March 22, 2021

Digital Transformation of Business and Industrial Organizations - Subject Update


What is Management? A New Look:

Management Definition – Narayana Rao


Management of an organization is the process of establishing objectives and goals of the organization periodically, designing the work system and the organization structure, and maintaining an environment in which individuals, working together in groups, accomplish their aims and objectives and goals of the organization effectively and efficiently. (3rd December 2008)

Implications of the  Definition:

(i) Management is a process.
(ii) Management applies to every kind of organization, government, profit making, or nonprofit making.
(iii) It applies to managers at all levels in the organization.
(iv) Management is concerned with effectiveness and efficiency.

Video Explanation of  the  Definition

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2021

Mar 15, 2021  Montornès / Spain

Recognition for Industry 4.0 Leadership

World Economic Forum recognizes Henkel as frontrunner in the 4th Industrial Revolution for the second time

2020
The state of digital transformation in 2020
The lessons learned from a decade of digital transformation provide a roadmap for those embarking on their own initiatives. CIO, Computerworld, CSO, InfoWorld, and Network World team up to dissect that legacy from every angle.   
Eric Knorr, Editor in Chief, CIO | 13 JANUARY 2020
https://www.cio.com/article/3513849/the-state-of-digital-transformation-in-2020.html


2019



2019 McKinsey - Top 10 Digital
https://www.mckinsey.com/~/media/McKinsey/Email/Top-Ten/2019/2019-12-23a-TopTen.html

EDITORS' PICK- Dec 16, 2019,
100 Stats On Digital Transformation And Customer Experience
Blake Morgan
https://www.forbes.com/sites/blakemorgan/2019/12/16/100-stats-on-digital-transformation-and-customer-experience/#68dd47b83bf3

A winning operating model for digital strategy

January 2019


  • Four important areas in how companies with the best economic performance approach digital strategy,
  • The best performers have increased the agility of their digital-strategy practices, which enables first-mover opportunities.
  • They have taken advantage of digital platforms to access broader ecosystems and to innovate new digital products and business models.
  • They have used M&A to build new digital capabilities and digital businesses.
  • They have invested ahead of their peers in digital talent.

https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/a-winning-operating-model-for-digital-strategy


Five moves to make during a digital transformation

April 2019


  • Ruthlessly focus on a clear set of objectives
  • Be bold when setting the scope
  • Create an adaptive design
  • Adopt agile execution approaches and mind-sets
  • Make leadership and accountability crystal clear



Looking ahead

  • Raise the bar on leadership alignment and commitment.
  • Build in flexibility with clearly defined handoffs.
  • Enforce survival of the fittest among digital initiatives.

https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/five-moves-to-make-during-a-digital-transformation

Digital transformation: Improving the odds of success
October 2019
Our latest research shows that exceptionally effective digital transformations are distinguished mostly by the practices that executives choose to follow.  Emerging from that analysis were five thematic groups of practices that particularly move the performance needle.


  • Laying out clear priorities.
  • Investing in talent—especially at the top. 
  • Committing time and money. 
  • Embracing agility.
  • Empowering people.

https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-transformation-improving-the-odds-of-success

Top 10 influencers in digital transformation you should follow in 2019

Dez Blanchfield – Chief Data Scientist, Gara Guru
Ken Bonifay – North America Sales Leader – Financial Services Market, IBM
Sally Eaves – Member, Forbes Technology Council
Antonio Grasso – Founder & CEO, Digital Business Innovation Srl
Dr. Robin Kiera – Speaker, Thought Leader, Storyteller, DigitalScouting.de
Joe McKendrick – Analyst and Contributor, CBS Interactive, Forbes, Information Today
Mike Quindazzi – Managing Director US Digital Alliances, PwC
Jacqui Shawley – Global Market and Offering Manager, IBM Z
Ronald van Loon – Director, Adversitement
Helen Yu – Founder & CEO, Tigon Advisory Corp.
https://www.ibm.com/blogs/systems/top-10-people-digital-transformation-2019/

Are your operations adapting as fast as your markets are changing?
https://www.ey.com/en_gl/tmt/are-your-operations-adapting-as-fast-as-your-markets-are-changing

2018

January

Digital Transformation - Principles, Strategies and Rules


Digital Supply Chain at Corning - Lora Cecere
https://www.slideshare.net/loracecere/corning-presentation-from-the-supply-chain-insights-global-summit-2018

Advice and Suggestion from Jeff Immelt -
Leaders must act as Systems Thinkers in Digital Transformation.


Leaders have to understand how cyber - physical systems in combination deliver value to customers.

Marketing chain and Supply Chain are to be integrated and cyber - physical systems exist in both the chains. Digital and Physical systems and people have to work in combination and deliver value to customers. Leaders and managers have to first visualize and design the work system.


https://www.linkedin.com/pulse/leaders-must-act-systems-thinkers-digital-jeff-immelt

Transform Your Business to Compete in the Digital Age

Columbia Business School
uploaded 19 January 2018
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#207: Digital Transformation and disruption in the Insurance Industry, with UNIQA Insurance Group



2017

KPMG declared leader in digital transformation consulting
Jul 12, 2017

KPMG was recently named a leader in the IDC MarketScape awards titled “Worldwide Digital Transformation Consulting and Systems Integration Services 2017 Vendor Assessment”. The award process noted that under times of turbulent change and economic challenges many firms around the world were calling upon KPMG to help them through the process challenges. KPMG have been identified for their strength in aiding organizations to begin the transformation process, and the disruptions this can bring, while maintaining their place within a competitive market.
http://www.digitaljournal.com/business/kpmg-declared-as-a-leader-in-digital-transformation-consulting/article/497459


Evolve Or Die: Why Digital Transformation Is More Important Than Ever
Four areas of focus for Digital transformation
http://www.brandquarterly.com/evolve-die-digital-transformation-important-ever

Davos 2017 - Preparing for the Fourth Industrial Revolution

World Economic Forum
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Published on 19 Jan 2017
http://www.weforum.org/
What is needed from the public and private sectors to ensure that the Fourth Industrial Revolution benefits all of humanity?

- Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries, India
- Mary Barra, Chairman and Chief Executive Officer, General Motors Company, USA
- Marc R. Benioff, Chairman and Chief Executive Officer, Salesforce, USA; Young Global Leader Alumnus
- Shu Yinbiao, Chairman, State Grid Corporation of China, People's Republic of China
- Vishal Sikka, Chief Executive Officer, Infosys, USA

Chaired by
- Ngaire Woods, Dean, Blavatnik School of Government, University of Oxford, United Kingdom



Davos 2017 - Press Conference: The Digital Transformation of Industries

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World Economic Forum,  Published on 19 Jan 2017
http://www.weforum.org/

The World Economic Forum launched the multi-year Digital Transformation of Industries Project in 2015 in partnership with Accenture. The project looks at how digital technologies like machine learning, cloud computing, and the internet of things are changing existing industries and creating entirely new ones. It makes recommendations to incumbents on how they can thrive in the new digital environment.

There are now hundreds of startups attacking traditional markets as a result of the democratization of technology, increased access to funds and a rising entrepreneurial culture. Start-ups are achieving scale far quicker than analogue companies ever did. Average Fortune 500 companies took 20 years to reach a market cap of $1 billion, Google managed it in eight years, and the likes of Uber, Snapchat and Xiaomi in three years or less. 88% of Fortune 500 companies from 1955 – 2015 no longer exist. Digital disruption has been a major driver of this, consequently Fortune 500 companies must use their considerable resources to fight off the attacks of leaner challengers and remain relevant in a digital age.

- Bruce Weinelt, Head of Digital Transformation, World Economic Forum
- Peter Lacy, Global Managing Director, Strategy and Sustainability, Accenture
- Stephanie Linnartz, Global Chief Commercial Officer, Marriott International Inc.
- Jean Philbert Nsengimana, Minister of Youth and Information Communication Technology,        Ministry of Youth and Information and Communication Technology of Rwanda

Moderated by
- Alem Tedeneke, Media Specialist, World Economic Forum LLC

2016


3 Industries That Will Be Transformed By AI, Machine Learning And Big Data In The Next Decade
Bernard Marr
SEP 27, 2016
Healthcare - Finance - Insurance

https://www.forbes.com/sites/bernardmarr/2016/09/27/3-industries-that-will-be-transformed-by-ai-machine-learning-and-big-data-in-the-next-decade/#2104a850183e


Acting on the Digital Imperative - BCG

SEPTEMBER 12, 2016
By Ralf Dreischmeier , Karalee Close , Thomas Gumsheimer , Peter Hildebrandt , and Adal Zamudio
https://www.bcg.com/publications/2016/technology-digital-strategy-acting-on-digital-imperative.aspx

Digital Transformation Playbook

Prof. David Rogers, Columbia Business School
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June 2016, Columbia Business School

https://cup.columbia.edu/book/the-digital-transformation-playbook/9780231175449



The Digital Imperative  - Article by BCG

By Ralf Dreischmeier , Karalee Close , and Philippe Trichet
MARCH 2, 2015
https://www.bcg.com/publications/2015/digital-imperative.aspx



Updated on 2021 - 23 March
2020 - 15 June
2019  27 December 2019,   11 August 2019, 31 May 2019
2018 - 3 February 2018,   25 January,  19 January


 25 November 2017,  26 August 2017,   22 August 2017, 7 June 2017, 14 April 2017
Posted by at 8:46 PM 4 comments
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March 3, 2021

Transportation in the Supply Chain - Chopra and Meindl - Review Notes



Chopra and Meindl's book, Supply Chain Management: Strategy, Planning, and Operation, a comprehensive introduction on supply chain management.

The product is to be moved from one location to the other and at the end it has to be in hands of the premises of the customer. Rarely production and consumption of an item takes place at the same location. Transportation cost is a significant item in the cost sheets of a supply chain.

Key Players in Transportation Activity

Shippers and Carriers are the two key players in the transportation activity. Shippers require the movement of products from place to place. Carriers provide the transportation service.
Modes of Transport
1. Air
2. Truck
3. Rail
4. Water
5. Pipeline
6. Intermodal or multimodal
7. Package Carriers



Costs of Carrier



1. Vehicle related cost
2. Fixed operating cost
3. Trip related cost
4. Quality related cost
5. Overhead cost


Cost Items Considered by Shippers in Transportation Decisions



1. Transportation cost
2. Inventory cost
3. Facility cost
4. Processing cost
5. Service level cost

Design Options for a Transport Network

A  complex supply chain may have number of suppliers supplying a variety of components and sub assemblies to a multiple manufacturing facilities of a final assembler. From these multiple assembly facilities a number of products may be produced and distributed to a large number of retailers. A large number of suppliers and a large number of receiving points create various options for design of transport networks.


1. Direct shipment network
2. Direct shipping with milk runs
3. Shipments via  central distribution centre
4. Tailored network
  • Tailored Transportation
  • Tailored Transportation by Customer Density and Distance
  • Tailored Transportation by Size of Customer
  • Tailored Transportation by Product Demand and Value

Routing - Scheduling Decisions in Transportation

Savings Matrix method
Steps
1. Identify the distance matrix: distance between each pair of locations to be visited.
2. Identify the savings matrix: The savings that results from using only one truck to two locations
3. Assign locations to trucks.
4. Sequence customers within routes
For details visit

Generalized Assignment Method
1. Assign seed points for each route
2. Evaluate insertion cost for each customer
3. Assign customers to routes
4. Sequence customers within  routes
For details visit


Some More Guidelines for Making Transportation Decisions in Practice


Align transportation strategy with competitive strategy.
Consider both in-house and outsourced transportation.
Use technology to improve transportation performance.
Design flexibility into the transportation network
Under the facilities available to enable e-commerce by your company




References

Sunil Chopra and Peter Meindl, Supply Chain Management: Strategy, Planning and Operations, Prentice Hall, 2001. Supply Chain Management: Chopra and Meindl - Book Information and Review
Original knol - http://knol.google.com/k/narayana-rao/transportation-in-supply-chains/2utb2lsm2k7a/   1376

Updated on 3 March 2021
pub on 9 Dec 2011
Posted by at 3:11 AM 3 comments
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Information Technology and the Supply Chain



Based on Chopra and Meindl's book, Supply Chain Management: Strategy, Planning, and Operation - A comprehensive introduction to  supply chain management.




