Supply Chain Strategyctl.mit.edu/sites/ctl.mit.edu/files/attachments/tab 7 SC... · 2016. 11. 15. · McKesson Cardinal Amerisource Walgreen • Pharma margins are dropping and they

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SupplyChainStrategy

[email protected]

JarrodGoentzel©2016MITCTL


"Allgoodstrategyeventuallydegeneratesintowork."

PeterDrucker

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Sessionoutline

•  FirmobjecMves•  Excellentsupplychains•  Strategyalignment•  SupplychainstrategyformaMon


FIRMOBJECTIVES

3

WhatwereyourgoalsinthesimulaMon?


TwoGoalsoftheCEO

•  ProvideShareholderValue•  …andstayoutofjail


4

GoaloftheCEO

•  ProvideShareholderValue

•  DriversofShareholderValue– RevenueGrowth– OperaMngMargin– AssetUMlizaMon


Supplychainprofessionalscanaffectallthree!

JarrodGoentzel©2016MITCTLSource:h]p://www.maaw.info/ArMcleSummaries/ArtSumKaplanNorton2001.htm

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Source:website,TradeDynamics,LLC


Source:website,FinlisMcsSoluMons

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Deloi]eEnterpriseValueMap


DriversofShareholderValue


RevenueGrowth

AssetU;liza;on

Opera;ngMargin

Risk

Leverage

7



8


Source:Higgins,R.AnalysisforFinancialManagement.10thed.McGraw-HillIrwin,2011

“Acompany’sfinancesandoperaMonsareintegrallyconnected.”

PopularCorporateFinanceTextbook

Firm’svalueproposiMon


Div

iden

d

Financial Assets

STOCKHOLDERS INVEST ELSEWHERE

Investors(Equity)

Firm

STOCKHOLDERS INVEST IN FIRM

Investors(Debt)

Operational Assets

Firm invests

Future cash flows: revenues, expenses, etc.

Future portfolio returns

Firm leverages debt

Financing

Investment

9

Financeandsupplychainworktogethertocreateshareholdervalue


Div

iden

dInvestors(Equity)

Firm

Investors(Debt)

Operational Assets

Firm invests

Future cash flows: revenues, expenses, etc.

OperaMons/supplychain:usefundstogeneratereturns

Finance:acquirefunds

Finance:allocatefunds

Howdoessupplychainperformancemakeanimpactonshareholdervalue?

•  Tradeoffsexist•  Whichonedoyoufocuson?


AssetU;liza;onOpera;ngMargin

RevenueGrowth

Responsiveness(productavailability)Capability(newmarkets)

Leanness(reduceassets)Agility(adaptcapaci<es)

Leanness(reducecost)Segmenta<on(iden<fyopportuni<es)

10


DupontAnalysis

assets TotalSalesoverAsset turn =

SalesincomeNet marginNet =

overAsset turn margin Net ROA ×=

Equityassets Totalleverage Financial =

leverage FinancialoverAsset turnmarginNet ROE ××=

InventoryTurnover,anarrowerfocusthanAssetTurnover,isomenametricforsupplychainprofessionals

GrossorOperaMngMarginisamorecommonmetricforsupplychainprofessionalsthanNetMargin


DupontAnalysisassessestheMargin–AssetUMlizaMontradeoffatahighlevel


RevenueGrowth

“ProfitPath” “TurnoverPath”

SameDes;na;on:ROA

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DoyouseeanyextremeexamplesofProfitPathandTurnoverPath?


Source:Higgins,R.AnalysisforFinancialManagement.10thed.McGraw-HillIrwin,2011.

ChemicalIndustryFinancialAnalysis


Datasource:Compustat-CapitalIQ;Analysis:JarrodGoentzel

FiveYearAverage(2010-2014)

RDS.A XOM BASFY DOW DDRevenueGrowth 4.3% 2.5% 2.0% 2.2% 2.6%OperatingMargin 11.1% 15.3% 14.7% 12.2% 17.0%AssetTurnover 1.25 1.17 1.15 0.82 0.74

ROA 13.9% 18.0% 16.9% 10.1% 12.5%

Source:ManagementDayInvestorHandout,RoyalDutchShell,3-4November2015.

