Supply chain management Collaboration

SUPPLY CHAIN SUPPLY CHAIN MANAGEMENTMANAGEMENT

Pia Bosma MScPia Bosma MSc

Content Lecture Content Lecture CollaborationCollaboration

Basics of Supply Chain Management

The evolving Supply Chain

Analysing Relationships Questions

Inter-organizational Relationships

Assignments

What Is the Supply Chain?

Also referred to as the logistics network Suppliers, manufacturers, warehouses,

distribution centers and retail outlets – “facilities”

and the

Raw materials Work-in-process (WIP) inventory Finished products

that flow between the facilities

Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material Costs

Transportation

Costs

TransportationCosts

TransportationCostsInventory CostsManufacturing Costs

The Supply Chain – Another View

Suppliers Manufacturers Warehouses &Distribution Centers

Customers

Material CostsTransportation

CostsTransportation

Costs TransportationCostsInventory CostsManufacturing Costs

PlanPlan Source Source Make Make Deliver Deliver Buy Buy

Illustration of the supply chain network, using Braun Oral-B as an exampleIllustration of the supply chain network, using Braun Oral-B as an example

What Is Supply Chain Management (SCM)?

A set of approaches used to efficiently integrate– Suppliers– Manufacturers– Warehouses– Distribution centers

So that the product is produced and distributed– In the right quantities– To the right locations– And at the right time

System-wide costs are minimized and Service level requirements are satisfied

Plan Source Make Deliver Buy

Why Is SCM Difficult?

Uncertainty is inherent to every supply chain– Travel times– Breakdowns of machines and vehicles– Weather, natural catastrophe, war– Local politics, labor conditions, border issues

The complexity of the problem to globally optimize a supply chain is significant– Minimize internal costs– Minimize uncertainty– Deal with remaining uncertainty

Plan Source Make Deliver Buy

Today’s Marketplace Requires:

Personalized content and services for their

customers

Collaborative planning with design partners,

distributors, and suppliers

Real-time commitments for design, production,

inventory, and transportation capacity

Flexible logistics options to ensure timely fulfillment

Order tracking & reporting across multiple

vendors and carriers

Shared visibility for Shared visibility for trading partnerstrading partners






Assignments

Supply Chain Integration – Push Strategies

Classical manufacturing supply chain strategy Manufacturing forecasts are long-range

– Orders from retailers’ warehouses Longer response time to react to marketplace

changes – Unable to meet changing demand patterns– Supply chain inventory becomes obsolete as

demand for certain products disappears Inefficient use of production facilities (factories)

– How is demand determined? Peak? Average? – How is transportation capacity determined?

Examples: Auto industry, large appliances, others?

Supply Chain Integration – Pull Strategies

Production and distribution are demand-driven– Coordinated with true customer demand

None or little inventory held– Only in response to specific orders

Fast information flow mechanisms– POS data

Decreased lead times Decreased retailer inventory Decreased variability in the supply chain and

especially at manufacturers Decreased manufacturer inventory More efficient use of resources More difficult to take advantage of scale

opportunities Examples: Dell, Amazon

Supply Chain Integration – Push/Pull Strategies

Hybrid of “push” and “pull” strategies to overcome disadvantages of each

Early stages of product assembly are done in a “push” manner

Final product assembly is done based on customer demand for specific product configurations

Supply chain timeline determines “push-pull boundary”

Supply Chain Timeline

RawMaterials

EndConsumer

Push Strategy Pull Strategy

Push-Pull

Boundary“Generic” Product “Customized” Product

Choosing Between Push/Pull Strategies

Pull Push

Pull

Push

Economies of ScaleLow High

Low

HighD

em

and

Un

cert

ain

tyIndustries where:

• Customization is High• Demand is uncertain• Scale economies are Low

Computer equipment

Industries where:

• Standard processes are the norm• Demand is stable• Scale economies are High

Grocery,Beverages

Industries where:

• Uncertainty is low• Low economies of scale• Push-pull supply chain

Books, CD’s

Industries where:

• Demand is uncertain• Scale economies are High• Low economies of scale

Furniture

Where do the following industries fit in this model:

Automobile? Aircraft? Fashion? Petroleum refining? Pharmaceuticals? Biotechnology? Medical Devices?

Characteristics of Push, Pull and Push/Pull Strategies

PUSH PULL

Objective Minimize Cost Maximize Service Level

Complexity High Low

Focus Resource Allocation

Responsiveness

Lead Time Long Short

Processes Supply Chain Planning

Order Fulfillment

Supply Chain Collaboration – What Is It?

Many different definitions depending on perspective The means by which companies within the supply

chain work together towards mutual goals by sharing– Ideas– Information– Processes– Knowledge– Information– Risks– Rewards

Why collaborate?– Accelerate entry into new markets– Changes the relationship between cost/value/profit

equation

16

Supply Chain Collaboration Cornerstone (= something very important that

something else depends on) of effective SCM The focus of many of today’s SCM initiatives

Manufacturer

Distributors/Wholesalers

Suppliers

Retailers

Collaborative Demand Planning

Collaborative Logistics Planning•Transportation services•Distribution center services

Synchronized Production Scheduling

Collaborative Product Development

Logistics Providers

Benefits of Supply Chain Collaboration

CUSTOMERS MATERIAL SUPPLIERS

SERVICE SUPPLIERS

Reduced inventory Increased revenue Lower order management costs Higher Gross Margin Better forecast accuracy Better allocation of promotional budgets

Reduced inventory Lower warehousing costs Lower material acquisition costs Fewer stockout conditions

Lower freight costs Faster and more reliable delivery Lower capital costs Reduced depreciation Lower fixed costs

