1. Intro. to Supply Chain Strategies
Chapter 2

2. Recap: What is Strategy?
Greek military term: strategos - “the general’s art”
Elements
establishing purposes
setting directions
securing a position
Companies spend a great % of their income and employee hrs carrying out activities that stem from decisions in various parts of the org. As these activities continue, they help to shape the destiny of the entire company. The top managers are responsible for making the vital decisions that set the org. overall goals and keep all parts of the company pulling together towards these goals. Decisions that have a long-term impact on the general directions and basic character of a company are called “ strategic decisions”, After you have made a or two such decisions, you have a strategy.
Positioning when you stand before a shelf, what makes you decide to buy one rather others?
Over time you make decisions in here and there, a lot of them. Add capacity, relocate, make appearance in new mkts, outsourcing,
“一言以丧邦，一言以兴邦”

3. SBU Strategy Buz ST -- what strategy is meant
Strategic business unit’s strategy - business strategy
Business A
ST.
Comp’ve/
mkting ST.
Ops/mfg ST.
R/D ST.
Finance/acc.
ST.
Functional strategies support, through a specific & consistent pattern of decisions
Buz ST -- what strategy is meant
Positioning
competitive advantage

4. Li & Fung’s Retailing Company Mission To be the premier specialty retailing group in Asia offering the right products at the right price at the right places.
Li & Fung’s Retailing
To deliver ultimate customer satisfaction offering:
safe, reliable products
competitive pricing
convenient location
quality customer service
a pleasurable shopping experience
To leverage group synergy locally and regionally through:
shared central resources
supply chain management
information technology
networking with Li & Fung Trading and Li & Fung Distribution

5. SWOT Analysis to Strategy Formulation
Michael Porter

6. Some Strategic Supply Chain Questions
Q1: Should my supply chain focus more on cost or customer service?
(Depends on product type and product life cycle)
Q2: Do I need retailers in my supply chain?
(Compare direct-sell models to traditional models)
Q3: Do I need warehouses/DCs in my supply chain?
(Role of warehouse/DCs)
Q4: Perform all the functions in-house or outsource some?
(Depends on your core competencies)

7. Achieving a Strategic Fit
Understanding the products
Understanding the SC
Developing the ideal strategic fit
In the following weeks, we will review inventory theory -- inventory is important because in parallel to information flow and credit flow, the material flow centers around inventory management. Focus of the sessions will be on presenting the analytical planning models in a SC context, thus emphasizing:
intuition behind the models
their strengths & limitations
impact of various factors on the performance of inventory planning strategies
Tradeoffs in inventory management
Topics: Frameworks for Inventory Mgmt
Complexity of the inventory mgmt
types & purposes of inventory, inventory-related costs,
EOQ, newsboy problem; and continuous /periodic review policies
The level of math derivation will be kept as minimal as possible, however, you should refresh knowledge acquired in other courses since this part will play an important role in case analysis and class discussion
Q1: Should my supply chain focus more on cost or customer service?

8. Understanding Your Product
Two “Extreme” Types of Products --
(a) Functional products -- predictable demand & long life cycle
-- Easy to meet customer demand (revenue predictable)
-- Competition based on price offered to customers
-- Strategy: Supply chain design should focus on minimizing total cost
(b) Innovative products -- unpredictable demand & short life cycle
-- Difficult to forecast demand
-- Difficult meeting customer demand (oversupply or stockout)
-- Competition based on customer service (product variety, degree
of customization, lead time)
-- Strategy: Supply chain design should focus on customer service

