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Supply networks.pptx
- 1. Supply Networks Efficiency and Effectiveness Standardization vs adaptation or customization
- 2. Learning Outcomes To understand and critically analyse • Supply chains/networks • Supply chain design • Outsourcing, offshoring and global sourcing • Supply Network Matching Decision
- 3. • The design and management of flows of products, information, and funds throughout the supply chain Supply Chain Management (SCM)
- 4. SCM integrates functions within and between enterprises of the supply chain through: • Intra – Organizational Integration • Cross – Enterprise Integration The Boundary-Spanning Nature of SCM
- 6. Supply Chain for Breakfast Cereals
- 7. Structure of a Supply Network
- 8. Total and Immediate Supply Networks “Second tier” Suppliers “First tier” Suppliers “Second tier” Customers “First tier” Customers The Operation Supply side of the network Demand side of the network The Immediate Supply Network The Total Supply Network Internal Supply Networks
- 9. Supply Network for a Plastic Home-Ware Company Plastic homeware manufacturer First tier suppliers Packaging supplier Plastic stockist First tier customers Wholesaler Second tier suppliers Ink supplier Cardboard company Chemical company Second tier customers Retailer Retailer Direct supply Information
- 10. Supply Network Co-ordination • Bullwhip effect: Fluctuation and distortion of information increases as it moves up the supply chain • Each stage of the chain carries progressively more inventory • The longer the supply chain, the greater the opportunity for the Bullwhip Effect • Supply chain integration provides the basis for successful supply network coordination. • ICT such as Electronic Point of Sale (EPOS)
- 11. The Bullwhip Effect 0 Time Sales from store Consumers 0 Time Store’s orders to wholesaler Time Wholesaler’s orders to manufacturer 0 Manufacturer’s orders to its suppliers 0 Time Retail Store Whole -saler Manuf - acturer Supplier Time
- 12. Reducing the Impact of the Bullwhip Effect • Reducing the number of the stages in the supply chain • Communicating end consumer demand directly to all stages of the supply chain • Reducing order sizes and increasing their frequency • Reducing delivery times • Reducing manufacturing lead times • Avoiding creating surges in demand due to price cutting and promotional activities
- 13. Service/Product Processes Supply Chain Link Services/Products with Internal Processes Link Services/Products with External Supply Chain Link Services/Products with Customers, Suppliers, and Supply Chain Processes Creating an Effective Supply Chain
- 14. Supply Chain Design Decisions • Supply network shape/configuration decisions • Supply network rationalization • Disintermediation • Do or Buy/vertical integration or outsourcing decision. • How much of the network should the operation own? • Supply network matching decision • How should supply chain networks be configured when operation compete in different ways in different market?
- 15. Supply Network Rationalization • Reducing the base of suppliers and customers • Reducing the number of relationships • Simplifying the basis of relationships • Reducing transaction costs • Carefully selecting customers and suppliers
- 16. Disintermediation: Magnitude of Supply Chain Costs Manufacturer Distributor Retailer Customer Cost per Percent Shirt Saving $52.72 0% $41.34 28% $20.45 62% Manufacturer Distributor Retailer Customer Manufacturer Distributor Retailer Customer Example of the Apparel Industry
- 17. Outsourcing • Vertical Integration being replaced by outsourcing Advantages of outsourcing • Reduced cost • Use of the expertise of the supplier • Better inventory control • Reduced capital employed • Accurate operation costs • Concentrating on core activities Disadvantages of outsourcing • Loss of control • Continuity of the supply at risk • Managing the supplier • Underutilisation of in-house resources • Commercial secrecy at risk
- 18. Outsourcing/Do or Buy Decision Matrix • The implications of outsourcing can be assessed in terms of strategic value and criticality
- 19. Global Sourcing • Sourcing resource inputs form different countries (offshoring) Stages of global sourcing • Stage 1: Domestic sourcing only • Stage 2: Reactive international sourcing • Stage 3: Proactive international sourcing • Stage 4: Global sourcing network
- 20. A typology of Outsourcing and Off-Shoring
- 21. Supply Network Matching Decisions • Supply chains should be designed in a way to support the competitive priorities of their services or products. • The nature of demand for the firm’s services or products determines the best choice of supply chain strategy/design. • Two distinct designs: efficient supply chains and responsive supply chains • Responsive supply chains are designed to react quickly to customer demand. • Efficient supply chains are aimed at reducing operational costs.
- 22. Efficient Vs Responsive Supply Chains (1) Factor Efficient Supply Chains Responsive Supply Chains Demand Predictable, low forecast errors Unpredictable, high forecast errors Competitive priorities Low cost, consistent quality, on- time delivery Development speed, fast delivery times, customization, volume flexibility, variety, top quality New-service/product introduction Infrequent Frequent Contribution margins Low High Product variety Low High
- 23. Efficient Vs Responsive Supply Chains (2) Factor Efficient Supply Chains Responsive Supply Chains Operation strategy Make-to-stock or standardized services or products; emphasize high volumes Assemble-to-order, make-to- order, or customized service or products; emphasize variety Capacity cushion Low High Inventory investment Low; enable high inventory turns As needed to enable fast delivery time Lead time Shorten, but do not increase costs Shorten aggressively Supplier selection Emphasize low prices, consistent quality, on-time delivery Emphasize fast delivery time, customization, variety, volume flexibility, top quality
- 24. Matching supply chains with products Nature of Demand Functional products Innovative products Predictable Unpredictable Few changes Many changes Low variety High variety Price stable Price markdowns Long lead-times Short lead-times Low margin High margins Supply Chain Policy Efficient Responsive Low throughput times low cost Low utilization High utilization Deployed inventory Minimum inventory Flexible suppliers Low cost suppliers - Mismatch Mismatch Lean SCM Agile SCM
- 25. Job Small Batch Large Batch Line Continuous Flow Process Service/Product Characteristics Standardized Customized Supply Chain Design Link to Processes
- 26. Business to business (B2B) Most common, all but the last link in the supply chain E-commerce examples: EDI networks Business information exchanges Business to consumer (B2C) Retail operations Catalogue operations, etc. E-commerce examples: Internet retailers Amazon.com, etc. Consumer to Business (C2B) Consumer ‘offer’, business responds E-commerce examples: Some airline ticket operators Priceline.com, etc. Supply Chain Relationships Trading ‘swap’ and auction transactions E-commerce examples: Specialist ‘collector’ sites Gumtree Ebay.com, etc. Consumer to Consumer (C2C) Business Consumer To...... Business Consumer From....
- 27. Traditional approach Partnership approach Adversarial relationship Co-operative relationship Arm’s length formal relationship Close relationship Many suppliers Few suppliers (single sourcing for some items) Price the main purchasing criterion Multiple purchasing criteria Short term contracts Long term contracts Evaluation on bid by bid basis Evaluation of supplier capability Purchaser sets the detailed specification and design of the products and services Purchaser sets performance specification, suppliers designs products and services Purchaser responsible for quality inspection Supplier responsible for quality inspection Problems are the suppliers responsibility to solve Problems are jointly solved Improvements when demanded by buyer Continuous improvements mutually sought Improvement benefits shared by negotiation Improvement benefits shared equitably Information is Proprietary Information is shared Relationship with Suppliers
- 28. References • Barnes, D. (2008). Operations Management: An International Perspective. Cengage Learning EMEA. • Krajewski, L. J., Malhotra, M. K., and Ritzman, L. P. (2015). Operations Management: Processes and Supply Chains. Pearson Higher Ed. • Slack, N., Brandon-Jones, A. and Johnston, R. (2011). Essentials of operations management. Financial Times Prentice Hall.