supply chain management

• A supply chain consists of all stages involved, directly or indirectly in fulfilling a customer's request




• The objective of the SC is to maximise the overall value generated




• The value a SC generates is the difference between what the final product is worth to the customer and the effort SC expands in fulfilling the customers request.




• Process view of the supply chain can be Cycle view which starts from the customer order cycle to replenishment cycle, to manufacturing cycle to procurment cycle or it can be PUSH/PULL VIEW in which pull process: initiated by customer's order and Push process: initiated in the anticipation of the customers orders.




• For a company to be successful, its SC strategy and competitive strategy must fit together.




• A competitive strategy will specify, either explictly or implicitly, one or more customer segments that a company hopes to satisfy.




• There are three steps to achieve strategic fit: Understanding the Customer need: It involves the quantity of product needed in each lot, the response time desired, the variety of products needed, the service level required, the price of the product and desired rate of innovation. All this leads to implied demand uncertainty (it is the uncertainty that exists due to the portion of demand that the SC is required to meet). There is something else which is called demand uncertainty (reflects the uncertainty of a customer's demand for a product).




• We can have low implied demand uncertainty ( purely functional products like gasoline), somewhat certain ( established goods like crest toothpaste), somewhat uncertain ( new models of existing products) and high implied demand ( entirely new products).




• Correlation between demand uncertainty and other attributes:

Attribute Low implied High Implied

Product Margin low High

Avg. Forecast error 10% 40-100%

Average Stockout Rate 1-2% 10-40%

Average Forced Seasoned Markdown 0% 10-25%

• Understanding the Supply Chain.

In this we talk about SC responsiveness and supply chain efficiency.

SC responsiveness is the ability to respond to wide range of quantity demanded, meet short lead times, handle a large varieties of products, build highly innovative products and meet a very high service level.

SC efficiency is the cost of making and delivering a product to the customer.

The responsiveness spectrum starts from Highly efficient ( integrated steel mills) to somewhat efficient ( hanes apparel, a traditional make to store manufacturer-lead time- several weeks) to somewhat responsive ( most automotive production) to highly responsive ( Dell- custom made PCs and servers in a few days)

Supply Chain Drivers
The supply chain drivers are: Inventory, transportation, facilities and information
supply chain drivers structure

Inventory Decisions
1. Cycle Inventory: Average amount of inventory used to satisfy between receipts of supplier shipments- the basic trade off SC managers face is the cost of holding larger lots of inventory ( when cycle inventory is high) vs. the cost of ordering products frequently ( when cycle inventory is low)
2. Safety Inventory: Inventory held just in case demand exceeds expectations. It is held to counter uncertainty.
3. Seasonal Inventory: That is build up to counter predictable variability in demand.
Remember: Increasing inventory will generally make SC more responsive but less efficient
Transportation
Transportation moves the product between different stages of a supply chain.
Role in SC: Faster transportation allows a SC to be more responsive but reduces its efficiency.Role In COmpetitive Strategy: When customer criteria is responsiveness-> need faster transportation, when Price--> slower transportation
components of Transportation Decision
1. Mode of transportation2. Route and Network SelectionA route is the path along which a product is shipped and a network is the collection of locations and routes along which a product can be shipped3. In house or Outsource
The fundamental tradeoff for transportation is between the cost of transporting a given product (efficiency) and the speed with which that product is transported (responsiveness)
Facilities: It includes
are the places in wht SC network where inventory is stored, assembled or fabricated.
Location where a company will locate its facilities. Trade off: whether to centralise( to gain economies) or decentralise ( to become more responsive).
Capacity: A large amount of excess capacity allows the facility to be flexible and to respond to wide swings to the demands placed on it. Excess capacity costs money and therefore decreases efficiency.
Manufacturing Methodology: They must decide whether to design a facility with a product focus or a functional focus.
A product focussed factory perfoms many different functions ( such as fabrication and assembly) in producing a single type of product.
A process/ functional foucussed factory performs fewer functions (such as fabrication only or only assembly) on many types of products.
A product focus tends to be more cost effective whereas function focus tends to be more flexible.
Warehousing Methodology
It can be SKU storage, Job Lot storage or Cross Docking
SKU storage stores all of one type of product together-efficient
Job Lot stage: All different types of products needed to perfom a particular job or satisfy a particular type of customer are stored together.
Cross Docking: Here goods are not actually wahehoused in a facility. Instead trucks from suppliers, each carrying a different types of products, deliever goods to a facility. There the inventory is broken into smaller lots and quickly loaded onto store-bound trucks that carry a variety of products.
INFORMATION
It - serves as the connection between the supply chain various stages- It is also crucial to the daily operations of each stage in a supply chain.
Components of Information Decision
1. Push Vs. Pull
Push systems generally require information in the form of an elaborate material requirement planning (MRP) systems, to take the master production schedule and roll it break, creating schedules for suppliers with part types, quantity and delivery dates. Pull systems require information on an actual demand to be transmitted extremely quickly throughout the chain so that production and distribution of parts and products can accurately reflect the total demand.
2. Coordination and Information Sharing
3. Forecasting and Aggregate Planning
Aggregate planning tranforms forecasts into plans of activity to satisfy the projected demand.
4. Enabling Technologies
a. Electronic Data Interchange, b. the Internet, c. ERP, d. supply chain management

OBSTACLES OF ACHIEVEING STRATEGIC FIT
- Increasing variety of products- decreaing product life cycle- increasingly demanding customer- fragmentation of SC ownership- globalisation