WEEK 2 Flashcards
Name the six drivers to ashive strategic fit
Facilities, Inventory, Transportation (Logistics)
Information, sourcing, pricing (cross-functional drivers)
Goal of the drivers? Are they independet?
Increase supply chain surplus. Supplychain structure should sitibably deal with implied demand uncertainty.
The drivers are not independent. They interact with each other.
What is IKEAs SC tactic?
Low price, acceptible quality. Unsamble furnitures, low component varity.
Facilities. And the role in the supply chain?
The physical locations in the supply chain network where products is stored, assembled or fabricted.7
- Direct influence on the level of repsonsiveness.
- More facillites = less transpirtation costs but more facilities and inventory costs.
Example. IKEA vs Seven-Eleven
The three components of facillities decisions
- Capability
- flexible or dedicated capacity?
- product- or functional-focused facility?
-cross-docking or storage? - Location
- Capacity
- Facility-related metrics (processing time, quality losses, produt varity…)
Inventory and its role in supply chain?
- To match supply and demand.
All raw materials, work in process, and finised goods within a supply chain.
Role in the Supply Chain:
- Littles law
- Match the supply and demand
- Prodcuing in large quantaites to fullfill the future demand
- Increases the responsiveness!
Example: Amazon books.
What is Littles law?
I=DT
D= thoughout
T= material flow time
I= avarage inventory
What are the components of inventory decisions?
- Cycle inventory
- Safety inventory
- Seasonal inventory
- Level of product invenotry (can you promise?)
- Inventory - related metrics avarafe (inventory, inventory turns, avarage safelty, seasonal invenotry)
Example of inventory
Amazon holds on avarage 100,000 units of books in stock
Sells 1000 a day
Little Law= 100,000/1,000=100 days on avarage in inventory
Transportation and role in supply chain?
Moves products between stages
Faster transportation = higher costs, but also higher level of responivness
Exmaple. Blu Nile uses FedEx
Components of transportatin decions
- Design of transportation network
- Choise of transportation mode
- Transportation related metrics (avarage in-/outbound transportation costs, shipment size)
Information and role in supply chain?
Data and analysis concerning facilities, inventory, transportation, costs, prices and costumers thoughout the supply chain.
Role in the supply chain:
- Impoves utilization and coordination of supply chain assets and flows
-Increase responsiveness
-Reduce costs
For exmaple: Walmart is cross-docking, airlines has discounted flights. DHL centralized integrated system.
Components of information descions
- Demand planning (clear time horizon)
- Coordination sharing
- Sales and operations planing
- Information related metrics (forecast horizon, frequency of upates, forecasr error…)
What is sourcing and its role in Supply Chain?
- To purchase goods
- Responsive or efficent source (otherwise KFC case)
- Internal source or third party
Example Zara.
Components of sourcing decions
- In-house or outsource
- Supplier selection
- Procurement
- Source-relarted metrics (days payable, avarage purchase, price, supply clead time…)
Example: Boing 787 case
Pricing and its role in Supply Chain?
- How much to charge the costumer
- Influence costumer expectation
- Match supply and demand
Example: Amazone (diffrent shipping services)
Components of Pricing Decisions
- Pricing and economies
- Everyday low pricing vs high-low pricing (Appie vs Lidl)
- Fixed price vs menu pricing
-Source-related metrics (profit margins, pays sales outstanding…)
Structuring drivers model
Competative Strategy —> Supply Chain Stategy —-> Drivers
What is the role of distrobution in SC?
The steps taken to move and store a product from the supplier stage to the costumer stage in a supply chain. Key driver to profit.
Affects SC cost + costumer value
Tex.
raw materials from supplier–>manufacture, finnished products from manufactoe—>costumer
Give example of distrobution in the cement industry. And successfull distrobutions:
- Cement industry (India): Distribution cost is about 30% of production and sale.
- The apparel retail industry: Distribution affects about 35% of the revenue.
Choise of distrobution can achive supply chain objectives from low cost to high responsiveness.
Walmart + Seven Eleven!
Two phases of designing a distrobution network:
- visulising the broad network (number of stages and their role)
-specifying the details (location, capability, capacaty, demand allocation)
Examplr, new TV set implementation in Europe, where do you wany yo store and sell it? Mediamarkt?
Example off companys and their distrobution network. P&G, Dell, HP, Gateway, Apple.
