Supply Chain Management

(OM-401)
Session-1

Dr. Aalok Kumar

SUPPLY SIDE DEMAND SIDE PhD-IIT Roorkee
Presentation flow

 Course modules
 Course Learning Outcomes (CLO)
 Assessment Criterion and contribution
 Need of SCM course
 Definition of SCM
 Zoom breakout task
 Discussion of SCM relevance to current situation
 Component of SCM
 Learning expectation form this course
 Prescribed Modules
Text Book
Sunil Chopra, Peter Meindl. D. V. Kalra (2016). Supply Chain Management: Strategy, Planning, and
Operations. 5th Edition. New Delhi, Pearson.
Module I: Introduction to Supply Chain Management (5 of 20 Sessions)
 Session Topic Reference  Pedagogy
1 Opening (Course overview, Need of course, Text, Ch 1  Class Discussion
Expectations, Evaluation)  Video: Dell Supply chain
2 Managing Supply Chain is managing Business, Text, Ch 1  Class Discussion
Contemporary Issues and Challenges
 Video: Future Supply Chain
2016
3 SC Strategy Text, Ch. 2  Efficient Vs Responsive SCM
4 Key Drivers and enablers in Supply Chain Management Text, Ch. 3  Class Discussion
 Case: Seven –Eleven Co
5 Comparison of Online and Store based supply chain    Class Discussion
Models  Case Analysis
Prescribed Modules
Module II: Integrated Approach of SCM and its issues (9 of 20 Sessions)
Topic Reference  Pedagogy
6.  Integrated Approach of SCM and role of Simulation by Beer Game
SCM Players learnbiz
Integrated Approach of SCM and Bull  
whip effect Ch. 10  Beer Game
 Class Discussion
7. Collaborative Planning, forecasting and Ch. 10 Class Discussion
Replenishment (CPFR) Model  
8. Inventory Management and JIT in SCM. Ch. 11  Class Discussion
   Exercise
 Industry visit
9. Guest Session/ Industry Visit
Prescribed Modules
Module III: Sourcing in Supply Chain Management (10 of 20 session)
Session  Topic Reference Pedagogy

 10 Make Vs Buy: The Ch. 15 Class Discussion

strategic approach  
(Sourcing/Outsourcing)
Vendor development & Ch. 15 Exercise: Develop supplier
Selection   selection criteria using at least
five Qualitative and five
Quantitative dimensions.
 Prescribed Modules
Module IV: Designing SCM Network (15 of 20 Sessions)
Session No Topic Reference Pedagogy
11 Number of Warehouses and the impact of supply Chain, Text Ch. 4 Class Exercises
Variety and LSCM  
Role of Distribution Network, Factors influencing network Text Ch. 4 Class discussion
decisions. Or
12 Industry visit
Distribution practices in E-commerce: Drop-shipment Text Ch. 4 Case Discussion
model, On-Demand Sourcing Model and Stocking Model.  
Fulfilment of Long-tail products
13 Role of Network in Supply Chain, Factors influencing Text Ch. 5 Class Exercises
network design decisions, Framework for Network Design
decisions, Models for facility location and capacity
allocation
14 Impact of uncertainty on Network Design, Discounted Text Ch. 6 Class
Cash Flow Analysis, Representations of Uncertainty, Exercises
Evaluating Network Decision using Decision Trees
 Prescribed Modules
Module V: Performance Monitoring and Sustainability Aspects in SCM (17 of 20 Session)
Session Topic Reference Pedagogy
15 Performance Measurement Text Ch.7 Class Discussion
parameters in supply chain.  
16 Emerging Technologies in Text Ch.17 Class Discussion
Supply Chain Integration,
Discussion on Amazon
E Supply Chain, and E-
logistics , Flipkart and other e-
commerce companies
17. Guest Session/ Industry Visit
Prescribed Modules
Module VI: Contemporary Practices in SCM (20 of 20 Session)
Session Topic Reference Pedagogy
18  Postponement Strategy, Notes Class Discussion
 Aggregation Strategy,  
 Cross Docking Strategy,
 Risk Pooling
19 Vendor Managed Inventory (VMI): A Ch. 10 Class Discussion
tool of Agile SCM    
20 Transportation Problems: Integrated Text Ch. 14 Class Discussion
Decision on Transportation  
considering both transportation and
inventory costs
Course Learning Outcomes (CLOs)
At the end of the course, the students should be able to:

 CLO1: Summarize the challenges and complexity in managing supply chains.

