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SUPPLY CHAIN

AWARENESS
LOCAL WORKSHOP

1
Logistics Training International Ltd
OBJECTIVES

Understand the supply chain process and sub-processes


Identify how material flows through a supply chain
Map and analyse a supply chain
Utilise the supply chain decision framework
Demonstrate how inventory impacts the supply chain
Demonstrate how warehousing impacts the supply chain
Demonstrate how transport impacts the supply chain
Demonstrate how information drives supply chain
performance
Utilise facility location models

SCA:2
SUPPLY CHAIN CONCEPTS

What a supply chain is

Why it is important and how it has developed

How the supply chain works or doesnt

Supply chain audit

Core material flow concepts

SCA:3
INVENTORY CONCEPTS
Why hold inventory

Identifying important inventory

Forecasting issues

Safety stock determination

Order systems

Impact of lead times

Role of inventory in the supply chain

SCA:4
WAREHOUSING CONCEPTS

Purpose of warehousing

Warehouse analysis

Warehouse methods

Handling and storage equipment

Layout planning

Role of warehousing in the supply chain

SCA:5
TRANSPORT CONCEPTS

Mode selection

Inter-modal co-ordination

Planning of primary transport

Control of transport

Role of transport in supply chain

SCA:6
NETWORK CONFIGURATION

Supply chain decision framework

Facility location methods

SCA:7
INFORMATION CONCEPTS

Role of information in supply chain

Major IT enablers

Impact of e-business

SCA:8
THE SUPPLY CHAIN
SUPPLY PRIMARY GOODS FLOW DEMAND
PURCHASE I PRODUCTION I DISTRIBUTIONI MARKETING

BUY MAKE MOVE SELL

INFORMATION FLOWS

RAW WORK IN FINISHED


MATERIALS PROGRESS GOODS
SUPPLIERS RECYCLING GOODS FLOW ULTIMATE
SUPPLIER CONSUMER

I = INVENTORY
SCA:9
Supply Chain Management

Supply chain is
not a FUNCTION
to a limited team,
its a PROCESS

Process that integrates, co-ordinates and controls the


movement of materials, finished inventory and related
information; from suppliers through a company; to meet
consumer requirements.

The linking thing is not the COST, its the DEMAND of the
customer and the AVAILABILITY of the thing in the process.

SCA:10
EFFECTIVE AND EFFICIENT
Effectiveness is doing the right things.
Efficiency is doing things right.

HIGH SURVIVAL
THRIVE
EFFECTIVE TAKEOVER

SLOW
DEATH
DEATH
LOW

LOW HIGH

EFFICIENT

SCA:11
SUPPLY CHAIN PROCESS CYCLES

SOURCE MAKE DELIVERY ORDER


CIRCLE CIRCLE CIRCLE CIRCLE

SUPPLIER MANUFACTURER DISTRIBUTOR RETAILER CUSTOMER

SCA:12
SUPPLY CHAIN PROCESS

PLAN

Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source

Return Return Return

Supplier Return Customer


Suppliers Customers
Supplier Customer
Internal or External Your Company Internal or External

Pipeline management = the restriction of the streamline through supply


chain management in order to meet with the customers requirements.
FOUR PROCESSES OF SCOR 1
Demand/supply planning
Assess supply resources, aggregate
and prioritise demand requirements,
plan inventory, distribution
requirements, production, material, and
rough-cut capacity for all products and
Plan all channel.
Manage planning infrastructure.
Make/buy decisions, supply-chain
configuration, long-term capacity and
resource planning, business planning,
product phase-in/phase-out,
manufacturing ramp-up, end-of-life
management, product-line management.

SCA:14
FOUR PROCESSES OF SCOR 2

Sourcing/material acquisition
Obtain, receive, inspect, hold,
and issue material.

Source Manage sourcing infrastructure


Vendor certification and
feedback, sourcing quality, in-
bound freight, component
engineering, vendor contracts,
initiate vendor payments.

SCA:15
FOUR PROCESSES OF SCOR 3

Production execution
Request and receive material,
manufacture and test product,
package, hold and/or release
product.
Make Manage make infrastructure
Engineering changes, facilities
and equipment, production
status, production quality, shop
scheduling/sequencing, short-
term capacity.

