21st Century Supply Chain

8/8/2019 21st Century Supply Chain

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2121stst Century SupplyCentury Supply

ChainChainNew Focus RequiredNew Focus Required


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Supply ChainSupply ChainSignificanceSignificance

SC aroused prominence by the turn of 21stSC aroused prominence by the turn of 21st

century.century.

It is rightly pointed that the competition isIt is rightly pointed that the competition is

between supply chains and not companies.between supply chains and not companies.(Christopher and Towill 2001)(Christopher and Towill 2001)

The SCM is a complex subjectThe SCM is a complex subject topics from various disciplines of study.


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Supply ChainSupply ChainDefinitionDefinition

Supply Chain is the net work of facilities and activities

often owned by different entities that

performs the functions of product development,

procurement of raw materials from vendors,

manufacturing,

distribution,

retailing and after-sale service of products

delivers to ultimate customers.


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The Perils of EfficiencyThe Perils of EfficiencyFocus of last decade (90)Focus of last decade (90)

Companies focused on

building and re-building supply chains to

deliver goods and services toconsumers

as quickly and inexpensively as possible


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The Perils of EfficiencyThe Perils of EfficiencyFocus of last decadeFocus of last decade some of the efforts (90)some of the efforts (90)

Quick Response initiative (American

apparel companies)

Efficient Consumer Response (grocerycompanies in Europe and US)

Efficient Foodservice Response (U.S. food

service industry)

Host other individual initiatives in various

sectors


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The Perils of EfficiencyThe Perils of EfficiencyDeficiencyDeficiency

High speed , low-cost supply chains are

unable to respond to unexpected changes in demand

or supply

performance steadily deteriorated

consumer satisfaction with product availability fell

sharply during the same period


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The Perils of EfficiencyThe Perils of EfficiencyReasonReason

centralized manufacturing and distribution facilities to

generate scale economies, Deliver only container loads of products to customers to

minimize transportation time, freight costs, and

the number of deliveries

When demand for a particular brand, pack size, or

assortment rises without warning the required merchandise was often already in factory

stockyards, packed and ready to ship,

but it couldn't be moved until each container was full.


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The Perils of EfficiencyThe Perils of EfficiencyConsequenceConsequence

When manufacturers eventually deliver additionalmerchandise, it results in excess inventory

because most distributors don't need a container loadto satisfy the increased demand.

To get rid of the stockpile, Companies sell at discounted

prices reduce companies' profits

erode brand equity and

anger loyal customers who bought

the items at full price in the recent past


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The TripleThe Triple--A Supply ChainA Supply ChainThe New ApproachThe New Approach

To provide companies with sustainablecompetitive advantage

supply chains need to be

agile,

adaptable, and

aligned


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AGILITYAGILITYObjectiveObjective

Respond to short-term changes in demand

or supply quickly;

handle external disruptions smoothly


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AGILITYAGILITYMethodsMethods

Promote flow of information with suppliers andcustomers.

Develop collaborative relationships with

suppliers.Design for postponement.

Build inventory buffers by manufacturing astockpile of inexpensive but key components.

Have a dependable logistics system or partner.Draw up contingency plans and develop crisis

management groups.


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AGILITYAGILITYnot new or radicalnot new or radical Three PrinciplesThree Principles

closing the communication loop,

sticking to a rhythm, and

leveraging your assets

Each one alone could improve the

responsiveness of any companys supply chain.But together, they create a powerful forcebecause they reinforce one another


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AGILITYAGILITYSignificanceSignificance

Frequent sudden shocks to supply chains

threat from natural Disasters (Taiwan earthquakes),

Terrorism (sept 9/11), wars,

epidemics (recent bird flue), and

computer viruses has intensified in recent years

because supply lines now traverse the globe


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AGILITYAGILITYContingency PlanContingency Plan

most supply chains are incapable of

coping with emergencies

the importance of drawing up contingency

plans for times of crisis.