 CLO2: Analyze cross-functional supply chain management drivers to improve

supply chain performance.  

 CLO3: Apply relevant contemporary frameworks to business situations for

developing supply chain strategy.
Assessment Criterion and Process
Assessment Description Weight
Components (%)
The purpose of Individual Viva is to assess student’s learning in an online or
Individual
Viva
hybrid environment. Each student will be assessed on understanding of 20
concepts, tools & techniques of supply chain management.
Individual Assignment: The purpose of this task is to assess students’
understanding of the supply chain concepts, 2-3-page supply chain
visualization /diagram, approximately 400 words, this is an individual
assessment.
For the given assignment problem, students are required to:
Individual
Assignment
 review a given supply chain 10
 visualize the main components in a drawing/diagram
 describe the main components
 provide a short commentary/ or learning recommondation
 
Assessment Tasks
Assessment Description Weight
Components (%)
Supply Chain Simulation Game “Whipped Bear”  
(All students provided online access to the game by Learnbiz Simulations)  
Assessment Scheme for Simulation Game:  
 Maximum 2 marks to be awarded for participation; being equivalent to  
number of times simulation is attempted. For example, if someone attempt  
twice he/she gets 1 marks but if someone attempts 5 times or more, he/she  
gets 3 marks.  
Simulation  Maximum 4 marks to be awarded for performance during practice; by  
Game multiplying percentile achieved in 'Hard' mode by 4. The percentile  
calculation procedure takes into account all attempts by all the students  
 Maximum 4 marks to be awarded for performance during Tournament. 1st 10
position can be awarded 4 out of 4, person coming last can be awarded 1 out
of 4 and in-between participants' marks can be scaled down from 4 to 1
gradually.
 
 Assessment Tasks
Assessment Description Weight (%)
Components
It will be on group basis (group of 4 students). Project will involve application of
course content and the live problems of the industry.
In-class (or recorded) group presentation of 15 minutes’ duration. Students can
alternatively submit an electronic version (PowerPoint, or equivalent), a video
or voice recorded version of your presentation.
Students are required to:
Group Project Report
 Application of relevant supply chain management concepts/frameworks and 20
and Presentation
theories in completing the report
 Logical development of arguments in presenting your analysis •
Conclusions and recommendations
 Engagement with audience
 Use of relevant credible sources and appropriate referencing style
 Collaboration among group members (peer evaluation report)
End Term This will consist of case study, application-based situation questions 40
Examination along with caselet analysis.  
Philosophy of SCM
 The entire supply chain is a single, integrated entity.

 The cost, quality and delivery requirements of the customer are

objectives shared by every company in the chain.

 Inventoryis the last resort for resolving supply and demand

imbalances.
 History of Supply Chain Management

 • 1960’s - Inventory Management Focus, Cost Control

 • 1970’s - MRP & BOM - Operations Planning
 • 1980’s - MRPII, JIT - Materials Management, Logistics
 • 1990’s - SCM - ERP - “Integrated” Purchasing, Financials, Manufacturing,
Order Entry
 • 2000’s - Optimized “Value Network” with Real-Time Decision Support;
Synchronized & Collaborative, Extended Network
 2010;s – AI and data driven decision network; resilient supply network
SUPPLY CHAIN MANAGEMENT
Supply Chain Management – Definitions

Supply chain management is the management of a network of interconnected

businesses involved in the ultimate provision of product and service packages required
by end customers (Harland, 1996).

Importance of Supply Chain Management

To compete in the global market and networked economy.

Inter-organizational supply network can be acknowledged as a new form of

organization.

