A Framework for Supply Chains - Oakden chapter 02

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  • 1. Chapter 2 Business Planning, Risk and Sustainability PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-1
  • 2. Introduction Learning Outcomes After this lesson, you should be able to: • recognise the necessity for a business plan • identify key elements of the logistics strategy and contribute to its development • follow a framework for evaluating risk in a supply chain • understand the importance of sustainability in supply chain environments • appreciate the role of reverse logistics and how it is distinct from forward logistics PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-2
  • 3. Introduction Learning Outcomes After this lesson, you should be able to: • conceptualise the connections between multiple supply networks • explain the rationale behind the enterprise’s choice of supply network structure. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-3
  • 4. Strategic Approach • Few companies have a strategic plan for their supply chains and logistics.  Supply chains are currently viewed with a cost focus.  Supply chains are a cross-organisational concept that is not under the control of any one function. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-4
  • 5. Strategic Approach Business Plan • Purpose of Business Plan:  planning to take advantage of current opportunities  allows management to make informed choices concerning the ‘best’ portfolio of regions or countries and products  provides the guide to building on future or longer term opportunities. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-5
  • 6. Logistics Strategy Approach • Logistics strategy model developed by Professor Pieter Nagel. • Logistics strategy of the enterprise is informed by current structure of the supply chains that interact with the business. • Structure also defines the framework within which the logistics operations can execute the strategy. • The logistics strategy is driven, in part, by the strongest influence on the strategy; either the brand, the customers or suppliers. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-6
  • 7. Logistics Strategy Approach Power and its impact on supply chains • Power – capability of a party in a relationship to make the other member do something they otherwise would not do. • Porter (1979) proposed that five forces shape industry competition. • Aspect of logistics strategy will identify how power is being used in the business relationships through the supply chains. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-7
  • 8. Logistics Strategy Approach Power and its impact on supply chains • Examples of how companies may increase their power:  restricting the availability of supply for an item in high demand  incorporating product(s) into a superior service package that is not easily duplicated  gaining influence through contacts in government  providing a continual flow of innovative (‘must have’) products and services that customers have to stock. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-8
  • 9. Logistics Strategy Approach Power and its impact on supply chains  obtaining a licence to operate from government  promoting reputation and prestige by the seller or buyer  increasing the size of the organisation and its buying strength  promoting specialised knowledge, e.g. commodity trading  eliminating dependency on a few powerful customers  being a technology leader, e.g. holding patents  developing superior information, optimisation and modelling systems. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-9
  • 10. Logistics Strategy Approach Power and its impact on supply chains • An established power base can be weakened by:  implementing superior technologies  disintermediation (removal of intermediaries in the buying and selling process)  e-procurement techniques  creating joint ventures and joint purchasing initiatives. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-10
  • 11. Logistics Strategy Approach Supply Chain Risks • Supply chain can be complex and, due to the time, distances and range of assets used, subject to variability. • Importance of contingency plan – ‘Plan B’. • Uncertainty is the totality of all the variables, constraints and complexity that can exist in a supply chain. • Level of uncertainty is high – current supply chain situation may change, but we do not know exactly when and to what extent. • Level of uncertainty is low – the most likely limits of change in a supply chain are known, based on observation and analysis. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-11
  • 12. Logistics Strategy Approach Supply Chain Risks • Pressures on supply chains can all be called risks, which are amplified by the current acceptance of:  distance from suppliers and customers  focus on speed of operations  disruption of natural and political disasters  elimination of ‘safety margins’ concerning time, inventory and working capital. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-12
  • 13. Logistics Strategy Approach Supply Chain Risks • Risk assessment – important initial process in risk management for supply chains, it consists of the following steps:         Identify potential supply chain risks Observe the process Identify and document the criticality of risks Assess the likelihood of the event occurring Assess the consequences Develop a risk management plan Implement Evaluate PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-13
  • 14. Logistics Strategy Considerations • Assumptions must be made relating to future demand requirements, based on the quality of data. • Additional questions relating to the logistics strategy are:  What is the fit between life cycle stages of products and the design of specific logistical activities?  How can customer service be improved, with reference to the ‘cost to serve’? PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-14
  • 15. Logistics Strategy Considerations  Where should the various parts of the manufacturing process be performed?  From where should materials and components be sourced?  Should the enterprise have ownership or control of the upstream and downstream links?  What global collaborations will assist the efficiency and effectiveness of the supply chains? PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-15
  • 16. Logistics Strategy Considerations Network mapping • Network mapping can be of value in providing a visual structure for a business. • Network mapping requires the capturing of extensive information, such as:  the direction and volume of materials flowing through each supply chain  details of core suppliers and customers and their respective locations  ownership and control of specific links  contractual responsibilities. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-16
  • 17. Logistics Strategy Considerations Network mapping • The benefits of using network mapping for a supply network: 1. It shows how value is being driven through the supply chains. 2. It maintains the big picture of the business. 3. It assists in maintaining competitiveness. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-17
  • 18. Logistics Strategy Considerations Logistics Strategy Elements • Logistics strategy can be considered within five elements: 1. Customer service strategy 2. Inventory location strategy 3. Inventory management policy 4. Cost strategy 5. Transport and distribution strategy PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-18
  • 19. Logistics Strategy Considerations Logistics Strategy Elements • Outsourcing strategy – degree to which the business will ‘make’ (do something within the business) or ‘buy’ (contract another party to do something). • Off-shoring – the transfer of an organisational function to another country; this decision is likely to be outsourced. • Near-shoring – signifies outsourcing or relocating operations to a lower cost country that is within a few hours’ distance. • In-sourcing – a function that has been outsourced is being brought back within the enterprise. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-19
  • 20. Sustainability and Logistics Strategy Sustainability and business • Future sustainability of supply chains increasingly important element of the logistics strategy. • Critical element of sustainability is the operation of supply chains. • Both product and service companies can incorporate sustainability objectives within their overall business and supply chain logistics strategy. • Examples: HP and Linfox PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-20
  • 21. Sustainability and Logistics Strategy Reverse Logistics Process of handling items as they travel back through a supply chain for one of the following reasons: • recall (faulty) • repair (service) • returns (warranty) • recycle (convert) • refurbishment (end of lease or rental period) • remanufacturing (hours of operation or trade-in). PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-21
  • 22. Sustainability and Logistics Strategy Developments in freight movement • Dense trade cluster (DTC) – An approach to improving and consolidating freight movements. • Typical designations of DTCs:  freight village  inland port  logistics hub  logistics city. PPTs t/a A Framework for Supply Chains by Oakden and Leonaite © 2011 McGraw-Hill Australia Pty Ltd 2-22