Strategic Supply Chain Management - Supply Chain Online

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12 Strategic Supply Chain Management FIGURE 1–1 Types of operations strategies. Strategy Make to stock Configure to order Make to order Engineer to order When to Choose This Strategy For standardized products selling in high volume For products requiring many variations For customized products or products with infrequent demand For complex products that meet unique customer needs Benefits Low manufacturing costs; meeting customer demands quickly Customization; reduced inventory; improved service levels Low inventory levels; wide range of product options; simplified planning Enables response to specific customer requirements FIGURE 1–2 Operations strategies by industry. Consumer Packaged Goods Chemicals, Pharma Semiconductors A&D, Auto, Industrial Computers Telecom, Electronics Medical Devices 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Make to Stock Configure to Order Make to Order Engineer to Order © Copyright 2004 The Performance Measurement Group, LLC
CHAPTER 1 Core Discipline 1: View Your Supply Chain as a Strategic Asset 13 We worked with these companies to combine make-to-stock and configure-to-order strategies. “Vanilla” products were produced and stored in a central distribution center. When orders came in from each market, products were customized and shipped accordingly. Availability shot up and inventory went down in part due to the central inventory but also because the new approach simplified supply chain planning since procurement and manufacturing could focus on generic products instead of hundreds of language variants. It may be to your advantage to choose different operations strategies for different products or market segments. Automobile makers have long pursued a make-to-stock strategy, but some—especially European manufacturers of high-end vehicles—have aggressively pursued make-to-order and configure-to-order strategies, an approach we call “Dell on Wheels.” 1 However, make to order has its limits, as automobile makers are finding. Offering passenger cars on a make-to-order basis while maintaining a competitive lead time is a tremendous challenge given the millions of potential end configurations. Unless suppliers can be fully integrated into the maketo-order supply chain, the inventory risk is very high. In addition, changing the manufacturing process to allow each car to match a unique set of characteristics is a very costly undertaking that few OEMs have been willing to embrace. In 2002, only about 20 percent of passenger cars sold in North America were made to order. The rest were made to stock and sold from dealer lots. In Europe, the percentage of made-to-order vehicles was greater. In the German domestic market, for instance, about 60 percent of the high-end cars made by BMW, Audi, Porsche, and Mercedes were made to order. Like the other supply chain configuration components, operations strategy is dynamic. A key driver is the product life cycle. As demand for products peaks and then decreases, companies can move from make to stock to make to order to reduce inventory risk while still ensuring availability at a competitive price. Another driver is the number of product variants. It is not unusual to find that 80 percent of volume shipments comes from just 20 percent (yes, Pareto at work again) of your sales item numbers (or possible configurations). In this circumstance, a hybrid make-to-stock and make-to-order strategy may be more appropriate. Channel Strategy Your channel strategy has to do with how you’ll get your products and services to buyers or end users. These decisions address such issues as whether
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Stage 4: Cross-Enterprise Collabora
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FIGURE B-3 Summary results of popul
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308 Index Business strategy: metric
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310 Index F Faught, Laura, 175-176
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312 Index Mexico, 96, 196 Michelin,
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314 Index Regional planning group,
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316 Index Toys “R” Us, 53 Trace
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