Corporate Strategy- Supply Chain Management- Dell Case Study
Transcript of Corporate Strategy- Supply Chain Management- Dell Case Study
8/3/2019 Corporate Strategy- Supply Chain Management- Dell Case Study
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Corporate Strategy
vis-a-vis
Supply Chain Management
Prof. Rushen Chahal
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Fit Between Corporate andFunctional Strategies (Chopra &
Meindl)Corporate Competitive Strategy
Supply Chain
or Operations
Strategy
Product
Development
Strategy
Marketing
and Sales
Strategy
Information Technology Strategy
Finance Strategy
Human Resources Strategy
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Corporate Mission
The mission of the organization ± defines its purpose, i.e., what it contributes to society
± states the rationale for its existence
± provides boundaries and focus
± defines the concept(s) around which the company can rally
Functional areas and business processes define their
missions such that they support the overall corporate
mission in a cooperative and synergistic manner.
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Corporate Mission Examples
Merck: The mission of Merck is to provide society with superior products and services-innovations and solutions that improvethe quality of life and satisfy customer needs-to provideemployees with meaningful work and advancementopportunities and investors with a superior rate of return.
FedEx: FedEx is committed to our People-Service-Profitphilosophy. We will produce outstanding financial returns byproviding totally reliable, competitively superior, global air-ground transportation of high-priority goods and documents thatrequire rapid, time-certain delivery. Equally important, positivecontrol of each package will be maintained utilizing real time
electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our requestfor payment. We will be helpful, courteous, and professional for each other, and the public. We will strive to have a completelysatisfied customer at the end of each transaction.
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Defining the Corporate Strategy
Differentiation (Quality; Uniqueness;
e.g., Luxury cars, Fashion Industry,
Brand Name Drugs)
Cost Leadership (Price;
e.g., Wal-Mart, Southwest
Airlines, Generic Drugs)
Responsiveness (Reliability; Quickness; Flexibility;
e.g., Dell, Overnight Delivery Services)
Competitive Advantage through whichthe companymarket share is attracted
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Defining the Corporate Strategy
Corporate Strategy: The organization¶s positioning in terms of
± responsiveness,
± cost leadership and
± product differentiation
requirements, i.e., the sought competitive advantage(s).
The corporate strategy dictates the detailed strategies for eachfunctional area (i.e., Operations, Finance, Marketing) but it is
also affected by those areas.
Collectively, all these strategies seek to exploit (external)opportunities and (internal) strengths, neutralize (external)threats, and address (internal) weaknesses
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Factors affecting Corporate Strategy
External ± Emerging strengths and weaknesses of competitors => newthreats and opportunities, respectively
± New industry entrants
± Development of substitute products
± Development of new technologies
± Legal developments (e.g., environmental concerns andregulations)
± Economic and political developments (e.g., new internationalagreements, political crises)
Internal ± Company politics and restructuring
± Modified relationships with customers and suppliers
± Product Life Cycle
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Strategy and Issues during a Product¶s
Life(J. Heizer & B. Render, ³Operations Management´, Prentice
Hall)Introduction Growth Maturity Decline
Time
Sales
Best period toincrease marketshare
R&D engineering
critical
Frequent product
and processchanges
Short production
runs
High production
costs
Limited models
Attention toquality
Practical to
change price or
quality image
Strengthen
niche
Forecasting
criticalProducts and
process reliability
Increase capacity
Shift towards
product focus
Enhance
distribution
Poor time to change
image, price or
quality
Competitive costs
become criticalDefend market
position
Standardization -
minor productchanges
Optimum capacity
Process stability
Long production
runs
Cost control
critical
Little product
differentiationOvercapacity in
the industry
Reduce capacity
and eventually
prune line to
eliminate items not
returning goodmargin
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The ³Zone of Strategic Fit´
ImpliedUncertaintySpectrum
CertainDemand
UncertainDemand
EfficientSupply Chain
ResponsivenessSpectrum
ResponsiveSupply Chain
Implied Demand Uncertainty: The uncertainty that exists due to the portion of
Demand that the supply chain is required to meet.
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Operations Frontier, Trade-offs,and Operational Effectiveness
Differentiation
Cost Leadership
Responsiveness
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Expanding the Operations frontier:
Dell¶s ³revolution´ in the PC market
Dell¶s competitive advantage: Provide customized PC
configurations, with short delivery times and affordable
prices.
