Supply Chain Performance PDF

Understanding The Supply Chain Dr. Ghada Adel Dr. Ghada Adel  Define supply chain strategy and explain Supply Chain how creating a strategic fit between a Performance company’s competitive strategy and its...

Understanding The Supply Chain Dr. Ghada Adel Dr. Ghada Adel  Define supply chain strategy and explain Supply Chain how creating a strategic fit between a Performance company’s competitive strategy and its supply chain strategy affects performance. Dr. Ghada Adel Competitive and Supply Chain Strategies A company’s competitive strategy defines, relative to its competitors, the set of customer needs that it seeks to satisfy through its products and services Dr. Ghada Adel Dr. Ghada Adel Competitive and Supply Chain Strategies Dr. Ghada Adel Competitive and Supply Chain Strategies Dr. Ghada Adel Competitive and Supply Chain Strategies Competitive and Supply Chain Strategies In each case, the competitive strategy is defined based on how the customer prioritizes product cost, delivery time, variety, and quality Dr. Ghada Adel Competitive and Supply Chain Strategies A product development strategy: To see the relationship between competitive and supply chain strategies, we start with the value chain for a typical organization Dr. Ghada Adel Competitive and Supply Chain Strategies A product development strategy: specifies the portfolio of new products that a company will try to develop Dr. Ghada Adel Competitive and Supply Chain Strategies A marketing and sales strategy: specifies how the market will be segmented and how the product will be positioned, priced, and promoted Dr. Ghada Adel Competitive and Supply Chain Strategies A supply chain strategy determines: the nature of procurement of raw materials, transportation of materials to and from the company, manufacture of the product or operation to provide the service, and distribution of the product to the customer, along with any follow-up service and a specification of whether these processes will be performed in- house or outsourced. Dr. Ghada Adel Competitive and Supply Chain Strategies Dr. Ghada Adel Achieving Strategic Fit It refers to consistency between: the customer priorities that the competitive strategy hopes to satisfy and the supply chain capabilities that the supply chain strategy aims to build Dr. Ghada Adel  Achieving Strategic Fit For a company to achieve strategic fit, it must accomplish the following: Dr. Ghada Adel  Achieving Strategic Fit A company may fail either because of a lack of strategic fit or because its overall supply chain design, processes, and resources do not provide the capabilities to support the desired strategic fit. Dr. Ghada Adel Dr. Ghada Adel Achieving Strategic Fit Dr. Ghada Adel What does a company need to do to achieve that all-important strategic fit between the supply chain and competitive strategies? How Is Strategic Fit Achieved? Understanding the Customer and Supply Chain Uncertainty Dr. Ghada Adel Understanding the Customer and Supply Chain Uncertainty Dr. Ghada Adel Understanding the Customer and Supply Chain Uncertainty Dr. Ghada Adel Understanding the Customer and Supply Chain Uncertainty Dr. Ghada Adel Impact of Customer Needs on Implied Demand Uncertainty Dr. Ghada Adel Understanding the Customer and Supply Chain Uncertainty The first step in achieving strategic fit between competitive and supply chain strategies is to understand customers and supply chain uncertainty. Uncertainty from the customer and the supply chain can be combined and mapped on the implied uncertainty spectrum. Dr. Ghada Adel Understanding the Supply Chain Capabilities Dr. Ghada Adel Understanding the Supply Chain Capabilities Supply chain responsiveness includes a supply chain’s ability to do the following: Respond to wide ranges of quantities demanded Meet short lead times Handle a large variety of products Build highly innovative products Meet a high service level Handle supply uncertainty Dr. Ghada Adel Understanding the Supply Chain Capabilities Supply chain efficiency Is the inverse of the cost of making and delivering a product to the customer. Increases in cost lower efficiency. For every strategic choice to increase responsiveness, there are additional costs that lower efficiency. Dr. Ghada Adel Understanding the Supply Chain Capabilities The cost-responsiveness efficient frontier Is the curve showing the lowest possible cost for a given level of responsiveness. Lowest cost is defined based on existing technology; not every firm is able to operate on the efficient frontier, which represents the cost responsiveness performance of the best supply chains. A firm that is not on the efficient frontier can improve both its responsiveness and its cost performance by moving toward the efficient frontier. Dr. Ghada Adel Understanding the Supply Chain Capabilities The Responsiveness Spectrum Dr. Ghada Adel  Understanding the Supply Chain Capabilities Dr. Ghada Adel  Understanding