-

0.05

0.10

0.15

0.20

0.25

2010 2011 2012 2013 2014

ROA(E

BIDT

A/To

talA

ssets)

RDS.A

XOM

BASFY

DOW

DD

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Datasource:Compustat-CapitalIQ;Analysis:JarrodGoentzel

-

0.05

0.10

0.15

0.20

0.25

2010 2011 2012 2013 2014

ROA(E

BIDT

A/To

talA

ssets)

RDS.A

XOM

BASFY

DOW

DD

0.50

0.70

0.90

1.10

1.30

1.50

0.07 0.09 0.11 0.13 0.15 0.17 0.19AssetT

urno

ver

Opera/ngMargin

RDS.A

XOM

BASFY

DOW

DD

Isoquant

FinalPeriod

ROAforShellChemicals

JarrodGoentzel©2016MITCTLSource:ManagementDayInvestorHandout,RoyalDutchShell,3-4November2015.

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FinancialAnalysisforPharmaceuMcals,WholesalersandRetailers(AnnualReports2007-2011)


-

2

4

6

8

10

12

14

16

18

20

0.000 0.200 0.400 0.600 0.800 1.000

Inve

ntor

y Tu

rnov

er

Gross Margin

GMROI Lastest Period

GSK

Merck

Novartis

Pfizer

RiteAid

CVS

McKesson

Cardinal

Amerisource

Walgreen

•  Pharmamarginsaredroppingandtheyneedtoincreaseinventoryturns,i.e.reduceinventory.

•  WholesalersdonothavethemargintotakeonaddiMonalinventory.Manufacturers

Wholesalers

Retailers

PharmaCoInventoryExample


0

10

20

30

40

50

60

70

80

90

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

Janu

ary-

10

Febr

uary

-10

Mar

ch-1

0

Apr

il-10

May

-10

June

-10

July

-10

Aug

ust-1

0

Sep

tem

ber-

1

Oct

ober

-10

Nov

embe

r-1

Dec

embe

r-1

Janu

ary-

11

Febr

uary

-11

Mar

ch-1

1

Apr

il-11

May

-11

June

-11

July

-11

Aug

ust-1

1

Sep

tem

ber-

1

Oct

ober

-11

Nov

embe

r-1

Dec

embe

r-1

Day

s of

Inve

ntor

y

Volu

me

Sales (Monthly)

Average Inventory (Monthly)

Days of Inventory

Policy Recommended 24 days

•  HighvariabilityininventoryposiMonforstablesales•  AverageinventoryhigherthaninventorypolicyrecommendaMon

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CommonBondtoManagetheTradeoff



RevenueGrowth

Source:DominicDoddandKenFavaro.“ManagingtheRightTension,”HarvardBusinessReview,Vol.84/12,December2006,pp.62-74.

WhatwereyourgoalsinthesimulaMon?


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TotalMargin


MEANForecast without optionForecast with optiondifference with option

Total Margin without optionTotal Margin with optiondifference with option

30 30 30 3030 26 29 29

0 -4 -1 -1

2,700$ 2,700$ 2,700$ 2,700$ 2,700$ 2,340$ 2,755$ 2,610$

-$ (360)$ 55$ (90)$

YEAR 1 OPTIONS

Price without optionCost without optionUnit Margin without option

Price with optionCost with optionUnit Margin with optionUnit Margin difference with option

