The Triple-A Supply Chain

Outline of discussion

Introduction Perils of efficiency Fostering agility Adapting your SC

Creating the right alignment

7-Eleven Japans three aces Conclusion

Three As

Agile

React speedily to sudden changes in demand & supply

Adaptable

Adapt supply networks when markets or strategies change

Aligned

Align interest of SC partners with their own

Perils of efficiency

Focus on economies of scale Inability to respond quickly to changes Discounts New product launch

Cannot adapt to change in market structures

Lucents Electronic Switching Systems

Agile chains

Both quick & cost efficient big price for disregarding agility

Compaq

Exemplary chains

H&M, Mango, Zara

Better quipped to recover from sudden shocks

Dell vs. Compaq, Apple & Gateway

Nokia vs. Ericsson

Fostering agility

Rules of thumb

Share real time data with partners Collaborate with suppliers and customers Postponement Keep small inventory of inexpensive, non-bulky materials Build dependable logistics system by 3 PL collaborations Have contingency plans

Adapting your supply chain

Identify structural shifts by capturing latest data & tracking key patterns

HP ink-jet printers supply chain

New products or new markets More than one supply chain

Cisco Gap

Defining appropriate markets

Level of technology Stage of PLC Prius, Toyota

Adapting your supply chain

Spot changes/ future patterns

Track economic changes, specially in developing countries Decipher needs of ultimate customers to avoid bullwhip effect

Change supply networks

Develop new suppliers to complement existing ones DFS (commonality, postponement and standardization)

Creating the right alignment

Problem of misalignment

Cisco supply chain

Why VMI has not reduced costs?

Aligning interests
Redefine terms of relationship to share risks, costs & rewards

Align information
Align identities Align incentives

Predict possible behavior of partners

RR Donnelley Saturn service parts chain

Supply chain of 7-Eleven Japan

Competitive strategy

Micro-matching supply and demand

Replenishment cycle time less than 12 hours for fresh & fast-food (3 times a day delivery for rice dishes)
Rapid replenishment for responsiveness High cost of transportation and receiving at stores Aims to aggregate transportation and receiving to make both cheaper Transfleet Ltd. (set up by Mitsui & Co.) for exclusive use of 7-eleven Japan Flexible to get both efficiency and responsiveness

Supply chain design

Transportation

Supply chain of 7-Eleven Japan

Location: Area dominance strategy

Both franchise & Co. owned network of stores Small size of stores Lowers cost of replenishment

Centralized facilities

Dedicated manufacturing plants Dedicated Distribution Centers (DCs) which carried no inventory

Supply chain of 7-Eleven Japan

Combined distribution system

All suppliers deliver to the DC where products are sorted by temperature Maximum benefit of aggregation of capacity & demand Reduces outbound transportation cost from DC because of aggregation of deliveries across multiple suppliers & retail stores Lowers receiving cost & minimizes disruption at retail outlets Lower transportation cost to DC from manufacturer

Better utilization of trucks

Supply chain of 7-Eleven Japan

Direct store delivery by suppliers appropriate if

Items being delivered do not need bulk broken at a DC (stores are large and nearly-full truck load quantities are coming from a supplier to a store) Have special handling requirements Supplier has information system integrated with stores

Supply chain of 7-Eleven Japan

Inventory

Aggregation, run on information system Minimize total system inventory Allow store managers to place orders based on analysis of consumption data Transmits POS information directly to the supplier and distribution center Goods are produced using a pull system to replace what has been sold during that delivery period Facilitates the sorting of an order at the DC and receiving of the order at the store

Information infrastructure

Supply chain of 7-Eleven Japan

7dream.com

Are customers ready to take deliveries from store? Can use existing distribution network Better utilization of trucks Use storage space Extra work at stores given the existing distribution network the frequency of visits by customers

More successful in Japan

Supply chain of 7-Eleven Japan

Duplicating structure of supply chain in US

Lower density of stores Larger distance between stores getting both direct store deliveries as well as wholesaler deliveries to its stores Customers have many other options Cost of operating in suburban/ rural regions will be extremely high

Supply chain of 7-Eleven Japan

Distributors add more value in US

Lower store density in US distributors aggregate bulk less transportation, material handling, and labor costs for 7- Eleven system overall loss of control increased number of deliveries to each store difficulty of integrating information flows across disparate systems

Advantages

Disadvantages

7-Eleven Japans three aces

Agility

Through real-time information sharing supported by location, transport, inventory strategies Changed strategy with time & location Clear incentives and disincentives Works with suppliers to develop products & share revenues 7dream.com created with 6 partners

Adaptability

Alignment

Conclusion

Adopting triple A

Does not necessarily need more technology & investment Needs a change of mind-set

Look beyond efficiency Keep changing network Look beyond organizational boundaries & take care of entire network