INFORMATION TECHNOLOGY AND SUPPLY CHAIN



The supply chain management (SCM) is concerned with the flow of products and information between the supply chain members that encompasses all of those organizations such as suppliers, producers, service providers and customers. In the supply chain, these organizations linked together to acquire, purchase, convert/manufacture, assemble, and distribute goods and services, from suppliers to the ultimate and users.


The cost and availability of information resources allow easy linkages and eliminate information-related time delays in any supply chain network. Organizations are adopting Electronic Commerce, where transactions are completed via a variety of electronic media, including electronic data interchange (EDI), electronic funds transfer (EFT), bar codes, fax, automated voice mail, CD-ROM catalogs, and a variety of others. The old “paper” type transactions are becoming increasingly becoming obsolete. Leading-edge organizations no longer require paper purchase requisitions; purchase orders, invoices, receiving forms, and manual accounts payable “matching” process. All required information is recorded electronically right at the origin, and associated transactions are performed with the minimum amount of human intervention.  With the application of the appropriate information systems, monitoring inventory levels, placing orders, and expediting orders will soon become totally automated.

IMPORTANCE OF INFORMATION



The information systems and the technologies utilized in the supply chain represent one of the fundamental elements that link the organizations into a unified and coordinated system. In the current technology and process environment, little doubt remains about the importance of information and information technology to the ultimate success, and perhaps even the survival, of any supply chain management initiative. Cycle time reduction, implementing redesigned cross-functional processes, utilizing cross-selling opportunities require information. Timely and accurate information is more critical now than at any time.

Three factors have strongly impacted this change in the importance of information.

1) Satisfying customers have become something of a corporate obsession. Serving the customer in the best, most efficient and effective manner has become critical, and information about issues such as order status, product availability, delivery schedules, and invoices has become a necessary part of the total customer service experience.

2) Information is a crucial factor in the managers’ abilities to reduce inventory and human resources requirements to a competitive level.


3) Information flows play an essential role in the strategic planning for and deployment of resources.


The need for virtually seamless bonds within and between organizations is a key notion in the essential nature of information systems in the development and maintenance of successful supply chain. That is, creating intra-organizational processes and link to facilitate delivery of seamless information between marketing, sales, purchasing, finance, manufacturing, distribution and transportation internally, as well as inter organizationally, to customers, suppliers, carriers across the supply chain will improve fill rates of the customers service, increase forecast accuracy, reduction in the total inventory and savings in the company’s’ transportation costs - goals which need to be achieved.

In fact, inaccurate or distorted information from one end of a supply chain to the other can lead to tremendous inefficiencies such as excessive inventory investment, poor customer service, lost revenues, misguided capacity plans, ineffective transportation, and missed production schedules. Bullwhip effect, which is big variability in orders at factory level  is commonly experienced by the consumer goods industries due to lack of uniform information in the entire supply chain. Suitable technologies such as bar codes and scanners have been developed and applied in the supply chain to remove inaccuracy, time delays and gaps in communications.

Information Required to Manage Supply Chain at Global Scope Level


Supplier/Supply Information


What products can be purchased, at what price, with what lead time, and where they can be delivered. Supplier information also includes real time pending order status, purchase order amendments, and payment arrangements. This information can be used in product industrial engineering also.

Manufacturing Information


What products can be made, how many, by what facilities, with what lead time, with what trade-offs, at what cost, and in what batch size. This information can be used in process industrial engineering also.

Distribution and Retailing Information

Demand Information

Information must have the following characteristics to be of value in decision making.

1. It must be accurate.
2. It has to be accessible in a timely manner.
3. It has to be of right kind.


Existing IT Systems in Supply Chain

Legacy Systems

ERP Systems

Analytical Applications

Procurement and Content Cataloging Applications

Advanced Planning and Scheduling

Transportation Planning and Content Systems

 Demand Planning and Revenue Management

Customer Relationship Management (CRM) and Sales Force Automation (SFA)

Supply Chain Management Systems

Supply Chain Management (SCM) Systems are a combination of many of the preceding applications. They are delivered in a tightly integrated modules that span all the activities of supply chain: strategy/design, annual planning and operations over shorter periods.

Applications Focused on Operational Issues

Inventory Management Systems
Manufacturing Execution Systems
Transportation Execution 
Warehouse Management System


Some More Guidelines on IT Systems in Supply Chain

Select an IT system that addresses the company's key success factors
Align the level of sophistication with the need for sophistication
Think about the future.


e-business and the Supply Chain. - Review Notes

Global Complexity is driving Supply Chain Information  Systems into Cloud Wharton Knowledge Article January 2011


Software for Supply Chain Analytics, Communication, Information, Planning & Control  and Management


2021

Infor Products - Infor Nexus™


Gartner Magic Quadrant Leader for Multienterprise Supply Chain Business Networks
https://www.infor.com/products/infor-nexus

Oakland, Calif.-based GT Nexus,  runs the largest cloud-based collaborative platform for logistics, trade and transportation managers. It was acquired by Infor.



Siemens Supply Chain Suite (SCS)

The Supply Chain Suite (SCS) lets you design, monitor, manage, and understand your entire supply chain. The holistic, data-driven view of the supply chain lets you design processes more efficiently and cut costs, leaving you ideally positioned to meet the challenges of next-generation industry.

SCS gives you a state-of-the-art IT platform, so you can harness the power of data to analyze, simulate, and optimize any complex logistical tasks.


MONITORING YOUR SUPPLY CHAIN
SCS brings extended supply chain visibility to your business. It does so by consolidating data from all sources and formats (ERP data, unstructured data), refining it, then expanding it in a flexible, configurable data model.

Easily glean logistical information from distributed, inconsistent data.


UNDERSTANDING YOUR SUPPLY CHAIN
The standardized data models in SCS offer powerful simulation and analysis tools to run business and logistical evaluations.

