Supply-Chain Stategy Operations Management Dr. Ron Tibben-Lembke

Supply Chain Designs Efficient – economies of scale Risk-Hedging – pooled resources, multiple sources of supply, need good IT Responsive – Changing consumer needs Agile – responsive to changing needs, pooled resources Efficient Risk-Hedging Responsive Agile LowHigh Low High Supply Uncertainty Demand Uncertainty

Mass Customization Highly customized Integrate design, processes, supply network Supply components cheaply to production points Fast, responsive production, quick delivery Higher weight, lower value

Managing the Supply Chain Postponement -- withhold any modification until as long as possible. Keep product generic “vanilla” HP Benetton Home Depot paint department Channel Assembly -- have distributor assemble products from components

HP Inkjet Printers Printers made in Vancouver, sent via ship through Panama Canal to Europe Europe warehouse stocks inventory by country physically different-- power supply manuals different languages Substitution not allowed Re-supply time very long

Euro Plugs No standardized power supplies for Europe Different power supply for every country.

HP Inkjet Printers Redesigned printers so that power supply added in Europe Re-engineer product, power supply Assembly done in a warehouse (Quality?) Manuals added in Europe Many expensive changes Store ‘vanilla’ boxes Postpone point of differentiation 25% cost reduction

Delayed Customization ProductionStorageShippingStorage Before After

Benetton Sweaters of undyed wool, dyed once demand is known Dyeing LT much faster than production How many undyed sweaters to make? How many Red, Green, Blue, also, if this production process is cheaper, and you know you’ll sell some minimum amount?

Behr Paints Small # of bases Small # tints Unlimited # combinations Keep stock colors on hand? How many gallons? Which ones? Lower labor costs Higher inventory costs

Bullwhip Effect Lack of information sharing can cascade through the supply chain. Small changes at retail level lead to huge swings at manf., like bullwhip Several retailers order all at once, distributor thinks sales have jumped, orders a much bigger order, etc. Better: sales information shared across the “Value Chain.”

Managing the Supply Chain Drop Shipping -- Supplier sends directly to the store, not to store’s warehouse Blanket orders -- Long-term pledge to buy certain amount, shipped quickly EDI -- standardized format for sending electronic information computer-to- computer