The network structure fits neither "market" nor "hierarchy" categories

Some More Definitions
Supply Chain Management deals with the management of materials, information, and
financial flows in a network consisting of suppliers, manufacturers, distributors and
customers.
Stanford Supply Chain Forum
SCM involves “managing the flow of items, information, cash and ideas through the
coordination of supply chain processes and through the strategic addition of place, period
and pattern values.
MIT Center for Transportation and Logistics

https://www.youtube.com/watch?v=AwemFfdD6VI&t=81s
Some More Definitions
 Supply Chain Management is primarily concerned with the efficient integration of suppliers, factories,
warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right
locations and at the right time, and so as to minimize total system cost subject to satisfying service
requirements. Simchi-Levi

 System-wide costs are minimized and

 • Service level requirements are satisfied
 Customers,
Figure: Sources: Regional
Field
Warehouses:
demand
centers
plants Warehouses: sinks
SCM network vendors
ports
stocking
points
stocking
points

representation

Supply

Inventory &
warehousing
costs
Production/
purchase Transportation Transportation
costs costs costs
Inventory &
warehousing
costs
Supply Chain Management
Why is SCM Important?
 Strategic Advantage – It Can Drive Strategy
* Manufacturing is becoming more efficient
* SCM offers opportunity for differentiation (Dell) or cost reduction (Wal-Mart or Big
Bazaar)
 Globalization – It Covers The World
* Requires greater coordination of production and distribution
* Increased risk of supply chain interruption
* Increases need for robust and flexible supply chains
Contrasting Supply Chain Management with Traditional
Management Chain
Element Traditional Management Supply Chain Management

Inventory management approach Independent Efforts. Joint reduction in channel inventories.

Total cost approach Minimize firm costs Channel-wide cost efficiencies

Time horizon Short-term Long-term
Amount of information sharing As required for planning and
Limited to needs of own current transactions
and monitoring monitoring purposes

Amount of coordination of Single contact for the transaction between Multiple contacts between levels in
multiple levels in the channel channel pairs firms and levels of channel

Joint planning Transaction-based On-going

Breadth of supplier base Large to increase competition and spread risk Small to increase coordination

Channel leadership Not needed Needed for coordination focus

‘Distribution Centre’ orientation (focus
‘Warehouse’ orientation (storage, safety stock).
Speed of operations, information on turnover speed). Interconnecting
Interrupted by barriers to flows. Localized to
and inventory flows flows; JIT, Quick Response across the
channel pairs
channel
A picture is better than 1000 words!
- A supply chain consists of

Supplier Manufacturer Distributor Retailer Customer

Upstream
Downstream

- aims to Match Supply and Demand,

profitably for products and services
SUPPLY SIDE
SUPPLY SIDE DEMAND SIDE
DEMAND SIDE
SUPPLY SIDE DEMAND SIDE
- achieves

The right
Product
+ The right
Price
+ Store
+
The right The right
Quantity
+ The right
Customer
+ The right
Time
= Higher
Profits
SCM- Key Issues
Why do we need supply chain management?

 We have an increased reliance on suppliers. Procurement happens in each and every aspect of an
organization, from business needs to IT needs. Everything needed in a corporation is tied to suppliers and
there will be a long list of suppliers in no time.
An effective SCM system helps accomplish the following:
 • Managing contractual obligations to assure a continuous supply and avoid a service company’s delivery
disruptions.
• Strengthening supplier relations for systematic synergy with suppliers and different lines of business.
• Enterprise spending management to assure procurement happens through the right suppliers and reduces
costs.
• Managing risk and compliance to abide by organizational as well as industry specific regulations and
compliances.
• Establishing a single comprehensive supplier view and deriving insightful procurement analytics.
 Flows in a Supply Chain
Material

Supplier Information Customer

Funds
Cash
The flows resemble a chain reaction. Products and Services
Information
THAILAND INDIA MEXICO TEXAS US
The task of SCM is to design, plan, and N-Tier Suppliers Suppliers Logistics Distributors Retailers

execute the activities at the different stages

so as to provide the desired levels of service
to supply chain customers profitably. Supply Side OEM Demand Side
Demand

Supply
 The Objective of a Supply Chain
Maximize net value generated
Supply Chain Surplus = Customer Value − Supply Chain Cost
 Example: a customer purchases a wireless router from Best Buy for $60 (revenue)
 Supply chain incurs costs (convey information, produce components, storage,
transportation, transfer funds, etc.)
 Difference between $60 and the sum of all of these costs is the supply chain profitability
 Supply chain profitability is total profit to be shared across all stages of the supply chain
 Success should be measured by total supply chain surplus, not profits at an individual stage
Decision Phases in a Supply Chain