P&G:
-direct distrobution to large supermarkets
- extra stage when distrobutiong to small players
Dell: direct delivery to vostumer
HP: sale trhough retailers
Gateway: (direct delivery from factory) - bank rupt
Apple - sale through retailers
Distrobution tactics for small vs. big players?
Smaller players has contacts more close by, however big players has huger transportation and therefore they can afford distrobution center closer by.
What happened with Giant?
Had their wearhouse very far away, changed to have it in Lelystad.
Saved money on it in the end!
Restructer your network to keep up with the flactuating market.
Give example on factors that influenced your distrobutuion network design.
- Response time - barnes & noble stores
- Product variety - amazon
- Product avalibilty
- Costumer experience
- TIme to market
- Order visability
- Returnability -
How do you evaluate the performance of a distrobution network?
- Costumer value
- Costs of meeting costumer needs
What SC costs gets mainly affected when changing the distrobution network design?
- Inventories
- Transportation
- Facillities and handeling
- Information
(AKA the supply chain drivers)
Make a picture of the distrobution network design graph. Describe:
y-axel - Required Number of facillities
x- axel - Desired responsetime
Graph goes down from y -axel to x-axel.
Depends on your compentition strategy. Customers with
longer response time
tolerance =
fewer number of
facilities.
Customers with
shorter response
time tolerance = larger number of
facilities.
Describe the graph regarding the relation between inventory costs and number of facillites
Kolla bild.
Graph increases a lot in beginning and flattens out a bit more later on.
- When you increase the number of facillities, the invenotry costs increaseas.
- Firms try to combine their
facilities to fewer number.
Tex. With a fewer numbers of
facility Amazon turns
inventory twice as frequently
as Barnes & Noble.
Amazon has less facilities, but Barnes & Nibles has more stores.
Descibe the graph of the relation of facilities and transportation cost:
Transportation cost decreases among larger numbers of facillities.
HOWEVER:
The curve goes up after a while as there is more
need for transportation. The demand does not change. The small trucks gert exchanges to smaller trucks–> increases price.
It is a fine line!
What factors influences the transportation costs?
- Inbound transportation costs.
- Outbound transportation costs.
Outbound transportation costs per unit tend to be higher thaninbound costs, why?
Need smaller veichals - business looses economies of scale. Inbound can bring in a huge amount, however the stores cant store to much + chant drive huge trucks in the cities for exmaple.
Drop-shipping
Number of facillities and facility cost. Draw the graph of their relation.
Starts in the middle of the y -exes, increases more in the end.
Facility costs decrease as
the number of facilities is
reduced:
* Fixed cost due to installing
facility,
* Economies of scale with
fewer facilities.
Total logistic cost?
Total logistics cost = inventory + transportaton + facilitiy cost
Does having more facilities make sence?
It all depend on your compitative strategy to choose your
number of facillities. Check slide 19.
Distribution network choices from the manufacturer to the end
consumer. There are two key decisions:
- Will product be delivered to the costumer locastion or picked up from a prearagned site?
- Will product flow through an intermediate location?
There are 6 different design options for a distrobution network. Name these six. One of these may be used:
- Manufacturer storage with direct shipping,
- Manufacturer storage with direct shipping and in-transit merge,
- Distributor storage with carrier delivery,
- Distributor storage with last-mile delivery,
- Manufacturer/distributor storage with customer pickup,
- Retail storage with customer pickup
Manufacturer storage with direct shipping. Write up the stages. Advantage + disadvanteges.
Product is shipped directly from manufacturar to the end costumer
Advantage: The retailer carries not inventory, manufacturer can postpone c
3 steps towards a Zone of strategic fit
For a high level of performance, companies should move their competitive strategy (and
resulting implied uncertainty) and supply chain strategy (and resulting responsiveness) toward
the zone of strategic fit.
- Assign roles to different areas of the SC to ensure an aropriate level of strategic fit. Depending on what your compatitave strategy is.
- Last step is to find match SC responsiveness with the
implied uncertainty from demand and supply.
Manufactorstorage with direct shipping - describe inventory, transportation, facilities and handeling, information.
Inventory: Lower cost due to aggregation. Benefit if low demand, high valued products, costumized products.
Transportation: Higher costs due to increased distance and disaggregate shipping.
Facillities and handeling: Lower facillities costs due to aggreagtion. Saving handelung cost if manufactorer can handel small shipments from productionline.
Information: Significant investment in information infrastucture to intigrate manufactorer and retailer.
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