Supply Chain Management

For Competitive Advantage

Presented By:
Ejazur Rahman CSCM MBA AIMM PgDMC
Regional Chief Executive Officer
ISCEA Asia

Supply Chain Management

For Competitive Advantage

What is Supply Chain Management

Supply Chain Management includes planning and management of all stages that are involved directly or indirectly
in fulfilling customer request. Importantly, it also includes coordination and collaboration with channel partners,
which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain
management integrates supply and demand management within and across companies.
(Source: http://cscmp.org/aboutcscmp/definitions.asp)

Flows in a Supply Chain

THE CLASSICAL FLOW MODEL:

Physical Supply and Demand Information Flows

What is a Supply Chain

The Objective of a Supply Chain

The objective of every Supply Chain is to maximize the overall value generated
Value : The difference between what the final product is worth to the customer and the costs the supply
chain incurs in fulfilling the customers request.
Value is strongly correlated with supply chain profitability (also known as supply chain surplus)

Sources of Revenue / Cost in the supply chain

The customer is only one source of revenue for any supply chain.
Customer is the only one providing positive cash flow for the supply chain.
Other cash flows are simply fund exchanges that occur within the supply chain.
All flows of information, product, or funds generate costs within the supply chain.
Effective supply chain management involves the management of supply chain assets and products,
information, and fund flows to maximize the total supply chain profitability.

Supply Chain Management

The Changing Paradigm

Functional vs Process
Products vs Customers
Revenues vs Performance
Inventory vs Information
Transactions vs Relationships

Process Views and Decision Phases

Decision Phases in a Supply Chain
Process Views of a Supply Chain

Decision Phases in a Supply Chain

Supply Chain Strategy or Design

Supply Chain Planning
Supply Chain Operation

Supply Chain Strategy or Design

During this phase, given the marketing and pricing plans for a product, a companydecides how to
structure the supply chain over the next several years.
Strategic supply chain decisions include
Locations and capacities of facilities
Products to be made or stored at various locations
Modes of transportation
Information systems

Supply Chain Planning

Definition of a set of policies that govern short-term operations. Time frame considered is a quarter to a
year.
Planning decisions include
Which markets will be supplied from which locations
Planned buildup of inventories
Subcontracting, backup locations
Inventory Policies
Timing and size of the market promotions

Supply Chain Operation

During this phase companies make decisions regarding individual customer orders. Time horizon here is
weekly or daily.
At the operational level, supply chain configuration is considered fixed, and planning policies are already
defined.
The goal of supply chain operation is to handle incoming customer orders in the best possible manner.
Allocate orders to inventory or production, set order due dates, generate pick lists at the warehouse,
allocate an order to a particular shipment, set delivery schedules, place replenishment orders.
Uncertainty at this phase is much less (as the time horizon is short)

Process Views of a Supply Chain

A Supply Chain is a sequence of processes and flows that take place within and between different stages
and combine to fill a customer need for a product.
Two ways to view the processes performed in a supply chain
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 a supply chain.
Push/Pull View: 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.
Pullprocesses are initiated by a customer order, whereas Pushprocesses are initiated and
performed in anticipation of customer orders.

Cycle View of Supply Chain Process

The processes in a supply chain are divided into a series of cycles,

each performed at the interface between two successive stages of
a supply chain.
Supply Chain processes can be broken down into the following
four process cycles
Customer order cycle
Replenishment cycle
Manufacturing cycle
Procurement cycle

Supply Chain Macro Process in a firm

All supply chain processes (as discussed in the two process views) can be classified into the following
three macro processes
Customer Relationship Management (CRM): All processes that focus on the interface between
the firm and its customers.
Internal Supply Chain Management (ISCM): All processes that are internal to the firm.
Supplier Relationship Management (SRM): All processes that focus on the interface between the
firm and its suppliers.
Within a firm, all supply chain activities belong to one of the three macro processes: CRM, ISCM and SRM
Integration among the three macro processes is crucial for successful supply chain management.

Achieving Strategic Fit in Supply Chain Performance

Competitive and Supply Chain Strategies

What is Strategic Fit
How is Strategic Fit Achieved

Competitive & Supply Chain Strategies

Competitive strategy: A companys competitive strategy defines, relative to its competitors, the set of
customer needs that it seeks to satisfy through its products and services.
Example: Wal-Mart aims to provide high availability of a variety of products of reasonable quality
at low prices.
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
Consistency and support between supply chain strategy, competitive strategy, and other
functional strategies is important

The Value Chain: Linking Supply Chain and Business Strategy

Achieving Strategic Fit

Strategic Fit:
Consistency between customer priorities of competitive strategy and supply chain capabilities
specified by the supply chain strategy.
Competitive and supply chain strategies have the same goal.
A company may fail because of lack of strategic fit or because its processes and resources do not provide
the capabilities to execute the desired strategy

How is Strategic Fit Achieved?