Use key performance indicators to evaluate your entire supply chain.


DESIGNING YOUR SUPPLY CHAIN
SCS lets you simulate and optimize the logistical processes in your supply chain. Here you’ll find many areas for tapping into your strategic and tactical potential, and you’ll be able to identify conflicts before they occur.

Model and simulate changes, tap into your potential for optimization.


MANAGING YOUR SUPPLY CHAIN
SCS lends a hand with the operational aspects of warehouse and transport processes—in system-supported calls for tenders and contracts, and in the day-to-day work with warehouse strategies and transport planning. SCS also lets you leverage the operational potential of your supply chain.

Transfer operational improvements from the system directly onto the road.



2019

London UK, 14th June - Siemens Digital Industries Software announced today the immediate availability of Siemens Opcenter™ software, a cohesive portfolio of software solutions for manufacturing operations management (MOM).

Siemens Opcenter integrates MOM capabilities including advanced planning and scheduling, manufacturing execution, quality management, manufacturing intelligence and performance, and formulation, specification and laboratory management. The new portfolio combines products including Camstar™ software, SIMATIC IT® suite, Preactor, R&D Suite and QMS Professional into a single portfolio that unifies these widely recognised products and leverages synergies between them. A fully web-based, modern, consistent, adaptive and comfortable user interface implemented throughout the Siemens Opcenter portfolio offers a situationally adapted user experience and facilitates the implementation of new capabilities and additional components while reducing training efforts.

http://www.connectingindustry.com/DesignSolutions/siemens-launches-siemens-opcenter-a-new-unified-portfolio-of-manufacturing-operations-management-solutions--.aspx


Updated 3 March 2021,  22 June 2019,  10 Apr 2016
9 Dec 2011
Posted by at 2:09 AM 3 comments
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e-business and the Supply Chain. - Review Notes



Learning Objectives (Chopra and Meindl)

1. Identity the role of e-business in a supply chain.
2. Evaluate the impact of setting up an e-business on revenues for a supply chain.
3. Evaluate the impact of setting up an e-business on costs for a supply chain; and
4. Identify factors that influence the value of e-business in a supply chain.

Identity the role of e-business in a supply chain.


E-Business or E-Commerce is the facilitating of enquiry, order booking and execution of order using internet facilities. Flow of information, delivery of certain products and funds transfer are taking place through E-business mode in supply chains.

Companies can do the following functions or activities with suppliers and customers through E-business mode or facilities.

Provision of information about products and facilities
Negotiation of prices and contracts
Order booking
Tracking of order by customers
Delivery of certain products (electronic documents, e-books, music, videos etc., examinations)
Sending delivery information and payment instructions
Funds transfers and payments


Evaluate the impact of setting up an e-business on revenues for a supply chain.

E-business offers revenue-enhancing opportunities as well as cost reduction opportunities to business organizations.

Revenue Enhancing Opportunities

Direct sales to customers - disintermediation - Customers can view the full product line of the firm at their convenience and time of choice and also place orders at their convenience and choice.
Providing 24-hour access for information,  order placing, and order tracking.
Availability of more and aggregated information about customers (CRM)
Providing mass customization
Faster time to market
Ability to provide flexible price quotes
Ability to provide differentiated services

Evaluate the impact of setting up an e-business on costs for a supply chain

Cost-Reduction Opportunities

Supply chain reduction
Efficient delivery of downloadable products
Reduction in order handling costs
Decrease in inventory costs due to centralized warehouses
Improvement in supply chain coordination and resultant decrease in costs
Internet Markets
Electronic markets are communities of interest where in buyers and sellers come together, exchange information, discuss, negotiate and finalize deals in virtual space instead of physical space.


Value of E-Business in Different Industries


Using E-Business to Sell PCs

Using E-Business to Sell Books

Using E-Business to Sell Groceries

Using E-Business to Sell Maintenance, Repair, and Operations Supplies

Using E-Business to Create Markets: Internet Exchanges

More Guidelines for E-Business Systems and Practices


Integrate the Internet with the existing Physical network

Understand cost of shipment and device shipment pricing strategies that reflect costs.

The last mile deliveries have to be consolidated to the extent possible.

Remember you have to plan the returns process also.

Keep customers informed throughout the order fulfillment principle.






References

Sunil Chopra and Peter Meindl, Supply Chain Management: Strategy, Planning and Operations, Prentice Hall, 2001. Supply Chain Management: Chopra and Meindl - Book Information and Review

Additional Articles for more Information

E-Export - US Government Site

What is E-Commerce
Types of E-Commerce Sites
E-Payments and Taxes
Internet Auctions - A Paper
http://www.e-bc.ca/media/ebizguides/internet_auctions.pdf


Updated on 3 March 2021,  4 August 2019, 9 December 2011
Posted by at 2:08 AM 1 comments
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March 2, 2021

Supply Chain Management - Coordination

Supply Chain Management Revision Article Series



Supply Chain Management - Coordination - Topics

1. Lack of Supply Chain Coordination and the Bullwhip Effect
2. Other Effects of Lack of Supply Chain Coordination on Supply Chain Performance
3. Obstacles to Coordination in a Supply Chain
4. Managerial Levers to Achieve Coordination
5. Building Strategic Partnerships and Trust Within a Supply Chain
6. Achieving Coordination in Practice

Coordination implies actions by various agents in the supply chain that are aimed at increase in total supply chain profits. It also implies that supply chain agents avoid actions that improve their local profits but hurt total profits. Hence supply chain coordination principles requires each stage of the supply chain to take into account the impact its actions have on other stages.

Lack of Supply Chain Coordination and the Bullwhip Effect


A lack of coordination creates "bullwhip effect" in the supply chain. Due to this effect, fluctuations in sales become larger and larger fluctuations in orders at higher stages in the supply chain. This leads to situations wherein large shortages or large surplus capacities are felt in the supply chain cyclically.

Bullwhip effect reduces the profit of a supply chain by making it more expensive to provide a given level of product availability.

In what way bullwhip effect increases costs for the supply chain?

