A summary of the course 'Supply Chain Management' in Year 3, quarter 1 of the study programme 'International Business and Management Studies' at Avans Hogeschool.
With which departments or functons do the SC Operatons have
which key interactonss
Finance: budgetngg analysisg funds
MIS: what IT solutons to make it all work togethers
Human resources: skillsg training of employees
Marketng: what productsg volumesg costsg uualityg deliverys
Accountng: performance measurement systemsg planning
and control
Design: sustainabilityg uualityg manufacturability
Supply Chain Operatinn eference (SCO ) midel = a framework
developed and supported by the Supply Chain Council that seeks to provide standard descriptons of
the processesg relatonships and metrics that defne supply chain management
o Planning actvitesg which seek to balance demand reuuirements against resources and
communicate these plans to the various partcipants.
o Sourcing actvitesg which include identfyingg developingg and contractng with suppliers and
scheduling the delivery of incoming goods and services.
o “Make”g or producton actvites which cover the actual producton of a good or service.
o Delivery actvitesg
which include
everything from
entering customer
orders and
determining
delivery dates to
storing and moving
goods to their fnal
destnaton.
o Return actvitesg
which include the
actvites necessary to return and process defectve
or excess products or materials
A supply chain “encompasses all actvites associated with
the fow and transformaton of goods from the raw material
stage (extractonng through to the end userg as well as the
associated informaton fows.”
Why is SCM difcults
Due to its global nature and systemic impact on the
frm’s fnancial performanceg the supply chain
arguably faces more risk than other areas of the
company.
Risk is a fact of life for any supply chaing whether it’s dealing with uuality and safety
challengesg supply shortagesg legal issuesg security problemsg regulatory and environmental
complianceg weather and natural disastersg or terrorism. There’s always some element of
risk.
Companies with global supply chains face additonal risksg includingg but not limited tog
longer lead tmesg supply disruptons caused by global customsg foreign regulatons and port
congestong politcal and/or economic instability in a source countryg and changes in
economics such as exchange rates.
1
,SUPPLY CHAIN MANAGEMENT Q1
(DEMANDn UNCERTAINTY: Most supply chain chiefs don’t worry about what they knowg they
worry about what they don’t know!” (T.Carollg vp SC IBMn.
Complexity to (globallyn optmiie the SC
Forecastng
Lack of cohesion
Technology failures
Lack of strategic ft between supply chain strategy and compettve strategy
An integrated perspectve: Supply Chain
managers think with and for the business
and the functons
(departmentsn in the businessg and come
with solutons for the company as well as for
the customer…. cuboid watermelon
Strategies: "Strategy is the directon and
scope of an organiiaton over the long-term:
which
achieves advantage for the organiiaton
through its confguraton
of resources within a challenging
environmentg to meet the needs of markets
and
to fulfl stakeholder expectatons".
1. Generic strategies
a. Low cost
b. Differentaton
c. Focus
2. Business strategy: The strategy that identfes a frm’s targeted
customers and sets tme frames and performance objectves
for the business
a. Structural: ‘hard side of the organiiaton’
i. Facilites: Services/Manufacturingg
Warehousesg Distributon hubsg Siieg locatong
degree of specialiiaton
ii. Capacity: Amountg Typeg Timing
iii. Technology: services/Manufacturingg Material
handling euuipmentg Transportaton
euuipmentg Informaton systems
b. Infrastructural: ‘sof side of the organiiaton’
i. Organiiaton: Structureg Control/reward systemsg Workforce decisions
ii. Sourcing/Purchasing: Sourcing strategiesg Supplier selectong Supplier
performance measurement
iii. Planning and Control: Forecastngg Tactcal planningg Inventory managementg
Producton planning and control
iv. Business Processes and Quality Management: Six Sigmag Contnuous
improvementg Statstcal process control
v. Product and service development: The developmental processg
Organiiatonal and supplier roles
3. Functonal strategy: A strategy that translates a business strategy into specifc functonal
areas & Coordinaton
2
,SUPPLY CHAIN MANAGEMENT Q1
4. Core competences
Operatons and Supply Chain Strategies Indicates how the structural and infrastructural elementsg
within the operatons and supply chain areasg will be acuuired and developed to support the overall
business strategy. Questons to ask:
1. What mix of structural and infrastructural elements s
2. Is the mix aligned with the business strategys
o Internally neutral: management seeks only to minimiie any negatve potental in the
operatons and sc. No effort to link this to business strategy
o Externally neutral: benchmark with compettors and no effort to link this to business
strategy
o Internally supportve: operatons and SC partcipate in the strategic debate.
Structural and infrastructural elements must be aligned with the business strategy
o Externally supportve: operatons and SC do more than just support the business
strategy. The core competencies were found in operatons and SC
3. Does it support the
development of
core competenciess
How does a customer assess
the value of a product or
service..s!
Value is..“What you get”
VS “What it costs”
o Value analysis: A
process for
assessing the value
of a product or
service.
o Value Index - A
measure that uses
the performance
and importance
scores for various
dimensions of performance for an item or a service to
calculate a score that indicates the overall value of an item
or a service to a customer
Performance dimensions:
1. Quality
a. Performance Quality – The basic operatng
characteristcs of the product or service.
b. Conformance Quality – Was the product made or
the service performed to specifcatonss
c. Reliability Quality – Will a product work for a long tme without failings
2. Time
a. Delivery Speed - The ability for the operatons or supply chain functon to uuickly
fulfll a need once it has been identfed.
b. Delivery Reliability – The ability to deliver products or services when promised.
3. Flexibility
a. Mix Flexibility – The ability to produce a wide range of products or services.
3
, SUPPLY CHAIN MANAGEMENT Q1
b. Changeover Flexibility – The ability to produce a new product with minimal delay.
c. Volume Flexibility – The ability to produce whatever volume the customer needs.
4. Cost
a. Labor costs
b. Material costs
c. Engineering costs
d. Quality-related costs
Generally very difcult to excel at all four performance dimensions. Some common conficts:
Low cost versus high uuality
Low cost versus fexibility
Delivery reliability versus fexibility
Conformance uuality versus product fexibility
Order Winnern: A performance dimension that
differentates a company’s products and services
from its compettors.
Order Qualifern: A performance dimension on
which customers expect a minimum level of
performance to be considered
Measurements
Performance against
o Customer needs
o Business objectves or standards
Comparisons to compettors
Comparisons to “best in class”
Supply Management –The broad set of actvites carried out by organiiatons to analyie sourcing
opportunitesg develop sourcing strategiesg select suppliersg and carry out all the actvites reuuired to
procure goods and services.
Procurement means acuuiring goods and/or services from an outside source
Other terms include purchasing and outsourcing
Why is Supply Management critcal:
Global sourcing = Competton against global compettors and their supply chains
(Sustainabilityn Procurement is becoming critcal to a company's survival in today's
increasingly complex business world. Procurement is playing an important role in handling
such crucial business concerns as risk managementg complianceg and sustainability.
Financial Impact
Return On Assets
Proft Margin
Proft leverage effect
o Materials: high percentage (ofen 50%n of end product cost!
o For example: Food 60%g (note: fast food 31% + serviceng Automobile 67%g Petroleum 79%
Performance Impact: Purchased goods can have a major effect on other dimensions such as
uuality and delivery performance.
Why Outsources
To reduce both fxed and recurrent costs
To allow the client organiiaton to focus on its core business
4
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