chopra_scm6_inppt_02.pptx

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Supply Chain Perforance !chie"ing Strategic #it and Scope

PowerPoint presentation to accompany  Chopra and Meindl  Supply Chain Management, 6e

$earning %&'ecti"es %&'ecti"es 1. E(plai E(plain n )hy )hy achi achie"i e"ing ng stra strateg tegic ic *t *t is is critical to a copany+s o"erall success. 2. esc escri ri&e &e ho) a cop copan any y achi achie" e"es es strategic *t &et)een its supply chain strategy and its copetiti"e strategy. -. iscus iscuss s the the iport iportanc ance e of e(pandi (panding ng the the scope of strategic *t across the supply chain. . escri escri&e &e the a'or a'or chal challen lenges ges that that ust ust &e o"ercoe to anage a supply chain successfully.

$earning %&'ecti"es %&'ecti"es 1. E(plai E(plain n )hy )hy achi achie"i e"ing ng stra strateg tegic ic *t *t is is critical to a copany+s o"erall success. 2. esc escri ri&e &e ho) a cop copan any y achi achie" e"es es strategic *t &et)een its supply chain strategy and its copetiti"e strategy. -. iscus iscuss s the the iport iportanc ance e of e(pandi (panding ng the the scope of strategic *t across the supply chain. . escri escri&e &e the a'or a'or chal challen lenges ges that that ust ust &e o"ercoe to anage a supply chain successfully.

Copetiti"e and Supply Chain Strategies •

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Competitive strategy de*nes the set of custoer needs a *r see/s to satisfy through its products and ser"ices Product development strategy speci*es the portfolio of ne) products that the copany )ill try to de"elop Marketing and sales strategy speci*es ho) the ar/et )ill &e segented and product positioned, priced, and prooted Supply chain strategy deterines the nature of aterial procureent, transportation of aterials, anufacture of product or creation of ser"ice, distri&ution of product !ll functional strategies ust support one another

 he alue Chain

#I34E 251

!chie"ing Strategic #it •

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Strategic ft – copetiti"e and supply chain strategies ha"e aligned goals ! copany ay fail &ecause of a lac/ of strategic *t or &ecause its processes and resources do not pro"ide the capa&ilities to e(ecute the desired strategy

!chie"ing Strategic #it 1. he copetiti"e strategy and all functional strategies ust *t together to for a coordinated o"erall strategy. Each functional strategy ust support other functional strategies and help a *r reach its copetiti"e strategy goal. 2. he di7erent functions in a copany ust appropriately structure their processes and resources to &e a&le to e(ecute these strategies successfully. -. he design of the o"erall supply chain and the role of each stage ust &e aligned to support the supply chain strategy.

9o) is Strategic #it !chie"ed: 1. 3nderstanding the custoer and supply chain uncertainty 2. 3nderstanding the supply chain capa&ilities -. !chie"ing strategic *t

Step 1< 3nderstanding the Custoer and Supply Chain 3ncertainty •

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=uantity of product needed in each lot 4esponse tie custoers )ill tolerate ariety of products needed Ser"ice le"el re>uired Price of the product esired rate of inno"ation in the product

Step 1< 3nderstanding the Custoer and Supply Chain 3ncertainty •

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Demand uncertainty – uncertainty of custoer deand for a product Implied demand uncertainty – resulting uncertainty for the supply chain gi"en the portion of the deand the supply chain ust handle and attri&utes the custoer desires

Custoer @eeds and Iplied eand 3ncertainty Customer Need

Causes Implied Demand Uncertainty to …

4ange of >uantity re>uired increases

Increase &ecause a )ider range of the >uantity re>uired iplies greater "ariance in deand

