Efficiency-Responsiveness Framework of Supply Chain MatchMismatch Match Functional ProductInnovative...
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Efficiency-Responsiveness Framework of Supply Chain
Match Mismatch
Mismatch Match
Functional Product Innovative Products
Efficie
nt
Su
pp
ly
Ch
ain
Re
sp
on
siv
e
Su
pp
ly C
hain
Zone of strategic fit in supply chain
Certain Demand
Implied Uncertainty Spectrum
Uncertain Demand
Responsive Supply Chain
Responsiveness Spectrum
Efficient Supply Chain
Zone of Strategic Fit
Suppliers CustomersDistribution
ChannelsManufacturer
Dominant Model: A value-chain with arm-length transactions from one layer to the next
Suppliers CustomersManufacturer
Direct Business Model: Leverage relationships with both suppliers and customers by eliminating time and cost of third-party distribution
Suppliers Manufacturer Customers
Virtual Integration: Stitching together a business with partners and customers treated as if they are inside the company – sharing information real-time
Dell’s Direct Business Model
Direct Model: Focus
Vertical Integration vs. Virtual Integration
Engineering-centric vs. customer-centric
Supplier exchange vs. supplier relationship
“we have developed everything” vs. “ we need to add value to customers”
Key Factors of the Direct Model
• Customer Focus
• Supplier Partnership
• Mass Customization
• Just-in-Time Manufacturing
Direct Model: Customer Focus
• Segment Customers
• Communicate closely with customers to forecast needs and keep inventory low
• Create most value for customers
• Use technology to free customer to focus on their business
Supplier Partnership
• Have as few suppliers as possible; keep them as long as they are technological and quality leaders
• Communicate your inventory levels and replenishment needs with suppliers real-time
• Order from suppliers only when you receive demand from customers
Direct Model - Innovation
Technology is enabling coordination across company boundaries to
achieve new levels of efficiency, speed, and flexibility as well as extraordinary returns to investors
Li & Fung Success …
• Innovation• Flexibility• SpeedThrough
– dispersed manufacturing– smokeless factory
Dispersed Manufacturing (Li & Fung)
• Detaches critical links in the supply chain• Finds best solutions for each link from a world-
wide network of independent suppliers• Weave a strong and flexible network of
specialized suppliers, manufacturing, and distributors
• Chips away time and cost from the production and delivery cycle (planning close to market)
Dispersed (Borderless) Manufacturing
Order of 10,000 European Garment
Pick Yarn from Korea
Make the Garment in
Thailand
Send Yarn toTaiwan forWeaving
Buy JapaneseZippers from
China
Order DeliveredTo Customer
all Looking Alike
Organizing Around Customers – Li & Fung
• Li & Fung organizes itself to create a unique value chain for each customer
• Basic operating unit is entrepreneurial divisions serving just one large customer or several smaller customers
• Uniqueness – remains entrepreneurial despite it growing size and scope by structuring around customer-focused divisions
• Create a customized value chain for each customer