SUPPLY CHAIN

MANAGEMENT

Prof. Shikha Aggarwal

SUPPLY CHAIN
CASE PREPARATION: STEPS

Top-Down Existing lens

Approach
Top Level Message
Bottom-Up Coding and
Approach categorization
techniques
Support of Data
5 steps
towards Frameworks, Models
preparing and Charts
Synthesize
the case Presentation Hacks

Feasibility Industry, Country,

Analysis Level of Detail
Finances, Time
Opinion/
Judgement/
Hypothesis "So what?” statement

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Session 15:

Innovation
SUPPLY CHAINS
THE BASICS

INVENTION

CREATIVITY

INNOVATION

DISRUPTIVE
INNOVATION TECHNOLOGICAL
INNOVATION

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SUPPLY CHAINS
CREATIVITY

Creativity is about unleashing the potential of the mind to conceive new ideas. Those
concepts could manifest themselves in any number of ways, but most often, they
become something we can see, hear, smell, touch, or taste.

However, creative ideas can also be thought experiments within one person's mind.

Creativity is subjective, making it hard to measure.

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SUPPLY CHAINS
INVENTION

Invention is the "creation of a product or introduction of a process for the first time.”

Thomas Edison was an inventor.

New scientific or technical idea, and the means of its embodiment or

accomplishment. To be patentable, an invention must be novel, have utility, and be
non-obvious.

To be called an invention, an idea only needs to be proven as workable.

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SUPPLY CHAINS
INNOVATION

Innovation is about introducing change into relatively stable systems. It's also
concerned with the work required to make an idea viable. By identifying an
unrecognized and unmet need, an organization can use innovation to apply its
creative resources to design an appropriate solution and reap a return on its
investment.

Innovation is completely measurable

To be called an innovation, it must also be replicable at an economical cost, and

must satisfy a specific need.

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SUPPLY CHAINS
TECHNOLOGICAL INNOVATION

To conceive and produce a new solution (from a scientific and technological

knowledge) to a real or perceived need (Invention) to develop this solution into a
viable and producible entity (Realization); and to successfully introduce and supply
this entity to the real or perceived need (Implementation)

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SUPPLY CHAINS
TECHNOLOGICAL INNOVATION: PROCESS

1 2 3 4
Basic Applied
Development Engineering
Research Research

5 6 7 8

Continuous
Manufacturing Marketing Promotion
Improvement

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SUPPLY CHAINS
DISRUPTIVE INNOVATION

An innovation following a process whereby a smaller company with fewer

resources is able to successfully challenge established incumbent businesses.

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SUPPLY CHAINS
DISRUPTIVE INNOVATION MODEL

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SUPPLY CHAINS
DISRUPTIVE INNOVATION: ELEMENTS

ü As incumbents focus on improving their products &

services for their most demanding (& profitable) customers,
they exceed needs of some segments & ignore needs of
others.
ü Entrants that prove disruptive begin by successfully
targeting those overlooked segments, gaining a foothold by
delivering more-suitable functionality—frequently at a lower
price.
ü Incumbents, chasing higher profitability in more-demanding
segments, tend not to respond vigorously.
ü Entrants then move upmarket, delivering the performance
that incumbents’ mainstream customers require, while
preserving the advantages from early success.
ü When mainstream customers start adopting the entrants’
offerings in volume, disruption has occurred.

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SUPPLY CHAINS
DISRUPTIVE INNOVATION- CHECKLIST

1. Are today’s existing competitors pricing out a large, untapped need?

2. Does your business model allow you to serve customers radically cheaper
than existing competition?
3. Will your future competitors write you off as low-quality?

4. As your product develops, will the quality increase to satisfy higher-value

customers?

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WHAT IS A
BUSINESS MODEL?
“ ..a plan for the successful operation of a
business, identifying sources of revenue, the
intended customer base, products, and details
of financing.”
• Who are your key partners?
• What are your key activities?
• What are your value propositions?
• How are your customer relationships?
• What are your customer segments?
• What are your key resources?
• What channels do you use?
• What is your cost structure?
• What is your revenue stream?
China’s e-commerce
during lockdown