CONSENSUSForecast without optionForecast with optiondifference with option

Total Margin without optionTotal Margin with optiondifference with option

WAP Color Stylish Infrared240$ 240$ 240$ 240$ 150$ 150$ 150$ 150$

90$ 90$ 90$ 90$

270$ 255$ 250$ 243$ 180$ 165$ 155$ 152$

90$ 90$ 95$ 90$ -$ -$ 5$ -$

33 33 33 3334 34 31 33

1 1 -2 0

2,970$ 2,970$ 2,970$ 2,970$ 3,060$ 3,060$ 2,945$ 2,970$

90$ 90$ (25)$ -$

Model B

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TotalMarginconsiderstheOperaMngMargin–AssetUMlizaMontradeoff


RevenueGrowth

TotalM

argin

Howdoesthiscommercialstrategyapproachfitwiththevaluetriangle?


Commercial Value Levers Margin Volume X

Source:EthyleneOxide/GlycolsCOMMERCIALSTRATEGYREFRESH2016-2018,June2015

AssetU'liza'onOpera'ngMargin

RevenueGrowth

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AssetUMlizaMon–supplychain


-

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

2010 2011 2012 2013 2014

DaysofInven

toryOutstan

ding

RDS.A

XOM

BASFY

DOW

DD

Howwouldyouplotthese?

-

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

2010 2011 2012 2013 2014

DaysofInven

toryOutstan

ding

RDS.A

XOM

BASFY

DOW

DD

AssetUMlizaMon–commercial


T&RChemicals2016-creditmetrics

DSO

Target2015 Target2016

Productline EUAF AMER APME GLOBAL EUAF AMER APME GLOBAL

EOG 35.0 37.8 64.4 49.7 34.6 37.1 64.2 49.5

Overdue%

Target2015 Target2016

Productline EUAF AMER APME GLOBAL EUAF AMER APME GLOBAL

EOG 3.0% 2.5% 0.5% 1.1% 2.7% 2.3% 0.5% 1.2%

Source:EthyleneOxide/GlycolsCOMMERCIALSTRATEGYREFRESH2016-2018,June2015

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AssetUMlizaMon–property,plantandequipment(PP&E)


Source:ShellAnnualReport2014.


JarrodGoentzel©2016MITCTLDatasource:Compustat-CapitalIQ;Analysis:JarrodGoentzel

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2010 2011 2012 2013 2014

Mod

ified

AT(=

COGS

/TotalAssets)

RDS.A

XOM

BASFY

DOW

DD

FiveYearAverage(2010-2014)RDS.A XOM BASFY DOW DD

ModifiedAT(=COGS/TotalAssets) 1.06 0.95 0.79 0.66 0.49IT(=COGS/Inv) 13.58 20.97 5.11 5.79 3.22InvInt(=Inv/TotalAssets) 0.08 0.05 0.15 0.11 0.15

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JarrodGoentzel©2016MITCTLDatasource:Compustat-CapitalIQ;Analysis:JarrodGoentzel

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2010 2011 2012 2013 2014

Mod

ified

AT(=

COGS

/TotalAssets)

RDS.A

XOM

BASFY

DOW

DD

-

5.00

10.00

15.00

20.00

25.00

30.00

- 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20

InventoryTu

rnover

InventoryIntensity

RDS.A

XOM

BASFY

DOW

DD

Series6

FinalPeriod

RevenueGrowth

JarrodGoentzel©2016MITCTLSource:ManagementDayInvestorHandout,RoyalDutchShell,3-4November2015.

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RevenueGrowth


HowwouldyouposiMonRDSanditscompeMtors?

FiveYearAverage(2010-2014)

RDS.A XOM BASFY DOW DDRevenueGrowth 4.3% 2.5% 2.0% 2.2% 2.6%OperatingMargin 11.1% 15.3% 14.7% 12.2% 17.0%AssetTurnover 1.25 1.17 1.15 0.82 0.74

ROA 13.9% 18.0% 16.9% 10.1% 12.5%


RevenueGrowth


HowwouldyouposiMonpetrochemicals,pharma,andmobilephones?

