3. Learning
objectives
⢠Define what a SUPPLY CHAIN is and outline the steps
that make up the chain
⢠Explain the factors that affecting its DESIGN including:
- The decision to MAKE or BUY
- The ALTERNATIVES to make or buy
- The issues surrounding OUTSOURCING
⢠Understand the processes of MANAGING and
DEVELOPING supply chains, and the TECHNIQUES
used in these approaches
⢠Outline the BENEFITS of effectively managing supply
chains
4. Lecture outline
⢠INTRODUCTION
⢠What is a SUPPLY CHAIN?
⢠DESIGNING the supply chain
⢠MANAGING the supply chain
⢠DEVELOPING the supply chain
⢠Critical REFLECTIONS
⢠SUMMARY
11. Designing the supply
cDheaciidning to make or buy
⢠Support MARKET order-winners or
qualifiers
⢠Build BARRIERS to entry
⢠Maintain SUPPLY of key materials
⢠Better UNDERSTAND customers
⢠Retain CORE capabilities
⢠Access EXTERNAL capabilities
⢠Take advantage of reduced TRADE
barriers
12. > KEY IDEA
The FIRST STEP in designing a supply
chain is to decide what to MAKE and
what to BUY
13. > KEY IDEA
Companies need to keep IN-HOUSE the
services, products or processes that
help them
understand customer REQUIREMENTS
and build customer RELATIONSHIPS
14. Designing the supply
cDheaciidning to make
ADVANTAGES
⢠Increased CONTROL
⢠Increased
OPPORTUNITY
DISADVANTAGES
⢠More difficult to
MANAGE
⢠Less FOCUS
⢠Reduced ACCESS
15. > KEY IDEA
Making IN-HOUSE:
⢠Increases CONTROL over processes,
material supply and service/product
knowledge
⢠Provides greater OPPORTUNITY for
differentiation and cost reduction
16. Designing the supply
cDheaciidning to buy
ADVANTAGES
⢠Easier to MANAGE
⢠Increased FOCUS
⢠Increased ACCESS
DISADVANTAGES
⢠Increased RISK
⢠Difficult to
REVERSE
⢠New SKILLS
required
⢠Less FLEXIBLE
17. > KEY IDEA
Deciding to BUY:
⢠Makes it easier to manage COSTS
⢠Increases FOCUS on critical tasks
⢠Increases ACCESS to external sets of
capabilities
19. > KEY IDEA
To REDUCE the potential disadvantages
of deciding to buy, businesses can
instead use JOINT VENTURES or CO-SOURCING
20. CASE 11.1
STRATEGIC
OUTSOURCING
DECISIONS
1.Why are most
companies
SUBCONTRACTING call
centre facilities?
2.Why would a company
decide to set-up and
manage its OWN call
centre?
21. CASE 11.1
STRATEGIC
OUTSOURCING
DECISIONS
Question Answer
Subcontrac
t
Keep
in-house
⢠COST reduction
⢠Easier to MANAGE
⢠Increased FOCUS
⢠Increased ACCESS
⢠Increased CONTROL
⢠Direct CUSTOMER contact
⢠Increased OPPORTUNITY
22. CASE 11.2
CREATING A POSITIVE
RETAIL EXPERIENCE
1.Why is the guitar tuning
service SIGNIFICANT for
Fender?
2.Why are distributors
now ORDERING new
products?
23. CASE 11.2
Questio
n
CREATING A POSITIVE
RETAIL EXPERIENCE
Answer
Significan
t service
Ordering
new
products
⢠Creates âpositive retail EXPERIENCEâ
- Customer does not have to STRING and
TUNE guitar themselves after delivery
⢠Increases SERVICE specification
- To match their high PRODUCT
specification
⢠Reduced delivery LEAD-TIME
- UPS now hold INVENTORY
- So retailers can offer WIDER
range without holding inventory
24. CASE 11.3
SINGLE SOURCING
POLICY
1.Comment on KPMGâs
ROLE in this dispute
2.What would you ADVISE
Land Rover to do about
its single sourcing
policy?
25. CASE 11.3
Questio
n
SINGLE SOURCING POLICY
Answer
KPMGâs
role
Advice
⢠Get best deal for SUPPLIER
- But focused on SHORT-TERM benefit
- Would have DAMGED long-term
relationship
⢠Increases SERVICE specification
- To match their high PRODUCT
specification
⢠Single sourcing brings ADVANTAGES
- Reduces COST
- Develops RELATIONSHIPS
⢠However, need to introduce
SAFEGUARDS into future supplier
contracts
26. Designing supply
chains
Markets, capabilities and supply chains
Apple
TV adverts
Dell
TV adverts
V
S.