Dell¶s success in PC market:
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Supporting Dell¶s competitiveadvantage through a new operational
model Focused on strategic partnerships: suppliers downfrom 200 to 47
Suppliers maintain nearby ship points; delivery time15 minutes to 1 hour
Suppliers own inventory until used in production Demand pull throughout value chain ± ³information
for inventory´ substitution
Demand forecasting is critical ± changes are sharedimmediately within Dell and with supply base
Customers frequently steered to ³recommendedconfigurations´ with high availability to balance supplyand demand
External logistics supplier used to manage inbound
supply chain
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V i r t u a l I n t e g r a t i o
n
Customer
Dell
Suppliers
Dell Supply Chain
PUSH
PULL
PC SUPPLY CHAINS
Typical PC Supply Chain
(Compaq, HP, IBM, etc.)
Customer
Distr ibutionChannels
Manufacturer
Suppliers
PUSH
PULL
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The CSF¶s underlying Dell¶s
competitive advantage
Very high product (configurable) variety ± masscustomization!
Direct fulfillment - no intermediaries
No production launch until customer order booked(pure pull!)
Very low finished goods inventory (costs) ± highinventory turns (raw material inventory influenced by³recommended configurations´)
High velocity material flows & fulfillment
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Dell performance
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Emerging factors and trends
enablingD
ell¶s strategy The commoditization of the PC industry
± Standardized and interchangeable components
± Emergence of reliable manufacturing service providers
Recent advances in Supply Chain Management ± Information Technology (IT) platforms that allow the effective and
efficient information exchange and coordination across the entire
supply chain
± 3rd party logistics service providers
± Emerging emphasis on virtual rather than vertical companyintegration
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The Primary ³drivers´ for achieving strategic fit in Supply
Chain Strategy
Corporate Strategy
Supply Chain Strategy
Efficiency Responsiveness
Facilities Inventory Transportation InformationMarket
Segmentation
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The Role o Facilities
Facilities: The locations where inventory is
± processed and transformed into another state (manufacturing) or
± staged before being shipped to the next stage (warehousing)
In general, centralization boosts efficiency, while decentralizationboosts responsiveness (but not always«)
Primary decisions:
± Location
Proximity to the customer
Proximity to resources
Access to markets (ability to circumvent quotas and tariffs)
Infrastructure
Operational costs and tax incentives
± Capacity
Capital cost vs. responsiveness
± Operations Methodology for Manufacturing Facilities
Product vs. functional focus
Flexible vs. dedicated capacity
± Warehousing methodology
SKU-based storage
Job lot storage
Cross-docking
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The Role o Inventory
Primary inventory components:
± Raw Material ± Work In Process (WIP)
± Finished Goods
It exists because of the finiteness of the production and transportationrates (Little¶s Law: I=TH*T)
Types of Inventory
± Cycle Inventory: It is incurred in an effort to control the impact of ³fixed´ordering and set-up costs.
± Safety Inventory: It is used to deal with the randomness in theexperienced demand; it is set so that it meets the supply chain to meetsome ³service level´ (i.e., control the probability that no stock-out will beexperienced at any replenishment cycle).
± Seasonal Inventory: It is used to help the supply chain deal withpredictable variability in demand.
± Opportunistic Inventory: Takes advantage of ³bargains´.
Sourcing: Determine the set of suppliers / subcontractors to be used,and develop the contracts that will govern the relationship.
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The Role of Transportation
Transportation: The SC element that moves product between itsdifferent stages.
Primary decisions:
± Mode(s) of Transportation
Air: fastest but most expensive
Truck: Relatively quick, inexpensive and very flexible mode Rail: Inexpensive mode to be used for large quantities
Ship: Slowest but often the most economical choice for large overseas
shipments
Pipeline: Used (primarily) for oil and gas
Electronic transportation: for goods as music and movies
± Route and Network Selection ± Inhouse or Oursource to some 3PL provider
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The Role of Information
Information exchange is necessary for the most extensive modes of
coordination sought in contemporary supply chains. It allows the supplychain to improve simultaneously its efficiency and responsiveness.
Information-related decisions
± Push vs. pull
± Extent and modes of information sharing and coordination
± Forecasting and Aggregate Planning schemes
± Pricing and revenue management policies
± Enabling Technologies:
Electronic Data Interchange (EDI): Enables paperless transactions, primarily for
³backend´ operations of the SC.
The Internet and the WWW.
Enterprise Resource Planning (ERP): enables transactional tracking and global
visibility of information in the SC.
Supply Chain Management (SCM) software: decision support tools.
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Current Trends and Challenges in the SCM
Increasing variety of products Decreasing product life cycles
Increasingly demanding customers
Fragmentation of Supply Chain Ownership: vertical vs.
virtual integration Globalization and Market Segmentation
³Closed Loop´ SC
Production Distribution Consumption Retrieval
Disassembly/
ReprocessingDisposal
R everse Logistics and
R e-manufacturing network