Ch 2 Ed.docx
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Ch 2 Ed.docx
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Ch2Ed
Chapter2
TheRightDesignofSupplyChain:
Examples
2.1Designtherightsupplychain
Today,supplychainmanagersareoverwhelmedwitharangeofleading-edgesupplychainstrategiesandnewbusinessinitiatives.However,notalltheseinitiativesandstrategiesareappropriateforeverybusiness.Supplychainmanagersneedtounderstandtheconstraintsofthesupplyoftheirproductsandtheuncertaintiesofdemandfromcustomersbeforetryingtomatchtheseconstraintsanduncertaintieswiththerightsupplychainstrategies.AframeworkforanalyzingsupplychainpracticesisproposedinFigure2.1basedontheconstraintsofvariousindustryenvironments.
Figure2.1integratestheconceptofefficientsupplychainandresponsivesupplychainview,theclock-speedview,andthelevelofsupplier’scollaborationwediscussedinChapter1.Indesigningsupplychaininane-Bizenvironment,companieshavetointegratevariousaspectsofcompetitivepriority,thenatureoftheproduct,andthecomplexityofthemanufacturingprocessinordertobesuccessful.Whendesigningasupplychain,somefundamentalprinciplesofvaluechainshouldbeexploitedtorespondquicklytothedynamicbusinessenvironment.Assuch,supplychaindesignneedstobefine-tunedconstantlytomatchtheevolvingindustryparadigm.
Whennewproductintroductionsarefrequentandproductvarietyishigh,theresponsivesupplychainoptionismoreattractivebecauseitreactsquicklytomarketdemand.Whenproductlifecycleislong,demandisrelativelystable,anddemandvolumeishigh,efficientsupplychainismoreappropriate.Bothresponsivesupplychainandefficientsupplychaincanbeappliedtofast,mediumandslowclockspeedproducts.
Aproductclock-speedcanbefast,medium,orslow.Aproductlifecycleanditsmanufacturingprocesslifecycledeterminetheproductionvolume,thechoiceofsupplychaincollaborationlevel,andthetypeofsupplychaindesign.
Thelevelofcollaborationinasupplychainiscloselyassociatedwiththeproductclock-speedandtheproductionprocess.Thecollaborationspectrumontheleft-handsideinFigure2.1indicates,ononeend,virtualcompanieswhichoutsourceseveraloftheirbusinessactivitiesthroughthemarketplaceandformavirtualbusinessprocess.Attheotherendofthespectrum,verticalintegrationcompaniesmanagealmosteverythingin-housefromrawmaterialproductiontothedistributionchannelandtothefinalusers.
Inthemiddleofthecollaborativespectrumisstrategicalliancesandjointventure.Atthislevel,companiessynergizeresources,knowledge,expertise,locationadvantage,andcapabilitiestoshareresponsibilities,benefits,risks,andsetbacks.Strategicallianceisdefinedasanagreementbetweentwoormoreorganizationstosynergizethestrengthsofinvolvedparties.Intoday’ssupplychainmarket,organizationswithcomplementarystrengthsforgealliancestogaincompetitiveedgestoreduceriskandcosts.Thus,strategicalliancesareparticularlyapplicablewhenbusinessuncertaintyandcomplexityareincreasinginaglobalmarket.Jointventureisdefinedassealingacontractualagreementthatunitestwoormorebusinessentitiesforthepurposeofcarryingoutaparticularbusinessundertaking.Allpartiesagreetoshareinthebenefitsandlossesofthebusiness.Ajointventureissometimesusedinterchangeablywithastrategicalliance.However,astrategicalliancemayengagecompetitorsandgenerallyhasashorterlifespanthanjointventure.
Whenverticalintegrationgetsmoreinvolvedandcomplicated,manyglobalcorporationshaveautonomousdivisionswithintheirorganizationstomanageday-to-dayoperations.Autonomousdivisionsofalargecorporationareusuallyempoweredtomanagethemselvesandtheirdailywork.Themembersofanautonomousdivisionareresponsibleforawholeproductionprocess,productsproduced,orservicesprovided.Theautonomousdivisionsnotonlyperformthework,butarealsoinchargeofdesignandmanagement.
Anumberofsupplychainmodelsareintroducedinthefollowingsection.
Figure2.1Productlifecycleandsupplychaindesign
2.2Responsivesupplychaininmanufacturingindustry
2.2.1Responsivesupplychainandfastclock-speedproduct:
personalcomputer
ThePCindustryisafastclock-speedindustrywhichfacesshortproductlifecycles.Theproductisgenerallymadeinanassemble-to-orderproductionsystem.Facingthisbusinessenvironment,PCproducersadopttheresponsivesupplychainstrategytoreduceordercycle,productioncycle,andprocurementcycle.LetusconsiderDellComputerasanexample.
DellComputerdesigns,manufactures,andmarketsawiderangeofsystemsthatincludedesktops,notebooks,workstations,andnetworkservers.Dellalsomarketssoftwareandperipheralsaswellasserviceandsupportprograms.Centeredontwokeyelements:
adirectbusinessmodelandintensecustomerfocus,Dellstrivestoeliminateretailersandotherresellerssoastoreduceproductdeliverycycletimeandcost.DellsellscomputersystemsandrelatedservicesdirectlytocustomersintheglobalmarketthroughtheInternetandcallcenters.
