Lecture part of Sustaining Organisational Performance Module at Edinburgh Napier University

1. Dr. Miles Weaver,
The Business School,
Edinburgh Napier University
M.Weaver@napier.ac.uk
Sustaining Organisational Performance
Unit 4: Supply Chain Management

2. Feedback is two ways ….

3. Learning Outcomes
At the end of this unit you should be able to:-
• Critically analyse and evaluate the significance of modern supply
chain management practice to the delivery of customer value and
the building and sustaining of organisational performance.

4. Unlocking the potential in a supply chain:
the opportunity
"supply chains compete, not companies"
“Supply chain is the new value chain”
(Christopher, 2002; 2011)
• Supply strategies significantly impact upon a firms
performance (Christopher and Ryals, 1999, Keah-Choon et al.,
1999)
• Companies have far too often attempted to optimise their own
value chains, without considering the effect of these decisions
on their suppliers or customers (Chopra and Meindl, 2004)
• Supply chain professionals are in an outstanding position to
impact sustainability practices (Carter and Rodgers, 2008)

5. What is supply chain management?
• Supply chain management
is “the management of
upstream and downstream
relationships with
suppliers and customers in
order to deliver superior
customer value at less
cost to the supply chain
as a whole”
(Christopher, 2010)

6. First-tier
supplier
Second-tier
supplier
First-tier
customer
Second-tier
customer
End
customer
Demand
side
Supply
side
Purchasing and
supply
management
Physical distribution
management
Logistics
Materials
management
Supply chain management
Information
flow
Physical
flow

7. From cow to customer
(Harrison & van Hoek, 2008)
Boeing and aerospace
Supply chains are inherently complex

8. Business process view of a supply chain

9. Procurement (or supply management)
Choosing suppliers based on price,
quality & delivery (Greasley, 2013)
Approved supplier lists
System of supplier rating based on performance
criteria
Single sourcing or multi sourcing?
Outsourcing?
Offshoring?

10. “Puts procurement at the heart of
Scotland’s economic recovery“
“Procurement as an integral part of policy
development and service delivery”.
“Like all good ideas, it’s a simple concept
- business friendly and socially
responsible. Looking at outcomes not
outputs, it uses the power of public
spend to deliver genuine public value
beyond simply cost and /or quality in
purchasing”.
The Scottish Government
(Accessed: 1/10/15)
See: http://www.gov.scot/Topics/Government/Procurement/about/spd-aims
Example: The Scottish Model of
Procurement

11. Logistics
Logistics is the process of strategically managing the procurement, movement
and storage of materials, parts and finished inventory (and the related
information flows) through the organization and its marketing channels in such
a way that current and future profitability are maximized through the cost-
effective fulfillment of orders.
(Source: Christopher, 2010)
Components of an integrated logistics
system:
External Supply: links suppliers to
operations process
Internal Operations: manages in-
process material flow
Physical Distribution: links
operations process to customers

12. Measuring Supply Chain Performance
Supply Chain Council, V9, (2010)

13. How should I design my supply chain to
optimise performance?
• Where to locate facilities?
• Long-term capacity planning
• How to cooperate to provide
customer satisfaction?
• Impact on ensuring a sustainable
future?

14. Variability in the supply chain
• Need for cooperation in order to limit fluctuations in demand which occurs
in supply networks and affects performance (Greasley, 2013)
• Variability is affected by the time lag between ordering materials and getting
them delivered to the customer (Greasley, 2013). Can be expressed as ‘lead
time gap’
Lead Time Gap = Logistics Pipeline – Customer Order Cycle Time
Where:
Logistics pipeline = Time to source materials, convert them into products and
move them to the marketplace
Customer order cycle time = how long the customer is prepared to wait for the
product

15. Lead time components
Source: Christopher (2011)
Which activity add cost and which
add value?

16. Overcoming the lead time gap
• How best to ensure sufficient stock is available to meet customer
demand?
• Avoid over ordering?
Lowson et al., (1999) noted that getting this wrong can be costly, for
example loses in the apparel pipeline have been estimated at 25% of
retail sales (i.e. forced markdowns 14.6%, stock-outs 4%, and the
carrying cost of inventory 6.4%).
Taylor et al., (2008) ask one important sales consideration: determining
how much work in process, in-transit stock, and finished goods to have
on hand to support sales at a desired service level?