1. Supply chain strategy or design

 How to structure the supply chain over the next several years
2. Supply chain planning
 Decisions over the next quarter or year
3. Supply chain operation
 Daily or weekly operational decisions

COVID-19 has altered how we think about Supply Chain. Pre-COVID-19 , the
objective was to be Lean and Cost-effective. Post-COVID-19 companies must now
focus on making their Supply Chains Resilient, Agile, Smart, Digital, and
Sustainable. 
Unveiling Supply Chain of Amazon
India
Fulfillment By Amazon (FBA) is a service provided by Amazon that provides storage,
packaging, and shipping assistance to sellers. ...
 The program allows sellers to ship their merchandise to an Amazon fulfillment center, where
items are stored in warehouses until they are sold.
Seller

INFORMATION PRODUCT

FC
INFORMATION PRODUCT

Customer
Fulfillment By Amazon (FBA)
1. Sellers send products
to an Amazon 2. Amazon stores
fulfillment center or Sellers’ products –
schedule a pickup from a single unit to
your entire inventory

3. Customers order
Sellers’ products from
Amazon, often with
fast, free delivery

4. Amazon packs and 5. Amazon’s customer

ships Seller’s products service and delivery
from fulfillment center to creates loyal, happy
the customer customers

@Data Source: Amazon India Corporate Website

Fulfillment Centers of Amazon
Fulfillment Center: 26

New Fulfillment Center: 9

Delivery Station: 33

86% Sellers of FBA

1.3 Million Products are available for
Immediate Shipping

Largest FC in Sonipat, Haryana

Space: 200000 Sq. Ft.
Capacity: 800000 Cu. Ft.

@Data Source: MWPVL International

 Supply Chain Strategy or Design
• Decisions about the configuration of the supply chain, allocation of resources, and what
processes each stage will perform
• Strategic supply chain decisions
 Outsource supply chain functions
 Locations and capacities of facilities
 Products to be made or stored at various locations
 Modes of transportation
 Information systems
• Supply chain design must support strategic objectives
• Supply chain design decisions are long-term and expensive to reverse – must take into
account market uncertainty
Supply Chain Planning

• Definition of a set of policies that govern short-term operations

• Fixed by the supply configuration from strategic phase

• Goal is to maximize supply chain surplus given established constraints

• Starts with a forecast of demand in the coming year

 Supply Chain Planning
• Planning decisions:

 Which markets will be supplied from which locations

 Planned buildup of inventories

 Subcontracting

 Inventory policies

 Timing and size of market promotions

• Must consider demand uncertainty, exchange rates, competition over the time horizon in
planning decisions
 Supply Chain Operation
• Time horizon is weekly or daily

• Decisions regarding individual customer orders

• Supply chain configuration is fixed and planning policies are defined

• Goal is to handle incoming customer orders as effectively as possible

• Allocate orders to inventory or production, set order due dates, generate pick lists at a
warehouse, allocate an order to a particular shipment, set delivery schedules, place
replenishment orders

• Much less uncertainty (short time horizon)

Supply Chain Strategies
 Push-Based Supply Chain
 Pull-Based Supply Chain
 Push-Pull Supply Chain
 Process Views of a Supply Chain
1. Cycle View: The processes in a supply chain are divided into a series of
cycles, each performed at the interface between two successive stages of the
supply chain.

2. Push/Pull View: The processes in a supply chain are divided into two
categories, depending on whether they are executed in response to a customer
order or in anticipation of customer orders.

