GSCM Tutorials - Suggested Answers Student PDF

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GSCM topical and short case tutorial...

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Global Supply Chain Management Topical Tutorial Tutorial 1 1 Managers often overlook ensuring that everyone on their team is using the same terminology. To keep everyone on the same page in order to communicate and promote the ideas of SCM at your company how would you explain the following terms? i)

supply

ii)

supply chain

iii) supply chain management by Council of Supply Chain Management Professionals (CSCMP) A supply is defined as: a)

The quantity of goods available for use or

b) The actual or planned replenishment of product or component. The replenishment quantities are created in response to demand for the product or component or in anticipation of such a demand. A supply chain is the set of value-adding activities that connects a firm’s suppliers to the firm’s customers. It consists of all parties involved, directly or indirectly, in fulfilling a customer request. It is the system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer. Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies. 2 Toyota and General Motors work very closely with their supply chain members. A typical supply chain may involves a variety of member/stages/entities, describe these stages and the three different supply chain flows involved which integrate the key business processes from raw materials to the final consumer stage. The stages are:

Customers

Retailers Wholesalers/distributors Manufacturers Component/raw material suppliers Transporters Product flow: includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs. Financial/Funds flow: consists of credit terms, payment schedules, and consignment and title ownership arrangements. 1

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Information flow: involves transmitting product information, orders and updating the status of delivery. 3. Successful SCM requires many decisions relating to the three supply chain flows. Discuss the objective of a supply chain. Briefly explain the three phases of supply chain decisions and the impact of supply chain decisions on the success of a firm. The objective of a supply chain should be to maximize overall supply chain profitability. Supply chain profitability is the difference between the revenue generated from the customer and the total cost incurred across all stages of the supply chain. Supply chain decisions may be characterised as strategic (design), planning, or operational depending on the duration over which they apply. Strategic decisions relate to supply chain configuration. These decisions have a long-term impact lasting several years. Planning decisions cover a period of a few months to a year and include decisions such as production plans, subcontracting, and promotions over that period. Operational decisions span from minutes to days and include sequencing production and filling specific orders. Strategic decisions define the constraints for planning decisions and planning decisions define the constraints for operational decisions. Supply chain decisions have a large impact on the success or failure of each firm because they significantly influence both the revenue generated as well as the cost incurred. Successful supply chains manage flows of product, information, and funds to provide a high level of product availability to the customer while keeping costs low. 4 To explain the ideas of supply chain management in a way that could be operationalize, we can begin by viewing supply chain as a sequence of processes and flows that take place within and between different stages and combine to fill a customer need for a product. Describe the: a)

cycle view of supply chain processes

b)

push/pull view of supply chain processes

c)

supply chain macro processes

A cycle view of a supply chain divides processes into cycles, each performed at the interface between two successive stages of a supply chain. Each cycle starts with an order placed by one stage of the supply chain and ends when the order is received from the supplier stage. The cycles are the customer order cycle, replenishment cycle, manufacturing cycle and procurement cycle. The customer order cycle occurs at the customer/retailer interface and includes all processes directly involved in receiving and filling the customer. The replenishment cycle occurs at the retailer/distributor interface and includes all processes involved in replenishing retailer inventory. The manufacturing cycle typically occurs at the distributor/manufacturer (or retailer/manufacturer) interface and includes all processes involved in replenishing distributor (or retailer) inventory. The procurement cycle occurs at the manufacturer/supplier interface and includes all processes necessary to ensure that the materials are available for manufacturing according to schedule. A push/pull view of a supply chain characterizes processes based on their timing relative to that of a customer order. Pull processes are performed in response to a customer order while push processes are performed in anticipation of customer orders. All supply chain processes can be classified into three macro processes based on whether they are at the customer or supplier interface or are internal to the firm. The CRM macro 2

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process consists of all processes at the interface between the firm and the customer that work to generate, receive, and track customer orders. The ISCM macro process consists of all supply chain processes that are internal to the firm and work to plan for and fulfill customer orders. The SRM macro process consists of all supply chain processes at the interface between the firm and its suppliers that work to evaluate and select suppliers and then source goods and services from them. 5.

Could a firm have more than one supply chain?

Most firms do. If firms carry or sell different types of products, each has an associated supply chain. 6. one.

