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Drivers of Supply Chain Performance

 To achieve Efficiency and Responsiveness:

Logistical drivers

  • Inventory: Inventory can reduce costs by exploiting economies of scale in production, transportation, and purchasing. Inventory can be used to support firm’s competitive strategy. More inventory increases responsiveness, less inventory increases efficiency (reduces cost). 
  • Transportation: Faster transportation allows a supply chain to be more responsive but generally less efficient.
  • Facilities: Facilities either store inventory between supply chain stages (warehouses, Distribution centres, retailers) or transform inventory into another state (Fabrication or assembly plants). Centralization of facilities uses economies of scale to increase supply chain efficiency (fewer locations and less inventory) usually at the expense of responsiveness (distance from customer).

Cross functional drivers

  • Information: Information connects various supply chain stages and allows them to coordinate activities. Information is crucial to the daily operations of each stage of the supply chain.
  • Sourcing and Pricing
Forecasts are never right or very unlikely for actual demand = actual forecast demand.

Key Issues in SCM

Purchasing (Source)                      Distribution (Deliver)
Low purchase price                        Low inventories                
Multiple Vendors                           Low transportation  

Manufacturing (Make)                  Sales/Customer Service(Sell)
Few Changeovers                           High Inventories
Stable Schedules                             High Service levels
                                                        Regional Stocks

How to overcome them?

  • Network Planning: (a) Warehouse location and capacities (b) Plant locations and production levels (c) Transport between facilities to minimize cost around time
  • Inventory Control: How should inventory be managed?
  • Distribution Strategy: selection of distribution strategies
  • Integration and Strategic Partnering:What info and processes can be shared? and what level of integration?
  • Outsourcing and Procurement Strategy: What are our core supply chain capabilities and which are not?
  • Product Design: How are transportation costs, inventory affected by Product Design?
BENEFITS after integrating the supply chain:
Improvement in Delivery performance, Inventory Reduction, Forecast accuracy, improved capacity realization, lower supply chain costs, overall productivity.


Reference:
Part of this article is excerpted from David Simchi-Levi, Philip Kaminsky, Edith Simchi-Levi and Ravi Shankar’s book Designing and Managing the Supply Chain, third edition, 2008
https://books.google.co.in/books?id=n8eht9bJ47QC&pg=PA1&dq=what+is+supply+chain+&lr=&source=gbs_toc_r&cad=3#v=onepage&q=what%20is%20supply%20chain&f=false  https://www.sciencedirect.com/science/article/abs/pii/S0019850199001133


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