Petrochemicals

Pharma

Mobilephones

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RevenueGrowth


HowwouldyouposiMonthebusinessunitsforShellChemicals?

Discussinagroupof3-4people.

EXCELLENTSUPPLYCHAINS

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MITResearchonExcellentSupplyChains

•  Definedmythsregardinganexcellentsupplychain–  Itispartofaprofitablecompany–  Itisnotpartofanunprofitablecompany–  Itiscomprisedofsupplychain“bestpracMces”

•  ConductedqualitaMveresearch–  Exploreddrivers,challenges,andsupplychainresponsesfornineindustries

–  Profiledsupplychainsof21case-studycompanies–  IdenMfiedimportantlinkagesthatexistamongcompeMMvestrategies,operaMngmodels,operaMonalperformanceobjecMves,andbusinesspracMces.

JarrodGoentzel©2016MITCTLSource:LarryLapide.“TheEssenceofExcellence,”SupplyChainManagementReview,April2006,pp.18-24.

MITResearchonExcellentSupplyChains

Researchconfirmedthatanexcellentsupplychain:1.  Supports,enhances,andisanintegralpartofa

company’scompeMMvebusinessstrategy.2.  Leveragesa(notnecessarilyunique)supplychain

operaMngmodeltosustaincompeMMveness3.  ExecuteswellagainstabalancedsetofoperaMonal

performanceobjecMves/metrics4.  Focusesonafew“tailored”businesspracMcesthat

reinforceeachothertosupporttheoperaMngmodelandbestachieveoperaMonalobjecMves.

JarrodGoentzel©2016MITCTLSource:LarryLapide.“TheEssenceofExcellence,”SupplyChainManagementReview,April2006,pp.18-24.

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ExcellentSupplyChainFramework


Supports,enhances,andisanintegralpartofacompany’scompeMMvebusinessstrategy

Leveragesa(notnecessarilyunique)supplychainoperaMngmodeltosustaincompeMMveness

ExecuteswellagainstabalancedsetofoperaMonalperformanceobjecMves/metrics

Focusesonafew“tailored”businesspracMcesthatreinforceeachothertosupporttheoperaMngmodelandbestachieveoperaMonalobjecMves

Source:LarryLapide.“TheEssenceofExcellence,”SupplyChainManagementReview,April2006,pp.18-24.

1.Supports,enhances,andisanintegralpartofacompany’scompeMMvebusinessstrategy

SomecompeMMvestrategieslinkedtosupplychainSupplychainmaynotbeintegralwiththeenMrebusinessstrategy,butshouldbepart…otherwise,youhaveyourworkcutoutforyou

LowestpricesHighestmarginproductsHighestqualityFastestcustomerresponseMostinnovaMveHighestReturn-on-AssetsBroadestproductlineBestcustomerserviceBestpost-salessupportMostenvironmentallyresponsible

JarrodGoentzel©2016MITCTLAdaptedfromLarryLapide

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2.LeveragesasupplychainoperaMngmodeltosustaincompeMMveness


Compe;;veStrategy Opera;ngModelLowestprices •  LowestoperaMngcosts

Highestmarginproducts •  Maximumavailabilityatpointofsale

Highestquality •  Highestqualityofsuppliers•  Strongestmanufacturingqualitycontrols

Fastestcustomerresponse •  Shortestorder-to-deliverycycle•  Fastestrequest-to-promisedate

MostinnovaMve •  Mostefficientnewproductlaunch

HighestReturn-on-Assets •  HighestplantuMlizaMon•  Lowestinventories

Broadestproductline •  Adeptatmanagingcomplexity

Bestcustomerservice •  Specificserviceforeachcustomersegment•  Maximumavailabilityatpointofsale

Bestpost-salessupport •  Maximumavailabilityofserviceparts

Mostenvironmentallyresponsible •  Minimizewasteandmaximizerecycling

2.LeveragesasupplychainoperaMngmodeltosustaincompeMMveness


Company Operating Model Dell Inc. Consumer Direct/ MTO

Zara Speed to Market Intel Copy Exact

Nike, Cisco Virtual Integration/Network Master Agrenco Coordinating Many-to-many Customer/Supplier Network

