microsoft powerpoint - 10c robust strategies for mitigating

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Robust strategies for mitigating Robust strategies for mitigating

supply chain disruptionssupply chain disruptions

Global Logistics ManagementGlobal Logistics Management

Professor ChengProfessor Cheng--Chang LinChang Lin

2008/12/262008/12/26

Presented by Presented by

Sharon Kuo,Sharon Kuo,

Silver Lu and Silver Lu and

Jon DickersonJon Dickerson

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OutlinesOutlines

Research objectives for SC Research objectives for SC

disruptions disruptions

Impacts of SC disruptionImpacts of SC disruption

Definition of robust strategy Definition of robust strategy

9 Robust supply chain strategies9 Robust supply chain strategies

ConclusionsConclusions

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Research objectives for SC Research objectives for SC

disruptions disruptions

Supply chain disruptions can have Supply chain disruptions can have

longlong--term negative effectsterm negative effects on a firmon a firm’’s financial s financial performance (Hendricks and performance (Hendricks and SinghalSinghal, 2005), 2005)

Companies suffer from SC disruptions Companies suffer from SC disruptions experience 33~44% lower stock return relative experience 33~44% lower stock return relative to their industry benchmarks over a 3 years to their industry benchmarks over a 3 years periodperiod

2006-01-07 2007-01-07 2009-01-07

End of Lower

stock returns

Start of Lower stock returns

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How serious affect will it be to How serious affect will it be to

a company caused by a supply a company caused by a supply

chain disruption ?chain disruption ?

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Impacts of SC disruptionImpacts of SC disruption

Examples of SC disruptionsExamples of SC disruptions

True Story 1True Story 1

In Year 2000, Ericsson lost 400 In Year 2000, Ericsson lost 400

Million Euro after their supplierMillion Euro after their supplier’’s s

semiconductor plant in New Mexico semiconductor plant in New Mexico

caught firecaught fire

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Impacts of SC disruption Impacts of SC disruption (cont(cont’’d.)d.)


In year 2001, Ford closed 5 plants for In year 2001, Ford closed 5 plants for

several days after all air traffic was several days after all air traffic was

suspended after 911 suspended after 911


In year 2001, Land Rover laidIn year 2001, Land Rover laid--off 1,400 off 1,400

workers after one of their key supplier workers after one of their key supplier

became insolventbecame insolvent

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How many companies are How many companies are

reported as vulnerable to reported as vulnerable to

supply chain disruption ?supply chain disruption ?

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Phenomenon of managing SC Phenomenon of managing SC

risks at most companiesrisks at most companies

Apprehension

without action

Study conducted by Computer Sciences

Corporations

Rice and Caniatio (2003) and Zsidisin et

al(2000,2004)

8130

31No vulerable to

disruptions

Vulerable to

disruptions

Vulerable and no

documented

contingency plan

Survey conducted by CFO Research

Services

(cf Eskew 2004)

153

94

Tolerable supply

chain risk

Too much

unmanaged

supply chain risk

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What can the company do to What can the company do to

reduce SC disruptions ? reduce SC disruptions ?

To create a efficient and yet To create a efficient and yet

resilient SC towards major resilient SC towards major

disruptions !disruptions !

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Definition of robust strategyDefinition of robust strategy

Will enable or help a firm to Will enable or help a firm to ……. .

to manage regular fluctuations efficiently to manage regular fluctuations efficiently under normal circumstance regardless of the under normal circumstance regardless of the occurrence of major disruptionsoccurrence of major disruptions

to sustain its operations during a major to sustain its operations during a major disruptions disruptions

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Robust supply chain strategiesRobust supply chain strategies

-- Postponement Postponement (1/9)(1/9)

DefinitionDefinition -- utilizes utilizes productproduct or or

process designprocess design concept such as concept such as standardization, commonality, modular standardization, commonality, modular design and operations reversal, to delay design and operations reversal, to delay the point of product differentiation.the point of product differentiation.

Example Example –– Nokia deployed a contingency Nokia deployed a contingency plan by reconfigure its generic cell phone plan by reconfigure its generic cell phone quickly to allows slightly different quickly to allows slightly different components components (flexibility of product (flexibility of product

design)design)

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-- Strategic stock Strategic stock (2/9)(2/9)

DefinitionDefinition -- Instead of carrying more Instead of carrying more safety stocks, a firm may consider safety stocks, a firm may consider storing some (warehouse, logistics storing some (warehouse, logistics hubs, repair centers, etc.) inventories hubs, repair centers, etc.) inventories at certain at certain ““strategicstrategic”” locations to be locations to be shared by multiple SC partnersshared by multiple SC partners

Example Example –– CDC keeps large quantities CDC keeps large quantities

of medicine and medical supplies at of medicine and medical supplies at

certain strategic locations in USA certain strategic locations in USA

(Strategic National Stockpile; SNS) (Strategic National Stockpile; SNS)

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-- Flexible supply base Flexible supply base (3/9)(3/9)

DefinitionDefinition --To use more than 2 production To use more than 2 production bases (normally at different country), one bases (normally at different country), one for for base volumebase volume and the other for the and the other for the

excess in order to mitigate the risk excess in order to mitigate the risk associated with sole sourcing.associated with sole sourcing.

