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Generation Data Matrix 2d barcode in Software Copyright 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.

Copyright 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
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Strategic Supply Chain Management
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sales and build-to-order manufacturing to the computer industry. In truth, Michael Dell is a visionary in supply chain management. PCs simply were the medium he used to introduce his idea for a competitive supply chain: Sell direct, build to order, and ship direct. Sam Walton was another supply chain visionary. Wal-Mart s legendary partnership with Procter & Gamble to replenish inventory automatically showed the power of integrating with key suppliers. To further reduce inefficiencies and costs, Wal-Mart shifted from buying from distributors to buying directly from manufacturers for a broad range of merchandise. These and other supply chain actions combine to deliver on the promise of always low prices the strategy that has helped Wal-Mart become the world s largest retailer.
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FIVE KEY CONFIGURATION COMPONENTS
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Strategic supply chain management is more than just innovation for the sake of being innovative. It s creating a unique supply chain configuration that drives your strategic objectives forward. To get the most from your supply chain, you need to consider five critical configuration components:
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Operations strategy Outsourcing strategy Channel strategy Customer service strategy Asset network
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Your decisions around these components and how they play together define your supply chain strategy. Until now, companies tended to either address these components informally or make decisions about them in isolation often as part of a functional strategy related to sales, purchasing, or manufacturing. However, companies that view the supply chain as a strategic asset see their components as interdependent part of an integrated whole. Let s look at each more closely.
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Your decisions about how you ll produce goods and services form your operations strategy. Will you choose make to stock, make to order, engineer to order, or some combination Will you outsource manufacturing Will you pursue a low-cost offshore manufacturing strategy Will you complete your final configuration outside the manufacturing plant and
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CHAPTER 1 Core Discipline 1: View Your Supply Chain as a Strategic Asset
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closer to the customer These are critical decisions because they influence and shape the whole supply chain and the investments you make. Your operations strategy determines how you staff and run your factories, warehouses, and order desks as well as how you design your processes and information systems.
Make to stock is the best strategy for standardized products that sell in high volume. Larger production batches keep manufacturing costs down, and having these products in inventory means that customer demand can be met quickly. Make to order is the preferred strategy for customized products or products with infrequent demand. Companies following this strategy produce a shippable product only with a customer order in hand. This keeps inventory levels low while allowing for a wide range of product options. Configure to order is a hybrid strategy in which a product is partially completed to a generic level and then finished when an order is received. This is the preferred strategy when there are many variations of the end product and you want to achieve low finished-goods inventory and shorter customer lead times than make to order can deliver. Engineer to order, which shares many of the characteristics of make to order, is used in industries where complex products and services are created to unique customer specifications.
Strategic supply chain management is more than just innovation for the sake of being innovative. It s creating a unique supply chain configuration that drives forward your strategic objectives.
Changing your operations strategy can be a key source of performance advantage (see Figures 1-1 and 1-2). Several of our clients in consumer packaged goods, for instance, found that moving from make to stock to configure to order improved service levels while reducing inventory. In the past, these companies manufactured and shipped products directly to the end market. Small pack size, combined with the need for local language variants, meant that products were dedicated to a given market very early in the production process.
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