Upload
damian-holland
View
212
Download
0
Embed Size (px)
Citation preview
SUPPLY CHAIN STRATEGY
Dr. Debadyuti Das
Associate Professor
Faculty of Management Studies
University of Delhi – 110 007
VALUE CHAIN
THE VALUE CHAIN: LINKING SUPPLY CHAIN AND BUSINESS STRATEGY
3
NewProduct
Development
Marketingand
Sales Operations Distribution Service
Finance, Accounting, Information Technology, Human Resources
Business Strategy
New ProductStrategy
MarketingStrategy
Supply Chain Strategy
COMPETITIVE AND SUPPLY CHAIN STRATEGIES
Competitive strategy: defines the set of customer needs a firm seeks to satisfy through its products and services
Product development strategy: specifies the portfolio of new products that the company will try to develop
Marketing and sales strategy: specifies how the market will be segmented and product positioned, priced, and promoted
4
COMPETITIVE AND SUPPLY CHAIN STRATEGIES
Supply chain strategy: determines the nature of material procurement,
transportation of materials, manufacture of product or creation of service, distribution of product
Consistency and support between supply chain strategy, competitive strategy, and other functional strategies is important
5
EXAMPLES OF SC STRATEGY
Dell’s decision to sell direct. Gateway’s decision to sell PCs through
retailers. Cisco’s decision to use contract
manufacturers. Amazon’s decision to build warehouses to
stock some products and to continue using distributors as a source of other products.
Toyota’s decision to have production facilities in each of its major markets.
ACHIEVING STRATEGIC FIT
Strategic fit: Consistency between customer priorities of
competitive strategy and supply chain capabilities specified by the supply chain strategy
Competitive and supply chain strategies have the same goals
A company may fail because of a lack of strategic fit or because its processes and resources do not provide the capabilities to execute the desired strategy
Example of strategic fit -- Dell 7
HOW IS STRATEGIC FIT ACHIEVED?
Step 1: Understanding the customer and supply chain uncertainty
Step 2: Understanding the supply chain capabilities
Step 3: Achieving strategic fit
8
STEP 1: UNDERSTANDING THE CUSTOMER AND SUPPLY CHAIN UNCERTAINTY
Identify the needs of the customer segment being served
Lot size Response time Variety of products Service level Price of the product Innovation
9
STEP 2: UNDERSTANDING THE SUPPLY CHAIN CAPABILITIES
How does the firm best meet demand? Dimension describing the supply chain is
supply chain responsiveness Supply chain responsiveness -- ability to
respond to wide ranges of quantities demandedmeet short lead timeshandle a large variety of productsbuild highly innovative productsmeet a very high service level
10
STEP 2: UNDERSTANDING THE SUPPLY CHAIN CAPABILITIES There is a cost to achieving
responsiveness Supply chain efficiency: cost of making
and delivering the product to the customer
Increasing responsiveness results in higher costs that lowers efficiency
Cost-responsiveness efficiency frontier Supply chain responsiveness spectrum Second step to achieving strategic fit is
to map the supply chain on the responsiveness spectrum
11
UNDERSTANDING THE SUPPLY CHAIN: COST-RESPONSIVENESS EFFICIENT FRONTIER
12
High Low
Low
High
Responsiveness
Cost
RESPONSIVENESS SPECTRUM
13
Integratedsteel mill
Dell
Highlyefficient
Highlyresponsive
Somewhatefficient
Somewhatresponsive
Hanesapparel
Mostautomotiveproduction
STEP 3: ACHIEVING STRATEGIC FIT
Step is to ensure that what the supply chain does well is consistent with target customer’s needs
Uncertainty/Responsiveness map
Zone of strategic fit
Example: Dell, Barilla
14
ACHIEVING STRATEGIC FIT SHOWN ON THE UNCERTAINTY/RESPONSIVENESS MAP
15uncertainty spectrum
Responsive supply chain
Efficient supply chain
Certain demand
Uncertain demand
Responsiveness spectrum Zone o
f
Strateg
ic Fit
SCM STRATEGIES – EFFICIENT VS. RESPONSIVE Responsive Strategy: ability to
respond to wide ranges of quantities demandedmeet short lead timeshandle a large variety of productsbuild highly innovative productsmeet a very high service level
Efficient Strategy: Focus is on improving efficiency and reducing cost by emphasizing on- procuring in bulk- manufacturing in bulk- distributing in bulk etc. by making use of economies of scale
16
SCM STRATEGIES – EFFICIENT VS. RESPONSIVE Responsive strategy is useful for
products having high level of demand uncertainty, e.g. innovative products (Dell computer, Popular music, Fashion apparel, solar-powered wireless communication devices, mobility devices for children with disability etc.)
