Current Event Assignments
Chapter 2
Supply Strategy
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Key Questions Addressed in Chapter 2
How can supply and the supply chain contribute effectively to organizational objectives and strategy?
How can the organizational objectives and strategy properly reflect the contribution and opportunities offered in the supply chain?
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Three Levels of Strategic Planning
Corporate: Decisions and plans that answer:
What business are we in?
How will we allocate resources among these businesses?
Business unit: Decisions mold the plans of a particular business unit to contribute to corporate strategy
Function: Plans concern:
How each functional area contributes to business strategy
Allocation of internal resources
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Supply Strategy Interpreted in Organizational Strategy
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Supply
Objectives
Organizational
Objectives
Supply
Strategy
Organizational
Strategy
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Supply Strategy Links Current and Future Markets to Current and Future Needs
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Current
Needs
Current
Markets
Future
Markets
Future
Needs
https://www.autonews.com/article/20150511/OEM10/305119952/gm-to-suppliers-let-s-see-books-not-bids
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Normal Organizational and Supply Objectives
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Organizational
Objectives
Survival
Growth
Financial
Environmental
Supply
Objectives
Quality
Quantity
Delivery
Price
Service
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Three Challenges in Setting Supply Objectives and Strategies
Effective interpretation of corporate objectives and supply objectives
The choice of the appropriate action plan or strategy to achieve the desired objectives
The identification and feedback of supply issues to be integrated into organizational objectives and strategies
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Six Major Supply Strategy Areas
Assurance of supply
Cost reduction
Supply chain support
Environmental change
Competitive edge
Risk management
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Three Categories of Supply Risk
Operational:
Risk of interruption of the flow of goods or services
Financial:
Risk that the price of the goods or services acquired will change significantly
Reputational:
Risk that the organization’s reputation will be harmed by a supply decision
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Managing Supply Risks
Identify and classify risks
Assess impact and probability of risk event
Develop a risk management strategy
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Corporate Risk Management
All organizations are exposed to supply risk and other forms of risk
In large organizations, a corporate risk management group headed by a risk manager or chief risk officer (CRO) assesses total risk exposure and seeks the best ways of managing all risks
The chief purchasing officer works with the CRO in the three areas of supply risks
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Strategic Purchasing Planning Process
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Identify and
analyze alternatives
Determine
supply strategy
Review implementation
factors
Gain commitment
and implement
Restate
organizational goals
Determine supply
objectives to contribute
to organizational goals
Isolate factors affecting
achievement of
supply objectives
Evaluate
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Examples of Organizational Strategies Involving Supply
Materials management
Project management
Logistics management
Supply chain management
JIT purchasing/production
Make or buy/insource or outsource
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Supply Strategy Questions
What
Make or buy/insource or outsource
Standard versus special
Quality
Quality versus cost
Supplier involvement
How much
Large versus small quantities (inventories)
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Supply Strategy Questions
Who
Centralized or decentralized
Location of staff
Top management involvement
When
Now versus later
Forward buy
What Price
Premium, standard, lower
Cost-based, market-based
Lease/make/buy
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Supply Strategy Questions
Where
Local, regional
Domestic, international
Large versus small
Multiple, single versus sole source
Current, new versus newly developed supplier
High versus low supplier turnover
Supplier certification
Supplier ownership
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Supply Strategy Questions
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How
Systems and procedures
e-Commerce
Negotiations
Competitive bids
Fixed bids
Blanket orders/open orders
Systems contracting
Group buying
MRP
Short- or long-term contracts
Ethics
Aggressive or passive
Purchasing research
Value analysis
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Supply Strategy Questions
Why?
Objectives congruent operationally and strategically
Market conditions current and future
Internal reasons
Outside supply
Inside supply
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