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Summary - Designing and Managing the Supply Chain
1.1 What is supply chain management?
What is the definition of Supply Chain Management?Supply Chain Management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize systemwide costs while satisfying service level requirements.
Why is Supply Chain Management difficult?1. Supply chain strategies cannot be determine in isolation. They are directly affected by another chain that most organizations have.
2. It is challenging to design and operate a supply chain so that total systemwide costs are minimized and systemwide service levels are maintained.
3. Uncertainty and risk are inherent in every supply chain
1.2 The development chain
What is the development chain?The development chain is the set of activities and processes associated with new product introduction.
The Development Chain vs Supply ChainIncludes the following:
- Product design
- Associated capabilities and knowledge that need to be developed internally
- Sourcing decisions
- Production plans
1.3 Global optimization
What factors make finding the best systemwide, or globally optimal, integrated solution so difficult and a challenging problem?1. The supply chain is a complex network of facilities dispersed over a large geography, and, in many cases, all over the globe.
2. Different facilities in the supply chain frequently have different, conflicting objectives.
3. The supply chain is a dynamic system that evolves over time.
4. System variations over time are also an important consideration.
1.4 Managing uncertainty and risk
Global optimization is made even more difficult because supply chains need to be designed for, and operated in, uncertain environments, thus creating sometimes enormous risks to the organization. Which factors contribute to this?1. Matching supply and demand is a major challenge.
2. Inventory and back-order levels fluctuate considerably across the supply chain, even when customer demand for specific products does not vary greatly.
3. Forecasting doesn't solve the problem.
4. Demand is not the only source of uncertainty. Delivery lead times, manufacturing yields, transportation times and component availability also can have significant supply chain impact.
5. Recent trends such as lean manufacturing, outsourcing, and offshoring that focus on cost reduction increase risks significantly.
1.5 The evolution of supply chain management
What happened during the 80s?Companies discovered new manufacturing technologies and strategies that allowed them to reduce costs and better compete in difficult markets.
What happened during the 90s?Many companies focused on strategies to reduce their costs as well as those of their supply chain partners. At the same time, many supply chain partners engage in information sharing so that manufacturers are able to use retailers' up-to-date sales data to better predict demand and reduce lead times.
Another huge pressure to reduce costs and increase profits pushed many industrial manufacturers towards outsourcing.
Finally, in the late 90s, the Internet and the related e-business models led to expectations that many supply chain problems would be solved merely by using these new technologies and business models.
What is happening nowadays?Companies discover that effective supply chain management is the next step they need to take in order to increase profit and market share.
The e-business and Internet did not solve supply chain management problems, but to the contrary. In many cases, the downfall of some of the highest-profile Internet businesses can be attributed to their logistics strategies.
Over the past several years, progressive firms have started to focus on strategies that find the right balance between cost reduction and risk management.
Name a number of approaches that have been applied by industry to manage risk in their supply chains.
- Building redundancy into the supply chain so that if one portion fails, the supply chain can still satisfy demand
- Using information to better sense and respond to disruptive events
- Incorporating flexibility into supply contracts to better match supply and demand
- Improving supply chain processes by including risk assessment measures
1.6 The complexity
Name the three critical abilities that successful firms must posses.1. The ability to match supply chain strategies with product characteristics.
2. The ability to replace traditional supply chain strategies, in which each facility or party in the chain makes decisions with little regard to their impact on other supply chain partners, by those that yield a globally optimized supply chain.
3. The ability to effectively manage uncertainty and risk.
Latest added flashcards
- Transaction based
- Single-function specific
- Adding value to products
- Improving market access
- Strengthening operations
- Adding technological strength
- Enhancing strategic growth
- Enhancing organizational skills
- Building financial strength
- Internal activities - perform the activity with internal resources
- Acquisitions - acquire the resources externally
- Arm's-length transactions - this kind of short-term arrangement fulfills a particular business need but does not lead to long-term strategic change
- Strategic alliances - form partnerships with others