The Triple-A Supply Chain - NCKU IMBA E-Business and Supply Chain Management (Fall 2011)

7/22/2019 The Triple-A Supply Chain - NCKU IMBA E-Business and Supply Chain Management (Fall 2011)

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The Triple-A SupplyChain

Kelvin Lye Kwong Loong (RA6007578)

Martin Pech (RA6007625)

by Hau L. Lee

E-Business and Supply Chain Management 2011-11-14


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Agenda

Introduction

Triple As - explanation

Class Activitysupply chainoptimization

Assignment - 7-eleven Case - Zara



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Introduction

What is the case about?

Fast and cost-effective does not

ensure sustainable advantage

2011-11-14 E-Business and Supply Chain Management 2011-11-14


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Triple-A Supply Chain

Agility

Adaptability

Alignment



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Agility

Quick respond to sudden short-term

changes in supply or demand

Unexpected disruptions handled

smoothly

Prompt recovery from shocks(natural disaster, epidemics)



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Agility

Methods

Promote flow of information with suppliers and

customers

Develop collaborative relationships with

suppliers

Design for postponement



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Agility

Methods

Build inventory buffers by maintaining a

stockpile of inexpensive but key components

Have a dependable logistics system or partner

Draw up contingency plans and develop crisis

management teams



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Adaptability

Evolve over time as economic

progress, political shifts,

demographic trends, and

technological advances reshape

markets



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Adaptability

Methods

Monitor economic changes all over the world to

spot new supply bases and markets (especially

in developing countries)

Use intermediaries to develop fresh suppliersand logistics infrastructure



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Adaptability

Methods

Evaluate needs of ultimate consumersnot just

immediate customers

Create flexible product design

Determine where companies products stand in

terms of technology cycles and product life

cycles



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Alignment


What does the word align mean?

To arrange in a line or so as to be parallel

Alignment in SC context?

Objective: Create incentives for betterperformances


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Alignment


Quotes by Prof. Lee:

Not sufficient to say Youre the best company in

the supply chain.

Instead of company to company competition, we

are now in an era of supply chain to supply chain

competition

Win-win relationship is the cornerstone of supplychain success


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Alignment


Common Scenarios without Alignment

Scenario 1

Each party maximize only its own interests

Overstocking, wastage, overspending

E.g.: HPs IC Division vs Ink-jet Printer Division

IC DivisionCarry as little inventory as possible

Printer DivisionForced to keep large inventory due to

low inventory of ICs.

Implication: Increases costs


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Alignment



Scenario 2

Suppliers forced to bear huge costs of inventories Suppliers/vendors hubowned by vendors

Vendors role - maintain enough stock & replenish

them on time using VMI

Manufacturers shift inventory costs to vendors in

order to reduce its own cost

Vendors borrow money at higher interest rates to

finance inventory costs.

Implication: Costs in SC not reduced


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Alignment



Scenario 2


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Alignment


Why is alignment needed for

supply chain?

To maximize a supply chains

performance


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Alignment


What can be aligned amongthe parties involved in SC?

Ways What it means1. Align

informationCompanies have equal access to forecasts, sales

data and plans2. Align

identitiesManufacturer must define the roles and

responsibilities of each partner so that there is no

scope for conflict.3. Align

incentivesWhen companies try to maximize returns, they

also maximize the supply chainsperformance.

Companies must try to predict the possible

behaviour of supply chain partners in the light of

their current incentives4. Redesign

incentives

Partners act in ways that are closer to whatsbest

for the entire supply chain.


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Alignment


How is alignment done in thereal world?

Redefine the terms of their relationships so that firms

share risks, costs, and rewards equitably

Example: RR Donnelley (magazine printing for HBR)

Quality and reliability of supplies improve

Firm can reduce waste and make delivery to customers

on time. Firm encourages suppliers to suggest ways to improve

processes and products

How? Split any savings with suppliers.


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Alignment


How is alignment done in the realworld?Use intermediaries (Finance re-engineering)

Who? Financial institutions such as banks

Why them?

Can borrow money at a much lower interest rate and

finance the purchase of the inventories.

When manufacturers need them, banks can sell these

inventories to the manufacturers.

Outcome?

Vendors/suppliers can reduce its costs and

manufacturers can get the inventory they need.


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Alignment


Real Life Case

Toyota Prius case(explained by Prof Lee in his

lecture at Stanford GSB)

Youtube clip (34:4739:09)


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Alignment


Methods

Exchange information and knowledge freely with

vendors and customers

Lay down roles, tasks and responsibilities

clearly for suppliers and customers

Equitably share risks, costs and gains of

improvement initiatives


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Class Activity

Efficient SC dont adapt to changesin the structure of markets

Build efficient SC

2011-11-14E-Business and Supply Chain Management

Vendor

Procurement

Retail

Testing

Assembly

Order Fulfillment

Centralized with HQ:


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Class Activity


Demonstrate change in market

Adapt, optimize!


