The document discusses different supply chain strategies including push, pull, and push-pull strategies. It explains that traditional push strategies involve production decisions based on forecasts which can lead to problems like inability to meet changing demand, obsolescence, and the bullwhip effect. Pull strategies are demand-driven and involve producing to actual customer orders, reducing inventory levels and variability. Push-pull strategies take a hybrid approach, with early stages replenished by forecasts and later stages based on actual orders. The document also discusses factors to consider in selecting the appropriate strategy, such as demand uncertainty and importance of economies of scale.

1. Unit –2

2. lSupply Chain Strategies
lPush-Based Supply Chain
lPull-Based Supply Chain
lPush-Pull Supply Chain

3. lThe Old Paradigm:Push Strategies
lProduction decisions based on long-term
forecasts
lOrdering decisions based on inventory &
forecasts
lWhat are the problems with push strategies?
lInability to meet changing demand patterns
lObsolescence
lThe bullwhip effect:
lExcessive inventory
lExcessive production variability
lPoor service levels

4. lA Newer Paradigm: Pull Strategies
lProduction is demand driven
lProduction and distribution coordinated with true
customer demand
lFirms respond to specific orders
lPull Strategies result in:
lReduced lead times (better anticipation)
lDecreased inventory levels at retailers and
manufacturers
lDecreased system variability
lBetter response to changing markets
lBut:
lHarder to leverage economies of scale
lDoesn’t work in all cases

5. lA new Supply Chain Paradigm
lPush-Pull System

6. lPush-Pull Supply Chains
Low Uncertainty High Uncertainty
The Supply Chain Time Line
CustomersSuppliers
Push-Pull Boundary
PUSH STRATEGY PULL STRATEGY

7. lA new Supply Chain Paradigm
lA shift from a Push System...
lProduction decisions are based on forecast
l…to a Push-Pull System
lInitial portion of the supply chain is replenished
based on long-term forecasts
lFor example, parts inventory may be replenished
based on forecasts
lFinal supply chain stages based on actual customer
demand.
lFor example, assembly may based on actual
orders.

8. lConsider Two PC Manufacturers:
lBuild to Stock
lForecast demand
lBuys components
lAssembles computers
lObserves demand and
meets demand if
possible.
lA traditional push
system
lBuild to order
lForecast demand
lBuys components
lObserves demand
lAssembles computers
lMeets demand
lA push-pull system

9. lPush-Pull Strategies
lThe push-pull system takes advantage
of the rules of forecasting:
lForecasts are always wrong
lThe longer the forecast horizon the worst
is the forecast
lAggregate forecasts are more accurate
lThe Risk Pooling Concept
lDelayed differentiation is another

10. lWhat is the Best Strategy?
Pull Push
Pull
Push
I
Computer
II
IV III
Demand
uncertainty
(C.V.)
Delivery cost
Unit price
L H
H
L
Economies of
Scale

11. lPush-Pull Strategies
lThe push-pull system takes advantage
of the rules of forecasting:
lForecasts are always wrong
lThe longer the forecast horizon the worst
is the forecast
lAggregate forecasts are more accurate
lThe Risk Pooling Concept
lDelayed differentiation is another

12. lSelecting the Best SC Strategy
lHigher demand uncertainty suggests pull
lHigher importance of economies of scale
suggests push
lHigh uncertainty/ EOS not important such as the
computer industry implies pull
lLow uncertainty/ EOS important such as groceries
implies push
lDemand is stable
lTransportation cost reduction is critical
lPull would not be appropriate here.