9. Step 1 Understanding the Customer
The nature of the demand for your products
Highly
predictable
demand
Somewhat
predictable
demand
Somewhat
uncertain
demand
Highly
uncertain
demand
In the following weeks, we will review inventory theory -- inventory is important because in parallel to information flow and credit flow, the material flow centers around inventory management. Focus of the sessions will be on presenting the analytical planning models in a SC context, thus emphasizing:
intuition behind the models
their strengths & limitations
impact of various factors on the performance of inventory planning strategies
Tradeoffs in inventory management
Topics: Frameworks for Inventory Mgmt
Complexity of the inventory mgmt
types & purposes of inventory, inventory-related costs,
EOQ, newsboy problem; and continuous /periodic review policies
The level of math derivation will be kept as minimal as possible, however, you should refresh knowledge acquired in other courses since this part will play an important role in case analysis and class discussion
Purely
functional products
Established
goods
New models
of existing goods
Entire new
products
Washing m/c refridgritor
petro
Digiman 8, brand PC
Quicktionary 3G handphone

10. Step 2 Understanding your SC
Two “Extreme” Types of Supply Chains
Cost effective supply chain
Market-responsive SC
Primary purpose
Supply predictable demand efficiently at the lowest possible cost
Respond quickly to unpredictable demand in order to minimize stockouts, and obsolete inventory
Manufacturing focus
(capacity utilization)
Maintain high average utilization rate
Maintain relatively lower utilization rate, which implies lower lead times
Inventory strategy
minimize inventory throughout the chain at long as cost is low
Deploy significant buffer stocks of parts and/or finished goods
Transportation strategy
Use slow transportation modes (truck, rail) to minimize transportation cost
Use fast transportation modes (Air)
to respond to demand quickly
Approach to choosing suppliers
Select primarily for cost and quality
Select primarily for speed, flexibility, and quality
Lead-time focus
Shorten lead time as long as it doesn’t increase cost
Invest aggressively to reduce lead time
LOW COST
Customer Service

11. What is the Right Supply Chain for Your Product?
Step 3: A stratigc fit
What is the Right Supply Chain for Your Product?
Responsive
supply chain
Nokia, Fashion
Toyota, HP
Cost-effective
supply chain
Beers, Tissues
Demand
uncertainty
Low
(functional products)
High
(innovative products)

12. A Mismatch
If you offer too many varieties for a basically functional product using highly flexible mfg systems
If you use an efficient SC for an innovative product
plan long ahead of sales season
carrying a high variety with high stock levels
Large forced markdown
High stockout
In the following weeks, we will review inventory theory -- inventory is important because in parallel to information flow and credit flow, the material flow centers around inventory management. Focus of the sessions will be on presenting the analytical planning models in a SC context, thus emphasizing:
intuition behind the models
their strengths & limitations
impact of various factors on the performance of inventory planning strategies
Tradeoffs in inventory management
Topics: Frameworks for Inventory Mgmt
Complexity of the inventory mgmt
types & purposes of inventory, inventory-related costs,
EOQ, newsboy problem; and continuous /periodic review policies
The level of math derivation will be kept as minimal as possible, however, you should refresh knowledge acquired in other courses since this part will play an important role in case analysis and class discussion
Co-exist

13. Not So Simple!
Many companies make both functional and innovative products. How could they configure their SCs to accommodate both?
Over time, the nature of product may evolve from innovative to functional or vice-versa. How to adjust your SC to cope with the change?
If you choose to improve responsiveness (cost-effectiveness) of your SC, then you would have to compromise your cost performance (delivery time, product availability, etc. - responsiveness performance).
In the following weeks, we will review inventory theory -- inventory is important because in parallel to information flow and credit flow, the material flow centers around inventory management. Focus of the sessions will be on presenting the analytical planning models in a SC context, thus emphasizing:
intuition behind the models
their strengths & limitations
impact of various factors on the performance of inventory planning strategies
Tradeoffs in inventory management
Topics: Frameworks for Inventory Mgmt
Complexity of the inventory mgmt
types & purposes of inventory, inventory-related costs,
EOQ, newsboy problem; and continuous /periodic review policies
The level of math derivation will be kept as minimal as possible, however, you should refresh knowledge acquired in other courses since this part will play an important role in case analysis and class discussion

14. Q1: Should my supply chain focus more on cost or customer service?
Product Life Cycle
Time
Market Volume
Ramp-up and growth
Maturity
End-of-life

15. Further Discussion: SC Structure?
Bagged chips
Cylinder chips