the Supply Chain Capabilities Seven-Eleven Japan: Replenishes its stores with breakfast items in the morning, lunch items in the afternoon, and dinner items at night. As a result, the available product variety changes by time of day. store managers placing replenishment orders less than 12 hours before they are supplied. W.W. Grainger: provide customers with a wide variety of MRO products within 24 hours. An efficient supply chain, Sam’s Club sells a limited variety of products in large package sizes. Dr. Ghada Adel  Understanding the Supply Chain Capabilities The second step in achieving strategic fit between competitive and supply chain strategies is to understand the supply chain and map it on the responsiveness spectrum. Dr. Ghada Adel Achieving Strategic Fit There is no right supply chain strategy Dr. Ghada Adel Achieving Strategic Fit There is a right supply chain strategy for a given competitive strategy Dr. Ghada Adel Achieving Strategic Fit Dr. Ghada Adel Achieving Strategic Fit Dr. Ghada Adel Dr. Ghada Adel Achieving Strategic Fit  Achieving Strategic Fit Increasing implied uncertainty from customers and supply sources is best served by increasing responsiveness from the supply chain. This relationship is represented by the “zone of strategic fit” For a high level of performance, companies should move their competitive strategy (and resulting implied uncertainty) and supply chain strategy (and resulting responsiveness) toward the zone of strategic fit Dr. Ghada Adel Achieving Strategic Fit Dr. Ghada Adel Achieving Strategic Fit The final step in achieving strategic fit is to match supply chain responsiveness with the implied uncertainty from demand and supply. The supply chain design and all functional strategies within the firm must also support the supply chain’s level of responsiveness. Dr. Ghada Adel Achieving Strategic Fit Efficient Responsive Primary goal Lowest cost Quick response Product design strategy Min product cost Modularity to allow postponement Pricing strategy Lower margins Higher margins Mfg strategy High utilization Capacity flexibility Inventory strategy Minimize inventory Buffer inventory Lead time strategy Reduce but not at expense of Aggressively reduce even if greater cost costs are significant Supplier selection strategy Cost and low quality Speed, flexibility, quality Transportation strategy Greater reliance on low-cost Greater reliance on modes responsive (fast) modes Dr. Ghada Adel Multiple Supply Chain Tailoring the Supply Chain for Strategic Fit Different supply chains Dr. Ghada Adel Tailoring the Supply Chain for Strategic Fit When supplying multiple customer segments with a wide variety of products through several channels, a firm must tailor its supply chain to achieve strategic fit. Dr. Ghada Adel Expanding Strategic Scope Scope of strategic fit refers to the functions within the firm and stages across the supply chain that devise an integrated strategy with an aligned objective Dr. Ghada Adel Intraoperation Scope: Minimizing Local Cost The intraoperation scope has each stage of the supply chain devising its strategy independently Dr. Ghada Adel Intrafunctional Scope: Minimizing Functional Cost All supply chain functions, including sourcing, manufacturing, warehousing, and transportation, had to align their strategies to minimize total functional cost Dr. Ghada Adel Interfunctional Scope: Maximizing Company Profit all functional strategies are developed to align with one another and with the competitive strategy. Dr. Ghada Adel McMaster- Carr The company enjoys high profits because all functions align their strategy around the common objective of customer convenience in the form of next-day delivery of a wide variety of MRO products. Dr. Ghada Adel  Intercompany Scope: Maximizing Supply Chain Surplus The intercompany scope proposes a different approach. Instead of just forcing the inventory onto the weaker party, the two parties work together to reduce the amount of inventory required. Dr. Ghada Adel Agile Intercompany Scope Agile intercompany scope refers to a firm’s ability to achieve strategic fit when partnering with supply chain stages that change over time Dr. Ghada Adel Obstacles to Achieving Strategic Fit Increasing variety of products One of the biggest challenges to maintaining strategic fit is the growth in product variety and the decrease in the life cycle of many products. Obstacles to Achieving Strategic Fit Globalization and Increasing Uncertainty Obstacles to Achieving Strategic Fit Fragmentation of Supply Chain Ownership Obstacles to Achieving Changing Technology and Business Environment Strategic Fit Obstacles to Achieving Strategic Fit The Environment and Sustainability Issues related to the environment and sustainability have grown in relevance and must be accounted for when designing supply chain strategy Waste Electrical and Electronic Equipment (WEEE) and Restriction of Hazardous Substances (RoHS) Questions Dr. Ghada Adel