1.1.

MAJOR SUPPLY CHAIN DRIVERS

1.1.1. Six Major Change Drivers

External Change Drivers:

1. Technology
1. Globalization
2. Empowered Consumers
3. Government Policy and Regulation
4. Sustainability
5. Organizational Consolidation and Power Shift

1. TECHNOLOGY

“Technology is a facilitator of internal process and supply chain transformation. It is also a

major force in changing the dynamics of the marketplace.”

The internet is “connected” 24/7

Social networks. Impact on customer demand and the speed of information transfers

The world’s “knowledge pool” connection. Opportunities for collaboration in supply chains.

2. GLOBALIZATION

“Globalization causes volatile supply chains, shorter product life cycle and expands business
boundaries.”

Inventory management challenges

- Faster duplicability of products and services
- Faster reduction in demand
- Requirement of new pricing policies
- Higher risk of obsolescence

Longer and more complex supply chain challenges

- Growth and increased scope of outsourcing

In modern society, goods and services are not produced locally for domestic consumption,
but are sourced/manufactured from multiple locations intended for global distribution and
consumption.

For example, iPhone 12.

Different sources from different countries.
Assembled in China.
Bluetooth and components from Japan, Italy, Germany.
3. EMPOWERED CONSUMERS

“Consumers are empowered by exponentially expanded access to product sources and

related information and increased buying power due to high income levels.”

Increased pressures on supply chain due to increased demands at the retail level in terms
of:
- Competitive prices
- High quality in products and services
- Tailored or customized products
- Convenience and responsiveness – 24/7 availability with a minimum of wait time
- Flexibility – omnichannel distribution strategies

For example, a student from KB. Studying in UBD

Shirt from Uniqlo - Vietnam
Bag from Nike – India
Laptop from Apple – China
Haircare from Sunsilk – Thailand

4. GOVERNMENT POLICY AND REGULATION

“More competitive environment is a result of the deregulation of several important sectors

in the United States occurred in the 1980s and 1990s.”

The transportation industry. Expanded services beyond transportation, with service

providers’ role evolving to outsourcing partners

The financial sector. More flexible and responsive to customer needs, making businesses
more cognizant of supply chain management impact on efficiency and cash flow.

The communications industry. A component of the information revolution, leading to

dramatic improvements and opportunities in logistics and supply chains.

5. SUSTAINABILITY

“The pursuit of sustainability is widely recognized as a key element of a successful supply

chain management. This is critical to effective risk management and achieving competitive
advantage.”

Society. Focus on people is significant concern in the area of sustainability.

Environment. The objective of being “green” is a key element of making positive

contributions to improving our environment. There are many ways of which supply chains
may help to achieve desired outcomes.
Economy. Continued economic and financial sustainability is essential to making future
positive impacts on society and the environment.
6. ORGANIZATION CONSOLIDATION AND POWER SHIFTS

“During the 1980s and especially 1990s, economic power and the driving force in supply
chains shift from product manufacturers to the retail end of the supply chain.”

More collaboration among organizations in supply chains

- Car manufacturers work closely with tire manufacturers
- Airlines collaborate with tourism boards, tour providers, and hotels
- LSPs, ISP and Internet companies work together for seamless and on-time delivery

As more collaboration is practiced among organizations in the supply chains, they can gain
shared cost savings and improved customer service.

2.0. DEVELOPMENT OF SCM CONCEPT

2.0.1. Evolution of Supply Chain Management Concept

3.0. SUPPLY CHAIN CHARACTERISTICS

3.0.1. Integrated Supply chain – Basics

“SCM is the art and science of integrating the flows of products, information and financials
through the entire supply pipeline from the supplier’s supplier to the customer’s customer.”
Integrated Supply Chain – Network

3.0. SUPPLY CHAIN FLOWS

1. Product Flow
- Physical movement of goods and materials

2. Information Flow
- Enabling physical flow of products
- Decision making
- Supply chain collaborations

3. Cash Flow
- Management of working capital

4. Demand Flow
- Detect and understand demand signals
- Synchronize demand vs. supply
4.0. SUPPLY CHAIN ISSUES

2.1.1. Major Supply Chain Issues

1. Supply chain networks

2. Complexity
3. Inventory deployment
4. Information
5. Cost and value
6. Organizational relationships
7. Performance measurement
8. Technology
9. Transportation management
10. Supply chain security
11. Talent management

1. SUPPLY CHAIN NETWORK

The challenges
- Network system (facilities and supporting transportation services) must be capable
and flexible to respond and change with market dynamics.

2. COMPLEXITY

The challenges
- Increased requirements in simplifying and continually evaluating areas of complexity
in the various aspects of supply chains.

3. INVENTORY DEPLOYMENT

The challenges
- Increased requirements of coordination or integration to reduce inventory levels on
horizontal (single-firm) and vertical (multiple-firms) levels in the supply chain.

