ALIGNING SUPPLY CHAIN

STRATEGIES WITH PRODUCT

UNCERTAINTIES

PRESENTED BY:
AYUSH SHARMA
CHETAN JOSHI
KRITIKA GOYA
KULDEEP BISHT
MANVI GOYAL
INTRODUCTION
• Supply chain is a major area that has emerged to gain
competitive advantage and it is a complex and challenging task.
• Internet has contributed to improvement of supply chain
management and with internet companies are connected with
information and knowledge.
• With internet new products can be developed for different
market segments and new supply chain structures can be
developed to serve customers in a more direct manner.
Contd…
• When the company moves into new markets and adopts new
technologies, it must prepare supply chain strategies according
to new business opportunities.
• The right supply chain strategies are dependent on various
factors such as :
✓ specific needs of the customers
✓Stable or highly unpredictable demand of the product and both
should be managed differently.
✓Internet can be a powerful tool
UNCERTAINTY FRAMEWORK
• This framework specifies the two key
uncertainties faced by the product-
demand and supply. Fisher
introduced matching of supply chain
strategies with right level of demand
uncertainties of the product.
• Demand uncertainty is linked to the
predictability of the demand for the
product. Different supply chain
strategies are required for functional
versus innovative product.
 UNCERTAINTY FRAMEWORK

• Other kind of uncertainty

revolves around the supply side
of the product- “stable” supply
where supply base is well
established whereas “evolving”
supply where supply base is
limited in size and experience.

• Supply process is very stable

with reliable supply and a
mature manufacturing process
technology.
Changing the uncertainity
landscape
▪ Knowledge of source of the uncertainity is necessary
▪ Remove the uncertainity in characterstics of
product.
▪ Explore way to reduce uncertainity.
▪ Study supply chain rightly.
 DEMAND UNCERTAINTY

LOW (Functional Products) HIGH (Innovative Products)

SUPPLY UNCERTAINTY

LOW
(Stable Grocery, basic apparel, Fashion apparel,
Process) Food, Oil & gas Computers, Pop music

HIGH Hydro-electric Telecom, High-end

(Evolving power, some food computers,
Process) produce semiconductor
 DEMAND UNCERTAINTY

LOW (Functional Products) HIGH (Innovative Products)

LOW
SUPPLY UNCERTAINTY

(Stable
Process)

HIGH
(Evolving
Process)

Demand Uncertainty Supply Uncertainty

Reduction Strategies Reduction Strategies
Demand Uncertainty Reduction Strategies

BULLWHIP EFFECT

It is a concept for explaining inventory fluctuation or

inefficient assets allocation as a result of demand changes
as you move further up the supply chain. As such,
upstream manufacturers often experience a decrease in
forecast accuracy as the buffer increases between the
customer and the manufacturer.
 MINIMISE THE BULLWHIP EFFECT

▪ Improve the inventory planning process

▪ Improve the raw material planning process
▪ Sharing and tighten coordination
▪ Optimise the minimum order quantity and offer stable price
▪ Collaborate and information sharing between managers
 SUPPLY UNCERTAINTY
REDUCTION STRATEGIES
Free Exchanges of Information

When?
• Throughout the PLC from
product development to end-
of-life phase.

How it will help?

• Reduces the risks of supplier
failure.
1. To ramp up fast enough in
the Introduction Phase
2. Reduces the risks of
suppliers overproducing at
end of the product life cycle.
Example- companies in PC
industry
Sharing product rollover plans

• To support your new product

changes & transitions prior
information should be
communicated to the suppliers.

• It helps in reducing risks during the

product transition associated with
suppliers.

• Companies are using softwares to

bridge this gap.

• For example ‘Agile software’

helping manufactures like WebTV,
Flextronics work tightly with their
suppliers to reduce the risks
during transition phase.
 Collaborations with Suppliers

This help in knowing your business

requirements and demand pattern

Companies like Exostar, e2Open &

Cavosint have identified design
collaboration as key service provided by
consortium-based market exchanges.

