Enabler-Drivers of SCM

Supply Chain Enablers
Organizational Infrastructure
Information Technology
Strategic Alliance
Human Resource Management
Supply Chain Enablers
Organizational Infrastructure
Coherent business strategy that aligns
business units towards same goals 32%
Formal process-flow methodologies to
enable the SCM improvements 15%
People committed to and responsible for
cross-functional processes 14%
Right process metrics identified to guide
operating units performance toward
strategic organizational SCM objective 13%
Information Technology
Operations, marketing , & logistics data
coordinated within the company 30%
Data readily available to managers, not
embedded in legacy system 27%
Operations, marketing, & logistics data
coordinated between companies 18%
Linking SCM to ERP systems 10%
Strategic Alliance
Expectations clearly stated, understood,
and agreed upon up front 48%
Collaborating on supply chain and
product service strategies 18%
Top management of partnering
companies interface on a regular basis
9%
Top management communicate why
strategic alliances are important and
should be pursued 8%
Human Resource Management

Enablers
Source, hire, and select skilled and quality
people at all management levels 27%
Find change agents to champion SCM
implementation 27%
Compensation and incentives in place for
SCM performance 14%
Finding the internal process facilitators
knowledgeable in SCM 13%
Appropriate job description and
responsibilities 12%
Drivers of Supply Chain

Performance
Efficiency
Responsiveness
Supply chain structure
Inventory
Transportation
Facilities
Drivers
Information
Considerations for Supply Chain

Drivers
Driver
Efficiency
Responsiveness
Inventory
Cost of holding
Availability
Transportation
Consolidation
Speed
Facilities
Consolidation /
Proximity /
Dedicated
Flexibility
What information is best suited for
each objective
Information
Functional vs. Innovative Products:

Differences in Demand
Product life cycle
Functional
(Predictable)
Innovative
(unpredictable)
More than 2 years
3 months to 1 years
Contribution margin 5% to 20%
20% to 60%
Product variety
Low (10 to 20
variants per
category)
High (often millions

of variants per
category
Forecast accuracy
(margin of error)
10%
40% to 100%
Average stockout
rate
1% to 2%
10% to 40%
Average forced
markdown
0%
10% to 25%
Physically Efficient vs. Market-Responsive

Supply Chain
Physically Efficient
Process
Market-Responsive
Process
Primary purpose
Supply predictable
demand efficiently at
the lowest possible
cost
Respond quickly to
unpredictable demand
to minimize stockouts,
forced markdowns, and
obsolete inventory
Manufacturing focus
Maintain high
average utilization
rate
Deploy excess buffer

capacity for flexibility
Inventory strategy
Generate high turns & Deploy significant

lower inventory cost
buffer stock of all stock
items
Lead-time focus
Shorten lead time at

low cost
Invest in ways to
reduce lead time
Approach to choosing
suppliers
Select primarily for

cost and quality
Select primarily for

speed, flexibility, and
quality
Product-design strategy
Maximize
Use modular design to
Efficiency-Responsiveness Framework
of Supply Chain
Functional Product
Innovative Products
Efficient
Supply Chain
Responsive
Supply Chain
Match
Mismatch
Mismatch
Match
Zone of strategic fit in supply chain

Responsive Supply
Chain
Responsiveness
Spectrum
Zone of
Strategic Fit
Efficient Supply
Chain
Certain
Demand
Implied
Uncertainty
Spectrum
Uncertain
Demand
Achieving Strategic Fit

Understanding the Customer
Lot size
Response time
Service level
Product variety
Price
Innovation
Implied
Demand
Uncertainty
The Value Chain: Linking Supply

Chain and Business Strategy
Business Strategy
New Product Marketing

Strategy
Strategy
New
Product
Development
Supply Chain Strategy
Marketing
and
Operations Distribution
Sales
Service
Finance, Accounting, Information Technology, Human Resources
Flows in a Supply Chain

Information
Product
Funds
Customer
Sequential Optimization vs.

Global Optimization
Sequential Optimization
Procurement
Planning
Manufacturing
Planning
Distribution
Planning
Demand
Planning
Global Optimization
Supply Contracts/Collaboration/Information Systems and DSS
Procurement
Planning
Manufacturing
Planning
Source: Duncan McFarlane
Distribution
Planning
Demand
Planning
Order Size
The Dynamics of the Supply Chain
Customer
Customer
Demand
Demand
Distributor
Distributor Orders
Orders
Retailer
RetailerOrders
Orders
Production
ProductionPlan
Plan
Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
Order Size
The Dynamics of the Supply Chain
Customer
Customer
Demand
Demand
Production
ProductionPlan
Plan
Time
Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Enabler-Drivers of SCM

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Supply Chain Enablers

Supply Chain Enablers

Human Resource Management

Drivers of Supply Chain

Considerations for Supply Chain

Functional vs. Innovative Products:

Product life cycle

More than 2 years

Contribution margin 5% to 20%

High (often millions

Physically Efficient vs. Market-Responsive

Deploy excess buffer

Generate high turns & Deploy significant

Shorten lead time at

Select primarily for

Select primarily for

Use modular design to

Zone of strategic fit in supply chain

Achieving Strategic Fit

The Value Chain: Linking Supply

New Product Marketing

Supply Chain Strategy

Finance, Accounting, Information Technology, Human Resources

Flows in a Supply Chain

Sequential Optimization vs.

Source: Duncan McFarlane

The Dynamics of the Supply Chain

The Dynamics of the Supply Chain

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