Description
The presentation hghlights about supply chain in detail and also links it to various products. It talks about the supply chain - product matrix on how to select Supply chain.
Right Supply Chain for A Product
Need for Right Supply Chain
?
?
Poor Coordination among Supply Chain partners – Annual wastage of $30 billion Supply Chains suffer from:
? ?
Excess of some products Wastage of others
?
Reasons
? ?
Inability to predict demand Managers lack a framework for decision on Right Supply Chain
?
Result – Inefficient Supply chain
Functional Vs Innovative Products
Functional Products
Demand Product Life cycle Contribution Margin Product Variety Stable and Predictable demand Long life cycles (> 2 years) 5% - 20% Low (10 to 20 variants per category)
Innovative Products
Volatile and unpredictable Relatively Short Life cycles (3 months to 1 year) 20% - 60% High (Millions of variants per category) 10% - 40% Low (1 day - 2 weeks) 10% 40% - 100%
Average Stock out rate 1% - 2% Lead time High (6 months - 12 months)
Average Error margin
Profit Margins Low
High
Innovation in Products
?
Companies introduce innovation
?
Customers an additional reason to buy
?
Ben & Jerry, Mrs. Coffee and Starbucks Coffee
?
Designed flavors and innovative concepts in functional category of food
?
Century Products – Manufacturer of Children’s car seats
? ?
Children’s car seats as Functional Products till 1990’s Smart Move – New Innovative seat with wide variety of brightly colored fabrics
Supply Chain Functions
?
Physical Function
Conversion of Raw Materials into parts, Components and Finished Goods ? Transportation of goods from one point to another
?
?
Market Media Function
?
Ensuring Supply matches Demand
Costs in Supply Chain
?
Physical Costs – Production, Transportation and
Storage Costs
?
Market Mediation Costs
?
?
Supply > Demand – Product marked down and sold at a loss Demand > Supply – Lost sales opportunities and Dissatisfied customers
? ?
Functional Products – Physical costs Innovative Products – Market Mediation costs
Physically Efficient Vs Market Responsive Supply Chains
Physically efficient
Primary Supply predictable demand purpos at the lowest possible e cost Manufactu ring Maintain high average focus utilisation rate Inventory Strateg Generate high turns and y minimize inventory Lead time focus Suppliers Shorten lead time as long as it does'nt increase cost Cost and Quality
Market Responsive
respond quickly to unpredictable demand in order to minimize stockouts
Deploy excess buffer capacity Deploy significant buffer stocks of parts/finished goods Invest aggressively to reduce lead time Speed, Flexibility and Quality
Devising Ideal Supply Chain strategy
? ? ?
Determine the nature of their products Determine their Supply Chain priorities Employ Supply Chain – product Matrix
Supply Chain – Product Matrix
? ?
Functional Products – Efficient process Innovative Products – Responsive process
Trapped in Upper Right Hand Cell
?Innovation
?Too
spree due to:
Many competitors ?Yearning to higher profit margins
?Blind
Blending
Automobile – Hourglass Analogy
?
At the one extreme manufacturer is offering 20 million models
At the other extreme there are infinite number of customer with as many preferences
?
?
Above two facts present large demand & supply but at the middle dealers are playing as spoilsport
Exception Everywhere Computers
?
Try to imagine computer industry 20 years back
?
It was perceived as a magical instrument Waiting time can be of more than one year
?
IBM comes up with mainframe-360
?
Reason: Market is most powerful force Can you imagine this today???
Theoretically speaking: ? Either make your product functional Or make your supply chain responsive
?
?
Getting out of Upper Right Hand Cell
Choose option one when product gives low margin, comes in variety but has only some minor changes here and there. Go for option two when product is highly innovative & promising. Make less promising products as functional. Ex-automobiles
?
Handling supply of Functional products
?
?
Cost cutting has become over exploited tool Now it is all about better coordination along the supply chain enabled by electronic networks.
? ? ? ?
Campbell adopting EDI links Retailers coming together in forecasting Less Inventory & lead time Price promotions- Are they to be blamed??
Responsive supply of Innovative products
?
Expect and Accept Inherent demand fluctuations & uncertainty Three step solution:
? ? ?
?
Reduce- find new data sources Avoid- cut lead time, more flexible partners Hedge- excess inventory or capacity
National Cycles
?
Operating in Japan in functional product High technical expertise, skilled labor, big brand name and large dealer network of 9000 dealers Hit by Taiwan & Korea on price point
?
?
National Cycles gone Innovative
?
Leveraging the strengths- Moving to high end sport bicycles Aiming at creating highly responsive supply chain while avoiding overproduction Process to order- millions of new designs on the cost of just two weeks
?
?
Mass Customization
?
Customize a large volume of products and deliver them at close to mass production prices Classical example: Dell
Driver: affluent people Challenges: lean period, expertise, automation
?
?
?
