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# System prepended metadata

title: Supply Chain - Week 1 Notes
tags: [MGT8803]

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# Introduction to Supply Chain Management and Long-Term Decisions

## M8L1 What is Operations and Supply Chain Management
### Operations and Supply Chain Management (OSCM)
Operations and supply chain managers focus on how to **develop capabilities to design, produce and deliver** products and services in a competitive market.
Capabilities drive performance including:
- Products & service features
- Costs
- Quality (Increase quality in design, production, and/or deliver)
- Time to market (Reduce)
- Ability to innovate (Come up with something new i.e. faster, cheaper, easier)

### Six Primary Processes
Supply Chain Council says OSCM has 6 Primary Processes:
1. Plan - What you want to do
2. Sourcing - Where you will get your inputs
3. Make - Actually making product/service
4. Deliver - Actually delivering product/service
5. Return - How to handle customer returns
6. Engage - Look at ways to innovate and improve other five processes

### Sample Supply Chain
![image](https://hackmd.io/_uploads/ryvAAwZTlx.png)
The example above shows a linear supply chain.

### Boeing and Supply Chain
![image](https://hackmd.io/_uploads/BJGH1uWTlg.png)
Most of the components are made by another company. Globalization, another concept, is prevalent here.
The engine is made by Rolls-Royce, who is supplying the WHOLE engine. If we dug deeper and looked at the engine's breakdown, it is very likely another detailed supply chain with MULTIPLE suppliers for the components.

## M8L2 Why is OSCM Important?
### Why does Ops & Supply Chain Matter?
Supply Chain is akin to the heart and the cardiovascular system of a business. It is the core of how effective and efficiently a business operates.

There is an example of KFC running out of chicken in the UK due to swapping to a new supplier.

Toyota had to suspend much of its production in Japan, due to earthquakes. The earthquakes damaged components that were coming into their factories. 

### Consequences of Poor Supply Chain
- Loss of productivity
- Customer complaints
- Increased costs (i.e. expediting, increase shipping costs)
- Loss of revenue
- Damage to brand

## M8L3 Supply Chain Challenges
### Top Five Challenges - 2015
1. Flexibility and Responsiveness to changes in demand or product mix
2. Supplier Performance in terms of risk, reliability and quality
3. Ensuring sufficient supplier capacity to meet demand
4. Effectively supporting new product launches
5. Lack of competitive cost structure

### Top Five Challenges - 2019
1. Hiring qualified workers
2. Customer demands for lower costs/pricing
3. Customer demands for faster response times
4. Increasing competitive intensity, rising customer expectations
5. Forecasting

## M8L4 Types of Decisions
### Hierarchy of Decisions
<font color="#f00">Note: Supply chain is about matching supply of your product/service with demand of your product/service.</font>
![image](https://hackmd.io/_uploads/BJXN4cbpgg.png)
The idea here is the Long-Term, High-Level decisions should feed down into the Medium-Term, Tactical decisions. Those should feed down into the Short-Term, Operational decisions.

#### Long-Term
How you plan to compete against others in your industry. Timeline: > 2 Years.
Some common areas:
- Network Configuration
- Supply Chain Model
- Outsourcing
- Vertical Integration (Integrate up or down in your supply chain i.e. Delta bought an oil refinery to produce their own jet fuel)
These are not easily changed.

#### Medium-Term
Tactical decisions that come from goals from the top-level choices. You're trying to optimize. Timeline: Approximately 1 Year.
Some areas include:
- Lean
- S&OP
- Inventory Management

#### Short-Term
Operational, day-to-day decisions. Scheduling people, equipment, product, etc. More real-time decisions. Timeline: < 1 Year.

#### Summary
Long-Term: I want to go to Disney next Summer.
Medium-Term: How am I going to get to Disney? Car, train, plane? When? Optimize cost of driving vs flying.
Short-Term: When the day comes, I have left and I have a route mapped. Am I going to stay on that route? When do I stop for gas? When do I stop to eat?

## M8L5 Responsive vs. Efficient
### Supply Chain Operating Model
![image](https://hackmd.io/_uploads/H1Q1DqWpgg.png)
Companies try to focus on either cost or speed.

### Driving the Operating Model thru the Supply Chain
![image](https://hackmd.io/_uploads/r1h-_9bTgx.png)

### Why Different Models?
Why would a company pick the model that they did? It depends on the product. **Functional products** like toilet paper require an effecient supply chain. **Innovative products** like the iPhone require a responsive supply chain.
![image](https://hackmd.io/_uploads/HyvadqWplx.png)

### Model Should Drive Tactical Decisions
![image](https://hackmd.io/_uploads/SJedFqWpeg.png)

## M8L6 Network Configuration
### Centralized Distribution Manufacturing and Sourcing
![image](https://hackmd.io/_uploads/Ska355b6xl.png)

