SUPPLY CHAIN
MANAGEMENT 3 – IMM
GRADUATE SCHOOL
K MELVILLE
,Table of Contents
UNIT 1: LOGISTICS, THE SUPPLY CHAIN AND COMPETITIVE STRATEGY ..................................................... 10
Introduc)on ...................................................................................................................................................... 10
Supply Chain Management is a Wider Concept than Logis)cs ............................................................................ 11
Compe))ve Advantage ..................................................................................................................................... 12
Cost Advantage......................................................................................................................................................................... 13
Value Advantage ....................................................................................................................................................................... 14
Seeking the High Ground ................................................................................................................................... 14
Achieving the Higher Ground ............................................................................................................................. 16
The Supply Chain Becomes the Value Chain ....................................................................................................... 16
Mission of Logis)cs Management ...................................................................................................................... 17
Supply Chain and Compe))ve Performance ...................................................................................................... 19
The Changing Compe))ve Environment ............................................................................................................ 20
The New Rules of Compe))on .......................................................................................................................... 20
Turbulence and Vola)lity ................................................................................................................................... 22
Globalisa)on of Industry ................................................................................................................................... 24
Keeping Costs under Control.............................................................................................................................. 24
JIT and Cost Reduc)ons ..................................................................................................................................... 25
Managing the 4Rs .............................................................................................................................................. 26
Reeves (2017) explains these 4Rs as follows: ........................................................................................................................... 27
UNIT 2: DELIVERING CUSTOMER VALUE .................................................................................................. 28
Introduc)on ...................................................................................................................................................... 28
The Marke)ng and Logis)cs Interface ................................................................................................................ 28
Delivering Customer Value ................................................................................................................................ 29
What is Customer Service? ................................................................................................................................ 31
Impact of Out-of-Stock ...................................................................................................................................... 33
Customer Service and Customer Reten)on ........................................................................................................ 33
Measure of Customer RetenDon .............................................................................................................................................. 34
Market-driven Supply Chains ............................................................................................................................. 34
Iden)fying Customer’s Service Needs ................................................................................................................ 35
Defining Customer Service Objec)ves................................................................................................................ 35
Cost Benefit of Customer Service ....................................................................................................................... 36
Se]ng Customer Service Priori)es .................................................................................................................... 38
Managing Product Service Levels ....................................................................................................................... 40
Quadrant 1: Seek cost reduc)on: ....................................................................................................................... 40
Quadrant 2: Provide high availability: ................................................................................................................ 40
Quadrant 3: Review: .......................................................................................................................................... 40
Quadrant 4: Centralised inventory: .................................................................................................................... 40
Se]ng Service Standards .................................................................................................................................. 41
UNIT 3: GOING TO MARKET .................................................................................................................... 44
1
, Introduc)on ...................................................................................................................................................... 44
Tradi)onal Distribu)on Channels ...................................................................................................................... 44
Stage 1: choose the Value ........................................................................................................................................................ 45
Stage 2: Provide the Value........................................................................................................................................................ 45
Stage 3: Communicate the Value ............................................................................................................................................. 46
Stage 4: Capture the Value ....................................................................................................................................................... 46
One Size does not fit all ..................................................................................................................................... 47
Innova)on in the Distribu)on Channel .............................................................................................................. 48
Omni-Channel Revolu)on.................................................................................................................................. 49
The Personalised Supply Chain .......................................................................................................................... 51
Deliver customer experiences rather than products ........................................................................................... 51
Customers want it their way – not our way ........................................................................................................ 51
The customer is the centre of the ‘web-value’ – not at the end of a chain .......................................................... 52
UNIT 4: THE FINANCIAL IMPACT OF LOGISTICS ........................................................................................ 53
Introduc)on ...................................................................................................................................................... 53
Logis)cs and the Bodom Line ............................................................................................................................ 53
Logis)cs and the Balance Sheet ......................................................................................................................... 55
Cash and receivables ................................................................................................................................................................ 55
Inventory .................................................................................................................................................................................. 56
Property, plant and equipment ................................................................................................................................................ 56
Current liabiliDes ...................................................................................................................................................................... 57
Debt and equity ........................................................................................................................................................................ 57
Logis)cs and Shareholder Value ........................................................................................................................ 57