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ADAPTABILITYADAPTABILITYObjectiveObjective

Adjust Supply Chains design to meet

structural shifts in markets;

modify supply network to

strategies, products, and

technologies


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ADAPTABILITYADAPTABILITYMethodsMethods

Monitor economies all over the world to spot

new supply bases and markets.

Use intermediaries to develop fresh suppliers

and logistics infrastructure.

Evaluate needs of ultimate consumers-not just

immediate customers.

Create flexible product designsDetermine where companies products stand in

terms of technology cycle and product life cycles


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ALIGNMENTALIGNMENTObjectiveObjective

Create incentives for better performance.


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ALIGNMENTALIGNMENTMethodsMethods

Exchange information and knowledge

freely with vendors and customers

Lay down roles, tasks, and responsibilities

for suppliers and customers

Equitably share risks, costs, and gains of

improvement initiatives (INCENTIVES)


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ALIGNMENTALIGNMENTA STEPA STEP--BY STEP APPROACHBY STEP APPROACH -- 11

Companies face incentive problems in

their supply chains because of Hidden actions by partner firms

Hidden information-data or knowledge that only

some of the firms in the Supply Chain possess

Badly designed incentives


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They can tackle incentive problems by

Acknowledging that such problems exist

Diagnosing the cause-hidden actions, hiddeninformation, or badly designed incentives

Creating or redesigning incentives that will inducepartners to behave in ways that maximize thesupply chains profits


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They can redesign incentives by

Changing contracts to reward partners for actingin the supply chains best interests

Gathering or sharing information that waspreviously hidden

Using intermediaries or personal relationships todevelop trust with supply chain partners


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They can prevent incentive problems by

Conducting incentives audits when they adopt new

technologies, enter new markets, or launch supply chainimprovement programs

Educating managers about processes and incentives atother companies in the supply chain

Making discussions less personal by getting executivesto examine problems at other companies or in otherindustries


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ALIGNMENTALIGNMENTBuilding Deep Supplier RelationshipBuilding Deep Supplier Relationship -- 00

This requires Building Deep Supplier

Relationship

six steps in a hierarchical order,

although these steps are complementary


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ALIGNMENTALIGNMENTBuilding Deep Supplier RelationshipBuilding Deep Supplier Relationship -- step 1step 1

Understand how your suppliers work

Learn about suppliers business

Go to and see how the suppliers work

Respect suppliers capabilities

Commit to co prosperity.


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Turn supplier rivalry into opportunity

Source each component from 2 or 3 vendors

Create compatible production philosophies and

systems

Set up joint ventures with existing suppliers to

transfer knowledge and maintain control


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Develop suppliers technical capabilities

Build suppliers problem-solving skills

Develop a common lexicon

Hone core suppliers innovation capabilities


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Share information intensively butselectively

Set specific times, places, and agendas for meetings

Use rigid formats for sharing information

Insist on accurate data collection

Share information in a structured fashion


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Conduct joint improvement activities

Exchange best practices with suppliers

Initiate Kaizen projects at suppliers facilities

Set up supplier study group


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ALIGNMENTALIGNMENTPartnering for SuccessPartnering for Success

Partnerships are costly to implement

they require extra communication,

coordination, and

risk-sharing.

They are justified only if they stand to yield

substantially better results than the firms could

achieve without partnering


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ALIGNMENTALIGNMENTPartnering for SuccessPartnering for Success partnership modelpartnership model

partnership model developed by Ohio State

Universitys Global Supply Chain Forum Managers develop the ingredients of partnership model by

statingthe drivers behind their desire to partner and examiningthe conditions that would facilitate cooperation

helpingthem decide on a partnership type and

Identifyingthe needed managerial components.

Later, if the partners are not happy with the relationship, they

determine whether drivers or facilitators are at an appropriatelevel.


