4. Methods and Tools for I-SCM

A company cannot succeed alone. Its performance depends on the entire network of suppliers, manufacturers, logistics providers, and distributors.

1. Understand the company’s mission.

2. Create a suitable Supply Chain Strategy.

3. Derive specific Supply Chain concepts.

Example of Mission: Apple - We want to put computers in everyones pockets

The mission explains where the company wants to go and what it contributes to society.

The strategy explains how the company will achieve this mission.

Mission: Where to we want to go/ what do we want to acheived?

Strategy: How will we get ther/ how will we do it?

Because the company may need different products, suppliers, materials, production processes, technologies, or sustainability standards if they decidie to do a new mission.

• Differentiation: offering something better or different. E.g. Hardrock cafe + Apple

• Cost leadership: providing customer value at lower cost. E.G. Southwest airline + Walmart

• Response: being more flexible, reliable, or fast. E.g. Fast-fashion Zara or Pizza Dilevery srvice + Amazon

Creating uniqueness that increases the customer’s perception of value.

Differentiation can come from the product, service, design, brand, quality, or customer experience.

No.

It means reducing unnecessary costs while still providing the value and quality expected by the customer.

1. Flexibility: adapting to changes in product design or volume.

   
   

2. Reliability: meeting promised schedules.

1. Quickness: producing and delivering rapidly.

An efficient Supply Chain focuses on low cost, standardization, and high utilization.

A responsive Supply Chain focuses on speed, flexibility, availability, and product variety.

Strategic fit means matching the Supply Chain’s responsiveness with the uncertainty of customer demand.

• Certain demand requires a more efficient Supply Chain.

• Uncertain demand requires a more responsive Supply Chain.

Activity mapping shows how different company activities support and reinforce one competitive strategy.

Example:

Southwest Airlines combines secondary airports, standardized aircraft, limited service, fast turnaround, and productive employees to achieve low cost.

Supply Chain requirements change during the product life cycle:

• Introduction Phase : innovation and flexibility.

• Growth phase : forecasting and capacity expansion.

• Maturity phase: standardization and cost reduction.

• Decline phase: cost minimization and capacity reduction.

1. International strategy: import, export, or license with little adaptation.

2. Global strategy: standardized products and strong cost reduction.

3. Multidomestic strategy: strong local adaptation.

4. Transnational strategy: combines economies of scale with local responsiveness.

Pressure for cost reduction and need for local responsiveness.

Local Responsivness high: Transnational + Multidomestic

Local Responsivness low: Global + international

Cost Reduction high: Global + Transnational

Cost Reduction low: international + Multidomestic

A startegy that balances two goals at once: it keeps core operations the same everywhere to save money, while also changing products to fit local cultures

E.G. Coca-Cola and Nestlé.

An international strategy is a plan to sell a company's products to foreign markets using exports and licenses, primarily keeping production at home.

It focuses on importing and exporting goods without building major manufacturing sites overseas.

EXAMPLE:

U.S. Steel and Harley-Davidson -> make in U.S. then Export.

A global strategy aims to standardize products worldwide to achieve massive economies of scale (the cost advantage a company gets by producing on a large scale)

The Goal: Sell the exact same product everywhere to maximize efficiency.

EXAMPLE:

Texas Instruments -> semi conducturs, Caterpillar -> builidng mashciens, and Otis Elevator -> elevators.

A decentralized business approach where a company customizes its products, marketing, and operations for each individual country.

Examples:

Heinz, McDonald’s, The Body Shop, and Hard Rock Cafe.

Total Cost of Ownership, or TCO considers all costs connected with a product during its life cycle, not only its purchasing price.

Before procurement: supplier search, selection, qualification, testing, and negotiation.

Through procurement: purchasing price, transport, customs, tariffs, quality assurance, and goods receipt.

After procurement: storage, downtime, maintenance, repairs, returns, and disposal.

Because low prices may be combined with high transport costs, quality problems, inventory, administration, downtime, or maintenance costs.

Life-Cycle Costs, or LCC, consider all costs during the useful life of an asset, especially

• acquisition,

• utilization,

• and recovery.

Acquisition costs: Procurement, installation, and required infrastructure.

Utilization costs: Energy, staff, tooling, facilities, operating materials, maintenance, repairs, inspections, spare parts, and training.

Recovery costs: Sale, reuse, recycling, or disposal at the end of the asset’s life.

Productivity, MTBF, MTTR, availability, lifespan, quality level, and operating hours.

MTBF ( Mean Time Between Failures): the average operating time between failures.

MTTR (Mean Time to Repair): the average time needed to repair a failure.

TCO - focuses more strongly on costs before and through procurement.

LCC - focuses more strongly on costs during utilization, such as energy, maintenance, repairs, and downtime.

TCO is especially suitable for components, materials, and services when procurement and transaction costs are important.

-> When costs before and through procurement are high, but utilization costs play a smaller role.

LCC is especially suitable for machines and production equipment when operating and maintenance costs are high.

-> When utilization costs are high compared with the purchasing price.

To improve the comparison of procurement alternatives.

-> where/what should i purchase and why?

Incoterms are standardized International Commercial Terms that divide costs, risks, responsibilities, and delivery obligations between buyer and seller.

They regulate:

• Who pays which costs.

• Where risk transfers.

• Who organizes transport and customs.

• Where the seller has fulfilled the delivery obligation.

No.

Under some Incoterms, the seller may pay for transport even after the risk has already transferred to the buyer.

1. A-Price: all costs up to shipping from the supplier.

2. B-Price: all costs from shipping to receiving.

3. C-Price: all costs from receiving until the material is ready for production.

The C-Price gives a more complete view than the supplier’s quoted price.