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Supply-Chain Stategy Operations Management Dr. Ron Tibben-Lembke Supply-Chain Stategy Operations Management Dr. Ron Tibben-Lembke

Supply Chain Designs Supply Low Uncertainty High n n Demand Uncertainty Low High Efficient Supply Chain Designs Supply Low Uncertainty High n n Demand Uncertainty Low High Efficient Responsive Risk-Hedging Agile Efficient – economies of scale Risk-Hedging – pooled resources, multiple sources of supply, need good IT Responsive – Changing consumer needs Agile – responsive to changing needs, pooled resources

Mass Customization n Highly customized n n Integrate design, processes, supply network Supply components Mass Customization n Highly customized n n Integrate design, processes, supply network Supply components cheaply to production points Fast, responsive production, quick delivery Higher weight, lower value

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

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

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

HP Inkjet Printers n Redesigned printers so that power supply added in Europe n HP Inkjet Printers n Redesigned printers so that power supply added in Europe n n n n 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

Delayed Customization Before Production Storage After Shipping Storage Delayed Customization Before Production Storage After Shipping Storage

Benetton n n Sweaters of undyed wool, dyed once demand is known Dyeing LT Benetton n n 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?

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

Bullwhip Effect n n Lack of information sharing can cascade through the supply chain. Bullwhip Effect n n Lack of information sharing can cascade through the supply chain. Small changes at retail level lead to huge swings at manf. , like bullwhip Several retailers order all at once, distributor thinks sales have jumped, orders a much bigger order, etc. Better: sales information shared across the “Value Chain. ”

Managing the Supply Chain n Drop Shipping -- Supplier sends directly to the store, Managing the Supply Chain n Drop Shipping -- Supplier sends directly to the store, not to store’s warehouse Blanket orders -- Long-term pledge to buy certain amount, shipped quickly EDI -- standardized format for sending electronic information computer-tocomputer