Pull processes are initiated by a customer order, whereas push processes are
initiated and performed in anticipation of customer orders.
Cycle View of Supply Chain Processes

Figure: Supply Chain Process Cycles

Cycle View of Supply Chain Processes

Figure: Subprocesses in Each Supply Chain Process Cycle

Push-Pull Supply Chains

The Supply Chain Time Line

Customers
Suppliers
PUSH STRATEGY PULL STRATEGY

Low Uncertainty High Uncertainty

Push-Pull Boundary
Push/Pull View of Supply Chain Processes
 Supply chain processes fall into one of two categories depending on the
timing of their execution relative to customer demand

 Pull: execution is initiated in response to a customer order (reactive)

 Push: execution is initiated in anticipation of customer orders (speculative)

 Push/pull boundary separates push processes from pull processes

Push/Pull View of Supply Chains
E-Fulfillment Requires a New Logistics
Infrastructure
Traditional Supply Chain e-Supply Chain

Supply Chain Strategy Push Push-Pull

Shipment Type Bulk Parcel

Inventory Flow Unidirectional Bi-directional

Reverse Logistics Simple Highly Complex

Destination Small Number of Stores Highly Dispersed Customers

Lead Times Depends Short

Push/Pull View – L . L. Bean

Figure: Push/Pull Processes for the L.L. Bean Supply Chain

Push/Pull View – Ethan Allen

Figure: Push/Pull Processes for Ethan Allen Supply Chain for Customized
Furniture
Supply Chain Macro Processes

Supply chain processes discussed in the two views can be classified into

1. Customer Relationship Management (C R M):

 all processes at the interface between the firm and its customers

2. Internal Supply Chain Management (I S C M):

 all processes that are internal to the firm

3. Supplier Relationship Management (S R M):

 all processes at the interface between the firm and its suppliers
Supply Chain Macro Processes
 Zara
1. What advantage does Zara gain against the competition by having a very responsive supply chain?

2. Why has Inditex chosen to have both in-house manufacturing and outsourced manufacturing?

3. Why does Zara source products with uncertain demand from local manufacturers and products with
predictable demand from Asian manufacturers?

4. What advantage does Zara gain from replenishing its stores multiple times a week compared to a less
frequent schedule?

5. Do you think Zara’s responsive replenishment infrastructure is better suited for online sales or retail sales?
 Toyota

1. Where should the plants be located, and what degree of flexibility should be built
into each? What capacity should each plant have?

2. Should plants be able to produce for all markets or only for specific contingency
markets?

3. How should markets be allocated to plants and how frequently should this
allocation be revised?

4. How should the investment in flexibility be valued?

 Amazon
1. Why is Amazon building more warehouses as it grows? How many warehouses should it
have, and where should they be located?

2. Should Amazon stock every product it sells?

3. What advantage can online players derive from setting up a brick-and-mortar location?
How should they use the two channels to gain maximum advantage?

4. What advantages and disadvantages does the online channel enjoy in the sale of shoes
and diapers relative to a retail store?

5. For what products does the online channel offer the greater advantage relative to retail
stores? What characterizes these products?
 Competitive and Supply Chain Strategies
 Competitive strategy defines the set of customer needs a company seeks to satisfy through its
products and services

 Product development strategy specifies the portfolio of new products that the company will
try to develop

 Marketing and sales strategy specifies how the market will be segmented and product
positioned, priced, and promoted

 Supply chain strategy determines the nature of material procurement, transportation of

materials, manufacture of product or creation of service, distribution of product, follow-up
service, whether processes will be in-house or outsourced
The Value Chain

Figure: The Value Chain in a Company

 Achieving Strategic Fit

• Strategic fit – competitive and supply chain strategies have aligned goals

• A company may fail because of a lack of strategic fit or because its overall supply chain
design, processes, and resources do not provide the capabilities to support the desired
strategy.
Achieving Strategic Fit

1. The competitive strategy and all functional strategies must fit together to form a
coordinated overall strategy. Each functional strategy must support other functional
strategies and help a firm reach its competitive strategy goal.

2. The different functions in a company must appropriately structure their processes and
resources to be able to execute these strategies successfully.

