MGT 563

OPERATIONS
STRATEGIES
Dr. Aneel SALMAN
Department of Management Sciences
COMSATS Institute of Information
Technology, Islamabad
 Recap Lecture 17
Green Supply Chain
Environment
Society
Economic
THE TRIPLE A
SUPPLY CHAIN
Hau L. Lee
The holy grails of supply chain
management are high speed
and low cost--or are they?
 To achieve sustainable
competitive advantage,
your supply chain needs all
three of these qualities
Agility, Adaptability, and
Alignment.
 Agile
They respond quickly to sudden
changes in supply or demand.
They handle unexpected external
disruptions smoothly and cost-
efficiently. And they recover promptly
from shocks such asnatural disasters,
epidemics, and computer viruses.
 Adaptable
They evolve over time as economic
progress, political shifts,
demographic trends, and
technological advances reshape
markets.
 Aligned
They align the interests of all
participating firms in the supply
chain with their own. As each player
maximizes its own interests, it
optimizes the chain's performance as
well.
 Agility
Objective
Respond to short-term changes in demand or supply
quickly.
Methods:
Continuously provide supply chain partners with data on
changes in supply and demand so they can respond
promptly.
Collaborate with suppliers and customers to redesign
processes, components, and products in ways that give
you a head start over rivals.
Finish products only when you have accurate information
on customer preferences.
Keep a small inventory of inexpensive, nonbulky product
components to prevent manufacturing delays.
 Adaptability

Objective
Adjust supply chain design to accommodate market
changes.
Methods:
Track economic changes, especially in developing
countries.
Use intermediaries to find reliable vendors in unfamiliar
parts of the world.
Create flexibility by ensuring that different products use
the same components and production processes.
Create different supply chains for different product lines, to
optimize capabilities for each. For example, with highly
customized, low-volume products, use vendors close to
your main markets. For standard, high-volume products,
commission contract manufacturers in low-cost countries.
 Alignment
Objectives
Establish incentives for supply chain partners to improve
performance of the entire chain.
Methods:
Provide all partners with equal access to forecasts, sales
data, and plans.
Clarify partners' roles and responsibilities to avoid
conflict.
Redefine partnership terms to share risks, costs, and
rewards for improving supply chain performance.
Align incentives so that players maximize overall chain
performance while also maximizing their returns from
the partnership.
Rapid-Fire Fulfillment

Kasra Ferdows
Michael A. Lewis
Jose A.D. Machuca
 ZARA Supply Chain
Management
you need to have five fingers
touching the factory and five touching
the customer. Amancio Ortega
Control what happens to your product
until the customer buys it.
Zara has developed a superresponsive
supply chain.
Zara keeps almost half of its
production inhouse.
 Far from pushing its factories to
maximize their output, the company
intentionally leaves extra capacity.
The company manages all design,
warehousing, distribution, and logistics
functions itself.
It holds its retail stores to a rigid
timetable for placing orders and
receiving stock.
 It puts price tags on items before
theyre shipped, rather than at each
store.
It leaves large areas empty in its
expensive retail shops.
It tolerates, even encourages,
occasional stock-outs.
Self-reinforcing system built on
three principles
Close the communication loop
Stick to a rhythm across the entire
chain
Leverage your capital assets to
increase supply chain flexibility
 Close the Loop
Transfer both hard data and anecdotal
information quickly and easily from shoppers to
designers and production staff.
Track materials and products in real time every
step of the way, including inventory on display in
the stores.
The goal is to close the information loop between
the end users and the upstream operations of
design, procurement, production, and distribution
as quickly and directly as possible.
Regular creation and rapid replenishment of
small batches of new goods.
 Stick to a rhythm across the
entire chain
At Zara, rapid timing and synchronicity
are paramount.
Company indulges in an approach that
can best be characterized as penny
foolish, pound wise.
It spends money on anything that
helps to increase and enforce the
speed and responsiveness of the chain
as a whole.
Leverage your capital assets to
increase supply chain
flexibility.
Zara has made major capital
investments in production and
distribution facilities and uses them
to increase the supply chains
responsiveness to new and
fluctuating demands.
It produces complicated products in-
house and outsources the simple
ones.
 Lessons learnt.
Touch the factories and customers
with two hands.
Do everything possible to let one
hand help the other.
Whatever you do, dont take your
eyes off the product until its sold
DEEPER SUPPLIER
RELATIONSHIPS
Jeffery K Liker
Thomas Y Choi
 The Supplier Partnering
Hierarchy
An army marches on its stomach.
Amateurs talk strategy and
professionals talk logistics.
 Understand how your Supplier
Works
Learn about suppliers businesses
Go see how suppliers work
Respect suppliers capabilities
Commit to coprosperity
 Turn supplier rivalry into
opportunity
Source each component from two or
three vendors
Create compatible production
philosophies and systems
Set up joint ventures with existing
suppliers to transfer knowledge and
maintain control
 Supervise your suppliers
Send monthly supply cards to core
suppliers
Provide immediate and constant
feedback
Get senior management involved in
solving problems
 Develop suppliers technical
capabilities
Build suppliers problem solving skills
Develop common lexicon
Hone core suppliers innovation
capabilities
 Share information intensively
but selectively
Set specific time, places and
agendas for meetings
Use rigid formats for sharing
information
Insist on accurate data collection
Share information in a structured
fashion
 Conduct joint improvement
activities
Exchange best practices with
suppliers
Initiate Kiazen projects at suppliers
facilities
Set up supplier study groups
Were in This Together

Douglas M. Lambert
A. Michael Knemeyer
The Partnership Model
The Propensity to Partner
Matrix
Are You the Weakest
Link in Your
Companys Supply
Chain?
Reuben E. Slone
John T. Mentzer
J. Paul Dittmann
 Pick the right leaders
Supply chain management cant be
competently managed by the
uninitiated.
Ensure senior supply chain executives
have a background in SCM, through
formal education, significant
experience, or both.
Extend this best-and-brightest
principle down to entry-level hiring.
 Initiate benchmarking and
select metrics.
Conduct external best-practice
benchmarking on key aspects of supply
chain performance, such as inventory turns,
availability of goods, and SKU system costs.
Set goals for metrics based on
benchmarking.
Define metrics in ways that generate useful
information; for example, good
availability means orders delivered to
customers on time.
 Set incentives
Establish rewards encouraging
suppliers and employees to support
your supply chain goals.
 Keep up with technology and
trends
Stay current with supply chain
technology advances (such as software
and devices supporting production
planning, inventory management, and
warehousing) and process tools (such
as Six Sigma) applied to the entire
supply chain.
Understand how your firm is currently
using technologies, and ask challenging
questions before adopting new tools.
 Factor supply chain
management into business
plans
Make supply chain considerations
core components of operations, sales
and marketing planning, as well as
contract negotiations with customers
and partners.
Watch for inconsistencies
undermining your strategic aims.
 Resist the tyranny of short-
term thinking
Discourage use of deep discounts at quarters
end to make the numbers.
Discounts train your supply chain partners to
delay buying until the end of each quarter.
That triggers low sales in the first two months
of the next quarter, which prompts more
discounts.
The cost to you: overtime during heavy buying,
wasted labor during slow months, and higher
inventory costs before the next surge.