1. In increases manufacturing cost.
2. It increases inventory cost.
3. It increases replenishment lead times.
4. Increases transportation cost.
5. Increases labor cost in shipping and receiving.
    All items of cost increase because excess capacity has to be installed to take care of unnecessary peaks in demand.
6. It reduces product availability due to some orders not getting filled when demand peaks. So some retail outlets may go out of stock.
7. Leads to problems of relationships - every body claims that they have done right. But still there is problem in the supply chain either as unfilled orders or excess inventory not having the order from down stream side.

The main reasons for coordination problems in supply chain are distributed owners of various stages of production & distribution, and product variety.

The fundamental challenge is for supply chains to achieve coordination in spite of multiple ownership and increased product variety.

Obstacles to Coordination in a Supply Chain


What are Obstacles to Coordination in a Supply Chain?

Incentive obstacles
      If a transport manager's incentive compensation is based on average transport cost, he tries to optimize his incentive objective without considering its effect on other supply chain stages.

      If sales force has incentive for selling to dealers, they push sales to dealers even though there is no sale in the period to customers. This will reduce orders from the dealers in the subsequent periods.

Information processing obstacles

       If each supply stage depends on orders from its previous stage without considering the ultimate sales to the consumer bull whip effect will appear.
Operational obstacles

        Economic batch quantities result in large lot sizes which are released periodically.

Pricing obstacles

        Quantity discounts and sales promotion discounts to dealers create distortions in orders.

Behavioral obstacles

         Each stage of the supply chain thinks locally and it unable to see the effect on the total supply chain and other supply chain stages.



Managerial Levers to Improve Coordination in Supply Chains


Aligning goals and incentives
Improving information accuracy
Improving operational accuracy
Designing pricing strategies to stabilize orders
Building Partnerships and trust
(Source: Chopra and Meindl)


Building Strategic Partnerships and Trust within a Supply Chain


Mutual Trust is a belief that each agent or party is interested in the other's welfare and would not take actions without considering their impact on the other stage.

Cooperation and trust in a supply chain relationship leads to the following benefits:

1. They are more likely to take  the other party's objectives into consideration when making decisions.
2. Sharing of information is natural between  parties that trust each other.
3. Operational improvements are easier to implement.
4. Pricing schemes are easier to design if both parties are aiming for common good.
5. Supply chain productivity increases because inspection can be avoided at many steps.

The key steps to be taken in the design of partnership are:

1. Assessing the mutual benefit of the partnership.
2. Identifying operations roles for each party in the partnership.
3. Creating effective contracts
4. Designing effective conflict resolution mechanism

Managing Supply Chain Relationships for Cooperation and Trust

It is important that the initial contract between parties is designed with sufficient flexibility to facilitate alterations based on the experience during the initial transactions as well as further transactions. The relationship is to evolve over a period of time into a mutual beneficial relationship.

The example of Marks & Spencer and a supplier of Kitchen product was given as an example.  It was discovered after the initial contract that there was a cost miscalculation and supplier was losing. The managers of M&S helped the supplier to redesign the product and the process. They also increased the price of the product paid to the supplier but held the price to the customer by reducing their margin. This action by M&S made the relationship stronger and the supplier happy and satisfied with the problem resolution.

The stronger party has to responsibility to act in a fair manners in the relationships.

Achieving Coordination in Practice


1. Quantify the bullwhip effect
2. Get top management commitment for coordination
3. Devote resources to coordination
4. Focus on communication with others stages
5. Try to achieve coordination in the entire supply chain network
6. Use technology to improve connectivity in the supply chain
    ERP is still helping the internal operations of companies. It has to be extended to the full supply chain. Extra effort is required to make the ERP systems facilitate collaborative forecasting and planning across the supply chain.

7. Share the benefits of coordination equitably.


Supply Chain Management - Collaborative Planning, Forecasting and Replenishment (CPFR)

Supply Chain Management: Review Notes Based on Chopra and Meindl's Book


References


Sunil Chopra and Peter Meindl, Supply Chain Management: Strategy, Planning and Operations, Prentice Hall, 2001.

Supply Chain Management: Chopra and Meindl - Book Information and Review


What Drives Supply Chain Behavior? HBS Working Knowledge article June 2004



Articles for Further Study - Coordination in Supply Chain


Ring, P.S., and A.H. Van de Ven, "Developmental Processes of Cooperative Interorganizational Relationships," Academy of Management Review, 19 (1994).

Kumar, N., "The Power of Trust in Manufacturer-Retailer Relationships," Harvard Business Review (November-Dec 1996), 92-106

Child, John, and David Faulkner, Strategies of Cooperation, Oxford, England, Oxford University Press, 1998.

Mariotti, John L., "The Trust Factor in Supply Chain Management," Supply Chain Management Review (Spring 1999), 70-77.

Bowersox, Donald J., David J. Closs, and Theodore P. Stank, "21st Century Logistics: Making Supply Chain Integration a Reality," Supply Chain Management Review (Fall 1999); 44-49.

Balakrishnan, Anantaram, and Geunes, Joseph, "Collaboration and Coordination in Supply Chain Management and E-Commerce," Production and Operations Management, Spring 2004.
http://findarticles.com/p/articles/mi_qa3796/is_200404/ai_n9366598/

Crum, Colleen, and George E. Palmatier, "Demand Collaboration: What is Holding Us Back?" Supply Chain Management Review (Jan-Feb 2004); 54-61.

Supply Chain Coordination with Revenue-Sharing Contracts: A Missed Opportunity?




Fugate, Brian, Sahin, Funda,and Mentzer, John T., "SUPPLY CHAIN MANAGEMENT COORDINATION MECHANISMS," Journal of Business Logistics, 2006

http://findarticles.com/p/articles/mi_qa3705/is_200607/ai_n17180845/



Qing Zhang, Essentials for Information Coordination in Supply Chain Systems, Asian Social Science, October 2008.
Presentation Slides

Partnerships in the Supply Chain

Links to be given to above two references

Supply Chain Management - Revision Notes of All Chapters based on Chopra and Meindl's Book

Knol Number - 1381

Updated  3 March 2021,  28 July 2019,  2 May 2019. 11 April 2015, 21 March 2013
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Supply Chain Drivers and Obstacles - Review Notes





The supply chain strategic fit concept requires that a company achieve the desired responsiveness and efficiency in its supply chain that best meets the needs of the company's competitive strategy.


