Outcome Driven Supply Chain - Part 2
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Transcript of Outcome Driven Supply Chain - Part 2
Dr. Etinder Pal SinghFeb 24, 2012
Presented at MDP organized by Center for Management Development & UPES Dehradun
Consequences of Supply Chain Disruptions
•Impact of disruptions on supply chain performance:–Disruptions in the supply chain supply chain performance decreases
–Higher costs, lower delivery dependability, lower service level etc.
•Impact of disruptions on stock-related metrics and financial-statement metrics:–10% decrease in shareholder wealth –40% decrease in stock returns–107% drop in operation income–114% decrease in return on sales–93% drop in return on assets
Source: Hendricks and Singhal (2003, 2005a, 2005b) , Wagner and Bode (2008)
The consequences of disruptions are severe but are they the same for all firms?
We need to answer the following
• How do you design a supply chain for a specific desired outcome?
• When can outcomes be blended and under what conditions should they not be?
The Emergence of the Blended Outcomes
EnterpriseChallenge – How to achieve multiple objectives• Solution
– Blended Outcomes
Blending Outcomes
• Blending outcomes means making tradeoffs
• When blending outcomes,one should stand out
• Emphasis on the alignment of incentives within supply chain
• It complicates the outcome measurement process
• Some outcomes should not be blended (cost and innovation)
Success depends on• Critical SC drivers
– Demand driven (Walmart/Dell)– Supply driven (oil/gas)– Technology driven
• Global Cultural Differences• Location• Corporate culture (when boss is away)• Stage of product life
– Early stages (responsiveness, innovation,security)– Maturity (cost and resilience)
• “The only constant is change.”– Heraclitus, 600 BC, Greek philosopher
• “It is not the strongest of the species that survive, not the most intelligent, but the ones most responsive to change.” – Charles Darwin
Final Comments
• If we shift from old view of supply chains to the new view, we have to rethink the supply chain.
• To understand the new supply chains, we need to understand outcomes.
• The new supply chain must be designed to make the blended outcomes inevitable.
Thank you for listening!
Any questions?