How does the nature of products and services vary?
Standardisation vs specialisation, product variation
High vs low product volume
Elements of variation - predictability of demand
When was the product last changed
What is transitory demand?
Transitory = not permanent
Partial realisation of maximum demand
Unexpected event that changes the perception and level of demand for a good or service
Why is it difficult to predict demand for something like a candle or perfume?
A focus group might like the small, but people might not
Dior forecasting demand - error rates 1000% - need supply chains that can increase or decrease production and distribution
How does the product lifecycle impact demand?
The trend towards more frequent innovations places more emphasis on capability to shorten NPSD cycle
e. g iPhone - very fast product lifecycle
- Greater demand at the start of the lifecycle
- More stable towards the end
What impacts the ability to forecast demand?
Are the demand patterns stable or volatile?
Are they predictable or unpredictable?
E.g predictable + stable = easy to forecast
predictable + volatile –> seasonal, easy to forecast but not stable
unpredictable + stable - knowing demand will increase/decrease at some point but not sure when
unpredictable + volatile - difficult to forecast and implement
What are the characteristics of innovative demand?
- Relatively unpredictable
- Fundamental variety is relatively high
- Relatively frequent new iterations
- Lead time relatively important
What are the characteristics of functional demand?
- Relatively predictable
- Fundamental variety is relatively low
- Relatively few new iterations
- Lead time unimportant
What are agile supply network structures?
Fast response
Fast t/p times
Flexibility
Customisation
Focus on responsiveness
What are lean supply network structures?
Low cost
High utilisation
Dependability
Standardisation
Focus on efficiency
What are the distinguishing attributes of lean SNS?
- Commodities
- Predictable demand
- Low variety
- Long product lifecycle
- Cost driven
- Low profit margin
- Physical cost dominant
- Algorithmic forecasting
- Desirable information enrichment
- Focus on purchasing materials
- Long term contractual stock out penalties
What are the distinguishing attributes of agile SNS?
- Fashion items
- Volatile demand
- High variety
- Short lifecycles
- Availability driven
- High profit margin
- Marketing cost dominant
- Consultative forecasting
- Obligatory information enrichment
- Capacity focus
- Immediate and volatile stockout penalties
What is the matrix for achieving supply network fit?
Efficiency and functional demand - LEAN OSCM
Efficiency and innovative demand - MISMATCH
Responsiveness and functional demand - MISMATCH
Responsiveness and innovative demand - AGILE OSCM
Mismatches = being under/unnecessarily flexible
What are the four ways to combine lean and agile systems?
1) Pareto curve approach
2) De-coupling point approach
3) Separation of base and surge demand
4) Platforms or modularity
What is the pareto curve approach?
20% of product - 80% of total demand –> lean
- Make to forecast
- Low priority in production schedule
- Manage inventory centrally
- Seek EOS
80% of product, 20% of demand –> agile
- Make to order
- High priority in production schedule
- Utilise quick response and continuous replenishment concepts
- Forecast for capacity, execute to demand
What is the decoupling point approach?
- Use strategic inventory and holding generic inventory stock
- Then, only complete final assembly when customer requirement is known
= ‘postponement’ - Use lean up to decoupling point, agile strategy after (demand driven, localised configuration)
What is the separate base and surge approach?
- Separate demand into base and surge elements
- Base forecasted using historical data whereas surge is unpredictable
- Surge met using flexible processes and agile strategy (which are higher cost)
- e.g Fashion industry - base demand sourced from low cost economies, surge topped up locally near the market
What is platforms or modularity?
Having a base model - platform e.g for cars and customising the rest
What is fit in operations and supply?
It means that the operations and supply chain resources are aligned with the requirements of its market
Fit also means that requirements are moved to exploit operations and supply chain resource capabilities
What is a tight fit in OSCM?
Movement in market requirement and operations and supply chain resources produces misalignment
What is a loose fit in OSCM?
Looser fit between market requirements and operations and supply chain resources preserves alignment
What happens when you deviate from the line of fit?
Internal operational risk (excess capability for current market needs means risk of unexploited capabilities)
External operational risk (market needs exceeding current level of capability means risk of failing to satisfy the market)
What is single loop learning in SCM?
1) Examine the performance of supply network processes
2) Compare this performance against objectives
3) Develop new insights and capabilities
4) Supply network innovation
What are the potential limitations of single loop learning in SCM?
- Reduced performance of supply network processes
- Performance objectives less appropriate
- Insights and capabilities less useful
- Supply network innovation less easy
Shifts in technology, processes or markets, leading to improved competitor performance
What is double loop learning in SCM?
1) Examine the performance of supply network processes
2) Compare performance against new objectives
- -> follow original loop or move to
3a) Question the relevance of objectives
4a) Develop new (more relevant objectives –> 2