The performance of a supply chain (responsiveness and efficiency) is determined by decisions in the areas of inventory, transportation, facilities and information. Hence these four areas are identified as drivers of supply chain performance.

A Framework for Structuring Supply Chain Drivers


Supply chain managers have to undertake research and development efforts to improve both responsiveness and efficiency of their supply chains on a continuous basis. In the past there were technological and managerial breakthroughs which improve one of them without any deterioration in the other and also improvement in both dimensions simultaneously. Actual economic theory tells, new technologies (capital investments) are adopted for capital productivity. Capital productivity in the context of supply chains comes through improvement in responsiveness and efficiency.

But at a certain point in time, there can be tradeoffs between responsiveness and efficiency.  Hence supply chain designers come with supply chains that give various combinations of responsiveness and efficiency (responsiveness - efficiency frontier) and the optimal combination is chosen based on the competitive strategy considerations.

Definition/Explanation of Four Drivers



Inventory: It consists of all raw material, work in process, and finished goods within a supply chain.

Transportation: It involves moving inventory from one point in the supply chain to another point.

Facilities: A facility is a place where inventory is stored, manufactured or assembled. Hence facilities can be categorised into production facilities and storage facilities.

Information: It consists of data and results of analysis regarding inventory, transportation, facilities, customer orders, customers, and funds.

Inventory

Inventory is maintained in the supply chain because of mismatches between supply and demand.

Types of inventory based on reasons for keeping them:


Cycle inventory: This results due to producing or buying larger lots to minimize acquisition costs related to processing each purchase order or production order.

Safety Inventory: It is held to counter against uncertainty or variability of demand.

Seasonal Inventory: It is inventory maintained to satisfy higher demands in a period compared to production capacity. It arises due to the decision to service predicted variability in demand through extra production during slack period or low demand periods.

Increasing inventory gives higher responsiveness but results in higher inventory carrying cost.

Transportation


Number of decisions have to be taken in designing a supply chain regarding transportation.

Decisions

Mode of Transportation

Six basic modes exist

Air
Truck (Road)
Rail
Ship
Pipeline
Electronic transportation (the newest mode for music, documents etc.)


Route and Network Selection

Network is a set of facilities or destinations which can be used for transportation of goods. Route is a specific selection of facilities or destinations through which goods move.

Own Transport or Outsourced Transport


Facilities


Within a facility, inventory is either transformed into another state or stored.

Facilities Related Decisions

Location
Capacity
Manufacturing Methodology or Technology
Warehousing methodology


Information

Information does not have a physical presence. It is likely to be overlooked. But it deeply affects every part of supply chain. Information is the connection between various stages in a supply chain and allows them to coordinate actions and increase the maximum supply chain profitability. It is also essential in daily operations. The stocks available in warehouses must have visibility so that when a customer wants an item, it can be delivered to him.




Decisions related to Information


Push Process Information and Pull Process Information
Coordination and information sharing across various facilities in the supply chain.
Forecasting
Aggregate Planning
Enabling technologies

Obstacles to Achieving Strategic Fit


Increasing Variety of Products: In the era of mass customization production variety is increasing.

The customers becoming increasingly demanding. Today's customers are demanding faster fulfillment, better quality, and better performing products for the same price that they are paying today.

The supply chain is getting fragmented. At one time vertical integration was the order of the day. But the present trend is to concentrate on core competence and outsource more activities. Thus the supply chain is more fragmented now.

Globalization is creating global supply chains and hence physical distance is increasing between a company and its suppliers and a company and its customers.

While creating a strategy is difficult, executing it is much more difficult. Many companies understand Toyota Production System now, but still find it difficult to implement and operate.


References

Sunil Chopra and Peter Meindl, Supply Chain Management: Strategy, Planning and Operations, Prentice Hall, 2001.

Marien, Edward J. "The Four Supply Chain Enablers," Supply Chain Management Review, March/April 2000, pp. 60-68

Presentation slides on the topic
Presentation - Supply chain drivers and metrics

Article originally posted at
http://knol.google.com/k/narayana-rao/drivers-of-supply-chain-performance/2utb2lsm2k7a/  1351#


Updated on 2 March 2021, 2 May 2019
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Facility Decisions: Network Design in the Supply Chain - Review Notes





Supply Chain Network Design

1. The role of facility decisions in a supply chain
2. Factors influencing network design decisions
3. A framework for network design decisions
4. Models for Facility location and capacity allocation
5. Making network design decisions in practice

The role of facility decisions in a supply chain


During supply chain network design facility related decisions are made. The decisions are:

1. What is the role of the facility?

What processes are done at the facility.

2. Location Where should facilities be located?

3. Capacity decision How much capacity is to be created

4. Market and supply allocation - What markets should each facility serve? Which supply sources should feed each facility?

Supply chain facilities are manufacturing, storage and transportation-related facilities. We may need to think of adding information processing facilities also to them to have a wider view of the facilities used in supply chains. Location of these facilities, capacity of these facilities, capacity allocated to them in an period and role given to them etc. are facility related supply chain decisions. Facility decisions are referred to as supply chain network decision decisions.


Decision regarding role become important in providing flexibility. If facilities can serve demand in a region globally there is more flexibility. Similarly in a multi-product firm, if facilities can produce large number of products, there is flexibility.


Factors Influencing Facility Decisions


Strategic Factors

    Strategic Focus of the Company
    Cost leadership or Responsiveness

    Strategic Role of Each Facility


  1. Off shore facility
  2. Source facility
  3. Server facility
  4. Contributor facility
  5. Outpost facility
  6. Lead facility

Technological Factors

If available production technology displays significant economies of scale, a few high-capacity location are most effective and accordingly supply chain will have less number of facilities.

Instead, if fixed costs are low, many local facilities are preferred.

Economic Incentives - Macroeconomic Factors

These include taxes, tariffs, exchange rates and other economic factors that are not internal to an individual firm.