Nokia Early Detection Systems, Multi-point Relationship etc Whirlpool Direct Fulfillment

Caterpillar Shared Operations Walmart Flow Distribution

AdaptedfromLarryLapide

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3.ExecuteswellagainstabalancedsetofoperaMonalperformanceobjecMves


Howsupplychainperformancemakesanimpactonshareholdervalue



RevenueGrowth

Responsiveness(productavailability)Capability(newmarkets)

Leanness(reduceassets)Agility(adaptcapaci<es)

Leanness(reducecost)Segmenta<on(iden<fyopportuni<es)

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BalancedoperaMonalobjecMvesvarybyindustryinabsoluteterms


HighMarginandShortLifeCycleProducts:• PharmaceuMcal• Fashionapparel• Media&Entertainment

LowMargin&MatureProducts:• Food&Beverage• Basicgoodsretail•  Industrialsupplies

AssetU;liza;onEfficiency

CustomerResponse

CapitalIntensiveIndustries:• Petrochemical• Semi-conductorfab• CommodiMes(steel,paper,coal)


BalancedoperaMonalobjecMvesvarywithinindustryinrelaMveterms



CustomerResponse

PharmaCo2

PharmaCo1

ChemCo2 ChemCo1FoodCo2

FoodCo1

OperaMonalobjecMvesmayfurthervarywithinacompanybybusinessunit


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4.Focusesonafew“tailored”businesspracMcesthatreinforceeachothertosupporttheoperaMngmodelandbestachieveoperaMonalobjecMves•  Tailored(notbest)businesspracMces•  AligntoperformanceobjecMves

–  Fit–  Consistent(makesensetogether)–  Reinforcing(supporteachother)–  Cross-opMmized(worktogethertoachievecommongoals)

•  LeveragefundamentaloperaMngprinciples/theoryJarrodGoentzel©2016MITCTL

STRATEGYALIGNMENT

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AligningCorporateStrategyandOperaMonalPerformanceObjecMves



CustomerResponse

Customer-focusedperformanceobjec;ves

• Highestsupplierqualitystandards• ShortestMme-to-market• ShortestmanufacturingchangeoverMmes

Customer-focusedcorporatestrategy• Highestqualityproducts• MostinnovaMve• Broadestproductline

Aligned


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CustomerResponse

• Lowestprocurementcosts• HighestplantuMlizaMon• Lowestinventories

Efficiencyandasset-focusedperformanceobjec;ves:

Customer-focusedcorporatestrategyCustomer-focusedcorporatestrategy• Highestqualityproducts• MostinnovaMve• Broadestproductline

Non-aligned





CustomerResponse

Customer-focusedperformanceobjec;ves:

• Highestpost-salesupMmes• ShortestproductlaunchcycleMmes• Loweststockouts

Customer-focusedcorporatestrategy• Highestqualityproducts• MostinnovaMve• Broadestproductline

Aligneddifferently


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Strategy Alignment Process


BusinessStrategy

SupplyChainStrategy

OperaMngModel

TailoredPracMces

PerformanceObjecMves

Step1• Discusshowsupplychainstrategysupportsbusinessstrategy• IdenMfysupplychaincompeMMvestrategyelements

Step2•  DevelopoperaMngmodelthatsupportsSCcompeMMvestrategyelements

•  IdenMfyoperaMonalperformancemetricsthatarealignedwithstrategy

Step3•  DevelopSCpracMcestailoredtotheoperaMngmodel

•  Discusstrade-offsandalignments

Strategy Alignment for Ethylene Oxide/Glycols


CommercialStrategy

SupplyChainStrategy

OperaMngModel

TailoredPracMces


Step1• Discusshowsupplychainstrategysupportscommercialstrategy• IdenMfysupplychaincompeMMvestrategyelements

Step2•  DevelopoperaMngmodelthatsupportsSCcompeMMvestrategyelements

•  IdenMfyoperaMonalperformancemetricsthatarealignedwithstrategy

Step3•  DevelopSCpracMcestailoredtotheoperaMngmodel

•  Discusstrade-offsandalignments

CompleteSteps1-2forEOG.Discussinagroupof3-4people.