Identify the three key supply chain decision phases and explain the significance of each

Supply chain decisions may be characterized as strategic (design), planning, or operational depending on the duration over which they apply. Strategic decisions relate to supply chain configuration. These decisions have a long-term impact lasting several years. Planning decisions cover a period of a few months to a year and include decisions such as production plans, subcontracting, and promotions over that period. Operational decisions span from minutes to days and include sequencing production and filling specific orders. Strategic decisions define the constraints for planning decisions and planning decisions define the constraints for operational decisions. 7. Discuss the goal of a supply chain and explain the impact of supply chain decisions on the success of a firm. The goal of a supply chain should be to maximize overall supply chain profitability. Supply chain profitability is the difference between the revenue generated from the customer and the total cost incurred across all stages of the supply chain. Supply chain decisions have a large impact on the success or failure of each firm because they significantly influence both the revenue generated as well as the cost incurred. Successful supply chains manage flows of product, information, and funds to provide a high level of product availability to the customer while keeping costs low. 8. Consider the supply chain involved when a customer purchases a book at a bookstore. Describe the four cycles in this supply chain and identify the location of the push/pull boundary. The customer order cycle connects the customer with the retailer; this connection is made as the book is selected and paid for by the customer. The replenishment cycle connects the retailer and the distributor and is triggered by the retailer’s need to fill the empty shelf space with another copy of this book. The manufacturing cycle connects the distributor and the manufacturer. As demand for the book is realized and distributors empty their warehouses, they signal the manufacturer to print another million copies to fill their empty warehouses. Finally, the procurement cycle connects the manufacturer and the supplier. The manufacturer requires raw material inputs of paper, ink, etc., to begin the assembly process for another batch of the book. The push/pull boundary exists where demand switches from reactive (pull) to speculative (push) production. For most bookstore supply chains the push/pull boundary is between the customer order cycle and the replenishment cycle. The customer order pulls the book from the 3

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book store shelf but the initial production of the book was triggered by a build order that moved materials along the supply chain to the retail outlet. Tutorial 2.1 1. Strategy’s most important role is to define a company’s business model which is illustrated in the example of P&G. Describe briefly four company’s strategies of a typical company and also list four other areas of functional strategies.

Competitive strategy defines the set of customer needs a firm seeks to satisfy through its products and services. Product development strategy specifies the portfolio of new products that the company will try to develop. Marketing and sales strategy specifies how the market will be segmented and product positioned, priced, and promoted. Supply chain strategy determines the nature of material procurement, transportation of materials, manufacture of product or creation of service and distribution of product

The functional strategies are finance, accounting, information technology, human resources, etc 2. For any company to be successful, all its strategies must fit together. Explain how P&G or a typical company achieves strategic fit.

i) The competitive strategy and all functional strategies must fit together to form a coordinated overall strategy. ii) The different functions in a company must appropriately structure their processes and resources to be able to execute these strategies successfully. iii) The design of the overall supply chain and the role of each stage must be aligned to support the supply chain strategy. 3.

Explain why achieving strategic fit is critical to a company's overall success.

A lack of strategic fit between the competitive and supply chain strategy can result in the supply chain taking actions that are not consistent with customer needs, leading to a reduction in supply chain surplus and decreasing supply chain profitability. Strategic fit requires that all functions and stages in the supply chain target the same goal, one that is consistent with customer needs. 4. Describe how a company achieves strategic fit between its supply chain strategy and its competitive strategy.

To achieve strategic fit, a company must first understand the needs of the customers being served, understand the uncertainty of the supply chain, and identify the implied uncertainty. The second step is to understand the supply chain's capabilities in terms of effi-ciency and 4

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responsiveness. The key to strategic fit is ensuring that supply chain responsiveness is consistent with customer needs, supply capa-bilities, and the resulting implied uncertainty. 5. A deep held belief at P&G is that “the consumer is boss”. Customer is an integral part of supply chain level. The demand from customer from different segments varies along six attributes. Describe these attributes. Quantity of product needed in each lot Response time customers will tolerate Variety of products needed Service level required Price of the product Desired rate of innovation in the product 6. The challenge for today’s supply chain leaders is ………. designing supply chains to better meet consumers’ and customers’ needs…… Every supply chain has to be tailored for strategic fit to achieve the balance between responsiveness and efficiency. Describe the six major drivers that can help a company to improve supply chain per¬formance in terms of responsiveness and efficiency. Facilities places where inventory is stored, assembled, or fabricated production sites and storage sites Inventory raw materials, WIP, finished goods within a supply chain inventory policies Transportation moving inventory from point to point in a supply chain combinations of transportation modes and routes Information data and analysis regarding inventory, transportation, facilities throughout the supply chain potentially the biggest driver of supply chain performance Sourcing functions a firm performs and functions that are outsourced Pricing Price associated with goods and services provided by a firm to the supply chain

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Having more facilities generally makes a chain more responsive, whereas having few, central facilities creates higher efficiency. Holding higher levels of inventory increases the responsiveness of a supply chain, whereas keeping inventory low increases the chain's efficiency. Using faster modes of transportation increases a chain's responsiveness, whereas using slower modes generally increases efficiency. Investing in information can vastly improve the supply chain performance on both dimensions. This investment, however, must be done based on the strategic position supported by the other drivers. 7.