17. Overcoming the lead time gap (2)
• Order batching (placing orders when a
predetermined batch size is reached) can cause a
mismatch between demand and the order quantity
• Price fluctuations (i.e. price cuts, quantity
discounts) leads to demand variability as companies
buy products before actually needed
The Beer Game:
http://supplychain.mit.edu/supply
-chain-games/beer-game/
http://www.beergame.lim.ethz.ch
• Effects amplified across the supply chain – the bullwhip effect (Forrester,
1961)
• Behavior is caused due to a lack of synchronisation between supply chain
members
• Given appropriate conditions, eliminating the bullwhip effect can increase
product profitability by 10–30% (Metters, 1997)

18. Sources of risk and supply chain
vulnerability
Christopher & Peck (2004)

19. Creating the resilient supply
chain
‘the ability of a
system to return to
its original (or
desired) state after
being disturbed’
• Encourages a whole
system perspective
• Explicitly accepts that
disturbances happen
• Implies adaptability to
changing
circumstances
(Peck and
Christopher, 2008)

20. The agile supply chain
• Agility is not a single
company concept, it extends
from one end of the supply
chain to the other.
• Embraces uncertainty in
markets and achieve
competitive advantage by the
flexibility and speed of their
responses to them (Greasley,
2013)
The ability to respond rapidly to unpredictable changes in demand

21. The concept of Agility (Harrison, 1999)
• Market sensitive
– Supply chain is capable of reading and responding
to real demand
• Virtual
– Information-based supply chain, rather than
inventory-based
• Network based
– EDI and internet enable partners in the supply
chain to act upon the real demand
• Process integration
– Collaborative working between buyers and
suppliers, joint product development, common
systems and shared information

22. Lean Supply Chain
The “Lean supply chain” identifies all types of waste in
the value stream chain and seeks to eliminate them
(Rother and Shook, 1999; Abdulmalek and Rajgopal, 2007)
In Lean supply, the entire flow from raw materials to
consumer is considered as an integrated whole.
“Lean” means a series of activities or
solutions to eliminate waste, reduce non-
value added (NVA) operations, and improve
the value added (VA)

23. Lean Supply (Lamming, 1996)
• Genuine equality in Partnership
• Perfect quality focus: defined by
mutual adjustment and
continuous improvement
• Synchronisation of capacity
• Just-in time delivery
• Supplier/ customer transparency
and information exchange
• Ongoing price reduction based on
cost reductions from joint efforts

24. Mass customisation through
postponement
• Regional customisation -
regional distribution until
products have reached
regional distribution centres
• Customer-specific
customisation - Postponing
differentiation until orders have
been received
• Lean, agile or leagile? (see
Mason-Jones et al., 2000)

25. Material flow decoupling points and
strategic inventory
See: Towill (2000)

26. Integration in the Supply Chain
the degree to which the firm can
strategically collaborate with their
supply chain partners and
collaboratively manage the intra-
and inter-organisation processes
to achieve the effective and
efficient flows of:-
Product and services
Information
Money
Decisions
With the objective of providing the maximum value to
the customer at low cost and high speed

27. Relationships, Strategic Partnerships &
Alliances
• Market relationships – lasts as long as transaction takes.
– Use electronic data interchange (EDI) to share information
• Strategic partnerships & alliances - long-term relationship, work
together & share information
Successful partnerships (Lambert et al., 1996):
• Drivers – e.g. cost reduction, better customer service or security
• Facilitators – e.g. compatibility of operations, similar management
styles, common aims
• Components – to build & sustain relationship e.g. communication
channels, joint planning, shared risk and reward & investments

28. Outsourcing & Offshoring
• Outsourcing: transfer to a third party of the management & delivery of
a process previously performed by the company itself (Greasley,
2013)
– Supplier development to monitor & manage the relationship; improvement efforts
(rather than squeeze based on price?)
• Offshoring: transfer of specific processes to lower cost locations in
other countries (Greasley, 2013)
– To reduce costs
– May still own & control the process itself in lower cost location
• Lure of cost saving due in part to fewer regulations & low cost
wages …. Mass Migration of manufacturing from the developed world
to emergent economies in other regions (Christopher, Peck & Towill,
2006)

29. Sustainable SCM
Carter and Rodgers (2008)
“strategic, transparent
integration and achievement of
an organisation’s social,
environmental, and economic
goals in the systemic coordination
of key interorganisational
business processes for
improving the long-term
economic performance of the
individual company and its
supply chains”.
Sustainability: the triple bottom line

30. SSCM: Win-Win situations
• Carter and Rodgers (2008) offer a variety of environmental and social
issues that a firm can undertake which can improve as well as harm
the economic bottom line Can Harm?
Little help?
Some social/environmental
initiatives can fail? (as do
others). Need to understand
why (i.e. link between quality
and sustainability, price
premium)
Sustainable SCM Practices
Carter and Rodgers (2008) suggest
this area is large!
True sustainability intersects at all
three areas

31. A WIN-WIN?
“It’s waste reduction stupid!”
• Banerjee (2001) survey on
managerial attitudes to
environmentalism showed most
actions focused around
manufacturing (especially where
cost advantage possible)
• As usually cost reductions follow
• Lean production techniques
– Toyota production system
• Rely heavily on and gain many of
their returns from waste
reduction (Cannon, 2012)

32. Prescribed reading & tutorial case
• Prescribed Reading
– Chapter 15 [6 – SCM] (Greasley, 2013)
– Chapter 3 [SC Relationships] (Greasley,
2013)
• Recommended reading of selected key
articles related to unit on Moodle
• Next weeks tutorial
– Discuss in small groups the characteristics &
traits of an effective project manager and the
London Olympics
– Case Study: Orbit Case (Greasley, 2013)