Drivers of Stakeholder Value .................................................................................................................................................... 58
Opera)ng cost reduc)on ................................................................................................................................... 58
Revenue growth ................................................................................................................................................ 58
Tax minimisa)on ............................................................................................................................................... 59
Working capital efficiency .................................................................................................................................. 59
The role of cash flow in crea0ng shareholder value ............................................................................................................... 59
Logis)cs Cost Analysis ....................................................................................................................................... 59
The Concept of Total Cost Analysis..................................................................................................................... 60
The cost of holding inventory ................................................................................................................................................... 60
Understanding the Cost to Serve ....................................................................................................................... 61
Customer Profitability Analysis .......................................................................................................................... 62
Customer profitability matrix ................................................................................................................................................... 62
Build.................................................................................................................................................................. 62
Danger zone ...................................................................................................................................................... 62
Cost engineer .................................................................................................................................................... 62
Protect .............................................................................................................................................................. 63
Direct Product Profitability ................................................................................................................................ 63
Cost Drivers and Ac)vity-based Cos)ng ............................................................................................................. 64
UNIT 5: MATCHING SUPPLY WITH DEMAND ............................................................................................ 65
Introduc)on ...................................................................................................................................................... 65
2
, The Lead-)me Gap ............................................................................................................................................ 65
Improving Visibility of Demand ......................................................................................................................... 66
The Decoupling Point ........................................................................................................................................ 67
Inventory buffers: .............................................................................................................................................. 67
Capacity buffers:................................................................................................................................................ 68
Time buffers: ..................................................................................................................................................... 68
The Supply Chain Fulcrum ................................................................................................................................. 68
Forecast for Capacity; Execute against Demand ................................................................................................. 69
Demand Management and Planning .................................................................................................................. 70
Product review ......................................................................................................................................................................... 71
Demand review ........................................................................................................................................................................ 72
Supply review ........................................................................................................................................................................... 72
Finance review ......................................................................................................................................................................... 72
Pre-S&OP .................................................................................................................................................................................. 72
ExecuDve S&OP ........................................................................................................................................................................ 72
Collabora)ve Planning, Forecas)ng and Replenishment .................................................................................... 73
.......................................................................................................................................................................... 74
Strategy and planning:....................................................................................................................................... 74
Demand and supply management: .................................................................................................................... 74
Execu)on: ......................................................................................................................................................... 74
Analysis: ............................................................................................................................................................ 74
UNIT 6: CREATING THE RESPONSIVE SUPPLY CHAIN ................................................................................ 75
Introduc)on ...................................................................................................................................................... 75
Agility and Lean ................................................................................................................................................. 75
Generic Supply Chain Strategies ........................................................................................................................ 76
Quadrant 1: ....................................................................................................................................................... 76
Quadrant 2: ....................................................................................................................................................... 76
Quadrant 3: ....................................................................................................................................................... 77
Quadrant 4: ....................................................................................................................................................... 77
The Decoupling Point ........................................................................................................................................ 77
Using the Volume/Variability Matrix ................................................................................................................. 77
Product ‘Push’ VS Demand ‘Pull’ ........................................................................................................................ 78
Sta)s)cal Inventory Control .............................................................................................................................. 79
Reorder Point .................................................................................................................................................... 80
Periodic Review ................................................................................................................................................. 81
Distribu)on Requirements Planning .................................................................................................................. 82
The Japanese Philosophy ................................................................................................................................... 83
The Agile Supply Chain ...................................................................................................................................... 85
The Founda)ons of Agility ................................................................................................................................. 86
Route Map to Responsiveness ........................................................................................................................... 87
Supply chain visibility: ....................................................................................................................................... 87
3
MANAGEMENT 3 – IMM
