Supply Chain Management Training Course
03 Supply Chain
Strategy
Almahi Suliman
Procurement and SCM Consultant
Certified Supply Chain Professional by ITC/WTO
Master in Public Procurement Management from University of Turin, Italy
Ex Shell Co and P&G
What are we going to do?
• What is Strategy?
• Key Objectives of Supply Chain Management
• Supply Chain Strategy
• Lean Philosophy
• Efficient vs.Agile Supply Chains
• Push Strategies
• Pull Strategies
• Postponement
• Where in the supply chain and how much inventory to keep?
• Advantages of Supply Chain Management
Strategy is:
a planning activity focused on the long-term decisions of
the supply chain
These decisions include:
The choice of products & services to offer to customers
The structure of the logistics network & the supply chain
The capabilities the supply chain will specialise in
The types of relationship between supplier & customers
Strategic decisions have a significant impact on the organisation!
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Key Objectives of
Supply Chain Management
Responsiveness
Reliability
Delivery of value
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For many companies, supply chain activities are
the key to gaining a competitive advantage as
they focus on:
Opportunities in global markets
The need for time compression strategies in
order to cope with shorter product life cycles
The provision of tailored services for customers
Rapid communication with customers & suppliers
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The lean philosophy is based on eliminating all waste from the
supply chain
Thus, seven types of waste have been identified as
detrimental for the supply chain:
Overproduction
Waiting
Transporting
Inappropriate processing
Unnecessary inventory
Unnecessary motions
Defects
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Efficient vs.Agile Supply
Chains
Efficient (lean) supply chains using JIT work when:
Demand is relatively stable & predictable
Product variety is low
Price & quality are key to advantages in the market place
Agile (responsive) supply chains :
Are characterised by very flexible structures, production capabilities &
people within each part of the supply chain
Focus on responsiveness over waste elimination
Work best when customer service & responsiveness lead to
competitive advantage
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Push Strategies
Push strategies means working to long-term forecasts &
estimating the number of products being produced
Each company throughout the supply chain has its own
forecast
Forecasts are not aligned with suppliers or customers
Long term forecasts are difficult to predict with many
variables disrupting the forecast
Limited forecasting ability results in build up of inventory
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Pull Strategies
Pull strategies mean that there is no production until the customer has
signalled demand by ordering a product or service
Advantages:
No inventory costs as the product is made as soon as the order is received
Information flow throughout the supply chain
Collaboration between supply chain members
Disadvantages:
Smoothing demand is difficult
Time taken to build final product or service might be longer as the supply chain has to make the
order
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Postponement
Postponement or ‘push-pull„ strategies aim at preventing the
disadvantages of both push & pull strategies
Under postponement, certain parts of the supply chain are
undertaking a push strategy while other parts perform a pull
strategy:
Upstream suppliers provide commodity parts & components using a push strategy as
demand is smoother & more predictable
Downstream suppliers employ a pull strategy & do not customise products & services
until an order from the final customer has been made
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PUSH & PULL
? ? ? ? ?
Determining the cross-over point in the supply
chain from PUSH to PULL - factors
Demand change & forecast reliability (“all we know about the forecast is
that it will be wrong”)
Required product configurations & variability
Required customer response time (balancing capacity with demand)
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Where in the supply chain and
how much inventory to keep?
? ? ? ? ?
Materials Component Assembler Storage Retailer
suppliers manufacturer
Cost •
•
Flexibility
•
Service level
•
Response time
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Implementing supply chain management
provides the following advantages:
12
Reduced cost 9
6
3
Improved quality
Improve Customer Value
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Cost Reduction
The reduction of total cost of ownership is key to cost
advantage
Total cost of ownership measures include both ownership &
post-ownership costs
Logistics cost advantages include:
Efficient use of capacity
Reduction in inventory levels
Faster & more reliable information exchange
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Quality Improvements
Quality is the most visible aspect of the supply chain
The quality objective is the foundation for the other
objectives & is considered necessary just to compete
Quality affects other objectives, such as:
Cost
Flexibility
Dependability
Speed
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The Value Advantage
Differentiation can be achieved by more advanced or reliable
technology and/or tailored services to meet customer needs
Customers are buying not just a product but the benefits of the
product:
Intangible & psychological benefits
Tangible benefits based on superior performance
The logistics value advantage includes:
Provision of tailored logistics service
Responsiveness to the customer
Reliability of the service to deliver to expectations
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Key Performance Objectives
of supply chain management
Long term supply chain efficiency and success rely on
performance advantages which other supply chains will not have
These performance objectives include:
Cost
Quality
Flexibility
Speed
Dependability
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We have talked about:
• What is Strategy?
• Key Objectives of Supply Chain Management
• Supply Chain Strategy
• Lean Philosophy
• Efficient vs.Agile Supply Chains
• Push Strategies
• Pull Strategies
• Postponement
• Where in the supply chain and how much inventory to keep?
• Advantages of Supply Chain Management
Now check your understanding
Strategy is: a planning activity focused on the ………… decisions of the supply
chain
• Long term
• Strategic decisions have …………..on the organisation!
• a significant impact
• What are the strategic decisions in supply chain?
The choice of products & services to offer to customers
The structure of the logistics network & the supply chain
The capabilities the supply chain will specialise in
The types of relationship between supplier & customers
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Now check your understanding
• What are the Key Objectives of Supply Chain Management?
• Responsiveness
• Reliability
• Delivery of value
• What are the main supply chain strategies?
• Push, pull, push-pull (postponement)
• What are the seven types of waste have been identified as detrimental for the supply
chain:
• Overproduction, Waiting, Transporting, Inappropriate processing, Unnecessary inventory, Unnecessary
motions, Defects
• Write the advantages of Implementing supply chain management?
• Reduced cost, Improved quality and Improve Customer Value
• What are the keyp performance objectives of supply chain management?
• Cost, Quality, Flexibility, Speed, Dependability
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