Making World-Class Supply Chains - PowerPoint PPT Presentation

creating world class supply chains l.
Skip this Video
Loading SlideShow in 5 Seconds..
Making World-Class Supply Chains PowerPoint Presentation
Making World-Class Supply Chains

share
play prev play next
play fullscreen
1 / 16
Download
Download Presentation

Making World-Class Supply Chains

Presentation Transcript

  1. Creating World-Class Supply Chains Matthias Holweg Ph.D. Judge Business School University of Cambridge Email: m.holweg@jbs.cam.ac.uk World Bank - Knowledge Economy Forum VI Cambridge, April 17 2007

  2. Outline Supply chain mangement • Why is it important? • Features of high-performing supply chains • The role of technology The automotive industry • Global trends • The case of Slovakia Conclusions • Policy recommendations

  3. Outline Supply chain mangement • Why is it important? • Features of high-performing supply chains • The role of technology The automotive industry • Global trends • The case of Slovakia Conclusions • Policy recommendations

  4. Why do we talk about it? • Traditional thinking: competition is driven by the 4P’s • Today: supply chain capabilities determine competitiveness! • Wal-Mart versus K-Mart • Compaq/HPversus Dell • A final product is not the sole achievement of the OEM • Customer experience is determined by supply chain: quality, cost, delivery • Significant proportion of value sourced from suppliers! • Supply chains are connected systems: • Competitiveness of one tier is a function of the supply and distribution functions, i.e. surrounding tiers. • “Value Chains compete, not individual companies!” • (Christopher 1992)

  5. “Islands of Excellence” or Optimal Supply Chain? 100 Max Average Assembly Plant 6% Raw Materials and components 21% Distribution 73% Min 50 Days of Inventory 0 Customer Dispatch Distribution On-site Parts Raw Material Assembly WIP Assembly WIP Finished Parts In-house Parts Bought-in Parts Inbound Transit Outbound Transit Pre-Assembly WIP Source: Holweg and Pil, “The Second Century”, MIT Press 2004

  6. Features of High-performing Supply Chains • Long-term collaborative relationships • Trust and commitment, respect of the right of mutual existence • Single or dual sourcing • Component volume is adjusted according to performance • Constant positive pressure by dual sourcing • Improvement • Collaboration with suppliers on operational improvement; example: Toyota’s Supplier Support Center (TSSC) in Kentucky • Annual cost reductions are realised in collaboration, not isolation • Operations and logistics • Level production schedules to avoid spikes in the supply chain • Milk-round delivery systems that can handle mixed-load, small-lot deliveries • Disciplined system of JIT delivery windows at the plant; suppliers deliver only what is needed, even if this compromises load efficiency in transport

  7. The Role of Technology • The ‘Holy Grail’ in curing supply chain ills? • Example: ‘Bullwhip problem’ • Demand visibility is key: RFID / AutoID, EDI, EDIFACT, EPOS, CPFR • …yet they only work if the planning systems use this information! • Example: transaction costs in automotive • COVISINT (est. 2000) and the B2B/e-commerce revolution • Predicted savings of $1,000 per vehicle in transaction costs! • The Role of Technology • Technology alone is not a sufficient, it can assistproblem solving • If the underlying processes are not capable, technology will fail • It is a means to an end, not an end in itself!

  8. Outline Supply chain mangement • Why is it important? • Features of high-performing supply chains • The role of technology The automotive industry • Global trends • The case of Slovakia Conclusions • Policy recommendations

  9. Production by Region 1975-2005

  10. Auto Industry: Major Trends • Overall global growth by 1.85% CAGR since 1975 • Substitution of production with adjacent low-cost regions • Major growth of production in China (2000-05: x5.2), and India (2000-05: x1.7), - 4% in Western Europe • Auto industry is regionalising, not globalising! • What does this mean for the dynamics of competition? • Competing in a global, distributed industry: • Future competition on cost is a futile battle.. • Rely on quality? Brand? Design? Proximity to customer?

  11. Market Demand New Entrant Continuous Window of Opportunity Established Player Product Features Time Any labour cost advantage is temporary! Source: adapted from Christensen (1997)

  12. The Auto Industry in Emerging Countries • Automotive industry very attractive • Job multiplier of 5-7 for every assembly job • Technology transfer • Many subsidies, but questions of long-term viability! • The case of Slovakia’s auto industry • VW Bratislava, PSA Trnava, Kia Zilina, growing cluster CZ, PL, HU • 5m inhabitants, c.900k production, domestic sales of <80k units • Challenges • Logistics: lead-time to customer, reliability of supply • Labour shortage, migration and rising compensation • Migration further east is inevitable • Domestic demand in Russia, growing labour cost differential

  13. Outline Supply chain mangement • Why is it important? • Features of high-performing supply chains • The role of technology The automotive industry • Global trends • The case of Slovakia Conclusions • Policy recommendations

  14. Conclusion: Supply Chain ‘Enemies’ • Common logic behind all SCM initiatives! • Inventory & delays • Time worsens ‘swing’ of amplification • Decision delays require stock • Safety stock decisions send false signals • Unreliability or uncertainty • Any kind of uncertainty needs to be covered with inventory • Unreliable processes cause unreliable delivery • Hand-offs or decision points • Every hand-off or tier in the system bears danger of distortion! ‘Inventory is a substitute for information’

  15. Policy Recommendations • Infrastructure is a always a concern.. • …but uncertainty is a sure killer of any location decision! • Customs clearance • Currency • Regulation (labour, traffic, taxation) • Crime & bribes • Supply chains are connected systems: • Labour cost differential is only a short-term advantage • Strong need to attract suppliers, not just manufacturers! • Need to build local competencies, rather than “screw-driver factories” • Domestic demand is not essential if logistics systems work

  16. Centre for Competitiveness and Innovation,Judge Business School, Univ. of Cambridge http://www-innovation.jbs.cam.ac.ukInternational Motor Vehicle ProgramMassachusetts Institute of Technologyhttp://imvp.mit.edu Email: m.holweg@jbs.cam.ac.uk