How you design a Competitive Supply Chain (1)

1. Alignment of Strategies - Interactive Strategies Development (Corporate, Competitive

and Supply Chain Strategy Alignment - study of the company's strategy to develop of supply chain
strategy to meet company’s objectives ((see Word file “Proiectarea unui Supply Chain competitiv”).

2. Define the type of Supply Chain that best suits your Corporate and Competitive Strategy

3. Define the supply chain strategy: aligns the Supply Chain with the business goals
(Operations Strategy , Outsourcing Strategy , Channel Strategy, Customer Service
Strategy, Asset network )
3.1. ASSET NETWORK DESIGN /Supply Chain Design/Network Design (SCD) – establishes
the supply chain ASSET NETWORK architecture, manages sourcing decisions and ensures
that the components are aligned with corporate and supply chain strategy, and that our
supply chains are as efficient and effective as required.
4. Organizational Strategy - Design the organization for SC performance
5. Build the right coordination and collaborative SC model
6. Use metrics to drive business success (a recommended performance measurement scorecard)
Remarks:
1. Supply chain performance is all about integration
- Integration of strategy, processes, organization, performance
management and information systems in order to maximize system-wide delivered value.
2. Integration needs:
– Streamline operations/processes
– New business models
– New organizational relationships (virtual companies )
30 March 2021 1
 How you design a Competitive Supply Chain?
(2)
2. Define the type of Supply Chain that best suits your
Corporate and Competitive Strategy.
Matching enterprise competitive strategy and SC strategy is called
“strategic fit-corelarea strategica” (Chopra and Meindl 2015). Strategic fit
presumes the alignment of objectives in different departments with the
overall SC objectives.
There are six generic supply chain models:
1. Supply chains oriented to efficiency (in industries where the
competitive strategy is oriented toward low cost and/or high relevance of asset
utilization to total cost, end-to-end efficiency is a must. Examples of such
industries: cement, steel, paper, commodities, and low-cost fashion, among others.
SC models based on efficiency are
1.1. Efficient (it is best suited to industries that are characterized by intense
market competition, with several competitors fighting for the same group of
customers, always based almost solely on price.
1.2. Fast (is best for companies that produce trendy products with a short
lifecycle)
1.3. Continuous-flow (is for companies where customer demand profile has little
variation and production workload can match demand through a continuous-
replenishment model.
 How you design a
Competitive Supply Chain?
(3)
Supply chain models (CONT)
2. Supply chains oriented to responsiveness (in industries that
face considerable demand uncertainty, where the imbalance of demand
and supply cost is highly relevant, and supply chain should provide a great
response capacity in relation to changes in demand)
SC models based on responsiveness are:
2.1. agile (is useful for companies that manufacture products under unique
specifications for each customer after receiving the customer's purchase
order - manufacturers of intermediary goods that make products for
industrial customers according to each customer's specific needs)
2.2. custom-configured (is useful for combining parts into a set or assembly
on a unique platform - the assembly of personalized products, such as
computers and vehicles.)
2.3. flexible (is suited for companies that must meet unexpected demand and
therefore are faced with high demand peaks and long periods of low
workload- adaptability to reconfigure internal processes in order to meet a
customer's specific need or solve a customer's problem)
 Decisions phases in Supply Chain
Successful supply chain requires decision relating to:
– Flow of material/product
– Flow of information
– Flow of funds
These decisions fall into for categories:
• supply chain strategy or design/strategic level
• supply chain planning/tactical level
• supply chain operation/operational level
• planning and implementing measures to increase
resilience (planificarea si implementarea masurilor de crestere a
rezilientei – reprezinta provocarile managerilor in perioada coronavirus si
post-pandemie)
30 March 2021 4
 SCM - Making Decision Level
Strategic level : long term decisions (typically years or decades)
The development of the SC strategy, as presented in the previous courses, must respond to
the following strategic decisions:
• Strategic network optimization (physical configuration) , including:
– The number and location of facilities whose functions are to supply (the supplier base), to produce (the
manufacturing plants), distribute (the warehouses, cross-docks), and to sell (the retail stores, outlets, and
points of sale)
– Capability and capacity (“role”): where, by which means, and how much of which products can be made and
stored (capacitatile de productie si stocare, categoriile de produse fabricate si stocate,etc)
– Product flow (“lanes”): how (modes of transportation) and which products can move from facility to facility
• Strategic partnerships with suppliers, distributors, and customers (how to select entities/partner
to perform outsourced activities and what should be the nature of the relationship with those
entities) creating communication channels for critical information and operational
improvements such as cross docking, direct shipping, and third-party logistics (contracts).
• Product life cycle management, so that new and existing products can be optimally integrated
into the supply chain and capacity management activities.
• Information technology chain operations, processes (IT programs and information system to be
used, to make the process more effective, logical configuration)
• Where-to-make and make-buy decisions (what activities to be carried out by your firm & what
to be outsourced - whether to outsource or perform a supply chain function in-house)
• Enhancing organizational resilience - the ability of an organization to absorb and adapt in a
changing environment to enable it to deliver its objectives and to survive and prosper.
5
Model your Supply Chain Network Design?
Why do you need to model your Supply Chain, Logistics
or Distribution Network Design?
The business requirements of a network will change
over time.
This can be due to:

