Exam 16: Strategic Challenges and Change for Supply Chains

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Differentiation Strategies
Simply stated,this strategy refers to the extent to which the supply chain approach of a particular company may be different and unique and thus "differentiate" it from those of competing organizations.The basic concept underlying differentiation is to see that supply chain capabilities are viewed by customers as being sufficiently effective and unique to distinguish an organization in the marketplace.To a large extent,differentiation materializes in some combination of price and service.Although supply chains may strive for differentiation in many ways,this section will elaborate briefly on elements of time-based strategies,ones that typically have short- and long-term positive effects on levels of customer service that are delivered by supply chains.
Time-Based Strategies
The value of time can be measured in a number of different ways.Supply chain strategies that shorten the length of the order and/or replenishment cycle have been the focus of much attention in recent years.Time-compression strategies have also received attention
Reducing Cycle Time
Reductions in cycle time are based on three factors: processes,information,and decision making.Another important source of reductions in cycle time is faster provision of information.The utilization of faster,more efficient forms of order transmission can significantly reduce the time needed to complete the transaction.Also,the use of contemporary information technologies is becoming increasingly attractive as technology costs have been declining significantly.The final factor in reducing cycle time is decision making.The critical issue is to empower individuals to make decisions relevant to their areas of expertise and responsibility.
Time-Reduction Logistics Initiatives
It is imperative is for firms to develop the ability to know where all products may happen to be at any point in time.Interest has grown recently in the area of leveraging the power of effective demand planning and forecasting to more meaningfully moves from "push" to "pull." Recent interest in collaborative planning,forecasting,and replenishment also serves as an example of a highly useful,contemporary technology.Increasingly,companies continue to change from the traditional push approach to a pull approach,which is a demand-responsive system.
Overall,leading-edge companies have used a number of initiatives to improve their competitive position by reducing cycle time,thus producing significant benefits in terms of efficiency and effectiveness.

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By placing a priority on cost control,performance effectiveness and efficiency,and viable measurement strategies,companies are able to improve financial performance,focusing attention on metrics such as return on assets (ROA)and return on investment (ROI)facilitates the achievement of financial objectives.
Inventory Productivity
One class of assets that already receives significant attention is inventory,and major strategies are in place at many firms to reduce inventory levels without diminishing levels of customer service (or preferably,increasing levels of customer service).Initiatives such as just-in-time (JIT),vendor-managed inventory (VMI),and continuous replenishment (CRP)are examples of popular approaches.
Facility Utilization
One of the major trends in supply chain facility management is to more effectively utilize the capacity of various types of supply chain facilities.High priority is placed on making sure that all supply chain facilities create value not only for the individual organizations,but also for the supply chain in a broad sense
Equipment Utilization Strategies
Another area of asset investment for companies is logistics-related equipment such as materials-handling equipment used in warehouses and transportation equipment that is leased or owned by a company.Transportation equipment is an important area in terms of asset investment and has been another area of improvement for many companies.
Outsourcing
Once a strategy that focused primarily on the commercial procurement of tangible,asset-based services such as transportation and warehousing,outsourcing now has grown into areas that are both strategic and customer focused.Thus,recent studies have cited growth in services available from the outsourced logistics sector such as freight bill auditing and payment,customer service,information technology,and light manufacturing and assembly The decision to utilize third-party or contract logistics companies has been fostered in part by the interest in reducing asset investment to improve asset productivity.The relevance of using a 3PL becomes even clearer as increasing numbers of businesses get involved significantly in global commerce.
As a concluding comment regarding the use of 3PL providers,there has been a continuing trend toward the involvement of 4PL providers.Aside from managing a number of 3PL operations,a 4PL is looked to for the provision of competencies relating to knowledge availability,information technology,and skills in forming and sustaining successful supply chain relationships.