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Partnership model developed by OhioPartnership model developed by Ohio

State Universitys Global Supply ChainState Universitys Global Supply Chain

ForumForumDrivers

Compelling reasons

to partner

FacilitatorsSupportive

environmental

factors that enhance

partnership growth

Decisionto

create/adjust

partnershi

p

ComponentsJoint activities and

process that build

and sustain the

partnership

OutcomesExtent to which

performance

meets

expectations

Drivers set

expectations of

outcome


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ALIGNMENTALIGNMENTPartnering for SuccessPartnering for Success partnership modelpartnership model -- drivesdrives

partnership drivers fall into four

categories asset and cost efficiencies,

customer service enhancements, marketing advantages, and

profit growth or stability

drives are defined in specific metrics,

their goals for each metric and

corresponding target


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ALIGNMENTALIGNMENTPartnering for SuccessPartnering for Success partnership modelpartnership model -- ratingrating

drives are defined in specific metrics,

their goals for each metric and

corresponding target For example

In asset and cost efficiencies,

Formetrics improving utilization and cutting

product costs

Goalis to increase and decrease respectively Target is from 80% to 90% and by 7% lower per

yearrespectively


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ALIGNMENTALIGNMENTPartnering for SuccessPartnering for Success partnership modelpartnership model -- ratingrating

These are rated for its importance, For

example say a scale of 1 to 5,

perhaps with a score of 6 for exceptionally

important.

The cumulative value is found

A score out of maximum of 24


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ALIGNMENTALIGNMENT

Partnering for SuccessPartnering for Success partnership modelpartnership model -- facilitatorsfacilitators

partnership facilitators such as compatibility of corporate cultures,

compatibility of management philosophy & techniques,

a strong sense of mutuality, and

symmetry between the two parties are in place tosupport the venture

Similar rating as that of drivers,


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ALIGNMENTALIGNMENT

Partnering for SuccessPartnering for Success partnership modelpartnership model -- facilitatorsfacilitators


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ALIGNMENTALIGNMENT

Partnering for SuccessPartnering for Success partnership modelpartnership model -- componentscomponents

Once the type of the partnership is envisaged , then the focus is

on the

management components

such as thejoint activities and processes that are under thedirect control of management, required to launch and sustain the

partnership

capabilities for planning,

joint operating controls, communication and

risk/reward sharing.

Each of which have further sub items.


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ALIGNMENTALIGNMENT

Partnering for SuccessPartnering for Success partnership modelpartnership model ratingrating -- outcomeoutcome

Current levels are rated

as low, medium or high and

are compared with desired level required

for the partnership envisaged.


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ALIGNMENTALIGNMENT

Partnering for SuccessPartnering for Success partnership modelpartnership model outcomeoutcome

If differences persist in the Outcomes,

the drives are reexamined and

the associated action plans are revised.


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2121stst Century Supply ChainCentury Supply ChainNew FocusNew Focus Choosing the right partnerChoosing the right partner -- ConclusionConclusion

Choosing the right partners of SC is an

the important decision to be taken for asuccessful Supply Chain

They are determined considering theadaptability of the environment in which

SC is operating.


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2121stst Century Supply ChainCentury Supply ChainNew FocusNew Focus Creating the right partnershipCreating the right partnership -- ConclusionConclusion

Creating a right partnership or alignment

is the next important and deliberateexercise to be taken.

This should incorporate right level of

incentives and relationship.


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2121stst Century Supply ChainCentury Supply ChainNew FocusNew Focus Enhancing the agilityEnhancing the agility -- ConclusionConclusion

Then only one can think of making SCagile

It depends on the product and decidespositioning ofOPP


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2121stst Century Supply ChainCentury Supply ChainNew FocusNew Focus partnering for successpartnering for success -- ConclusionConclusion

Right Partner, well defined close relationship and alert

(agile) SC are new focus of 21st Century SC

The partnership model developed by Ohio StateUniversitys Global Supply Chain Forum provides a

framework for looking into.

The four step-by-step approach devised for aligning

incentives, i.e. the risks, cost and rewards across thenetwork can also be brought into

The six steps suggested for Building Deep Supplier

Relationship aids fostering partnership


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2121stst Century Supply ChainCentury Supply ChainNew FocusNew Focus -- ConclusionConclusion

Right Partner, well defined close

relationship and alert (agile) tounexpected changes at short

notice are the new focus of 21st

Century SC

21st Century Supply Chain

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