Chapter 10 SupplyChain Strategy

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Chapter 10Supply-Chain Strategy

• Supply-Chain Management Defined?
• Measuring Supply-Chain Performance
• Bullwhip Effect
• Outsourcing Defined
• Value Density Defined
• Mass Customization Defined

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What is Supply-Chain Management?Defined

• Supply-chain
• Supply-chain management is a total system
  approach to managing the entire flow of
  information, materials, and services from
  raw-material suppliers through factories and
  warehouses to the end customer.

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Supply Chain
VISA
VISA


Credit Flow
Mat'l Flow
Consumer
Mfg.
Supplier
Retailer
Retailer
Supplier
Wholesaler
Cash
Order
Schedules
Flow
Flow
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Supply Chain Model
Wholesaler
September 22, 1999 Racine
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Quaker and HyVee Push vs. Pull

• Push

• Pull

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Quaker and HyVeePush vs. Pull

• Tighter linkage between Quaker and HyVee means
• HyVee
• Quaker
• Þ

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Align Supply Chain Capability With Business
Strategy

• Business Strategy
• Supply Chain Role
• Supply Chain Measure

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Balancing Supply Chain Capability with Customer
Demands
Supply Chain Capability
Customer Requirements
Suppliers, Manufacturers, Distributors, Carriers
Market Demand,New Products, Promotions
Information
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Formulas for Measuring Internal Supply-Chain
Performance

• Inventory Turnover

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Example of Measuring Internal Supply-Chain
Performance

• Suppose a companys new annual report claims
  their costs of goods sold for the year is 160
  million and their total average inventory
  (production materials work-in-process) is worth
  35 million. This company is used to having any
  inventory turn ratio of 10.
• What is this years Inventory Turnover ratio?
  What does it mean?

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Example of Measuring Supply-Chain Performance
(Continued)

• Inventory Turnover
• Without knowing the industry average of turns
  for this company it is not possible to comment on
  how they are competitively doing in the
  industry.

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Supply Chain Measures
Common practice is to measure within a function
Supplier
Plant
Distribution
Customer
Center


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Measure Across Supply Chain Nodes
The correct method is to measure across a node
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Total Supply Chain Inventory

• Sum of inventory on hand at each node of the
  supply chain
• Supplier, Manufacturer, Distributor, Retailer
• Measurement Timing Weekly data collection

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Bullwhip Effect
The magnification of variability in orders in the
supply-chain.

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What is the Bullwhip Effect?
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The Bullwhip Effect Contd
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Causes of the Bullwhip Effect

• Price fluctuations
• Periodic order policies
• Rational/shortage gaming
• Production schedules

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What is Outsourcing?Defined

• Outsourcing

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Reasons to Outsource

• Organizationally-driven -
• Improvement-driven -
• Financially-driven -
• Revenue-driven -
• Cost-driven -
• Employee-driven -

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When outsourcing (or whenever working with
suppliers)
Confrontation Low-Bid Traditional
Partnership

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Outsourcing
Under what conditions would you not want to
outsource?

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Logistics

• The process of planning, implementing, and
  controlling the efficient, effective flow and
  storage of goods, services, and related
  information from the point of origin to the point
  of consumption for the purpose of conforming to
  customer requirement.

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Consumer Supply Chain
Logistics
Reverse Logistics
Supplier
Suppliers Supplier
Manufacturer
Wholesaler/ Distributor
Consumer
Retailer
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Value DensityDefined

• Value density the value of an item per pound of
  weight.
• It is used as an important measure when deciding
  where items should be stocked geographically and
  how they should be shipped.

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Mass CustomizationDefined

• Mass customization is a term used to describe the
  ability of a company to deliver highly customized
  products and services to different customers.