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Lecture 2

Ch.9 Supply Chain Policy

Deployment

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Agenda

0. What have enterprises done that is distinctive in supply chain?

1. Supply Chain Policy Deployment– Purposeful Supply Chain– Principles of SCM– Catch Ball Deployment– Planning and Execution Processes– Supply Chain Capability

2. Questions to Ponder

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(to p4)

(to p32)

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0. What have enterprises done that is distinctive in supply chain?

SCM Has Transformed

From:

Performance managers

Efficiency managers

(Doing it All)

To:

Strategists

Optimizers

(Doing it Well)(to p2)

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1. Supply Chain Policy Deployment

Question:

Why do we need Supply Chain?

Why do we need supply chain policy deployment?

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1. Supply Chain Policy Deployment

The concepts of supply chain management developed as a result of concerns about waste, pollution, duplication, stock holding, customer dissatisfaction, non-conforming products, social costs, and other non-value adding activities.

(to p4)

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Many businesses consider supply chain networks as key sources of competitive advantage, and not merely areas for cost improvements.

This perception led to changes in supply chain policies.

How to develop a supply chain policy?(to p7)

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To substantiate improvements and help organizations customize their supply chain policy deployment strategy, we present a framework for vertical implementation (see next slide). (to p8)

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New Supply Chain

New Capabilities

Favorable Outcomes

Unfavorable Outcomes

Further O

ptimization O

pportunityPrinciples of SCM

Environment

Stakeholders

System Integration/ Optimization/Synchronization

The Overall Performance of the SC

Catch Ball Deployment

Purposeful SC and Long-term Vision

Continuous

Improvem

ent/Reengineering

Guidelines for Vertical Implementation

Planning and Execution Processes

Purpose

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(to p29)(to p25)

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The key to implementing such guidelines systemically and successfully is being able to see the big picture and knowing how the components of our guidelines interact with each other.

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To be effective, as noted by Defeo and Janssen [2001], strategic deployment “should be used as a tool, a means to an end, not as the goal itself.”

DeFeo, J.A., and Janssen, A., “Strategic deployment: A key to profitable growth: Matching capabilities and plans to customer needs,” Measuring Business Excellence, 5(2), pp.4-5, 2001

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2. Purposeful Supply Chain

There must be a purpose for supply chains.

Some exist to supply predictable demand efficiently at the lowest possible cost, while others are designed to respond quickly to unpredictable demand with reasonable inventory

Examples: Efficient Supply Chains Responsive Supply Chains (to p12)

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This sense of purpose for supply chains is important. Otherwise, there will be no target for a supply chain to aim toward and no clear direction to follow.

More importantly, it must bear with a long term vision; otherwise it cannot be led into future development

(to p8)

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3. Principles of SCM

To effectively reconfigure organizations in the new global economy, a more prudent strategic thinking is needed.

This requires a more proactive approach in identifying what exactly comprises a unique policy deployment strategy portfolio.

7 Principles of SCM (to p14)

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7 Principles of SCM

1. Segment customers based on service needs

2. Customize the logistics network to the service requirements

3. Listen to signals of market demand and plan accordingly

4. Assemble the final product as close to the final marketplace as possible (to p15)

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Principles of SCM

5. Manage sources of supply strategically to reduce the total cost

6. Develop a supply chain-wide technology strategy

7. Adopt supply chain-wide performance measures to gauge collective success

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4. Catch Ball Deployment

To achieve supply chain excellence; strategic thinking and strategy development, policy deployment, employee involvement, supplier participation, team efforts, and dedicated programs are needed.

Why need catch ball deployment?

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Although many supply chain leaders and managers have recognized the importance of such an effort, the critical steps to achieve such a deployment remain unclear.

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The Catch-Ball Deployment model is thus adopted (see next slide).