13. lSelecting the Best SC Strategy
lLow uncertainty but low value of
economies of scale (high volume books
and cd’s)
lEither push strategies or push/pull
strategies might be most appropriate
lHigh uncertainty and high value of
economies of scale
lFor example, the furniture industry
lHow can production be pull but delivery

14. lCharacteristics and Skills
Raw
Material Customers
PullPush
Low Uncertainty
Long Lead Times
Cost Minimization
Resource Allocation
High Uncertainty
Short Cycle Times
Service Level
Responsiveness

15. lLocating the Push-Pull Boundaryss
lThe push section:
lUncertainty is relatively low
lEconomies of scale important
lLong lead times
lComplex supply chain structures:
lThus
lManagement based on forecasts is appropriate
lFocus is on cost minimization
lAchieved by effective resource utilization – supply chain optimization
lThe pull section:
lHigh uncertainty
lSimple supply chain structure
lShort lead times
lThus
lReacting to realized demand is important
lFocus on service level
lFlexible and responsive approaches

16. lCharacteristics and Skills
Raw
Material Customers
PullPush
Low Uncertainty
Long Lead Times
Cost Minimization
Resource Allocation
High Uncertainty
Short Cycle Times
Service Level
Responsiveness

17. lLocating the Push-Pull Boundary

18. Classification of supply chain Stratsegies
Lea
n
Agile
SpeculationPostponement

19. LEAN
Lean supply chain management is about reducing costs and
lowering waste as much as possible. This methodology is
important for organizations with high volumes of purchase orders
since waste and costs can accumulate quickly.
Additionally, companies with high volumes of low
variability purchase orders, such as food items, benefit their
efficiency greatly by utilizing the lean supply chain methodology.

20. 1.Lead Time (Cycle Time) reduction
2.Increase in Productivity
3.Reduction in Work-In-Process Inventory
4.Quality improvement
5.Reduction in space Utilization
Advantages of Lean Strategies

21. Supply Problems
Because only a small amount of inventory is kept on hand, lean manufacturing depends heavily on suppliers that
can provide products for the manufacturing process dependably and without interruption. Problems like
employee strikes, transportation delays and quality errors on the part of suppliers can create manufacturing
holdups that can be fatal. Vendors may be unable or unwilling to supply parts or products on a tighter schedule
or in smaller amounts.
High Cost of Implementation
Implementing lean manufacturing often means completely dismantling previous physical plant setups and
systems. Training employees can be lengthy and acquiring managers experienced in lean manufacturing
process can add considerably to companies payroll expenses.
Lack of Acceptance by Employees
Lean manufacturing processes require a complete overhaul of manufacturing systems that may cause stress
and rejection by employees who prefer old ways of doing things. Moreover, lean manufacturing requires constant
employee input on quality control, which some employees may feel disinclined or unqualified to do.
Customer Dissatisfaction Problems
Disdvantages of Lean Strategies

22. Agile Supply Chain is built to be highly flexible for the purpose of being able
to quickly adapt to changing situations. This methodology is considered
important for organizations that want to be able to adapt to unanticipated
external economic changes, such as economic swings, changes in
technology, or changes to customer demand.
Implementing an agile supply chain allows organizations to quickly adjust
their sourcing, logistics, and sales.
Agile Supply Chain

23. Small volume is a result of micro-markets, customization
and rapid responsiveness.
Three approaches of agile strategy related to small volume
lChangeover flexibility
lModularity at the network level
lService-based and information-based solutions
Benefiting from small volume

24. Variety
decrease
Volume
decrease
Mass production
Flexibility
Modular supply network
Craft production
Benefiting from small volume

25. Postponement is a deliberate action to delay final manufacturing or distribution of a
product until receipt of a customer order. This reduces the incidence of wrong
manufacturing or incorrect inventory deployment. Postponement strategies and
practices serve to reduce the anticipatory risk in a supply chain. It can be fine-tuned or
staged so that only the generic parts shared by a firm’s various end products are
warehoused, used only once orders come in for whichever products are selling, and
will reduce inventory pressures throughout the firm
Postponement

26. 1.Reduce inventory cost.
2.Reduce transportation cost.
3.Reduce risk of obsolescence.
4.Reduce demand variability.
5.Improve competitiveness by offering customized products
quickly.
Advantages of Postponement

