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CHAPTER 6: Supply Chain Management

As A Strategic Process

COMPETITIVE ADVANTAGE IN SUPPLY CHAIN

Time Advantage

• When a business process is faster in achieving the same result as another, time advantage is created. Time advantage is best explained through time to market examples. It is normally created by conducting a thorough and careful analysis of all the all the activities that support a process and elimination of non-value added activities that only adds lead time.

• When time advantage is achieved, product premiums can be created, revenues can be increased and product life cycles can be lengthened. When a firm has developed processes that allows it to introduce new products into the market and the firm is portrayed as a pioneer as well as when the firm conducts a business strategy by differentiating the product’s brand image in order to make market share grow and in order to increase revenue

Cost Advantage

• When business process that is superior is cheaper compared to the one with inferior business process, cost advantage is created. When waste is eliminated from the process, cost advantage can be created.

• Cost advantages in a manufacturing industry can arise when there is a better manufacturing process, higher automation levels that increase efficiency, or inputs that are cheaper. There are also some methods that are commonly used to reduce the manufacturing costs per unit by shortening the set up change time, reducing frequency changes and increment of batch sizes.

• Manufacturing process that are superior may have a cost structure that is comparable. However, it will only aloe small batch sizes to have flexible factory schedules. When there is cost advantage, the company will gain more profit and expand its market share over time

Efficiency Advantage

• Throughput is the measure of an output of a process per unit time. When business processes that are superior gives a higher throughput, efficiency advantage is created. Efficiency can also bring forward the meaning of asset utilization.

• People, technology or machinery or anything that is useful to the business process and incurs cost to maintain are all considered as assets under the context of efficiency. Automation, simplification or expedition of a process can create an efficiency advantage. It will usually give support to a cost-based business strategy and produce favorable cost structure.

Quality Advantage

• When fewer defects are created by a superior business process compared to an inferior one, quality advantage is created. Quality advantage usually results from the automization, simplification and standardization of a process. Costs can be reduced by providing a better quality and also by preventing defects. A differentiator that can produce better quality can also be introduced. For example, increasing customer satisfaction, brand value, customer retention, and product durability.

Seven supply chain best practices in gaining competitive advantage

There are seven supply chain best practices that successful companies use in order to gain competitive advantage.• Collaboration of virtual chain virtual integration• Replacement of one-size fits all with a tailored approach• Frequent planning across multiple horizons• Implementation of pull replenishment across the value chain• Actively manage complexity• Allow technology and automation choices be driven by

business needs• Reconfiguration of supply chain organization in order to

include business management capabilities.

Supply Network1) A Supply Chain Network (SCN) is an evolution of the basic supply chain. 2) Due to rapid technological advancement, organisations with a basic supply chain can develop this chain into a more complex structure involving a higher level of interdependence and connectivity between more organisations, this constitutes a supply chain network. 3) Supply chain networks allow us to look at the big picture, giving us a better understanding of the flow of materials and information.

Example of Supply ChainSupply Chain for apple juice productions :

Example of Supply NetworkSupply Network for apple juice organisation :

Cont…

The above example demonstrates a simplified version of a supply chain network of an Apple Juice organisation. A supply chain network shows the links between organisations and how information and materials flow between these links. The more detailed the supply chain network the more complex and web like the network becomes.

Organisations are linked via two types of flows To get a complete picture of an organisations supply chain network; information & material flow should be mapped. Inefficiency can then be located and removed. 1) Material flow: Is the movement of goods from raw primary goods (such as Wool, Trees and Coal etc.) to complete goods (TV’s, Radios and Computers) that are to be delivered to the final customer.2) Information flow: Is the demand from the end-customer to preceding organisations in the network.

ADVANTAGES OF SUPPLY CHAINi) Boosts Customer ServiceSCM impacts customer service by making sure the right product assortment and quantity are delivered in a timely. Additionally, those products must be available in the location that customers expect. Customers should also receive quality after-sale customer support.ii) Improves Bottom LineSCM has a tremendous impact on the bottom line. Firms value supply chain managers because they decrease the use of large fixed assets such as plants, warehouses and transportation vehicles in the supply chain. Also, cash flow is increased because if delivery of the product can be expedited, profits will also be received quickly.

DISADVANTAGES OF SUPPLY CHAIN

Extensive Training and

Planning

Inaccurate Info Create Havoc

Lack of Strategic Implementation

Lean Supply Chain are

Vulnerable

6.3 Demand Network on an Evaluation of Supply Chain (SC)

Objectives

• Business should assess health of supply chain from time to time.

• Ensure supply chain reacts appropriately to demand network.

• Allows organization to pause and reflect on current supply chain.

What is evaluation of supply chain?

• Also known as network evaluation. • Overall review on business SC that helps

company to examine health of SC and logistics management practices.

• Assist company in identifying strengths, weaknesses, opportunities and threats surrounding it.

• Benefit in terms of cost saving and efficiencies.

When to conduct SC evaluation?

Rising costs of SC management

Escalating demand for service from

customers

Increasing complexity of SC

Launching of new product or service

Increasing transportation costs

Shifts in sourcing

Divestiture or acquisition

Increasing infrastructure costs

Elements of SC network evaluation

Inventory positioning

Distribution facility

Transportation

General Level Specific Level

Shipment optimization

Mode-shift analysis

Current-carrier analysis

Supplier compliance

Freight audit and payment

Carbon-footprint analysis

Distribution-network analysis

Headcount allocation

Starting-point of SCN evaluation

Third-Party

Logistics (3PL)

Supports evaluation in two ways

Provide objectivity and experience of

SC professionals

Collaboration generates in-

depth understanding in business network

Rich experience in

logistics-network modeling

Gathering, filtering and identifying

data

Benefits of SCN evaluation

Operate and manage SC that aligns with business goals and direction

Reveals info that identifies area of improvement, roadmap, direction to benchmark and track progress

Enhance business ability – cost savings, process efficiencies, customer services

Decrease carbon footprint, lower inventory and infrastructure costs, shorten delivery time, and greater compliance from suppliers

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