L7 Supple Network Management

Chapter 7
Supply network management
Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st Edition, Slack, Brandon-Jones and Johnston, 2011
Slack et als model of operations management

Direct
Design
Operations
Management
Develop
Supply
network
management
Deliver
Capacity
management
Planning
and control
Inventory
management
Lean
synchronisation
Key operations questions

In Chapter 7 - Supply network management Slack et. al.
identify the following key questions.
Why should an organization take a supply network
perspective?
What is involved in managing supply networks?
What is involved in designing a supply network?
What are the types of relationships between operations in
supply networks?
What is the natural dynamic of a supply network?
How can supply networks be improved?
What is supply chain management?
Supply chain management is the management

of the interconnection of organizations that relate
to each other through upstream and downstream
linkages between the processes that produce
value to the ultimate consumer in the form of
products and services.
Operations network for a plastic homeware company

Second tier
suppliers
Chemical
company
Second tier
customers
Wholesaler
Plastic
stockist
Cardboard
company
Ink
supplier
First tier
customers
First tier
suppliers
Plastic
homeware
manufacturer
Packaging
supplier
Direct supply
Information
Retailer
Retailer
Operations network for a shopping mall

Second tier
suppliers
Recruitment
agency
First tier
suppliers
First tier
customers
Second tier
customers
Retailers
Retail
customers
Security
services
Cleaning
materials
supplier
Cleaning
services
Equipment
supplier
Maintenance
services
Shopping
mall
Direct supply
Information
Supply chain planning and control

.......is concerned with managing the flow of materials and information between
a string of operations, that form the strands or chains of a supply network
Flow between processes
Supply network
management concerns
flow between operations
Supply chain
management concerns
flow between a string of
operations
Supply chains management is concerned with the flow

of information and the flow of products and services
Upstream flow of
customer
Requirements
Flow between
processes
Long-term plans and requirements

Market research information
Individual orders
Payment
Potential new products and services
Flow between
processes
Flow between
processes
Consumer
Operation 1
Operation 2
Products and services

New products and services
Delivery information
Payment request / Credit
Operation 3
Downstream flow of products
and services for customer
Fulfilment
Supply chain planning and control

Second tier
supplier
First tier
supplier
First tier
customer
Supply side
Information
flow
Physical
flow
Purchasing and
supply
management
Second tier
customer
Demand
side
Physical distribution
management
Logistics
Materials management
Supply chain management
End
customer
Taking a customer perspective of supply performance

can lead to very different conclusions
Customer
requirements
100
Customer
satisfaction
20
Product/
Y
service
80
appropriate?
Product/
service
available?
N
N
10
70
N
50
Y
Y
Meets price
and delivery 20
requirements?
40
N
1
10
N
10
Customer
orders?
10
N
1
8
N
Received
as
Produced as
N
promised?
9 Y promised?
1
From the operations perspective
90% satisfaction
Y
From the customers perspective
8
8% satisfaction
1
The decision logic of outsourcing
Is activity of No
strategic
importance
Yes
Does
company
have
specialized
knowledge
Yes
Is significant
Is companys
Explore
No operations No
operations No
outsourcing
performance
performance
improvement
this activity
superior?
likely?
Yes
Yes
Explore keeping this activity in-house
Matching the supply chain with market requirements

Nature of Demand
Functional products
Innovative products
Low
Low cost
cost -- Low
Low throughput
throughput times
times
High
High utilization
utilization -- Low
Low utilization
utilization
Minimum
Minimum inventory
inventory -- Deployed
Deployed inventory
inventory
Low
Low cost
cost suppliers
suppliers -- Flexible
Flexible suppliers
suppliers
Supply Chain Objectives

Efficient
Responsive
Predictable
Few changes
Low variety
Price stable
Long lead-times
Low margin
Unpredictable
Many changes
High variety
Price markdowns
Short lead-times
High margins
Lean supply
chain
management
Mismatch
Mismatch
Agile supply
chain
management
Supply chain relationships

To......
Business
Business to business (B2B)

Most common, all but the last
link in the supply chain
Business
Consumer
Business to consumer (B2C)
Retail operations
Catalogue operations, etc.
E-commerce examples:
EDI networks
Business information
exchanges
Internet retailers
Amazon.com, etc.
Consumer to consumer (C2B)

or peer to peer (P2P)
Consumer to business (C2B)
From....
Consumer
Consumer offer, business

responds
Trading swap and auction

transactions
Some airline ticket
operators
Priceline.com, etc.
Specialist collector sites
Ebay.com, etc.
Do
Everything
Vertically
Integrated
Operation
Traditional Supply
Management
Do
Nothing
Do
Everything
Important
The character of Internal Operations Activity
Types of supply relationship
Partnership
Supply
Management
Virtual
Spot
Trading
Transactional Many Suppliers
Long-term
Virtual
Operation
Type of Inter-firm Contact
Close Few Suppliers
Factors for rating alternative suppliers