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SUPPLYCHAINSTRATEGYFORMATION

SupplyChainStrategyAudit

1.  Whatlevelsofservice(a)doourcustomersexpect?(b)doourcompeMtorsprovide?2.  HowdocompeMtorsachievetheservicelevelsthatwethinktheyachieve?3.  Throughhowmanyoutletsshouldwedistributeourproducts?Ofwhattype?Where?4.  Areourplantslocatedandfocusedproperlytosupportcorporatestrategy?5.  WhereisourcompanyonthelogisMcslifecycleforalloraporMonofitsbusiness?6.  HavewetakenadvantageofthefullpotenMalforpostponementandspeculaMon,

standardizaMon,consolidaMon,anddifferenMaMoninourlogisMcsprograms?7.  Towhatextenthaveweassuredourselvesthatourstrategymeetsdesiredlevelsof

costsandserviceswhereitcountsmost,totheend-user?8.  Towhatextenthaveweemployed“channelvision”indeterminingwhoshoulddo

what,when,where,andhowinourchannelsofdistribuMon?HavewetakenstepstoensurethatallparMescarryouttheirfuncMonsasplanned?

9.  WhatimplicaMonsdotechnologicaltrendshaveforourcompany?10.  WhatimplicaMonsdoregulatorytrendshaveforus?11.  DoesourlogisMcsstrategysupportourcorporatestrategy?Towhatextentshouldour

strategybelogisMcs-oriented?


Source:Heske],J.L.(1977)."LogisMcs--essenMaltostrategy.”HarvardBusinessReview55(6):85-96.

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1.  Corporatestrategyalignment:financialstructure/objecMves,productlifecycle,marketsegments

2.  CompeMtorstrategy3.  Servicetoend-users/servicetocustomers(bundleofproductsANDrelatedservices)4.  ChannelsofdistribuMon:funcMonalallocaMon,coordinaMon,…5.  GeographyofdistribuMon:retail,warehouselocaMons,…6.  Sourcingstrategy:plantlocaMons,supplierselecMon,…7.  Inventorypolicies&processes8.  TransportaMonpolicies&processes9.  InnovaMvepracMces10. Trends:technological,regulatory,market11. OrganizaMonalcapability,culture,andcommunicaMon

SexngSupplyChainStrategy

Tailored

Segmented

Adaptedfrom:Heske],J.L.(1977)."LogisMcs--essenMaltostrategy.”HarvardBusinessReview55(6):85-96.Shapiro,R.D.(1984)."GetleveragefromlogisMcs."HarvardBusinessReview62(3):119-126.


SupplyChainSegmentaMon

SupplyChainSegmentaMoncreatesclearandmeaningfulgroupsofproductsandcustomersforthepurposeof

strategicsupplychainmanagement.

•  ThesupplychainprioriMesandoperaMngstrategiesthatsupporttheneedsofeachsegmentwillbedifferent.

•  Thisdoesnotimplyseparatephysicalchains.ThesupplychainsthatservethesegmentswilllikelyshareresourcesandacMviMes.


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SegmenMngforLogisMcs

Source:Fuller,J.B.,etal.(1993)."TailoredLogisMcs:TheNextAdvantage."HarvardBusinessReview71(3):87-98.


SegmenMngforLogisMcs


Source:“HowManySupplyChainsDoYouNeed?”A.T.KearneyReport,2004.