27. Designing supply
chains
Markets, capabilities and supply chains
Film clip Mac vs PC advert
Film
Title
Director
(year)
Mac vc PC âCustomer Careâ advert
Apple âget a macâ advertising campaign (2002)
Clip Start
Finish
00:00:00
00:00:30
What clip shows
Three people discussing the âgeniusâ support
within an Apple store and how this is different
to the usual support for PC customers
Key learning
objective
How Apple competes on the level of customer
after sales support that it provides
28. Designing supply
chains
Markets, capabilities and supply chains
Film clip Mac vs PC advert
Film
Title
Director
(year)
Mac vc PC âInnovationâ advert
Apple âget a macâ advertising campaign (2002)
Clip Start
Finish
00:00:00
00:00:30
What clip shows
Three people discussing how Apple focuses
on product innovation and how this is different
to the usual support for PC customers
Key learning
objective How Apple competes on product design
29. Designing supply
chains
Markets, capabilities and supply chains
Film clip Dell advert
Film
Title
Director
(year)
âAll I want for Xmasâ advert
Dell advertising campaign (1999)
Clip Start
Finish
00:00:00
00:00:44
What clip shows A boy recording a video that asks his Dad for a
Dell computer for Xmas
Key learning
objective How Dell competes on price
30. Designing supply
chains
Markets, capabilities and supply chains
Film clip Dell advert
Film
Title
Director
(year)
âPortraitsâ advert (with âcoloursâ song by Kira
Willey)
Dell advertising campaign (2009)
Clip Start
Finish
00:00:00
00:00:31
What clip shows
A series of people who have all chosen a
laptop to match the colour of something they
like
Key learning
objective How Dell competes on product customisation
31. Designing supply
chains
Markets, capabilities and supply chains
Apple
â˘What are its MARKET order-winners?
â˘What are its CORE capabilities?
⢠How should it DESIGN its supply
chain?
32. Designing supply
chains
Markets, capabilities and supply chains
Dell
â˘What are its MARKET order-winners?
â˘What are its CORE capabilities?
⢠How should it DESIGN its supply
chain?
33. Markets, capabilities and supply chains
Aspect Apple Dell
Key MARKET
order-winners
CORE
capabilities
DESIGN
supply
chain
Make
Buy
⢠BRAND name
⢠Product DESIGN
⢠Technical SUPPORT
⢠Develop IMAGE
⢠UNDERSTAND customer
⢠DESIGN product
⢠After sales SERVICE
⢠DESIGN
⢠MARKETING
⢠PURCHASING
⢠RETAIL
⢠MANUFACTURING
⢠DISTRIBUTION
⢠PRICE
⢠Product
CUSTOMISATION
⢠Reduce COSTS
⢠PRODUCT flexibility
⢠VOLUME flexibility
⢠PURCHASING
⢠MANUFACTURING
⢠RETAIL
⢠DISTRIBUTION
Designing supply
chains
34. Designing supply
chains
Markets, capabilities and supply chains
Dell
â˘What are its MARKET order-winners?
â˘What are its CORE capabilities?
⢠How should it DESIGN its supply
chain?
35. Managing supply
chains
Driving the WHOLE
CHAIN
in the same direction to
satisfy CUSTOMERS
⢠Increased customer
FOCUS
⢠Increased EFFICIENCY
36. Managing supply
cKheay ienlesments
⢠Manage ENTIRE supply chain
⢠Develop customer and supplier
PARTNERSHIPS
⢠Reduce NUMBER of suppliers in chain
⢠Increase INFORMATION flow
37. > KEY IDEA
Businesses must see suppliers as an
INTEGRAL part of the total supply chain
and realise that whole chain is only as
strong as its WEAKEST link
42. > KEY IDEA
Businesses must build strong
RELATIONSHIPS with those suppliers
that are most strategically CRITICAL to
their business and help them SUPPORT
their key order-winners and qualifiers
43. > KEY IDEA
Businesses must aim to create
SUSTAINABLE supply chains that have a
positive
ECONOMIC, SOCIAL and
ENVIRONMENTAL impact within all parts
of the chain
44. CCAHSIQEU 1I1T.A4
RELOCATES FROM
CINCINNATI TO
COSTA RICA
1.Why did it MOVE its main
purchasing team to
Costa Rica?
2.What OPPORTUNITIES
did the relocation offer?
