supplier networks os jan 2014

8/13/2019 Supplier Networks OS Jan 2014

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Supply Networks

Lean supply networksToyota, Honda, Hero

Agile supply networksNokia, Cisco, Motorola


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Elements of process partnership relationships

Attitudes

Actions

Trust

Joint problemsolving

Joint co-

ordination of

activities

Joint

learning

Long-term

expectations

Sharing

success

Multiplepoints of

contact

Few relationships

Informationtransparency

Dedicated

assets

Closeness of

relationship


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Kankei Kaisha =dedicated supplier plants, Dokuritsu Kaisha = Independent supplier plants


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Agile Networks

Multi -sourcing more prevalent

Through agility in manufacturing facilities

Through network flexibility

Multi -sourcing more prevalent

Quick integration of suppliers (template based) Planned exit at end of contract period


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Second-tiersuppliers

First-tiersuppliers

SBU A

SBU B

Plant C

Second-tiercustomers

First-tiercustomers

xx

x

Focallevel

Upstream Downstream

Supply side of the network Demand side of the network

Flow of Products/ServicesFlow of Information

x x

Supply networks agility through change in supplier groups

Various other supply chain flexibilities such postponement, modularization of

products, and more customized products


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Design &Development

Distribution

Finished Goods

Manufacturing

Materials

Supply

Components

Supply

Warehousing Retailing

After-Sales

Support

Service

Centers

C

U

S

T

O

M

E

R

S

Promotion

& Sales

Flows of material,

information, money,

and knowledge

R

A

W

M

A

T

L

S

Agile Supply Networks (NOKIA- India)

Plastics

India

Supplier


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Quick supplier integration and planned exit

Template based integration of suppliers


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Supplier segmentation: identifying strategic suppliers


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Network Theory

Network lifecycle: Initiation, Configuration,

Implementation, stabilization,

transformation/dissolution

Network: Mission, Positioning, Resources,

Business Model

Organization: relationship with network


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A Network Lifecycle model


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Firms view of network management


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Network Strategy


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Aligning Firm view and Network view


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Thenetwork

view -

framewor


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IKEA network


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IKEAnetwork strategy components


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Alkzo Nobel case : Lack table (Future Biz)


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Becker Acroma case: IKEA - Network Exit


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Toyota Supplier Networks


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Partnership relationships are seen as desirable because

they can reduce the transaction costs of doing business

Supply Chain Management

k f


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Investment in supplier relationships - some key facts


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Attitudes

Actions

Trust

Joint problemsolving

Joint co-

ordination of

activities

Joint

learning

Long-term

expectations

Sharing

success

Multiplepoints of

contact

Few relationships

Informationtransparency

Dedicated

assets

Closeness of

relationship


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T p f ppl l ti hip


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Types of supply relationship

Partnership supply

relationships

Do nothing Do everything

The character of internal operations activity

Virtual spot

trading

Resource scope

Long-term

virtual operation Verticalintegration

Traditional

market

supplyTypeofinte

r-firmcontact

Transactional

manysuppliers

Close

few

s

uppliers

Wh n is th s f p r m rk t m h nisms ppr pri t in


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When is the use of pure market mechanisms appropriate in

buyersupplier relationships?

Low HighCost of changing suppliers

Market

mechanisms

inappropriate

Resource dimension

Marketmechanismsappropriate

Leverage needsuncertainty

Leverage

market

uncertainty

Numberofsupp

lyalternatives

Few

Many

Th l h i


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The supply chain


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Make-or-Buy Decisions

Criticality of item under consideration

Cost

Capacity issues including industry capacity

Strategic factors and competency buildingTechnology trends and obsolescence

No firm is an island: need for buying components

Factors to consider for make buy decisions

M k B E l t f f t i


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Make-or-Buy Examplecost of manufacturing

GE Company Cost of Making Part N900:Total Cost for Cost20,000 Units per Unit

Direct material $ 20,000 $ 1

Direct labor 80,000 4

Variable overhead 40,000 2

Fixed overhead 80,000 4

Total costs $220,000 $11

Another manufacturer offers to sell GE the same part for $10. Should GE

make or buy?


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Make-or-Buy Example

If the $4 fixed overhead per unit consists of

costs that will continue regardless of the

decision, the entire $4 becomes irrelevant.

If $20,000 of the fixed costs will be eliminated ifthe parts are bought instead of made, the fixed

costs that may be avoided in the future are

relevant.


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Relevant Cost Comparison

Make Buy

Total Per Unit Total Per Unit

Purchase cost $200,000 $10

Direct material $ 20,000 $ 1Direct labor 80,000 4

Variable overhead 40,000 2

Fixed OH avoided by

not making 20,000 10 0 0Total relevant costs $160,000 $ 8 $200,000 $10

Difference in favor

of making $ 40,000 $ 2

Vertically Integrated Products


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Vertically Integrated Products

make or buythe value chain design


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Make-or-Buy framework

Make or Buy


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Make or Buy


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Make or Buy

Make or Buy


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Make or Buy

Th l i Th IBM PC


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The classic case _ The IBM PC

The classic case The IBM PC


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The classic case _ The IBM PC

The IBM PC value chain


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The IBM PC value chain


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Make-or-Buy framework

Make or Buy strategic considerations


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Make or Buy strategic considerations

Kraljics Supply Matrix


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Kraljic s Supply Matrix

Kraljics supply matrix : Risk Impact Matrix


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STR TEGIC SOURCING


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C


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Consequences

Very long lead time

L1 syndrome (L1 is lowest bid)

Dissatisfied users

Poor exploitation of vendor potential andcommodity knowledge

Savings

- meager, short term and may be negative- based on false or inappropriate comparison

Purchase

R i itiPurchaseGBI


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Sales Order

Entry

Check

Availability

Procurement

Process

Pick

Materials

Requisition Order

Goods

Receipt

Invoice

Receipt

Payment

to Vendor

Post Goods

IssueInvoice

Customer

Receipt of

Payment

GBI

Exercise Roadmap

Run MRP

Procure to fulfill customer order


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Establish

procurement planning

process

Redesign strategic

sourcing processCreate cross-

divisional, cross-

geography

organization

STRATEGIC

PROCESSES

Commodity strategy

Professional development

Procurement Planning

TACTICAL PROCESSES

Supplier selection/management

Contracting and leverage

Materials management

Market/supplier analysis

TRANSACTIONAL PROCESSESOrder Management

Accounts payable

Inventory control/warehousing

DRIVE ACTIVITY

LEVELS DOWNPUSH SOURCINGFOCUS UP

Fewer spot buys

Fewer invoices

Fewer suppliers

Less manual work

Fewer stocked items

Paradigm Shift

What is Strategic Sourcing


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The twin dimensions of strategic sourcing

For commodities of medium spend & low criticality :

Rapid sourcing

Commodity study

For mega commodities :

Focuses on vendor consolidation

And quick hit savings

Focuses on optimizing totalSupply chain costs

sustained savings


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Fords A/c payable process


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p y p

Ford A/c payable process


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/ p y p

Process Improvement


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Best Practice : Total cost of procurement


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p

Total cost of procurementMany

supplierscompetitive market

Cost of goods Other costs*

Total cost of procurementL Trelationships with few suppliers

(Lean manufacturing)

Cost of goods Other

costs*



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Attitudes

Actions

Trust

Joint problem

solving

Joint co-

ordination of

activities

Joint

learning

Long-term

expectations

Sharing

success

Multiplepoints of

contact

Few relationships

Information

transparencyDedicated

assets

Closeness ofrelationship


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supplier networks os jan 2014

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