3. The design of the overall supply chain and the role of each stage must be aligned to
support the supply chain strategy.
 How Is Strategic Fit Achieved?
1. Understanding the customer and supply chain uncertainty
2. Understanding the supply chain capabilities
3. Achieving strategic fit
Step 1: Understanding the Customer and Supply
Chain Uncertainty
• Quantity of product needed in each lot

• Response time customers are willing to tolerate

• Variety of products needed

• Service level required

• Price of the product

• Desired rate of innovation in the product

Step 1: Understanding the Customer and Supply
Chain Uncertainty

• Demand uncertainty – uncertainty of customer demand for a product

• Implied demand uncertainty – resulting uncertainty for only the portion of the demand
that the supply chain plans to satisfy based on the attributes the customer desires
Customer Needs and Implied Demand Uncertainty
Table: Impact of Customer Needs on Implied Demand Uncertainty
Customer Need Causes Implied Demand Uncertainty to …
Range of quantity required increases Increase because a wider range of the quantity required implies
greater variance in demand
Lead time decreases Increase because there is less time in which to react to orders

Variety of products required increases Increase because demand per product becomes less predictable

Required service level increases
Rate of innovation increases
Number of channels through which
product may be acquired increases
Increase because the firm now has to handle unusual surges in
demand
Increase because new products tend to have more uncertain
demand
Increase because the total customer demand per channel
becomes less predictable
Implied Uncertainty and Other Attributes

1. Products with uncertain demand are often less mature and have less direct competition. As
a result, margins tend to be high.

2. Forecasting is more accurate when demand has less uncertainty.

3. Increased implied demand uncertainty leads to increased difficulty in matching supply

with demand. For a given product, this dynamic can lead to either a stockout or an
oversupply situation.

4. Markdowns are high for products with greater implied demand uncertainty because
oversupply often results.
Implied Uncertainty and Other Attributes

Table: Correlation Between Implied Demand Uncertainty and Other

Attributes
Blank Low Implied High Implied
Uncertainty Uncertainty

Product margin Low High

Average forecast error 10% 40% to 100%

Average stockout rate 1% to 2% 10% to 40%

Average forced season-end 0% 10% to 25%
markdown
Impact of Supply Source Capability

Table: Impact of Supply Source Capability on Supply Uncertainty

Supply Source Capability Causes Supply Uncertainty to...

Frequent breakdowns Increase
Unpredictable and low yields Increase
Poor quality Increase
Limited supply capacity Increase
Inflexible supply capacity Increase
Evolving production process Increase
Implied Uncertainty (Demand and Supply)
Spectrum

Figure: The Implied Uncertainty (Demand and Supply) Spectrum

Step 2: Understanding Supply Chain Capabilities

• How does the firm best meet demand?

• Supply chain responsiveness is the ability to
 Respond to wide ranges of quantities demanded
 Meet short lead times
 Handle a large variety of products
 Build highly innovative products
 Meet a high service level
 Handle supply uncertainty
Step 2: Understanding Supply Chain Capabilities

• Responsiveness comes at a cost

• Supply chain efficiency is the inverse to the cost of making and

delivering the product to the customer

• The cost-responsiveness efficient frontier curve shows the lowest

possible cost for a given level of responsiveness
Cost-Responsiveness Efficient Frontier

Figure: Cost-Responsiveness Efficient Frontier

Responsiveness Spectrum

Figure: The Responsiveness Spectrum

Step 3: Achieving Strategic Fit

 Ensure that the degree of supply chain responsiveness is consistent with

the implied uncertainty

 Assign roles to different stages of the supply chain that ensure the
appropriate level of responsiveness

 Ensure that all functions maintain consistent strategies that support the
competitive strategy
Zone of Strategic Fit

Figure: Finding the Zone of Strategic Fit

Roles and Allocations

Figure:Different Roles and Allocations of Implied Uncertainty for a Given Level of Supply Chain
Responsiveness
Efficient and Responsive Supply Chains
Table: Comparison of Efficient and Responsive Supply Chains
Objective Efficient Supply Chains Responsive Supply Chains
 Primary goal Supply demand at the lowest cost Respond quickly to demand
 Product design Maximize performance at a Create modularity to allow postponement
strategy minimum product cost of product differentiation
Lower margins because price is a Higher margins because price is not a
 Pricing strategy
prime customer driver prime customer driver
 Manufacturing Maintain capacity flexibility to buffer
Lower costs through high utilization
strategy against demand/supply uncertainty
Maintain buffer inventory to deal with
 Inventory strategy Minimize inventory to lower cost
demand/supply uncertainty
Reduce, but not at the expense of Reduce aggressively, even if the costs are
 Lead-time strategy
costs significant
Select based on speed, flexibility,
 Supplier strategy Select based on cost and quality
reliability, and quality
Efficiency-Responsiveness Framework of
Supply Chain
Functional Product Innovative Products
Chain
Supply
Efficient

