Supply Chain Modelling 1

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Supply Chain Modelling 1

• Part 2
• March 3, 2008
• Prepared by Hande ERYILMAZ
• Merve Hande ERGIN

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Outline

• Supply Chain Drivers
• Decision Phases/Levels
• Main functions in SCM
• Competitive Strategy/Strategic Fit

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Supply Chain Drivers

• There are many factors affecting Supply Chain
  performance. The following are the most important
  ones
• 1) Inventory
• 2) Transportation
• 3) Facilities
• 4) Information

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Decision Phases/Levels of a Supply Chain

• Supply chain strategy or design
• Supply chain planning
• Supply chain operation

STRATEGIC TACTICAL LEVEL OPERATIONAL LEVEL
LONG TERM decisions
MEDIUM TERM
DAY to DAY operation
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Main functions of SCM

• Demand Management
• Production Management
• Procurement Management
• Distribution Management
• Fulfillment Management

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Competitive and Supply Chain Strategies

• Competitive strategy Defines the set of customer
  needs a firm seeks to satisfy through its
  products and services
• Wal-Mart
• High availability
• Variety (from home appliances to clothing)
• Reasonable quality
• Low prices
• Products can be found elsewhere
• McMaster Carr (maintenance, repair, and
  operations (MRO) products)
• 200,000 products both through catalog and website
• Convenience
• Responsiveness
• Availability

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Competitive and Supply Chain Strategies (cont.)

• Product development strategy Specifies the
  portfolio of new products that the company will
  try to develop and will outsource
• Marketing and sales strategy Specifies how the
  market will be segmented and product positioned,
  priced, and promoted
• 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

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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

SC strategy and competitive strategy must
fit. Strategic Fit Competitive and SC Strategy
have the same goal.
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Achieving Strategic Fit

• STEP 1) UNDERSTANDING THE CUSTOMER SUPPLY
  CHAIN UNCERTAINTY
• Implied Demand Uncertainity
• STEP 2) UNDERSTANDING THE SUPPLY CHAIN
• Responsive versus Efficient
• STEP 3) ACHIEVING STRATEGIC FIT
• The zone of Strategic Fit

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Achieving Strategic Fit Shown on the
Uncertainty/Responsiveness Map
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Other Issues Affecting Strategic Fit

• Multiple products and customer segments
• Product life cycle
• Competitive changes over time

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Obstacles to Achieving Strategic Fit

• Increasing variety of products
• Decreasing product life cycles
• Increasingly demanding customers
• Fragmentation of supply chain ownership
• Globalization
• Difficulty executing new strategies

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Major Obstacles to Achieving Fit

• Multiple owners / incentives in a supply chain
• Increasing product variety / shrinking life
  cycles / customer fragmentation

Local optimization and lack of global fit
Increasing implied uncertainty