1. mergers and acquisitions,

2. change in sales channels (where they shop and where
they pick up the merchandise),
3. entering new markets (new facilities or increase
capacity in existing facilities),
4. expanding product ranges (new product introduction,
where and when),
5. changes to the regulatory environment
(modificari ale mediului de reglementare, trade wars)
6. lower customer service and higher time-to-
market
7. higher cost to serve, lower total profit- need
of company to periodically rationalize the
existing network supply chain
8. others (Wars, Pandemic, Natural Disasters,
Global Financial Crises, etc)
 Enhancing organizational resilience (1)
Reziliența organizationala este capacitatea unei organizații de a anticipa,
absorbi și de a se adapta la schimbarile normale si severe ale mediului,
indiferent de natura lui (economic, socio-politic, etc).

Există multe discipline de management care contribuie la constructia rezilienței unei

companii, dar, o actiune individuala a acestor discipline este insuficienta pentru a
creste rezilienta unei organizații. Modul în care echipele interdisciplinare lucrează
împreună pentru anticiparea și abordarea riscurilor și vulnerabilităților reprezinta
esenta dezvoltarii unei organizatii reziliente.
Rezilienta este îmbunătățita prin coordonarea între disciplinele de management si
regulile de buna practica si expertiza stiintifica aduse de fiecare domeniu in parte.
Enumeram cateva discipline mai apropiate de scopul cursului nostru:

• asset management; business continuity management ;

• cyber security management;
• financial control; emergency management; environmental management;
• health and safety management; information, communications and technology;
• human resources management;
• risk management; supply chain management; strategic planning.
 Enhancing organizational resilience (2)
Cresterea rezilientei supply chain ca parte a rezilientei organizationale

Ce este un SC rezilient?
Un SC este rezilient, daca are capacitatea de a gestiona dezastre sau crize, a anticipa, absorbi,
recupera și a se adapta la amenințările asteptate si neașteptate asupra operationalitatii
companiei. Indiferent de natura lor, pericolele pot fi previzionate pentru a fi evitate/gestionate,
dar si imprevizibile, inevitabile. Ceea ce putem face este sa construim un SC rezilient, efficient,
robust si agil, care sa protejeze continuitatea afacerilor companiei.

Un SC foarte rezilient ar trebui sa ofere:

• vizibilitate buna a rețelei de SC;
• capacitatea de a trece rapid de la o sursă la alta;
• aprovizionarea cu încredere de la furnizorii noi;
• schimbarea in timp real a rutelor de distribuție atunci când apar întreruperi și există probleme
logistice;
• flexibilitate, agilitate atunci când afacerile companiilor au devenit extrem de vulnerabile la
deteriorarea condițiilor economice și de piață;
• sisteme rapide de elaborare a scenariilor si fundamentare a deciziilor intr-un mediu economic
cu restricții multiple in perioada de recuperare a afacerii
 Enhancing organizational resilience (3)
Strategia de constructie rezilienta a unui SC
In elaborarea strategiei de SC, exista doua categorii mari de riscuri care trebuiesc luate in
considerare:
•Riscurile recurente (operationale sau comerciale) cauzate de fluctuatiile cererii, proliferarea
numarului de SKU si scaderea acuratetii cererii previzionate, reducerea timpilor de livrare (livrarea
produselor in cel mai scurt timp posibil), cresterea costurilor de transport (cresterea preturilor
carburantilor, cresterea livrarilor last mile, inflatie), etc
•Riscurile disruptive cauzate de pandemii, dezastre naturale (tsunami, inundații, erupții vulcanice),
atacuri teroriste si pirateresti, atacuri cibernetice, falimente/instabilitate/insolvabilitate parteneri,
incidente ale furnizorilor (incendii în fabrică, greve, etc), penurii de aprovizionare, scaderea brusca a
cererii, probleme grave ale fluxurilor logistice, crize socio-politice și economice, etc
Strategiile de reducere a riscurilor recurente, riscuri normale in timpul derularii afacerilor, se
concentreaza in general pe modelul LEAN de SC, care presupune reducerea la minimum a costurilor
de operare si cresterea profitabiltatii. Modelul este vulnerabil la riscurile majore si ofera un timp
mare de raspuns in cazul intreruperii activitatilor operationale.
Strategiile de reducere a riscurilor disruptive, riscuri anormale cu grad ridicat de incertitudine in
aparitie si manifestare, se concentreaza pe constructia unui SC resilient bazat pe modelul AGIL sau
ideal LEAGIL. Modelul are implementate in structura lui solutii de bune practici si reducere a
riscurilor ca parte componenta a strategiei de rezilienta a unui SC.
Ideea din spatele planificării rezilienței este de a reduce semnificativ timpul necesar pentru
implementarea unui plan de redresare a activitatii companiei.
Obs. În strategiile de proiectare a unui SC vor exista permanent tensiuni între eficiența maxima la
cost minim și reziliență, dar in mod cert, constructia unui SC rezilient presupune regândirea
priorităților noastre, în special a rolului optimizării și eficienței.
 SCM - Making Decision Level
• Tactical level/Planning Level
At this level, we have to plan policies and programs on medium-term
(6 months-12 months) given the constraints established during the strategic
phase to develop the resources needed to accomplish the strategic objective of
the SC. Companies start the planning phase with a forecast for the coming year
of demand and other factors, such as costs and prices in different markets.
Planning includes making decisions regarding to:
• Sourcing contracts and other purchasing decisions.
• Production decisions, including contracting, subcontracting, scheduling, and
planning process definition.
• Inventory decisions, including quantity, inventory replenishment policies at
warehouses/ stock-out handling , location, assignments of customers to
warehouses (which markets to be supplied by which locations and quality of
inventory
• Transportation planning, including frequency, routes, and contracting (freight
rate negotiation, etc).
• Timing and size of marketing promotions
• Benchmarking of all operations against competitors and implementation
of best practices throughout the enterprise.
• Demand planning focus on customer demand.
 SCM – Example of tactical level decisions
Planning at tactical level includes making decisions regarding which markets
will be supplied from which locations, the subcontracting of manufacturing,
the inventory policies to be followed, and the timing and size of marketing
and price promotions, etc.
A summary of the planning activities:
• Demand forecasting
• Procurement planning & control
• Production planning & control
• Distribution planning & control
• Inventory management
• Information processing management
• Transportation & transit management
• Warehousing & storage management
• Customer order processing
• Vendor relation management
• Customer relation management
• Channel partners management
What are the key issues in Supply Chain ?
ISSUE (slide 1) CONSIDERATIONS

Network Planning • Warehouse locations and capacities

• Plant locations and production levels
• Transportation flows between facilities to minimize cost and time

Inventory Control • How should inventory be managed (point to reorder, how much
to order, ..)?
• Why does inventory fluctuate and what strategies minimize this
(uncertainty demand , supply process or other)?
Supply Contracts • Impact of volume discount and revenue sharing
• Pricing strategies to reduce order-shipment variability (provide
incentives for buyers to order more while supplier increase it profit)

