Supply Chain Management

Professor Kim Hua Tan

Nottingham University Business School, England

Getting to know
each other
 Outlines and Objectives

➢ Brief overview of supply chain management

⚫ Supply chain strategy vs Supply chain management
➢ Key concepts in supply chain management
⚫ Order winner (OW) and Order Qualifier (OQ)
⚫ Decoupling point
⚫ Bullwhip effect
➢ Industry 4.0: Digitalise the supply chain
➢ Exercise

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4
5
 Viewpoints on Strategy

Plan Position

Ploy

Pattern Perspective
(Mintzberg et al. 1998) 6
Trade War, Tariffs, Sanctions Programs are
Other Supply Chain Strategic Weapons

“When it comes to
changing trade and
supply chain patterns,
the federal acquisition
regulations are the most
powerful weapon in the
Pentagon arsenal, even
more potent than our
nuclear weapons, and
are a formidable wedge
for forcing decoupling.”
Financial Times, September 12, 2019
• Trump administration effort to stop Beijing from obtaining sensitive
technologies and protect US defence supply chains
• To detect supply-chain vulnerabilities to help ensure US
companies do not help the Chinese military through sales or
procurement.
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SC Strategy vs SC Management

SC management SC strategy
Short-term Long-term
for example, capacity for example, capacity
decisions decisions
Time scale
Demand

Demand
1-12 months 1-10 years

Micro Macro
level of the process level of the total operation
Level of
analysis

Concrete Philosophical
Level of For example For example
abstraction “How do we improve our “Should we develop strategic
purchasing?” alliances with suppliers?”

8
Famous Quotes-
Who said this?
"These stupid supply chains that are
all over the world - we have a supply
chain where they're made in all
different parts of the world. And one
little piece of the world goes bad,
and the whole thing is messed up. We
should have them all in the United
States,"
What is Supply Chain Management?

Supply chain management takes a broader view of influences that will impact
our supply chain. The goal of supply chain management is to look holistically at
the entire supply chain from supplier through to the consumer, and review three
core areas of people, process and systems in order to maximise value from all
activities.
https://www.cips.org/knowledge/procurement-topics-and-skills/supply-chain-management/what-is-a-supply-chain/
Total and Immediate Supply Networks
“Second tier” “First tier” “First tier” “Second tier”
Suppliers Suppliers Customers Customers

The Operation

Supply side of Demand side of

the network the network

The Total
Supply
The Network
Immediate
Supply
Network

Internal Supply Networks

11
 Why SCM is Important?
“Customer value is
created by the whole
chain "

“Supply chains compete, (Croom et al, 1997)

not individual companies"

(Christopher, 1999)

"These stupid supply chains that are all over the world
- we have a supply chain where they're made in all
different parts of the world. And one little piece of
the world goes bad, and the whole thing is messed up.
President Trump, 2020
 “Customer value is

How Much Coffee Growers created by the whole

chain "

Get from A Cup of Coffee?

Small Latte - £2.50 (IDR48,000)

A £1.00 (IDR19,000)
B £0.50 (IDR 9,500)
C £0.10 (IDR 1,900)
D £0.01 (IDR 190)
E Lower or higher than above
https://www.visualcapitalist.com/from-
bean-to-brew-the-coffee-supply-chain/ 14
 Why SCM is Important?
“Customer value is
created by the whole
chain "

“Supply chains compete, (Croom et al, 1997)

not individual companies"

(Christopher, 1999)

"These stupid supply chains that are all over the world
- we have a supply chain where they're made in all
different parts of the world. And one little piece of
the world goes bad, and the whole thing is messed up.
President Trump, 2020
 Rethinking Supply Chain Strategies
After Brexit

https://w ww.gov.uk/government/new s/uk-and-japan-sign-free-

trade-agreement

https://w ww.vietnamuknetw ork.org.uk/new s/uk-vietnam-free- https://asia.nikkei.com/Economy/Trade/UK-to-apply-for-TPP- membership- Monday-for-

trade-agreement-2020/ bridge-to-Asia

https://w ww.mckinsey.com/~/media/Mc Kinsey/Featured%20Insights/Europe/Brexit% 20The% 20bigger%20picture% 20Rethinking%20supply%20chains%20in%20a%20

time%20of%20uncertainty/Brexit-The-bigger-picture- Rethinking-supply-chains-in-a-time-of-uncertainty-vF.pdf?shouldIndex=false
 UK KFC Run Out of Chicken

17
https://www.youtube.com/watch?v=fSjjHpsaRKw
When Barack Obama joined Silicon Valley’s
top luminaries for dinner in California in
January 2012, each guest was asked to come
with a question for the president.
But as Steven P. Jobs of Apple spoke, President
Obama interrupted with an inquiry of his own: what
would it take to make iPhones in the United States?