SCA:16
FOUR PROCESSES OF SCOR 4
Order management
Enter and maintain orders, generate quotations,
configure product, create and maintain
customer database, manage allocations,
maintain product/price database, manage
accounts receivable, credits, collections and
invoicing.
Deliver Warehouse management
Pick, pack and configure products, create
customer specific packaging/labeling,
consolidate orders, ship products.
Transport management
Manage traffic, manage freight, manage product
import/export, schedule installation activities,
perform installation, verify performance.
Manage deliver infrastructure
Manage channel business rules, order rules,
manage deliver inventories, manage deliver
quality.
SCA:17
CHAIN OF CHAINS

SOURCE MAKE DELIVER

SOURCE MAKE DELIVER

SOURCE MAKE DELIVER

Multiple Production
Operations within a
Multiple Suppliers Business Multiple Customers
SUPPLY CHAIN MANAGEMENT

Plan Supply Chain

Develop plan that


aligns supply resources
Aggregate all to meet demand
sources Aggregate all
of supply sources of demand

... Entity A Entity B Entity C Entity D Entity E Entity F ...

Deliver Source Make Deliver Source Make


DECOUPLING POINTS
RM MANU- SA FG FG CUSTOMERS
ASSEM
SUPPLIERS FACTURE DELIVERY
BLY
PURCHASED
RAW MATERIALS SUB-ASSEMBLIES FINISHED GOODS
DP
MAKE AND DELIVER TO STOCK 1

DP
MAKE TO STOCK 2

DP
3 ASSEMBLE TO ORDER
DP
4 MAKE TO ORDER
DP
5 PURCHASE AND MAKE TO ORDER

SCA:20
DECOUPLING POINTS
RM MANU- SA FG FG CUSTOMERS
ASSEM
SUPPLIERS FACTURE DELIVERY
BLY
PURCHASED
RAW MATERIALS SUB-ASSEMBLIES FINISHED GOODS
DP
MAKE AND DELIVER TO STOCK 1
FORECAST
DRIVEN DP
ACTIVITY
MAKE TO STOCK 2

DP
3 ASSEMBLE TO ORDER
DP ORDER
4 DRIVEN
MAKE TO ORDER
DP ACTIVITY
5 PURCHASE AND MAKE TO ORDER

SCA:21
OPERATIONS NOT RUNNING
SMOOTHLY
Poor customer service
Changed marketing goals
Changed competitive position
Excessive inventories
Excessive costs
New products
Acquisitions and mergers
Renting of external warehousing
Revision of labour agreements
Under-utilisation of resources
Duplication of activities

SCA:22
COST TO SERVE BALANCE
CHANGE CHANGE
CONDITIONS CUSTOMER
OF SERVICE
SUPPLY OFFER

SOURCE MAKE DELIVER

COST
TO
SERVE

SCA:23
SUPPLY CHAIN THE COMPETITIVE
TOOL
Pressures
on prices

Competition
Consumer Prices

Reducing
Supply Chain Gap
Performance
Material Prices

Globalisation
SCA:24
SUPPLY CHAIN DIFFERENTIATION
Service demands
Increasing Choice
Differentiation
Responsiveness Lead time reduction
Order picking- exact quantities
Pressures
Shorter product life cycles
on prices
New Product Development

Competition
On shelf availability
More frequent deliveries
Delivery windows Consumer Prices
Consolidation Warehouses
Consistent Customer Relationships Supply Chain
Performance
Upstream management and visibility Material Prices
Innovation
Global sourcing Globalisation

SCA:25
SERVICE PERCEPTION AND
EXPECTATION
Nature of Service
on offer Corporate Image

Word of mouth
Personal Needs Past Experience
communication

Expected Service
GAP 6
Perceived Service

GAP 5
Service delivery External communication
to customers

GAP 1
Staffs understanding
GAP 4 of service
requirements
GAP 3
Translation of
perceptions into
service system
GAP 2
Managements
perception of
customer
SCA:26
How a customer moves up in his journey
with 3rd party logistics
COLLABORATION
SHARE
$

LOYALTY
TRUST

RETAINING People buy from people, people DO


SUCCESS NOT buy from the business.

