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Chapter3

SupplyChainDriversandObstaclesSupplyChainManagement

(3rdEdition)

3-1OutlineDriversofsupplychainperformanceAframeworkforstructuringdriversFacilitiesInventoryTransportationInformationSourcingPricingObstaclestoachievingfit2DriversofSupplyChainPerformanceFacilitiesplaceswhereinventoryisstored,assembled,orfabricatedproductionsitesandstoragesitesInventoryrawmaterials,WIP,finishedgoodswithinasupplychaininventorypoliciesTransportationmovinginventoryfrompointtopointinasupplychaincombinationsoftransportationmodesandroutesInformationdataandanalysisregardinginventory,transportation,facilitiesthroughoutthesupplychainpotentiallythebiggestdriverofsupplychainperformanceSourcingfunctionsafirmperformsandfunctionsthatareoutsourcedPricingPriceassociatedwithgoodsandservicesprovidedbyafirmtothesupplychain3AFrameworkfor

StructuringDrivers4FacilitiesRoleinthesupplychainthe“where”ofthesupplychainmanufacturingorstorage(warehouses)Roleinthecompetitivestrategyeconomiesofscale(efficiencypriority)largernumberofsmallerfacilities(responsivenesspriority)Example3.1:ToyotaandHondaComponentsoffacilitiesdecisions5ComponentsofFacilitiesDecisionsLocationcentralization(efficiency)vs.decentralization(responsiveness)otherfactorstoconsider(e.g.,proximitytocustomers)Capacity(flexibilityversusefficiency)Manufacturingmethodology(productfocusedversusprocessfocused)Warehousingmethodology(SKUstorage,joblotstorage,cross-docking)Overalltrade-off:Responsivenessversusefficiency6InventoryRoleinthesupplychainRoleinthecompetitivestrategyComponentsofinventorydecisions7Inventory:RoleintheSupplyChainInventoryexistsbecauseofamismatchbetweensupplyanddemandSourceofcostandinfluenceonresponsivenessImpactonmaterialflowtime:timeelapsedbetweenwhenmaterialentersthesupplychaintowhenitexitsthesupplychainthroughputrateatwhichsalestoendconsumersoccurI=RT(Little’sLaw)I=inventory;R=throughput;T=flowtimeExampleInventoryandthroughputare“synonymous”inasupplychain8Inventory:RoleinCompetitiveStrategyIfresponsivenessisastrategiccompetitivepriority,afirmcanlocatelargeramountsofinventoryclosertocustomersIfcostismoreimportant,inventorycanbereducedtomakethefirmmoreefficientTrade-offExample3.2–Nordstrom9ComponentsofInventoryDecisionsCycleinventoryAverageamountofinventoryusedtosatisfydemandbetweenshipmentsDependsonlotsizeSafetyinventoryinventoryheldincasedemandexceedsexpectationscostsofcarryingtoomuchinventoryversuscostoflosingsalesSeasonalinventoryinventorybuiltuptocounterpredictablevariabilityindemandcostofcarryingadditionalinventoryversuscostofflexibleproductionOveralltrade-off:Responsivenessversusefficiencymoreinventory:greaterresponsivenessbutgreatercostlessinventory:lowercostbutlowerresponsiveness10TransportationRoleinthesupplychainRoleinthecompetitivestrategyComponentsoftransportationdecisions11Transportation:Rolein

theSupplyChainMovestheproductbetweenstagesinthesupplychainImpactonresponsivenessandefficiencyFastertransportationallowsgreaterresponsivenessbutlowerefficiencyAlsoaffectsinventoryandfacilities12Transportation:

RoleintheCompetitiveStrategyIfresponsivenessisastrategiccompetitivepriority,thenfastertransportationmodescanprovidegreaterresponsivenesstocustomerswhoarewillingtopayforitCanalsouseslowertransportationmodesforcustomerswhosepriorityisprice(cost)CanalsoconsiderbothinventoryandtransportationtofindtherightbalanceExample3.3:LauraAshley13Componentsof

TransportationDecisionsModeoftransportation:air,truck,rail,ship,pipeline,electronictransportationvaryincost,speed,sizeofshipment,flexibilityRouteandnetworkselectionroute:pathalongwhichaproductisshippednetwork:collectionoflocationsandroutesIn-houseoroutsourceOveralltrade-off:Responsivenessversusefficiency14InformationRoleinthesupplychainRoleinthecompetitivestrategyComponentsofinformationdecisions15Information:Rolein

theSupplyChainTheconnectionbetweenthevariousstagesinthesupplychain–allowscoordinationbetweenstagesCrucialtodailyoperationofeachstageinasupplychain–e.g.,productionscheduling,inventorylevels16Information:

RoleintheCompetitiveStrategyAllowssupplychaintobecomemoreefficientandmoreresponsiveatthesametime(reducestheneedforatrade-off)InformationtechnologyWhatinformationismostvaluable?Example3.4:AndersenWindowsExample3.5:Dell17ComponentsofInformationDecisionsPush(MRP)versuspull(demandinformationtransmittedquicklythroughoutthesupplychain)CoordinationandinformationsharingForecastingandaggregateplanningEnablingtechnologiesEDIInternetERPsystemsSupplyChainManagementsoftwareOveralltrade-off:Responsivenessversusefficiency18SourcingRoleinthesupplychainRoleinthecompetitivestrategyComponentsofsourcingdecisions19Sourcing:Rolein

theSupplyChainSetofbusinessprocessesrequiredtopurchasegoodsandservicesinasupplychainSupplierselection,singlevs.multiplesuppliers,contractnegotiation20Sourcing:

RoleintheCompetitiveStrategySourcingdecisionsarecrucialbecausetheyaffectthelevelofefficiencyandresponsivenessinasupplychainIn-housevs.outsourcedecisions-improvingefficiencyandresponsivenessExample3.6:Cisco21ComponentsofSourcingDecisionsIn-houseversusoutsourcedecisionsSupplierevaluationandselectionProcurementprocessOveralltrade-off:Increasethesupplychainprofits22PricingRoleinthesupplychainRoleinthecompetitivestrategyComponentsofpricingdecisions23Pricing:Rolein

theSupplyChainPricingdeterminestheamounttochargecustomersinasupplychainPricingstrategiescanbeusedtomatchdemandandsupply24Sourcing:

RoleintheCompetitiveStrategyFirmscanutilizeoptimalpricingstrategiestoimproveefficiencyandresponsivenessLowpriceandlowproductavailability;varypricesbyresponsetimesExample3.7:Amazon25ComponentsofPricingDecisionsPricingandeconomiesofscaleEverydaylowpricingversushigh-lowpricingFixedpriceversusmenupricingOveralltrad

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