Description
the customer and supply chain uncertainty, impact of different customer needs on implied demand uncertainty. What is the strategic fit in supply chain and what is its scope.
Supply Chain Performance: Achieving Strategic Fit and Scope
1
GLOBAL
STRATEGIC FIT BETWEEN COMPANY STRATEGY AND SUPPLY CHAIN STRATEGY
• Strategic fit means both the company and supply chain strategies (in fact all functional strategies) have the same goal. • Disconnect between the overall strategy and Supply chain strategy may lead to the failure of the business. ?The overall strategy and all functional strategies must fit together. ?The different functions in a company must appropriately structure their processes
and resources to be able to execute these strategies successfully.
2 2
GLOBAL
STEPS TO ACHIEVE STRATEGIC FIT
• Understanding the customer and supply chain uncertainty
• Understanding the supply chain capabilities
• Achieving strategic fit
3 3
GLOBAL
UNDERSTANDING THE CUSTOMER AND SUPPLY CHAIN UNCERTAINTY
• A company must understand the customer needs for each targeted segment and
uncertainty the supply chain faces in satisfying these needs.
? Ex: Customer expectations very between a convenience store and a hypermarket. • In general, customer demand from different segments may vary as below: ? Lot Size: ?Response time that the customers willing to tolerate ?Variety of Products ?Price
?Desired Rate of Innovation in the product
4 4
GLOBAL
IMPLIED DEMAND UNCERTAINTY
• Overall demand uncertainty reflects the uncertainty of customer demand for a product.
• Implied demand uncertainty is the uncertainty that exists due to the portion of demand
that supply chain required to meet. ?Example: Consider 2 companies manufacturing the same product. There are two market segments – one for normal production and the other for after market segment (after sales service). Assuming the customer demand for both the segment is 1 lac units per year, where would be the higher uncertainty of fulfilling the customer demand?
• Increased implied demand uncertainty leads to increased difficulty matching supply
with demand. For a given product, this dynamism can lead to either a high stock-out or an oversupply situation.
5 5
GLOBAL
IMPLIED DEMAND UNCERTAINTY SPECTRUM
Moderately UnPredictable /Predictable Supply and Demand
Highly Predictable Supply and Demand
Highly UnPredictable Supply and Demand
Groceries in a Supermarket
An existing automobile
A new communication device
6 6
GLOBAL
IMPACT OF DIFFERENT CUSTOMER NEEDS ON IMPLIED DEMAND UNCERTAINTY
Customer Need Increased Variety Less Lead Time Impact on Implied Demand Uncertainty Increase, because a wider range implies greater variance in demand Increase because there is less time in which to react to orders
High Innovation
High Service Level
Increase because new products tend to have more uncertain demand
Increase because the margin of error is low.
7 7
GLOBAL
CORRELATION BETWEEN IMPLIED DEMAND UNCERTAINTY AND OTHER ATTRIBUTES
Attribute Low Implied Uncertainty Low 10% 1 to 2% High implied uncertainty
Product Margin Average Forecast error Average stock-out rate
High 40% to 100% 10% to 40%
Average forced end season Negligible markdown
10 to 25%
8 8
GLOBAL
UNDERSTANDING THE SUPPLY CHAIN
• Every Supply Chain can be mapped on to the responsive and efficiency spectrum.
?Highly responsive supply chains will have the capability to:
? Respond to wide ranges of quantities demanded. ? Meet short lead-times ?Handle a large variety of products ? Build highly innovative products ? Meet a very high service level ?Handle Supply uncertainty
?Typically, given other things constant, highly responsive supply chains will have
high cost. ?Highly efficient supply chains will operate on lower cost but will be less responsive ?Responsiveness and Efficiency are inversely related.
9 9
GLOBAL
RESPONSIVENESS SPECTRUM
Highly efficient
Highly responsive
Integrated Steel Mills: Production scheduled weeks or months in advance with little variety or flexibility
10 10
Dell: Custom made PCs and servers in a few days
GLOBAL
ACHIEVING STRATEGIC FIT
• The final step in achieving strategic fit is to math supply chain responsiveness with the implied uncertainty.
Responsive Supply Chain
Responsiveness Spectrum Supply Chain
Efficient Supply Chain Low Implied Uncertainty
11 11
Implied Uncertainty Spectrum
High Implied Uncertainty
GLOBAL
SCOPE OF STRATEGIC FIT
• Scope of Strategic Fit could be:
? Intra Company Intra-operation Scope
? Intra Company Intra-functional Scope ?Intra Company Inter-functional Scope ?Inter-company Inter-functional Scope
12 12
GLOBAL
INTRACOMPANY INTRAOPERATION SCOPE : THE MINIMIZE LOCAL COST VIEW
Supplier Manufacturer Distributor Retailer Customer
Competitive Strategy Product Development Strategy Supply Chain Strategy Marketing Strategy
13 13
GLOBAL
INTRACOMPANY INTRAFUNCTION SCOPE : THE MINIMIZE FUNCTIONAL COST VIEW
Supplier Manufacturer Distributor Retailer Customer
Competitive Strategy Product Development Strategy Supply Chain Strategy Marketing Strategy
14 14
GLOBAL
INTRACOMPANY INTERFUNCTION SCOPE : THE MAXIMIZE COMPANY PROFIT VIEW
Supplier Manufacturer Distributor Retailer Customer
Competitive Strategy Product Development Strategy Supply Chain Strategy Marketing Strategy
15 15
GLOBAL
INTERCOMPANY INTERFUNCTION SCOPE : THE MAXIMIZE SUPPLY CHAIN SURPLUS
Supplier Manufacturer Distributor Retailer Customer
Competitive Strategy Product Development Strategy Supply Chain Strategy Marketing Strategy
16 16
doc_658074824.pptx
the customer and supply chain uncertainty, impact of different customer needs on implied demand uncertainty. What is the strategic fit in supply chain and what is its scope.
