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Transcript of 11 -managing_the_supply_chain
Alex Hill and Terry Hill
Managing the supply chainAlex Hill and Terry Hill
Learning objectives
• Define what a SUPPLY CHAIN is and outline the steps that make up the chain
• Explain the factors that affecting its DESIGN including:
- The decision to MAKE or BUY- The ALTERNATIVES to make or buy- The issues surrounding OUTSOURCING
• Understand the processes of MANAGING and DEVELOPING supply chains, and the TECHNIQUES used in these approaches
• Outline the BENEFITS of effectively managing supply chains
Lecture outline
• INTRODUCTION
• What is a SUPPLY CHAIN?
• DESIGNING the supply chain
• MANAGING the supply chain
• DEVELOPING the supply chain
• Critical REFLECTIONS
• SUMMARY
© Alex Hill and Terry Hill
> KEY IDEA
Businesses have to manageFLOWS of MATERIAL and INFORMATION across supply chain networks
What is a supply chain?
What is a supply chain?
> KEY IDEAThe supply chain comprisesall the STEPS required toSUPPLY a service or a product to a customer
Designing the supply chain
Designing the supply chainDeciding to make or buy
•Support MARKET order-winners or qualifiers
•Build BARRIERS to entry•Maintain SUPPLY of key materials•Better UNDERSTAND customers•Retain CORE capabilities•Access EXTERNAL capabilities•Take advantage of reduced TRADE
barriers
> KEY IDEAThe FIRST STEP in designing a supply chain is to decide what to MAKE and what to BUY
> KEY IDEA
Companies need to keep IN-HOUSE the services, products or processes that help them understand customer REQUIREMENTS and build customer RELATIONSHIPS
Designing the supply chainDeciding to make
•Increased CONTROL•Increased
OPPORTUNITY
•More difficult to MANAGE
•Less FOCUS•Reduced ACCESS
DISADVANTAGES
ADVANTAGES
> KEY IDEA
Making IN-HOUSE:• Increases CONTROL over processes, material supply and service/product knowledge• Provides greater OPPORTUNITY for differentiation and cost reduction
Designing the supply chainDeciding to buy
•Easier to MANAGE•Increased FOCUS•Increased ACCESS
•Increased RISK•Difficult to
REVERSE•New SKILLS
required•Less FLEXIBLE
DISADVANTAGES
ADVANTAGES
> KEY IDEA
Deciding to BUY:• Makes it easier to manage COSTS• Increases FOCUS on critical tasks• Increases ACCESS to external sets of capabilities
Designing the supply chainDeciding to make or buy
> KEY IDEATo REDUCE the potential disadvantages of deciding to buy, businesses can instead use JOINT VENTURES or CO-SOURCING
CASE 11.1
STRATEGIC OUTSOURCING DECISIONS
1.Why are most companies SUBCONTRACTING call centre facilities?
2.Why would a company decide to set-up and manage its OWN call centre?
CASE 11.1
Question Answer
Subcontract
Keepin-house
• Increased CONTROL• Direct CUSTOMER contact• Increased OPPORTUNITY
• COST reduction• Easier to MANAGE• Increased FOCUS• Increased ACCESS
STRATEGIC OUTSOURCING DECISIONS
CASE 11.2
CREATING A POSITIVE RETAIL EXPERIENCE
1.Why is the guitar tuning service SIGNIFICANT for Fender?
2.Why are distributors now ORDERING new products?
CASE 11.2
Question
Answer
Significant service
Ordering new products
• Reduced delivery LEAD-TIME- UPS now hold INVENTORY- So retailers can offer WIDER
range without holding inventory
• Creates ‘positive retail EXPERIENCE’- Customer does not have to STRING and
TUNE guitar themselves after delivery• Increases SERVICE specification- To match their high PRODUCT
specification
CREATING A POSITIVE RETAIL EXPERIENCE
CASE 11.3
SINGLE SOURCING POLICY
1.Comment on KPMG’s ROLE in this dispute
2.What would you ADVISE Land Rover to do about its single sourcing policy?
