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Session 4: Supply Chain Management, image - Coggle Diagram
Session 4: Supply Chain Management
"If supply chain is the answer, then what's the question" (Blanchard, 2010, pp. 1-11)
Supply Chain Managers
Constant cost pressures
Manage transportation and logistic costs while keeping budget increases minimal.
Trade-offs between labour, shipping and production costs.
Handling sudden demand changes
Meeting customer requests
Technology Implementation
Evaluate ROI and integrate new systems without disrupting operations.
Global sourcing and outsourcing
Identifying low cost suppliers (overseas)
Exploring options to improve speed, cost and service.
Cross-Departmental Coordination
Works closely with IT, manufacturing, HR and other departments to solve problems.
Troubleshooting issues with planning systems, inventory and production errors.
Risk & contingency planning
Plan for all sort of risks and disruptions.
Continuous monitoring of global suppliers and logistics.
High pressure, fast-paced role requiring multitasking and adaptability.
Understanding the Supply Chain
Complexity
Specific to industry and company. No 1 model.
"Sequence of events and processes that take a product from origin to end of life"
Core Activities of a Supply Chain (SCOR Model - Supply Chain Operations Reference)
Plan
Forecast demand and plan production
Source
Obtain raw materials or components.
Make
Manufacture or assemble the product.
Deliver
Transport and distribute to customers.
Return
Handle returns, recycling or disposal.
Comprehensive Definition from Council of Supply Chain Management Professionals (CSCMP)
Involves planning, sourcing, converting and logistics management.
Coordination and collaboration with suppliers, intermediaries, third parties and customers.
Supply and demand management
Back Story
Modern Thinking
Supply chain concept is a recent idea (1950s)
Jay Forrester studied supply pipelines and supplier-customer interrelationships.
Discovered
Bullwhip
effect - "inventory fluctuations increase further from the end user".
Porters Contribution (1985, Competitive Advantage)
Identified 5 primary processes in a supply chain:
Inbound logistics: receiving, storing, distributing inputs.
Operations: transforming inputs into products
Outbound logistics: distributing finished products
Sales and Marketing: activities to sell products
Service: post-sale support
Strategies
Horizontal
Coordinate across business units to reduce costs and improve differentiation.
Vertical
Compartmentalised departments hinder growth.
Goals
Clearly define supply chain and scope.
Identify bottlenecks in goods, services and info flow.
Implement processes to deliver the right product to the right place on time.
Empower right people to manage and execute these processes.
Roadblocks
Technology Failures
Internet bubble burst exposed failures in supply chain management.
Companies now cautious about new supply chain technology.
Cost Overruns and Missed Targets
Projects cost too much and fail to meet service objectives.
Misalignment with Strategy
Lack well-defined business strategy.
Supply chains can fail if corporate strategy is unclear or changing.
Difficulty Managing Change
Internal collabs are essential: employees must share data across divisions.
External collabs difficult if internal trust is low.
Throughput efficiency
A main source of waste is the delay of resource in a system, whether it is an item stuck as inventory in a store or trapped in a queue. In order to assess the total waste in a system, one of the measures you can apply is the ratio ‘throughput efficiency’:
Throughput efficiency = (Total value-adding time / Total throughput time) x 100%
System with no waste, where all activities add value and no delay between stages would have 100% throughput efficiency.
Bullwhip Effect
Demand fluctuations magnify through the supply chain.
Creates constraints on how supply chains can be managed.
Practices to reduce demand amplification
Reducing the number of stages in the supply chain.
Sharing demand information across the supply chain.
Generating smaller, more frequent replenishment.
Reducing Lead Times
Limiting promotions that create demand surges.
Vertically Integrated Supply Chains
How much of the supply chain a firm owns vs outsources.
3 Key Decisions to Make
Direction of Integration
Upstream integration (owning suppliers)
Security of supply of raw materials
Improved reliability of deliveries
Competitive advantage (restricting competitor access to scarce inputs)
Cost control over raw materials
Downstream integration (owning customers/distributors)
Control over customer behaviour (order timing and quantities)
Stable demand by guaranteeing sales
Access to market and customer data
Better understanding of end-user needs.
Extent of Integration
Narrow integration
E.g. controlling one factor only like distribution
Wide integration
E.g. controlling all factors with external partners
Choice depends on desired control vs complexity and cost.
Balance of Integration
Achieving smooth flow and balanced capacity is difficult.
Upstream stages tend to be large scale.
Downstream stages face higher variety.
Capacity imbalances lead to outsourcing during shortages and selling excess internal capacity externally.
Seasonal demand complicates planning.
Firms must decide whether to build capacity for peak demand or outsource during peaks (costly).
Outsourcing
Advantages
the ability to focus on core internal capabilities
access to supplier capabilities
reduced need for capital investment
fewer direct staff
outsource suppliers usually have lower unit costs
clear, identifiable supply chain costs
can be used to expand overall capacity.
Disadvantages
some loss of control
costs involved in managing suppliers
reduced economies of scale
potential closure of existing facilities
need to share sensitive information with third parties
risks of being dependent on a supplier
increased supply chain risks.
Outsourcing decisions
2 Aspects to Consider
Strategic Value of the Good/Service
Should assess the extent to which the item contributes to overall competitive advantage.
Criticality of the Component/Service
Should ask whether or not the component/service contributes to the performance of the final product or service.
Supplier Relationships
Three levels of collaboration:
Type 1 - Organisations recognise each other as partners, with limited coordination and planning. Often only one division or functional area.
Type II – Organisations progress beyond coordination to integration of activities. Multiple functions/departments involved in the partnership.
Type III – Organisations share a significant level of operational integration. No ‘end date’ to the relationship.
‘Joint ventures’ and ‘Vertical integration’ are structural ways of generating joint working. Where no collaboration exists, this is classed as ‘Arm’s length’.