This model involves: Content Process

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(to p20)

(to p8)

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SC Strategy

SC Segment Strategy Mix

SC Programs

Catch Ball

Catch Ball

Goals/Performance Indicators

Review/Continuous Improvement

SC Global Leaders (What)

SC Local Leaders (How)

Spin-off Teams (Empowered)

Catch-Ball Deployment

Efficient Supply Chains

Responsive Supply Chains

Making Strategies of Supplier Firms Sourcing Strategies of Manufacturing Firms Operational Strategies of Retailing FirmsWarehousing Strategies

Continuous Improvement Programs

Significant Improvement Programs

Level ofHierarchyand typeof problems

Goals

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(Catch-ball) Content

The entities in circles (i.e. supply chain strategy, supply chain segment strategy mix, and supply chain programs) represent the contents needed to attain the long-term supply chain vision.

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(Catch-ball) Content

The alignment of such entities enables managers to deploy the supply chain vision through the development of strategy portfolio and execution of strategy mix and programs, which in turn could help to institutionalize organizational, operational, and behavioral changes needed to manage the entire supply chain.

(to p18)

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(Catch-ball) Process

In order to tailor a supply chain strategy portfolio, all levels of employees and all supply chain members must participate in the deployment process. Catch-ball model is used to show how the process works.

In practice, these components involve … (to p23)

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(Catch-ball) Process

This process involves global supply chain leaders, local supply chain leaders, and spin-off teams.

Participants at each level need to identify plans and set priorities to ensure that the vision of the supply chain is deployed as intended.

They need to …..(to p24)

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(Catch-ball) Process

Frequent reviews and feedback from management can help organizations and team members to allocate their resources optimally and identify areas needing continuous or significant improvement.

(to p8)

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5. Planning and Execution Processes

Once a sound, solid foundation for a strategic plan has been developed and deployed along the catch-ball process, the business practices of an organization along the supply chain must be changed to reflect the new strategic intent.

How to do that ….. (to p26)

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To initiate a new process of change, major activities affecting business practices must first be identified and reviewed.

Example in Point: A furniture company (see next slide) (to p27)

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Customer Interface

Order Entry Logistics

(Shipment)Installation

The Traditional Way

Drawing

Forecasting

Preparing making/shipping

Using build-to-stock

Shipping to dealer’s warehouse

Reshipping to customer site for installation

Using software to show prices, product features, and delivery date

Using ERP

Sharing inventory information with dealers via Internet

Using build-to-order

Enhancing dealers’ confidence through reliable logistics services

Practicing postponement

The Implementation of New Strategy Mix

Planning/Execution Processes

How to know if it works? (to p28)

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Supply chain system is operationally and functionally stable when principles of SCM and catch-ball practices are endorsed by participants along the Planning/Execution processes .

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6. Supply Chain Capability

As noted by Prahalad and Hamel (1990), core competencies of a firm can be described as the collective learning of the organization.

The emphasis is on how to coordinate diverse skill sets and integrate them into the technical system.

What is SC capability in a SC firm?

Prahalad, C.K., and Hamel, G., The Core Competencies of the Corporation, Harvard Business Review, 90(3), 1990, pp.79-93.

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Supply chain capability is a vector of desired states for all the relevant competencies. ( will

discuss more in lecture 4, p 155)

Fisher et al. (2000) argue that corporations need to develop four core competencies in today’s business environment: forecasting, inventory planning, supply chain speed, and data accuracy.

Fisher, M., Raman, A., and McClelland, A.S., “Rocket science retailing is almost here, are you ready?” Harvard Business Review, July-August, 2000, pp.115-124.

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The overall objective of supply chain policy deployment is thus to develop a set of collective capabilities.

These capabilities are the foundation to adapt to supply chain challenges of having the right product in the right place at the right time and at the right price.

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7. Questions to Ponder• Do the following companies meet the

seven principles of Supply Chain Management? (1) Wal-Mart, (2) Lands’ End, and (3) Best Buy. Analyze and explain.

• What is Supply Chain Capability? Supply Chain Confidence? Which model do you think is best suited to measure supply chain success?

Hint: Christopher, M., and Lee, H.L., “Supply Chain Confidence,” available at http://www.standford.edu/group/scforum/welcome/supply chain confidence 021402.pdf (to p2)