45. CASE 11.4
CHIQUITA RELOCATES
FROM CINCINNATI TO
COSTA RICA
Question Answer
Move
purchasing
Opportuniti
es created
⢠Develop supplier RELATIONSHIPS
- With fruit GROWERS
⢠Integrate SUPPLY CHAIN
- Closer internal supply chain
RELATIONSHIPS
- Provide DIRECT support to buyers
⢠Develop its CSR policy
- Developing supplier PRACTICES
46. Managing supply
cInhcareinasse information flow
⢠Use Electronic Data Interchange
(EDI) systems to TRANSFER
information
⢠Incorporate INTERNET
technology
⢠Link companysâ business
SYSTEMS
48. > KEY IDEA
The continued development of
MOBILE electronic devices and faster
INTERNET connections creates the
opportunity for companies to move from
physical to DIGITAL supply chains
49. > KEY IDEA
Digital supply chains give customers
access to a WIDER range of CHEAPER
products that can be ordered and
delivered more QUICKLY
Such chains are also easier to MANAGE,
enabling suppliers to reduce CASH
holdings and supply COSTS
52. ACPAPSLEE 1â1S. 5iTUNES:
DIGITAL SUPPLY
CHAIN
1.What is Appleâs
business MODEL?
2.How has its digital
supply chain contributed
to its recent SUCCESS?
53. CASE 11.5
APPLEâS iTUNES: DIGITAL SUPPLY
CHAIN
Question Answer
Business
model
Contributio
n to
success
⢠Sell HARDWARE
- iPods, iPhones and iPads
⢠Give away SOFTWARE at no cost
- iTunes
⢠Allow suppliers to distribute their PRODUCTS through
iTunes
- Act as MARKETPLACE
- Take a PERCENT of sale
⢠Increased HARDWARE sales
- Customers access to WIDE range of CHEAP
products
⢠Reduced CASH holdings
- No PHYSICAL inventory
⢠Reduced supply COST
- No PHYSICAL chain
- No excess or obsolete INVENTORY
- Easier to MANAGE
55. > KEY IDEA
Supply chains can be developed to
⢠More EFFICIENTLY and EFFECTIVELY
support market needs by
⢠INTEGRATING, CO-ORDINATING and
SYNCHRONISING activities across the
chain
58. > KEY IDEA
To DEVELOP a supply chain, companies
must:
1.INTEGRATE activities across the chain
2.Look for ways to COORDINATE them
3.Work out how to SYNCHRONISE them
59.
60. CASE 11.6
THE DIRECT ALPINE
APPROACH TO
MOUNTAIN CLIMBING
1.What is the
TRADITIONAL
mountaineering supply
chain?
2.How has Messner
DEVELOPED this chain?
61. CASE 11.5
APPLEâS iTUNES: DIGITAL SUPPLY
CHAIN
Question Answer
Traditional
approach
Messner
developmen
ts
⢠High level of SUPPORT for climber
- Hundreds of PORTERS
- Tonnes of EQUIPMENT
⢠Large MANAGEMENT task
- MANAGE and CO-ORDINATE all of these
activities
⢠Separated climb into TWO phases
- Up to the BASE of a mountain
- From the base to the TOP
⢠FIRST phase
- Similar to TRADITIONAL approach
⢠SECOND phase
- Only ONE person - him
- LEAN, INTEGRATED and SYNCHRONISED
approach
62. Developing supply
cThooalisn asnd techniques
⢠Improve CUSTOMER
support
⢠Change ATTITUDES to
suppliers
⢠Increase use of IT
⢠Strategic PARTNERING
⢠Delivering to CUSTOMERS
66. CASE 11.7
JAPANESE
COMPANIESâ
APPROACH TO
SUPPLIERS
1.How would you
describe the Japanese
APPROACH?
2.How does this illustrate
a change in ATTITUDE
to suppliers?
67. CASE 11.7 JAPANESE COMPANIESâ
APPROACH TO SUPPLIERS
Questio
n
Answer
Approach
Attitude
⢠Suppliers RETAINED throughout product
life cycle
⢠TRAINS supplier
⢠Tests viability of long-term RELATIONSHIP
- Assesses ROBUSTNESS of supplier
⢠Bring suppliers on board in DESIGN phase
⢠REWARD and COLLABORATE with
suppliers
⢠Moved to HIGHEST level of attitude
- INTEGRATED and SYNCHRONISED
70. CASE 11.8
Questio
n
IT DEVELOPMENTS
Caterpillar Gap
From
To
Benefits
⢠REACTIVE
- Service triggered by
DEALER
⢠PROACTIVE
- CATERPILLAR identifies
need for service
⢠Reduced COSTS
- LONGER lead-times
⢠Improved SERVICE
- NO overdue services
- Reduced potential
customer PROBLEMS
⢠DELAYS
- Information always slightly
OLD
⢠REAL-TIME
- SALES, INVENTORY and
DISTRIBUTION data
⢠Reduced INVENTORY
- Increased TURNS
- Easier to CHANGE stock
⢠Reduced COSTS
- Less OBSOLETE stock
⢠Increased SALES
- Sell MORE when
fashionable
71. CASE 11.9
DELL: SUPPLY CHAIN
INTEGRATION
1.How does it INTEGRATE
its supply chain?
