8/25/00S.Chopra/LogisticsStrategy1AStrategicFrameworkforSupplyChainDesign,Planning,andOperationSyllabus8/25/00S.Chopra/LogisticsStrategy2OutlineWhatissupplychainmanagement?AsupplychainstrategyframeworkSevenElevenJapan8/25/00S.Chopra/LogisticsStrategy3TraditionalView:LogisticsintheEconomy(1990,1996)FreightTransportation$352,$455BillionInventoryExpense$221,$311BillionAdministrativeExpense$27,$31BillionLogisticsrelatedactivity11%,10.5%ofGNP.Source:CassLogistics8/25/00S.Chopra/LogisticsStrategy4TraditionalView:LogisticsintheManufacturingFirmProfit4%LogisticsCost21%MarketingCost27%ManufacturingCost48%ProfitLogisticsCostMarketingCostManufacturingCost8/25/00S.Chopra/LogisticsStrategy5SupplyChainManagement:TheMagnitudeintheTraditionalViewEstimatedthatthegroceryindustrycouldsave$30billion(10%ofoperatingcostbyusingeffectivelogisticsandsupplychainstrategies–Atypicalboxofcerealspends104daysfromfactorytosale–Atypicalcarspends15daysfromfactorytodealershipLauraAshleyturnsitsinventory10timesayear,fivetimesfasterthan3yearsago8/25/00S.Chopra/LogisticsStrategy6SupplyChainManagement:TheTrueMagnitudeCompaqestimatesitlost$0.5billionto$1billioninsalesin1995becauselaptopswerenotavailablewhenandwhereneededWhenthe1gigprocessorwasintroducedbyAMD,thepriceofthe800megprocessordroppedby30%P&Gestimatesitsavedretailcustomers$65millionbycollaborationresultinginabettermatchofsupplyanddemand8/25/00S.Chopra/LogisticsStrategy7Whatisasupplychain?CustomerwantsdetergentandgoestoJewelJewelSupermarketJewelorthirdpartyDCP&GorothermanufacturerPlasticProducerChemicalmanufacturer(e.g.OilCompany)TennecoPackagingPaperManufacturerTimberIndustryChemicalmanufacturer(e.g.OilCompany)8/25/00S.Chopra/LogisticsStrategy8FlowsinaSupplyChainCustomerInformationProductFunds8/25/00S.Chopra/LogisticsStrategy9CycleViewofSupplyChainsCustomerOrderCycleReplenishmentCycleManufacturingCycleProcurementCycleCustomerRetailerDistributorManufacturerSupplier8/25/00S.Chopra/LogisticsStrategy10Push/PullViewofSupplyChainsProcurement,ManufacturingandReplenishmentcyclesCustomerOrderCycleCustomerOrderArrivesPUSHPROCESSESPULLPROCESSES8/25/00S.Chopra/LogisticsStrategy11ExamplesofSupplyChainsDell/CompaqToyota/GM/FordMcMasterCarr/W.W.GraingerAmazon/Borders/BarnesandNobleWebvan/Peapod/JewelWhataresomekeyissuesinthesesupplychains?8/25/00S.Chopra/LogisticsStrategy12WhatisSupplyChainManagement?Managingsupplychainflowsandassets,tomaximizesupplychainsurplus.Whatissupplychainsurplus?8/25/00S.Chopra/LogisticsStrategy13TheValueChain:LinkingSupplyChainandBusinessStrategyNewProductDevelopmentMarketingandSalesOperationsDistributionServiceFinance,Accounting,InformationTechnology,HumanResourcesBusinessStrategyNewProductStrategyMarketingStrategySupplyChainStrategy8/25/00S.Chopra/LogisticsStrategy14AchievingStrategicFitUnderstandingtheCustomer–Lotsize–Responsetime–Servicelevel–Productvariety–Price–InnovationImpliedDemandUncertainty8/25/00S.Chopra/LogisticsStrategy15LevelsofImpliedDemandUncertaintyLowHighPriceResponsivenessCustomerNeedImpliedDemandUncertaintyDetergentLongleadtimesteelHighFashionEmergencysteel8/25/00S.Chopra/LogisticsStrategy16UnderstandingtheSupplyChain:Cost-ResponsivenessEfficientFrontierHighLowLowHighResponsivenessCost8/25/00S.Chopra/LogisticsStrategy17AchievingStrategicFitImplieduncertaintyspectrumResponsivesupplychainEfficientsupplychainCertaindemandUncertaindemandResponsivenessspectrum8/25/00S.Chopra/LogisticsStrategy18StrategicScopeSuppliersManufacturerDistributorRetailerCustomerCompetitiveStrategyProductDev.StrategySupplyChainStrategyMarketingStrategy8/25/00S.Chopra/LogisticsStrategy19DriversofSupplyChainPerformanceEfficiencyResponsivenessInventoryTransportationFacilitiesInformationSupplychainstructureDrivers8/25/00S.Chopra/LogisticsStrategy20ConsiderationsforSupplyChainDriversDriverEfficiencyResponsivenessInventoryCostofholdingAvailabilityTransportationConsolidationSpeedFacilitiesConsolidation/DedicatedProximity/FlexibilityInformationWhatinformationisbestsuitedforeachobjective8/25/00S.Chopra/LogisticsStrategy21SupplyChainDecisions:StructuringDriversStrategy(Design)PlanningOperationSyllabus8/25/00S.Chopra/LogisticsStrategy22MajorObstaclestoAchievingFitMultipleowners/incentivesinasupplychainIncreasingproductvariety/shrinkinglifecycles/customerfragmentationIncreasingimplieduncertaintyLocaloptimizationandlackofglobalfit8/25/00S.Chopra/LogisticsStrategy23DealingwithMultipleOwners/LocalOptimizationInformationCoordinationContractualCoordination8/25/00S.Chopra/LogisticsStrategy24DealingwithProductVariety:MassCustomizationMassCustomizationHighHighLowLowLongShortLeadTime8/25/00S.Chopra/LogisticsStrategy25FragmentationofMarketsandProductVarietyAretherequirementsofallmarketsegmentsservedidentical?Arethecharacteristicsofallproductsidentical?Canasinglesupplychainstructurebeusedforallproducts/customers?No!Asinglesupplychainwillfaildifferentcustomersonefficiencyorresponsivenessorboth.8/25/00S.Chopra/LogisticsStrategy26TailoredLogisticsEachLogisticallyDistinctBusiness(L