Well never win the business if we


ACQUIREMENT start with collaboration first whereas
we havent got the acquirement yet.

Time SCA:27
9 SUPPLY CHAIN TRENDS
1. Average Services to Tailored Services
Its very dangerous giving an average Service where customers are
overcharged or underserved

2. Confrontation to Collaboration
Massive opportunities in Supply Chains, inventories can be
removed , cycle time reduced

3. Forecast Driven to Order Driven


Share information throughout the Supply Chain, improve forecast
accuracy and move or postpone Decoupling points.

4. Information hoarding to Information sharing.


Unparalleled opportunity in Supply Chains by sharing information
and building trust.

5. Training to Learning
Implementing knowledge based learning removes supervisory
activity and adds value over and above the basic trained skills
SCA:28
9 SUPPLY CHAIN TRENDS
6. Eliminate Cost to Eliminate Waste
Improve the understanding of Supply Chain activities so
activities are carried out that add value, underpin these with
appropriate metrics

7. Efficient to Effective
Strategy has been based on past experience, this is no longer
good enough - be able to change quickly

8. Increase market share to Reducing Cost to Serve


Move away from market share and concentrate your energies on
the most profitable customers

9. Functional Silos to Integrated Processes


Both internal and externally by converting Metrics so individuals
are process orientated not Functional

SCA:29
MAKING EFFECTIVE
SUPPLY CHAIN
DECISIONS

SCA:30
DECISION MAKING FRAMEWORK
PRODUCT
LEADERSHIP

OPERATIONAL COMPETITIVE CUSTOMER


EXCELLENCE STRATEGY INTIMACY

PRODUCT SUPPLY SALES &


DEVELOP CHAIN MARKETING
STRATEGY STRATEGY STRATEGY

COST
TO
SERVE

SUPPLY CHAIN STRUCTURE

INVENTORY INFORMATION FACILITIES TRANSPORT

DRIVERS OF PERFORMANCE
SCA:31
INVENTORY

PIPELINE STOCK

REPLENISHMENT STOCK
REDUCE BY ORDERING
MORE FREQUENTLY
AND HENCE IN SMALLER
QUANTITIES

SAFETY STOCK

PROTECTS AGAINST
UNCERTAINTY
IN SUPPLY
AND DEMAND
RESTRICTS THE FLOW

SCA:32
SUPPLY CHAIN RESPONSE TIME

PROCUREMENT
TO STOCK

Component Subassembly Final


Supplier
Factory Factory Assembly
56+20
5+2
5+2 42+15 +
14+5 21+3 5+2
5+2 Factory
28+4

DELIVERY TO
CUSTOMER

Warehouse Distributor Retailer


5+1 5+1 14+13 = 256+?
5+1 28+27 5+1
5+1 28+27 5+1

SCA:33
SUPPLY CHAIN RESPONSE TIME

Distribution

Moving
Making
Buying
Total Lead
Time
(Source to
Payment)

Order - Raw Materials


Production sub assembly
Work in Progress Inventory
Final Production
FG Inventory (Central)
Transport
FG Inventory (Regional)
Receipt Order to Cash - Payment

SCA:34
SUPPLY CHAIN RESPONSE MATRIX
175

Retail Store
120 10
Distribution Centre
15

95
20 Finished Product Warehouse

5 Bulk
5 Cut Work
10 Fabric
5 Finished Fabrics
55
Grey
15 Fabric

MANUFACTURER
5 Yarn RMS

GARMENT
PRODUCTION
30 10 Yarn FGS

FABRIC

RETAILER
YARN

20 Fibre

10 15 20 10
Process
Lead Time
55
SCA:35
COST AND ADDED VALUE

Delivery to
DC Customer
Stock
Raw
Material
Stock Finished In
Goods Transit
VALUE ADDED

Production

COST ADDED

SCA:36
PLANNING INVENTORY FLOWS

Flowing stream analogy

Pump or store analogy

Dependant or independent demand

Push or pull

Types of stock

SCA:37
PUSH & PULL ANALOGY
SUPPLY

PUMP OR STORE

VARIABLE
LEVELS
POSSIBLE
INVENTORY

INDIRECT
DIRECT

DEMAND SCA:38
INVENTORY BASIC ISSUES
Achieve a balance which:-
Minimises the costs at an acceptable level of investment.
Provides the desired level of service.