Step 1: Understanding the customer and supply chain uncertainty

Step 2: Understanding the supply chain
Step 3: Achieving strategic fit

Step 1: Understanding the Customer and Supply Chain Uncertainty

Identify the needs of the customer segment being served

Quantity of product needed in each lot
Response time customers will tolerate
Variety of products needed
Service level required
Price of the product
Desired rate of innovation in the product
Therefore, the first step of to strategic fit is to map customer needs, productattributes, and supply chain
capabilities on the implied uncertainty spectrum

Step 1: Correlation between Implied Demand Uncertainty and other attributes

Step 2: Understanding the Supply Chain

How does the firm best meet demand?

Dimension describing the supply chain is supply responsiveness
Supply chain responsiveness ability to
respond to wide ranges of quantities demanded
meet short lead time
handle a large variety of product
build highly innovative product
meet a very high service level

Step 2: Responsiveness Spectrum

Step 3: Achieving Strategic Fit

All functions in the value chain must support the competitive strategy to achieve strategic fit
Step three is to ensure that what the supply chain does well is consistent with target customers need
Two extremes: Efficient supply Chains ( Barilla) and responsive supply chains (Dell)
Two key points
There is no supply chain strategy that is always right
There is a right supply chain strategy for a given competitive strategy

Achieving Strategic Fit Shown on the Uncertainty/Responsiveness Map

Comparison of Efficient and Responsive Supply Chains

Other Issues Affecting Strategic Fit

Multiple products and customer segment

The supply chain has to be able to balance efficiency and responsiveness given its portfolio of
products and customer segments.
Product life cycle
As the product goes through the life cycle, the supply chain changes from one emphasizing
responsiveness to one emphasizing efficiency.
Competitive changes over time
More competitors may result in an increased emphasis on variety at a reasonable price.

Supply Chain Drivers

Drivers of Supply Chain Performance

Framework for Structuring Drivers

Supply Chain Drivers

Strategic fit requires that a companys supply chain achieve the balance between responsiveness and
efficiency that best meets the needs of the companys competitive strategy.
To understand how a company can improve supply chain performance in terms of responsiveness and
efficiency, we must examine the logistical and cross functional drivers of supply chain performance:
Facilities, Inventory, Transportation, Information, Sourcing, and Pricing.
These drivers interact with each other to determine the supply chains performance in terms of
responsiveness and efficiency. As a result, the structure of these drivers determines if and how strategic
fit is achieved across the supply chain.
Facilities are the actual physical locations in the supply chain network where product is stored,
assembled, or fabricated. The two major types of facilities are production sites and storage sites.
Decisions regarding the role, location, capacity, and flexibility of facilities have a significant impact on the
supply chains performance.
Inventory encompasses all raw materials, work in process, and finished goods within a supply chain.
Changing inventory policies can dramatically alter the supply chains efficiency and responsiveness
Transportation entails moving inventory from point to point in the supply chain. Transportation can take
the form of many combinations of modes and routes. Transportation choices have a large impact on
supply chain responsiveness and efficiency.
Information consists of data and analysis concerning facilities, inventory, transportation, costs, prices, and
customers throughout the supply chain. Information is potentially the biggest driver of performance in
the supply chain because it directly affects each of the other drivers. Information presents the
management with the opportunity to make supply chains more responsive and more efficient.
Sourcing is the choice of who will perform a particular supply chain activity such as production, storage,
transportation or the management of information. At the strategic level, these decisions determine what
functions a firm performs and what functions the firm out sources. Sourcing decisions affect both the
responsiveness and efficiency of a supply chain.
Pricing determines how much a firm will charge for goods and services that it makes available in the
supply chain. Pricing affects the behavior of the buyer of the good or service, thus affecting supply chain
performance.

A Framework for Structuring Drivers

SUMMARY: A Great Supply Chain

What Does a Great SC Look Like?

