Supply Chain Management

Lecture-2 28 July 2018, Saturday

BITS Pilani Sandeep Kayastha, at Hyderabad
Pilani Campus
Flipped Mode delivery

Delivery of this course is in the Flipped Mode

 Video Lecture and PPTs used in pre-recorded lectures are available on

Taxila, at CW-SCM.

2
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Textbook

Supply Chain Management

Sunil Chopra, Peter Meindl and DV Kalra.
Pearson Education. Sixth Edition. 2016.

You need to buy this textbook.

Supply Chain Management 3 BITS-Pilani

 Supply Chain Management
Chapter 1: Understanding the supply
chain
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Topics

1.What is a Supply Chain?

2.Objective of Supply Chain Management
3.Decision phases in a Supply Chain

------------------

4. Process views of a Supply Chain

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Process views of a Supply Chain

Process views of a supply chain

1. Cycle view

2. Push-Pull view

Supply Chain Management 7 BITS-Pilani

1. Cycle view of a Supply Chain

Customer

Customer Order Cycle

Retailer

Replenishment Cycle

Distributor

Manufacturing Cycle

Manufacturer

Procurement Cycle

Supplier

Supply Chain Management 8 BITS-Pilani

2. Push/Pull view 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
(pull) or in anticipation of a customer order (push).

Supply Chain Management 9 BITS-Pilani

Impact of location of push/pull boundary
on Supply Chain performance

Supply Chain Management 10 BITS-Pilani

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

 The relative proportion of push and pull processes can have an impact
on supply chain performance.

 Useful in considering strategic decisions relating to supply chain design

– more global view of how supply chain processes relate to customer
orders

Supply Chain Management 11 BITS-Pilani

 Chapter 2:
Supply Chain Performance-
Achieving Strategic Fit and Scope

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Modules

2.1 - Competitive and Functional Strategies

2.2 - Achieving Strategic Fit and Scope
2.2.1 - Understanding the Customer and Supply Chain Uncertainty
2.2.2 - Understanding Supply Chain Capabilities
2.2.3 - Achieving Strategic Fit
2.3 - Expanding Strategic Scope

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2.1 – Competitive and Functional Strategies

Competitive Strategies

Profit = Revenue – Costs

Competitive strategy defines how a company competes in the market.

Types of Competitive strategies-
 Differentiation (high price)
 Efficiency (low cost)

Examples
 Mercedes/Maruti Alto car
 iPhone/Micromax phone
 American Express/VISA credit card
 Taj/Ginger hotel
 Speed Post/Ordinary post

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2.2 - Achieving Strategic Fit and Scope

Achieving Strategic Fit

 Strategic fit – aligning goals of competitive and supply chain

strategies.

 If the competitive strategy is differentiation, then the supply chain

strategy should align to achieve differentiation, and if the competitive
strategy is cost leadership, then the supply chain strategy should aim
to achieve low cost.

 A company may fail if its processes and resources do not provide the
capabilities to execute the desired strategy. Thus design of the
supply chain and different functions in a company must appropriately
structure their processes and resources to execute the chosen
supply chain strategy successfully.

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How is Strategic Fit achieved?

1. Understanding the customer (through supply chain uncertainty)

2. Understanding the supply chain

3. Achieving strategic fit

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2.2.1 - Understanding the Customer and

Supply Chain Uncertainty
Step 1: Understanding the Customer and
Supply Chain Uncertainty

 Understanding the customer- demands from the supply

chain
 Demand uncertainty Low, High
 Quantity of product needed in each lot 1, 5, 10 …
 Response time customers will tolerate Few minutes, few weeks ….
 Service level required Low, High, Very High …
 Variety of products needed Low, High
 Desired rate of innovation in the product Low, High
 Price of the product Low, High

 Implied demand uncertainty

 The demands of the customers from the supply chain can be summarised by a
single variable, implied demand uncertainty.

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Implied Demand Uncertainty

Customer needs and demand characteristics captured by “Implied Demand Uncertainty”

Quantity of
product
needed in
each lot
Desired Response
rate of time
innovation customers
in the will
product tolerate
Implied
Demand
Uncertainty

Price of Variety of
the products
product needed

Service
level
required

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 Customer Needs and Implied
Demand Uncertainty
Customer Need
Range of quantity required-
High
Lead time- Short
Required service level- High
Variety of products required-
High
Rate of innovation- High
Number of channels through
which product may be
acquired- Several
High Implied Demand Uncertainty because…
A wider range implies greater variance in demand
There is less time in which to react to orders
The firm has to handle unusual surges in demand
Demand per product becomes disaggregate
New products tend to have more uncertain
demand
Total customer demand is gets disaggregated over
more channels
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Levels of Implied Demand
Uncertainty

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Impact of Implied Demand
Uncertainty

 Products with uncertain demand are often less mature and have less direct
competition. As a result, margins tend to be high.
 Forecasting is more accurate when demand has less uncertainty.
 Increased implied demand uncertainty leads to increased difficulty in matching
supply with demand. For a given product, this can lead to a stockout or an
oversupply situation.
 Markdowns are high for products with greater implied demand uncertainty
because oversupply often results.

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Remaining chapter will be covered in the
next lecture

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