MGT 563 OPERATIONS STRATEGIES

1. MGT 563OPERATIONS STRATEGIES Dr. Aneel SALMAN Department of Management Sciences COMSATS Institute of Information Technology, Islamabad

2. Recap Lecture 17 • Green Supply Chain • Environment • Society • Economic

3. THE TRIPLE A SUPPLY CHAIN Hau L. Lee

4. The holy grails of supply chain management are high speed and low cost--or are they?

5. To achieve sustainable competitive advantage, your supply chain needs all three of these qualities Agility, Adaptability, and Alignment.

6. Agile • They respond quickly to sudden changes in supply or demand. • They handle unexpected external disruptions smoothly and cost-efficiently. And they recover promptly from shocks such asnatural disasters, epidemics, and computer viruses.

7. Adaptable • They evolve over time as economic progress, political shifts, demographic trends, and technological advances reshape markets.

8. Aligned • They align the interests of all participating firms in the supply chain with their own. As each player maximizes its own interests, it optimizes the chain's performance as well.

9. Agility • Objective • Respond to short-term changes in demand or supply quickly. • Methods: • Continuously provide supply chain partners with data on changes in supply and demand so they can respond promptly. • Collaborate with suppliers and customers to redesign processes, components, and products in ways that give you a head start over rivals. • Finish products only when you have accurate information on customer preferences. • Keep a small inventory of inexpensive, nonbulky product components to prevent manufacturing delays.

10. Adaptability • Objective • Adjust supply chain design to accommodate market changes. • Methods: • Track economic changes, especially in developing countries. • Use intermediaries to find reliable vendors in unfamiliar parts of the world. • Create flexibility by ensuring that different products use the same components and production processes. • Create different supply chains for different product lines, to optimize capabilities for each. For example, with highly customized, low-volume products, use vendors close to your main markets. For standard, high-volume products, commission contract manufacturers in low-cost countries.

11. Alignment • Objectives • Establish incentives for supply chain partners to improve performance of the entire chain. • Methods: • Provide all partners with equal access to forecasts, sales data, and plans. • Clarify partners' roles and responsibilities to avoid conflict. • Redefine partnership terms to share risks, costs, and rewards for improving supply chain performance. • Align incentives so that players maximize overall chain performance while also maximizing their returns from the partnership.

12. Rapid-Fire Fulfillment Kasra Ferdows Michael A. Lewis Jose A.D. Machuca

15. ZARA Supply Chain Management • “you need to have five fingers touching the factory and five touching the customer.” Amancio Ortega • Control what happens to your product until the customer buys it. • Zara has developed a superresponsive supply chain. • Zara keeps almost half of its production inhouse.

16. Far from pushing its factories to maximize their output, the company intentionally leaves extra capacity. • The company manages all design, warehousing, distribution, and logistics functions itself. • It holds its retail stores to a rigid timetable for placing orders and receiving stock.

17. It puts price tags on items before they’re shipped, rather than at each store. • It leaves large areas empty in its expensive retail shops. • It tolerates, even encourages, occasional stock-outs.

18. Self-reinforcing system built on three principles • Close the communication loop • Stick to a rhythm across the entire chain • Leverage your capital assets to increase supply chain flexibility

19. Close the Loop • Transfer both hard data and anecdotal information quickly and easily from shoppers to designers and production staff. • Track materials and products in real time every step of the way, including inventory on display in the stores. • The goal is to close the information loop between the end users and the upstream operations of design, procurement, production, and distribution as quickly and directly as possible. • Regular creation and rapid replenishment of small batches of new goods.

20. Stick to a rhythm across the entire chain • At Zara, rapid timing and synchronicity are paramount. • Company indulges in an approach that can best be characterized as “penny foolish, pound wise.” • It spends money on anything that helps to increase and enforce the speed and responsiveness of the chain as a whole.

21. Leverage your capital assets to increase supply chain flexibility. • Zara has made major capital investments in production and distribution facilities and uses them to increase the supply chain’s responsiveness to new and fluctuating demands. • It produces complicated products in-house and outsources the simple ones.

22. Lessons learnt…. • Touch the factories and customers with two hands. • Do everything possible to let one hand help the other. • Whatever you do, don’t take your eyes off the product until it’s sold

23. DEEPER SUPPLIER RELATIONSHIPS Jeffery K Liker Thomas Y Choi

24. The Supplier Partnering Hierarchy • “An army marches on its stomach.” • “Amateurs talk strategy and professionals talk logistics.”

25. Understand how your Supplier Works • Learn about suppliers businesses • Go see how suppliers work • Respect suppliers capabilities • Commit to coprosperity

26. Turn supplier rivalry into opportunity • Source each component from two or three vendors • Create compatible production philosophies and systems • Set up joint ventures with existing suppliers to transfer knowledge and maintain control

27. Supervise your suppliers • Send monthly supply cards to core suppliers • Provide immediate and constant feedback • Get senior management involved in solving problems

28. Develop suppliers technical capabilities • Build suppliers problem solving skills • Develop common lexicon • Hone core suppliers innovation capabilities

29. Share information intensively but selectively • Set specific time, places and agendas for meetings • Use rigid formats for sharing information • Insist on accurate data collection • Share information in a structured fashion

30. Conduct joint improvement activities • Exchange best practices with suppliers • Initiate Kiazen projects at suppliers facilities • Set up supplier study groups

31. We’re in This Together Douglas M. Lambert A. Michael Knemeyer

32. The Partnership Model

33. The Propensity to Partner Matrix

34. Are You the WeakestLink in YourCompany’s SupplyChain? Reuben E. Slone John T. Mentzer J. Paul Dittmann

35. Pick the right leaders • Supply chain management can’t be competently managed by the uninitiated. • Ensure senior supply chain executives have a background in SCM, through formal education, significant experience, or both. • Extend this best-and-brightest principle down to entry-level hiring.

36. Initiate benchmarking and select metrics. • Conduct external best-practice benchmarking on key aspects of supply chain performance, such as inventory turns, availability of goods, and SKU system costs. • Set goals for metrics based on benchmarking. • Define metrics in ways that generate useful information; for example, “good availability” means orders delivered to customers on time.

37. Set incentives • Establish rewards encouraging suppliers and employees to support your supply chain goals.

38. Keep up with technology and trends • Stay current with supply chain technology advances (such as software and devices supporting production planning, inventory management, and warehousing) and process tools (such as Six Sigma) applied to the entire supply chain. • Understand how your firm is currently using technologies, and ask challenging questions before adopting new tools.

39. Factor supply chain management into business plans • Make supply chain considerations core components of operations, sales and marketing planning, as well as contract negotiations with customers and partners. • Watch for inconsistencies undermining your strategic aims.

40. Resist the tyranny of short-term thinking • Discourage use of deep discounts at quarter’s end to “make the numbers.” • Discounts train your supply chain partners to delay buying until the end of each quarter. That triggers low sales in the first two months of the next quarter, which prompts more discounts. • The cost to you: overtime during heavy buying, wasted labor during slow months, and higher inventory costs before the next “surge.”