4. INFORMATION

The challenges
- The sharing of information along the supply chain
- The discipline to ensure the integrity of the vast amount of data collected and
stored.

5. COST AND VALUE

The challenges
- The prevention of sub-optimization
6. ORGANIZATIONAL RELATIONSHIPS

The challenges
- Internal collaboration (marketing, sales, operations, finance, etc)
- External collaboration (vendors, customers, transportation companies, 3PLs)

7. PERFROMANCE MEASUREMENT

The challenges
- Connecting lower-level metrics in an organization directly to the high-level
performance measures of the organization and the supply chain.

8. TECHNOLOGY

The challenges
- Evaluate, strategically plan and successfully implement the technology to make the
improvements desired.

9. TRANSPORTATION MANAGEMENT

The challenges
- Transport “perfect storm.” Transport market changes; driver shortages; fuel costs;
infrastructure constraints; and regulatory changes.

10. SUPPLY CHAIN SECURITY

The challenges
- Risk of disruptions, vulnerability, and exposure to terroristic threats exacerbated by
distance and complexity in global supply chain.

11. TALENT MANAGEMENT

The challenges
- Attract, develop and maintain the appropriate pool of talent from entry level to
executive level.

SUMMARY
The rate of change has been driven by a set of external forces including
globalization, technology, organizational consolidation and shifts in power in
supply chains, empowered consumers, and government policy and regulations.

Supply chains are extended enterprises which require managing four flows
products, information, financials (cash), and demand on a collaborative basis.

The global supply chains of the best companies must be adaptive, resilient,
and responsive to meet the challenges of the global economy and develop
mitigating strategies for disruptive forces.

5.0. RATIONALE FOR GLOBAL TRADE AND COMMERCE

- Absolute advantage:
Lower cost and/or access to items not available locally

- Comparative advantage:
Differences in the cost of producing products in different countries

6.0. CONTRIBUTING FACTORS FOR GLOBAL COMMERCE AND SUPPLY CHAIN FLOWS

7.0.1. Contributing factors for global flows and Trade

1. Population size and distribution

2. Urbanization
3. Land and resources
4. Technology and information
5. Globalized economy

7.0. SUPPLY CHAINS IN GLOBAL ECONOMY

“Global trade growth has been fueled by free trade agreements (FTAs) that lift most tariff,
quota and fee/tax limitations on trade. The best supply chains compete successfully on a
national, regional and global basis.”

Bilateral <- FTAs -> Regional

- Bi-lateral agreements are between two nations

- Brunei currently in 20 bi-lateral FTAs

- Regional trade agreements involve 3 or more nations

- Brunei currently involved in:
o ASEAN Free Trade Area
o ASEAN-Australia-New Zealand Free Trade Agreement
o ASEAN-People’s Republic of China Comprehensive Economic Cooperation
Agreement
o ASEAN-India Comprehensive Economic Cooperation Agreement
o ASEAN-(Republic of) Korea Comprehensive Economic Cooperation Agreement
o ASEAN-Japan Comprehensive Economic Partnership
8.0. MICRO PERSPECTIVE OF GLOBAL SUPPLY CHAINS

9.0.1. Global Markets and Strategy

“Success in the global market-place requires development of a cohesive set of strategies

including product development, technology, marketing, manufacturing, and supply chains.”

- Supply chain perspective

- Customer service perspective

9.0.2. Supply Chain Perspective

1. Strategically sourcing materials and components worldwide

2. Selecting global locations for key supply depots and DCs
3. Evaluating transportation alternatives and channel intermediaries
4. Understanding governmental influences on global SC flows
5. Examining opportunities for collaboration with 3PLs or 4PLs

9.0.3. Customer Service Perspective

1. Standardization to reduce complexity must maintain some customization

2. Global competition often reduces the product life cycle
3. Organizational structures and business models change with more outsourcing
4. Globalization introduces more volatility and complexity

9.0. WHAT IS LOGISTICS?

10.1.1. Perspectives and definition:

1. Council of Supply Chain Management Professionals

That part of the supply chain process that plans, implements, and controls the efficient,
effective flow and storage of goods, services, and related information from point of origin to
point of consumption in order to meet customer requirements.

2. International Society of Logistics

The art and science of management, engineering, and technical activities concerned with
requirements, design, and supplying and maintaining resources to support objectives, plans
and operations.

3. Dictionary
The branch of military science having to do with procuring, maintaining, and transporting
material, personnel, and facilities.
 4. Inventory
Management of materials in motion and at rest

5. Customer
Getting the right product, to the right customer, in the right quantity, in the right condition,
at the right place, at the right time, and at the right cost (called the “seven Rs of logistics”)

6. Utility/Value
Providing time and place utility/value of materials and products in support of organization
objectives

7. Component support
Supply management for the plant (inbound logistics) and distribution management for the
firm’s customers (outbound logistics)

“Logistics can be viewed as part of organizational management with four major

subdivisions.”