Political Factors

The political stability of the country is an important criterion for locating facilities.

Infrastructure

Key infrastructure elements that effects costs of sourcing, making and distributing are availability land and buildings, labor availability, proximity to transport terminals, rail service, proximity to airports and sea ports, highway access, ease of goods traffic and local utilities.

Competition

A Framework for Network Design Decisions


Phase I  Developing Supply Chain Strategy

Phase II. Regional Level Decisions

Phase III. Selecting Desirable Sites in Each Region

Phase IV. Choice of Location


Models for Facility Location and Capacity Allocation


Gravity Location Models


Gravity models are used to find locations that minimize the cost of transporting raw materials from supply sources to conversion facilities and from them to market serving facilities.

In gravity model, the conversion facility, the supply sources and market locations are assigned grid points on a plane map of the region or country. The distance between supply source and conversion facility is calculated as the geometric distance between the grid points. Similarly, the distance between conversions facility and market location is also calculated. The cost of transportation is assumed to vary linearly with distance between the locations. 

Therefore the total transport cost of the system - supply sources to conversion facility to market locations can be calculated for various assumed locations of the conversion facility. An iterative procedure gives a better locations based on the current candidate position. The iteration will stop if the new suggested solution is the same as the current one.

Network Optimization Models


In supply network, multiple supply sources, multiple factories, multiple warehouses and multiple market locations exist. Besides establishing the network of facilities, allocation of supply quantities to factories, factory output to warehouses, and warehouse stock to market locations needs to be done periodically. Also the cost keep fluctuating and quantities required also keep fluctuating. Optimal decision making is required every period taking into account quantities and costs.


Variables of interest in network optimization problems

m  number of markets or demand points
n  number of potential factory locations
l number of suppliers
t  number of potential warehouse locations

D annual demand customer j
K  annual capacity of factory at site i
S  annual supply capacity at sup h
W  annual warehouse capacity at site e
F  fixed annual cost of locating plant at site i
f  fixed an cost of locating warehouse
chi  cost of shipping one unit of supply source h to site e
cie factory i to warehouse e
cej warehouse e to customer j

Minimize total cost
fixed cost factories fixed cost warehouses  total cost warehouse to market  total cost factory to factories  total cost suppliers factories

Allocation from factory to warehouse problem

Minimize total cost  = Total of  cie*xie over various factories i and warehouses e.


Uncertainty and Network Design

While the above network design is for specific set of demand data, sensitivity analysis to likely scenarios can be made and decisions modified as needed.

Updated 2 March 2021, 29 July 2019,  29 June 2018

29.9.2013
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Supply Chain Strategy: Achieving Strategic Fit and Scope - Review Notes

Supply Chain Management: Review Notes Based on Chopra and Meindl's Book
Chaper one is concerned with the question what is a supply chain?

Competitive Strategy and Supply Chain Strategy of an Organization


A company's competitive strategy clearly spells out the set of customer needs that it seeks to satisfy through its products and services having a defined set of attributes.

The supply chain design or supply chain strategy must be in alignment with competitive strategy. A supply chain design can be taken up only after the competitive strategy is finalised and a supply chain needs to be redesigned or modified whenever there is a change in competitive strategy.

Chopra and Meindl use the concept of strategy to refer to what each function will try to do particularly well. They indicate that product strategy specifies  the portfolio of products that will be offered for sale by the company and product development strategy specifies the portfolio of new products that the company will develop. A marketing and sales strategy specifies how the market will be segmented and the products of the company are positioned, priced and promoted. The supply chain strategy determines the procurement process of the raw materials, transportation of materials, manufacture of the product,  distribution channels, warehousing and transportation of the products, and the follow-up services.

The supply chain strategy includes supplier strategy, operations strategy, and logistics strategy. Design decisions regarding inventory, transportation, operating facilities, and information flows in the supply chain of a company are all part of supply chain strategy.

The Process of Achieving Strategic Fit


Strategic fit between competitive strategy and supply chain strategy refers to the consistency between the customer needs that the competitive strategy aims to satisfy and the supply chain capabilities that the supply chain strategy aims to build. Chopra and Meindl stated an important point: no one function can ensure the chain's success. However, failure at one function may lead to failure of the overall chain.

Three steps are involved.

1. Understanding the customer needs regarding attributes of supply.
2. Understanding the supply chain attributes (alternatives available).
3. Achieving strategic fit. Making decision on the supply chain to best serve the needs of the target segment customers.

Understanding the Needs of the Customer Regarding Supply Attributes


Some of the attributes or dimensions of the supply are as follows:


The quantity of the product needed in each lot purchased. Preferred purchase quanity of the customer.
The response time from customer's enquiry.
The variety of products needed (applicable in case of a retail store, restaurant etc.).
The service level required (shortage of items)
The price of the product or service.
The desired rate of innovation.


Chopra and Meindl argued that while there are many attributes of the supply system which are to be understood from customer point of view and built into the supply chain, one key measure captures the variation for many of these attributes. That measure according to them is implied demand uncertainty. It is different from demand uncertainty. Demand uncertainty reflects the uncertainty of customer demand for a product. Implied demand uncertainty is uncertainty for a specific supply chain for the portion of the demand (target market) it caters to.

Implied demand uncertainty is defined in the context of multiple supply chains supplying the same product. Multiple supply chains come due to different attributes that they satisfy. An example is a firm supplying a product, say medicines, 24 hours versus a firm that supplies during normal day hours. The implied demand uncertainty for the 24 hour firm can be high as on some days there is heavy demand and some days very less demand and also the demand for specific medicines can be high on some days and can be even zero on some days.

A spectrum can be visualized in terms of implied demand uncertainty from low uncertainty to high uncertainty and a firm can be placed on this line or spectrum at some point.


Understanding the Supply Chain (Characteristics)

Supply Chain Performance

A supply chain can be described initially by two performance characteristics responsiveness and efficiency.

Various supply chain characteristics contribute to responsiveness and efficiency.

