STRATEGIC SUPPLY CHAIN MANAGEMENT PDF

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Strategic Supply Chain Management Pdf

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For many firms, using their supply chains as competitive weapons has become a central element of the strategic management process in recent. The strategic supply chain processes that management has to decide will cover the breadth of the supply chain, including product development. Doing business and investing in China Supply chain strategies . This can be combined with tools such as the Supply Chain Management Council's.

It may be helpful to think of the participants as the divisions of a large, vertically integrated corporation, although the independent companies in the chain are bound together only by trust, shared objectives, and contracts entered into on a voluntary basis.

Unlike captive suppliers divisions of a large corporation that typically serve primarily the parent corporation , independent suppliers are often faced with the conflicting demands of multiple customers.

The technological and investment problems faced by SMEs in attempting to deal with these conflicting demands are discussed in Chapter 9. All supply chains are integrated to some extent. One objective of increasing integration is focusing and coordinating the relevant resources of each participant on the needs of the supply chain to optimize the overall performance of the chain. The integration process requires the disciplined application of management skills, processes, and technologies to couple key functions and capabilities of the chain and take advantage of the available business opportunities.

Goals typically include higher profits and reduced risks for all participants.

Traditional unmanaged or minimally managed supply chains are characterized by 1 adversarial relationships between customers and suppliers, including win-lose negotiations; 2 little regard for sharing benefits and risks; 3 short-term focus, with little concern for mutual long-term success; 4 primary emphasis on cost and delivery, with little concern for added value; 5 limited communications; and 6 little interaction between the OEM and suppliers more than one or two tiers away.

Integrated supply chains tend to recognize that all parties should benefit from the relationship on a sustainable, long-term basis and are characterized by partnerships with extensive and open communications.

A well integrated system of independent participants can be visualized as a flock of redwing black birds flying over a marsh. Without any apparent signal, every bird in the flock climbs, dives, or turns at virtually the same instant. That is an integrated system! Supply chain members, in a similar manner, must react coherently to changes in the business environment to remain competitive.

Supply chain integration is a continuous process that can be optimized only when OEMs, customers, and suppliers work together to improve their relationships and when all participants are aware of key activities at all levels in the chain.

Forces Driving Increased Integration The following worldwide trends and forces are driving supply chains toward increased integration: Increased cost competitiveness. Having substantially improved the efficiencies of internal operations, OEMs are seeking further cost reductions by improving efficiency and synergy within their supply chains.

Shorter product life cycles. The Model-T Ford, for example, was competitive for many years. A personal computer PC is state of the art for less than a year, and the trend toward shorter product life cycles continues.

Faster product development cycles. Companies must reduce the development cycle times of their products to remain competitive. Early introduction of a new product is often rewarded with a large market share and sufficient unit volumes to drive costs down rapidly.

Globalization and customization of product offerings. Customers the world over can increasingly afford and are demanding a greater variety of products that address their specific needs. Mass customization has become the new marketing mantra. Higher overall quality. Increasing customer affluence and tougher competition to supply their needs have led to demands for higher overall quality.

These increased demands on OEMs for improvements in product design, manufacturing, cost, distribution, and support are being imposed, in turn, on their supply chains.

Case Study: Dell Computer and Fujitsu America Dell Computer Corporation's success in the past few years and its growth relative to the rest of the PC industry made daily headlines throughout the s. Based on the premise that bypassing resellers, building products to order, and reducing inventories would result in a lower cost, more responsive business, Dell has grown into one of the Page 29 Share Cite Suggested Citation:"3 Supply Chain Integration. Nevertheless, it is squeezed into such a narrow business niche that, from some perspectives, its very survival seems tenuous.

In many situations, this can be accomplished by carefully writing incentives into contracts. Collaborative forecasting with suppliers and customers can also help build alignment. Taking the time to sit together with participants in the supply chain to agree on anticipated business levels permits shared understanding and rapid information transfers between parties.

This is particularly valuable when customer demand is uncertain, such as in the retail industry. For example, Raytheon, one of the defense industry firms, utilizes financial incentives to help create alignment among the members of its supply chains.

Strategic Supply Chain Management

When partners' practices and decisions save Raytheon money while still maintaining quality, the firm splits the savings evenly with the partners. Through this incentive-based system, supply chain participants' financial outcomes are tied together in terms of both upside and downside risk. Typical supply chains use logistics as an extended transportation mechanism, while best value chains integrate logistics as a strategic mechanism at the level of corporate strategy.

Specifically, best value chains go beyond traditional logistics requirements by stressing a holistic logistical value proposition, emphasizing the value of positioning inventory, and developing a flexible chain structure. The logistical value proposition involves finding the ideal balance of speed, quality, cost, and flexibility.

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A well-designed logistical effort in best value chains stresses high customer impact, consistent performance, and optimal inventory management. Minimization of any one element, such as flexibility, should not be a goal of a best value supply chain.

