Professional Documents
Culture Documents
(CUSCM208)
Supply chain management and
Company strategy
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Outline
Learning Objectives
Introduction
Supply Chain Management objectives
Supply Chain strategy and decision levels
Difficulties in managing Supply Chains
Global optimization
Developing supply chain strategy
Discussion questions
Conclusion
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Learning objectives
Explain the importance of supply chain
strategy
Establish the objectives and decision
levels of Supply chain management
Identify challenges in managing supply
chains
Describe the steps involved in the
development of Supply Chain strategy
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Introduction
Supply Chain Management: a set of approaches utilized to
efficiently integrate suppliers, manufacturers, distributors
and retailers in order to produce goods whilst minimizing
system wide costs and attaining customer satisfaction -
Simchi-Levi, Kamsinky and Simchi-Levi (2009)
Strategy moves that a company makes to achieve a
sustained competitive advantage
Supply Chain Strategy: defines how a supply chain should
operate in order to compete.
Constitutes the actual operations of organizations and
the extended supply chain in order to meet specific
supply chain objectives
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Introduction
Business strategy: involves leveraging the core competencies of
the organisation to achieve a defined goal or objective.
Business strategic questions; what to offer, when to offer, where
to offer. (Happek, (2005))
Importance of Supply Chain Strategies
Operationalises and support business strategy
Focuses on reducing operational costs and maximizing
efficiencies
Establishes how organizations work with supply chain partners
Results in value creation if well executed
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Supply Chain Management Objective
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Supply Chain Strategies and decision
levels in SCM
Strategic Level
Product design
Make/ buy decisions
Supplier selection
Strategic partnering
Number, location and capacity of warehouses and
manufacturing plants
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Supply Chain Strategies and
decision levels in SCM
Tactical level
Sourcing contracts and other purchasing
decisions.
Production decisions, including contracting,
scheduling, and planning process definition.
Inventory decisions, including quantity,
location, and quality of inventory.
Transportation strategy, including frequency,
routes, and contracting.
Focus on customer demand and Habits or
preferences
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Supply Chain Strategies and decision
levels in SCM
Operational Level strategies
Scheduling
Lead time quotations
Routing
Truck loading etc
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Difficulties in managing a Supply
Chain
Supply chain strategies cannot be determined in
isolation – they are affected by other chains that
organisations have
It’s a challenge to design and operate a supply chain
so that system wide costs are minimized and
system wide service levels are maintained (global
optimization)
Designing Supply Chains to eliminate as much
uncertainty and risk as possible
◦ Customer demand can never be forecasted ,exactly,
transportation is uncertain, machines break down.
Outsourcing / off shoring increase levels of risk
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Global optimization
The process of finding the best system-wide
strategy in supply chain management
Challenges in global optimization:
The complexity of the supply chain network;
facilities dispersed over a large geography
Different facilities(companies
/organusations)frequently have different,
conflicting objectives.
Suppliers want manufacturers to commit to large
quantities in stable volumes, manufacturers need
to be flexible to their customers
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Global optimization
◦ The supply chain is a dynamic system that
evolves over time
Customer demand and supplier capabilities change
over time
Supply chain relationships evolve over time
◦ System variations over time are important
variations
Impact of seasonal fluctuations, trends, competitor
pricing activities, etc
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How Supply Chain Decisions
Impact Strategy
Low-Cost Response Differentiation
Strategy Strategy Strategy
Supplier’s Supply demand Respond quickly Share market
goal at lowest to changing research;
possible cost requirements jointly develop
(e.g., Emerson and demand to products and
Electric, Taco minimize options (e.g.,
Bell) stockouts (e.g., Benetton)
Dell Computers)
Primary Select primarily Select primarily Select primarily
selection for cost for capacity, for product
criteria speed, and development
flexibility skills
Table 11.1
How Supply Chain Decisions
Impact Strategy
Low-Cost Response Differentiation
Strategy Strategy Strategy
Process Maintain high Invest in excess Modular
charact- average capacity and processes that
eristics utilization flexible lend
processes themselves to
mass
customization
Inventory Minimize Develop Minimize
charact- inventory responsive inventory in the
eristics throughout the system with chain to avoid
chain to hold buffer stocks obsolescence
down cost positioned to
ensure supply
Table 11.1
How Supply Chain Decisions
Impact Strategy
Low-Cost Response Differentiation
Strategy Strategy Strategy
Lead-time Shorten lead Invest Invest
charact- time as long as aggressively to aggressively to
eristics it does not reduce reduce
increase costs production lead development
time lead time
Product- Maximize Use product Use modular
design performance designs that design to
charact- and minimize lead to low postpone
eristics costs setup time and product
rapid differentiation
production as long as
ramp-up possible
Table 11.1
Developing a supply chain Strategy
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Discussion
Discuss the PESTEL Factors affecting the
development of a supply chain strategy
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Continued....
Pestel Analysis (Macro environment)
Political factors
Taxation Policy
Trade regulations
Governmental stability
Unemployment Policy etc.
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Continued....
Economical factors
Inflation rate
Growth in spending power
Rate of people in a pensionable age
Recession or Boom
Customer liquidations
Socio-cultural
age distribution.
education levels.
income level.
consumerism.
diet & nutrition.
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Continued....
Environmental factors
competitive advantage
Waste disposal
Energy consumption
Pollution monitoring etc.
Legal factors
Unemployment law
Health and safety
Product safety
Advertising regulations
Product labeling
labor laws
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Discussion questions:
Consider the supply chain for a domestic
automobile.
◦ What are the components of the supply chain
for the automobile?
◦ What are the different firms involved in the
supply chain?
◦ What are the objectives of these firms?
◦ What risks would this supply chain face?
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Conclusion
Supply chain strategy is an enabler of
business strategy
The objectives of SC strategy is to be
efficient and cost effective through the
entire SC system
Due to its complex nature, SC
management faces a number of challenges
SC managers need to understand how
they can develop SC strategies
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References
Happeck, S., (2005). Supply Chain Strategy: The importance of aligning
your strategies. UPS Supply Chain Solutions www.ups-
scs.com/solutions/white_papers/wp_supply_chain.pdf
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E., (2009). Designing and
Managing the Supply Chain. Mcgraw Hill, Boston
http://pascalrenet.com/2010/09/align-and-develop-your-supply-chain-
strategy/
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