ExampleExample –– HP used Singapore plant as the HP used Singapore plant as the base volume and Washington one to produce base volume and Washington one to produce the the excess of the base volume.excess of the base volume.

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-- MakeMake--andand--buy buy (4/9)(4/9)

DefinitionDefinition -- SC chain is more SC chain is more resilient if certain products are resilient if certain products are produced produced inin--househouse while others while others are outsourced to other are outsourced to other suppliersupplier

ExampleExample –– ZaraZaraproduce their produce their fashion fashion itemitem at their inat their in--house house factories and factories and outsource other outsource other basic basic itemsitems to their to their suppliers in China.suppliers in China.

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-- Economic supply incentives Economic supply incentives (5/9)(5/9)

DefinitionDefinition -- Used at the Used at the condition which there is condition which there is very very limited number of limited number of supplierssuppliers available in available in the marketthe market

ExampleExample –– US government offers US government offers certain economic incentives to certain economic incentives to suppliers to resuppliers to re--enter the flu enter the flu vaccine market ivaccine market in terms of n terms of sharing some financial riskssharing some financial risks and and committing to certain QTY in committing to certain QTY in advance at a certain price and advance at a certain price and buying back the unsold stocks at buying back the unsold stocks at the end of flu season at a lower the end of flu season at a lower priceprice

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-- Flexible transportation Flexible transportation (6/9)(6/9)

DefinitionDefinition -- Transportation is the Transportation is the AchillesAchilles’’

heelheel and consider adding more flexibilities and consider adding more flexibilities

in a proactive mannerin a proactive manner

ExampleExample

MultiMulti--modal transportation (trucks, motorcycles, modal transportation (trucks, motorcycles,

bicycles, ships and helicopters)bicycles, ships and helicopters)

MultiMulti--carrier transportation carrier transportation

Multiple routesMultiple routes

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-- Revenue management via dynamic pricing Revenue management via dynamic pricing

and promotion (7/9)and promotion (7/9)

DefinitionDefinition -- Dynamic pricing is Dynamic pricing is a common mechanism for a common mechanism for selling perishable selling perishable products/servicesproducts/services

ExampleExample –– Dell offered special Dell offered special ””lowlow--

costcost--upgradeupgrade”” optionsoptions to customers to customers

if similar computers with if similar computers with

components from other supplier was components from other supplier was

chosen after an earthquake chosen after an earthquake

happened in 1999 and disrupted its happened in 1999 and disrupted its

Taiwan supplierTaiwan supplier

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Robust supply chain Robust supply chain

strategiesstrategies

-- Assortment planning Assortment planning (8/9)(8/9)

DefinitionDefinition -- Reconfiguring Reconfiguring the set of the set of products on display, location on the products on display, location on the shelves and number of facingsshelves and number of facings for each for each product to manipulate customerproduct to manipulate customer’’s s product choice and demandproduct choice and demand

ExampleExample –– The finding from The finding from ChongChong(et al.2001) at 5 supermarkets in (et al.2001) at 5 supermarkets in USA suggests that one can utilize USA suggests that one can utilize this strategy to entice customers this strategy to entice customers to to purchase widely availablepurchase widely availableproducts when certain ones are products when certain ones are facing SC disruptionsfacing SC disruptions

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-- Silent product rolloverSilent product rollover(9/9)(9/9)

DefinitionDefinition -- Under this strategy, new Under this strategy, new

products are products are ““leakedleaked”” slowly into the slowly into the

market without any formal announcement.market without any formal announcement.

ExampleExample –– Swatch produces each watch Swatch produces each watch

model only once and launches new model only once and launches new

products so that its customers will view products so that its customers will view

all available ones as collectibles by all available ones as collectibles by

utilizing this approachutilizing this approach

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ConclusionsConclusions

Even robust strategies are Even robust strategies are

beneficial under normal beneficial under normal

circumstances and during a circumstances and during a

major disruption. However, major disruption. However,

new challenges are creatednew challenges are created

as well (Cost vs. benefits, as well (Cost vs. benefits,

strategy fit and proactive strategy fit and proactive

executions ,etc.)executions ,etc.)

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Conclusions (cont.)Conclusions (cont.)

““Prevention is better Prevention is better

than curethan cure.. ““ If companies If companies

can reduce their exposure can reduce their exposure

to riskto risk……

Supply alliance networkSupply alliance network

Lead time reduction Lead time reduction

Recovery planning systemRecovery planning system

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Thanks for your attention !Thanks for your attention !

microsoft powerpoint - 10c robust strategies for mitigating

Documents

definition sc chain

robust strategies

definition transportation

sc risks

sc disruptions experience

resilient sc

certain products

base volume