GRADUATE SCHOOL
K MELVILLE
,Table of Contents
UNIT 1: LOGISTICS, THE SUPPLY CHAIN AND COMPETITIVE STRATEGY ..................................................... 10
Introduc)on ...................................................................................................................................................... 10
Supply Chain Management is a Wider Concept than Logis)cs ............................................................................ 11
Compe))ve Advantage ..................................................................................................................................... 12
Cost Advantage......................................................................................................................................................................... 13
Value Advantage ....................................................................................................................................................................... 14
Seeking the High Ground ................................................................................................................................... 14
Achieving the Higher Ground ............................................................................................................................. 16
The Supply Chain Becomes the Value Chain ....................................................................................................... 16
Mission of Logis)cs Management ...................................................................................................................... 17
Supply Chain and Compe))ve Performance ...................................................................................................... 19
The Changing Compe))ve Environment ............................................................................................................ 20
The New Rules of Compe))on .......................................................................................................................... 20
Turbulence and Vola)lity ................................................................................................................................... 22
Globalisa)on of Industry ................................................................................................................................... 24
Keeping Costs under Control.............................................................................................................................. 24
JIT and Cost Reduc)ons ..................................................................................................................................... 25
Managing the 4Rs .............................................................................................................................................. 26
Reeves (2017) explains these 4Rs as follows: ........................................................................................................................... 27
UNIT 2: DELIVERING CUSTOMER VALUE .................................................................................................. 28
Introduc)on ...................................................................................................................................................... 28
The Marke)ng and Logis)cs Interface ................................................................................................................ 28
Delivering Customer Value ................................................................................................................................ 29
What is Customer Service? ................................................................................................................................ 31
Impact of Out-of-Stock ...................................................................................................................................... 33
Customer Service and Customer Reten)on ........................................................................................................ 33
Measure of Customer RetenDon .............................................................................................................................................. 34
Market-driven Supply Chains ............................................................................................................................. 34
Iden)fying Customer’s Service Needs ................................................................................................................ 35
Defining Customer Service Objec)ves................................................................................................................ 35
Cost Benefit of Customer Service ....................................................................................................................... 36
Se]ng Customer Service Priori)es .................................................................................................................... 38
Managing Product Service Levels ....................................................................................................................... 40
Quadrant 1: Seek cost reduc)on: ....................................................................................................................... 40
Quadrant 2: Provide high availability: ................................................................................................................ 40
Quadrant 3: Review: .......................................................................................................................................... 40
Quadrant 4: Centralised inventory: .................................................................................................................... 40
Se]ng Service Standards .................................................................................................................................. 41
UNIT 3: GOING TO MARKET .................................................................................................................... 44
1
, Introduc)on ...................................................................................................................................................... 44
Tradi)onal Distribu)on Channels ...................................................................................................................... 44
Stage 1: choose the Value ........................................................................................................................................................ 45
Stage 2: Provide the Value........................................................................................................................................................ 45
Stage 3: Communicate the Value ............................................................................................................................................. 46
Stage 4: Capture the Value ....................................................................................................................................................... 46
One Size does not fit all ..................................................................................................................................... 47
Innova)on in the Distribu)on Channel .............................................................................................................. 48
Omni-Channel Revolu)on.................................................................................................................................. 49
The Personalised Supply Chain .......................................................................................................................... 51
Deliver customer experiences rather than products ........................................................................................... 51
Customers want it their way – not our way ........................................................................................................ 51
The customer is the centre of the ‘web-value’ – not at the end of a chain .......................................................... 52
UNIT 4: THE FINANCIAL IMPACT OF LOGISTICS ........................................................................................ 53
Introduc)on ...................................................................................................................................................... 53
Logis)cs and the Bodom Line ............................................................................................................................ 53
Logis)cs and the Balance Sheet ......................................................................................................................... 55
Cash and receivables ................................................................................................................................................................ 55
Inventory .................................................................................................................................................................................. 56
Property, plant and equipment ................................................................................................................................................ 56
Current liabiliDes ...................................................................................................................................................................... 57
Debt and equity ........................................................................................................................................................................ 57
Logis)cs and Shareholder Value ........................................................................................................................ 57