Distribution Strategies • Selection of distribution strategies (e.g., direct ship vs. cross-
docking), impact of inventory level, transportation cost, service
level
• How many cross-dock points are needed?
• Cost/Benefits of different strategies
Integration and Strategic • How can integration with partners be achieved?
Partnering • What level of integration is best?
• What information and processes can be shared?
• What partnerships should be implemented and in which
30 March 2021 situations? 12
 ISSUE (slide 2) CONSIDERATIONS
What are the key issues in Supply Chain ? (continue)
Outsourcing & Procurement Strategies
Product Design
Information Technologies and Decision Support
Systems
If ERP provides the “how to” by providing data and business rules for
supply chain functions, SCM&APS* software enables communication
and integration between suppliers, purchasers, manufacturers,
warehouse facilities and transport operations managing real-time
information flows and covers the “when, where, what, and who” by
using algorithms to calculate optimal plans for purchasing, production,
transportation and distribution.
*APS- Advanced Planning and Scheduling
Customer Value and Value chain
Value chain is integration of goods and services to
create customer value
Smart Pricing (use differentiated prices - avoid
single price)
30 March 2021
• What are our core supply chain capabilities and which
are not, what to make or buy?
• Does our product design mandate different outsourcing
approaches?
• Risk management: outsourcing vs. offshoring, dual
sources for the same component
• How are inventory holding and transportation costs
affected by product design? How does product design
enable mass customization?
•Which data are significant for supply chain
management?
•How frequently should data be transferred and
analyzed?
•What infrastructure is required both internally and
between supply chain partners for close collaboration ?
•How information technology is used in making decisions
to achieve competitive advantage in the market?
•How does SCM contribute to customer value?
•How is information technology used to enhance
customer value in the SC?
•How smart pricing strategy improve supply chain
performance?
Source: Simchi-Levi and all 13
 SCM - Making Decision Operational Level
Operational level: short term decisions (shifts, days or weeks).
• Operational planning- ensure that specific tasks are implemented into the day-to-day
operations, during which policies must be executed but cannot be changed.
Examples include filling customer orders and routing of delivery vehicles.
During this phase, companies make decisions regarding individual customer
orders.
At the operational level, supply chain configuration is considered fixed and planning policies are
already defined. The goal of supply chain operations is to handle incoming customer orders in the
best possible manner. During this phase, firms allocate inventory or production to individual
orders, set a date by which an order is to be filled, generate pick lists at a warehouse, allocate an
order to a particular shipping mode and shipment, set delivery schedules of trucks, and place
replenishment orders.
A summary of the operative activities
• Daily production and distribution planning, including all nodes in the supply chain.
• Production scheduling for each manufacturing facility in the supply chain (minute by minute).
• Demand planning and forecasting, coordinating the demand forecast of all customers and sharing
the forecast with all suppliers.
• Sourcing planning, including current inventory, replenishment order and forecast demand, in
collaboration with all suppliers.
• Inbound operations, including transportation from suppliers and receiving inventory.
• Production operations, including the consumption of materials and flow of finished goods.
• Outbound operations, including all fulfillment activities, warehousing and transportation to
customers (generate the pick lists for a warehouse, set delivery schedules for trucks, etc)
• Order promising, accounting for all constraints in the supply chain, including all suppliers,
manufacturing facilities, distribution centers, and other customers.
• From production level to supply level accounting all transit damage cases & arrange to settlement
at customer level by maintaining company loss through insurance company. 14
 How you design a
Supply Chain Competitive? (cont)
4. Design your organization for performance – magnitude of change
4.1 Determining how to structure the organization (from hierarchy centralized
structure to flatter decentralized structure, process and customer-centric)
4.2 Defining roles and responsibility
4.3. Finding the right people with the right skills
The structure of activities within and between companies is a critical cornerstone
of creating unique and superior supply chain performance

30 March 2021 Source: Adapted From O'Hara, Watson and Kavan 15

 How you design a
Supply Chain Performance Management? (cont)
5. Build the right coordination and collaborative model – from
exchange information to an end-to-end supply chain visibility

Supply Chain Collaboration – What Is It?

