Supply Chain Management

School of Business Logistics

 Supply Chain Strategic Asset
Organisations - Supply Chain (SC) operations
Utility mindset Business differentiator

Dell and Wal-Mart are leaders in this area.

Proactively shaped their SC organizations, processes,
infrastructure and relationships
Dell -beyond PCs/laptops to servers, network
equipment and consumer products.
Wal-Mart pioneered the deployment of leading-edge
technologies to lower transactional and management
costs of materials management
Constitution of the basic supply chain:
Core business processes of Plan, Source, Make, Deliver,
and Return
A supporting infrastructure
Skilled resources
A network of factories and distribution sites
A set of qualified suppliers
A set of buying customers
Factors that influence the complexity of the supply
chain:
global breadth and reach
reliability and responsiveness of its supply base
quality of the product design
position of power in the overall value chain.

How a company configures and manages its supply chain in

light of these factors determines whether it operates a
strategic asset or delivers utility service.
Requirement for converting Supply Chain from a
mere utility to a strategic asset :

Leadership & Customer Solution

Accountability Alignment Simplicity
 Leadership & Accountability
SC executive is responsible for converting the business strategy
into an operations strategy.
What are the business imperatives and priorities:
innovation, cost, service/delivery, quality?
What are true competencies, those services and operations that a
customer will pay a premium for?
What are the current constraints:
Is capital diverted to product development, channel expansion,
mergers/acquisitions?
What are the operating expectations in terms of speed, cost, and
asset utilization?

.
Roadmap:
Defining a clear path through these questions
Establishing the vision
Deploying a concise metrics package that reinforces the
desired outcomes.
Need to demonstrate willingness to maintain accountability-
both within company and external suppliers
 Customer Alignment
Understand how supply chain impacts customers...or how it
can impact customers.

"Better, Cheaper, Now

Building blocks for supply chain configuration.

Ability to integrate supply chain with customer's should be the

differentiator.

Ways to create differentiating value

increase
total asset productivity
decrease end-to-end cash cycle times
more tightly link supply response to customer's demand
Insights to SC configuration.
Work with leading sales executives
Foster a working business relationship with key customers

Toyota Production System (TPS)

Based on lean manufacturing principles that "pull" product
through the supply chain based on demand signals
Constant effort to eliminate "muda" (or waste)
Shorter cycle times with higher process reliability and flexibility.
Jonathan Fahey, "Just in Time Meets Just Right," Forbes, July 5, 2004)

Toyota's efforts to leverage TPS to deliver custom-ordered cars in

near build-to-stock lead times, thereby creating value for its
dealers and customers.
When buying a car, people want a specific model/color/finish
combination.
For example, if the dealer is stocked out of the Solar Yellow color,
the customer either buys his/her second choice, goes to another
dealer, or leaves the system.
Toyota wants to prevent losing or disappointing any potential
customer without increasing inventory investment.
 On analysis of current production processes, modified the
paint process to use self-contained canisters,
This prevented clean-up delays when switching from dark to
light colors.
By Linking dealers to a global network, Toyota can clearly
communicate the current scheduled sequence for inventory
on order and allow dealers to postpone color and finish.
Dealers can now make on-the-fly changes to the next car
allocated in the schedule to their dealership.
Instead of waiting weeks for a custom-color car, the customer
can now get it within days.
Everyone wins with this type of supply chain solution aligned
to customer needs.
 Solution Simplicity
Meeting multiple customers' needs results in a complex
supply chain with multiple, competing order fulfillment
processes.
Propagating supply chain configurations based on each
customer's preference, companies generate
additional overhead
create order conflicts
prevent operations from establishing true core
competencies
Establishing a strategic supply chain requires simplicity,
Driving simplicity requires you to evaluate your network:
Do you have too many nodes to effectively manage?
What points of aggregation exist that could reduce span-of-
control while increasing operating leverage?
Have you simply left assets in place for historic reasons (or
because consolidating them would require tough decisions)?
Have you thought through what your suppliers should be doing
for you...and their underlying capabilities?
How can you merge "like" customer requirements to create
greater scale for your operations?
 Converting SC -----Utility Strategic asset - persistence
Constructive interaction -Sales, R&D, suppliers and customers
Combines leadership, accountability, customer alignment and
simplification as the foundation for day-to-day operations.
Requires work, but the result will be worth it-not only "better,
faster, cheaper, but the ability to create additional
value for your customers and suppliers
5 Building blocks for Supply Chain Strategy:

Operations Strategy
Channel Strategy
Outsourcing Strategy
Customer Service Strategy
Asset Network
Realisation of strategic business objectives and
gaining competitive edge requires alignment of
building blocks with
Business Strategy
Customer Needs
Power position
Align with your Business Strategy:
Core Strategic Vision
What you are
What you will do
What you are not
What you will not do
What are your overall strategic objectives
What value do you deliver to your customers
How does your company differentiate in the marketplace
Source: Shoshanah Cohen & Joseph Roussel, PRTM
 Core Strategic Vision

Customer
Requirements

Market size & Competitive

Competition Situation
Core
Strategic
Vision

Core Financial
Competencies Goals

Key Business
Policies
Basis of Competition:
Competing on Cost
Competing on Innovation
Competing on Service
Competing on Quality

Translating business strategy into an effective plan of action requires

communication and discipline.
4 typical ways that companies competeon innovation, cost, service
and qualityotherwise known as the basis
of competition.
The matrix shows the key supply chain contribution for each strategy.
Primary Strategy Source of Basis of Key Supply Chain
Advantage Competition Contribution
Cost Superb Lowest prices in the Efficient, low-cost
service product category infrastructure

Innovation Brand and unique Desirable and Time to market and

Technology innovative time to volume
Products
Service Cost-efficient Tailored to meet Designed from
operations customer-specific the customer in
needs

Quality Safest, most reliable Products you can Supply chain

Products count on excellence
and quality control
From a supply chain perspective, each basis of
competition requires a
Distinct Structure
Processes
Information Systems
Skills.
2. SC Performance Measure

Traditional Measures
Specific deliverable and resource efficiency in
the areas of :
Customer Service
Cost
Productivity
Asset Utilisation
Quality
Contemporary Measures:
Multi-disciplinary approach to decision-
making in SC domain
Application of Activity based Management &
Costing
Economic Profit Method
Process-based metrics
SCOR
Balanced Score Card
 1.SCOR Model

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2. Logistics Score Board
Financial Performance Measures
Productivity Measures
Quality Measures
Cycle Time Measures

3. Activity Based Costing Technique (ABC)

Diagnostic
Reengineering
Integrated Cost Management System
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4. Economic Value Added Analysis ( EVA)
5. Balanced Score card approach (BSC)
Financial Perspective
Customer Perspective
Internal Business Perspective
Innovative and Learning Perspective

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 SCM Framework - BSC link
SCM Goals Business Process Financial Benefits Financial
Perspective: Perspective:
Waste Reduction Higher profit margin
Time Compression Improved Cash Flow
Flexible Response Revenue Growth
Unit Cost Reduction
Higher Return on Assets

Customer Benefits Customer

Perspective: SCM Improvement - Learning &
Improved Product/Service Growth Perspective
Quality Product / Process innovation
Improved Timeliness Partnership management
Improved Flexibility Information Flows
Improved Value Threats / Substitute

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