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs

aren’t coming back,”

The New York Times: January 21, 2012

 Outlines and Objectives

➢ Brief overview of supply chain management

⚫ Supply chain strategy vs Supply chain management
➢ Key concepts in supply chain management
⚫ Order winner (OW) and Order Qualifier (OQ)
⚫ Decoupling point
⚫ Bullwhip effect
➢ Industry 4.0: Digitalise the supply chain
➢ Exercise

19
 Competitive Criteria
Order Winning and Order Qualifying Criteria

Order Qualifying Criteria

•Allow you to have a presence in the market but do not in
themselves win orders
•Define the absolute minimum in order to be considered by
customers

Order Winning Criteria

• Allow you to gain competitive advantage and
hence have a direct impact on sales.
•Directly contribute to winning business
•Improved performance translates into increased sales

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OW & OQ Changes Over Time
Japanese automakers initially competed on price but had to ensure
certain levels of quality before the US consumer would consider their
products.

Over time, the consumer was willing to pay a higher price (within
reason) for the assurance of a superior-quality Japanese car:
– Price became a Qualifier, but
– Quality Won the orders

Today, high quality, as a standard of the automotive industry, has

become an Order Qualifier, and innovative design Wins the orders

1960 2017 2021

 Example
➢ Companies usually produce goods/services for more
than one customer group
➢ …which dictates a separate set of competitive factors,
hence different priorities for the performance objectives
for each group

Business or Economy Class?

 Different Product Groups Require
Different Performance Objectives
First/Business class Economy class
Services First/Business-class cabin, Economy cabin
airport lounges, pick-up service

Customers Wealthy people, business Travellers (friends and family),

people, VIPs vacation takers, cost-sensitive
business travel

Service range Wide range, may need to be Standardised cabin

customised
Rate of service
innovation Relatively high Relatively low

Volume of activity Relatively low volume Relatively high volume

Profit margins Medium to high Low to medium

Performance
objectives

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Order Qualifier/Order Winner

ORDER QUALIFIERS
Get/keep a service or product on
a customer’s SHORTLIST

ORDER-WINNERS
WIN you the order once
you are on the shortlist
5 Mins Istirahat Kuliah

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 Outlines and Objectives

➢ Brief overview of supply chain management

⚫ Supply chain strategy vs Supply chain management
➢ Key concepts in supply chain management
⚫ Order winner (OW) and Order Qualifier (OQ)
⚫ Decoupling point
⚫ Bullwhip effect
➢ Industry 4.0: Digitalise the supply chain
➢ Exercise

26
Customer Order Decoupling Point
CODP is called the order penetration point i.e. how
early in the supply chain a specific customer order
is taken into consideration

➢ Operations before CODP is planned based on forecast

➢ Operations after CODP is planned based on customer
demand

Operations based
Operations based
on demand
on actual forecast Demand
forecast

CODP

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Customer Order Decoupling Point
Long Customer Lead time Short

➢ ETO: Engineer-to-Order

➢ MTO: Make-to-Order

➢ MTS: Make-to-Stock

➢ ATO: Assemble-to-Order

➢ Lead time: the time needed to respond to a customer order 28

 Make-to-Stock
➢ Examples of products
⚫ Televisions
⚫ Clothing
⚫ Packaged food products
➢ Trade-off between the costs of inventory and
level of customer service must be made
⚫ Prone to wastage and obsolescence
⚫ Minimising production and transportation costs
 Assemble-to-Order
➢ Examples:
⚫ Dell Computer
⚫ Nike customize (http://www.nike.com/gb/en_gb/c/nikeid)
➢ There is significant advantage from moving the CODP
from finished goods to components i.e. minimizing
supply and demand mismatch costs.
➢ One capability required is a product design that enables
as much flexibility as possible in combining components
Different Supply Networks Configuration
HP (COMPAQ) Corp.
Market

Suppliers Home
Office
Market

Retailers

Corp.
Market
DELL

Home
Office
Market

Suppliers

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 Make-to-Order & Engineer-to-Order
➢ Examples:
⚫ Luxury yachts

⚫ Air planes

➢ Manufactures the end product after the customer placed the order
➢ Longer wait time for the client but allowing for more customization
➢ Referred to as a pull-type supply chain operation because products are
only made when there is a firm customer demand
➢ Also appropriate for highly configured products such as computer
servers, automobiles, or products that are very expensive to keep
inventory
Inside Trump's new car dubbed the 'Beast': £1.2m Cadillac has eight-
inch thick doors, can survive a roadside bomb and has an an oxygen
system in case of a chemical attack
Read more: http://www.dailymail.co.uk/news/article-4273134/Inside-Trump-s-new-car-dubbed-Beast.html#ixzz4aBB6rNKO

Follow us: @MailOnline on Twitter | DailyMail on Facebook

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 Push/Pull –decouple points
➢ Factors affecting the decoupling points in
the supply chain from PUSH to PULL