Independent issues:-
How much to order - (What is the order quantity?)
When to order - (What time and frequency?)
Forecasting - (When can I guess about the
above?)
Demand analysis - (What is unique about each
product?)
Order policies - (When to undertake reorder
reviews?)

SCA:39
INVENTORY PLANNING & CONTROL
PLANNING
Basis requirements:
1. The beginning of the year opening stock.
2. The value of forecast demand on an annual basis phased
by month or week.
3. The value of planned receipts on an annual basis phased
by month or week.
4. The calculated value of closing stock at the end of each
month or week through the year.
Development points:
Opening stock
Forecast demand
Phasing of the demand
Planned receipts
SCA:40
INVENTORY CONTROL

CONTROL

v Through the comparison of the actual position of


stock.
v Analysis of the variances in demand and receipt.
v Establish causal factor contribution.
v Assessment of the forward impact on the
remaining length of the plan.
v Service level performance.

SCA:41
MODEL FOR INVENTORY PLANNING
Analyse Demand eg trend, level, frequency, distribution, service level,
ABVC analysis. To be done, line by line.

Analyse Lead Times eg LT demand, supply LT


eg fixed or variable

Establish Forecast System eg simple average, exponential smoothing

Establish When to Order eg demand quantities, lead times, service levels, free
stock

Establish How Much to Order Eg EOQ

Select Order System eg continuous review, periodic review

What Effects Elsewhere? eg purchase, production, warehouse, transport,


marketing
SCA:42
INVENTORY IMPROVEMENTS
Order systems/rol/stock availability

Lead time
Demand
Order policies
Service level (stock availability)
Product lines
Externalise stock holding
Stock holding levels and pipelines effects

SCA:43
FORECAST NEED

SOURCE MAKE DELIVER

SUPPLY CHAIN RESPONSE TIME (T)

DP CUSTOMER ORDER
UNCERTAINTY GAP
CYCLE TIME (D)

IF RATIO T>D THEN NEED TO FORECAST

SCA:44
BETTER PLANS

Reduce T time

Force a match between predictions & reality


Make your customers D time equal your T time
Sell what you forecasted

Simplify your product range

Standardise your product and process

Forecast more accurately

Contingency for forecast errors


Safety stock
Overplanning

SCA:45
DECISION MAKING FRAMEWORK
PRODUCT
LEADERSHIP

OPERATIONAL COMPETITIVE CUSTOMER


EXCELLENCE STRATEGY INTIMACY

PRODUCT SUPPLY SALES &


DEVELOP CHAIN MARKETING
STRATEGY STRATEGY STRATEGY

COST
TO
SERVE

SUPPLY CHAIN STRUCTURE

INVENTORY INFORMATION FACILITIES TRANSPORT

DRIVERS OF PERFORMANCE
SCA:46
NETWORK DESIGN DECISIONS

DESIGN DECISION

FACILITY ROLE FACLILITY LOCATION


What role should each facility play? Where should facilities be located
What processes are performed at each facility?

CAPACITY ALLOCATION MARKET AND SUPPLY ALLOCATION


How much capacity should be allocated here? What market should each facility does ?
Which supply sources should feed each facility?

SCA:47
WAREHOUSE PLANNING

v WHY DO WE NEED A WAREHOUSE?

STOCKPILING

PRODUCTION

PRODUCT MIXING

CONSOLIDATION

DISTRIBUTION

CUSTOMER SERVICE

SCA:48
WAREHOUSE RELATIONSHIPS &
LINKS
Purchasing To hold purchased anticipation or investment
stocks.

Production To store raw materials, components and work in


progress during production. To hold finished
goods after long batch production runs.

Transport The origin/destination of many loads and


therefore of potential cost through time delays.

Marketing To hold goods (especially safety stocks) for


customers supply.

Inventory To ensure stocks are available through linking


with purchase (supplies) and marketing
(customers).

