1. Supply Chain Strategy What is the right supply chain for your product?

3. How to choose the right supply chain? (cont.) Functional (Predictable Demand) Innovative (Unpredictable Demand) Average Stockout Rate Average Markdowns Average Lead-time for make to order 1% to 2% 10% to 40% 0% 10% to 25% 6 months to 1 year 1 day to 2 weeks

4. The two roles of the supply chain Functional (Predictable Demand) Innovative (Unpredictable Demand) Production Physical Function Transportation Inventory Storage Market Mediation Supply Chain Role Matching Supply/Demand Sensing Market MRP Driven Available Capacity Economies of Scale Difficult to achieve Mostly FGs Inventory Positioning is Important Easy Difficult and Costly Penalties Easy Important Examples: Campbell Soup (food) Functional: Sports Obermeyer (fashion skiwear) Innovative:

6. Supply Chain Types Physically Efficient Market-Responsive Primary Purpose Manufacturing Focus Inventory Strategy Lead-time focus Supplier Choice Product Design Supply predictable demand at lowest cost Respond quickly to unpredictable demand while controlling stockouts, forced markdowns and obsolete inventory High Utilization Excess Capacity High turns and minimum inventory through chain Buffer stock of parts or finished goods Shorten lead-times if it doesn’t increase cost Invest in lead-time reduction On cost and quality On speed, flexibility, and quality Maximize performance, minimize cost Modular design, postponement of differentiation for as long as possible