03
Supply Chain
Drivers
and
Metrics
PowerPoint presentation to accompany
Chopra and Meindl Supply Chain Management, 5e
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
© 2012 Prentice Hall Inc. 1
1-1
3-1
Outline
Drivers of supply chain performance
A framework for structuring drivers
Facilities
Inventory
Transportation
Information
Sourcing
Pricing
Obstacles to achieving fit
© 2007 Pearson Education 3-2
Drivers of Supply Chain Performance
Facilities:
– places where inventory is manufactured, stored &
assembled
– production sites (factory) and storage sites (warehouses)
Inventory:
– raw materials, Work in Process, finished goods within a
supply chain
– inventory policies
Transportation:
– moving inventory from point to point in a supply chain
– combinations of transportation modes and routes
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Drivers of Supply Chain Performance
Information:
– data collection and analysis regarding inventory,
transportation, facilities throughout the supply chain
– potentially the biggest driver of supply chain
performance
Sourcing:
– functions a firm performs and functions that are
outsourced
Pricing:
– Price associated with goods and services provided by a
firm to the supply chain
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A Framework for
Structuring Drivers
Competitive Strategy
Supply Chain
Strategy
Efficiency Responsiveness
Supply chain structure
Logistical Drivers
Facilities Inventory Transportation
Information Sourcing Pricing
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Cross Functional Drivers 3-5
Components of Facilities Decisions
Location:
Centralization
(efficiency---Central Warehouse: Only 01)
VS.
Decentralization
(responsiveness---Regional Warehouse: 08)
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Components of Inventory Decisions
Overall trade-off: Responsiveness versus efficiency
– more inventory: greater responsiveness (greater cost)
– less inventory: more efficient (lower cost)
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Components of Inventory Decisions
• Cycle inventory:
– Average amount of inventory used to satisfy demand
between shipments
• Safety inventory:
– Inventory held in case of demand exceeds expectations
• Seasonal inventory:
– Inventory built up to counter predictable variability in
demand
Costs of carrying too much inventory
versus
cost of losing sales
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Transportation: Role in
the Supply Chain
Impact on responsiveness and efficiency
Faster transportation : greater responsiveness
(e.g. Air)
Slower transportation : more efficiency
(e.g. Ship, Rail)
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Components of
Transportation Decisions
Mode of transportation:
– air, truck, rail, ship, electronic
transportation
– vary in cost, speed, size of shipment,
flexibility
Route selection
– route: path along which a product is shipped
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Information: Role in
the Supply Chain
The connection between the various stages in the
supply chain – allows coordination between stages.
Crucial to the daily operation of each stage in a supply
chain – e.g.
❖production scheduling,
❖inventory levels.
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Components of
Information Decisions
• Enabling technologies
1. Electronic data interchange (EDI)
2. The Internet
3. Enterprise resource planning (ERP) systems
4. Supply chain management (SCM) software
5. Radio frequency identification (RFID)
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Obstacles to Achieving
Strategic Fit
01. Increasing variety of products:
Increasing variety tends to raise uncertainty, and increased
uncertainty hurts both efficiency and responsiveness within the
supply chain.
02. Decreasing product life cycles:
Increasing demand for a variety of products;
decreases product life cycle.
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Obstacles to Achieving
Strategic Fit
03. Increasingly demanding customers:
Customers are constantly demanding improvements in-
➢ Delivery time,
➢ Quality,
➢ Cost,
➢ Service,
➢ performance.
04. Fragmentation of supply chain ownership:
Different owners have different preferences and different
policies.
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Obstacles to Achieving
Strategic Fit
05. Globalization:
e.g. LUX
06. Difficulty in executing new strategies:
➢ Many highly talented employees (HR),
➢ New technologies,
➢ Sustainability requirements,
➢ Financial resources.
© 2007 Pearson Education 3-15
Summary
What are the major drivers of supply chain
performance?
What is the role of each driver in creating strategic fit
between supply chain strategy and competitive strategy
(or between implied demand uncertainty and supply
chain responsiveness)?
What are the major obstacles to achieving strategic fit?
In the remainder of the course, we will learn how to
make decisions with respect to these drivers in order to
achieve strategic fit and surmount these obstacles
© 2007 Pearson Education 3-16