SCA:49
WAREHOUSE METHODS

Storage and how to fill space.

Receiving, pick/select, despatch.

Warehouse objectives:
Maximise storage in cubic terms.
Minimise handling operations.

Warehouse size

Warehouse operations

SCA:50
WAREHOUSE SIZE
Layout involves:
Space for goods and storage equipment
Aisles
Gangways
Other areas
Modular planning
MB

Pallet Pallet
ML

SCA:51
WAREHOUSE OPERATIONS
Goods inwards
Methods by which goods are received
Use of an unloading dock
Stock location criteria in bulk store
Fixed positioning
Random positioning
Order picking methods
Low level picking
High level picking
Station picking
Order picking
Line picking
Zonal picking
Goods outwards

SCA:52
WAREHOUSE OPERATIONAL
PLANNING MODEL
Analyse Stock list eg Demand Volumes/Movements/

What storage requirement? eg Demand/Length of Stay, etc.

Choose truck type and stacking eg Equipment Horizontal/Vertical,


height Racking types, etc.

Draw layout(s) and alter for eg Stanchions/Doors/Flow planning


Building constraints Spaces/Aisles/Gangways, etc.

Calculate labour and truck eg Work Cycle times, etc.


requirements

Test layout eg Bottlenecks/Flow, etc.

Calculate total cost eg Labour/Space/Equipment

Happy Yes eg Transport/Sales/Production


Inventory, etc.
No What effects elsewhere ?
SCA:53
WAREHOUSE IMPROVEMENTS

Why do we need a warehouse?

Method related
Cubic utilisation
Procedures
Equipment related

Systems related

People related

SCA:54
STORAGE

Storage methods - Drive-in / Drive through racking


STORAGE

Storage methods
Adjustable pallet racking
( A.P.R.) - components
upright
beam
bracing
protection
decks/cradles/pallet stops/tie
bars
STORAGE

Storage methods
Factors - Random location
Any free storage location can be
allocated to a SKU
Best utilisation of space
Average stock quantity + 10%
Requires effective management system
STORAGE

Storage methods
Cantilever racking
Long loads
Bar stock
Profiles
Timber
(served by sideloader/4 way
reach trucks)
STORAGE

Storage methods
Pallet live storage - Pallet slave application
STORAGE

Storage methods
Pallet live storage
Gravity / braked rollers
Requires good quality pallets or
use of slave pallets
Automatic FIFO
High throughput speed
Very high storage density
High stock rotation
Orderpicking ( low SKU volume)
Very high cost per pallet position
STORAGE

Storage methods
A.P.R.- Standard

Flexible design (slot


dimensions can be varied)
Served by Reach trucks /
Counterbalanced trucks
Aisles open to multi traffic
Normal floors
TRANSPORT LINKS
Distribution Transport Management
Delivers products to customers.
Provides the link in supply chains.
Relationships/Links

Purchasing Ex Works or Delivered pricing options determine the


handover place/time.
Production Moving sub assemblies/work in progress. JIT incoming
deliveries.
Warehousing Arrival on time. Availability for loading out.
Inventory Stockless warehouses/transhipment centres/outbases.
Marketing Physically delivering customer service (the customer
may only ever see two people from the supplier the
salesman and the delivery driver).

SCA:62
GLOBAL OPERATIONS MODEL

LOGISTICAL
APPROACH

LIABILITY PHYSICAL
NETWORK BASE

THROUGH
FLOW OF TRANSPORT
INFORMATION OPERATION

COMMERCIAL
SYSTEM

SCA:63
GLOBAL OPERATIONS MODEL

PHYSICAL CFS ROAD TERM- TERM- ROAD CFS


SEA TRUNK LEG
BASE CY RAIL INAL INAL RAIL CY

THROUGH CONTR SHIP STOWAGE


LCL INLAND TERMINAL
TRANSPORT POS ROUTE
PACK MOVEMENT OPS
OPERATION INLAND SCHEDULE
C C

DOCUMENT

CUSTOMS
COMMERCIAL LCL INLAND INLAND LCL
& PORT TO PORT &
SYSTEM PACK MOVE MOVE PACK
D D
BILL OF RELEASE
FLOW OF DELIVERY
BOOKING LADING OR INVOICE MANIFEST OF
INFORMATION INSTRUCT
WAYBILL CARGO

