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CREATING THE RESPONSIVE SUPPLY CHAIN

Creating the Responsive Supply Chain

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This is for supply chain course.

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Page 1: Creating the Responsive Supply Chain

CREATING THE RESPONSIVE SUPPLY CHAIN

Page 2: Creating the Responsive Supply Chain

Lesson 1: Agility

Page 3: Creating the Responsive Supply Chain

Sense and Respond

Sense

Respond

Agility

Page 4: Creating the Responsive Supply Chain

Demand is supported by deploying inventory in anticipation of projected sales levels and location

OrderAnticipatory

Forecast

Actual Demand

Inventory Deployment

Inventory Replenishment or

Reclamation

When and How Much to Order?• Min-Max, Visual Review, Weeks of Supply• Distribution Resources Planning (DRP)

Anticipatory Fulfillment

Page 5: Creating the Responsive Supply Chain

Reduce uncertainty by managing demand and order cycle time variance

OrderCollaborative

Plan

Actual Demand

Small Inventory Deployment

Flexible, Rapid Response

Synchronization of activities through shared information Process reengineering Supplier partnerships/delivery lead time and variance reduction, quality improvement Reduce process and network complexity Performance cycle acceleration and postponement Use appropriate metrics

Lean Fulfillment – “Containing little fat”

Page 6: Creating the Responsive Supply Chain

Eliminate uncertainty by postponing form and/or time and place utility untilorder received and then rapidly respond when order is received.

CapacityCollaborative

Plan

Actual Demand

Flexible, Rapid Response

Agile Fulfillment – “Nimble”

• Customer Focus vs. Product Focus• Cross-functional and cross-organizational process

integration• Leveraging relationships• Information visibility

Page 7: Creating the Responsive Supply Chain

AGILE

LEAN

High

Low

Low High

Volume per variant

Varie

ty/V

aria

bilit

y

Source: http://www.martin-christopher.info/resources/powerpoints

Page 8: Creating the Responsive Supply Chain

AGILE

LEAN

High

Low

Low High

Volume per variant

Varie

ty/V

aria

bilit

y

“Lean” works best inhigh volume, lowvariety and predictableenvironments.

“Agility” is needed inless predictableenvironments wherethe demand for varietyis high.

Source: http://www.martin-christopher.info/resources/powerpoints

Page 9: Creating the Responsive Supply Chain

Functional Products

Innovative Products

Lean Mgt Match Mismatch

Agile Mgt Mismatch Match

Matching a Supply Chain with Products

Page 10: Creating the Responsive Supply Chain

Functional Innovative

Aspects of Demand Predictable Demand Unpredictable Demand

Product life cycle > 2 yrs < 1 yr

Contribution margin 5 – 20 % 20 – 60 %

Product variety Low (10 – 20 variants/category) High (many variants/category)

Average forecast error 10% 40 – 100%

Average stockout rate 1 – 2% 10 – 40%

Average end-of-season markdown

0% 10-25%

Leadtime for MTO products

6 – 12 months 1 – 2 days

Key Product & Demand Characteristics

Page 11: Creating the Responsive Supply Chain

Time

Do

llar

s

0

Profits

Sales

IntroductoryStage

GrowthStage

MaturityStage

DeclineStage

AGILE LEAN LEAN

Stages of the Product Life Cycle (PLC)

AGILE

Page 12: Creating the Responsive Supply Chain

Sense and Respond

Sense

Respond

Agility

Page 13: Creating the Responsive Supply Chain

Why didn’t you produce enough?

I better get to work since

we will probably

have a big order in June

With

out D

eman

dIn

form

ation

With

Dem

and

Info

rmati

onIn June

In May

Sales are Up!

May

Big Order!

June

Page 14: Creating the Responsive Supply Chain

Supply Chain Visibility Types (Sensing)

Source: Williams, B.D., Roh, J., Tokar, T., Swink, M. 2013. “Leveraging Supply Chain Visibility for Responsiveness: The Moderating Role of Internal Integration” Journal of Operations Management 31(7-8), 543-554.

Market

• Market-level demand

• Market-level supply

Customer

• POS• Forecasts• Inventory

levels• Promotional

plans

Supplier

• Inventory levels

• Order lead time/delivery

• Advanced shipment notices (ASNs)

• Finished goods location status

Page 15: Creating the Responsive Supply Chain

Sense Respond Agility

Page 16: Creating the Responsive Supply Chain

Respond

VolumeFlexibility

VarietyFlexibility

CustomizationFlexibility

New Product

Flexibility

Source: Williams, B.D., Roh, J., Tokar, T., Swink, M. 2013. “Leveraging Supply Chain Visibility for Responsiveness: The Moderating Role of Internal Integration” Journal of Operations Management 31(7-8), 543-554.