Supply Chain Drivers

Supply Chain Performance Drivers

To understand how company can best achieve the supply chain performance in terms of responsiveness and efficiency one must understand the supply chain drivers for performance

Drivers
We must understand the impact of following drivers on performance. Facilities Inventory Transportation Information Sourcing pricing

1. 2. 3. 4. 5. 6.

Facilities:
Are the actual physical locations in the supply chain where the product is stored or assembles. Two major facilities are production and storage sites. Decisions regading location, capacity and other facilities have significant impact on supply chain performance

Cont.
e.g. an auto parts distributor striving for responsiveness could have many warehousing facilities close to customers. If striving for efficiency distributor would have fewer warehouses to increase the efficiency.

Inventory
All raw material, and finished goods with in supply chain. Changing inventory policies can alter the supply chain efficiency or responsiveness. E.g. An automobile parts supplier can be more responsive by stocking large amount of inventory. A large inventory however increases cost and makes system less efficient.

Transportation
Moving inventory from one point to another. Transportation choices have a large impact on efficiency and responsiveness. E.g. A local courier company can use a faster mode of transportation such as FedEx to ship products which will increase the responsiveness of supply chain but will reduce efficiency.

Information
Most important driver. Includes data and analysis regarding inventory, transportation, warehousing, prices and customers throughout supply chain. It helps management to make supply chain efficient or responsive. e.g. an organization can produce and store products in anticipation of customer demands, which makes the supply chain responsive.

Sourcing
Is the decision of making responsible about the particular duties of transportation, production, storage or the management of information. These decisions take place at strategic level that what functions will be performed by organization and what functions the firm out sources.

Pricing
Determines how much the organization would charge for its product and services. Pricing drives the behaviour of the customer. Which effects the supply chain performance. e.g. if customers provide short lead time to deliver the product the transportation contractor will charge high prices and will effect the price of product this will increase responsiveness but will reduce efficiency.

It is important to understand that all these drivers interact with each other to determine the overall supply chain performance.