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SUPPLYCHAINMANAGEMENT3RDEDITION1SUPPLYCHAINMANAGEMENT3RDEDITIONCHAPTER1UNDERSTANDINGTHESUPPLYCHAIN1TRADITIONAL5VIEWLOGISTICSINTHEECONOMY1990,1996FREIGHTTRANSPORTATION352,455BILLIONINVENTORYEXPENSE221,311BILLIONADMINISTRATIVEEXPENSE27,31BILLIONLOGISTICSRELATEDACTIVITY11,105OFGNPSOURCECASSLOGISTICS1TRADITIONALVIEWLOGISTICSINTHEMANUFACTURINGFIRMPROFIT4LOGISTICSCOST21MARKETINGCOST27MANUFACTURINGCOST48PROFITLOGISTICSCOSTMARKETINGCOSTMANUFACTURINGCOST1SUPPLYCHAINMANAGEMENTTHEMAGNITUDEINTHETRADITIONALVIEWESTIMATEDTHATTHEGROCERYINDUSTRYCOULDSAVE30BILLION10OFOPERATINGCOSTBYUSINGEFFECTIVELOGISTICSANDSUPPLYCHAINSTRATEGIESATYPICALBOXOFCEREALSPENDS104DAYSFROMFACTORYTOSALEATYPICALCARSPENDS15DAYSFROMFACTORYTODEALERSHIPLAURAASHLEYTURNSITSINVENTORY10TIMESAYEAR,FIVETIMESFASTERTHAN3YEARSAGO1SUPPLYCHAINMANAGEMENTTHETRUEMAGNITUDECOMPAQESTIMATESITLOST5BILLIONTO1BILLIONINSALESIN1995BECAUSELAPTOPSWERENOTAVAILABLEWHENANDWHERENEEDEDWHENTHE1GIGPROCESSORWASINTRODUCEDBYAMD,THEPRICEOFTHE800MBPROCESSORDROPPEDBY30PGESTIMATESITSAVEDRETAILCUSTOMERS65MILLIONBYCOLLABORATIONRESULTINGINABETTERMATCHOFSUPPLYANDDEMAND1OUTLINEWHATISASUPPLYCHAINDECISIONPHASESINASUPPLYCHAINPROCESSVIEWOFASUPPLYCHAINTHEIMPORTANCEOFSUPPLYCHAINFLOWSEXAMPLESOFSUPPLYCHAINS1WHATISASUPPLYCHAININTRODUCTIONTHEOBJECTIVEOFASUPPLYCHAIN1WHATISASUPPLYCHAINALLSTAGESINVOLVED,DIRECTLYORINDIRECTLY,INFULFILLINGACUSTOMERREQUESTINCLUDESMANUFACTURERS,SUPPLIERS,TRANSPORTERS,WAREHOUSES,RETAILERS,ANDCUSTOMERSWITHINEACHCOMPANY,THESUPPLYCHAININCLUDESALLFUNCTIONSINVOLVEDINFULFILLINGACUSTOMERREQUESTPRODUCTDEVELOPMENT,MARKETING,OPERATIONS,DISTRIBUTION,FINANCE,CUSTOMERSERVICEEXAMPLESFIG11DETERGENTSUPPLYCHAINWALMART,DELL1WHATISASUPPLYCHAINCUSTOMERISANINTEGRALPARTOFTHESUPPLYCHAININCLUDESMOVEMENTOFPRODUCTSFROMSUPPLIERSTOMANUFACTURERSTODISTRIBUTORS,BUTALSOINCLUDESMOVEMENTOFINFORMATION,FUNDS,ANDPRODUCTSINBOTHDIRECTIONSPROBABLYMOREACCURATETOUSETHETERM“SUPPLYNETWORK”OR“SUPPLYWEB”TYPICALSUPPLYCHAINSTAGESCUSTOMERS,RETAILERS,DISTRIBUTORS,MANUFACTURERS,SUPPLIERSFIG12ALLSTAGESMAYNOTBEPRESENTINALLSUPPLYCHAINSEG,NORETAILERORDISTRIBUTORFORDELL1WHATISASUPPLYCHAINCUSTOMERWANTSDETERGENTANDGOESTOJEWELJEWELSUPERMARKETJEWELORTHIRDPARTYDCPGOROTHERMANUFACTURERPLASTICPRODUCERCHEMICALMANUFACTUREREGOILCOMPANYTENNECOPACKAGINGPAPERMANUFACTURERTIMBERINDUSTRYCHEMICALMANUFACTUREREGOILCOMPANY1FLOWSINASUPPLYCHAINCUSTOMERINFORMATIONPRODUCTFUNDS1THEOBJECTIVEOFASUPPLYCHAINMAXIMIZEOVERALLVALUECREATEDSUPPLYCHAINVALUEDIFFERENCEBETWEENWHATTHEFINALPRODUCTISWORTHTOTHECUSTOMERANDTHEEFFORTTHESUPPLYCHAINEXPENDSINFILLINGTHECUSTOMERSREQUESTVALUEISCORRELATEDTOSUPPLYCHAINPROFITABILITYDIFFERENCEBETWEENREVENUEGENERATEDFROMTHECUSTOMERANDTHEOVERALLCOSTACROSSTHESUPPLYCHAIN1THEOBJECTIVEOFASUPPLYCHAINEXAMPLEDELLRECEIVES2000FROMACUSTOMERFORACOMPUTERREVENUESUPPLYCHAININCURSCOSTSINFORMATION,STORAGE,TRANSPORTATION,COMPONENTS,ASSEMBLY,ETCDIFFERENCEBETWEEN2000ANDTHESUMOFALLOFTHESECOSTSISTHESUPPLYCHAINPROFITSUPPLYCHAINPROFITABILITYISTOTALPROFITTOBESHAREDACROSSALLSTAGESOFTHESUPPLYCHAINSUPPLYCHAINSUCCESSSHOULDBEMEASUREDBYTOTALSUPPLYCHAINPROFITABILITY,NOTPROFITSATANINDIVIDUALSTAGE1THEOBJECTIVEOFASUPPLYCHAINSOURCESOFSUPPLYCHAINREVENUETHECUSTOMERSOURCESOFSUPPLYCHAINCOSTFLOWSOFINFORMATION,PRODUCTS,ORFUNDSBETWEENSTAGESOFTHESUPPLYCHAINSUPPLYCHAINMANAGEMENTISTHEMANAGEMENTOFFLOWSBETWEENANDAMONGSUPPLYCHAINSTAGESTOMAXIMIZETOTALSUPPLYCHAINPROFITABILITY1DECISIONPHASESOFASUPPLYCHAINSUPPLYCHAINSTRATEGYORDESIGNSUPPLYCHAINPLANNINGSUPPLYCHAINOPERATION1SUPPLYCHAINSTRATEGYORDESIGNDECISIONSABOUTTHESTRUCTUREOFTHESUPPLYCHAINANDWHATPROCESSESEACHSTAGEWILLPERFORMSTRATEGICSUPPLYCHAINDECISIONSLOCATIONSANDCAPACITIESOFFACILITIESPRODUCTSTOBEMADEORSTOREDATVARIOUSLOCATIONSMODESOFTRANSPORTATIONINFORMATIONSYSTEMSSUPPLYCHAINDESIGNMUSTSUPPORTSTRATEGICOBJECTIVESSUPPLYCHAINDESIGNDECISIONSARELONGTERMANDEXPENSIVETOREVERSEMUSTTAKEINTOACCOUNTMARKETUNCERTAINTY1SUPPLYCHAINPLANNINGDEFINITIONOFASETOFPOLICIESTHATGOVERNSHORTTERMOPERATIONSFIXEDBYTHESUPPLYCONFIGURATIONFROMPREVIOUSPHASESTARTSWITHAFORECASTOFDEMANDINTHECOMINGYEAR1SUPPLYCHAINPLANNINGPLANNINGDECISIONSWHICHMARKETSWILLBESUPPLIEDFROMWHICHLOCATIONSPLANNEDBUILDUPOFINVENTORIESSUBCONTRACTING,BACKUPLOCATIONSINVENTORYPOLICIESTIMINGANDSIZEOFMARKETPROMOTIONSMUSTCONSIDERINPLANNINGDECISIONSDEMANDUNCERTAINTY,EXCHANGERATES,COMPETITIONOVERTHETIMEHORIZON1SUPPLYCHAINOPERATIONTIMEHORIZONISWEEKLYORDAILYDECISIONSREGARDINGINDIVIDUALCUSTOMERORDERSSUPPLYCHAINCONFIGURATIONISFIXEDANDOPERATINGPOLICIESAREDETERMINEDGOALISTOIMPLEMENTTHEOPERATINGPOLICIESASEFFECTIVELYASPOSSIBLEALLOCATEORDERSTOINVENTORYORPRODUCTION,SETORDERDUEDATES,GENERATEPICKLISTSATAWAREHOUSE,ALLOCATEANORDERTOAPARTICULARSHIPMENT,SETDELIVERYSCHEDULES,PLACEREPLENISHMENTORDERSMUCHLESSUNCERTAINTYSHORTTIMEHORIZON1PROCESSVIEWOFASUPPLYCHAINCYCLEVIEWPROCESSESINASUPPLYCHAINAREDIVIDEDINTOASERIESOFCYCLES,EACHPERFORMEDATTHEINTERFACESBETWEENTWOSUCCESSIVESUPPLYCHAINSTAGESPUSH/PULLVIEWPROCESSESINASUPPLYCHAINAREDIVIDEDINTOTWOCATEGORIESDEPENDINGONWHETHERTHEYAREEXECUTEDINRESPONSETOACUSTOMERORDERPULLORINANTICIPATIONOFACUSTOMERORDERPUSH1CYCLEVIEWOFSUPPLYCHAINSCUSTOMERORDERCYCLEREPLENISHMENTCYCLEMANUFACTURINGCYCLEPROCUREMENTCYCLECUSTOMERRETAILERDISTRIBUTORMANUFACTURERSUPPLIER1CYCLEVIEWOFASUPPLYCHAINEACHCYCLEOCCURSATTHEINTERFACEBETWEENTWOSUCCESSIVESTAGESCUSTOMERORDERCYCLECUSTOMERRETAILERREPLENISHMENTCYCLERETAILERDISTRIBUTORMANUFACTURINGCYCLEDISTRIBUTORMANUFACTURERPROCUREMENTCYCLEMANUFACTURERSUPPLIERFIGURE13CYCLEVIEWCLEARLYDEFINESPROCESSESINVOLVEDANDTHEOWNERSOFEACHPROCESSSPECIFIESTHEROLESANDRESPONSIBILITIESOFEACHMEMBERANDTHEDESIREDOUTCOMEOFEACHPROCESS1PUSH/PULLVIEWOFSUPPLYCHAINSPROCUREMENT,MANUFACTURINGANDREPLENISHMENTCYCLESCUSTOMERORDERCYCLECUSTOMERORDERARRIVESPUSHPROCESSESPULLPROCESSES1PUSH/PULLVIEWOFSUPPLYCHAINPROCESSESSUPPLYCHAINPROCESSESFALLINTOONEOFTWOCATEGORIESDEPENDINGONTHETIMINGOFTHEIREXECUTIONRELATIVETOCUSTOMERDEMANDPULLEXECUTIONISINITIATEDINRESPONSETOACUSTOMERORDERREACTIVEPUSHEXECUTIONISINITIATEDINANTICIPATIONOFCUSTOMERORDERSSPECULATIVEPUSH/PULLBOUNDARYSEPARATESPUSHPROCESSESFROMPULLPROCESSES1PUSH/PULLVIEWOFSUPPLYCHAINPROCESSESUSEFULINCONSIDERINGSTRATEGICDECISIONSRELATINGTOSUPPLYCHAINDESIGNMOREGLOBALVIEWOFHOWSUPPLYCHAINPROCESSESRELATETOCUSTOMERORDERSCANCOMBINETHEPUSH/PULLANDCYCLEVIEWSLLBEANFIGURE16DELLFIGURE17THERELATIVEPROPORTIONOFPUSHANDPULLPROCESSESCANHAVEANIMPACTONSUPPLYCHAINPERFORMANCE1SUPPLYCHAINMACROPROCESSESINAFIRMSUPPLYCHAINPROCESSESDISCUSSEDINTHETWOVIEWSCANBECLASSIFIEDINTOFIGURE18CUSTOMERRELATIONSHIPMANAGEMENTCRMINTERNALSUPPLYCHAINMANAGEMENTISCMSUPPLIERRELATIONSHIPMANAGEMENTSRMINTEGRATIONAMONGTHEABOVETHREEMACROPROCESSESISCRITICALFOREFFECTIVEANDSUCCESSFULSUPPLYCHAINMANAGEMENT1EXAMPLESOFSUPPLYCHAINSGATEWAYZARAMCMASTERCARR/WWGRAINGERTOYOTAAMAZON/BORDERS/BARNESANDNOBLEWEBVAN/PEAPOD/JEWELWHATARESOMEKEYISSUESINTHESESUPPLYCHAINS1GATEWAYADIRECTSALESMANUFACTURERWHYDIDGATEWAYHAVEMULTIPLEPRODUCTIONFACILITIESINTHEUSWHATADVANTAGESORDISADVANTAGESDOESTHISSTRATEGYOFFERRELATIVETODELL,WHICHHASONEFACILITYWHATFACTORSDIDGATEWAYCONSIDERWHENDECIDINGWHICHPLANTSTOCLOSEWHYDOESGATEWAYNOTCARRYANYFINISHEDGOODSINVENTORYATITSRETAILSTORESSHOULDAFIRMWITHANINVESTMENTINRETAILSTORESCARRYANYFINISHEDGOODSINVENTORYISTHEDELLMODELOFSELLINGDIRECTLYWITHOUTANYRETAILSTORESALWAYSLESSEXPENSIVETHANASUPPLYCHAINWITHRETAILSTORESWHATARETHESUPPLYCHAINIMPLICATIONSOFGATEWAYSDECISIONTOOFFERFEWERCONFIGURATIONS17ELEVENWHATFACTORSINFLUENCEDECISIONSOFOPENINGANDCLOSINGSTORESLOCATIONOFSTORESWHYHAS7ELEVENCHOSENOFFSITEPREPARATIONOFFRESHFOODWHYDOES7ELEVENDISCOURAGEDIRECTSTOREDELIVERYFROMVENDORSWHEREAREDISTRIBUTIONCENTERSLOCATEDANDHOWMANYSTORESDOESEACHCENTERSERVEHOWARESTORESASSIGNEDTODISTRIBUTIONCENTERSWHYDOES7ELEVENCOMBINEFRESHFOODSHIPMENTSBYTEMPERATUREWHATPOINTOFSALEDATADOES7ELEVENGATHERANDWHATINFORMATIONISMADEAVAILABLETOSTOREMANAGERSHOWSHOULDINFORMATIONSYSTEMSBESTRUCTURED1WWGRAINGERANDMCMASTERCARRHOWMANYDCSSHOULDTHEREBEANDWHERESHOULDTHEYBELOCATEDHOWSHOULDPRODUCTSTOCKINGBEMANAGEDATTHEDCSSHOULDALLDCSCARRYALLPRODUCTSWHATPRODUCTSSHOULDBECARRIEDININVENTORYANDWHATPRODUCTSSHOULDBELEFTATTHESUPPLIERWHATPRODUCTSSHOULDGRAINGERCARRYATASTOREHOWSHOULDMARKETSBEALLOCATEDTODCSHOWSHOULDREPLENISHMENTOFINVENTORYBEMANAGEDATVARIOUSSTOCKINGLOCATIONSHOWSHOULDWEBORDERSBEHANDLEDWHATTRANSPORTATIONMODESSHOULDBEUSED1TOYOTAWHERESHOULDPLANTSBELOCATED,WHATDEGREEOFFLEXIBILITYSHOULDEACHHAVE,ANDWHATCAPACITYSHOULDEACHHAVESHOULDPLANTSBEABLETOPRODUCEFORALLMARKETSHOWSHOULDMARKETSBEALLOCATEDTOPLANTSWHATKINDOFFLEXIBILITYSHOULDBEBUILTINTOTHEDISTRIBUTIONSYSTEMHOWSHOULDTHISFLEXIBLEINVESTMENTBEVALUEDWHATACTIONSMAYBETAKENDURINGPRODUCTDESIGNTOFACILITATETHISFLEXIBILITY1SUMMARYOFLEARNINGOBJECTIVESWHATARETHECYCLEANDPUSH/PULLVIEWSOFASUPPLYCHAINHOWCANSUPPLYCHAINMACROPROCESSESBECLASSIFIEDWHATARETHETHREEKEYSUPPLYCHAINDECISIONPHASESANDWHATISTHESIGNIFICANCEOFEACHWHATISTHEGOALOFASUPPLYCHAINANDWHATISTHEIMPACTOFSUPPLYCHAINDECISIONSONTHESUCCESSOFTHEFIRM1AMAZON3WHYISAMAZONBUILDINGMOREWAREHOUSESASITGROWSHOWMANYWAREHOUSESSHOULDITHAVEANDWHERESHOULDTHEYBELOCATEDWHATADVANTAGESDOESSELLINGBOOKSVIATHEINTERNETPROVIDEARETHEREDISADVANTAGESWHYDOESAMAZONSTOCKBESTSELLERSWHILEBUYINGOTHERTITLESFROMDISTRIBUTORSDOESANINTERNETCHANNELPROVIDEGREATERVALUETOABOOKSELLERLIKEBORDERSORTOANINTERNETONLYCOMPANYLIKEAMAZONSHOULDTRADITIONALBOOKSELLERSLIKEBORDERSINTEGRATEECOMMERCEINTOTHEIRCURRENTSUPPLYFORWHATPRODUCTSDOESTHEECOMMERCECHANNELOFFERTHEGREATESTBENEFITSWHATCHARACTERIZESTHESEPRODUCTSCHAPTER2SUPPLYCHAINPERFORMANCEACHIEVINGSTRATEGICFITANDSCOPESUPPLYCHAINMANAGEMENT3RDEDITIONOUTLINECOMPETITIVEANDSUPPLYCHAINSTRATEGIESACHIEVINGSTRATEGICFITEXPANDINGSTRATEGICSCOPEWHATISSUPPLYCHAINMANAGEMENTMANAGINGSUPPLYCHAINFLOWSANDASSETS,TOMAXIMIZESUPPLYCHAINSURPLUSWHATISSUPPLYCHAINSURPLUSCOMPETITIVEANDSUPPLYCHAINSTRATEGIESCOMPETITIVESTRATEGYDEFINESTHESETOFCUSTOMERNEEDSAFIRMSEEKSTOSATISFYTHROUGHITSPRODUCTSANDSERVICESPRODUCTDEVELOPMENTSTRATEGYSPECIFIESTHEPORTFOLIOOFNEWPRODUCTSTHATTHECOMPANYWILLTRYTODEVELOPMARKETINGANDSALESSTRATEGYSPECIFIESHOWTHEMARKETWILLBESEGMENTEDANDPRODUCTPOSITIONED,PRICED,ANDPROMOTEDSUPPLYCHAINSTRATEGYDETERMINESTHENATUREOFMATERIALPROCUREMENT,TRANSPORTATIONOFMATERIALS,MANUFACTUREOFPRODUCTORCREATIONOFSERVICE,DISTRIBUTIONOFPRODUCTCONSISTENCYANDSUPPORTBETWEENSUPPLYCHAINSTRATEGY,COMPETITIVESTRATEGY,ANDOTHERFUNCTIONALSTRATEGIESISIMPORTANTTHEVALUECHAINLINKINGSUPPLYCHAINANDBUSINESSSTRATEGYACHIEVINGSTRATEGICFITINTRODUCTIONHOWISSTRATEGICFITACHIEVEDOTHERISSUESAFFECTINGSTRATEGICFITACHIEVINGSTRATEGICFITSTRATEGICFITCONSISTENCYBETWEENCUSTOMERPRIORITIESOFCOMPETITIVESTRATEGYANDSUPPLYCHAINCAPABILITIESSPECIFIEDBYTHESUPPLYCHAINSTRATEGYCOMPETITIVEANDSUPPLYCHAINSTRATEGIESHAVETHESAMEGOALSACOMPANYMAYFAILBECAUSEOFALACKOFSTRATEGICFITORBECAUSEITSPROCESSESANDRESOURCESDONOTPROVIDETHECAPABILITIESTOEXECUTETHEDESIREDSTRATEGYEXAMPLEOFSTRATEGICFITDELLHOWISSTRATEGICFITACHIEVEDSTEP1UNDERSTANDINGTHECUSTOMERANDSUPPLYCHAINUNCERTAINTYSTEP2UNDERSTANDINGTHESUPPLYCHAINSTEP3ACHIEVINGSTRATEGICFITSTEP1UNDERSTANDINGTHECUSTOMERANDSUPPLYCHAINUNCERTAINTYIDENTIFYTHENEEDSOFTHECUSTOMERSEGMENTBEINGSERVEDQUANTITYOFPRODUCTNEEDEDINEACHLOTRESPONSETIMECUSTOMERSWILLTOLERATEVARIETYOFPRODUCTSNEEDEDSERVICELEVELREQUIREDPRICEOFTHEPRODUCTDESIREDRATEOFINNOVATIONINTHEPRODUCTSTEP1UNDERSTANDINGTHECUSTOMERANDSUPPLYCHAINUNCERTAINTYOVERALLATTRIBUTEOFCUSTOMERDEMANDDEMANDUNCERTAINTYUNCERTAINTYOFCUSTOMERDEMANDFORAPRODUCTIMPLIEDDEMANDUNCERTAINTYRESULTINGUNCERTAINTYFORTHESUPPLYCHAINGIVENTHEPORTIONOFTHEDEMANDTHESUPPLYCHAINMUSTHANDLEANDATTRIBUTESTHECUSTOMERDESIRESSTEP1UNDERSTANDINGTHECUSTOMERANDSUPPLYCHAINUNCERTAINTYIMPLIEDDEMANDUNCERTAINTYALSORELATEDTOCUSTOMERNEEDSANDPRODUCTATTRIBUTESTABLE21FIGURE22TABLE22FIRSTSTEPTOSTRATEGICFITISTOUNDERSTANDCUSTOMERSBYMAPPINGTHEIRDEMANDONTHEIMPLIEDUNCERTAINTYSPECTRUMACHIEVINGSTRATEGICFITUNDERSTANDINGTHECUSTOMERLOTSIZERESPONSETIMESERVICELEVELPRODUCTVARIETYPRICEINNOVATIONIMPLIEDDEMANDUNCERTAINTYIMPACTOFCUSTOMERNEEDSONIMPLIEDDEMANDUNCERTAINTYTABLE21FIRMNOWHASTOHANDLEUNUSUALSURGESINDEMANDREQUIREDSERVICELEVELINCREASESNEWPRODUCTSTENDTOHAVEMOREUNCERTAINDEMANDRATEOFINNOVATIONINCREASESTOTALCUSTOMERDEMANDISNOWDISAGGREGATEDOVERMORECHANNELSNUMBEROFCHANNELSINCREASESDEMANDPERPRODUCTBECOMESMOREDISAGGREGATEDVARIETYOFPRODUCTSREQUIREDINCREASESLESSTIMETOREACTTOORDERSLEADTIMEDECREASESWIDERRANGEOFQUANTITYIMPLIESGREATERVARIANCEINDEMANDRANGEOFQUANTITYINCREASESCAUSESIMPLIEDDEMANDUNCERTAINTYTOINCREASEBECAUSECUSTOMERNEEDLEVELSOFIMPLIEDDEMANDUNCERTAINTYCORRELATIONBETWEENIMPLIEDDEMANDUNCERTAINTYANDOTHERATTRIBUTESTABLE2210250AVGFORCEDSEASONENDMARKDOWN104012AVGSTOCKOUTRATE4010010AVGFORECASTERRORHIGHLOWPRODUCTMARGINHIGHIMPLIEDUNCERTAINTYLOWIMPLIEDUNCERTAINTYATTRIBUTESTEP2UNDERSTANDINGTHESUPPLYCHAINHOWDOESTHEFIRMBESTMEETDEMANDDIMENSIONDESCRIBINGTHESUPPLYCHAINISSUPPLYCHAINRESPONSIVENESSSUPPLYCHAINRESPONSIVENESSABILITYTORESPONDTOWIDERANGESOFQUANTITIESDEMANDEDMEETSHORTLEADTIMESHANDLEALARGEVARIETYOFPRODUCTSBUILDHIGHLYINNOVATIVEPRODUCTSMEETAVERYHIGHSERVICELEVELSTEP2UNDERSTANDINGTHESUPPLYCHAINTHEREISACOSTTOACHIEVINGRESPONSIVENESSSUPPLYCHAINEFFICIENCYCOSTOFMAKINGANDDELIVERINGTHEPRODUCTTOTHECUSTOMERINCREASINGRESPONSIVENESSRESULTSINHIGHERCOSTSTHATLOWEREFFICIENCYFIGURE23COSTRESPONSIVENESSEFFICIENTFRONTIERFIGURE24SUPPLYCHAINRESPONSIVENESSSPECTRUMSECONDSTEPTOACHIEVINGSTRATEGICFITISTOMAPTHESUPPLYCHAINONTHERESPONSIVENESSSPECTRUMUNDERSTANDINGTHESUPPLYCHAINCOSTRESPONSIVENESSEFFICIENTFRONTIERHIGHLOWLOWHIGHRESPONSIVENESSCOSTSTEP3ACHIEVINGSTRATEGICFITSTEPISTOENSURETHATWHATTHESUPPLYCHAINDOESWELLISCONSISTENTWITHTARGETCUSTOMERSNEEDSFIG25UNCERTAINTY/RESPONSIVENESSMAPFIG26ZONEOFSTRATEGICFITEXAMPLESDELL,BARILLARESPONSIVENESSSPECTRUMFIGURE24INTEGRATEDSTEELMILLDELLHIGHLYEFFICIENTHIGHLYRESPONSIVESOMEWHATEFFICIENTSOMEWHATRESPONSIVEHANESAPPARELMOSTAUTOMOTIVEPRODUCTIONACHIEVINGSTRATEGICFITSHOWNONTHEUNCERTAINTY/RESPONSIVENESSMAPFIG25IMPLIEDUNCERTAINTYSPECTRUMRESPONSIVESUPPLYCHAINEFFICIENTSUPPLYCHAINCERTAINDEMANDUNCERTAINDEMANDRESPONSIVENESSSPECTRUMZONEOFSTRATEGICFITSTEP3ACHIEVINGSTRATEGICFITALLFUNCTIONSINTHEVALUECHAINMUSTSUPPORTTHECOMPETITIVESTRATEGYTOACHIEVESTRATEGICFITFIG27TWOEXTREMESEFFICIENTSUPPLYCHAINSBARILLAANDRESPONSIVESUPPLYCHAINSDELLTABLE23TWOKEYPOINTSTHEREISNORIGHTSUPPLYCHAINSTRATEGYINDEPENDENTOFCOMPETITIVESTRATEGYTHEREISARIGHTSUPPLYCHAINSTRATEGYFORAGIVENCOMPETITIVESTRATEGYCOMPARISONOFEFFICIENTANDRESPONSIVESUPPLYCHAINSTABLE24GREATERRELIANCEONRESPONSIVEFASTMODESGREATERRELIANCEONLOWCOSTMODESTRANSPORTATIONSTRATEGYSPEED,FLEXIBILITY,QUALITYCOSTANDLOWQUALITYSUPPLIERSELECTIONSTRATEGYAGGRESSIVELYREDUCEEVENIFCOSTSARESIGNIFICANTREDUCEBUTNOTATEXPENSEOFGREATERCOSTLEADTIMESTRATEGYBUFFERINVENTORYMINIMIZEINVENTORYINVENTORYSTRATEGYCAPACITYFLEXIBILITYHIGHUTILIZATIONMFGSTRATEGYHIGHERMARGINSLOWERMARGINSPRICINGSTRATEGYMODULARITYTOALLOWPOSTPONEMENTMINPRODUCTCOSTPRODUCTDESIGNSTRATEGYQUICKRESPONSELOWESTCOSTPRIMARYGOALRESPONSIVEEFFICIENTOTHERISSUESAFFECTINGSTRATEGICFITMULTIPLEPRODUCTSANDCUSTOMERSEGMENTSPRODUCTLIFECYCLECOMPETITIVECHANGESOVERTIMEMULTIPLEPRODUCTSANDCUSTOMERSEGMENTSFIRMSSELLDIFFERENTPRODUCTSTODIFFERENTCUSTOMERSEGMENTSWITHDIFFERENTIMPLIEDDEMANDUNCERTAINTYTHESUPPLYCHAINHASTOBEABLETOBALANCEEFFICIENCYANDRESPONSIVENESSGIVENITSPORTFOLIOOFPRODUCTSANDCUSTOMERSEGMENTSTWOAPPROACHESDIFFERENTSUPPLYCHAINSTAILORSUPPLYCHAINTOBESTMEETTHENEEDSOFEACHPRODUCTSDEMANDPRODUCTLIFECYCLETHEDEMANDCHARACTERISTICSOFAPRODUCTANDTHENEEDSOFACUSTOMERSEGMENTCHANGEASAPRODUCTGOESTHROUGHITSLIFECYCLESUPPLYCHAINSTRATEGYMUSTEVOLVETHROUGHOUTTHELIFECYCLEEARLYUNCERTAINDEMAND,HIGHMARGINSTIMEISIMPORTANT,PRODUCTAVAILABILITYISMOSTIMPORTANT,COSTISSECONDARYLATEPREDICTABLEDEMAND,LOWERMARGINS,PRICEISIMPORTANTPRODUCTLIFECYCLEEXAMPLESPHARMACEUTICALFIRMS,INTELASTHEPRODUCTGOESTHROUGHTHELIFECYCLE,THESUPPLYCHAINCHANGESFROMONEEMPHASIZINGRESPONSIVENESSTOONEEMPHASIZINGEFFICIENCYCOMPETITIVECHANGESOVERTIMECOMPETITIVEPRESSURESCANCHANGEOVERTIMEMORECOMPETITORSMAYRESULTINANINCREASEDEMPHASISONVARIETYATAREASONABLEPRICETHEINTERNETMAKESITEASIERTOOFFERAWIDEVARIETYOFPRODUCTSTHESUPPLYCHAINMUSTCHANGETOMEETTHESECHANGINGCOMPETITIVECONDITIONSEXPANDINGSTRATEGICSCOPESCOPEOFSTRATEGICFITTHEFUNCTIONSANDSTAGESWITHINASUPPLYCHAINTHATDEVISEANINTEGRATEDSTRATEGYWITHASHAREDOBJECTIVEONEEXTREMEEACHFUNCTIONATEACHSTAGEDEVELOPSITSOWNSTRATEGYOTHEREXTREMEALLFUNCTIONSINALLSTAGESDEVISEASTRATEGYJOINTLYFIVECATEGORIESINTRACOMPANYINTRAOPERATIONSCOPEINTRACOMPANYINTRAFUNCTIONALSCOPEINTRACOMPANYINTERFUNCTIONALSCOPEINTERCOMPANYINTERFUNCTIONALSCOPEFLEXIBLEINTERFUNCTIONALSCOPEDIFFERENTSCOPESOFSTRATEGICFITACROSSASUPPLYCHAINSUMMARYOFLEARNINGOBJECTIVESWHYISACHIEVINGSTRATEGICFITCRITICALTOACOMPANYSOVERALLSUCCESSHOWDOESACOMPANYACHIEVESTRATEGICFITBETWEENITSSUPPLYCHAINSTRATEGYANDITSCOMPETITIVESTRATEGYWHATISTHEIMPORTANCEOFEXPANDINGTHESCOPEOFSTRATEGICFITACROSSTHESUPPLYCHAINCHAPTER3SUPPLYCHAINDRIVERSANDOBSTACLESSUPPLYCHAINMANAGEMENT3RDEDITIONOUTLINEDRIVERSOFSUPPLYCHAINPERFORMANCEAFRAMEWORKFORSTRUCTURINGDRIVERSFACILITIESINVENTORYTRANSPORTATIONINFORMATIONSOURCINGPRICINGOBSTACLESTOACHIEVINGFITDRIVERSOFSUPPLYCHAINPERFORMANCEFACILITIESPLACESWHEREINVENTORYISSTORED,ASSEMBLED,ORFABRICATEDPRODUCTIONSITESANDSTORAGESITESINVENTORYRAWMATERIALS,WIP,FINISHEDGOODSWITHINASUPPLYCHAININVENTORYPOLICIESTRANSPORTATIONMOVINGINVENTORYFROMPOINTTOPOINTINASUPPLYCHAINCOMBINATIONSOFTRANSPORTATIONMODESANDROUTESINFORMATIONDATAANDANALYSISREGARDINGINVENTORY,TRANSPORTATION,FACILITIESTHROUGHOUTTHESUPPLYCHAINPOTENTIALLYTHEBIGGESTDRIVEROFSUPPLYCHAINPERFORMANCESOURCINGFUNCTIONSAFIRMPERFORMSANDFUNCTIONSTHATAREOUTSOURCEDPRICINGPRICEASSOCIATEDWITHGOODSANDSERVICESPROVIDEDBYAFIRMTOTHESUPPLYCHAINAFRAMEWORKFORSTRUCTURINGDRIVERSFACILITIESROLEINTHESUPPLYCHAINTHE“WHERE”OFTHESUPPLYCHAINMANUFACTURINGORSTORAGEWAREHOUSESROLEINTHECOMPETITIVESTRATEGYECONOMIESOFSCALEEFFICIENCYPRIORITYLARGERNUMBEROFSMALLERFACILITIESRESPONSIVENESSPRIORITYEXAMPLE31TOYOTAANDHONDACOMPONENTSOFFACILITIESDECISIONSCOMPONENTSOFFACILITIESDECISIONSLOCATIONCENTRALIZATIONEFFICIENCYVSDECENTRALIZATIONRESPONSIVENESSOTHERFACTORSTOCONSIDEREG,PROXIMITYTOCUSTOMERSCAPACITYFLEXIBILITYVERSUSEFFICIENCYMANUFACTURINGMETHODOLOGYPRODUCTFOCUSEDVERSUSPROCESSFOCUSEDWAREHOUSINGMETHODOLOGYSKUSTORAGE,JOBLOTSTORAGE,CROSSDOCKINGOVERALLTRADEOFFRESPONSIVENESSVERSUSEFFICIENCYINVENTORYROLEINTHESUPPLYCHAINROLEINTHECOMPETITIVESTRATEGYCOMP
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