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11 -managing_the_supply_chain
- 1. Alex Hill andTerry Hill
- 2. Managing the supplychain Alex Hill and Terry Hill
- 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
- 5. © Alex Hilland Terry Hill
- 6. > KEY IDEA Businesses have to manage FLOWS of MATERIAL and INFORMATION across supply chain networks
- 7. What is asupply chain?
- 8. What is asupply chain?
- 9. > KEY IDEA The supply chain comprises all the STEPS required to SUPPLY a service or a product to a customer
- 10. Designing the supply chain
- 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
- 18. Designing the supply cDheaciidning to make or buy
- 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 CREATINGA 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 ‘positive retail EXPERIENCE’ - 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 SINGLESOURCING POLICY 1.Comment on KPMG’s 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 KPMG’s 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 ‘Customer Care’ advert Apple ‘get a mac’ advertising campaign (2002) Clip Start Finish 00:00:00 00:00:30 What clip shows Three people discussing the ‘genius’ 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 ‘Innovation’ advert Apple ‘get a mac’ 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) ‘All I want for Xmas’ 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) ‘Portraits’ advert (with ‘colours’ 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 •What are its MARKET order-winners? •What are its CORE capabilities? • How should it DESIGN its supply chain?
- 32. Designing supply chains Markets, capabilities and supply chains Dell •What are its MARKET order-winners? •What are its CORE capabilities? • How should it DESIGN its supply chain?
- 33. Markets, capabilities andsupply 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 •What are its MARKET order-winners? •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 cKheayienlesments • 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
- 38. Managing supply cThypaeinssof supplier relationship
- 39. Managing supply cThypaeinssof supplier relationship
- 40. Managing supply cThypaeinssof supplier relationship
- 41. Managing supply cThypaeinssof supplier relationship
- 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 RELOCATESFROM 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 CHIQUITARELOCATES 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 cInhcareinasseinformation flow • Use Electronic Data Interchange (EDI) systems to TRANSFER information • Incorporate INTERNET technology • Link companys’ business SYSTEMS
- 47. Managing supply cInhcareinasseinformation flow
- 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
- 50. Managing supply cDhigaitianlssupply chains
- 51. Managing supply cDhigaitianlssupply chains
- 52. ACPAPSLEE 1’1S. 5iTUNES: DIGITAL SUPPLY CHAIN 1.What is Apple’s business MODEL? 2.How has its digital supply chain contributed to its recent SUCCESS?
- 53. CASE 11.5 APPLE’SiTUNES: 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
- 54. Developing supply cPhhaasines1 - Fragmented
- 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
- 56. Developing supply cPhhaasines2 - Integrating activities within a business
- 57. Developing supply cPhhaasines3 - Integrating activities between businesses
- 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
- 60. CASE 11.6 THEDIRECT ALPINE APPROACH TO MOUNTAIN CLIMBING 1.What is the TRADITIONAL mountaineering supply chain? 2.How has Messner DEVELOPED this chain?
- 61. CASE 11.5 APPLE’SiTUNES: 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 cThooalisnasnd techniques • Improve CUSTOMER support • Change ATTITUDES to suppliers • Increase use of IT • Strategic PARTNERING • Delivering to CUSTOMERS
- 63. Developing supply cChhaaningsingattitudes to suppliers
- 64. Developing supply cChhaaningsingattitudes to suppliers
- 65. Developing supply cChhaaningsingattitudes to suppliers
- 66. CASE 11.7 JAPANESE COMPANIES’ 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 JAPANESECOMPANIES’ 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
- 68. Developing supply cInhcareinassinguse of IT
- 69. CASE 11.8 ITDEVELOPMENTS
- 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 Dell’s 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 SYNCHRONISINGTHE 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)
- 75. Developing supply cBheaneinfitss • Reduced COSTS • Increased access to TECHNICAL expertise • Shorter LEAD-TIMES • Lower INVENTORIES
- 76. > KEY IDEA Businesses can DEVELOP their supply chains to • Lower COSTS • Shorten LEAD-TIMES • Reduce CASH holdings • Increase access to TECHNICAL expertise
- 77. Developing supply cInhteaginrastedsupply chain: The ‘one-firm’ concept
- 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 •What kind of ORGANISATION is presented? •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 AUTOCRATIC management style CENTRALISED management structure FUNCTIONAL structure FRAGMENTED supply chain No one looking at ENTIRE chain Poor COMMUNICATION Lack of CUSTOMER focus INEFFICIENT operation Change MANAGEMENT STYLE Move to TEAM BASED structure 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 Harry’s approach DIFFERENT? •What are the BENEFITS? •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• MAKEor 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
- 89. © Alex Hilland Terry Hill
- 90. Revision questions 1A 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 1A 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 2The 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 2The 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 3Benefits of making in-house include: a) Increased control b) Increased focus on core issues c) Both a) and b)
- 95. Revision questions 3Benefits of making in-house include: a) Increased control b) Increased focus on core issues c) Both a) and b)
- 96. Revision questions 4Benefits of choosing to buy include: a) Increased control b) Increased focus on core issues c) Both a) and b)
- 97. Revision questions 4Benefits of choosing to buy include: a) Increased control b) Increased focus on core issues c) Both a) and b)
- 98. Revision questions 5An alternative to choosing to buy is: a) Synchronising the supply chain b) Switching suppliers c) Developing a joint venture
- 99. Revision questions 5An alternative to choosing to buy is: a) Synchronising the supply chain b) Switching suppliers c) Developing a joint venture
- 100. Revision questions 6Developing 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 6Developing 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 7The benefits of developing a supply chain include: a) Reduced inventory b)More responsive to customer needs c) Both a) and b)
- 103. Revision questions 7The benefits of developing a supply chain include: a) Reduced inventory b)More responsive to customer needs c) Both a) and b)
- 104. CASE FOR TUTORIAL ZARA
Editor's Notes
- #27 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.
- #32 Show students the two adverts for Apple and ask them to think about the questions above.
- #33 Show students the two adverts for Dell and ask them to think about the questions above.
- #79 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.
- #82 Show students the first clip and ask them to think about these three questions.
- #85 Show students the second clip of Harry Tuttle.
- #105 See the lecturer zone for teaching notes and methods to accompany this case.