Continuing… 

Right Supply Chain for your product

1^st Step:
Determine the nature of your product
Functional v.s. Innovative:
◆ Functional products: Stable predictable demand & long life cycles
Ex.) Staples, Detergent, Long lead time steel
◆ Innovative products: Unpredictable & short life cycle
Ex.) High Fashion, Entirely New Electronic devices.

Correlation Between nature of products and other Attributes 

Attributes Functional Innovative
Product Lifecycle > 2 years 3 months. to 1 year
Product margin Low High
Avg. forecast error 10% 40%~100%
Avg. stockout rate 1%~2% 10%~40%
Avg. forced season- 0% 10%~25%
end markdown

2^nd Step:
Determin Structure of the Supply Chain
Supply Chain Strategy Fitting

Factors related to Respondsiveness v.s. Efficiency
Responsiveness Efficiency
Primary Purpose Respond quickly Lowest possible cost
Manuf. Focus Deploy excess capacity High utilization
Inventory Strategy Deploy significant Generate high tums
Buffer or safety stock
Lead time Focus Invest in order to decrease Shorten if no cost increase
Supplier Selection Speed, Flexibility, Quality Price and Quality
Product Desigh Modular Design Minimize Cost, High
Postponement Performance 

Example
Supply Chain Types & Design Requirements

Factor	Efficient Supply Chains	ResponsiveSupply Chains
Operations strategy	Make-to-stock or standardized services; emphasize high volume, standardized products, or services	Build-to-order,make-to-order, or customized services; emphasize product or service variety
Capacity cushion	Low	High
Inventory investment	Low; enable high inventory turns	As needed to enable fast delivery time
Lead time	Shorten, but do not increase costs	Shorten aggressively
Supplier selection	Emphasize low prices; consistent quality; on-time delivery	Emphaseize fast delivery time; customization; volume flexibility; High-performance desigh quality

3^rd Step:Positioning your supply chain

Functional Products Innovative Products
Efficiency Supply Chain Match Mismatch
Responsive Supply Chain Mismatch Match 

Other Supply Chain Design Factors

・Location ・Transportaion and logistics ・Inventory and forecasting ・Marketing and channel restructing ・Sourcing and supplier selection ・Information and electronic mediated environments

・Product design and new product introduction ・Service and after sales support ・Reverse logistics and green issues ・Outsourcing and strategy alliances ・Metrics and incentives ・Global issues

Supply chain network design (1)

(Ex.) National Semiconductor’s facility network:
Production:
Produces chips in six different locations: four in the US, one in Britain and one in Israel. Chips are shipped to seven assembly locations in Southeast Asia.
Distribution:
The final product is shipped to hundreds of facilities all over the world.
20,000 different routes, 12 different airlines are involved, 95% of the products are delivered within 45 days, 5% are delivered within 90 days. 

Cost – Responsiveness Efficiency Frontier

Supply chain network design (2)
Logistics Cost related Trade-offs

Supply chain network design(3)
Logistics Costs and Required Respones Time

Supply chain integration (1)

Integration involves:
◆ Functional Integration (of purchasing, manufacturing, transportation, warehousing)
◆ Spatial Integration (across geographically dispersed vendors, facilities, markets)
◆ Hierarchical Planning (coherence and consistency among overlapping supply chain decisions at various levels of planning)

Supply chain integration (2)
Process integration : Cycle view

Supply chain integration (3)

Information Sharing & Decision support
Need for information technology & system
Intra-firm information systems;
Warehouse management systems;
Transportation management systems;
Intranet/Extranet;
MRP/ERP systems;
CRM systems.
MRP: material requirement planning, ERP: enterprise resource planning, CRM: customer relationship management.

Decision making in supply chain (1)
◆ Strategic level decision – (long term)
Location, capacity, new product development, technology management, modes of transportation.
Scale: Years.
◆ Tactical level decision – (medium term)
Inventory policies, distribution channel, resource and product allocation, subcontracting, promotion.
Scale: Month – year.
◆ Operational level decision – (short term)
Scheduling, vehicle assignments and routing, sourcing and production orders.
Scale: Minute, hour and days. 

Decision making in supply chain (2)

Information system in SCM
◆ Plan driven production management
(1) Master planning system MPS
(2) Material requirement planning MRP
(3) Capacity requirement plaining CRP

◆ Demand driven production management
(1) Forecast / Demand planning
(2) Distribution requirement planning DRP
(3) Production planning & scheduling
(4) Fulfilment planning 

Supply chain management function MAP

Information system fuction MAP

Supply chain collaboration 

□ Cometitive model
Cost in chain are assumed fixed, and manufacturer and retailer compete through price negotiation
□ Cooperative model
Cooperate to cut costs throughout the chain. Each company in the SC, has a part in the establishment of the price, quality and customer satisfaction aspects.
□ Inter-and intra-company integration is essential.
□ Building synergies by integrating business functions, departments and companies.

Internet – Enabled suppy chain

Business to business (B2B)
Product ordering
Sharing product information
Creating display space
Defining customer information
Co-developing products
Business to customer (B2C)
Sharing packing, shipping, inventory, product movement trends and forecasts with the supply chain partners.

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