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The Triple-A Supply

Chain

Kelvin Lye Kwong Loong (RA6007578)

Martin Pech (RA6007625)

by Hau L. Lee


Break


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External Case: ZARA


Taken from

Rapid-Fire Fulfillment

By Kasra Ferdows, Michael A. Lewis and Jose A.D.Machuca


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External Case: ZARA


Background of Zara

Spanish clothing and accessories retailer

Based in Arteixo, Galicia

Founded in 1975 by Amancio Ortega and Rosalia Mera

Flagship chain store of the Inditex group

Brands like Massimo Dutti, Pull and Bear, Oysho,

Uterque, Stradivarius and Bershka

Revenue: 7.071 billion euros in 2009Present in 73 countries, more than 650 Zara stores

worldwide


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External Case: ZARA


Story Behind ZaraA huge order by a German wholesaler was cancelled in

1975

All Ortegas order is tied up in this order and there was

no buyers

No option but to sell the stuff on his ownHe opened a shop named Zara near his factory in La

Coruna in Spain

Lesson for OrtegaTo be successful, You need to have five fingerstouching the factory and five touching the customer.

Meaning: Control what happens to your product until the

customer buys it


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External Case: ZARA


Zaras Philosophy

Superresponsive supply chainDesign, prodice and deliver a new garment

and put it on display in its stores worldwide in a

mere 15 days

Offer a large variety of the latest designsquickly and in limited quantities


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External Case: ZARA


Zaras PhilosophyDefies most of the current conventional practices in Supply

Chain.

a) Keep almost half of its production inhouse

b) intentionally leaves extra capacityc) Manufactures and distributes products in small batches

d) Manages all design, warehousing, distribution and logistic

functions itself (instead of relying outside partners)

e) Hold its retail stores to a rigid timetable for placing orders and

receiving stock

f) Put price tags of items before theyre shipped

g) Leaves large areas empty in its expensive retail shops

h) Tolerates, even encourages ocassional stockouts.


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External Case: ZARA


Zaras Self-Reinforcing System

Part 1: Close the communication loop

Transfer both hard data and anecdotal information quickly and

easily from shoppers to designers and production staff

Example: Fast fashion system

Track materials and products in real time every step of the

way, including inventory on display in the stores

Goal: close the information loop between the end users and

the upstream operations of design, procurement, production

and distribution as quickly and directly as possible


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External Case: ZARA


Zaras Self-Reinforcing System

Part 2: Stick to a rhythm across the entire SC

Spends money on anything that helps to increase and

enforce the speed and responsiveness of the chain as a whole

Part 3: Leverage your capital assets to

increase SC flexibility

Make major capital investments in production and distribution

facilities

Uses these facilities to increase the supply chainsresponsiveness to new and fluctuating demands

Produces complicated products in-house and outsources the

simple ones.


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Class Activity

Efficient SC dont adapt to

changes in the structure of

markets

Build efficient SC

Demonstrate change in market

Adapt, optimize!



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Conclusion


Managers are the key person in making

triple-A supply chain successful

Whats needed? - a fresh attitude and a

new culture to achieve triple-A supply

chain performance


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Conclusion


Suggestions to firm that wants toachieve triple-A performance

1. Give up the counterproductive

efficiency mind-set (Agility)

2. Be prepared to keep changing

networks (Adaptability)

3. Look out and take responsibility for

the entire chain instead of looking outfor personal interests only (Alignment)


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Conclusion

2011-11-14

Market conditions

and

Business Cycles

Demand

and

Supply Uncertainties

Technology

and

Product Life Cycle

Supply Chain

Strategies

E-Business and Supply Chain Management

Adaptive Supply Chain


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Conclusion

Ways What it means1. Align

informationCompanies have equal access to forecasts, sales

data and plans2. Align

identitiesManufacturer must define the roles and

responsibilities of each partner so that there is noscope for conflict.

3. Align

incentivesWhen companies try to maximize returns, they

also maximize the supply chainsperformance.

Companies must try to predict the possible

behaviour of supply chain partners in the light of

their current incentives4. Redesign

incentives

Partners act in ways that are closer to whatsbest

for the entire supply chain.

Supply Chain Alignment

The Triple-A Supply Chain - NCKU IMBA E-Business and Supply Chain Management (Fall 2011)

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