LIABILITY
CFS ROAD RAIL TERMINAL SEA CONCEALED
NETWORK

LOGISTICAL INTERMODAL TRANSFORM


PRODUCTION STOCK STOCK
APPROACH DISTRIBUTION & SALE

SCA:64
INFORMATION FLOWS

An interacting system of people, equipment and


procedures, which make relevant information available,
for planning, analysis, implementation and control
Physical Flow

Information Flow

Customers
Raw material

Facilitators (EDI, Barcoding, Internet)

Value Adding (Partnerships, Quality, Quick response)

Time
SCA:65
EPOS
Materials
Usage
Machine Production
Performance Plans Delivery Plans

Manufact-
Supplier Supplier Retail Retail
Factory urers Consumer
Factory Warehouse Warehouse Branch
Warehouse
Stock
Movement Telemarketing
Plans

Supplier Manufacturer Orders Retail


Orders
HQ HQ HQ
Invoices Invoices
Instructions
to pay
Statement of
Account
Bank

SCA:66
FOOD SUPPLY CHAIN
0 012345 678905

Electronic Point of Sale In-store Back Shop Scanning


Scanning at Checkout Computer (Cases) SHOP
(Singles)

Manufacturer Regional
EDI Retail Regional
Warehouse
Warehouse Scanning Scanning (Pallets)
(Pallets) HQ

EDI Retail
HQ
Manufacturer Packaging
HQ Designs
Supplier
EDI HQ
Supplier
Factory
Factory
EDI Supplier Warehouse
Scanning (Pallets)
Scanning (Pallets)
SCA:67
COLLABORATIVE PLANNING

COLLABORATOR A COLLABORATOR B

DATA JOINT
INTERNAL PROCESSES INTERNAL PROCESSES
FLOWS PROCESSES

COLLABORATIVE
SERVER

= FUNCTION

SCA:68
E-BUSINESS
Inventories Information
Physical assets Replaced by Intellectual assets
Closed business systems New collaborative relationships

Increase
Profit
Increase New Markets
Revenue Maximise Customer Value - QSCT
Personalised Marketing increased satisfaction
Convenience 24/7 Order Capture , tracking

Decrease Procurement Exchanges - Communities


Cost Disintermediation - Inventory Reduction - VMI
Speed -EDI/XML- Human/ Paperwork removal
Cut out redundant time Utilisation efficiencies
Self Service Total SC visibility

SCA:69
SUPPLY CHAIN SYNCHRONISATION

PLAN PLAN PLAN


Buying frequency Replenishment frequency Order frequency
Buying quantity Replenishment quantity Order quantity

SOURCE MAKE DELIVER

Shipping quantity Shipping quantity Shipping quantity


Supplier lead time Replenishment fulfilment lead time Order cycle time
Schedule change lead time Manufacturing lead time
Scheduling cycle & horizon Scheduling cycle & horizon
Batch size

SCA:70
LOGISTICS PLANNING STRUCTURE
MODEL FOR Forecast Demand
LOGISTICS PLANNING
Determine Service Constraints

Examine Critical Trade-offs

Determine Suppliers Policy

Locate Production Plant

Locate Warehouses

Locate Transhipment Centres

Determine Stockholding Policy

Determine Transport Requirements

Structure the Management Organisation

Decide on Information Requirements

Evaluate the Network SCA:71


ACHIEVING STRATEGIC FIT
HIGH

AGILE
COST TO SERVE

ZONE OF
OBSTACLES
STRATEGIC PRODUCT VARIETY
FIT PRODUCT LIFE CYCLES
DEMANDING CUSTOMERS
FRAGMENTATION
STRATEGY EXECUTION
GLOBALISATION
LEAN

LOW

CERTAIN UNCERTAIN

IMPLIED DEMAND UNCERTAINTY

SCA:72
LEAN SUPPLY CHAINS

v Supply demand at lowest cost


v Maximise performance at a minimum product cost
v Lower margins because price is a prime customer driver
v Lower manufacturing costs through high utilisation
v Minimise inventory to lower cost
v Reduce lead time but not at the expense of cost
v Select suppliers based on cost and quality
v Greater reliance on low cost modes of transport