Supply chain responsiveness is measured by the abilities of the chain to do the following:


Ability to respond to fluctuations in demand
Ability to provide short lead times
Ability to handle large variety of products
Ability to come out with innovations and highly innovative products
Ability to provide a very high service level


Supply chain efficiency is the cost of making and delivering a product to the customer. Increase in costs lowers efficiency.

Cost-Responsiveness Efficient Frontier


It is a chart or graph with cost on the X-axis (origin is high cost) and Responsiveness on the Y axis (origin is low responsiveness). See Example

The frontier shows the minimum cost for a given responsiveness. If a company is operating within the frontier,  at a higher cost, it can decrease the cost by appropriate actions but keep the responsiveness same. When it is operating on the efficient frontier, any increase in responsiveness can only come by incurring extra cost.

The frontier curve is a short-run phenomena and companies continually try to improve their supply chain by reducing cost further and increasing responsiveness and thus change the frontier over each period.

Achieving strategic fit


The greater the implied demand uncertainty, the more responsive a supply chain has to be. More responsive supply chains are more costly supply chains. When compared directly with less responsive but more efficient supply chains, their costs may look excessive. But the fit demands that for target markets with greater implied demand uncertainty, more responsive supply chain is to be employed.

Therefore it is to be emphasized that there is no right supply chain strategy independent of the competitive strategy. For a given competitive, a right supply chain can be specified.

Other Issues affecting the Strategic Fit Decision


Multiple Target Markets: Most companies may serve two or more target markets and the supply chain has to serve them both. In this case some tailoring has to be done by having common facilities and in some supply chain activities and dedicated facilities in some supply chain activities so that economies of scale where exist can be utilized without deterioration in service for either target markets.

Product Life Cycle: As the product is new, implied demand uncertainty is high and as it matures, implied demand uncertainty is low. Hence supply chain design has to change over the life cycle of the product.

Competitive situation: As the product matures, more competitors emerge and implied demand uncertainty keeps changing.

Expanding the Supply Chain Optimization and Strategic Fit Scope

From Intraoperation Planning to Flexible Intercompany Interfunctional Supply Chain Model Building and Planning.


Intracompany Intraoperation scope: The most limited scope over which strategic fit and optimization can be attempted is one with one operation within a functional area in a company. For example each warehouse of the company has its own goal.

Intracompany Intrafunctional scope:  If the competitive strategy and supply chain strategy are aligned across all the supply chain activities (supplier strategy, operations strategy, and logistics strategy   ) or functions of the company and optimization is attempted in an integral manner including the raw material inventory, manufacturing operations, finished goods inventory and warehouse, and transportation, the scope is extended to intracompany intrafuctional level.

Intracompany Interfunctional scope: At this level of scope, the entire company's activities are viewed and modeled as one single system, and optimization is done and company profit is maximized.

Intercompany Interfunctional scope: The Maximum Supply Chain Surplus view: At this level of optimization and fit making, the entire supply chain (including various different organizations) is modeled as a system and optimization and fit is designed so that supply chain surplus is maximized.

Flexible Intercompany interfunctional scope: The flexibility refers to dynamic situation. Physically, the participants in the supply chain keep changing, products keep changing, technologies keep changing, facilities keep changing. Mathematically, there are changes in number of variables and variable values. A supply chain capable of optimizing and fit making dynamically over time is a flexible intercompany interfuctional scope supply chain.
____________________________________________________________

An Illustration

Supply Chain Strategy & Organization - Deloitte



Supply chain lies at the center of the value chain. The importance of a supply chain strategy for successful implementation of company strategy need not be stressed further.

While designing supply chain strategy, companies have the tendency to select from one of these sets of options: “Being customer focused or product focused?”; “Focusing on efficiency or flexibility?”; “Organizing management regionally or globally?”; and “Adopting a centralized or decentralized structure?” Developing a competitive advantage in supply chain management requires achieving multi-dimensional excellence. Therefore, focusing attention solely on a single issue trade-off  and ignoring the others has serious negative effects.

At Deloitte, we help our clients have a better understanding of the required strategic decisions within the supply chain and allows them to make these decisions effectively in  developing supply chain strategies that will be aligned with business strategies, increase stakeholder value, and reduce risk. 

Once the supply chain strategy is defined,  focus has to be shifted to the implementation of plans in accordance with their defined strategies and the supply chain organization becomes the next priority.

Operations performed separately by different units of the supply chain that are driven by their own targets do not optimize whole of the supply chain. In order to manage the supply chain in the best way possible, all supply chain functions should be organized in a way that will support sufficient information sharing, have pre-defined roles and responsibilities, and have identified reporting relationships. 
____________________________________________________

References


Sunil Chopra and Peter Meindl, Supply Chain Management: Strategy, Planning and Operations, Prentice Hall, 2001.

Fisher, Marshall L. "What is the Right Supply Chain for Your Product?" Harvard Business Review, March-April 1997, pp. 83-93.

Deloitte, Supply Chain Strategy and Organization
https://www2.deloitte.com/tr/en/pages/operations/solutions/supply-chain-management-services/supply-chain-strategy-and-organization-services.html



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For Further Reading

The Strategic Fit of Supply Chain Integration in TFL-LCD Industry
http://web.cc.chu.edu.tw/sha/files/honor/SCMAIJ.pdf

Sustaining Strategic Fit across Culturally Diverse Supply Chain Relationships
http://geconsult.blogspot.com/2010/05/corporate-strategy-sustaining-strategic.html

Relating Structure of Supply Chain Organization to Objectives: Few Propositions and a Pilot Study
http://www.iitk.ac.in/infocell/announce/convention/papers/Strategy-02-RRK%20Sharma,%20Rahul%20Sharma,H%20Hazaria%20final.pdf



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Slides

http://www.slideserve.com/presentation/6980/Supply-Chain-Performance-Achieving-Strategic-Fit-and-Scope


Name changed from Supply Chain Performance: Achieving Strategic Fit and Scope - Review Notes to Supply Chain Strategy: Achieving Strategic Fit and Scope - Review Notes on 28 May 2019.



Article originally posted at
http://knol.google.com/k/narayana-rao/aligning-competitive-strategy-and/2utb2lsm2k7a/1350

Updated 2 March 2021,  28 May 2019,  27.3.2013
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