Efficiency-Responsiveness Framework of Supply Chain Functional Product Innovative

Efficiency-Responsiveness Framework of Supply Chain Functional Product Innovative Products Efficient Supply Chain Responsive Supply Chain Match Mismatch Match

Zone of strategic fit in supply chain Responsive Supply Chain Responsiveness Spectrum Zone of Strategic Fit Efficient Supply Chain Certain Demand Implied Uncertainty Spectrum Uncertain Demand

Dell’s Direct Business Model Suppliers Manufacturer Distribution Channels Customers Dominant Model: A value-chain with arm-length transactions from one layer to the next Suppliers Manufacturer Customers Direct Business Model: Leverage relationships with both suppliers and customers by eliminating time and cost of third-party distribution Suppliers Manufacturer Customers Virtual Integration: Stitching together a business with partners and customers treated as if they are inside the company – sharing information real-time

Direct Model: Focus Vertical Integration vs. Virtual Integration Engineering-centric vs. customer-centric Supplier exchange vs. supplier relationship “we have developed everything” vs. “ we need to add value to customers”

Key Factors of the Direct Model • • Customer Focus Supplier Partnership Mass Customization Just-in-Time Manufacturing

Direct Model: Customer Focus • Segment Customers • Communicate closely with customers to forecast needs and keep inventory low • Create most value for customers • Use technology to free customer to focus on their business

Supplier Partnership • Have as few suppliers as possible; keep them as long as they are technological and quality leaders • Communicate your inventory levels and replenishment needs with suppliers realtime • Order from suppliers only when you receive demand from customers

Direct Model - Innovation Technology is enabling coordination across company boundaries to achieve new levels of efficiency, speed, and flexibility as well as extraordinary returns to investors

Li & Fung Success … • Innovation • Flexibility • Speed Through – dispersed manufacturing – smokeless factory

Dispersed Manufacturing (Li & Fung) • Detaches critical links in the supply chain • Finds best solutions for each link from a worldwide network of independent suppliers • Weave a strong and flexible network of specialized suppliers, manufacturing, and distributors • Chips away time and cost from the production and delivery cycle (planning close to market)

Dispersed (Borderless) Manufacturing Order of 10, 000 European Garment Order Delivered To Customer all Looking Alike Pick Yarn from Korea Make the Garment in Thailand Send Yarn to Taiwan for Weaving Buy Japanese Zippers from China

Organizing Around Customers – Li & Fung • Li & Fung organizes itself to create a unique value chain for each customer • Basic operating unit is entrepreneurial divisions serving just one large customer or several smaller customers • Uniqueness – remains entrepreneurial despite it growing size and scope by structuring around customer-focused divisions • Create a customized value chain for each customer