrated.


End-to-end process approach.
Customer focus, profitable growth,
liquidity, functional integration.
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Consumer
T3
Consumer
Web Site
T3
T2
Consumer
OEM 1
T3
T3
T2
T1
T2
T1
Warehouse
Retailer
Consumer
Consumer
Retailer
T3
T2
T1
Tier 1
supplier
T3
T3
Consumer
OEM 2
Consumer
Distributor/Retailer
Consumer
T2
Distributor
Tier2 and 3
Suppliers
Retailer
Consumer
Direct Sales Force
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Supply Chain of a Typical Original Equipment Manufacturer
Overall Strategy

A Supply Chain is fully optimized when:






Bundles of well-priced products/services create
unassailable levels of customer attachment
(acquisition and retention).
Total supply chain costs are at the lowest level.
The supply chain contributes to profitable sales
growth by creating cost/service advantages.
Worldwide effective tax rates are at the lowest
level.
Capital efficiency is at the lowest level.
The supply chain is made flexible to respond to
changes faster than competitors and to stratify7
Supply Chain Issues



The main purpose of the levels in any supply
chain is to add processes to the
product/service.
Another purpose is to absorb the differences
between the stable supply on the upstream side
and the erratic demand on the
downstream(consumer) side.
The synchronization of the supply chain will
optimize efficiency along the chain.
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Matching Supply-Chains
with Products
Efficient
Functional
Innovative
Products
Products
Match
Mismatch
Mismatch
Match
Supply-Chain
Responsive
Supply-Chain
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Supply Chain Excellence

New corporate state of being:

Supply chain excellence requires effective
strategies, sustained management commitment,
and changes in attitude, culture, and organization.
More importantly, it requires superior execution.
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Principles For Supply Chain
Excellence



Formulate a differentiated supply chain
strategy by channel.
For product categories, product channels, and
target customers, develop an operating strategy
that, when executed, makes your supply chain
different from the rest.
Focus on long- and short-term profitability,
liquidity, and growth.
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Principles For Supply Chain
Excellence


Organize your business unit around
major processes or channels, not
functions. Traditional “silos”
separates work and interrupts flows
which leads to inefficiency.
Work collaboratively with
customers, suppliers, partners, and
third parties to change the way
operations perform, viewed, and 12
Principles For Supply Chain
Excellence


Invest/reinvest in supply chain
information technology to manage
flows end-to-end. IT should
support both planning, analysis, and
execution.
Invest/reinvest in supply chain
knowledge, people, skills, and
learning. Supply chain practice is
relatively new. Change is a
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constant, with innovations and
Principles For Supply Chain
Excellence


Operate/manage by product/channel.
Think in terms of product/service
bundles that are sold through
potentially different channels.
Supply chains should be set up and
driven by the characteristics of each
channel.
Outsource parts of the chain for
flexibility and better asset
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management. In many cases,
Principles For Supply Chain
Excellence


Think globally…build
regionally…operate locally. The
best performing supply chains are
managed with centralized planning,
regional approaches, and local
operations.
The most critical principle:
Execution!!! Focus on it, measure it15
Supply Chain Management
Approach

Three items that flow through the
supply chain:



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Three areas of decision-making:




Information
Money
Materials
Materials
Processes
Logistics
Two types of tools:

Information Technology
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12 SCM Ground Rules

1. Build in flexibility.

Supply chain capacity(push things off your books).

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
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
Move fixed to variable costs.
More flexible production methods.
Improved information flows.
Use subcontractors, co-packing, outsourcing.
Operations capability.
Management’s will to change.
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12 SCM Ground Rules continued

2. Plan and measure accurately.

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
Total cost approach – true margins,
profitability by customer segment.
Enterprise-wide planning –
demand-driven and supply-aware;
reduce cycle times; respond
quickly(for high material cost
industries).
Dashboard concept – 5 to 7 metrics
in operational cost, time and
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12 SCM Ground Rules continued

3. Develop logistically separate
operations /supply chains where
appropriate.


Entities: suppliers, manufacturers,
distributors, freight forwarders, contract
carriers, 3rd-party warehousing, 3rd-party
logistics partners, 3rd-party maintenance,
financing companies,
import/export/customs brokers.
Fulfillment channels: direct-home, directbusiness, retailers, value-added resellers,
mass merchandisers, OEMs, service
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centers, integrators.
12 SCM Ground Rules continued

4. Get lean by emphasizing simplicity and
speed. Value Stream Map Current & Future
States

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Reduce uniqueness (parts, designs, suppliers,
processes) and variety(transportation resources,
parts suppliers).
Reduce cycle times and maximize inventory
velocity. Key: information.
Understand where value is captured and eliminate
non-value
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12 SCM Ground Rules continued

5. Optimize Information.



Focus on Time to Benefit and Decision
Support. ERP? Multiple smaller systems?
Take ownership of Customer Information.
Most untapped: not articulated needs.
Replace assets with Information. E.g.
inventory are moved several times before
reaching final destination. Replace physical
movement with digital movement of
customer and product information.
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12 SCM Ground Rules continued


6. Treat customers unequally:
Segment and Stratify. No
unnecessary excellence.
7. Operate Globally.


Economic, time, tax differences.
8. Practice Virtuality (partnering)
and Collaborative
Manufacturing/Management.

Virtuality – attempt to gain scale.
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12 SCM Ground Rules continued

9. Exploit Electronic Commerce.



Collapsing supply chain levels.
E.g. distribution channel.
New channel: many-to-many.
Supply Web – key customers can
have communities of suppliers;
collaboratively plan, forecast,
replenish on a real-time(or near
real-time) basis.
Valued-based differentiation – add
value along product, information,
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12 SCM Ground Rules continued



10. Leverage People.
11. Operationalize New Product Introductions
and Phaseouts.
12. Mass Customize and Postpone.



Commodities vs. highly customizable products.
Downstream flexibility.
E.g. HP printers. Automobile. Amazon.
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Performance Measurement:
Operational

1. Throughput


2. Inventory


the rate at which money is generated by the system
through sales: O2C
all the money that the system has invested in
purchasing things it intends to sell
3. Operating Expenses

all the money that the system spends to turn
inventory into throughput
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