Toreduceordercycle,Dellusestheinternetandcallcenterstopromoteitsdirectordermodel(Figure2.2a).ThetraditionalPCsupplychainhasalongersupplychainbecauseithasadistributionnetworkasanadditionallinkinthechain(Figure2.2b).CustomerscanorderPCsdirectlyfromDellandconfigurecomputerstomeettheirneeds.TheordersaredirectlyroutedtothemanufacturingfloorandfromtherethePCsarebuilt,testedandsenttothecustomerallwithin5-7daysafterthecustomersplacedtheirorders.Dell’sdirectmodelallowsforbetterunderstandingofcustomers’needs.
Toreduceitsprocurementcycletime,Dellshiftedfromatraditionallyfashionedassemblylinetocellularmanufacturingtechniquesandestablishedstrategicallianceswithitskeysuppliers.Itforgedpartnershipswithreputablesuppliersratherthanmanufacturingitsownpartsandcomponents.Sincenewpartsandcomponentsareintroducedsofastthatinventoryisobsoleteinamatterofmonthsorevenquicker,Dellonlyholds10-dayinventory.Meanwhile,Dellprovidesitsinventorydataandproductionneedstoitssuppliersatleastonceaday.CollaborationwithsuppliersenablesDelltooperatewithonlyafewhoursofinventoryforsomepartsandafewdaysofinventoryforotherparts.Dell’sdirectmodelcapitalizesthebenefitsofe-commerceandJust-in-Timeproductionstrategy.
Asaresponsivesupplychainwhichproducesfastclockproducts,Dell’scorecompetenceliesinitsvirtualsupplynetwork,JITproductionsystem,andflexibleassemble-to-orderorconfigure-to-ordermanufacturingstrategy.
Figure2.2SupplychainsforDellandtraditionalPCmakers
2.2.2Responsivesupplychainandmediumclock-speedproduct:
Automobileindustry
Theautoindustryisamediumclock-speedindustry.Newmodelsareintroducedeveryfourtosixyearsandthevarietyofconfigurationsisabundant.Passengercarsaremadeinanassemble-to-order(alsocalledconfigure-to-order)fashion.Thechallengeinthisproductionenvironmentistomanagehundredsofsuppliersandreactquicklytothemarketneeds(Figure2.3).Theautosupplychainisleadbythesupplychaincaptain,whichistheautomakersuchasGeneralMotors(GM)orToyota,withnumeroussuppliersintheupstreamofthesupplychainanddealersatthedownstreamofthesupplychain.
TakeGeneralMotorsasanexampleofapassengercarproducer.GMistheworld’slargestindustrialcorporationandafull-linevehiclemanufacturer.Itoperatesin30countries,employsmorethan277,000people,andhasapproximately27%oftheautomarket.In2007alone,GMsoldmorethan9.37millioncarsandtruckinmorethan200countries.GMhasalonglistofproductlines,includingBuick,Cadillac,Chevrolet,GMC,GMDaewoo,Holden,HUMMER,Opel,Pontiac,Saab,Saturn,VauxhallandWuling.ThesedifferentproductlinesrequireGMtomanagethousandsofpartsandcomponentsproducedbyhundredsofsuppliers.Thus,itemploysstrategiccollaborationandjointventurestomanagethismedium-clocksupplychain.Tobemoreresponsivetomarketneedsandreduceinitialresearchanddevelopmentcost,GMforgespartnershipswithsuppliersratherthandesigningandmanufacturingitsownpartsandcomponents.StrategicalliancesandjointventuresensureGMasmoothflowofmaterialataminimumcost.Thus,GMcanfocusonitscorebusiness,designingandassemblingcars.
Inordertoguaranteeasteadysupplyofaluminumthatisusedineverythingfromwheelcoverstopowertrains,GeneralMotors,signeda10-year,multi-billiondollaragreementwithAlcanAluminumtobuyaluminumatpredictableprices.GMalsohasajointventurewithAlcanAluminumtoco-developnewautomotiveapplications.Inasimilarmanner,GMagreedtobuymorethan$1billionworthofrecycledaluminumtobeusedinavarietyofenginesandothervehiclecomponents(Figure2.3).Underthis13-yearcontract,IMCORecyclingwillbuilda$22millionplantinMilwaukee,Michigan,andGMwillbuyalloftherecycledspecificationaluminumalloysfromthatplant.
Figure2.3GM’ssupplychainusingjointventureandstrategicalliances
SinceGMdoesbusinesswithover80,000differentsuppliers,itcreatedanautomotivepartstrackingsysteminordertofindfastandefficientwaystotrackrawmaterial,partsandcomponents,andfinishedgoodsthatflowinitssupplychain.Thissystemhelpsreducetimespentoninformationlook-upandmanualinformationtranscription.Withthissystem,dealershipsknowexactlywheretheirproductsarelocatedandhowlongitwilltaketoarriveattheircustomer’s
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