$ead tie decreases

Increase &ecause there is less tie in )hich to react to orders

ariety of products re>uired increases

Increase &ecause deand per product &ecoes less predicta&le

@u&er of channels through )hich product ay &e ac>uired increases

Increase &ecause the total custoer deand per channel &ecoes less predicta&le

4ate of inno"ation increases

Increase &ecause ne) products tend to ha"e ore uncertain deand

4e>uired ser"ice le"el increases

Increase &ecause the *r no) has to handle unusual surges in deand  !A$E 251

Iplied 3ncertainty and %ther !ttri&utes 1. Products )ith uncertain deand are often less ature and ha"e less direct copetition. !s a result, argins tend to &e high. 2. #orecasting is ore accurate )hen deand has less uncertainty. -. Increased iplied deand uncertainty leads to increased diBculty in atching supply )ith deand. #or a gi"en product, this dynaic can lead to either a stoc/out or an o"ersupply situation. . ar/do)ns are high for products )ith greater iplied deand uncertainty &ecause o"ersupply often results.

Iplied 3ncertainty and %ther !ttri&utes Low Implied High Uncertainty Implied Uncertainty Product argin

$o)

9igh

!"erage forecast error

10D

0D to 100D

!"erage stoc/out rate

1D to 2D

10D to 0D

!"erage forced season5end ar/do)n

0D

10D to 2D  !A$E 252

Ipact of Supply Source Capa&ility Supply Source Capability

Causes Supply Uncertainty to...

#re>uent &rea/do)ns

Increase

3npredicta&le and lo) yields

Increase

Poor >uality

Increase

$iited supply capacity

Increase

Ine(i&le supply capacity

Increase

E"ol"ing production process

Increase  !A$E 25-

Iplied 3ncertainty Feand and SupplyG Spectru

#I34E 252

Hey Point  he *rst step in achie"ing strategic *t &et)een copetiti"e and supply chain strategies is to understand custoers and supply chain uncertainty. 3ncertainty fro the custoer and the supply chain can &e co&ined and apped on the iplied uncertainty spectru.

Step 2< 3nderstanding Supply Chain Capa&ilities • •

9o) does the *r &est eet deand: Supply chain responsi"eness is the a&ility to  –

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4espond to )ide ranges of >uantities deanded eet short lead ties 9andle a large "ariety of products Auild highly inno"ati"e products eet a high ser"ice le"el 9andle supply uncertainty

Step 2< 3nderstanding Supply Chain Capa&ilities 4esponsi"eness coes at a cost Supply chain eciency is the in"erse to the cost of a/ing and deli"ering the product to the custoer  he cost-responsiveness ecient rontier cur"e sho)s the lo)est possi&le cost for a gi"en le"el of responsi"eness

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Cost54esponsi"eness EBcient #rontier

#I34E 25-

4esponsi"eness Spectru

#I34E 25

Hey Point  he second step in achie"ing strategic *t &et)een copetiti"e and supply chain strategies is to understand the supply chain and ap it on the responsi"eness spectru.

Step -< !chie"ing Strategic #it •

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Ensure that the degree of supply chain responsi"eness is consistent )ith the iplied uncertainty !ssign roles to di7erent stages of the supply chain that ensure the appropriate le"el of responsi"eness Ensure that all functions aintain consistent strategies that support the copetiti"e strategy

one of Strategic #it

#I34E 25

4oles and !llocations

#I34E 256

EBcient and 4esponsi"e Supply Chains Ecient Supply Chains

!esponsi"e Supply Chains

Priary goal

Supply deand at the lo)est cost

4espond >uic/ly to deand

Product design strategy

a(iiJe perforance at a iniu product cost

Create modularity  to allo) postponeent of product di7erentiation

Pricing strategy

$o)er argins &ecause price is a prie custoer dri"er

9igher argins &ecause price is not a prie custoer dri"er

anufacturing strategy

$o)er costs through high utiliJation

aintain capacity e(i&ility to &u7er against deandKsupply uncertainty

In"entory strategy

iniiJe in"entory to lo)er cost

aintain buer inventory to deal )ith deandKsupply uncertainty

$ead5tie strategy

4educe, &ut not at the e(pense of costs

4educe aggressi"ely, e"en if the costs are signi*cant

Supplier strategy

Select &ased on cost and >uality

Select &ased on speed, e(i&ility, relia&ility, and >uality  !A$E 25

Hey Point  he *nal step in achie"ing strategic *t is to atch supply chain responsi"eness )ith the iplied uncertainty fro deand and supply. he supply chain design and all functional strategies )ithin the *r ust also support the supply chain+s le"el of responsi"eness.

