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© Nigel Slack and Michael Lewis 2003
Quality
Per
form
ance
o
bje
ctiv
es
Dependability
Process Technology
Developmentand
Organization
Speed
Flexibility
Cost
Resource Usage
Mar
ket
Co
mp
etit
iven
ess
Decision areas
Issues covered in this chapter
Capacity Supply Network Behaviour
Issues include:• Taking a supply
network perspective• How do supply
networks fluctuate over time
• Reducing supply chain instability •Supply chain
restructuring
© Nigel Slack and Michael Lewis 2003
Supply network strategy
The concept of supply networks
Vertical integration Partnerships Market
trading
Supply network
relationships
Supply network behavior
The network perspective
Network management
Network dynamics
Co-ordinationDifferentiationReconfiguration
QuantitativeQualitative
Supply network issues
© Nigel Slack and Michael Lewis 2003
Competitors
Focal Company
Complementors
Suppliers Customers
The value net
© Nigel Slack and Michael Lewis 2003
Materials manufacturer
Packaging manufacturer
Food manufacturer
Warehouse Retail store
InventoriesOperations processes
Multi echelon inventory chain
© Nigel Slack and Michael Lewis 2003
1
2
3
4
5
6
7
8
99 8 7 6 5 4 3 2 1
LOW IMPORTANCE HIGH
BA
D
P
ER
FO
RM
AN
CE
GO
OD
1
2
3
4
5
6
7
8
99 8 7 6 5 4 3 2 1
LOW IMPORTANCE HIGH
BA
D
P
ER
FO
RM
AN
CE
GO
OD
1
2
3
4
5
6
7
8
99 8 7 6 5 4 3 2 1
LOW IMPORTANCE HIGH
BA
D
P
ER
FO
RM
AN
CE
GO
OD
Trading the priority of objectives
© Nigel Slack and Michael Lewis 2003
Supply chain dynamics
“Hard” supply dynamics
Look for the causes of overreaction to volume
changes
© Nigel Slack and Michael Lewis 2003
6
5
4
3
2
1
Third-tier supplier
Second-tier supplier
First-tier supplier
Original equipment
manufacturer DEM
AN
D
PER
IOD
Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock
100 100 100 100100100
100100
100100
100100
100
95
95
95
95
95
3 2 1 OEM MARKET
Note - All operations keep one period’s inventory
20 60 80 90100
60100
80100
9010095
180 120 100 9560
12080
1009095
9595
60 90 9512090
10095
100 959095
9595
95 959595
9595
95
95
959595959595
95
95
95
959595959595
Orders Orders Orders Orders
Items Items Items Items
Fluctuations of production levels along supply chain in response to small change in end-customer demand
© Nigel Slack and Michael Lewis 2003
6
5
4
3
2
1
Third-tier supplier
Second-tier supplier
First-tier supplier
Original equipment
manufacturer DEM
AN
D
PER
IOD
Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock
100 100 100 100100100
100100
100100
100100
100
95
3 2 1 OEM MARKET
100
Orders Orders Orders Orders
Items Items Items Items
All operations hold one periods stock
95
95
95
95
© Nigel Slack and Michael Lewis 2003
6
5
4
3
2
1
Third-tier supplier
Second-tier supplier
First-tier supplier
Original equipment
manufacturer DEM
AN
D
PER
IOD
Prodn. Stock Prodn. Stock Prodn. Stock Prodn. Stock
100 100 100 100100100
100100
100100
100100
100
95
3 2 1 OEM MARKET
100
Orders Orders Orders Orders
Items Items Items Items
All operations hold one periods stock
105
95
105
95
© Nigel Slack and Michael Lewis 2003
Supply chain dynamics
“Soft” supply dynamics
Look for the perception gaps
© Nigel Slack and Michael Lewis 2003
Supplier selection strategy
Supplier development strategy
Operation BOperation A Operation C
Operations performance
What Bthinks C wants
Market requirements
What Cthinks it wants
Gap?
How Bthinks it is performing
How C thinks B is performing
Gap?
Gap?
Gap?
Gap?
Gap?
Gap?
What Athinks B wants
What Bthinks it wants
Gap?