Improved customer service More efficient use of human resources

18

Supply Chain Collaboration Spectrum

Source: Cohen & Roussel

Number of Relationships

Exte

nt

of

Collab

ora

tion

Many Few

Limited

Extensive

TransactionalCollaboration

SynchronizedCollaboration

CooperativeCollaboration

CoordinatedCollaboration

Not Viable

Low Return

The green arrow describes increasing complexity and sophistication of:

– Information systems– Systems infrastructure– Decision support systems– Planning mechanisms– Information sharing– Process understanding

Higher levels of collaboration imply the need for both trading partners to have equivalent (or close) levels of supply chain maturity

Synchronized collaboration demands joint planning, R&D and sharing of information and processing models

– Movement to real-time customer demand information throughout the supply chain

Successful Supply Chain Collaboration

Try to collaborate internally before you try external collaboration

Help your partners to work with you Share the savings Start small (a limited number of selected partners) and

stay focused on what you want to achieve in the collaboration

Advance your IT capabilities only to the level that you expect your partners to manage

Put a comprehensive metrics program in place that allows you to monitor your partners’ performance

Make sure people are kept part of the equation– Systems do not replace people– Make sure your organization is populated with

competent professionals who’ve done this before






Assignments

1. Comparison of B2C and B2B relationships

B2C– Product driven– Maximize the value of transaction– Large target market– Single step buying process, shorter sales

cycle– Brand identity created through repetition and

imagery– Merchandising and point of purchase

activities– Emotional buying decision based on status,

desire or price

1. Comparison of B2C and B2B relationships

B2B– Relationship driven– Maximize the value of the relationship– Small, focused target group– Multi-step buying process, longer sales cycle– Brand identity created on personal

relationship– Educational and awareness building activities

– Relational buying decision based on business value

Relationships in the value netRelationships in the value net

2. Advantages and disadvantages of creating relationships with consumers for a manufacturer

Advantages– Retain consumers is more profitable in

general– Long-term relationships maintain a

competitive advantage

Disadvantages– Calculate the effects on a company’s profit

costs (CRM program)– Miss new opportunities through focusing on

current consumers

3. Motorola and Hewlett-Packard Co-opetition if both elements of

cooperation and competition are visible, the relationship between the competitors is named co-opetition. – A firm with a strong position, but lacking

resources held by the competitor must focus on a co-opetitive relationship.

– Within the process, firms develop mechanisms that attempt to deal with competitiveness

Five types of relationship between a firm and its competitor

4. Properly incorporating suppliers in their product development process Suppliers can do much more than

deliver reasonably priced items on request.

Exploiting some of the potential of a supplier requires that operations of the two companies become more closely integrated in the various facets of the relationship.

5. A manufacturer how wants to integrate end-consumers in the product development process Formal way: conjoint analysis Informal way: sales

representative comes home to the HQ with some inspiration for the new product development

6. How can ‘distance’ be reduced in cross-cultural buyer-seller negotiations

Cultural dimensions that affect the distance:– Different understanding of the

national and industry culture– Different understandings of the

organisational culture– Different personal behaviour because

of the different mental programming

6. How can ‘distance’ be reduced in cross-cultural buyer-seller negotiations It is possible to reduce the ‘psychic

distance’ by an intercultural learning process. In this learning process, the company transfers knowledge about reduction of ‘psychic distances’ in different cultures– Psychic: Having a special mental ability,

for example so that you are able to know what will happen in the future or know what people are thinking

7. Dell entered into a relationship with IBM’s Global Service Division

Dell has maybe evaluated is own competences and realised that service support is not its core competence. It is better in PC-manufacturing. Therefore, it has outsourced the service support to IBM, which sees this as one of its existing and future core competences. That is a relationship of value for both partners.

8. Describe the interactions between buyer and seller in the ‘diamond’ model

In the ‘diamond’ model, the boundaries between buying and selling firms become more transparent. Interactive, cross functional teams openly exchange ideas for improving efficiency and effectiveness. The goal is to create new value together.

Organisation of buyer–seller relationship



Efficient consumer response



Assignments

Summary Inter-organizational relationships The network perspective on

supply chains requires a holistic approach. (dealing with of treating with the whole of something)

It recognizes the interdependence not only of immediate partners but also among the entire network of relationships

Summary Inter-organizational relationships The movement of organizations

toward network relationships places new challenges on management– to define the core and establish the

boundaries of the firm– to create the most effective

governance mechanism– to develop the most appropriate

relationships with partners

Summary Inter-organizational relationships Trust relationships are a

necessary condition in supply chain management. Without it, partners won’t share information or commit to specific high-risk investments.– It is time consuming and is based on

building positive experience

Summary Inter-organizational relationships The essential characteristics of the

supply chain is its inter-organizational relationships. The ability to develop and manage the supply chain becomes a core competency, along with product technology, knowledge, and market access these relationships govern future actions of the corporation.


Efficient consumer response



Assignments

Basics of Supply Chain ManagementBasics of Supply Chain Management

Assignments: Innovation and entrepreneurship Working assignments 1 and 2 Page

9 Question: Are large firms better

innovators than small firms Page 10 Questions: Skype: innovators and

entrepreneurs Page 13 Article: Innovation Management in

Supply Chains Summary

Benetton’s Supply networks’

Assignment Assignment – Combine several subjects in a professional Combine several subjects in a professional

report. The size of the report must not exceed 5 report. The size of the report must not exceed 5 A4, excluding the cover, contents and A4, excluding the cover, contents and appendixes. appendixes.

Then there will be at the end a talk of around Then there will be at the end a talk of around 30 minutes about the report 30 minutes about the report

Documents

Supply chain management Collaboration