2.How does its WEBSITE
help this integration?
3.How is Ford able to
reduce its COSTS by
using Dellâs Premier
Pages?
72. DELL: SUPPLY CHAIN
INTEGRATION
Question Answer
Integrate
Website
Reduce
costs
⢠Reduced STAFF costs
- STANDARDISED purchasing process
- SINGLE buyer can manage all Dell
purchases
CASE 11.9
⢠It only MAKES-TO-ORDER
⢠Manages MATERIALS
- Just-in-time (JIT)
- Short LEAD- TIME
⢠Low INVENTORY
- Quick NEW product introduction
⢠Easier for customers to ORDER
⢠DIRECT customer contact
73. CASE 11.10
SYNCHRONISING
THE SUPPLY CHAIN
1.How has Calyx and
Corolla
SYNCHRONISED its
supply chain?
2.What ADVANTAGES
has it gained from these
developments?
74. CASE 11.10
SYNCHRONISING THE SUPPLY
CHAIN
Question Answer
Synchronise
d
Benefits
⢠Improved flow of INFORMATION
- Between GROWER and FED EX
⢠Reduced delivery LEAD-TIME
- From GROWER to CUSTOMER
⢠No INVENTORY
⢠Increased SALES
- Better meet product DESIGN order-winner
⢠Increased PROFITS
- Can increase PRICE as better meet
product DESIGN and price is a qualifier)
78. Developing supply
chains
Approaches, benefits and issues
Brazil
(1985)
Central services vs. Harry Tuttle
79. Developing supply
chains
Approaches, benefits and issues
Film clip Central Services
Film
Title
Director
(year)
Brazil
Gilliam (1985)
Clip Start
Finish
00:00:00
00:08:49
What clip shows The Central Services government operation
bringing the wrong person in for questioning
Key learning
objective
The issues that exist in a traditional
unintegrated and unsynchronised supply chain
80. Developing supply
chains
Approaches, benefits and issues
Film clip Harry Tuttle
Film
Title
Director
(year)
Brazil
Gilliam (1985)
Clip Start
Finish
00:23:39
00:32:23
What clip shows
Harry Tuttle (a heating engineer) intercepting a
call to Central Services and going to solve the
problem himself
Key learning
objective
The benefits that result from integrating and
synchronising a supply chain
81. Developing supply
chains
Approaches, benefits and issues
â˘What kind of ORGANISATION is
presented?
â˘What type of ISSUES result?
⢠How would you IMPROVE it?
82. Developing supply
chains
Approaches, benefits and issues
Aspect Central Services
TYPE of
organisation
Resulting
ISSUES
How to
IMPROVE
ď˘ AUTOCRATIC management style
ď˘ CENTRALISED management
structure
ď˘ FUNCTIONAL structure
ď˘ FRAGMENTED supply chain
ď˘ No one looking at ENTIRE chain
ď˘ Poor COMMUNICATION
ď˘ Lack of CUSTOMER focus
ď˘ INEFFICIENT operation
ď˘ Change MANAGEMENT
STYLE
ď˘ Move to TEAM BASED
structure
ď˘ EMPOWER staff
83. Developing supply
chains
Bad points about Central Services
⢠AUTOCRATIC management style
⢠CENTRALISED management
structure
⢠FUNCTIONAL structure
⢠Low staff MOTIVATION
⢠Lack of RESPONSIBILITY
⢠Poor QUALITY
⢠INEFFICIENT operation
- High level of WASTE
- High level of CONTROL
⢠INFLEXIBLE delivery system
- Unable to change SERVICE
provided
- Unable to cope with VOLUME
changes
84. Developing supply
chains
Approaches, benefits and issues
⢠How is Harryâs approach
DIFFERENT?
â˘What are the BENEFITS?
â˘What are the ISSUES?
