Exam (elaborations)
Supply Chain Management and Design - Strategic Planning and Operations
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Topic 1:Strategic Fit (Supply chain and strategy)
Supply chain: all parties involved directly or indireclty in fullfilling customer requests
(retailers, manufacturers, suppliers, transporters)
The ultimate goal of a supply chain is to create as much value as possible while keeping
costs low
Strategic fit: refers to a company’s competitive strategy (what they aim to deliver to their
customers) and its supply chain strategy (how the company plans to deliver it)
A lack of strategic fit results in waste of resources, reduced efficiency, low profits, and
failling to meet customer demand
Uncertainity demand: unpredictability of how much demand there will be for a product or
service
Implied uncertanity demand: uncertanity the supply chain faces in meeting customer needs
(not just about how much demand there is but also how challenging it is for the supply chain
to fullfill that demand).
Low IU: Predictable and stable
Example: Lemonade stand that only sells plain lemomade and expects about 50 customers a
day
Medium IU: Some variations but somewhat predictable
Example: Lemonade stand that also sells mint and strawberry flavors along with plain
lemomade. Little hard to predict which flavor will be a hit one day and a miss the other. We
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,need to have enough in stock to be able to meet variying customer demand but not too much
as to wasting resources.
High IU: Highly unpredictable
Example: A trendy Lemonade stand that sells with a lot of customisation (glitter, tiny paper
umbrella) and many new flavors (chia, mango) and introducing new flavors every month.
Now the uncertanity is high it is hard to predict what the customer will ask for, and react to
new flavors. Here we need to be prepared so we don’t run out of supplies, we need to keep in
stock even if it is expensive and be ready to cater for customer needs.
Efficient Supply Chain: Focuses on keeping costs low as possible while delivering products
that have predictable and stable demand
Example: Supermarkets like wallmart for salt, canned food, toilet paper
Responsive Supply Chain: Focuses on flexibility and speed to meet unpredictable or
changing customer demand
Example: New smart phone, Dell with customisable laptops
How supply chain share responsiveness
Supply chain I: Retailers absorbs most of the uncertanity
Example: The lemonade stand owner keeps a big stock of lemonade ready to serve
immediately, no matter what the customer orders. The lemon suppliers work on a predictable
schedule to provide bulk ingredients and batches.
Supply chain II: Manufacturers absorbs most of the uncertanity
Example: A highly customisable furniture store only keeps a few items on stock. The
business relies heavyly on manufacturers who customizes and delivers furniture rapidly to
meet customer needs.
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, Topic 2:
Supply chain drivers and metrics
Supply chain: all parties involved directly or indireclty in fullfilling customer requests
(retailers, manufacturers, suppliers, transporters)
Supply chain drivers: are the key factors and components that influence how a supply chain
operates. This include logistical drivers (Facility, Inventory, Transportation) and cross
functional drivers (Information, Sourcing, Pricing).
Supply chain metrics: are tools or measures used to evaluate the performance of these
drivers in acheving strategic and financial goals.
Dupont model is a framework that provides a financial prespective of a supply chain
ROA (Return on Assets): how effectively a company uses its assets to generate earning
ROA = Net profit margin % * Asset turnover
ROA Components
Sales: Imagine a company with a fast and reliable supply chain like Amazon. If they
always deliver on time and keep items in stock, more customers will buy their products,
increasing their sales
Direct material (raw material) and labor (wages) cost: If you sell a product for $100
and it cost $60 to make, your gross profit is $10. Net profit margin is after subtracting
taxes, interest, and other expenses tells you the actual profit. If it cost you $90 to make
something and you sell it for $100 your Net profit margin is (10/100)*100 = 10%.
Asset turnover: Current assets Things that can be quickly turned into cash
Fixed assets Long-term investments like buildingd and machinery
Asset turnover = sales / total assets
Example: A bakery has $100,000 assets and makes $200,000 in profits a year. So $200,000 /
$100,000 = 2. This means the bakery generates $2 in sales for every $1 of assets it owns.
How ROA is influenced by establishing a factory in Chain to replace transport from
Europe
A company transports products from Europe to China but decides to build a factory in
China.
- If savings from transportation and increased sales are greater that the new factory
costs ROA will improve. If it outweighs savings ROA will decrease.
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