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Global Sourcing, or “What’s a ‘Supply Chain?’”

Global Sourcing, or “What’s a ‘Supply Chain?’”. Dr. Ron Lembke Operations Management. Old View of the World. One company does all processing, from raw material through delivery. Supply Network View of the World.

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Global Sourcing, or “What’s a ‘Supply Chain?’”

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  1. Global Sourcing, or“What’s a ‘Supply Chain?’” Dr. Ron Lembke Operations Management

  2. Old View of the World • One company does all processing, from raw material through delivery

  3. Supply Network View of the World • Integrated international networks of companies process, produce and distribute products.

  4. Spring Hill, Tennessee

  5. Saturn Layout

  6. Computer Example • Wacker Siltronic makes silicon wafers: • buy sand • grow into long crystals • slice into thin wafers

  7. Chip Production • Chip burned in a $2b “wafer fab” • Wafer cut into chips and “packaged”

  8. CD Drive • Chip stuffed onto board by Flextronics, Celestica, etc. • CD drive assembled by separate contract manufacturer • Green Printed Circuit Board from different supplier • CD drive, with a brand name on it, sold to Gateway

  9. Supply Chain Design

  10. Low High Low (stable) Efficient Responsive High (evolving) Risk-Hedging Agile Supply Chain Design Demand Uncertainty • Efficient – economies of scale. • TP, toothpaste, landlines, routers • Responsive – Changing consumer needs, mass customization, build-to-order • Computers, fashion apparel • Risk-Hedging – pooled resources, multiple sources of supply, more inv., share inv., need good IT • Server parts, some ag products, power • Agile – responsive to changing needs, pooled resources: Foxconn/Apple Supply Uncert.

  11. Mass Customization • Dell perfected: exactly what you want, how you want, cheaper than off the shelf • Highly customized • Integrate design, processes, supply network • Supply components cheaply to production points • Fast, responsive production, quick delivery • Higher value, lower weight

  12. Managing the Supply Chain • Postponement -- withhold any modification until as long as possible. Keep product generic “vanilla” • HP • Benetton • Home Depot paint department • Channel Assembly -- have distributor assemble products from components

  13. HP Inkjet Printers • Printers made in Vancouver, sent via ship through Panama Canal to Europe • Europe warehouse stocks inventory by country • physically different-- power supply • manuals different languages • Substitution not allowed • Re-supply time very long

  14. Euro Plugs • No standardized power supplies for Europe • Different power supply for every country.

  15. HP Inkjet Printers • Redesigned printers so that power supply added in Europe • Re-engineer product, power supply • Assembly done in a warehouse (Quality?) • Manuals added in Europe • Many expensive changes • Store ‘vanilla’ boxes • Postpone point of differentiation • 25% cost reduction

  16. Delayed Customization Before Production Storage Shipping Storage After

  17. Benetton • Sweaters of undyed wool, dyed once demand is known • Dyeing LT much faster than production • How many undyed sweaters to make? • How many Red, Green, Blue, also, if this production process is cheaper, and you know you’ll sell some minimum amount?

  18. Behr Paints • Small # of bases • Small # tints • Unlimited # combinations • Keep stock colors on hand? • How many gallons? • Which ones? • Lower labor costs • Higher inventory costs

  19. Modular Components • Take advantage of modules: parts or products previously prepared • Restaurants: prepared ingredients, assembled to order • Suppliers can develop new, interesting products to use more quickly, cheaply • Variety is gained by different combinations of same components

  20. Summary • What’s a Supply Chain? • Examples: Saturn, computer chips • Supply Chain design: • Efficient, Responsive, Risk-Hedging, Agile • Mass Customization • Postponement • HP, Benetton, Home Depot paint • Channel assembly

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