Drivers of Stakeholder Value .................................................................................................................................................... 58
Opera)ng cost reduc)on ................................................................................................................................... 58
Revenue growth ................................................................................................................................................ 58
Tax minimisa)on ............................................................................................................................................... 59
Working capital efficiency .................................................................................................................................. 59
The role of cash flow in crea0ng shareholder value ............................................................................................................... 59
Logis)cs Cost Analysis ....................................................................................................................................... 59
The Concept of Total Cost Analysis..................................................................................................................... 60
The cost of holding inventory ................................................................................................................................................... 60
Understanding the Cost to Serve ....................................................................................................................... 61
Customer Profitability Analysis .......................................................................................................................... 62
Customer profitability matrix ................................................................................................................................................... 62
Build.................................................................................................................................................................. 62
Danger zone ...................................................................................................................................................... 62
Cost engineer .................................................................................................................................................... 62
Protect .............................................................................................................................................................. 63
Direct Product Profitability ................................................................................................................................ 63
Cost Drivers and Ac)vity-based Cos)ng ............................................................................................................. 64
UNIT 5: MATCHING SUPPLY WITH DEMAND ............................................................................................ 65
Introduc)on ...................................................................................................................................................... 65
2
, The Lead-)me Gap ............................................................................................................................................ 65
Improving Visibility of Demand ......................................................................................................................... 66
The Decoupling Point ........................................................................................................................................ 67
Inventory buffers: .............................................................................................................................................. 67
Capacity buffers:................................................................................................................................................ 68
Time buffers: ..................................................................................................................................................... 68
The Supply Chain Fulcrum ................................................................................................................................. 68
Forecast for Capacity; Execute against Demand ................................................................................................. 69
Demand Management and Planning .................................................................................................................. 70
Product review ......................................................................................................................................................................... 71
Demand review ........................................................................................................................................................................ 72
Supply review ........................................................................................................................................................................... 72
Finance review ......................................................................................................................................................................... 72
Pre-S&OP .................................................................................................................................................................................. 72
ExecuDve S&OP ........................................................................................................................................................................ 72
Collabora)ve Planning, Forecas)ng and Replenishment .................................................................................... 73
.......................................................................................................................................................................... 74
Strategy and planning:....................................................................................................................................... 74
Demand and supply management: .................................................................................................................... 74
Execu)on: ......................................................................................................................................................... 74
Analysis: ............................................................................................................................................................ 74
UNIT 6: CREATING THE RESPONSIVE SUPPLY CHAIN ................................................................................ 75
Introduc)on ...................................................................................................................................................... 75
Agility and Lean ................................................................................................................................................. 75
Generic Supply Chain Strategies ........................................................................................................................ 76
Quadrant 1: ....................................................................................................................................................... 76
Quadrant 2: ....................................................................................................................................................... 76
Quadrant 3: ....................................................................................................................................................... 77
Quadrant 4: ....................................................................................................................................................... 77
The Decoupling Point ........................................................................................................................................ 77
Using the Volume/Variability Matrix ................................................................................................................. 77
Product ‘Push’ VS Demand ‘Pull’ ........................................................................................................................ 78
Sta)s)cal Inventory Control .............................................................................................................................. 79
Reorder Point .................................................................................................................................................... 80
Periodic Review ................................................................................................................................................. 81
Distribu)on Requirements Planning .................................................................................................................. 82
The Japanese Philosophy ................................................................................................................................... 83
The Agile Supply Chain ...................................................................................................................................... 85
The Founda)ons of Agility ................................................................................................................................. 86
Route Map to Responsiveness ........................................................................................................................... 87
Supply chain visibility: ....................................................................................................................................... 87
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