Download 8-1 - McGraw Hill Higher Education

Chapter 8
Coordinating
the Supply
Chain
McGraw-Hill/Irwin
Operations Strategy
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
8-1
Supply Chain Strategy Questions
 How does a company determine where to locate inventory and what
inventory service levels to support, and how do these inventory decisions
support strategy?
 How do decisions in transportation and distribution, flow patterns with
suppliers and distributors, and other related questions affect the strategic
position of the firm?
 Can the outcomes of the decisions improve a company’s cost, quality,
availability, features/innovativeness, or environmental performance?
 How do supply chain decisions affect availability and the sub dimensions
of availability such as lead times, breadth of product line, and so on?
 What are the trade-offs inherent in the logistics and supply chain
system? For example, is there a trade-off between cost and service?
 What are the key factors in general that dictate logistics and supply chain
design?
 Which factors support strategies such as customization or rapid or direct
delivery?
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Supply chain decisions
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Inventory position
Inventory levels
Planning and materials
Forecasting and demand management
Transportation choices
Reverse logistics
Supplier selection and coordination
Structure – Number of facilities, number of stages
Distribution flow
Possible customization point (push-pull)
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Supply Chain Decisions: Pitfalls
 Lead times
 Offshore sourcing and production
 Lack of visibility
 Multiple moves
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Supply chain choices
source: HP
Suppliers
Distribution
Centers
Factories
Customers
Chassis
NA
Pow er supplies
EU
Motherboards
Others . . .
?
AP
LA
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Some approaches
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Input and output framework
Structure based on key parameters
Using IT
Leveraging capabilities
 Postponement and customization
 Rapid response and direct delivery
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Tools for Supply Chain Decisions:
Input and Output Framework
 Subcategories of availability
 Delivery or service time
 Service level
 Variation of service level of delivery time
 Customization and breadth of product line
or service
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Tools for Supply Chain Decisions:
Input and Output Framework
N denotes neutral, arrows denote effect
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Tools for Supply Chain Decisions:
Inventory position as an input
 Buffer before the high value-added steps
 Buffer after variable lead times
 Buffer before significant increases in
product variety
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Tools for Supply Chain Decisions:
Cost-Service Trade-offs
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Tools for Supply Chain Decisions:
Cost-Service Trade-offs
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Tools for Supply Chain Decisions:
Cost-Service Trade-offs
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Tools for Supply Chain Decisions: Matching
Structure to Product and Market Characteristics
 Factors in determining the type of logistics and supply chain
strategy that might be appropriate:
 Magnitude of transportation costs
 Demand uncertainty
 Product variety
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Approaches for Managing the Supply Chain:
Using IT
 Causes of the bullwhip effect
 Demand forecasting updating or filling the pipeline
 Order batching
 Price fluctuation
 Rationing and shortage gaming
 Decentralized policies
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Approaches for Managing the Supply Chain:
Using IT
 Managing the bullwhip effect
 Forecasting improvements
 Structural approaches
 Incentives
 Alignment of metrics
 Pricing
 Coordination of centralization of
information and policy
 Supply chain visibility
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Approaches for Managing the Supply Chain:
Postponement and Customization
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Approaches for Managing the Supply Chain:
Postponement and Customization
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Approaches for Managing the Supply Chain:
Implementing Externally Based Postponement Systems
 What factors determine whether a push-pull system or an
externally based postponement system can work and how
well it can work?
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Assembly or configuration capacity
Assembly or configuration lead time
Assembly modularity
Value added at distribution
Demand uncertainty
Product variety and product proliferation
Economical delivery costs and value density
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Product proliferation
Lead time
Value added
Variability of lead time
 What are the factors that dictate the location of the
boundary or delimiter?
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Approaches for Managing the Supply Chain:
Rapid Response and Direct Delivery
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Rapid Response: Trends both create great opportunities
but also great pitfalls
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Great opportunities in technologies such as auto ID tags
and IT linkages
More opportunities for customization and direct delivery
(despite last mile)
Lower Costs of Scope
More Capabilities and Lower Costs of Information Technology
Changing Economics of Transportation
Better Material Handling Capability
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Complexities such as multiple moves and long lead times
and resulting disasters
Poor coordination and visibility despite technology (the
beer game and bullwhip)
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Example of Leveraging capabilities: The Storefront
Concept
The storefront is based on the notion that the retailing or
dealer aspect of a distribution chain performs many functions
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Sales
Service
Parts
Demonstration merchandise
Inventory
Customer contact
There is no reason why these cannot be separated
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The Approach was implemented at Union
Carbide’s Packaged Gas Business
 Carbide delivers cylinders of gas (or bulk gas) and supplies to branches
from plants.
 Carbide converted some branches to storefronts - Customer contact
points and “walk-in” service points.
 The service was still the same.
 The economics was an elimination of three steps out of five.
1 - Filling and Storing cylinders and parts centrally
2 - Loading cylinders and parts on trailers and delivering them to branches
3 - Unloading and storing cylinders and parts at branches.
4 - Warehousing and handling
5 - Loading parts and cylinders on truck routes and delivering them to
customers
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The most profound example is for
the car companies
 Why do dealers need to be sales offices,
service centers and inventory locations?
 Distribution and inventory can be
centralized
 Sales can be decentralized and
established on a different scale
 In addition, the other parts of the
business can establish new service
entities
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Supply Chain Strategy: Steps to
Developing
 Operations strategy and supply chain
choices
 Mapping and supply chain tools
 Feasibility of postponement and other
approaches
 Inventory and supply chain analysis
 Cost-service trade-offs
 Finalize the strategy
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