Short-term ability to supply
Longer-term ability to supply
Range of products or services

provided
Potential for innovation
Quality of products or services

Responsiveness
Ease of doing business

Willingness to share risk
Dependability of supply
Delivery and volume flexibility
Long-term commitment to supply

Ability to transfer knowledge as
well as products and services
Total cost of being supplied

Ability to supply in the required
quantity
Technical capability
Operations capability
Financial capability
Managerial capability
Weighted supplier selection criteria for a hotel chain

Factor
Weight
Supplier A
score
Supplier B
score
Cost performance
10
8 (8x10=80)
5 (5x10=50)
Quality record
10
7 (7x10=70)
9 (9x10=90)
Delivery speed
promised
5 (5x7=35)
5 (5x7=35)
Delivery speed
achieved
4 (4x7=28)
8 (8x7=56)
Dependability record
6 (6x8=48)
8 (8x8=64)
Range provided
8 (8x5=40)
5 (5x5=25)
Innovation capability
6 (6x4=24)
9 (9x4=36)
325
356
Total weighted score
Prodn.
Stock
1
2
100
3
4
180
60
100
100
100
60
60
120
120
90
100
95
20
2nd LEVEL
SUPPLIER
Prodn.
Stock
90
100
100
100
80
80
100
100
95
90
95
95
95
95
95
100
60
120
1st LEVEL
SUPPLIER
Prodn.
Stock
ORIGINAL
EQUIPMENT
MFG.
Prodn.
Stock
95
100
100
100
90
90
95
95
95
95
95
95
95
95
95
100
100
100
95
95
95
95
95
95
95
95
95
95
95
95
95
95
95
100
80
100
100
90
95
95
3rd LEVEL
SUPPLIER
DE
MA
N
PE
RI
O
The bullwhip effect
OEM
ALL OPERATIONS HOLD ONE PERIODS STOCK

100
95
95
95
95
95
MARKET
Prodn.
1
2
Stock
100
100
100
2nd LEVEL
SUPPLIER
Prodn.
Stock
100
100
100
1st LEVEL
SUPPLIER
Prodn.
Stock
100
100
100
ORIGINAL
EQUIPMENT
MFG.
Prodn.
100
3rd LEVEL
SUPPLIER
DE
MA
N
PE
RI
O
The bullwhip effect
Stock
100
100
100
95
3
4
105
95
105
95
3
OEM
ALL OPERATIONS HOLD ONE PERIODS STOCK

MARKET
The bullwhip effect
Supplier
Time
Manuf
-acturer
Time
Whole
-saler
Sales from
store
Orders
Stores orders to
wholesaler
Orders
Wholesalers
orders to
manufacturer
Orders
Orders
Manufacturers
orders to its
suppliers
Time
Retail
Store
Time
Consumers
The effects of supply chain compression

Supply chain time compression
Schedule
changes impact
market faster
so can
respond to
market changes
better
so revenues
are maximized
Forecasts
made closer to
demand time
Defects are
detected faster
so improved
forecasts
so easier to
improve quality
New products
and service
faster to market
so fewer lost
sales from
delayed launch
so reduced
risk of
obsolescence
so revenues
are maximized
so less
discounted
sales
so less need for

safety stocks
so reduced
stockholding
costs
so reduced
wastage costs
Improved profitability
The structure of supply chains implicit in the SCOR model

showing the relationship between Plan, Source, Make, Deliver,
Return elements of the model
Plan
Plan
Deliver Source
Make
Return
Suppliers
supplier
Plan
Deliver
Source
Make
Deliver Source
Return
Supplier
Make
Deliver Source
Return
Focal
company
Return
Customer
Scope of the SCOR model

Customers
customer

L7 Supple Network Management

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Chapter 7

Supply network management

Slack et als model of operations management

Key operations questions

What is supply chain management?

Supply chain management is the management

Operations network for a plastic homeware company

Operations network for a shopping mall

Supply chain planning and control

Flow between processes

Flow between processes

Flow between processes

Flow between processes

Flow between processes

Supply chains management is concerned with the flow

Long-term plans and requirements

Products and services

Supply chain planning and control

Taking a customer perspective of supply performance

The decision logic of outsourcing

Explore keeping this activity in-house

Matching the supply chain with market requirements

Supply Chain Objectives

Supply chain relationships

Business to business (B2B)

Consumer to consumer (C2B)

Consumer to business (C2B)

Consumer offer, business

Trading swap and auction

The character of Internal Operations Activity

Types of supply relationship

Type of Inter-firm Contact

Close Few Suppliers

Factors for rating alternative suppliers

Longer-term ability to supply

Range of products or services

Potential for innovation

Quality of products or services

Ease of doing business

Long-term commitment to supply

Total cost of being supplied

Weighted supplier selection criteria for a hotel chain

Total weighted score

The bullwhip effect

ALL OPERATIONS HOLD ONE PERIODS STOCK

The bullwhip effect

ALL OPERATIONS HOLD ONE PERIODS STOCK

The bullwhip effect

The effects of supply chain compression

so less need for

The structure of supply chains implicit in the SCOR model

Scope of the SCOR model

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