85. Developing supply
chains
Approaches, benefits and issues
Aspect Harry Tuttle
CHANGES
made
Resulting
BENEFITS
Resulting
ISSUES
⢠Move to TEAM-BASED
structure
⢠Direct CUSTOMER CONTACT
⢠High MOTIVATION
⢠High level of RESPONSIBILITY
⢠EFFICIENT operation
⢠ENTREPRENEURIAL style
⢠Lack of STRUCTURE
⢠Lack of PROCESS
⢠Lack of CONTROL
86. Developing supply
chains
Good points about Harry Tuttle
⢠ENTREPRENEURIAL style
⢠High MOTIVATION
⢠High level of RESPONSIBILITY
⢠CELL structure
- Harry performs ALL processes
- Harry has direct CUSTOMER
contact
87. Critical
reflections
⢠Businesses are at the CENTRE of
- MATERIAL networks; and
- INFORMATION flows
⢠Supply chains are becoming more COMPLEX
- Through increased OUTSOURCING
- Becoming supply NETWORKS
⢠Supplier RELATIONSHIPS are key
- Must have FEWER relationships
- Become tested when SALES reduce
⢠BENEFITS is required
- Huge OPPORTUNITY
- Requires a completely different APPROACH
88. Summar
y⢠MAKE or BUY is first key decision
- Must reflect MARKET OW and Q
- Understand CUSTOMERS
- Build BARRIERS to entry
⢠ADVANTAGES of each
- MAKE - control, knowledge and opportunity
- BUY - focus, access and costs
⢠DEVELOPING supply chains
- Increase customer focus, integrate, align and
synchronise
⢠BENEFITS of developing chains
- Reduced INVENTORY
- Reduced COSTS
- More RESPONSIVE
90. Revision
questions
1 A supply chain is:
a) All the steps in the supply of a service or
product from its origin to its consumption
b) The steps managed by the suppliers
c) The steps managed by the organisation
91. Revision
questions
1 A supply chain is:
a) All the steps in the supply of a service or
product from its origin to its consumption
b) The steps managed by the suppliers
c) The steps managed by the organisation
92. Revision
questions
2 The first decision in designing the supply
chain is:
a) Make or buy
b)Which suppliers to use
c) How to manage your suppliers
93. Revision
questions
2 The first decision in designing the supply
chain is:
a) Make or buy
b)Which suppliers to use
c) How to manage your suppliers
94. Revision
questions
3 Benefits of making in-house include:
a) Increased control
b) Increased focus on core issues
c) Both a) and b)
95. Revision
questions
3 Benefits of making in-house include:
a) Increased control
b) Increased focus on core issues
c) Both a) and b)
96. Revision
questions
4 Benefits of choosing to buy include:
a) Increased control
b) Increased focus on core issues
c) Both a) and b)
97. Revision
questions
4 Benefits of choosing to buy include:
a) Increased control
b) Increased focus on core issues
c) Both a) and b)
98. Revision
questions
5 An alternative to choosing to buy is:
a) Synchronising the supply chain
b) Switching suppliers
c) Developing a joint venture
99. Revision
questions
5 An alternative to choosing to buy is:
a) Synchronising the supply chain
b) Switching suppliers
c) Developing a joint venture
100. Revision
questions
6 Developing an integrated supply chain
involves:
a) Moving from being a supply chain to a
demand chain
b) Competing as a chain rather than as an
individual organisation
c) Both a) and b)
101. Revision
questions
6 Developing an integrated supply chain
involves:
a) Moving from being a supply chain to a
demand chain
b) Competing as a chain rather than as an
individual organisation
c) Both a) and b)
102. Revision
questions
7 The benefits of developing a supply chain
include:
a) Reduced inventory
b)More responsive to customer needs
c) Both a) and b)
103. Revision
questions
7 The benefits of developing a supply chain
include:
a) Reduced inventory
b)More responsive to customer needs
c) Both a) and b)
At this point you can show a series advertising campaigns for computer companies Dell and Apple, demonstrating how each company competes on issues such as price, customer care and customization.
n.b These clips can be found easily through your search toolbar or on a video-sharing site, such as Youtube.
Show students the two adverts for Apple and ask them to think about the questions above.
Show students the two adverts for Dell and ask them to think about the questions above.
At this point you can show students two clips from Brazil, dir. by Gilliam (1985), to demonstrate the problems of an unintegrated supply chain and the benefits of an integrated and synchronised supply chain.
Show students the first clip and ask them to think about these three questions.
Show students the second clip of Harry Tuttle.
See the lecturer zone for teaching notes and methods to accompany this case.