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Strategic Supply Policy and Supply Chain Management
Business Impact of Supply Chain Dynamics
Dr Rachel Mason-Jones
Agenda
Defining True supply chain performance
Supply Chain Drivers
Improving the supply chain performance
Re-cap: The Bullwhip Effect in action
The Bullwhip EffectResults from playing the Beergame, Taken from Sterman, 1992
Hence matching supply and demand (purchasing and sales, internally and externally) is a key supply chain management philosophy
Previously we stated:-
Ensuring a good end consumer base is paramount to survival – however far upstream you are
You are only as good as the weakest link in your chain
Understanding and controlling the dynamics of a supply chain enables true supply chain performance improvements (not just passing the problem upstream – invariably to an SME!)
Defining TRUE Supply Chain performance
True supply chain performance (especially if you are serious about SCM) requires you to take a holistic approach –
i.e. what is the performance of the WHOLE pipeline in comparison to the end consumer demand
Defining TRUE Supply Chain performance
Many ‘improvements’ made in isolation by companies tend not to change the competitive advantage of a chain due to the fact it does not impact the total supply chain performance
If you’ve reduced your stock levels but haven’t changed the supply chain pipeline correctly you may just have moved the stock back to your supplier base! Therefore NO change to the SC performance
Only by understanding and measuring the total SC performance can you go about improving it.
Only by understanding and measuring the total SC performance can you go about improving it.
Time:-
Speed of response to customer
Need to concentrate on the value adding activities
Improved linkage between supply chain members
Stock Levels:-
Improve stock turns
Analysis of stock available in the supply chain
Bring levels down while preserving customer service level
Information:-
Improve and smooth the flow
Reduce magnification
Speed up flow
Transfer information not data
The need to match supply and demand has two main facets – internal and external
Internal – inside the 4 walls
Optimise processes and minimise waste - utilising the nirvana target of one widget sold by sales = one set of components bought by purchasing to produce replacement
External – inter-company connections
Utilising strategic relationships with customers and suppliers to optimise demand forecasting
Both Pipelines are Necessary
To impact the supply chain performance both information and material pipelines need to be optimised.
There is little benefit to the customer if you manage to shave a second off your production cycle time if your order cycle time is 3 weeks!!
Information transference and the supply chainReducing information magnification (the Bullwhip) will impact positively on supply chain performance
The goal therefore should be to improve visibility upstream of what the end consumer is actually buying
How to reduce Information Magnification
Upstream members of the supply chain need to have a view of the end consumer buying pattern and develop strategic decision functions that enable them to utilize the information source. This enables them to reduce the effect of information magnification
How to reduce Information Magnification
Upstream members of the supply chain need to have a view of the end consumer buying pattern and develop strategic decision functions that enable them to utilize the information source. This enables them to reduce the effect of information magnification
Improving Supply Chain PerformanceStalk and Hout suggest ‘product champion's’ work with their suppliers simultaneously on the following
· Firstly, they work to provide each company in the chain with better and more timely information about orders, new products and special needs. (Share information)
· Secondly, they help members of the chain, including themselves, to shorten work cycles by removing the obstacles to time compression that one company often unwittingly imposes on another (Reduce time by removing non value adding activities)
Thirdly, they synchronise lead times and capacities among the levels or among tiers of the supply chain so that more work can flow in a coordinated fashion up and down the chain. (SCM – smoothing the flows in the pipelines)
“Companies are faced with the prospect of incurring double or even triple costs in order to build up inventories to support marginal increases in customer service, but at the same time more intensive competition in slow growth markets, combined with the rising costs of other production and supply factors, means that many firms can’t afford not to supply a level of service that results in a competitive advantage.”
Houlihan, 1985:22
A key element has therefore been the exploitation of supply chain principles to deliver better customer service….
To ensure customer service do I…
Hold more stock or
Buy in more capacity?
The answer – SCM work together to reduce the Bullwhip thereby enabling you to reduce capacity and stock!!!
Lean has received a lot of press but it doesn’t answer the needs of all supply chain performance issues
What if you need excess capacity (a lean waste) at times due to the fact you have a volatile market – say a ski wear company – Then maybe you should be agile
Strategic decisions need to be based on MoPs relevant to your supply chain and marketplace – ONE DOES NOT FIT ALL
Many companies are finding they are having to address SCM due to the pressures of their Marketplace:-
“Hypercompetition” - structural changes such as:-
globalisation
technological innovation
Mergers & acquisitions are making larger more powerful competitors
Internal materials management
(Tan) The management of suppliers - operationally-focused e.g. JIT, VMI etc..
The management of suppliers - strategically focused e.g. ‘partnerships’, value-add (innovation, learning, knowledge)
(Christopher) Relationships from ultimate supplier to ultimate customers e.g. ‘lean supply’
(Guinipero & Brand) SCM as management tool.
(Cooper & Ellram) SCM as (integrative) philosophy.
Or……..
Supply chain management is a fundamental approach to organisational strategy
It’s about harnessing the assets/resources, expertise, specialisation, and capability from the supply chain
http://www.ukassignment.org/scyxgl/2012/0329/19375.htmlA key competence must therefore be the effective management of the supply chain - managing supplier relationships
Over to you
What do you consider to be your key supply chain driver (s)
What Measures of Performance do you feel would be crucial
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