27. This strategy in general followed by most of the companies as (Pagh
1998)states it. in this type of postponement, a full speculation and forecast of
the manufacturing and logistics is carried out. The final consumer is places at
the lowest level of the supply chain. All the manufacturing, designing
operations are performed. The finished product is kept at a warehouse close
to the customer and delivered as and when required. A decentralized
distribution system is used for this purpose.
The author further gives an example of this strategy by using Xerox Company.
Xerox Company has become a generic term in photo copying
departments. Xerox used this type of strategy for standardized products (plug-
and play products like small workstations, small copiers, and telecopy’s). What
they did was to manufacture, assemble and stored at a spot near the delivery
needed. Further the author explains, this is because, the short delivery time is
the ‘order winning’ criteria in this field.
Speculation

28. Advantages
Large scale production possible.
Distribution can be carried out in large lots.
Disadvantages
Inventory investment very high. (Amongst all strategies).
Due to large stockings, obsolescence and return shipments
may occur.
Speculation

29. Obstacles to Achieving
lStrategic Fit
lIncreasing variety of products
lDecreasing product life cycles
lIncreasingly demanding customers
lFragmentation of supply chain ownership
lGlobalization
lDifficulty executing new strategies

30. lMajor Obstacles to Achieving Fit
lMultiple owners / incentives in a supply chain
lIncreasing product variety / shrinking life cycles /
customer fragmentation
Increasing implied uncertainty
Local optimization and lack of global fit

31. l Step 1: Understanding the Customer and Supply Chain
Uncertainty
lIdentify the needs of the customer segment being served
lQuantity of product needed in each lot
lResponse time customers will tolerate
lVariety of products needed
lService level required
lPrice of the product
lDesired rate of innovation in the product

32. Step 2: Understanding the Supply Chain
lHow does the firm best meet demand?
lDimension describing the supply chain is supply chain
responsiveness
lSupply chain responsiveness -- ability to
lrespond to wide ranges of quantities demanded
lmeet short lead times
lhandle a large variety of products
lbuild highly innovative products
lmeet a very high service level

33. lStep 3: Achieving Strategic Fit
lStep is to ensure that what the supply chain
does well is consistent with target
customer’s needs
lExamples: Dell, Barilla

34. An organization can finalize its business plans on the recommendation of
demand forecast. Once business plans are ready, an organization can do
backward working from the final sales unit to raw materials required.
Thus annual and quarterly plans are broken down into labor, raw
material, working capital, etc. requirements over a medium-range period
(6 months to 18 months). This process of working out production
requirements for a medium range is called aggregate planning.
Aggregate
Planning

35. An organization can finalize its business plans on the recommendation of
demand forecast. Once business plans are ready, an organization can do
backward working from the final sales unit to raw materials required.
Thus annual and quarterly plans are broken down into labor, raw
material, working capital, etc. requirements over a medium-range period
(6 months to 18 months). This process of working out production
requirements for a medium range is called aggregate planning.
Aggregate
Planning

36. Factors Affecting Aggregate Planning
1.A complete information is required about available production facility and
raw materials.
2.A solid demand forecast covering the medium-range period
3.Financial planning surrounding the production cost which includes raw
material, labor, inventory planning, etc.
4.Organization policy around labor management, quality management,
etc.

37. There are three types of aggregate planning strategies available for organization to choose from.
They are as follows.
Level Strategy
As the name suggests, level strategy looks to maintain a steady production rate and workforce
level. In this strategy, organization requires a robust forecast demand as to increase or decrease
production in anticipation of lower or higher customer demand. Advantage of level strategy is
steady workforce. Disadvantage of level strategy is high inventory and increase back logs.
Chase Strategy
As the name suggests, chase strategy looks to dynamically match demand with production.
Advantage of chase strategy is lower inventory levels and back logs. Disadvantage is lower
productivity, quality and depressed work force.
Hybrid Strategy
As the name suggests, hybrid strategy looks to balance between level strategy and chase
strategy.
Aggregate Planning Strategies