CASE 11.3
Question
Answer
KPMG’s role
Advice
• Single sourcing brings ADVANTAGES- Reduces COST- Develops RELATIONSHIPS• However, need to introduce
SAFEGUARDS into future supplier contracts
• Get best deal for SUPPLIER- But focused on SHORT-TERM benefit- Would have DAMGED long-term
relationship• Increases SERVICE specification- To match their high PRODUCT
specification
SINGLE SOURCING POLICY
Markets, capabilities and supply chains
Designing supply chains
AppleTV adverts
DellTV adverts
VS.
Film clip Mac vs PC advert
FilmTitleDirector (year)
Mac vc PC ‘Customer Care’ advertApple ‘get a mac’ advertising campaign (2002)
ClipStartFinish
00:00:0000:00:30
What clip showsThree people discussing the ‘genius’ support within an Apple store and how this is different to the usual support for PC customers
Key learning objective
How Apple competes on the level of customer after sales support that it provides
Markets, capabilities and supply chains
Designing supply chains
Film clip Mac vs PC advert
FilmTitleDirector (year)
Mac vc PC ‘Innovation’ advertApple ‘get a mac’ advertising campaign (2002)
ClipStartFinish
00:00:0000:00:30
What clip showsThree people discussing how Apple focuses on product innovation and how this is different to the usual support for PC customers
Key learning objective
How Apple competes on product design
Markets, capabilities and supply chains
Designing supply chains
Film clip Dell advert
FilmTitleDirector (year)
‘All I want for Xmas’ advertDell advertising campaign (1999)
ClipStartFinish
00:00:0000:00:44
What clip showsA boy recording a video that asks his Dad for a Dell computer for Xmas
Key learning objective
How Dell competes on price
Markets, capabilities and supply chains
Designing supply chains
Film clip Dell advert
FilmTitleDirector (year)
‘Portraits’ advert (with ‘colours’ song by Kira Willey)Dell advertising campaign (2009)
ClipStartFinish
00:00:0000:00:31
What clip showsA series of people who have all chosen a laptop to match the colour of something they like
Key learning objective
How Dell competes on product customisation
Markets, capabilities and supply chains
Designing supply chains
•What are its MARKET order-winners?
•What are its CORE capabilities?•How should it DESIGN its supply
chain?
Markets, capabilities and supply chains
Designing supply chains
Apple
•What are its MARKET order-winners?
•What are its CORE capabilities?•How should it DESIGN its supply
chain?
Markets, capabilities and supply chains
Designing supply chains
Dell
Aspect Apple Dell
Key MARKET order-winners
CORE capabilities
DESIGN supply chain
Make
Buy
• BRAND name• Product DESIGN• Technical SUPPORT
• Develop IMAGE• UNDERSTAND customer• DESIGN product• After sales SERVICE
• DESIGN• MARKETING• PURCHASING• RETAIL
• MANUFACTURING• DISTRIBUTION
• PRICE• Product
CUSTOMISATION
• Reduce COSTS• PRODUCT flexibility• VOLUME flexibility
• PURCHASING• MANUFACTURING
• RETAIL• DISTRIBUTION
Markets, capabilities and supply chains
Designing supply chains
•What are its MARKET order-winners?
•What are its CORE capabilities?•How should it DESIGN its supply
chain?
Markets, capabilities and supply chains
Designing supply chains
Dell
Managing supply chains
•Increased customer FOCUS
•Increased EFFICIENCY
Driving the WHOLE CHAIN
in the same direction to satisfy CUSTOMERS
Managing supply chainsKey elements
•Manage ENTIRE supply chain•Develop customer and supplier
PARTNERSHIPS•Reduce NUMBER of suppliers in chain•Increase INFORMATION flow
> KEY IDEA
Businesses must see suppliers as an INTEGRAL part of the total supply chain and realise that whole chain is only as strong as its WEAKEST link
Managing supply chainsTypes of supplier relationship
Managing supply chainsTypes of supplier relationship
Managing supply chainsTypes of supplier relationship
Managing supply chainsTypes of supplier relationship
> KEY IDEA
Businesses must build strong RELATIONSHIPS with those suppliers that are most strategically CRITICAL to their business and help them SUPPORT their key order-winners and qualifiers
> KEY IDEA
Businesses must aim to create SUSTAINABLE supply chains that have a positiveECONOMIC, SOCIAL and ENVIRONMENTAL impact within all parts of the chain
CASE 11.4
CHIQUITA RELOCATES FROM CINCINNATI TO COSTA RICA
1.Why did it MOVE its main purchasing team to Costa Rica?
