supply chain management: from a “necessary evil” to a ... · supply chain management: from a...
TRANSCRIPT
3/6/2014
1
Supply Chain Management:
from a “necessary evil” to a
“core organisational competency”
Dr Sinéad Roden
Senior Lecturer in Operations & Supply Management
Director of Studies for MSc in Global Supply Chain Management
Marketing/sales
2
Supply Chain
Management
31
Corporate strategy
17 IT strategy
17
Benefits/Actuarial
16
Organisational
design
11
Financial
6
Percentage of world revenues of 40 largest consultancy
firms
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2
Agenda for this evening
Defining supply chain and supply chain
management
The challenges in managing supply chains
Supply chain risk management • What is it and how can it be implemented?
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What is Supply Chain
A supply chain is the flow of physical goods,
information, people and finance
Suppliers/
Mfg plants
Distribution
centres Warehouses
Retail stores
Head office
Physical goods
Information
Finance
Managing the information flow is becoming increasingly important.
Definition of SCM
Supply chain management is concerned with the efficient
integration of suppliers, factories, warehouses and stores so
that goods and services are produced and distributed:
• In the right quantities
• To the right locations
• At the right time
In order to • Minimize total system cost
• Satisfy customer service requirements
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The Evolution of SCM
Old paradigm - Firm gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities.
• Focus on mass production; purchasing efficiency & aggressive negotiation.
New paradigm - Firms in a supply chain focus activities in their area of specialization (core competency) and enter into voluntary and trust-based relationships with supplier and customer firms • Focus on sensing customer demand & responding (agility)
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Supply Chain Disruption Map
Why are Supply Chains Increasingly
Vulnerable?
What is making supply chain management difficult:
• Global Sourcing – Increasing number of hand-offs, not necessarily location
• Lean Operations – Reduced inventories; JIT
• Supply Chain Complexity – Globalisation and outsourcing
• Supply Base Reduction – Prevalence of sole sourcing
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Dependency on key suppliers
Intellectual property risk
Supply delays / labour disputes • East coast port Strike
Inbound quality
Inventory risks
• Dangers of obsolescence
IT / information risks
Supply Risks
Demand Risks
Short lifecycles
Global economy
Forecasting
Drop in demand • Product disaster (recalls)
• Fad Volatility
• New Product Uncertainty
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Economic Risks Environmental Riskssks
Economic fluctuations,
such as exchange rates
Commodity price shifts
Regulatory changes
Terrorism & war
Weather
Natural disasters
Source: UN Environment Programme
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What is Supply Chain Risk Management
“the management of supply chain risks through
coordination or collaboration among the supply chain
partners so as to ensure profitability and continuity” (Tang,
2006).
……a supply chain is only as strong as its weakest link!
24%
34%
27%
15%
Assessment of SC Risks
No formal assessment Qualitatively/Intuitviely
Rough Quant Estimate Detailed models
What is the state of SCRM in industry today?
Studies indicate a lack of preparation
55%
17%
28%
Tenure of SC Risk Programme
No formal programme
In place < 12 months
In place > 12 months
Sources: Aberdeen Group, McKinsey Quarterly
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How can we manage increasing risk
and vulnerability?
HIGH
VULNERABILITY
Consequences
Dis
rup
tio
n P
rob
ab
ilit
y
Light
High
Low
LOW
VULNERABILITY
Assessing Risk
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Consequences
Dis
rup
tio
n P
rob
ab
ilit
y
Light
High
Low
Loss of key
supplier
Avian Flu
IT System
Failure
Earthquake
Transportation Link
Disruption
Computer
Virus
Employee
Sabotage
Product failure
Avian Flu
(Tang, 2006)
Risk Management
Product Management
Demand Management
Information Management
Supply Management
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Supply
Management
Demand
Management Product
Management
Information
Management
Strategic plans Supply network
design.
Product rollovers,
and product
pricing.
Product variety. Supply chain
visibility.
Tactical plans Supplier selection,
supplier order
allocation, and
supply contracts.
Shift demand
across time,
markets, and
products
Postponement,
process
sequencing.
Information
sharing, Vendor
Managed
Inventory,
Collaborative
forecasting.
(Tang, 2006)
Risk Manageme
nt
Product Management
Demand Management
Information Management
Supply Managemen
t
Strategies based on Redundancy and Flexibility
Redundancy Flexibility
1. Inject safety stock
• Buffer uncertain and variable
demand and supply
• Not lean
2. Add excess capacity
• Operational equivalent of safety
stock
• Internal or through supply network
1. Interchangeability
• Modular plants
• Modular processes
• Modular products
2. Visibility
3. Increase agility
4. Postponement
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Contingency Planning
Establishing a pre-set course of action for an anticipated scenario.
i.e. virtual buffering, because it involves securing buffers only when needed, rather than holding them continuously in advance.
Use when the risk from an event becomes more severe.
Do not hold resources, but instead develop a plan for obtaining them when needed.
E.g. flexible supply contracts, multi-sourcing, reserve shipping capacity, temporary workers.
E.g. contracts with alternative suppliers to provide backup in case of disruption.
Philips Chip Factory
Ericsson Mobile Phones
Nokia Mobile Phones
• Shipment discrepancies noticed
within 3 days.
• Philips is pushed hard.
• New supply sources.
• New chip design.
• Global capacity grab.
• Problem undiscovered for weeks.
• Slow chain of command.
• Slow response.
• Capacity already taken.
• $400M revenue loss.
• Exits phone manufacture.
Contingency Planning:
The Mobile Phone Supply Chain
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Conclusions
Supply chains are increasingly vulnerable to disruption due to macro trends and supply chain design
There is a lack of preparation within industry today
To be a global business, supply chain risk management is a necessity. The key is to determine how to do it efficiently and effectively.