Match Mismatch
Supply Chain
Responsive

Mismatch Match
Tailoring the Supply Chain

 Achieve strategic fit while serving many customer segments with a variety of products

across multiple channels

 Requires sharing operations for some links in the supply chain, while having separate

operations for other links

Changes over Product Life Cycle

• Beginning stages

1. Demand is very uncertain, and supply may be unpredictable

2. Margins are often high, and time is crucial to gaining sales

3. Product availability is crucial to capturing the market

4. Cost is often a secondary consideration

Changes over Product Life Cycle

• Later stages

1. Demand has become more certain, and supply is predictable

2. Margins are lower as a result of an increase in competitive pressure

3. Price becomes a significant factor in customer choice

 Supply Chain Levers
• Five basic levers to deal with uncertainty

 Capacity, combination of excess capacity and flexible capacity

 Inventory, one of the most common levers used in practice to deal with uncertainty

 Time, combination of speedy supply and the willingness of customers to wait

 Information, appropriate information can help a supply chain reduce uncertainty

 Price, prices of products and services that vary over time

Supply Chain Uncertainty

Figure: Five Key Levers to Deal with Supply Chain Uncertainty

 Expanding Strategic Scope

• Scope of strategic fit – the functions within the firm and stages across the supply chain

that devise an integrated strategy with an aligned objective

• Intraoperation Scope: Minimizing Local Cost

 Each stage of the supply chain devises strategy independently

Expanding Strategic Scope

• Intrafunctional Scope: Minimizing Functional Cost

 Firms align all operations within a function

• Interfunctional Scope: Maximizing Company Profit

 Functional strategies are developed to align with one another and with the
competitive strategy
 Expanding Strategic Scope

• Intercompany Scope: Maximizing Supply Chain Surplus

 Supplier and customer work together and share information to reduce total cost and
increase supply chain surplus

• Agile Intercompany Scope

 A firm’s ability to achieve strategic fit when partnering with supply chain stages that
change over time
 Supply Chain Operations Reference (SCOR®)
Model
• The Supply Chain Operations Reference (SCOR®) model provides a unique framework that
links performance metrics, processes, best practices, and people into a unified structure. The
framework supports communication between supply chain partners and enhances the
effectiveness of supply chain management, technology, and related supply chain
improvement activities.

• SCOR® is a consensus model. It was developed and continues to evolve with the direct input
of industry leaders who manage global supply chains and use it daily to analyze and improve
the performance of their organizations. It features an intentionally broad scope and definitions
that can be adapted to the specific supply chain requirements of any industry or application.
 SCOR® solves supply chain challenges
• Superior Customer Service
The SCOR model provides a framework for measuring and understanding current supply chain conditions and
performance and creates a foundation for improvement.

• Cost Control
SCOR metrics provide the basis for an organization to measure how successful it is in achieving its desired
objectives. SCOR metrics are designed to be used in conjunction with supply chain performance attributes,
making it easier to compare different supply chains and different supply chain strategies.

• Planning And Risk Management

SCOR helps users establish rules and strategies, assign responsibilities, coordinate responses, and monitor
current conditions.

• Supplier/Partner Relationship Management

SCOR provides a common language for supply chain classification and analysis. Using a common language and
framework makes it easier for teams to communicate, speeds benchmarking efforts, and enhances the evaluation of
best practices.

• Talent
The SCOR skills management framework complements process reference, metrics reference, and practice
Scope of SCOR® model
SCOR® includes all customer
interactions from order entry
through paid invoice; all produc
(physical material and service)
transactions, including
equipment, supplies, spare
parts, software, etc.; and all
market interactions, from
understanding aggregate
demand to the fulfillment of
each order.
SCOR® Contents: PERFORMANCE METRICS:
Standard metrics to measure
process performance

PROCESSES: Standard
descriptions of management
The SCOR® process processes and a framework
reference model of process relationships
contains:

PRACTICES: Management
practices that produce best-
in-class performance

PEOPLE: Training and skills

requirements aligned with
processes, best practices,
and metrics