objectives of chapters1, 2, 3 - al akhawayn universitya.berrado/mgt5309/mgt5309_ch03.pdf ·...
TRANSCRIPT
3-1© 2007 Pearson Education
Objectives of Chapters1, 2, 3
�Building a Strategic Framework to Analyze a SC: (Ch1,2,3)
– Ch1�Define SC, expresses correlation between SC decisions and a firms performance.
– Ch2� Relationship between SC strategy and Competitive strategy, and the concept of strategic fit,
– Ch3�SC drivers and performance metrics
© 2007 Pearson Education 3-2
Chapter 3
Supply Chain Drivers and Metrics
Supply Chain Management(3rd Edition)
3-3© 2007 Pearson Education
Outline
�Drivers of supply chain performance
�A framework for structuring drivers
�Facilities
�Inventory
�Transportation
�Information
�Sourcing
�Pricing
�Obstacles to achieving fit
3-4© 2007 Pearson Education
Drivers of Supply Chain Performance
�Three logistical drivers:
– Facilities
» places where inventory is stored, assembled, or fabricated
» Two major types: production sites and storage sites
» Decision regarding their role, location, capacity and flexibility have to be made
– Inventory
» raw materials, WIP, finished goods within a supply chain
» inventory policies have to be decided
– Transportation
» moving inventory from point to point in a supply chain
» Many combinations of transportation modes and routes
3-5© 2007 Pearson Education
Drivers of Supply Chain Performance
�Three cross-functional drivers:
– Information
» data and analysis regarding inventory, transportation, facilities throughout the supply chain
» potentially the biggest driver of supply chain performance
– Sourcing
» functions a firm performs and functions that are outsourced
– Pricing
» Price associated with goods and services provided by a firm to the supply chain
» Affect the behavior of the buyer
3-6© 2007 Pearson Education
Drivers of Supply Chain Performance
�Cross-functional drivers have become more
important in increasing the SC surplus.
�These drivers do not act independently but interact
with each other to determine the overall SC
performance.
�Drivers have to be structured appropriately to provide
the desired level of responsiveness/efficiency.
3-7© 2007 Pearson Education
A Framework for
Structuring Drivers
Com petitive Strategy
Supply Chain
Strategy
Efficiency Responsiveness
Facilities Inventory Transportation
Information
Supply chain structure
Cross Functional Drivers
Sourcing Pricing
Logistical Drivers
3-8© 2007 Pearson Education
Facilities
�Role in the supply chain
�Role in the competitive strategy
�Components of facilities decisions
3-9© 2007 Pearson Education
Facilities
�Role in the supply chain
– the “where” of the supply chain
– Location to and from which inventory is transported
– manufacturing or storage (warehouses)
�Role in the competitive strategy
– economies of scale (efficiency priority)
– larger number of smaller facilities (responsiveness priority)
�Example 3.1: Toyota and Honda
3-10© 2007 Pearson Education
Components of Facilities Decisions
�Role
– Production facilities: Flexible vs. dedicated, Product focused vs. functional focused.
– Warehouses and DCs: Cross-docking vs. Storage facilities
�Location
– centralization (efficiency) vs. decentralization (responsiveness)
– other factors to consider (e.g., macroeconomic factors, quality of workers, cost of facility, availability of infrastructure, tax effects…)
�Capacity (flexibility versus efficiency)
�Overall trade-off: Responsiveness versus efficiency
3-11© 2007 Pearson Education
Inventory
�Role in the supply chain
�Role in the competitive strategy
�Components of inventory decisions
3-12© 2007 Pearson Education
Inventory: Role in the Supply Chain
�Inventory exists because of a mismatch between
supply and demand
�Source of cost and influence on responsiveness
�Impact on
– material flow time: time elapsed between when material
enters the supply chain to when it exits the supply chain
– throughput
» rate at which sales to end consumers occur
» I = DT (Little’s Law)
» I = inventory; D = throughput; T = flow time
» Example
» Inventory and flow time are “synonymous” in a supply chain
3-13© 2007 Pearson Education
Inventory: Role in Competitive
Strategy
�If responsiveness is a strategic competitive priority, a
firm can locate larger amounts of inventory closer to
customers
�If cost is more important, inventory can be reduced to
make the firm more efficient
�Trade-off
�Example 3.2 – Nordstrom
3-14© 2007 Pearson Education
Components of Inventory
Decisions
� Cycle inventory– Average amount of inventory used to satisfy demand between shipments
– Depends on lot size
– Trade-off between ordering cost and cost of holding large inventory.
