bis2005 sessie3b

Introductie Supply Chain Management

4PL

What is a supply chain?

2nd tier

supplier

1st tier (main)

supplierDistributor Retailer

Customer

3 PL 3 PL

Carrier Carrier Carrier Carrier

Orignal

Equipment

Manufacturer

Trailer service

ICT host

Hardware provider

Value chains

the supply chain

Opprtunities & Threats

• Shorter product life cycles

• Customization

• Globalization• Outsourcing

Longer chains, more parties involved,

tougher competitors:

Tougher supply chain management

More product introductions and

products for unfaithful customers:

Tougher competition

Consequenses for ICT

• Handling information of more products• Handling more changes in product information• Handling more customers, and changing

customers (installed base)• Longer chains, more parties: more information

exchange for managing the chain

Weaknesses & Strength

• The ability to succesfully implement contemporary supply chain management principles

• The ability to succesfully implement contemporary supply chain management technology

sustainable competitive advantage

Customer Order Decoupling Point: Make to Stock

2nd tier

supplier

1st tier (main)

supplierDistributor Retailer

Orignal

Equipment

Manufacturer

Make to Stock

Push

Customer Order Decoupling Point: Engineer to Order

2nd tier

supplier

1st tier (main)

supplierDistributor Retailer

Orignal

Equipment

Manufacturer

Engineer to Order

Make to Stock

Customer Order Decoupling Point: Assemble to Order

2nd tier

supplier

1st tier (main)

supplierDistributor Retailer

Orignal

Equipment

Manufacturer

Assemble to order

Assemble to Order

• High volume low cost upstream from CODP• Customization downstream from CODP

Mass customization: Best of both worlds……

Mass customization requires more information technology!

Who is in charge in the value chain?

• The one who interacts with the CUSTOMER!– Walmart– Proctor & Gamble– Nike

• The one who has the unique feature in the PRODUCT or SERVICE!– Intel– Fedex

Competition takes places at the end customer market!

• Choose a market: Target your strategy on end user markets and make it measurable in Key Performance Indicators regarding the customer market.

• Competitive strategies according to Porter– Cost leadership: Price based competition, low production

and logistics costs

– Differentiation: Quality based competition, productportfolio, time to market.

– Focus: Target a niche market

From market strategy to corporate strategy

Market strategy KPI’s!

SC strategy KPI’s!2nd tier

supplier

1st tier (main)

supplierDistributor RetailerOEM

Corporate strategy

KPI’s!OEM

Strategy sec. processes KPI’s!

3 PL

Trans

ICT host

Hardware

Market performance indicators

• Cost leadership: – Price– Total cost of ownership for customer

• Differentiation oriented: – Product quality, – Service level, – After sales services– Delivery time, – Product image.

Supply chain performance

• Cost leadership: – cost of goods sold– overhead costs per unit, consolidated– Obsolescence costs (apparel),– inventory cost (CODP, High Tech)– manufacturing costs (consumer electronics), – cash to cash cycle times (retail).

• Differentiation: – Time to market (Personal computers),– Supply chain leadtime (Mobile phones), – customization (Cars), – Flexibility, productportfolio

Inventory is bad!

Inventory hides problems

Corporate performance

Same as supply chain performance indicators, however

• Beware of the COPD, the upstream KPI’s may differ from the downstream KPI’s (and then the COPD is a tough position) !

• Beware of local optimization: pie sharing versus pie growing!

• Unfortunately…you are in more than one chain, and different chains have different priorities!

WeComp1Comp2Comp3

Fisher’s supply chain fit matrixQuality/Innovative market(differentiation -JvdK)

Commodity market(cost leadership -JvdK)

Responsive

Supply chain

FIT NO FIT

Functional supply chain

NO FIT FIT

Enhancing performance through state of the art SCM concepts

• Postponement : Move the CODP upstream (reduces inventory)!

• Cross Docking: reduces inventory and lead times

• Vendor Managed Inventory: reduces inventory and replenishment costs:

Strategic alliances: fair shares!!!

Enhancing performance through state of the art technology

• Share (market) information through the supply chain: trade inventory for information

• Organize visibility : monitor & alert on KPI’s.

• Plan and schedule according to supply chain KPI’s: Collaborative Planning Forecasting and Replenishment.

• Technology brings new SCM concepts within reach

Benetton’s innovation: postponement

Making wool Wool dyingDistributor Retailerknitting

Benetton’s innovation: postponement

Making wool Wool dyingDistributor RetailerKnitting

Benetton’s score

• Market– Better collection in store (customization)– Lower price– Better response

• Supply chain– Lower inventory costs– Lower obsolescence costs– Higher production costs– Integration with Logistic Service Provider

Dell’s innovation: assemble to internet order

Chips ComponentenComputers

Dell’s score• Market– Low price– Extreem fast delivery– Customization – Market share

• Supply chain– Negative cash to cash cycle time!– Less pie eaters, more pie!– Higher fulfillment cost– Zero inventory– Full supplier and LSP integration, on planning, scheduling and

execution level

Facts & Figures

PC market shares Q4 2003

Dell 16.0 %HP/Compaq 15.5%

Source: Gartner Dataquest

How SCM & Technology becomes a competitive advantage?

Be in chains that are winners on the end user market, measure in end user market KPI’s

Target Supply chain and corporate KPI’s in terms of market KPI’s.

Use state of the art competitive weapons (your competitors do!) :

SCM concepts, if they supports the SC strategyICT, if it supports the SC strategy

Think strategically, pie growing, not pie sharing