• The means by which companies within the supply chain work together towards mutual goals by sharing
– Ideas
– Information
– Processes Framework of SCM What processes should
– Knowledge be linked with each of
– Information
– Risks SC Business these key SC members
– Rewards process

What level of integration and SC Business

SC Network
management should be Management
structure
applied for each process link components
Who are the key SC
members with whom
Types of collaboration to link processes
Information Exchange, Collaborative Forecasting, Collaborative Planning, Collaborative Planning,
Forecasting and Replenishment (CPFR), Sales and Operations Planning (S&OP), Collaborative Scheduling,
Collaborative execution, Collaborative Monitoring and Controlling, Collaborative Reassignment of Tasks

30 March 2021 17
 Collaborative relationships levels
When examining collaborative relationships, there are three levels :
1) transactional
2) information sharing
3) strategic.
Depending on the nature of the relationship, supply managers will decide at what level to segment their
partners.
Transactional level. Nearly 80 percent of relationships are categorized as transactional. While collaboration
does occur, it’s short term. What type of relationship constitutes transactional? If the relationship is
centered on processing purchase orders, customer orders and receipts, then it’s purely
transactional. This doesn’t mean that it’s not important, however. The data exchanged must be accurate or
the value is lost. Such systems as EDI and IDE can make transactional collaboration more efficient.
Information sharing level. Once critical data such as costs, forecasts and market intelligence are
exchanged, collaboration evolves into information sharing. At this level, a true partnership takes shape
because partners are exchanging information to help each other be more efficient and make better
decisions. Using such tools as S&OP can provide the transparency required for both partners to succeed.
Integration of critical information enables the parties to discuss variations and decide on alternate
strategies.
Strategic relationship level. The highest level of collaboration is a strategic relationship where supply
management partners are truly involved in a joint venture with long-term commitments. At
the heart of a strategic relationship is a relationship manager who develops personal relationships
between the company and its partners. This individual shares his or her knowledge to colleagues and
ensures alignment of expectations, governance and decision making.
While the relationship manager is critical, so too are quarterly business reviews among high-level participants
from the organization and supplier partners. These business reviews allow all parties to evaluate goals,
objectives and metrics, as well as review performance and progress.
From a contractual standpoint, supply management professionals should establish a joint services agreement
(JSA) that outlines what the collaborative relationship entails and the expectations. This document does
not replace the contract, but is an addendum.
Together with the relationship manager, quarterly business review and JSA, there’s a strong foundation for
managing the collaborative relationship at the strategic level.
Supply Chain Collaboration Spectrum

Extensive Not Viable Synchronized • The green arrow describes

Collaboration increasing complexity and
sophistication of:
– Information systems
– Systems infrastructure
Extent of Collaboration

– Decision support systems

– Planning mechanisms
Coordinated – Information sharing
Collaboration – Process understanding
• Higher levels of
collaboration imply the need
Cooperative for both trading partners to
Collaboration have equivalent (or close)
levels of supply chain process
maturity
• Synchronized collaboration

– Alignment of supply chain

partners’ business
Transactional objectives and associated
Collaboration Low Return processes
Limited – Movement to real-time
Many Few planning, decision making,
and response to customer
Number of Relationships requirements enabled by
advanced information
30 March 2021 technology 19
Source: Cohen & Roussel
 Framework for supply chain collaboration
The proposed framework includes two main components.
The first component is the design and government of supply chain activities. This
component includes four elements:
• the selection of an appropriate partner. Enterprises make decisions regarding
who they will choose as their partners in the supply chain environment. These
decisions are typically made based on the expectations, perceived benefits and
drawbacks, and the “business fit” of companies.
• the selection of the activities in which collaboration will be established. Since
not all of the business activities require collaboration, firms need to determine the
specific activities upon which they will collaborate.
• the identification of the level at which firms will collaborate. The levels for
collaboration include the strategic level, the tactical level, and the operational level.
• the selection of the appropriate technique and technology to facilitate
information sharing. Technology investment and training are usually needed to help
potential collaborators meet the requirements of collaboration in terms of
technology and techniques.
The second component is the establishment and maintenance of supply chain
relationships. The crucial elements include trust, dependence, and a risk-and-
reward-sharing balance. It is important to identify the ways in which these elements
interact with each other and to note how they affect and determine the intensity of
the collaboration, as well as the selection of appropriate information data sharing
Since many partners can participate in the chain, a coordination mechanism is
needed for an effective collaboration between the partners in the supply chain.
 IT – the backbone of SC coordination concepts
Efficient information handling in a SC is of the most significant importance.
Information flows connect SC participants, SC functions both vertically and horizontally and
management decision levels.