� Safety inventory– inventory held in case demand exceeds expectations, to counter uncertainty.
– costs of carrying too much inventory versus cost of losing sales
� Seasonal inventory– inventory built up to counter predictable variability in demand
– cost of carrying additional inventory versus cost of flexible production
� Level of Product Availability– Fraction of demand that is served on time from product held in inventory
� Overall trade-off: Responsiveness versus efficiency– more inventory: greater responsiveness but greater cost
– less inventory: lower cost but lower responsiveness
3-15© 2007 Pearson Education
Transportation
�Role in the supply chain
�Role in the competitive strategy
�Components of transportation decisions
3-16© 2007 Pearson Education
Transportation: Role in
the Supply Chain
�Moves the product between stages in the supply chain
�Impact on responsiveness and efficiency
�Faster transportation allows greater responsiveness
but lower efficiency
�Also affects inventory and facilities
�Dell example
3-17© 2007 Pearson Education
Transportation:
Role in the Competitive Strategy
�If responsiveness is a strategic competitive priority,
then faster transportation modes can provide greater
responsiveness to customers who are willing to pay
for it
�Can also use slower transportation modes for
customers whose priority is price (cost)
�Can also consider both inventory and transportation to
find the right balance
�Example 3.3: Laura Ashley
3-18© 2007 Pearson Education
Components of
Transportation Decisions
�Mode of transportation selection
– air, truck, rail, ship, pipeline, electronic transportation
– vary in cost, speed, size of shipment, flexibility
�Route and network design
– network: collection of transportation modes, locations and routes
– route: path along which a product is shipped
– Direct supply vs. intermediate consolidation points
– Supply and Design points to be included in a single run
– Set of transportation modes to be used
� In-house or outsource
�Overall trade-off: Responsiveness versus efficiency
3-19© 2007 Pearson Education
Information
�Role in the supply chain
�Role in the competitive strategy
�Components of information decisions
3-20© 2007 Pearson Education
Information: Role in
the Supply Chain
�The connection between the various stages in the
supply chain – allows coordination between stages
�Crucial to daily operation of each stage in a supply
chain – e.g., production scheduling system, warehouse
mgt system
3-21© 2007 Pearson Education
Information:
Role in the Competitive Strategy
�Allows supply chain to become more efficient and
more responsive at the same time (reduces the need
for a trade-off)
�Information technology
�What information is most valuable?
�Example 3.5: Dell
3-22© 2007 Pearson Education
Components of Information
Decisions
�Push (MRP) versus pull (demand information transmitted quickly throughout the supply chain)
�Coordination and information sharing
�Forecasting and aggregate planning
�Enabling technologies– EDI– Standards to electronically exchange info between and within
businesses
– Internet communication between and within stages of the SC
– ERP systems—real time transactional tracking within and across SC stages
– Supply Chain Management software—Analytical decision support of information from ERP
– RFID–a RF tag applied to items for tracking
�Overall trade-off: Responsiveness versus efficiency
3-23© 2007 Pearson Education
Sourcing
�Role in the supply chain
�Role in the competitive strategy
�Components of sourcing decisions
3-24© 2007 Pearson Education
Sourcing: Role in
the Supply Chain
�Set of business processes required to purchase goods
and services in a supply chain
�Supplier selection, single vs. multiple suppliers,
selection criteria, contract negotiation
3-25© 2007 Pearson Education
Sourcing:
Role in the Competitive Strategy
�Sourcing decisions are crucial because they affect the
level of efficiency and responsiveness in a supply
chain
�In-house vs. outsource decisions- improving
efficiency and responsiveness
�Example 3.6: Cisco
3-26© 2007 Pearson Education
Components of Sourcing
Decisions
�In-house versus outsource decisions
�Supplier evaluation, selection and negotiation
�Procurement process
�Overall trade-off: Increase the supply chain profits
with little risk
3-27© 2007 Pearson Education
Pricing
�Role in the supply chain
�Role in the competitive strategy
�Components of pricing decisions
3-28© 2007 Pearson Education
Pricing: Role in
the Supply Chain
�Pricing determines the amount to charge customers
for goods and services
�Pricing strategies can be used to match demand and
supply
�Pricing affects significantly the level and type of
demand that the SC will face.
