Dr. Steven A. Melnyk

Professor of Operations &

Supply Chain Management

The Eli Broad Graduate School of Management

Michigan State University

East Lansing, MI 48824

melnyk@msu.edu/517-432-6410

Integrated Supply Chain Management Insights for Today’s Turbulent Economy and TomorrowIntegrated Supply Chain Management Insights for Today’s Turbulent Economy and Tomorrow

WEATHERING THE STORMWEATHERING THE STORM

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THE FUTURE BELONGS TO THOSE WHO PREPARE FOR IT TODAY.THE FUTURE BELONGS TO THOSE WHO PREPARE FOR IT TODAY.

Malcolm X

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New RealityNew Reality

• GM and Chrysler – bankrupt• Major automotive suppliers seeing volume of

business fall– Some have filed bankruptcy

• Visteon• Dura Automotive Systems

• New reality– Automotive will recover– New automotive less than old

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Today’s EnvironmentToday’s Environment

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SUPPLY CHAIN OPTIONSSUPPLY CHAIN OPTIONS

Weathering the Storm

Steven A. Melnyk, 2009- 6 - Source: Supply Chain Faculty, Michigan State University

The Integrated Supply ChainThe Integrated Supply Chain

SUPPLIERSUPPLIERNETWORKNETWORK INTEGRATEDINTEGRATED

ENTERPRISEENTERPRISE DISTRIBUTIVEDISTRIBUTIVENETWORKNETWORK

Information, Product, Service, Financial and Knowledge FlowsInformation, Product, Service, Financial and Knowledge Flows

MMAATTEERRIIAALLSS

Capacity, Information, Core Competencies, Capital and Human ResourcesCapacity, Information, Core Competencies, Capital and Human Resources

Relationship ManagementRelationship Management

Sourcing

Operations

Logistics

EENNDD

CCOONNSSUUMMEERRSS

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DiversifyDiversify

Source: http://www.gotbroken.com/wp-content/uploads/2009/07/2010-Rizk-Auto-RA-Front-Side-View-588x367.jpg

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Types of IntegrationTypes of Integration

• New related markets– Defense– Aerospace– Medical

• New geographic related markets• Unrelated markets• Change in emphasis

– Broaden– Diminish– Abandon

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DIVERSIFICATION HAS RISKSFEW SUCCEED!DIVERSIFICATION HAS RISKSFEW SUCCEED!

Reality

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IntegrateIntegrate

Source: www.scienceofselling.com

Expand

Solutions as well as products

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ImproveImprove

Source: “The idea Generator by Norman Bodek

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EnhanceEnhanceEnhanceEnhance

Source: digitalcarversguild.com

Broaden Product OfferingsBroaden Product Offerings

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Comparing Supply ChainsComparing Supply Chains

• Today’s supply chain

– Strategically-Decoupled, Price-Driven

– Focused• Driven by the supply chain disruptions/risk, leadership within

the supply chain, managing the timely delivery of goods and services.

– Measured by three critical indicators• Price

• Delivery

• Quality

– Not linked to strategic objectives

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Tomorrow’ Supply ChainTomorrow’ Supply Chain

• Strategically-Coupled, Value-Driven

• Highly adaptive

• More complex performance measurement– Cost savings– Cost avoidance– Revenue growth– Asset utilization

• Strategic in nature– A corporate capability and asset– A necessity and an opportunity.

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Emerging ShiftEmerging Shift

• The emerging challenge for supply chains– Creating, delivering, and maintaining value

– The “challenge” of abundance• American homes

• Growth of the Self-storage industry

– Increasing response• INNOVATION

– Product

– Process

– Supply Chain

– Service

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The Goal of Strategic Supply Chain ManagementThe Goal of Strategic Supply Chain Management

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What Outcomes Do You Want Your Supply Chain To Achieve?What Outcomes Do You Want Your Supply Chain To Achieve?

• Six Major Outcomes– Efficiency

– Responsiveness

– Security

– Sustainability

– Resiliency

– Innovation

• Blending outcomes requires trade-offs

• Performance measurement is more complex.

• Outcome not enough; focus on solution.

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Blending Supply Chain OutcomesBlending Supply Chain Outcomes

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Assessing OpportunitiesAssessing Opportunities

Aerospace Military Medical Green/Renewable

Efficiency ✔✔✔ ✔✔ ✔✔ ✔✔

Responsiveness ✔✔ ✔✔✔ ✔✔ ✔✔✔

Security ✔✔ ✔✔✔ ✔✔✔ ✔✔

Resilience ✔✔ ✔✔✔ ✔✔ ✔

Sustainability ✔✔ ✔✔ ✔✔ ✔✔✔

Innovation ✔✔✔ ✔✔ ✔✔ ✔✔✔

✔✔✔ = Critical; = Important; = Nice✔✔ ✔

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Major LessonsMajor Lessons

• Diversifying is more than changing customers– It will involve changing your supply chain

– New certification standards• AS9100

• Understand the problem that your system is good at solving and the problem that your customer wants you to solve– Efficiency and effectiveness may not mix

• Understand your critical customer

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Major Lessons - 2Major Lessons - 2

• Understand your value proposition

• Recognize the impact of culture– Culture – what people do when the boss is not around

– Six sigma/lean and Radical innovation

– Culture takes time to change

• Change takes time, resources, and commitment

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Success in Today’s MarketSuccess in Today’s Market

• Success is more than identifying a market where your skills seem to apply.

• Success is dependent on making sure that what you offer and how you offer it fits the needs of the customer.

• Success is dependent on speed and understanding.

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A RequestA Request

• Weathering the Storm Research Initiative

• A Study to understand how small to medium sized firms are responding to this period of market instability.

• Focus on options being pursued, factors influencing the choice of options, and obstacles/enhancers.

• Your involvement is needed.

• Help us help you!

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QUESTIONSQUESTIONS