Thank You
doc_563459385.ppt
The presentation hghlights about supply chain in detail and also links it to various products. It talks about the supply chain - product matrix on how to select Supply chain.
Right Supply Chain for A Product
Need for Right Supply Chain
?
?
Poor Coordination among Supply Chain partners – Annual wastage of $30 billion Supply Chains suffer from:
? ?
Excess of some products Wastage of others
?
Reasons
? ?
Inability to predict demand Managers lack a framework for decision on Right Supply Chain
?
Result – Inefficient Supply chain
Functional Vs Innovative Products
Functional Products
Demand Product Life cycle Contribution Margin Product Variety Stable and Predictable demand Long life cycles (> 2 years) 5% - 20% Low (10 to 20 variants per category)
Innovative Products
Volatile and unpredictable Relatively Short Life cycles (3 months to 1 year) 20% - 60% High (Millions of variants per category) 10% - 40% Low (1 day - 2 weeks) 10% 40% - 100%
Average Stock out rate 1% - 2% Lead time High (6 months - 12 months)
Average Error margin
Profit Margins Low
High
Innovation in Products
?
Companies introduce innovation
?
Customers an additional reason to buy
?
Ben & Jerry, Mrs. Coffee and Starbucks Coffee
?
Designed flavors and innovative concepts in functional category of food
?
Century Products – Manufacturer of Children’s car seats
? ?
Children’s car seats as Functional Products till 1990’s Smart Move – New Innovative seat with wide variety of brightly colored fabrics
Supply Chain Functions
?
Physical Function
Conversion of Raw Materials into parts, Components and Finished Goods ? Transportation of goods from one point to another
?
?
Market Media Function
?
Ensuring Supply matches Demand
Costs in Supply Chain
?
Physical Costs – Production, Transportation and
Storage Costs
?
Market Mediation Costs
?
?
Supply > Demand – Product marked down and sold at a loss Demand > Supply – Lost sales opportunities and Dissatisfied customers
? ?
Functional Products – Physical costs Innovative Products – Market Mediation costs
Physically Efficient Vs Market Responsive Supply Chains
Physically efficient
Primary Supply predictable demand purpos at the lowest possible e cost Manufactu ring Maintain high average focus utilisation rate Inventory Strateg Generate high turns and y minimize inventory Lead time focus Suppliers Shorten lead time as long as it does'nt increase cost Cost and Quality
Market Responsive
respond quickly to unpredictable demand in order to minimize stockouts
Deploy excess buffer capacity Deploy significant buffer stocks of parts/finished goods Invest aggressively to reduce lead time Speed, Flexibility and Quality
Devising Ideal Supply Chain strategy
? ? ?
Determine the nature of their products Determine their Supply Chain priorities Employ Supply Chain – product Matrix
Supply Chain – Product Matrix
? ?
Functional Products – Efficient process Innovative Products – Responsive process
Trapped in Upper Right Hand Cell
?Innovation
?Too
spree due to:
Many competitors ?Yearning to higher profit margins
?Blind
Blending
Automobile – Hourglass Analogy
?
At the one extreme manufacturer is offering 20 million models
At the other extreme there are infinite number of customer with as many preferences
?
?
Above two facts present large demand & supply but at the middle dealers are playing as spoilsport
Exception Everywhere Computers
?
Try to imagine computer industry 20 years back
?
It was perceived as a magical instrument Waiting time can be of more than one year
?
IBM comes up with mainframe-360
?
Reason: Market is most powerful force Can you imagine this today???
Theoretically speaking: ? Either make your product functional Or make your supply chain responsive
?
?
Getting out of Upper Right Hand Cell
Choose option one when product gives low margin, comes in variety but has only some minor changes here and there. Go for option two when product is highly innovative & promising. Make less promising products as functional. Ex-automobiles
?
Handling supply of Functional products
?
?
Cost cutting has become over exploited tool Now it is all about better coordination along the supply chain enabled by electronic networks.
? ? ? ?
Campbell adopting EDI links Retailers coming together in forecasting Less Inventory & lead time Price promotions- Are they to be blamed??
Responsive supply of Innovative products
?
Expect and Accept Inherent demand fluctuations & uncertainty Three step solution:
? ? ?
?
Reduce- find new data sources Avoid- cut lead time, more flexible partners Hedge- excess inventory or capacity
National Cycles
?
Operating in Japan in functional product High technical expertise, skilled labor, big brand name and large dealer network of 9000 dealers Hit by Taiwan & Korea on price point
?
?
National Cycles gone Innovative
?
Leveraging the strengths- Moving to high end sport bicycles Aiming at creating highly responsive supply chain while avoiding overproduction Process to order- millions of new designs on the cost of just two weeks
?
?
Mass Customization
?
Customize a large volume of products and deliver them at close to mass production prices Classical example: Dell
Driver: affluent people Challenges: lean period, expertise, automation
?
?
?
Thank You
doc_563459385.ppt