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Supply Chain
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Supply Chain Options
S1
P1
S2
S3
S4
P2
P3
C1
C2
C3
Suppliers Plants Customers
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Supply Chain Strategies
• Low Cost single supply chain for all products and customers
• Differentiation unique supply chains by product or customer groups
• Responsiveness customer focused, information technology for speed and reengineering, advanced logistics planning
• Portfolio Approach supply chain platforms (analogy: manufacturing cells)
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Customers and capabilities
• Understanding the customer and supply chain uncertainty
• Understanding the supply chain capabilities
• Achieving strategic fit – Redesign the supply chain– Alter strategy
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Causes of demand variations
• Quantity of the product needed in each lot
• Response time that customers are willing to tolerate
• Variety of products needed
• Service level required
• Price of the product
• Desired rate of innovation in the product
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Implied demand uncertainties
Customer Needs Implied Demand Uncertainty
Range of quantity required increases
Lead time decreases
Variety of products required increases
Number of channels for product acquisition increases
Rate of innovation increases
Required service level increases
Increases because a wider range of the quantity required implies greater variance in demand
Increases because there is less time in which to react to orders
Increases because demand per product becomes more disaggregate
Increase because the total customer demand is now disaggregated over more channels
Increases because new products tend to have more uncertain demand
Increase because the firm now has to handle unusual surges in demand
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Supply Source Capability Supply Uncertainty
Frequent breakdowns Unpredictable and low yields Poor qualityLimited supply capacity Inflexible supply capacityEvolving production process
IncreasesIncreasesIncreasesIncreasesIncreasesIncreases
Supply uncertainty
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Efficiency/responsiveness
Highly efficient Integrated steel mills: Production scheduled weeks or months in advance with little variety or flexibility
Somewhat efficient Hanes apparel: A traditional make-to-stock manufacturer with production lead time of several weeks
Somewhat responsive
Most automotive production: Delivering a large variety of products in a couple of weeks
Highly responsive Dell: Custom-made PCs and servers in a few days
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Supply Chain Matching
Match Mismatch
Mismatch Match
Functional Products
Innovative Products
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Supply Chain Dynamics
2-tier Supply Chain
Bull-Whip Effect
Manufacturer Retailer Consumer
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Supply Chain Dynamics
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Causes of Bullwhip
• Number of tiers in supply chain
• Order arrival lead time
• Forecast variations
• Order batching
• Capacity constraints
• Price increase
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Elements of strategy
• Structure and Ownership
• Infrastructure and Process Alignment
• Sustaining advantage
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Structure & Ownership• Supply chains for individual products (multiple
markets) – Saturn car, collaborative product design, outsourcing
• Supply chains for individual markets (multiple products) – Geographical region (China), customer segments,
logistics
• Product and Process Matching• Channel Design
– Business models
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Electronic proximity
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Business model
• Partners – PC Supplier– Ford Motor Company– Ford Employees– Buyer-Club– Vendors in Buyer-Club
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The model
• PC Associates acquire PCs at a discount • PCs are given to Ford for its employees free of charge• Ford pays $25 per month for Internet access per
employee, but charges $5 per month from the employees
• Employees belong to the buyer-club on the PCA web page
• Vendors join the buyer-club to take advantage of economies of scale. Buyers are given Price Discounts
• Buyer-Club profits are shared three ways: Vendors, PCA, and Ford
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Process Alignment
• Managing Material Flow – demand assessment, inventory location and
sharing, supplier contracts
• Coordination and Control – monitoring and accountability, troubleshooting
• Managing Flow of Information
– routing, access and transparency, distributed-databases, strategic/operational
• Leveraging Connectivity – EDI/shareware/Intranet, online learning,
transaction-speed, waste-reduction
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Telecommunication Supply Chain
Figure 9.17: Telecommunication Industry: Supply Chain for Total Customer Solution
Switching/Routers
BackbonesAccess
ProvidersServicesProtocols
Wireless
Optical
Cable
PrivateNetwork
FrameRelay
Telepony Data
Internet
Packet
Local PhoneCompany
Cellular PhoneCompany
CableCompany
Direct
Customer
Fax
Audio
Video
ATM Circuit
InternetAccess
Providers
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Sustaining Advantage
• Agility/responsiveness– inventory network and transshipment– modular product design– restructuring
• Redesigning the chain– information technology and logistics– changes in customer preferences– new in-house capabilities or acquisitions– experience curve, environment scanning