### Centralized Manufacturing
![image](https://hackmd.io/_uploads/H1wC5qZ6lg.png)

### Decentralized (Local) Distribution, Manufacturing and Sourcing
![image](https://hackmd.io/_uploads/SkKxjcW6gl.png)

### Decentralized (Local) Distribution and Manufacturing
![image](https://hackmd.io/_uploads/B1uzocWTel.png)

### Advantages and Disadvantages of a Centralized Configuration
![image](https://hackmd.io/_uploads/B1Vos5bTel.png)
<font color="#f00">Note: A Centralized Network Configuration necessitates an ++efficient supply chain++. It is inherently less Responsive.</font>
<font color="#f00">Note: Conversely, a Decentralized Network Configuration necessitates a ++responsive supply chain++. It is inherently more Responsive.</font>

### When is a Centralized Strategy More Appropriate?
* Stable/Predictable Environment
* Low Velocity (How quickly you're moving product)
* Higher Product Availability
* Fewer Points of Sale
* Low Distribution Cost per Weight
* High Volume per Shipment
* Low Distribution Complexity
All this gives you an ++EFFICIENT (LOW COST)++ Supply Chain!

### When is a Decentralized Strategy More Appropriate?
* High Demand Uncertainty/Unpredictable Environment
* High Velocity
* Need to reduce Delivery Times
* Need higher Delivery Responsiveness
* Many Points of Sale
* High Distribution Cost per Weight
* Need more Delivery Customization
All this gives you a ++RESPONSIVE++ Supply Chain!

### Summary
A centralized supply chain tends to lend itself to a cost/efficient focused operating model.
A decentralized supply chain tends to lend itself to a responsive operating model.

## M8L7 Outsourcing
### Outsourcing
++Outsourcing++: Obtaining of any resource or process external to the company.

### Why Should You Outsource?
* Reduce and control costs
* Increase flexibility and speed
* Decrease lead times
* Increase innovation capability
* Focus on core capabilities/competencies
* Gain access to world class capabilities
* Free internal resources for other purposes
* Insufficient resources are available internally
* Share risks with a partner company

### What Should You Outsource?
![image](https://hackmd.io/_uploads/B1hI1iZpgl.png)

## M8L8 Offshoring
### Offshoring
++Offshoring++: Obtaining of any resource or process external to the company and across the ocean.
Note: You can offshore to yourself (Captive Offshore).
++Nearshoring++: Obtaining of any resource or process external to the company, but from a nearby neighboring country.
++Re-Shoring++: The reversal of offshoring.

### Supplier and Location Factors
Supplier Related Factors:
* Innovation/Technical Capability
* Quality
* Capacity
* Lead Time
* Delivery
* Cost/Price
* Dependability
* Supply Chain Capability
* Etc.

Location/Country Related Factors

### Supplier and Location Factors
<font color="#f00">Note: Study the 4 different types of drivers.</font>
![image](https://hackmd.io/_uploads/rJ5xbsWpxg.png)

### Offshore Cost Elements
* Free On Board (FOB) Cost
* Export Taxes
* International/Ocean Transportation Costs
* Insurance and Tariffs
* Brokerage Cost (Shipping and Money)
* Letters of Credit
* Cost of Money (Interest Rates)
* Exchange Rates Exposure
* Inland Freight Costs (Domestic & Overseas)
* Risk of Obsolescence
* Cost of Rejects/Rework
* Damage in Transit
* Inventory Holding Costs in Supply Chain
* Technical Support
* Employee Travel/Repatriation Costs

### Pitfalls of Offshoring
* Exchange Rate Volatility
* Effect on Core Competencies
* Delivery Lead Times and Reliability
* Suppliers Become Future Competitors
* Often Inaccurate "True" Cost of Offshore Sourcing
* Lack of Control over Suppliers' Cost and Quality
* Supplier Integrity
* Inaccurae Determination of Overall Product Cost
* Introduction of Various Risk Elements in the Supply Chain

## Live Call - Oct. 1, 2025
### Harvard Business Global Supply Chain Management Simulation
Canvas provides a sheet for the simulation so that you can write down the decisions you make.
#### Design Room 
Consensus is not the average.
#### Forecasting Room

## Self-Assessment Questions
1. Which of the following product characteristics are more conducive to a Responsive Supply chain? Select all that apply.
2. Which of the following product characteristics are more conducive to an Efficient Supply chain? Select all that apply
3. When is a Decentralized Supply Chain more appropriate?
4. How do Efficient and Responsive supply chains relate to Centralized vs Decentralized strategies? Select all that apply.
5. Why would a company consider Outsourcing?  Select all that apply.
6. Why would a company want to Offshore?  Select all that apply
7. Which of the following are pitfalls to Offshoring? Select all that apply
8. Which  one of the following is NOT a cost factor when considering offshoring that is not captive?
9. Which conditions are more conducive to a Centralized supply chain?
10. A centralized network configuration lends itself to which type of supply chain model?
11. A functional product is likely to have? Choose the best answer.
12. Which of the following is NOT a reason for outsourcing
13. Which of the following is NOT among the drivers of offshoring? Base you answer on the material in the video lessons
14. Which of these is NOT a cost driver for offshoring?
15. Which of the following is NOT a pitfall of offshoring? Choose the best answer.
16. Which of the following is NOT a characteristic of a PULL system?
17. Which of the following is an advantage of a Decentralized strategy compared to a Centralized strategy?