SCA:73
AGILE SUPPLY CHAINS

v Respond quickly to demand


v Create modularity to allow postponement of product
differentiation
v Higher margins as price is not a prime customer driver
v Maintain manufacturing capacity flexibility to meet
unexpected demand
v Maintain buffer inventory to meet unexpected demand
v Aggressively reduce lead time even if costs are significant
v Select suppliers based on speed, flexibility and quality
v Greater reliance on responsive modes of transport

SCA:74
KEY POINT

THERE IS NO RIGHT
SUPPLY CHAIN STRATEGY
INDEPENDENT OF THE
COMPETITIVE STRATEGY

THERE IS A RIGHT
SUPPLY CHAIN STRATEGY
FOR A GIVEN
COMPETITIVE STRATEGY

SCA:75
TAILORING SUPPLY CHAINS
Product

To $100K Over $100K

To 500 Over 500

Simple Intermediate Complex

< 1 week 1 - 3 weeks 3 - 6 weeks Extended

Low High

Cut Cable Binnable Cartons Pallets


Characteristics
Annual sales volume (1 of 384
Annual unit volume
Co-ordination requirements
buckets)
Order fulfilment lead time
Destination volume
Handling characteristics

SCA:76
TAILORING SUPPLY CHAINS
384 Buckets Cluster into Six Supply Chains
Important, unique attributes of supporting
pipeline
Systems Co-ordinated staging, marshalling of orders for installers
orders Dedicated installer support

Customer
Cycle shipping
inventory
Stocking points near largest customer locations
replenishment
Rapid Order-specific shipping
response Low cycle time, order entry and material handling

Nuts Ordered and stored in bulk quantities (not individually picked)


and bolts Freely available to installers and marshals in barrels and
suitcases

Slow Dedicated product management with unique pricing


movers guidelines
Inventory held by suppliers
Bulk Independent transportation
cable Dedicated material handling

SCA:77
SUPPLY CHAIN SEGMENTATION
1. Unit value (Low margin? High full-stream cost?)
2. Sales volume (Unit sales per year?)
Nature of relationship Product Strategy and Economics
(Long-standing? Transactional?)
Capacity to draw in others
3. Degree of order co-ordination
(Independent line items? Complete systems?)
Accuracy of delivery timing
15 minute window? Plus or minus 3 days?) Special Interaction Requirements
On site service (Dump? Installation?)
4. Merchandising (Product displays? Promotions?)
Order taking (EDI? In person? Involved?)
Product preparation (Standard? Custom?)
5. Order response time (Hours? Days? Weeks?)
Frequency (Time per day? Irregular?)
Order quantity (Individuals? Truckloads?) Standard Delivery and
6. Product shipment norms (Parcel? Truckload?) Order Requirements
Destination locations (Clustered? Scattered/Rural?)
Packaging (Returnable? Custom?)
Demand patterns (Seasonal? Derived or pulled demand?)
7. Product handling characteristics (Binnable? Bulk?
Handling Requirements
Liquid?)
8. Demand variability (Predictable?
Product substitutability (Unique?High variance?)
Highly
Inventory Requirements
interchangeable?)
Cost of no stock/no delivery (Lost sale? Plant
closure?) SCA:78
SUPPLY CHAIN BARRIERS

STRONG NO
FUNCTIONAL SUPPLY CHAIN
BARRIERS THINKING

IMBALANCE
POOR BETWEEN
COMMUNICATION SUPPLY &
DEMAND

INACCURATE
FORECASTS
LACK
CREATE
OF TRUST
MAYHEM &
ANARCHY

SCA:79
WORKING TOGETHER
TO
TO
UNDERSTAND
BREAKDOWN
SUPPLY CHAIN
FUNCTIONAL
PROCESS
BARRIERS TO
TO
BALANCE
SUPPLY &
IMPROVE
DEMAND
COMMUNICATION

TO

BUILD
TRUST BY TO
WORKING
TOGETHER REDUCE
IMPACT OF
INACCURATE
FORECASTS

SCA:80