1. Military Logistics. Design and integration of all aspects of support for the operational
capability of the military forces and their equipment.
2. Business Logistics. Part of supply chain that plans, implements, and controls the flow
and storage of goods, services, and related information.
3. Event Logistics. Network of activities, facilities & personnel required to organize,
schedule & deploy the resources for an event to take place and withdraw after the
event.
4. Service Logistics. Acquisition, scheduling & management of facilities, assets,
personnel & materials to support a service operation & business.

10.1.2. Value-added Roles of Logistics: Five Principal Types of Economic Utility

Economic Utility:
1. Time
2. Form
3. Possession
4. Quantity
5. Place

10.2.3. Key Logistics Activities

1. Transportation
2. Storage
3. Inventory control
4. Warehouse site location
5. Materials handling
6. Industrial packaging
7. Order fulfilment
8. Demand forecasting
9. Production planning & scheduling
10. Procurement
11. Customer service

11.1. MICRO DIMENSIONS OF LOGISTICS

11.1.1. Logistics Interfaces with Other Functional Areas

Manufacturing/Operation
- Length of the production run
- Available quantity of raw material and component
- Industrial packaging

Finance
- Inventory
- Warehouses & transportation fleet owned and/or outsourced
- Customer service

Marketing (4 Ps – Marketing Mix)

- Price (eg. Purchase quantity discounts)
- Product (eg. Size, shape, weight, packaging)
- Promotion
- Place (distribution channel selection)

Accounting
- Cost information for analysis of alternative logistics options
- Supply chain tradeoffs and performance measurement

12.0. DRIVERS OF SUPPLY CHAIN NETWORK REDESIGN

1. Changes in global trade patterns

2. Changes in customer service requirements – The emergence of omni-channel supply

chains

3. Shifts in customer and/or supply market locations

4. Changes in corporate ownership

5. Cost pressures

6. Competitive capabilities
12.0.1. Supply Chain Network Design

Step 1: Define the Supply Chain Network Design Process

- Form a supply chain network transformation team

- Establish the parameters and objectives of the network design or redesign process

- Evaluate the potential involvement of third-party suppliers of logistics services

Step 2: Perform a Supply Chain Audit

1. Fundamental Business Information

2. Logistics/Supply Chain System

3. Key Logistics/Supply Chain Activities

4. Measurement and Evaluation

5. Strategic Logistics/Supply Chain Issues

6. Logistics/Supply Chain Strategic Plan

Step 3: Examine the Supply Chain Network Alternatives

- Apply suitable quantitative models to the current logistics system and to the
alternatives under consideration.

- Identify preliminary supply chain network design solutions consistent with the key
objectives identified during the audit phase.

- Conduct “what-if” analysis to test sensitivity of recommended network designs to

changes in key variables.

Step 4: Conduct a Facility Location Analysis

- Form a location selection team.

- Qualitatively and quantitatively analyze the attributes of specific regions and locales.

- Identify recommended specific sites for logistics facilities.

Step 5: Make Decisions Regarding Network and Facility Location

Evaluate the recommended network and specific sites for logistics facilities (Steps 3 and 4)
for consistency with the design criteria identified in Step 1.

Step 6: Develop an Implementation Plan

- Develop a “blueprint for change” as a road map for moving from the current supply
chain network to the desired new one.

- Commit the resources necessary to assure a smooth, timely implementation, and the
continuous improvement of the network decisions.

13.0. MAJOR LOCATIONAL DETERMINANTS

13.0.1. Broad Geographic and Site-Specific Locational Determinants

Global/National/Regional Determinants

- Labor climate
- Transportation services and infrastructure
- Proximity to markets and customers
- Quality of life
 - Taxes and industrial development incentives
- Supplier networks
- Land costs and utilities
- IT infrastructure
- Company preference

Site-Specific Determinants

- Transportation access
o Truck
o Air
o Rail
o Water
- Inside/outside metropolitan area
- Availability of workforce and needed skill sets
- Land costs and taxes
- Utilities

14.0. MODELING APPROACHES FOR SUPPLY CHAIN NETWORK DESIGN

14.0.1. Types of Modeling Approaches

Modeling Approaches:

- Optimization Models
o Designed to find the “best”, or optimum solution, while recognizing relevant
constraints.

- Simulation Models
o Designed to develop a computer representation of supply chain network &
observe changes as cost structures, constraints, and other factors are varied.

- Heuristic Models (eg. Grid technique)

o Designed to reduce a problem to a manageable size and search automatically
through various alternatives in an attempt to find a better solution.