EDI - schimbul electronic de date (EDI) a înlocuit pentru prima data documentele de afaceri pe
suport de hârtie cu documentele digitale.
Supply Chain Collaboration – based on value of information
• Cornerstone of effective SCM – provide supply chain partners to get
timely accurate supply chain data, real time planning and decision
making
• Provide visibility to executives into critical business level metrics,
response to customer requirements and enhance value chain
• Offer the ability to accurately forecast demand and has the potential
to eliminate or minimize the Bullwhip effect. Bullwip efect Retailers

Suppliers Synchronized Manufacturer

Production
Scheduling Collaborative
Distributors/
Demand
Collaborative Wholesalers
Planning
Product
Development

Collaborative Logistics Planning

•Transportation services
•Distribution center services

30 March 2021 Logistics Providers 22

 Information Sharing
Insufficient Collaboration Results in the Bullwhip Effect
• Supply chain partners can benefit by sharing information on sales,
demand forecasts, inventory levels & marketing campaigns
• Inaccurate or distorted information leads to the Bullwhip Effect :
Suppliers and retailers observed that while demand did not vary much,
fluctuations in order increase up to the upstream stages of supply chain
resulting an inventory in excess across supply chain on each stages.

Image shows an increase in inventory across supply chain

23
(Copyright 2011 John Wiley & Sons, Inc.)
 Bullwhip Effect
The bullwhip effect is not a new phenomenon in the industrial world (Forrester
1961). APICS Supply Chain Council defines the bullwhip effect as “an extreme
change in the supply position upstream in a supply chain generated by a small
change in demand downstream in the supply chain.” Each link in the SC will over- or
under-estimate product demand, resulting in exaggerated fluctuations.
The figure shows how this effect propagates in a simple supply chain with only
three companies: a retailer, a wholesaler and a paper mill.
In this figure, the retailer exclusively sells to the customer and buys from the
wholesaler, the wholesaler sells to the retailer and buys from the paper mill, and
the paper mill sells to the wholesaler and buys from an unknown supplier.

Fabrica de hartie

As a variability, the bullwhip effect is measured by the standard deviation б of

orders. Note that the means μ of orders are all equal in our example given in figure.
NON-COLLABORATIVE SUPPLY CHAIN MODEL
Results of interdepartmental misinformation
 Managing Uncertainly

Order variations in the supply chain

SCM
 Insufficient Collaboration Results in the Bullwhip Effect
Decentralized demand information

• The Bullwhip Effect

External Demand

– Consider the wholesaler Retailer

• Wholesaler receives orders

from retailer and places Order lead time Delivery lead time

orders with its supplier, the

distributor Wholesaler

• The wholesaler uses

Order lead time Delivery lead time
forecasting to determine
the retailer’s demand using
Distributor
past orders placed by the
retailer
Order lead time Delivery lead time
• The retailer’s order
variability is higher than Factory
the variability of customer
demand Production lead time

30 March 2021 27
Good Collaboration results in the minimize Bullwhip Effect
Centralized information system

Centralized demand information External Demand

Retailer
• Retailer observes demand
– Forecasts mean demand using a moving
average with p observations Order lead
time
Delivery lead
time
– Places order to wholesaler
• Wholesaler Wholesaler
– Receives retailer’s order along with forecast
mean demand
Order lead Delivery lead
– Uses forecast to determine target inventory time time
level, and then places order to distributor
• Distributor Distributor
– Receives order along with retailers forecast
mean demand Order lead Delivery lead
– Uses forecast to determine target inventory time time

