Supply Network Strategy

By
Prof Alok Kumar Singh

A.K.SINGH, IMI, NEW DELHI

 Operation Strategy Matrix
Performance Capacity Supply Network Strategy PT D&O
Objective/
Decision
Areas
Quality What to do and what to M
subcontract a
Speed When to use market-based r
purchasing k
Dependability How to develop partnership e
supply t
Taking a supply network
Flexibility perspective
How Supply network fluctuate
Cost
overt time.
Reducing SC instability
Supply Chain Restructuring
Resource Usage

A.K.SINGH, IMI, NEW DELHI

 Supply Network Strategy
It is an interconnection of organization which
relate to each other through upstream and
downstream linkages between the different
processes and activities that produce value in
the form of products and services to the
ultimate consumer.

A.K.SINGH, IMI, NEW DELHI

 Supply Network
Flow of Products/Services
Flow of Information
Upstream Focal Downstream
level
Second-tier First-tier First-tier Second-tier
suppliers suppliers customers customers

Company A

Company B

Company C

Supply side of the network Demand side of the network

A.K.SINGH, IMI, NEW DELHI

Benefits of looking whole supply chain
Puts the operation into its competitive context
Helps identify the key players
Shifts emphasis to the long term
Sensitizes the operation to macro changes
Changes the nature of the supplierbuyer
relationship

A.K.SINGH, IMI, NEW DELHI

 Why Supply Network Perspective
Enhances understanding of competitiveness
Enhances understanding of co-operations
Enhances understanding of Operations with
its strategic resource options
Global Sourcing options

A.K.SINGH, IMI, NEW DELHI

 Types of supply relationship

suppliers
few
Close
Long-term
virtual Vertical
operation Partnership integration
supply
Type of inter-firm

relationships
contact

Traditional
market
Transactiona

Virtual
suppliers
l many

spot supply
trading
Resource scope
The character of internal operations activity
Do nothing Do everything

A.K.SINGH, IMI, NEW DELHI

 Make or Buy Decisions
Performance Make Buy
Objectives
Quality Easy to trace and rectify More difficult to get rectified

Cost Low cost due to shared High as margin would be charged by

resources subcontractor
At low volume hard to get High volume might lead to lower cost
EOS

Dependability More Less

Late delivery penalties can improve the
situation
Flexibility More but limited by the Less for customers high for themselves
scale and scope of If asked may provide flexibility unless
operations contradictory to competitors
Speed More Less but could be improved through
better contracts
A.K.SINGH, IMI, NEW DELHI
Issues with Market Based Supplies
Buyer Supplier Uncertainties
Transaction cost
Switching cost
Strategic risks

A.K.SINGH, IMI, NEW DELHI

Elements of partnership relationships
Attitudes
Trust

Long-term Sharing
expectations success

Joint Multiple
learning points of
contact
Closeness of
relationship
Joint co- Few relationships
ordination of
activities

Joint problem Information

solving transparency
Dedicated
assets Actions

A.K.SINGH, IMI, NEW DELHI

 Degrees of trust
Calculative trust trusting you is likely to Based on
give me more benefits than knowledge

Cumulative positive experiences

not trusting you...

I believe I can trust you

because I think I know you
Cognitive trust
enough to be confident you
will behave as I would
wish...

I trust you because I know

that you know that I
Bonding wouldnt let you down and Based on
trust you know that I know that feelings
you wouldnt either......

A.K.SINGH, IMI, NEW DELHI

 Some factors influencing the nature of network
relationships

Economies of Market
scale position
Transaction Market
costs risks

Nature of
OPERATIONS MARKET
network
RESOURCES REQUIREMENTS
relationship

Learning Market
potential structure

Resource Competitive
deficiencies behaviour

A.K.SINGH, IMI, NEW DELHI

 Reasons for Supply Chain Instability
Demand Forecast updating
Batch Ordering
Price Fluctuations
Rationing and Shortages

A.K.SINGH, IMI, NEW DELHI

Match supply chain characteristics to the nature of demand
Nature of Demand
FUNCTIONAL PRODUCTS INNOVATIVE PRODUCTS
Predictable Unpredictable
Few changes Many changes
Low variety High variety
Price stable Price markdowns
Long lead-time Short lead time
Low margin High margin
EFFICIENT

Match Mismatch
Supply chain objectives
RESPONSIVE

Mismatch Match
A.K.Singh, IMI Delhi
A.K.Singh, IMI Delhi