Chapter 14: Supply Chain Design

Financial Measures

Total revenue

Cost of goods sold

Operating expenses

Cash flow

Working capital

Return on assets (ROA)

Supply Chain Design Strategies

Make-to-stock

Assemble-to-order

Make-to-order

Design-to-order

Demand

Efficient Supply Chains: Predictable, low forecast errors

Responsive Supply Chains: Unpredictable, high forecast errors

Competitive priorities

Efficient Supply Chains: Low cost, consistent quality, on-time delivery

Responsive Supply Chains: Development speed, fast delivery times, customization, volume flexibility, variety, top quality

New-service/product introduction

Efficient Supply Chains: Infrequent

Responsive Supply Chains: Frequent

Contribution margins

Efficient Supply Chains: Low

Responsive Supply Chains: High

Product variety

Efficient Supply Chains: Low

Responsive Supply Chains: High

Operation strategy

Efficient Supply Chains: Make-to-stock standardized services or products; emphasize high volumes

Responsive Supply Chains: Assemble-to-order, make-to-order, or design-to-order customized services or products; emphasize variety

Inventory investment

Efficient Supply Chains: Low; enable high inventory turns

Responsive Supply Chains: As needed to enable fast delivery time

Lead time

Efficient Supply Chains: Shorten, but do not increase costs

Responsive Supply Chains: Shorten aggressively

Supplier selection

Efficient Supply Chains: Emphasize low prices, consistent quality, on-time delivery

Responsive Supply Chains: Emphasize fast delivery time, customization, variety, volume flexibility, top quality

Competitive advantages

Managing customer relationships

Eliminating finished goods inventory

Increasing perceived value of services or products

Supply chain design for mass customization

Assemble-to-order strategy

Modular design

Postponement

▪ Channel Assembly

Outsourcing Decision Factors: 1

Comparative Labor Costs

Outsourcing Decision Factors: 2

Geopolitical Disruptions

Outsourcing Decision Factors: 3

Rework and Product Returns

Outsourcing Decision Factors: 4

Logistics Costs

Outsourcing Decision Factors: 5

Tariffs and Taxes

Outsourcing Decision Factors: 6

Market Effects

Outsourcing Decision Factors: 7

Labor Laws and Unions

Outsourcing Decision Factors: 8

Internet

Outsourcing Decision Factors: 9

Energy Costs

Outsourcing Decision Factors: 10

Access to Low-Cost Capital

Outsourcing Decision Factors: 11

Supply Chain Complexity

Outsourcing Potential Pitfalls

Pulling the Plug too Quickly

Technology Transfer

Process Integration

External Causes

Environmental Disruptions

Supply Chain Complexity

Loss of Major Accounts

Loss of Supply

Customer-Induced Volume Changes

Service and Product Mix Changes

Late Deliveries

Underfilled Shipments

Internal Causes

Internally Generated Shortages

Quality Failures

Poor Supply Chain Visibility

Engineering Changes

Order Batching

New Service or Product Introductions

Service or Product Promotions

Information Errors

Reducing Operational Risks

Strategic Alignment

Upstream/Downstream Supply Chain Integration

Visibility

Flexibility and Redundancy

Short Replenishment Lead Times

Small Order Lot Sizes

Rationing Short Supplies

Everyday low pricing (EDLP)

Cooperation and Trustworthiness

Reducing Security Risks

Access Control

Physical Security

Shipping and Receiving

Transportation Service Provider

ISO 28000:2022

SCOR Model

Plan → Source → Make → Deliver → Return

Cloud Computing

Enables every participant in the supply chain to receive the right information, at the right place, and at the right time

Supply chain coordination can exist at three levels:

Transaction integration

Management information

Strategic collaboration

Blockchain: Benefits

Decentralization

Transparency

Immutability

Uses

Integration of IoT

– Radio frequency identification (RFID)

Tracking and traceability

Smart contracts