21
st
-Centur y
Supply Chains
1-2
Overview of 21
st
-century supply chains
•
The supply chain revolution
•
Why integration creates value
•
Generalized supply chain model
•
Responsiveness
•
Financial sophistication
•
Globalization
1-3
The supply chain revolution has reshaped
contemporary strategic thinking
•
Supply Chain Management
–
Consists of firms collaborating to
leverage strategic positioning
and to improve operating
efficiency

Responsiveness
•
Financial sophistication
•
Globalization
1-8
Integrative management requires
simultaneous achievement of 8 processes
Table 1.2 Eight Supply Chain Processes
1-9
Concepts necessary for achieving integrated
management
•
Lowest total process cost is the focus of integrated management
–
Differs from lowest cost of each function in the process
•
Collaboration of operating information, technology and risk has been
encouraged by national legislation to keep US-based firms
competitive
•
Enterprise extension includes expanded managerial influence and
control beyond traditional ownership boundaries of a single enterprise
•
Integrated service providers (ISP) provide a range of logistics
services to accommodate customers, ranging from order entry to
product delivery
–
Commonly known as third (or fourth) party service providers
1-10

•
Objective is to maintain products in an uncommitted status
as long as possible
•
Balances economy of scale with responsiveness
–
Can build a sufficient quantity of “ready to customize” basic units
•
Requires a lot of forethought during product design
1-13
Example of Manufacturing Postponement
Keeping all the car panels a base color (white or gray) until
the order is received, then painting to the color ordered
1-14
Geographic (or Logistics) Postponement
•
Build or stock a full-line inventory at one or a few strategic
locations
•
Forward deployment of inventory is postponed until
customer orders are received
•
Once orders received, specific item is expedited to the local
distributor
•
Advantages are manufacturing economies of scale along
with responsiveness to customer
•
Often used for critical, high cost parts and assemblies (e.g.
engines)

Expectations of continued financial
results often drive promotional and
pricing strategies to “load the
channel” with inventory
•
Need to establish collaborative
relationships
–
Most business managers do not have
training or experience in
development of collaborative
arrangements
1-18
Financial sophistication enables
measurement of time-based supply chain
•
Cash-to-Cash Conversion—
the time required to convert
raw material or inventory
purchases into sales revenue
•
Dwell Time Minimization—
dwell time is the ratio of time
that an assets sits idle to the
time required to satisfy its
supply chain mission
•
Cash Spin—reducing assets in
the supply chain can “spin”
cash for reinvestment in other

Documentation requirements for business
transactions is significantly more complex
•
Operations must be deal with significant Diversity
in work practices and local operating environments
•
How consumers Demand products and services
must accommodate cultural variations
1-21
END