2.What OPPORTUNITIES did the relocation offer?
CASE 11.4
Question Answer
Move purchasing
Opportunities created
• Integrate SUPPLY CHAIN- Closer internal supply chain
RELATIONSHIPS- Provide DIRECT support to buyers• Develop its CSR policy- Developing supplier PRACTICES
• Develop supplier RELATIONSHIPS- With fruit GROWERS
CHIQUITA RELOCATES FROM CINCINNATI TO COSTA RICA
Managing supply chainsIncrease information flow
•Use Electronic Data Interchange (EDI) systems to TRANSFER information
•Incorporate INTERNET technology
•Link companys’ business SYSTEMS
Managing supply chainsIncrease information flow
> KEY IDEA
The continued development ofMOBILE electronic devices and faster INTERNET connections creates the opportunity for companies to move from physical to DIGITAL supply chains
> KEY IDEADigital supply chains give customers access to a WIDER range of CHEAPER products that can be ordered and delivered more QUICKLYSuch chains are also easier to MANAGE, enabling suppliers to reduce CASH holdings and supply COSTS
Managing supply chainsDigital supply chains
Managing supply chainsDigital supply chains
CASE 11.5
APPLE’S iTUNES: DIGITAL SUPPLY CHAIN
1.What is Apple’s business MODEL?
2.How has its digital supply chain contributed to its recent SUCCESS?
CASE 11.5
Question Answer
Business model
Contribution to success
• Increased HARDWARE sales- Customers access to WIDE range of CHEAP products• Reduced CASH holdings- No PHYSICAL inventory• Reduced supply COST- No PHYSICAL chain- No excess or obsolete INVENTORY- Easier to MANAGE
• Sell HARDWARE- iPods, iPhones and iPads• Give away SOFTWARE at no cost- iTunes• Allow suppliers to distribute their PRODUCTS
through iTunes- Act as MARKETPLACE- Take a PERCENT of sale
APPLE’S iTUNES: DIGITAL SUPPLY CHAIN
Developing supply chainsPhase 1 - Fragmented
> KEY IDEASupply chains can be developed to • More EFFICIENTLY and EFFECTIVELY support market needs by• INTEGRATING, CO-ORDINATING and SYNCHRONISING activities across the chain
Developing supply chainsPhase 2 - Integrating activities within a business
Developing supply chainsPhase 3 - Integrating activities between businesses
> KEY IDEA
To DEVELOP a supply chain, companies must: 1.INTEGRATE activities across the chain2.Look for ways to COORDINATE them3.Work out how to SYNCHRONISE them
CASE 11.6
THE DIRECT ALPINE APPROACH TO MOUNTAIN CLIMBING
1.What is the TRADITIONAL mountaineering supply chain?
2.How has Messner DEVELOPED this chain?
CASE 11.5
Question Answer
Traditional approach
Messner developments
• Separated climb into TWO phases- Up to the BASE of a mountain- From the base to the TOP• FIRST phase- Similar to TRADITIONAL approach• SECOND phase- Only ONE person - him- LEAN, INTEGRATED and SYNCHRONISED approach
• High level of SUPPORT for climber- Hundreds of PORTERS- Tonnes of EQUIPMENT• Large MANAGEMENT task- MANAGE and CO-ORDINATE all of these
activities
APPLE’S iTUNES: DIGITAL SUPPLY CHAIN
Developing supply chainsTools and techniques
•Improve CUSTOMER support•Change ATTITUDES to
suppliers•Increase use of IT•Strategic PARTNERING•Delivering to CUSTOMERS
Developing supply chainsChanging attitudes to suppliers
Developing supply chainsChanging attitudes to suppliers
Developing supply chainsChanging attitudes to suppliers
CASE 11.7
JAPANESE COMPANIES’ APPROACH TO SUPPLIERS
1.How would you describe the Japanese APPROACH?
2.How does this illustrate a change in ATTITUDE to suppliers?