Efficient strategy is useful for products having a reasonable level of stable demand, e.g. functional products (Soap, detergent, tooth-paste, rice, wheat etc.) 17
STEP 3: ACHIEVING STRATEGIC FIT
All functions in the value chain must support the competitive strategy to achieve strategic fit
Two extremes: Efficient supply chains (Barilla) and responsive supply chains (Dell)
Two key pointsthere is no right supply chain strategy
independent of competitive strategythere is a right supply chain strategy for a given
competitive strategy 18
PRODUCT-SUPPLY CHAIN MATRIX
Right Supply Chain
Inefficient Supply Chain
Ineffective Supply Chain
Right Supply Chain
19
Functional products
Innovative products
Efficient Strategies Responsive strategies
SC STRATEGY: A DIFFERENT PERSPECTIVE
Push-based supply chain
Pull-based supply chain
Push-Pull supply chain
20
THE OLD PARADIGM: PUSH STRATEGIES
Production decisions based on long-term forecasts
Ordering decisions based on inventory & forecasts
What are the problems with push strategies? Inability to meet changing demand patterns Obsolescence The bullwhip effect:
Excessive inventory Excessive production variability Poor service levels
A NEWER PARADIGM: PULL STRATEGIES
Production is demand driven Production and distribution coordinated with true
customer demand Firms respond to specific orders
Pull Strategies result in: Reduced lead times (better anticipation) Decreased inventory levels at retailers and
manufacturers Decreased system variability Better response to changing markets
But: Harder to leverage economies of scale Doesn’t work in all cases
PUSH AND PULL SYSTEMS
What are the advantages of push systems?
What are the advantages of pull systems?
Is there a system that has the advantages of both systems?
A NEW SUPPLY CHAIN PARADIGM
A shift from a Push System... Production decisions are based on forecast
…to a Push-Pull System Initial portion of the supply chain is replenished
based on long-term forecasts For example, parts inventory may be replenished based on
forecastsFinal supply chain stages based on actual customer
demand. For example, assembly may be based on actual orders.
PUSH-PULL SUPPLY CHAINS
Push-Pull Boundary
PUSH STRATEGY PULL STRATEGY
Low Uncertainty High Uncertainty
The Supply Chain Time Line
CustomersSuppliers
CONSIDER TWO PC MANUFACTURERS:
Build to Stock Forecast demand Buys components Assembles computers Observes demand and
meets demand if possible.
A traditional push system
Build to order Forecast demand Buys components Observes demand Assembles computers Meets demand
A push-pull system
PUSH-PULL STRATEGIES
The push-pull system takes advantage of the rules of forecasting: Forecasts are always wrong The longer the forecast horizon, the worst is the
forecast Aggregate forecasts are more accurate
The Risk Pooling Concept
Delayed differentiation is another example Consider Benetton sweater production
WHAT IS THE BEST STRATEGY?
Pull Push
Pull
Push
I
Computer
II
IV III
Demand uncertainty
(C.V.)
Delivery costUnit price
L H
H
L
Economies of Scale
SELECTING THE BEST SC STRATEGY
Higher demand uncertainty suggests pull Higher importance of economies of scale
suggests push High uncertainty/ EOS not important such
as the computer industry implies pull Low uncertainty/ EOS important such as
groceries implies push Demand is stable Transportation cost reduction is critical Pull would not be appropriate here.
SELECTING THE BEST SC STRATEGY
Low uncertainty but low value of economies of scale (high volume books and CDs) Either push strategies or push/pull strategies might be
most appropriate
High uncertainty and high value of economies of scale For example, the furniture industry How can production be pull but delivery push? Is this a “pull-push” system?
LOCATING THE PUSH-PULL BOUNDARY
The push section: Uncertainty is relatively low Economies of scale important Long lead times Complex supply chain structures
Thus Management based on forecasts is appropriate Focus is on cost minimization Achieved by effective resource utilization –
supply chain optimization
LOCATING THE PUSH-PULL BOUNDARY
The pull section: High uncertainty Simple supply chain structure Short lead times
Thus Reacting to realized demand is important Focus on service level Flexible and responsive approaches
LOCATING THE PUSH-PULL BOUNDARY
The push section requires: Supply chain planning Long term strategies
The pull section requires: Order fulfillment processes Customer relationship management
Buffer inventory at the boundaries: The output of the tactical planning process The input to the order fulfillment process.
LOCATING THE PUSH-PULL BOUNDARY
THANK YOU FORGIVING ME AN OPPORTUNITY