Supply Chain Performance: Achieving Strategic Fit and Scope
1
GLOBAL
STRATEGIC FIT BETWEEN COMPANY STRATEGY AND SUPPLY CHAIN STRATEGY
• Strategic fit means both the company and supply chain strategies (in fact all functional strategies) have the same goal. • Disconnect between the overall strategy and Supply chain strategy may lead to the failure of the business. ?The overall strategy and all functional strategies must fit together. ?The different functions in a company must appropriately structure their processes
and resources to be able to execute these strategies successfully.
2 2
GLOBAL
STEPS TO ACHIEVE STRATEGIC FIT
• Understanding the customer and supply chain uncertainty
• Understanding the supply chain capabilities
• Achieving strategic fit
3 3
GLOBAL
UNDERSTANDING THE CUSTOMER AND SUPPLY CHAIN UNCERTAINTY
• A company must understand the customer needs for each targeted segment and
uncertainty the supply chain faces in satisfying these needs.
? Ex: Customer expectations very between a convenience store and a hypermarket. • In general, customer demand from different segments may vary as below: ? Lot Size: ?Response time that the customers willing to tolerate ?Variety of Products ?Price
?Desired Rate of Innovation in the product
4 4
GLOBAL
IMPLIED DEMAND UNCERTAINTY
• Overall demand uncertainty reflects the uncertainty of customer demand for a product.
• Implied demand uncertainty is the uncertainty that exists due to the portion of demand
that supply chain required to meet. ?Example: Consider 2 companies manufacturing the same product. There are two market segments – one for normal production and the other for after market segment (after sales service). Assuming the customer demand for both the segment is 1 lac units per year, where would be the higher uncertainty of fulfilling the customer demand?
• Increased implied demand uncertainty leads to increased difficulty matching supply
with demand. For a given product, this dynamism can lead to either a high stock-out or an oversupply situation.
5 5
GLOBAL
IMPLIED DEMAND UNCERTAINTY SPECTRUM
Moderately UnPredictable /Predictable Supply and Demand
Highly Predictable Supply and Demand
Highly UnPredictable Supply and Demand
Groceries in a Supermarket
An existing automobile
A new communication device
6 6
GLOBAL
IMPACT OF DIFFERENT CUSTOMER NEEDS ON IMPLIED DEMAND UNCERTAINTY
Customer Need Increased Variety Less Lead Time Impact on Implied Demand Uncertainty Increase, because a wider range implies greater variance in demand Increase because there is less time in which to react to orders
High Innovation
High Service Level
Increase because new products tend to have more uncertain demand
Increase because the margin of error is low.
7 7
GLOBAL
CORRELATION BETWEEN IMPLIED DEMAND UNCERTAINTY AND OTHER ATTRIBUTES
Attribute Low Implied Uncertainty Low 10% 1 to 2% High implied uncertainty
Product Margin Average Forecast error Average stock-out rate
High 40% to 100% 10% to 40%
Average forced end season Negligible markdown
10 to 25%
8 8
GLOBAL
UNDERSTANDING THE SUPPLY CHAIN
• Every Supply Chain can be mapped on to the responsive and efficiency spectrum.
?Highly responsive supply chains will have the capability to:
? Respond to wide ranges of quantities demanded. ? Meet short lead-times ?Handle a large variety of products ? Build highly innovative products ? Meet a very high service level ?Handle Supply uncertainty
?Typically, given other things constant, highly responsive supply chains will have
high cost. ?Highly efficient supply chains will operate on lower cost but will be less responsive ?Responsiveness and Efficiency are inversely related.
9 9
GLOBAL
RESPONSIVENESS SPECTRUM
Highly efficient
Highly responsive
Integrated Steel Mills: Production scheduled weeks or months in advance with little variety or flexibility
10 10
Dell: Custom made PCs and servers in a few days
GLOBAL
ACHIEVING STRATEGIC FIT
• The final step in achieving strategic fit is to math supply chain responsiveness with the implied uncertainty.
Responsive Supply Chain
Responsiveness Spectrum Supply Chain
Efficient Supply Chain Low Implied Uncertainty
11 11
Implied Uncertainty Spectrum
High Implied Uncertainty
GLOBAL
SCOPE OF STRATEGIC FIT
• Scope of Strategic Fit could be:
? Intra Company Intra-operation Scope
? Intra Company Intra-functional Scope ?Intra Company Inter-functional Scope ?Inter-company Inter-functional Scope
12 12
GLOBAL
INTRACOMPANY INTRAOPERATION SCOPE : THE MINIMIZE LOCAL COST VIEW
Supplier Manufacturer Distributor Retailer Customer
Competitive Strategy Product Development Strategy Supply Chain Strategy Marketing Strategy
13 13
GLOBAL
INTRACOMPANY INTRAFUNCTION SCOPE : THE MINIMIZE FUNCTIONAL COST VIEW
Supplier Manufacturer Distributor Retailer Customer
Competitive Strategy Product Development Strategy Supply Chain Strategy Marketing Strategy
14 14
GLOBAL
INTRACOMPANY INTERFUNCTION SCOPE : THE MAXIMIZE COMPANY PROFIT VIEW
Supplier Manufacturer Distributor Retailer Customer
Competitive Strategy Product Development Strategy Supply Chain Strategy Marketing Strategy
15 15
GLOBAL
INTERCOMPANY INTERFUNCTION SCOPE : THE MAXIMIZE SUPPLY CHAIN SURPLUS
Supplier Manufacturer Distributor Retailer Customer
Competitive Strategy Product Development Strategy Supply Chain Strategy Marketing Strategy
16 16
doc_658074824.pptx