▪ Required product configurations & variability

▪ Required customer response time (balancing capacity with inventory)
▪ Forecast reliability & demand change
▪ Setup times

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 Outlines and Objectives

➢ Brief overview of supply chain management

⚫ Supply chain strategy vs Supply chain management
➢ Key concepts in supply chain management
⚫ Order winner (OW) and Order Qualifier (OQ)
⚫ Decoupling point
⚫ Bullwhip effect
➢ Industry 4.0: Digitalise the supply chain
➢ Exercise

35
 Current Supply Chain Practice…
➢ Stages in network work in comparative
isolation
➢ Each stage ‘guards’ information
➢ Information inertia: transfers are delayed &
slow
➢ Arms length relations among stages
➢ Individual decision making

(What is so bad about this?)

36
 Information Distortion:
The Bull Whip Effect
The variance of orders is greater than that of sales,
and the distortion increases as one moves upstream.

37
How Can You ‘Break’ the Bullwhip?
➢ Share information
⚫ Customer demand
⚫ Orders placed by each player
⚫ Current status of backlogs, inventories, and
orders in transit
➢ Reduce information delays
➢ Remove links from the chain
➢ Centralise decisions about who makes
what when
➢ Vendor-managed inventory (VMI)
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Supply Chain Visibility

Source: McKinsey 2013

Big data in Retail

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 Outlines and Objectives

➢ Brief overview of supply chain management

⚫ Supply chain strategy vs Supply chain management
➢ Key concepts in supply chain management
⚫ Order winner (OW) and Order Qualifier (OQ)
⚫ Decoupling point
⚫ Bullwhip effect
➢ Industry 4.0: Digitalise the supply chain
➢ Exercise

41
Multiple Crises Impacting Global
Supply Chain Management
 Supply Chain Management
Challenges Under COVID-19

➢ Demand-side disruptions
⚫ Volume change – Demands for goods used in epidemic control
and prevention are dramatically increased
⚫ Channel change – Demands for consumer daily necessities are
dramatically shifted from in-store shopping to online home
deliveries

➢ Production disruptions
⚫ Labour and skill workforce shortages due to lockdown and travel
restrictions.

➢ Supply-side disruptions
⚫ Supplies are disrupted by factory shutdowns, personnel isolations
and control of transportations and logistics
⚫ Due to information asymmetry, the imbalance between supply and
demand is further amplified with the bullwhip effect
 How to Enhance
SCM Capabilities?
The ability of supply chains to plan for,
respond to, and recover from disruptions in a
timely and cost-effective manner
Supply Demand

Resilience Responsiveness
Ability to ensure continuity of SC operations Ability to respond quickly and
and recover quickly from the disruptions accurately to the fast
caused by external disasters changing customer demands
and market needs

Regeneration
Ability to restart supply chain after complete
stops and redesign/reconfigure the supply
chain to meet new demands under/after
external disasters
Example of Regeneration
(Digipas Group)

IPOS Innovation for

Humanity Award 2020
Rapid Iterative Product Development Process

Conventional Approach
Design Develop Test Launch

eGee Pro Rapid Iterative Process

Sprint 1 Sprint 2 Sprint 3 Sprint 4 Sprints 5, 6, 7

Design Design Design Design Intelligent

Features
Develop Develop Develop Develop - Real time
translation
Test Test Test Test - Subtitles
AFFORDABL LIGHT N95/N99- Intelligent - Etc.
E& WEIGHT, grade, TRANSLUC
Launch Launch Launch Launch
LIGHT GOOD FIT & TIGHT-FIT, ENT
WEIGHT EASY SAFETY
BREATHING & COMFORT

https://youtu.be/rPHzeUvHMX0
Fujifilm: Surviving the digital revolution in
photography through diversification into
cosmetics
Multiple Crises Impacting Global Supply
Chains Operations Management
Firms are overwhelmed by…
➢ Expanded market trends (e-commerce)
➢ Mass customisation/personalisation (cost,
quality, speed, variety)
➢ Social responsibility (ethical operations, child-
labor, fair trade, health and safety, product
safety, alleviate poverty, empower women)
➢ Environment/sustainable operations (SDG,
animal cruelty, recycling, water, air)

The conscious consumers

• 70% of consumers more interested in transparency about products, rather than
the firms who made them (Futerra, 2018)
• 74% of UK consumers willing to pay 5% extra for clothes from
factories that treated workers fairly and in safe conditions (Guardian, 2015)
Why should companies care?
• Brand performance, purchasing behavior, competitor’s
strategy/performance
 Prepare a grand reception. Eat
it if you want to.

Waste recycling jobs are back for sure…

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https://www.youtube.com/watch?v=-htnUTN4mH0
 Industry 4.0: Digitalise the
supply chain…
Blockchain

AI Machine Learning

https://w ww.youtube.com/w atch?v=h7OEvSSS6PU

Terima Kasih

Questions?

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