• Alibaba leveraged its internal digital

payments system
• JD.com tested its automated
technologies
• Drone deliveries
• Driverless smart vehicles
• Hiring workers from shuttered
restaurants for delivery to fill shortage
of people
• New talent to leverage ready-to-cook
foods
• Deposit boxes in gated communities
• Telemedicine by Alibaba
DEATH OF SUPPLY CHAIN MANAGEMENT ?
UBER ?
AIRBNB ?
VIDEO
STREAMING ?
ONLINE
ENCYCLOPEDIA?
SMART
PHONES ?
PHOTOGRAPHY?
3D PRINTING ?
ONLINE
EDUCATION ?
McDonald’s
offering
Pizza––Good
idea or not?
SUPPLY CHAINS
INNOVATION- THE RISK MATRIX

A project’s position on the matrix is

determined by its score on a range
of factors, such as how closely the
behavior of targeted customers will
match that of the company’s
current customers,
how relevant the company’s brand
is to the intended market, and how
applicable its technology
capabilities are to the new product.

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SUPPLY CHAINS
INNOVATION- THE RISK MATRIX (x-axis)

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SUPPLY CHAINS
INNOVATION- THE RISK MATRIX (y-axis)

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Sustainability in
Supply chains
SUPPLY CHAIN
SUSTAINABILITY

Sustainability is about…

meeting the needs of the present without compromising the ability of

future generations to meet their own needs.

Source: United Nations Brundtland Commission, 1987

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SUPPLY CHAIN
TRIPLE BOTTOM LINE

The triple bottom line concept emphasizes the importance

of examining the impact of business decisions on three key
arenas:

Environment (e.g. pollution; climate change; the depletion

of scarce resources, etc.)
Economy (e.g. effect on people’s livelihoods and financial
security; profitability of the business, etc.)
Society (e.g. poverty reduction; improvement of working
and living conditions, etc.)

What would be the triple bottom line in the context of supply chains ?

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SUPPLY CHAIN
TRAGEDY OF THE COMMONS

Ø Dilemma arising when the common

good does not align perfectly with the
good of individual entities Solutions
Ø Every company and supply chain faces
• Choose from options that are unlikely to be
the challenge of the tragedy of the
commons as it operates in a global supported by all of their own free will
environment • Mutual coercion – social arrangements or
mechanisms coerce all participants to
Ø Difficult to imagine a sustainable
behave in a way that helps the common
solution emerging without some
good
intervention
– Command-and-control approach
• Government/regulators set
standards

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SUPPLY CHAIN
SUSTAINABILIY AND DRIVERS

Facilities Inventory Transportation

o Consumers of energy and water and o Most supply chains focus on raw o Improve environmental performance
emitters of waste and green-house gases materials, work in process, finished goods through resource and emission reduction
o Separate the improvement opportunities o Inventory in a landfill o Product design can play a significant role
into those that generate positive cash o Cost borne collectively by society
flows and those that do not
o Reduce harmful inventory, unlock unused
o Facilities often offer the best opportunity to value
simultaneously improve the environmental
and financial performances through
innovation

Sourcing Information Pricing

o Greatest social and environmental impact o One of the biggest challenges to improved o Consumption visibility and differential pricing
occurs in the extended supply chain supply chain sustainability potentially lead to reduce resource consumption
o Biggest challenge is changing the customer’s
o Impact has grown with increased global o Absence of standards for measurement
willingness to pay
sourcing and reporting means that some claims of
o Government incentives can encourage
o Verifying and tracking supplier improvement are not verifiable
customers and firms
performance with regard to sustainability a
major challenge

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SUPPLY CHAIN
SUSTAINABILITY- IMPACT OF SUPPLY CHAIN DECISIONS

Design

More and more companies are actively seeking to reduce the amount of
packaging material that is used, for example, but there can be other, less
Source
obvious ways to improve resource sustainability.

If those managers responsible for new product development are not aware of
Make the resource implications of their design decisions, this may lead to the launch
of products with a bigger than desirable resource footprint.

Deliver

Return

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SUPPLY CHAIN
SUSTAINABILITY- IMPACT OF SUPPLY CHAIN DECISIONS

Design

‘Sustainable sourcing’ is emerging as a fundamental element of best practice

procurement. One reason for this is that it is estimated that for a manufacturer
Source somewhere between 40 and 60 per cent of their total carbon footprint lies
upstream of their operations.

Make Depending on where and how those upstream materials and products are
sourced and made, there can be major differences in resource consumption.