CASE 11.7 JAPANESE COMPANIES’
APPROACH TO SUPPLIERS
Question
Answer
Approach
Attitude
• Bring suppliers on board in DESIGN phase• REWARD and COLLABORATE with suppliers• Moved to HIGHEST level of attitude- INTEGRATED and SYNCHRONISED
• Suppliers RETAINED throughout product life cycle
• TRAINS supplier• Tests viability of long-term RELATIONSHIP- Assesses ROBUSTNESS of supplier
Developing supply chainsIncreasing use of IT
CASE 11.8 IT DEVELOPMENTS
Question
Caterpillar Gap
From
To
Benefits
CASE 11.8
• REACTIVE- Service triggered by
DEALER
IT DEVELOPMENTS
• Reduced COSTS- LONGER lead-times• Improved SERVICE- NO overdue services- Reduced potential
customer PROBLEMS
• PROACTIVE- CATERPILLAR identifies
need for service
• Reduced INVENTORY- Increased TURNS- Easier to CHANGE stock• Reduced COSTS- Less OBSOLETE stock• Increased SALES- Sell MORE when
fashionable
• DELAYS- Information always
slightly OLD
• REAL-TIME- SALES, INVENTORY and
DISTRIBUTION data
CASE 11.9
DELL: SUPPLY CHAIN INTEGRATION
1.How does it INTEGRATE its supply chain?
2.How does its WEBSITE help this integration?
3.How is Ford able to reduce its COSTS by using Dell’s Premier Pages?
Question Answer
Integrate
Website
Reduce costs
• Reduced STAFF costs- STANDARDISED purchasing process- SINGLE buyer can manage all Dell
purchases
CASE 11.9
• It only MAKES-TO-ORDER• Manages MATERIALS- Just-in-time (JIT)- Short LEAD- TIME• Low INVENTORY- Quick NEW product introduction
• Easier for customers to ORDER• DIRECT customer contact
DELL: SUPPLY CHAIN INTEGRATION
CASE 11.10
SYNCHRONISINGTHE SUPPLY CHAIN
1.How has Calyx and Corolla SYNCHRONISED its supply chain?
2.What ADVANTAGES has it gained from these developments?
CASE 11.10
Question Answer
Synchronised
Benefits
• Reduced delivery LEAD-TIME- From GROWER to CUSTOMER• No INVENTORY• Increased SALES- Better meet product DESIGN order-winner• Increased PROFITS- Can increase PRICE as better meet product
DESIGN and price is a qualifier)
• Improved flow of INFORMATION- Between GROWER and FED EX
SYNCHRONISING THE SUPPLY CHAIN
Developing supply chainsBenefits
•Reduced COSTS•Increased access to
TECHNICAL expertise
•Shorter LEAD-TIMES•Lower INVENTORIES
> KEY IDEABusinesses can DEVELOP their supply chains to • Lower COSTS• Shorten LEAD-TIMES• Reduce CASH holdings• Increase access to TECHNICAL expertise
Developing supply chainsIntegrated supply chain: The ‘one-firm’ concept
Approaches, benefits and issues
Developing supply chains
Central services vs. Harry Tuttle
Brazil
(1985)
Film clip Central Services
FilmTitleDirector (year)
BrazilGilliam (1985)
ClipStartFinish
00:00:0000:08:49
What clip showsThe Central Services government operation bringing the wrong person in for questioning
Key learning objective
The issues that exist in a traditional unintegrated and unsynchronised supply chain
Approaches, benefits and issues
Developing supply chains
Film clip Harry Tuttle
FilmTitleDirector (year)
BrazilGilliam (1985)
ClipStartFinish
00:23:3900:32:23
What clip showsHarry Tuttle (a heating engineer) intercepting a call to Central Services and going to solve the problem himself
Key learning objective
The benefits that result from integrating and synchronising a supply chain
Approaches, benefits and issues
Developing supply chains
•What kind of ORGANISATION is presented?
•What type of ISSUES result?•How would you IMPROVE it?
