1. Chapter 10 Supply-Chain Strategy
Supply-Chain Management Defined?
Measuring Supply-Chain Performance
Bullwhip Effect
Outsourcing Defined
Value Density Defined
Mass Customization Defined

2. What is a Supply-Chain? Defined
Supply-chain is a term that describes how organizations (suppliers, manufacturers, distributors, and customers) are linked together
Suppliers
Inputs
Service support operations
Transformation
Manufacturing
Local service providers
Localization
Distribution
Customers
Output
Services
Supply networks

3. What is Supply-Chain Management? Defined
Supply-chain management is a total system approach to managing the entire flow of information, materials, and services from raw-material suppliers through factories and warehouses to the end customer.

4. Supply Chain Mat'l Flow Mat'l Flow Credit Flow Credit Flow Supplier
VISA
VISA
Mat'l Flow
Mat'l Flow
Credit Flow
Credit Flow
Supplier
Supplier
Mfg.
Mfg.
Retailer
Retailer
Consumer
Consumer
Supplier
Supplier
Wholesaler
Wholesaler
Retailer
Retailer
Order
Order
Cash
Cash
Schedules
Schedules
Flow
Flow
Flow
Flow

5. Formulas for Measuring Internal Supply-Chain Performance
Inventory Turnover =
Weeks of Supply =

6. Example of Measuring Internal Supply-Chain Performance
Suppose a company’s new annual report claims their costs of goods sold for the year is $160 million and their total average inventory (production materials + work-in-process) is worth $35 million. This company is used to having any inventory turn ratio of 10.
What is this year’s Inventory Turnover ratio? What does it mean?

7. Example of Measuring Supply-Chain Performance (Continued)
Inventory Turnover

8. Common practice is to measure within a function:
Supply Chain Measures
Common practice is to measure within a function:
Supplier
Plant
Distribution
Customer
Center
Price
Cost
Efficiency
Output
Cost
Quality
Speed
Flexibility
Inventory
Stock Rotation
Space

9. Measure Across Supply Chain Nodes
Cycle Time
On-time Delivery
Vendor Managed
Inventory
Cycle Time
Delivery Reliability
Product Availability
Cycle Time
Order Completion
Performance

10. Total Supply Chain Inventory
Sum of inventory on hand at each node of the supply chain
Supplier, Manufacturer, Distributor, Retailer
Measurement Timing: Weekly data collection

11. Bullwhip Effect
Orders to a supplier have a larger variance than sales to a buyer
These distortions amplify as they move upstream, back to suppliers

12. What is the Bullwhip Effect?

13. Causes of the Bullwhip Effect
Price fluctuations
Periodic order policies
Rational/shortage gaming
Production schedules based on forecasts of wholesaler demand versus consumer demand

14. Hau Lee’s Concepts of Supply Chain Management
Hau Lee’s approach to supply chain (SC) is one of aligning SC’s with the uncertainties revolving around the supply process side of the SC
A stable supply process has mature technologies and an evolving supply process has rapidly changing technologies
Types of SC’s
Efficient SC’s
Risk-Hedging SC’s
Responsive SC’s
Agile SC’s 7

15. Hau Lee’s SC Uncertainty Framework
Demand Uncertainty
Low (Functional products)
High (Innovative products)
Low
(Stable
Process)
High
(Evolving
Supply
Uncertainty
Efficient SC
Ex.: Grocery
Responsive SC
Ex.: Computers
Risk-Hedging SC
Ex.: Hydro-electric power
Agile SC
Ex.: Telecom 7

16. What is Outsourcing? Defined

17. Reasons to Outsource Organizationally-driven Improvement-driven
Financially-driven
Revenue-driven
Cost-driven
Employee-driven

18. Logistics
The process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirement.

19. Value Density Defined
Value density is defined as the value of an item per pound of weight.
It is used as an important measure when deciding where items should be stocked geographically and how they should be shipped.

20. Mass Customization Defined
Mass customization is a term used to describe the ability of a company to deliver highly customized products and services to different customers.