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LogisMcallyDisMnctBusinesses


IMATELexample

Source:Fuller,J.B.,etal.(1993)."TailoredLogisMcs:TheNextAdvantage."HarvardBusinessReview71(3):87-98.



LogisMcallyDisMnctBusinesses

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FrameworkforDisMnctSupplyChains

Source:Shapiro,R.D.(1984)."GetleveragefromlogisMcs."HarvardBusinessReview62(3):119-126.


FrameworkforDisMnctSupplyChains

•  Strategyischoicesabout–  customerintegraMon–  value-addfocus–  supplierstructure&relaMonship

–  capacity–  assetdeployment


36

GroceryRetailer–onestorebutcomplexoperaMons•  Products

–  Dairy,meat,produce,frozen,floral,bakery,deli,health&beauty,generalmerchandise,pharmacy

–  CommonordisMnctDCs?– MulM-tempordisMncttrucks?

•  Services–  DirectStoreDelivery(Coca-Cola,Frito-Lay,…)–  PromoMonalitems,storedisplays–  Returns(packaging,product)

•  Fulfillment–  Cross-dockreplenishmentfrommanufacturer–  StockatDC


GroceryRetailerSegmentaMon

Segment1:DrygoodsthataresuppliedinhighvolumesonpalletstolargeurbanstoresSegment2:DrygoodsthataresuppliedonpalletstoruralstoresSegment3:ColdchainitemsforurbanandruralstoresSegment4:ShortshelflifeitemsforurbanandruralstoresSegment5:ProductssupplieddirectlybysupplierstostoresSegment6:PlannedadverMsedorpromoMonalitemsandspecialbuysforurbanandruralstores,etc.


37

FordPartsSupplyChain:IniMalSegmentaMon


Stock Orders

Service Orders

Emergency Orders

Slow movers

•  60k SKUs stocked at all Regional DCs •  Once per week on truck route •  Dealer carries high inventory

•  60k SKUs stocked at all Regional DCs •  Twice per week on truck route •  Dealer carries low inventory

•  From Regional DC or National Replenishment Center •  On request from Dealer for “critical” repairs •  Express shipment

•  140k SKUS stocked only at the National Depot •  Shipped directly to Dealer via LTL

8 regional distribution

centers

Replenishment center

Dealers

Suppliers

Packagers

Product segment 1 Product segment

2

"large, one-size-fits-all local warehouses

carrying high volumes of a broad selection of

parts”

Oil change Water pump, bumper A/C on luxury car Out-of-

production

Service segment 1

Service segment 2

Service segment 3

FordPartsSupplyChain:FinalSegmentaMon


High Volume

Low Volume /

Low Cube High Cube

•  19 HVCs carrying fewer SKUs •  Smaller, high-volume parts •  Delivered daily to dealers

•  1 LV/LCC •  Small, slow-moving parts based on critical orders available within 24 hours (express not LTL)

•  3 HCCs •  Large-size inventory items (e.g. sheet metal, bumpers) provided to dealers within 24 to 48 hours

3 HCCs

Daily Parts Advantage (DPA) program

LV/LCC

19 HVCs

Replenishment center

Dealers

Suppliers

Packagers

Three distinct fulfillment approaches to give the same next-day service to dealers

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1.  Corporatestrategyalignment:financialstructure/objecMves,productlifecycle,marketsegments

2.  CompeMtorstrategy3.  Servicetoend-users/servicetocustomers(bundleof

productsANDrelatedservices)

SegmentaMon


DefinethedisMnctsegmentsofproductsandservicesforShellChemicals.Discussinagroupof3-4people.

SupplyChainStrategy



RevenueGrowth

CommercialStrategy

SupplyChainStrategy

OperaMngModel

TailoredPracMces


SEGMENTATION(products,services)

Documents

Supply Chain Strategyctl.mit.edu/sites/ctl.mit.edu/files/attachments/tab 7 SC... · 2016. 11. 15. · McKesson Cardinal Amerisource Walgreen • Pharma margins are dropping and they