Rather, executives should realize that the optimal performance along each of the four priorities should be pursued relative to the value delivered to the customer. The number, size, and geographical network of facilities used for logistical operations affects the four competitive priorities. Accordingly, positioning inventory to achieve the desired time, place, and possession benefits at the lowest practical cost is a key feature of best value supply chains.

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This means that for a supply chain to realize maximum strategic value from logistics, all critical operations must be integrated i. Management chose to do a strategic supply-chain planning exercise to assist decision making. The Planning Spectrum Strategic supply-chain planning falls in the middle of a decision-making spectrum that has business-strategy formulation at one end and tactical supply-chain planning at the other.

Used in this strategic context, the tools help determine what would be an appropriate supply-chain configuration for sourcing and which plants or distribution centers should be closed or kept open.

Strategic Supply-Chain Planning and the Planning Spectrum View Exhibit Strategic Supply-Chain Planning and the Planning Spectrum Strategic supply-chain planning falls in the middle of a decision-making spectrum that has business strategy formulation at one end and tactical supply-chain planning at the other. In contrast, tactical supply-chain planning is short- or medium-term in scope and impact, with supply-chain planners using past demand to make forecasts for the near term and adjusting these forecasts on the basis of market intelligence or planned promotions.

Used in this context, optimization models and APS technology help determine where and when to produce what items and how to distribute them. Planning Processes and Optimization Although business-strategy formulation also uses tools and frameworks, it requires much more creativity than tactical planning.

The optimum route to maximizing shareholder value is rarely obvious. It takes creative thinking and freewheeling negotiations to identify, understand and agree upon possible actions. For tactical supply-chain planning, the decision options and the factors affecting them production capacity, distribution capacity, variable costs, demand forecast are clearly defined. The goal of minimizing total supply-chain costs — for manufacturing, storage and handling, and transportation — is narrower.

Because tactical planners can identify beforehand possible decisions and factors that might affect these decisions — and can build those elements into the software — they can use optimization models that rely on mathematical techniques. The models make recommendations that both minimize costs and help companies meet forecasted demand without exceeding production and distribution capacity.

Advanced planning-and-scheduling technologies are available from several companies. But strategic supply-chain planning can benefit from appropriately used optimization models because tactical supply-chain models can be extended to include strategic decisions about closing or opening plants and distribution centers.

APS vendors offer software for that purpose. The factors rarely change — production capacity, distribution capacity and variable costs. The goal of minimizing cost is extended to include the fixed costs of keeping plants and distribution centers open and the one-time costs of opening new ones and closing existing ones. These more strategic computer models can then guide decision making.

Optimization models for tactical supply-chain planning and models for strategic supply-chain planning differ only slightly in their design, but markedly in their use.

Case Study - Strategic Supply Chain Management.pdf

At General Motors Corp. Creating benchmarks in this way is unique to optimization models using linear programming, a method using advanced mathematics to capture all the constraints, such as capacity, and to find the best possible recommendations that would minimize the total operating cost or some other stated objective. Such models guarantee the lowest possible supply-chain cost.

Spreadsheet calculations or simulation models cannot provide that sort of benchmarking capability.

In another case, a personal-computer manufacturer made successful strategic use of an optimization model for its global manufacturing and distribution network.

DEC probably lengthened its life by using supply-chain models to decrease costs. Thus supply-chain management has evolved from a function garnering little attention or prestige to a highly visible and respected one. DEC likely relied too much on supply-chain planners.

And after Nike Inc. Moreover, because management education is focusing less on analytical strategic planning and operations research, M.

Only through a seamless process that encompasses those who are developing strategy and those who are using detailed supply-chain models can companies align their business strategy and their supply chain. Building scenarios is more art than science. The creative input needed from managers differs too much from one company to another for experts to offer more than guidelines.

The only constraint is plausibility. Three Approaches to Scenario Planning Three Approaches to Scenario Planning The idea of strategic supply-chain planning draws mainly on three scenario-planning techniques.Supply chain management attempts to combine the best of both worlds, the scale and coordination of large companies with the low costs, flexibility, and creativity of small companies. Rating them along important dimensions is one possible solution.

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Customers the world over can increasingly afford and are demanding a greater variety of products that address their specific needs.

Macdonald and D. Thus, a high premium has been placed on speed and process efficiency, blurring the traditional boundaries between supplier, manufacturer, and customer. Potential threats, including storms, power outages, terrorism, computer hackers, disruptions in communications, and equipment breakdowns, can be very difficult to predict and costly to prepare for. Jump to Page. As environmental issues influence corporate policy to a greater extent, this may influence strategic supply chain decisions with regards to manufacturing.

Therefore, best value supply chains differ from typical supply chains in how they approach three issues closely tied to strategic supply chain management: agility, adaptability, and alignment.

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