MD 021 - Management and Operations

Supply-Chain Management
Outline

Definitions

Developing the supply chain

Strategic management of the supply chain

Definitions

Supply Chain
The interconnected set of linkages between suppliers of materials and services
that spans the transformation of raw materials into products and services and
delivers them to a firms customers

Supply Chain Management

Synchronizing a firms functions and those of its suppliers to match the flow of
materials, services, and information with customer demand

Developing the Supply Chain

Make vs. Buy

Make

Buy

Pros
Increased control over price,
quality, etc.
Economies of combined
operations
Proprietary products protected
Low capital costs
Specialization
Competition
Increased flexibility

Cons
Capital costs
Reduced flexibility to change
partners
Reduced volume flexibility
Unfavorable allocation of
product
Lack of control over price,
quality, etc.
Transaction costs

Developing the Supply Chain

Supplier Relations
Competitive Orientation
The view that negotiations between buyer and seller is a zero-sum game.
Often used when a firm represents a significant share of the suppliers sales or
many substitutes are available. Example: WalMart
Cooperative Orientation
The view that the buyer and seller are partners. Includes sole sourcing. Often
used with strategically important and/or high value-added components.
Example: McDonalds
Mixed strategy
Seeks to combine the advantages of the competitive orientation (e.g. low
prices) with the cooperative orientation (e.g. few suppliers). Example: Dell
Computer

Strategic Management of the Supply Chain

Efficient Supply Chains
The purpose of efficient supply chains is to coordinate the flow of materials
and services so as to minimize inventories and maximize the efficiency of the
manufacturers and service providers in the chain. Efficient supply chains work
best when demand is predictable and products/services are stable. Examples
of competitive priorities: low cost, consistent quality, on-time delivery.
Responsive Supply Chains
The purpose of responsive supply chains is to react quickly to market demands
by positioning inventories and capacities in order to hedge against
uncertainties in demand. Responsive supply chains work best when demand is
unpredictable, new product introduction is frequent, and product variety is
high. Examples of competitive priorities: development speed, fast delivery,
customization, volume flexibility, high-performance design quality.