 ailoring the Supply Chain •

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!chie"e strategic *t )hile ser"ing any custoer segents )ith a "ariety of products across ultiple channels 4e>uires sharing soe lin/s in the supply chain )ith soe products, )hile ha"ing separate operations for other lin/s

Changes %"er Product $ife Cycle •

Aeginning stages 1. eand is "ery uncertain, and supply ay &e unpredicta&le 2. argins are often high, and tie is crucial to gaining sales -. Product a"aila&ility is crucial to capturing the ar/et . Cost is often a secondary consideration

Changes %"er Product $ife Cycle •

$ater stages 1. eand has &ecoe ore certain, and supply is predicta&le 2. argins are lo)er as a result of an increase in copetiti"e pressure -. Price &ecoes a signi*cant factor in custoer choice

Hey Point Lhen supplying ultiple custoer segents )ith a )ide "ariety of products through se"eral channels, a *r ust tailor its supply chain to achie"e strategic *t.

E(panding Strategic Scope •

Scope o strategic ft – the functions )ithin the *r and stages across the supply chain that de"ise an integrated strategy )ith an aligned o&'ecti"e

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Intraoperation Scope< iniiJe $ocal Cost ie)  –

Each stage of the supply chain de"ises strategy independently

E(panding Strategic Scope Intrafunctional Scope< iniiJing  otal #unctional Cost

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#irs align all operations )ithin a function

Interfunctional Scope< a(iiJe Copany Pro*t  –

#unctional strategies are de"eloped to align )ith one another and the copetiti"e strategy

E(panding Strategic Scope •

Intercopany Scope< a(iiJe Supply Chain Surplus  –

Supplier and custoer )or/ together and share inforation to reduce total cost and increase supply chain surplus

 !gile intercompany scope – a *r+s a&ility to achie"e strategic *t )hen partnering )ith supply chain stages that change o"er tie

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Hey Point  he intercopany scope of strategic *t re>uires *rs to e"aluate e"ery action in the conte(t of the entire supply chain. his &road scope increases the siJe of the surplus to &e shared aong all stages of the sup5 ply chain. he intercopany scope of strategic *t is essential today &ecause the copetiti"e playing *eld has shifted fro copany "ersus copany to supply chain "ersus supply chain. ! copany+s partners in the supply chain ay )ell deterine the copany+s

Challenges •

Increasing product "ariety and shrin/ing life cycles  –

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reater product "ariety and shorter life cycles increase uncertainty )hile reducing the )indo) of opportunity )ithin )hich the supply chain can achie"e *t

lo&aliJation and increasing uncertainty  –

Signi*cant uctuations in e(change rates, glo&al deand, and the price of

Challenges •

#ragentation of supply chain o)nership #irs are less "ertically integrated  a/e ad"antage of supplier and custoer copetencies they did not ha"e @e) o)nership structure a/es aligning and anaging the supply chain ore diBcult !ligning all e&ers of a supply chain has &ecoe critical to achie"ing supply

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Challenges •

Changing technology and &usiness en"ironent  –

Changes in custoer needs and technology ay force a *r to rethin/ their supply chain strategy to aintain strategic *t

 he en"ironent and sustaina&ility

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ro)ing in rele"ance and ust &e accounted for )hen designing supply chain strategy %pportunities ay re>uire coordination across di7erent e&ers of the supply chain

Hey Point any challenges, such as rising product "ariety and shorter product life cycles, ha"e ade it increasingly diBcult for supply chains to achie"e strategic *t. %"ercoing these challenges o7ers a treendous opportunity for *rs to use supply chain anageent to gain copetiti"e ad"antage.