How Athinks it is performing
How B thinks A is performing
Linked?
Linked?
© Nigel Slack and Michael Lewis 2003
Ord
ers
0
10
Time
Manufacturer’s orders to its suppliers
Ord
ers
0
10
Time
Sales from store
Manufacturer
Wholesaler Retail Store
Ord
ers
0
10
Time
Wholesaler’s orders to manufacturer
Ord
ers
0
10
Time
Store’s orders to wholesaler
Consumers
Typical supply chain dynamics
© Nigel Slack and Michael Lewis 2003
Supply chain dynamics
Supply chains with different end objectives need to be managed in different ways
© Nigel Slack and Michael Lewis 2003
Products
InformationSupplier Manufacturer
Depot
Outlets
Depot
Supplier Manufacturer
Depot
Outlets
Depot
Efficient fast throughput supply
Customer responsive supply
Pro
du
cts
Info
rmat
ion
Two types of supply chain organisation
© Nigel Slack and Michael Lewis 2003
Pre
dic
tab
le
Few
ch
an
ges
Lo
w v
arie
ty
Pri
ce s
tab
le
Lo
ng
lea
d t
ime
Lo
w m
arg
in
Un
pre
dic
tab
le
Man
y c
han
ges
Hig
h v
arie
ty
Pri
ce m
ark
do
wn
s
Sh
ort
lea
d t
ime
Hig
h m
arg
in
FU
NC
TIO
NA
LIN
NO
VA
TIV
EMismatch Match
Match Mismatch
MA
RK
ET
RE
QU
IRE
ME
NT
S
OPERATIONS RESOURCES
Low cost
High utilization
Min. inventory
Low cost suppliers
Fast response
Low T/P time
Deployed inventory
Flexible suppliers
EFFICIENT PROCESSES
RESPONSIVE PROCESSES
Matching the operations resources in the supply chain with market requirements (after Fisher)
© Nigel Slack and Michael Lewis 2003
Customer 8
Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Customer 6
Customer 7
Plant 1
Plant 2
Plant 3
Ordering complexRouting complex
Customer contact complex
Plants have 8 contact
Network has 24 routes
Customers have 3 contacts
(a)
© Nigel Slack and Michael Lewis 2003
Warehouse 1
Ordering simpleRouting simple
Warehouse complex
Customer contact simple
Warehouse 2
Plants have 2 contact
Network still has 24 routes but
simplified
Customers have 1 contact
(b)
Customer 8
Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Customer 6
Customer 7
Plant 1
Plant 2
Plant 3
© Nigel Slack and Michael Lewis 2003
Customer 8
Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Customer 6
Customer 7
Plant 1
Plant 2
Plant 3
Ordering simpleRouting simpleCustomer contact complex
Plants have 3 or 2 contacts but make
all products
Network has 8 routes
Customers have 1 contacts
(c)
Manufacturing complex
© Nigel Slack and Michael Lewis 2003
A B C
Y
X
Z
Merging operations reduces response time
Mer
gin
g o
per
atio
ns
red
uce
s co
mp
lexi
ty
Generic supply network structure
© Nigel Slack and Michael Lewis 2003
Producer
Recording studio
Engineer
Songwriter
Singer
Instrumental-ists
Disc/tape manufacturer
Physical distribution
Retailer
Consumer
ConsumerArtist(s) Via the Internet
Technology can change the music business supply network
© Nigel Slack and Michael Lewis 2003
How A thinks it is performing
How Bperceives
A’s performance
Schweabstens Cloth
manufacturers A
Lopez Industries Garment
manufacturersB
ZentrillFashion retailers
C
What A thinks B
wants
What B
wants
What B thinks C
wants
What C
wants
How B thinks it is performing
How Cperceives
B’s performance
Market requirements
Quality and innovation
InnovationHigh qualityFlexible delivery
Use only very high quality fashion cloth
suppliers
Good qualityFlexibility during seasonWide capabilities Good quality
Fast availabilityFlexibility during seasonWide capabilities
Operations performance
Doesn’t know (or care?)
Great qualityInnovationVery inflexible
Too small to influence supplier?
Great quality, wide capabilities but inflexible within season
Great quality, wide capabilities but slow and inflexible within season