level, and then places order to factory

Factory

Production lead time

30 March 2021 28
Good Collaboration results in the minimize Bullwhip Effect
Centralized information system

External Demand

– Centralized demand information Retailer

• Each facility in the SC receives the

Order lead Delivery
retailer’s forecast mean demand and time lead time

uses this mean demand to order-up-to Wholesaler

inventory amounts
– Centralized information: Order lead
time
Delivery
lead time

• Demand information Distributor

• Forecasting technique
• Inventory policy Order lead
time
Delivery
lead time

Factory

Results: Minimize Bullwhip effect

Production lead time

30 March 2021 29
 Causes of the bullwhip effect
• Poor Forecast accuracy, Wrong Demand Management through descentralized system
• Order synchronization
– Multiple retailers who tend to order around the same time period
– Manufacturers responding to an MRP system that place raw material orders at the
beginning of the month
• Order batching
– In order to save on shipping or ordering costs, firms order a full pallet or full truck
load
• Trade promotions and forward buying
– Supplier offers a discount on product ordered in a specific time period
– Supplier offers a quantity discount
– A retailer orders a large quantity intending to take advantage of a discount and sells
excess product to a second retailer (this strategy is called diversion)
• Reactive and over-reactive ordering
– A retailer who is not sure that demand is stable over time may act aggressively
when faced with periods of lower or higher than expected demand
• Shortage gaming - inflated orders
– A retailer suspect supplier to be in short supply in the future may order more than
needed expecting to only receive a portion of the ordered quantity
• Price fluctuation
- If prices fluctuate, retailers often try to stock up when prices are low
30 March 2021 30
 How we fight against the bullwhip
Having understood some of the causes of the bullwhip effect, we now outline some levers to counteract
them.
1. Operational effectiveness
2. Information sharing
3. Channel alignment
1. Operational Effectiveness in terms of cost, quality, and response time:
• Reduce (material and information) flow time (EDI, cross-docking, etc)
• • Reduce economies of scale: The bullwhip effect can be diminished if batch sizes of purchases are reduced
(reduce fixed costs: fixed procurement, production, and transportation costs; give quantity
discounts for assortments; form logistical alliances with a third-party logistics firm to achieve
• economies of scale in transportation by consolidating the needs of multiple suppliers/customers ;
2. Information Sharing - make sales data available to all players in the supply chain can reduce the
magnitude of the bullwhip effect:
• Share demand information with upstream players
• Share availability information with downstream players: Shortage gaming results when retailers do not know
the actual availability or capacity of their suppliers.
3. Channel Alignment (level of coordination) - explicit coordination/incentive mechanisms are needed to
align the priorities of individual members with those of the system:
• Coordinate replenishment and forecasting decisions (VMI,CRP, CPFR)
• Stabilize prices: Short-term price reductions provide an incentive to the retailers
• Change allocation policies: policy of basing allocations on past sales—may remove incentives to inflate orders.
To summarize, the ability to synchronize flows in a supply chain is the solution to reduce the effect of
bullwhip but the process is affected by factors as operational efficiency, information availability, and level
of coordination.
 6. Use metrics to drive business success

Supply Chain Metrics

You can't improve what you can't measure

Is our supply chain efficient?

What does our supply chain really cost our

business?

Where can we improve our supply chain?

30 March 2021 32
 A Spectrum of Approaches

30 March 2021 33
 Which metrics?
In a conversation about Performance Metrics we always need to start by asking the
question, “What is our goal?” Are we looking to be the best in customer service?
Are we looking to control market share? Are we worried about costs, like inventory costs
or operating costs? Or are we focused on quality?
Each of these goals drives us toward different methodologies and they can create
conflicting priorities.
However, the measure that will fit your organization the best depends on the following:
–The goals of the organization
–The expectations of the customer
–The response that employees or suppliers will have to the measure
–The accessibility and reliability of the measure
Asadar KPI-urile sunt utilizate pentru a masura progresul nostru in atingerea
obiectivelor organizationale propuse.
From a large spectrum of metrics we choose supply chain metrics and definitions based
on industry standards such as Performance Measurement Group (PMG)’ Supply Chain
Scorecard and Benchmark.
PMG performs all the benchmarking for the Supply-Chain Council and their metrics are
based on SCOR model.
PMG's Supply Chain Benchmark standards is a comprehensive program designed to
assess the operational performance, practices, and complexity of your end-to-end supply
chain (Plan, Source, Make, Deliver, and Overall).
It covers several key perspectives of supply chain efficiency including
30 Marchdelivery
2021 34
performance, flexibility, costs, and asset management.
 Is your supply chain efficient???
Solution?
You need an internally benchmark
The first step is to understand where you are by
comparing your delivery performance with a
standard.
Solution? You need a benchmark comparing your
current performance to that of companies like yours
or to a best-in class (BIC) standard to help you
understand:
 your current supply chain performance
 identify performance gaps to that off median or BIC
companies
 help you prioritize your efforts toward improvement
30 March 2021 35
Benchmarking Process
 What does our supply chain really cost our business?
SCOR: performance Metrics
SCOR model incorporates five performance measures of reliability, responsiveness, flexibility,
costs, and efficiency of asset utilization
Supply Chain Performance Attribute Metric (Strategic SCOR
level 1)
Reliability – the ability of the SC to deliver the correct •Perfect order fulfillment
Focus om customers

