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Global Sourcing, or“What’s a ‘Supply Chain?’”
Dr. Ron LembkeOperations Management
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Old View of the World
One company does all processing, from raw material through delivery
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Supply Network View of the World
• Integrated international networks of companies process, produce and distribute products.
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Spring Hill, Tennessee
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Saturn Layout
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Computer Example
Wacker Siltronic makes silicon wafers: buy sand grow into long crystals slice into thin wafers
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Chip ProductionChip burned in a $2b “wafer fab”Wafer cut into chips and “packaged”
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CD DriveChip stuffed onto board by Flextronics, Celestica, etc.CD drive assembled by separate contract manufacturer
Green Printed Circuit Board from different supplier
CD drive, with a brand name on it, sold to Gateway
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SUPPLY CHAIN DESIGN
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Supply Chain Design
Efficient – economies of scale. TP, toothpaste, landlines, routers
Responsive – Changing consumer needs, mass customization, build-to-order
Computers, fashion apparelRisk-Hedging – pooled resources, multiple sources of supply, more inv., share inv., need good IT
Server parts, some ag products, powerAgile – responsive to changing needs, pooled resources: Foxconn/Apple
EfficientRisk-Hedging
ResponsiveAgile
Low HighLow (stable)High (evolving)
SupplyUncert.
Demand Uncertainty
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Mass Customization
Dell perfected: exactly what you want, how you want, cheaper than off the shelfHighly customized
Integrate design, processes, supply networkSupply components cheaply to production pointsFast, responsive production, quick deliveryHigher value, lower weight
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Managing the Supply ChainPostponement -- withhold any modification until as long as possible. Keep product generic “vanilla”
HP BenettonHome Depot paint department
Channel Assembly -- have distributor assemble products from components
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HP Inkjet Printers
Printers made in Vancouver, sent via ship through Panama Canal to EuropeEurope warehouse stocks inventory by country
physically different-- power supplymanuals different languagesSubstitution not allowed
Re-supply time very long
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Euro Plugs
No standardized power supplies for EuropeDifferent power supply for every country.
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HP Inkjet PrintersRedesigned printers so that power supply added in Europe
Re-engineer product, power supplyAssembly done in a warehouse (Quality?)Manuals added in EuropeMany expensive changes
Store ‘vanilla’ boxesPostpone point of differentiation25% cost reduction
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Delayed Customization
Production Storage Shipping Storage
Before
After
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BenettonSweaters of undyed wool, dyed once demand is knownDyeing LT much faster than productionHow many undyed sweaters to make?How many Red, Green, Blue, also, if this production process is cheaper, and you know you’ll sell some minimum amount?
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Behr Paints
Small # of basesSmall # tintsUnlimited # combinationsKeep stock colors on hand?
How many gallons?Which ones?Lower labor costsHigher inventory costs
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Modular Components Take advantage of modules: parts or products previously preparedRestaurants: prepared ingredients, assembled to orderSuppliers can develop new, interesting products to use more quickly, cheaply Variety is gained by different combinations of same components
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Summary
What’s a Supply Chain?Examples: Saturn, computer chips
Supply Chain design:Efficient, Responsive, Risk-Hedging, Agile
Mass CustomizationPostponement
HP, Benetton, Home Depot paintChannel assembly