Deliver

Return

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SUPPLY CHAIN
SUSTAINABILITY- IMPACT OF SUPPLY CHAIN DECISIONS

Design

Manufacturing processes affect the footprint primarily through their use of

Source energy, their relative efficiency and the creation and disposal of waste and
toxic materials/effluents.

Make There are big differences in the energy efficiency of different factories and also
in the waste they generate and how they dispose of it. Even the source of
energy has sustainability implications.
Deliver

Return

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SUPPLY CHAIN
SUSTAINABILITY- IMPACT OF SUPPLY CHAIN DECISIONS

Design
Clearly decisions on the mode of transport will affect the carbon footprint of a
supply chain as will the extent to which transport capacity is efficiently used.

Source However, the nature of the delivery network (i.e. the number, location and
design of distribution centres, the use of hub and spoke arrangements, the
extent of cross-docking, etc.) can have a wider impact on supply chain
sustainability.
Make
A new generation of network optimization tools is now emerging which take
account of the carbon footprint as well as the more conventional costs.
Deliver

Return

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SUPPLY CHAIN
SUSTAINABILITY- IMPACT OF SUPPLY CHAIN DECISIONS

Design ‘Reverse logistics’ is the term usually used to describe the process of
bringing products back, normally at the end-of-life, but also for recall and
repair.
Source Essentially the challenge today is to create ‘closed-loop’ supply chains that
will enable a much higher level of reuse and recycling. Clearly products must
be designed with their end-of-life in mind, but also the logistics network
Make employed must minimize the use of resources.

Reverse logistics provides a major opportunity for companies to impact both

Deliver their costs and their carbon footprint and should be viewed as an opportunity
rather than a threat.

Return

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Bullwhip effect
 BEER GAME
SIMULATION

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COORDINATING SUPPLY CHAINS
BULLWHIP EFFECT

The bullwhip effect is a phenomenon observed in supply chains where the demand variability
increases as one moves up the supply chain from customers towards to distributors to
manufacturers.

At P&G, diaper orders issued by

distributors have a degree of
variability that cannot be explained by
consumer fluctuations alone

At Hewlett-Packard, the orders placed

to the printer division by resellers
have much bigger swings and
variations than customer demands

Bullwhip effect refers to the phenomenon where orders to the supplier tend to have larger
variance than sales to the buyer (i.e., information distortion) and the distortion propagates
upstream in an amplified form (i.e., variance amplification).

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COORDINATING SUPPLY CHAINS
BULLWHIP EFFECT

Manufacturer’s Wholesaler’s
orders to Store’s orders to Sales from
orders to its wholesaler
suppliers manufacturer store

Orders

Orders

Orders
Orders

0 0 0 0
Time Time
Time Time Time

Manu- Whole- Retail

Supplier Consumers
facturer saler Store

Inaccurate information can cause minor fluctuations in demand for a product to be

amplified as one moves further back in the supply chain. Minor fluctuations in retail sales
for a product can create excess inventory for distributors, manufacturers, and suppliers.

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COORDINATING SUPPLY CHAINS
BULLWHIP EFFECT

DC’s weekly orders Manufacturer’s

to Manufacturer weekly production
quantity
9,000
Retailers’ daily
orders to distribution
Order quantity

7,000 center
Babies’ daily
demand for diapers
5,000

3,000

0
Day 1 Day 30 Day 1 Day 30 Day 1 Day 30 Day 1 Day 30
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COORDINATING SUPPLY CHAINS
BULLWHIP EFFECT: EFECTS

Even slight demand uncertainties and variability become

magnified if each distinct entity on the chain, makes ordering
and inventory decisions with respect to its own interest above
those of the chain

Distorted information can lead to tremendous inefficiencies

excessive inventories
poor customer service
lost revenues
ineffective shipments
missed production schedules.

A common way to solve the bullwhip problem is by sharing information along the supply chain
through EDI, extranets, and groupware technologies. For example employing a vendor-managed
inventory (VMI) strategy, the vendor monitors inventory levels and when it falls below the
threshold for each product this automatically triggers an immediate shipment.

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COORDINATING SUPPLY CHAINS
ACHIEVING COORDINATION

Ø Get top management commitment for coordination

Ø Devote resources to coordination

Ø Focus on communication with other stages

Ø Try to achieve coordination in the entire supply chain network

Ø Use technology to improve connectivity in the supply chain

Ø Share the benefits of coordination equitably

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