Approaches, benefits and issues
Developing supply chains
Aspect Central Services
TYPE of organisation
Resulting ISSUES
How to IMPROVE
AUTOCRATIC management style CENTRALISED management structure FUNCTIONAL structure
FRAGMENTED supply chain No one looking at ENTIRE chain Poor COMMUNICATION Lack of CUSTOMER focus INEFFICIENT operation
Change MANAGEMENT STYLE Move to TEAM BASED structure EMPOWER staff
Approaches, benefits and issues
Developing supply chains
•AUTOCRATIC management style•CENTRALISED management
structure•FUNCTIONAL structure•Low staff MOTIVATION•Lack of RESPONSIBILITY•Poor QUALITY•INEFFICIENT operation- High level of WASTE- High level of CONTROL•INFLEXIBLE delivery system- Unable to change SERVICE
provided- Unable to cope with VOLUME
changes
Bad points about Central Services
Developing supply chains
•How is Harry’s approach DIFFERENT?
•What are the BENEFITS?•What are the ISSUES?
Approaches, benefits and issues
Developing supply chains
Aspect Harry Tuttle
CHANGES made
Resulting BENEFITS
Resulting ISSUES
• Move to TEAM-BASED structure• Direct CUSTOMER CONTACT
• High MOTIVATION• High level of RESPONSIBILITY• EFFICIENT operation• ENTREPRENEURIAL style
• Lack of STRUCTURE• Lack of PROCESS• Lack of CONTROL
Approaches, benefits and issues
Developing supply chains
•ENTREPRENEURIAL style•High MOTIVATION•High level of RESPONSIBILITY•CELL structure- Harry performs ALL processes- Harry has direct CUSTOMER
contact
Good points about Harry Tuttle
Developing supply chains
Critical reflections
• Businesses are at the CENTRE of- MATERIAL networks; and- INFORMATION flows
• Supply chains are becoming more COMPLEX- Through increased OUTSOURCING- Becoming supply NETWORKS
• Supplier RELATIONSHIPS are key- Must have FEWER relationships- Become tested when SALES reduce
• BENEFITS is required- Huge OPPORTUNITY- Requires a completely different APPROACH
Summary
• MAKE or BUY is first key decision- Must reflect MARKET OW and Q- Understand CUSTOMERS- Build BARRIERS to entry
• ADVANTAGES of each- MAKE - control, knowledge and opportunity- BUY - focus, access and costs
• DEVELOPING supply chains- Increase customer focus, integrate, align and
synchronise
• BENEFITS of developing chains- Reduced INVENTORY- Reduced COSTS- More RESPONSIVE
© Alex Hill and Terry Hill
Revision questions
1 A supply chain is:
a) All the steps in the supply of a service or product from its origin to its consumption
b) The steps managed by the suppliers
c) The steps managed by the organisation
Revision questions
1 A supply chain is:
a) All the steps in the supply of a service or product from its origin to its consumption
b) The steps managed by the suppliers
c) The steps managed by the organisation
Revision questions
2 The first decision in designing the supply chain is:a) Make or buy
b) Which suppliers to use
c) How to manage your suppliers
Revision questions
2 The first decision in designing the supply chain is:a) Make or buy
b) Which suppliers to use
c) How to manage your suppliers
Revision questions
3 Benefits of making in-house include:
a) Increased control
b) Increased focus on core issues
c) Both a) and b)
Revision questions
3 Benefits of making in-house include:
a) Increased control
b) Increased focus on core issues
c) Both a) and b)
Revision questions
4 Benefits of choosing to buy include:
a) Increased control
b) Increased focus on core issues
c) Both a) and b)
Revision questions
4 Benefits of choosing to buy include:
a) Increased control
b) Increased focus on core issues
c) Both a) and b)
Revision questions
5 An alternative to choosing to buy is:
a) Synchronising the supply chain
b) Switching suppliers
c) Developing a joint venture
Revision questions
5 An alternative to choosing to buy is:
a) Synchronising the supply chain
b) Switching suppliers
c) Developing a joint venture
Revision questions
6 Developing an integrated supply chain involves:a) Moving from being a supply chain to a
demand chainb) Competing as a chain rather than as an
individual organisationc) Both a) and b)
Revision questions
6 Developing an integrated supply chain involves:a) Moving from being a supply chain to a
demand chainb) Competing as a chain rather than as an
individual organisationc) Both a) and b)
Revision questions
7 The benefits of developing a supply chain include:a) Reduced inventory
b) More responsive to customer needs
c) Both a) and b)
Revision questions
7 The benefits of developing a supply chain include:a) Reduced inventory
b) More responsive to customer needs
c) Both a) and b)
CASE FOR TUTORIAL
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