3-29© 2007 Pearson Education
Sourcing:
Role in the Competitive Strategy
�Firms can utilize optimal pricing strategies to improve
efficiency and responsiveness
�Low and steady price and low product availability;
varying prices by response times
�Example 3.7: Amazon
3-30© 2007 Pearson Education
Components of Pricing Decisions
�Pricing and economies of scale
�Everyday low pricing versus high-low pricing
�Fixed price versus menu pricing
�Overall trade-off: Increase the firm profits
3-31© 2007 Pearson Education
Wal-Mart Example
�Competitive strategy: Wal-Mart aims to be a reliable, low-cost retailer for a wide variety of mass-consumption goods.
� SC strategy: Efficiency with an adequate level of responsiveness.
� Inventory: low level of inventory through cross-docking �efficiency
� Transportation: Wal-Mart runs its own fleet� responsiveness.
� Facilities: Centrally located DCs within its network of stores�Efficiency.
� Information: Large investment to share information across the SCall the way to the suppliers� Responsiveness and Efficiency.
� Sourcing: Different sources for different product � Efficiency through economies of scale.
� Pricing: EDLP� Low variability in demand, enable efficiency.
3-32© 2007 Pearson Education
Obstacles to Achieving
Strategic Fit
�Increasing variety of products
�Decreasing product life cycles
�Increasingly demanding customers
�Fragmentation of supply chain ownership
�Globalization
�Difficulty executing new strategies
3-33© 2007 Pearson Education
Summary
�What are the major drivers of supply chain
performance?
�What is the role of each driver in creating strategic fit
between supply chain strategy and competitive strategy
(or between implied demand uncertainty and supply
chain responsiveness)?
�What are the major obstacles to achieving strategic fit?
�In the remainder of the course, we will learn how to
make decisions with respect to these drivers in order to
achieve strategic fit and surmount these obstacles
3-34© 2007 Pearson Education
Case Study: Seven-Eleven Japan Co.
1. A CONVENIENCE STORE CHAIN ATTEMPTS TO BE RESPONSIVE AND PROVIDE CUSTOMERS WHAT THEY NEED, WHEN THEY NEED IT, WHERE THEY NEED IT. WHAT ARE SOME DIFFERENT WAYS THAT A CONVENIENCE STORE SUPPLY CHAIN CAN BE RESPONSIVE? WHAT ARE SOME RISKS IN EACH CASE?
2. SEVEN-ELEVEN'S SUPPLY CHAIN STRATEGY IN JAPAN CAN BE DESCRIBED AS ATTEMPTING TO MICRO-MATCH SUPPLY AND DEMAND USING RAPID REPLENISHMENT. WHAT ARE SOME RISKS ASSOCIATED WITH THIS CHOICE?
3. WHAT HAS SEVEN-ELEVEN DONE IN ITS CHOICE OF FACILITY LOCATION, INVENTORY MANAGEMENT, TRANSPORTATION, AND INFORMATION INFRASTRUCTURE TO DEVELOP CAPABILITIES THAT SUPPORT ITS SUPPLY CHAIN STRATEGY IN JAPAN?
3-35© 2007 Pearson Education
Case Study: Seven-Eleven Japan Co.
4. SEVEN-ELEVEN DOES NOT ALLOW DIRECT STORE DELIVERY IN JAPAN, WITH ALL PRODUCTS FLOWING THROUGH ITS DISTRIBUTION CENTER. WHAT BENEFIT DOES SEVEN-ELEVEN DERIVE FROM THIS POLICY? WHEN IS DIRECT STORE DELIVERY MORE APPROPRIATE?
5. WHAT DO YOU THINK ABOUT THE 7DREAM CONCEPT FOR SEVEN-ELEVEN JAPAN? FROM A SUPPLY CHAIN PERSPECTIVE IS IT LIKELY TO BE MORE SUCCESSFUL IN JAPAN OR THE UNITED STATES? WHY?
6. SEVEN-ELEVEN IS ATTEMPTING TO DUPLICATE THEIR SUCCESSFUL JAPANESE SUPPLY CHAIN STRUCTURE IN THE UNITED STATES WITH THE INTRODUCTION OF CDCS. WHAT ARE THE PROS AND CONS OF THIS APPROACH? KEEP IN MIND THAT STORES ARE ALSO REPLENISHED BY WHOLESALERS AND DSD BY MANUFACTURERS.
7. THE UNITED STATES HAS FOOD SERVICE DISTRIBUTORS LIKE MCLANE THATALSO REPLENISH CONVENIENCE STORES. WHAT ARE THE PROS AND CONS TOHAVING A DISTRIBUTOR REPLENISH CONVENIENCE STORES VERSUS A COMPANY LIKE SEVEN-ELEVEN MANAGING ITS OWN DISTRIBUTION FUNCTION?