Supply Chains http://www.managementsupport.com

Outline Strategic Importance of Supply Chains Supply Chain Economics Supply Chain Strategies Managing the Supply Chain Internet Purchasing Vendor Selection Materials Management Benchmarking Metrics Value Chains Global Supply Chains

Supply-Chain Support for Overall Strategy Supply demand at lowest possible cost Select primarily for cost Low Cost Respond quickly to changing requirements and demand to minimize stockouts Select primarily for capacity, speed, and flexibility Response Share market research; jointly develop products and options Select primarily for product development skills Differentiation Supplier’s goal Primary Selection Criteria This and the following two slides look at how supply-chain strategy can support overall strategy.

Make/Buy Considerations Reasons for Making Reasons for Buying Maintain core competencies and protect personnel from layoff Lower production cost Unsuitable suppliers Assure adequate supply Utilize surplus labor and make a marginal contribution Frees management to deal with its primary business Lower acquisition cost Preserve supplier commitment Obtain technical or management ability Inadequate capacity Ask students to consider the product characteristics which might cause a company to choose one or the other of the make/buy options.

Forms of Vertical Integration Iron Ore Silicon Farming Raw Material (Suppliers) Steel Flour Milling Backward Integration Integrated Circuits Current Transformation Automobiles Students should be asked to consider why, other than on a “cost” basis, a company might want to consider vertical integration. Distribution System Forward Integration Circuit Boards Computers Watches Calculators Finished Goods (Customers) Dealers Baked Goods

Supply Chain vs. Value Chain Supply chain: often focuses on activities that get raw materials and sub-assemblies into manufacturing operations smoothly and economically. Value chain: looks at every step from raw materials to the eventual end-user (even including disposing of packaging after use). The goal is to deliver maximum value to the end user for the least possible total cost.

Maximizing Value VCM needs to look at the entire value-adding process. Just optimizing one step usually is not a good solution. Because of the numerous interactions between functional areas (internal) and firms (external), any optimization actions should focus on the entire system, not just on a sub-system or on one task in a transformation process.

Measuring Value-Chain Effectiveness A suggested measure is called the IPC ratio which compares cycle times for three elements: Information, Products, and Cash. Ideally, information and cash should take less time to flow through the VC than actual product creation and distribution.

E-Commerce Benefits for the Value Chain The biggest benefit is time. E-commerce operations can give a firm invaluable information about trends and changing needs in its market. E-commerce can help a firm to cut costs and provide more flexibility in availability inquiries, order processing, billing, and other distribution activities.. If the firm can fulfill an order faster, complete a sale, or electronically transfer information from one channel to another, you can cut process time. Shorter process time lets the firm respond to more customer requests, lets its customers carry smaller inventories, and speeds the flow of both information and payments. Functions may provide product and information requests, surveys, complaints, and resolutions. This data can help shape business strategies and focus marketing tactics.