Bose corporation used strategy ‘ on-site’

supplier representative to foster
communication.

Micro Compact Car (MCC) gave the

responsibility to its suppliers to manage
the replenishments and were also given
the space inside their factory to store
their inventory.
 Supplier Hubs

Supplier hubs is just like

warehousing facility given to
suppliers. It has been used by the
companies to reduce supply risks
of their manufacturing units.

Apple computers in Colorado

created a supplier hub operated by
3PL, Fritz Companies. Fritz
managed the inbound logistics and
replenishments and also allowed
suppliers to stock their material.

It helped suppliers knowing about

Apple’s consumption patterns and
its consumption needs.
 SUPPLY CHAIN
STRATEGIES IN THE
INFORMATION AGE
 Demand Uncertainties
Low (Functional Products) High (Innovative Products)

Low
Efficient Supply Chains Responsive Supply Chains
(Stable Process)

High
(Evolving Hedging Supply Chains Agile Supply Chains
Process)
 Strategic Moves for uncertainty
reduction
To gain competitive edge some uncertainty characteristics
require specify supply chain strategies. Four types of such
strategies are:

1. Efficient Supply Chains

2. Risk-Hedging Supply chains

3. Responsive Supply Chains

4. Agile Supply Chains

 Efficient Supply Chains

• Aims at creating highest cost efficiencies

• Elimination of non-value added activities
• Economies of scale is focused
• Optimization in production and distribution
• Establishment of Information linkages
• INTERNET in this case allows strong information
integration from production, distribution, inventory
management etc. and are made transparent
 Risk-Hedging Supply Chains

• Aims at pooling and sharing resources so that the risk in

supply disruption can also be shared.
• Companies can share or pool the safety stock. And costs to
maintain this safety stock can also be shared
• INTERNET provides a key role in maintaining
transparency among members of the supply chain that are
sharing inventory.
 Responsive Supply Chains

• Aims at being responsible and flexible to the changing and

diverse needs of the customers.
• For this companies use build-to-order and mass
customisation processes
• Accurate specification of customer requirement is key
success mantra here.
• INTERNET helps in maintaining this accuracy and in prompt
manner.
 Agile Supply Chains

• Aims at being responsive and flexible to customer needs.

• Such supply chains uses the strengths of both “hedged”
and “responsive” supply chains.
• They are Agile because they have the capabilities to be
responsive to the changing, diverse and unpredictable
demands of the customers.
The Right supply Chain strategy to
Match Product Uncertainty
 Functional Product with Stable Supply Processes

• For product which have both low demand and supply

uncertainties, efficiency is the only competitive
advantage and cost and information coordination are
two elements of efficiency.

• Company should strive at improving supply chain

efficiency so that the cost of providing the product to
the customers is the lowest possible.
 Functional Product with Evolving Supply
Processes

• Those product which have low demand uncertainties

but a high supply uncertainty, represent a high risk in
supply chain, so a risk hedging supply chain can
contribute to reduce the risk.
Innovative Product with Stable Supply Processes

• With a highly unpredictable demand and short product life cycle,

excessive inventory can cause a significant storage cost.

• Companies with such products should pursue strategies with a

responsive supply chain.

• Dell computer is the best example for this type supply chain.
 Innovative Products with Evolving Supply
Processes

• Product with both high demand and supply

uncertainties should reduce the uncertainties from
two sides. The Agile supply chains are the best choice
 Conclusion
We have appeared here that how we can foresee right inventory
network for various items. The demand and supply uncertainties
can help us to plan right supply chain.

Companies need to first understand the uncertainties faced by the

demand and supply of its products and then try to match these
uncertainties with the right supply chain strategies. Based on an
analysis of the uncertainties of supply and demand faced by the
firm.
Innovative products with unpredictable demand and evolving
supply process face major difficulties.

Internet had played huge role in supply chain information sharing

and coordination . Companies like Xilinx and Adaptec those having
a high innovative product and evolving supply chain now
successfully compete in market.

The difficulties are incredible ,yet so are openings.