Discuss the importance of expanding the scope of strategic fit across the supply chain.

The scope of strategic fit refers to the functions and stages within a supply chain that coordinate strategy and target a common goal. When the scope is narrow, individual functions try to optimize their performance based on their own goals. This practice often results in conflicting actions that reduce the supply chain surplus. As the scope of strategic fit is enlarged to include the entire supply chain, actions are evaluated based on their impact on overall supply chain performance, which helps increase supply chain surplus. 8.

Identify the major drivers of supply chain performance.

The major drivers of supply chain perfor-mance are facilities, inventory, transportation, and information. 9. Discuss the role of each driver in creating strategic fit between the supply chain strategy and the competitive strategy. A company achieving strategic fit has found the right balance between responsive-ness and efficiency. Each driver affects this bal-ance. Having more facilities generally makes a chain more responsive, whereas having few, central facilities creates higher efficiency. Holding higher levels of inventory increases the responsiveness of a supply chain, whereas keeping inventory low increases the chain's efficiency. Using faster modes of transpor-tation increases a chain's responsiveness, whereas using slower modes generally increases efficiency. Investing in information can vastly improve the supply chain perfor-mance on both dimensions. This investment, however, must be done based on the strategic position supported by the other drivers. Tutorial 3.1 1 Amazon.com realized that there are several key factors in designing distribution network; identify these key factors to be considered for designing a good distribution network. Amazon must consider the customer needs to be met and the cost of meeting these needs when designing the distribution network. Some key customer needs to be considered include response time, product variety/availability, convenience, order visibility, and returnability. Important costs that managers must consider include inventories, transportation, facilities and handling, and information. Increasing the number of facilities decreases the response time and transportation cost but increases inventory and facility cost. 2. Firms looking to designing global distribution network have several major decisions to make. Describe the two key decisions when designing a distribution network. Will the product be delivered to the customer location or picked up from a preordained site? Will product flow through an intermediary? 6

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3. Describe the role that distributors play in the supply chain. Distributors add significant value to the supply chain if there are many small retailers to be replenished by the manufacturer. Distributors improve supply chain performance by decreasing transportation costs through aggregation of inbound and outbound shipments, decreasing inventory costs by aggregating safety inventories, stabilizing the stream of replenishment orders to manufacturers, providing one-stop shopping, and decreasing the response time relative to what manufacturers can provide. 4 Home Grocery is a new company that makes same-day deliveries of groceries to people’s home. (i)

List any six types of distribution networks. 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 or Distributor Storage with Consumer Pickup Retail Storage with Consumer Pickup

(ii)

Identify and describe briefly the appropriate distribution network used by Home Grocery. The company is launching its business in the North of Singapore. Distributor Storage with Last Mile Delivery. Inventory is held at the farm warehouse which delivers to customer using milk runs.

(iii) Discuss how labour costs are impacted/considered by using such a distribution network.  In areas with high labour costs.  it is very hard to justify the option of distributor storage with last mile delivery on the basis of improved margins. (iv) Discuss any four reasons how transportation costs are impacted/considered by using such a distribution network. Transportation costs will be highest. This option may somewhat become cheaper in large, dense cities. Transportation costs may also be justifiable for bulky items where the customer is willing to pay for home delivery.  High population density is able to decrease transportation costs which reduce costs.   

5. Discuss the strengths and weaknesses of various distribution options. Distribution networks that ship directly to the customer are better suited for large vari-ety of high-value products that have low and uncertain demand. These networks will carry low levels of inventory but incur high trans-portation cost and provide a slow response time. Distribution networks that carry local inventory are suitable for products with high demand, especially if transportation is a large fraction of total cost. These networks incur higher inventory cost but lower transportation cost and provide a faster response time. 7

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6. What types of distribution networks are typically best suited for commodity items. Retailer storage with customer pickup 7. What type of networks is best suited to highly differentiated products. Under high product variety, manufacturer storage with pickup or manufacturer storage with direct shipping 8. Companies should design their global supply chain networks holistically by simultaneously considering several supply chain members’ locations. List who are these supply chain members’ locations that must be considered to ensure the entire system is optimized and will not require a redesign for at least 5 to 10 years because it is often expensive to accommodate large shifts in distribution networks....