product, to the right place, at the right time, in the proper

condition, in the right package, in the correct quantity, with
the right documentation, to the right customer.
Responsiveness – the speed at which a SC provides •Order fulfillment cycle time
products to the customer.
Agility (Flexibility) - the ability of an organization to •Supply chain Flexibility
respond rapidly to changes in demand, both in terms of •Supply chain Adaptability
volume and variety in order to gain or maintain competitive
advantages.
Focus om costs&assets

Cost – the costs associated with operating the SC. •Cost of goods sold
•Supply Chain Management
costs -Total cost to serve
Asset Management Efficiency – the effectiveness of a •Cash-to-cash cycle time
SC in managing fixed and working assets to support •Return on Supply Chain Fixed
demand satisfaction. Assets
37
•Return on Working Capital
 3 Golden Rules for building meaningful supply
chain KPIs
• Golden Rule #1: Don’t Meddle or Manipulate – nu amestecati sau manipulati
Exemplu: daca livrati cu intarziere nu incercati sa convingeti clientii sa le accepte pentru a le considera on
time delivery. Concentrati-va asupra rezolvarii intarzierilor.
Late is late, even when it is with a customer’s permission.

• Golden Rule #2: Put Yourself on the Outside, Looking in – a ramane neutru
KPI-urile pentru SC ar trebui sa reflecte viziunea clientilor asupra performantei serviciilor dvs de SC, adica
“how your service would be viewed in the eyes of your customers”.
De exemplu daca fereastra de timp de livrare este de 3h si majoritatea livrarilor sunt realizate cu 15 min
inaintea inchiderii acesteia, cum este perceputa de catre clienti calitatea serviciilor tale?
Un indicator semnificativ in acest sens ar fi: Cate livrari au loc in prima ora a ferestrei de livrare?

• Golden Rule #3: Choose Quality Over Quantity – numar adecvat de indicatori
Avand prea multi indicatori veti ajunge sa nu mai vedeti padurea de copaci.
Aplicati regula de a avea 3 indicatori pentru fiecare functie/componenta de SC, dar nu mai mult de 10
indicatori in total.
 Strategia omnichannel profitabila in pandemie
pentru realizarea COMENZII PERFECTE
Fidelizarea cumpărătorilor in pandemia COVID-19 a venit de la capacitatea de a
finaliza o comanda perfectă: obținerea produselor solicitate la cel mai bun
preț, livrate când și unde doresc, returnarea articolului din orice locatie s-ar
afla.
Componente cheie care pot fi utilizate în construirea unei strategii omnichannel
profitabile pentru realizarea COMENZII PERFECTE sunt:

1. MANAGEMENTUL CENTRALIZAT AL COMENZILOR CLIENTILOR

Prin aceasta decizie , comerciantii cu amănuntul obțin o singură versiune a
informațiilor despre comenzi și stocuri, care acoperă toate canalele.

2. VIZIBILITATEA COMPLETA A STOCULUI LA NIVEL DE INTREPRINDERE

3. Alocarea inteligentă a comenzilor omnichannel.

Incercarea de a conecta diversele sistemele IT creează date duplicate pline de

erori, rezultand in final un sistem costisitor de gestionat (16% of all orders could
result in customers choosing to shop with a competitor, as well as 16% of orders going
through an extensive returns process).