Part 2- Understanding the SC Flashcards
History of the SC
Over last 75 years, SC has been transformed from COST FOCUSED function → CRITICAL PART of an organization for its global GROWTH STRATEGY to increase REVENUE & VALUE to the CUSTOMER.
- before ww2 logistics were mainly used/developed/connected with the logistics of war/ organizing battle/ send equipment/ probitions etc
- after the war the concept of logistics developed and companies/organizations saw the importance of the trade off between inventory costs vs transportation costs
- 60s → physical distribution transformed into a more integrated concept (transportation, inventory control ++) but related to the outbound side of the manufacturing process
- mid 60s → supply side incorporated as well into physical distribution concept but in many cases purchasing still wasn’t included
- early 80s → US manufacturing started to outsource production, materials and labor to other countries
- important integration and coordination between the parties was vital to be able to obtain competitive advantage to our competition
- more added value than our competitors to our customers
- efficiency of the supply chain
- to be able to develop all the new sc systems the development of the technology was vital → using new systems such as EDI (electronic data interchange), ERP (enterprise resource planning), internet etc.
the concept of utility is introduced → different types of utilities (form, time, place ++)
Value from utility
Utility is the value/ benefit a customer receives from a purchase.
- 6 different types of utilities
- SC management contributes to increase all these utilities
- the important thing: to have the right product, at the right place and price, at the right time
6 different types of utilities
1) Form utility
2) Time utility
3) Place utility
4) Possession utility
5) Information utility
6) Service utility
Mission statement
Company’s reason for being and should guide the actions of the organization and its goals.
It should include these concepts:
- customers
- products and services
- self-concept
- markets
- technology
- public image
- growth and profitability
- philosophy
- labor policy
Mission statement –> objectives
- Specific objectives with measurable targets
- possible to evaluate
After laying out the companies mission statement and objectives –>
Carry out a SWOT analysis
- with the analysis we are able to come up with potential competitive advantages the company has as that can be developed further in the near future
- defining strengths and opportunities to create a strategy to differentiate themselves from competitors to add value to customers
Industry framework:
- What is the interaction between the main players in the companies marketplace
- suppliers, customers, economic factors +++
4 main drivers that can impact SC design:
1. Demand variation
2. Market mediation costs
3. Product lifecycle
4. Cost of assets to total costs
Unique value proposition
1) Establish Competitive Priority Strategy (SC) → Establish Value Proposition offered to customer.
2) Define what it is necessary to obtain new business and incorporate it into de Value Proposition.
3) Incorporate key drivers into SC → make sure required value is delivered to the customer.
Internal processes
Internal processes must be interconnected and aligned properly.
- determine the decoupling point (where a product takes unique characteristics)
Which processes are:
- Push- push to the sales part of the business, a traditional strategy, high asset utilization rate just before decoupling point
- Pull- workload driven by customer demand, no inventory costs as its produced on demand –> buy a closet, pay and preorder, receive it one month later
SC strategy methodology
Paul Dittman´s 9 steps:
1) Customers current and future needs
2) Evaluate current SC capabilities with best in class
3) Scan environment changes that may impact customers + SC
4) Analyse competition
5) Evaluate technology
6) Deal with SC risk management
7) Develop new SC capability requirements and create a plan to get there –> requires agility, adaptability and alignment
8) Evaluate current SC organizational structure, people and metrics
9) Develop a business case (to be approved by management) and obtain success
SC Opportunities and challenges
- demand planning
- globalisation
- increased competition and price pressures
- outsourcing
- shortened/ complex product lifecycles
- lean + six sigma
Lean + six sigma
Team-based continuous-improvement processes.
Lean: identifies and eliminates waste throughout a company
Six sigma: reduces variation in individual processes
The bullwhip effect
Difficult to forecast the demand of a new product
- occurs when there is big differences between the real customer demand and the demand forecasted by all the companies in the supply chain
Example:
Real demand = 1
Retailer thinks the demand = 5
Wholesaler = 20
Manufacturer → receives an order for 20 units but the real demand is only 1