Supply Chain strategy & set up clearly aligned to customer value proposition
Effective integrated business planning
aligning supply chain resources with business plans
Adequate supply chain flexibility built into cost of sales
Potential supply chain risks recognised with mitigating actions in place.
Excellent supply chain execution underpin by
Simple, well designed processes
Fit for purpose systems
Well trained staff
High level of process automation
Exceptions predictable with course of actions in place.

Challenges facing todays SCs - Macro

Cost inflation (here to stay!)

Medium term weak growth in the Developed Markets
Increased global competition
The role of digital opening up new channels and rules of engagement
Volatile demand patterns
Corporate responsibility is not fashion any more
It is a must
Consumers will tell you what they want through Social Media channels

Challenges facing todays SCs Micro (on the ground)

Demand Plan accuracy

Supply reliability
Pressures on cash, limiting investment in inventory
Shortening lead time and increased requirements by customers
Shorter product lifecycle
Increased product offering required to compete
Trained supply chain resources

Primary objectives of an effective SC Strategy

Aligned to the customer value proposition

Maximise supply chain asset utilisation
With adequate flexibility
Affordable
Creates a competitive advantage in the market place
Understood by all stake holders in the business
Strategy translated to clear rules at product level

Definition of Value Proposition

A clear statement of the tangible results / benefits a customer gets from using our products and services.
The value proposition translates the market offering into a statement of the benefits a customer will
derive from doing business with us.

Strategy Execution the framework

Supply Chain Talent Crisis

Why Supply Chain Talent Crisis?

Supply chain faces a severe shortage of talent at a time when the demands on theprofession have never
been greater.
Factors driving the skills shortfall include :
Globalization
Market uncertainty
Shifting demographic patterns, and
The emergence of supply chain as a strategic function
***
Source : MIT CTL WHITEPAPER (Are You Prepared For the Supply Chain Talent Crisis?)
By Ken Cottrill, Global Communications Consultant
MIT Center for Transportation and Logistics

Supply Chain Talent Crisis

Challenges in respect of knowledge workers

Supply Chain Talent Crisis

Impact when talented staff are lost

Supply Chain Talent Crisis

Knowledge Worker Challenges

Supply Chain Talent Crisis

Talent Management Challenges by Industry

Supply Chain Talent Crisis

These challenges require a mix of capabilities that is hard to find, but companies need to fill these skills
gaps in order to remain competitive.
The industry can build an adequate supply of talent in a number of ways, but companies must be more
proactive in their approach to recruiting, developing, and retaining the supply chain professionals.

What Can Be Done to Cope With Such Talent Crisis

Lets understand about the causes of such crisis and possible solutions by addressing the following three
questions:
What Skills are in Demand?
Where Can These Skills Be Found?
How Can Companies Develop and Retain Supply Chain Talent?
***
Source: MIT CTL WHITEPAPER (Are We Prepared For the Supply Chain Talent Crisis?)
By Ken Cottrill, Global Communications Consultant
MIT Center for Transportation and Logistics

What Skills are in Demand

The mix of skills required to fulfill the supply chain management role varies with the type of company and sector
involved, but we are seeing some common threads in this complex pattern.
Not Just a Numbers Game
SC practitioners need a combination of hard and soft skills to effectively manage in an unpredictable
commercial environment. Supply chain analytical skills are necessary and important but not sufficient. The soft
skills includes thinking creatively and appreciating the big picture.
Navigate in a Fog
Extreme uncertainty has become the norm in many markets requiring supply chain professionals to be adept at
managing ambiguity.

Multi-Level Communicator
A crucial element of the broader skills base is the ability to communicate horizontally and vertically within the
organization, and across communities of trading partners.
A World Citizen
Another sought-after set of skills and one that is becoming more important is the ability to manage teams that
are located in multiple countries. As companies and their supporting supply chains become more international,
managers can no longer assume that all their reports will hail from the same country.

Where These Skills Can Be Found?

There are a number of sources of supply chain professionals:
Educational institutions (basic functional skills)
Other companies, and
Recruiting firms (strategic and change management skills).
The rationale for deciding which ones to tap depends on a number of factors. One is the human resources (HR)
philosophy of the organization.

Corporate Programs
Entering the Pipeline :Young recruits who will become future leaders.
Internship programs
Encourage technical and business students towork together on projects
Low Profile, High Fence: Encouraging young people to enter supply chain programs is difficult when they have
little or no knowledge of the profession.
Work to raise the profile of the profession and attuneeducational programs to the industrys skills
needs
Emerging Issues :There appears to be much concern over the lack of supply chain training and education
infrastructure in emerging economies, those countries that are top targets for business growth over the next
decade.

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