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Five Supply Chain DriversAs you simulate how your supply chain works, you learn about the demands it faces and the capabilities it needs to be successful. Develop your supply chain to meet these needs. Supply chain development is guided by the decisions you make about the five supply chain drivers. Each of these drivers can be developed and managed to emphasize responsiveness or efficiency depending on the business requirements.
These five drivers provide a useful framework in which to think about the supply chain capabilities you need.
Production – This driver can be made very responsive by building factories that have a lot of excess capacity and that use flexible manufacturing techniques to produce a wide range of items. To be even more responsive, a company could do their production in many smaller plants that are close to major groups of customers so that delivery times would be shorter. If efficiency is desirable, then a company can build factories with very little excess capacity and have the factories optimized for producing a limited range of items. Further efficiency could be gained by centralizing production in large central plants to get better economies of scale.
Simulate your decisions about production in SCM Globe by the products you define and the facilities you create to make these products.
Inventory – Responsiveness can be had by stocking high levels of inventory for a wide range of products. Additional responsiveness can be gained by stocking products at many locations so as to have the inventory close to customers and available to them immediately. Efficiency in inventory management would call for reducing inventory levels of all items and especially of items that do not sell as frequently. Also, economies of scale and cost savings could be gotten by stocking inventory in only a few central locations.
Simulate your decisions about inventory with SCM Globe by setting production levels at factories and defining on-hand amounts for different products at different facilities.
Location – A location approach that emphasizes responsiveness would be one where a company opens up many locations so as to be physically close to its customer base. For example, McDonald’s has used location to be very responsive to its customers by opening up lots of stores in its high volume markets. Efficiency can be achieved by operating from only a few locations and centralizing activities in common locations. An example of this is the way Dell serves large geographical markets from only a few central locations that perform a wide range of activities.
Simulate this decision in SCM Globe by the method you use to select locations for your facilities (factories, warehouses and stores) and the storage capacities and operating expenses you define for these facilities.
Transportation – Responsiveness can be achieved by a transportation mode that is fast and flexible. Many companies that sell products through catalogs or over the Internet are able to provide high levels of responsiveness by using transportation to deliver their products often within 24 hours. FedEx and UPS are two companies who can provide very responsive transportation services. Efficiency can be emphasized by transporting products in larger batches and doing it less often. The use of transportation modes such as ship, rail, and pipelines can be very efficient. Transportation can be made more efficient if it is originated out of a central hub facility instead of from many branch locations.
Simulate transportation decisions in SCM Globe by the modes of transportation you select to move products between facilities and the frequencies of those deliveries to different facilities.
Information – The power of this driver grows stronger each year as the technology for collecting and sharing information becomes more wide spread, easier to use, and less expensive. Information, much like money, is a very useful commodity because it can be applied directly to enhance the performance of the other four supply chain drivers. High levels of responsiveness can be achieved when companies collect and share accurate and timely data generated by the operations of the other four drivers. The supply chains that serve the electronics markets are some of the most responsive in the world. Companies in these supply chains from manufacturers, to distributors, to the big retail stores collect and share data about customer demand, production schedules, and inventory levels.
SCM Globe simulates real-time information sharing between all participants in a supply chain by making data about operating costs and on-hand inventory available for all the facilities in the supply chain. As you run a simulation you can see what is happening from end to end across your supply chain. At present in the real world, most companies are not able to see much about the overall status of the supply chains they participate in. So in that sense the information available from the SCM Globe simulations is not that readily available to companies in actual supply chain practice.
Regards,
Saiyid
Facilities and their corresponding capacities to perform their functions are a key driver of supply chain performance in terms of responsiveness and efficiency. For example, companies can gain economies of scale when a product is manufactured or stored in only one location; this centralization increases efficiency. The cost reduction, however, comes at the expense of responsiveness, as many of a company’s customers may be located far from the production facility. The opposite is also true. Locating facilities close to customers increases the number of facilities needed and consequently reduces efficiency. If the customer demands and is willing to pay for the responsiveness that having numerous facilities adds, however, then this facilities decision helps meet the company’s competitive strategy goals.
Inventory plays a significant role in a supply chain’s ability to support a firm’s competitive strategy. If a firm’s competitive strategy requires a very high level of responsiveness, a company can use inventory to achieve this responsiveness by locating large amounts of inventory close to the customer. Conversely, a company can also use inventory to make itself more efficient by reducing inventory through centralized stocking. The latter strategy would support a competitive strategy of being a low-cost producer. The trade-off implicit in the inventory driver is between the responsiveness that results from more inventory and the efficiency that results from less inventory.
The role of transportation in a company’s competitive strategy figures prominently when the company is considering the target customer’s needs. If a firm’s competitive strategy targets a customer that demands a very high level of responsiveness, and that customer is willing to pay for this responsiveness, then a firm can use transportation as one driver for making the supply chain more responsive. The opposite is true as well. If a company’s competitive strategy targets customers whose main decision criterion is price, then the company can use transportation to lower the cost of the product at the expense of responsiveness. As a company may use both inventory and transportation to increase responsiveness or efficiency, the optimal decision for the company often means finding the right balance between the two.
Information is a driver whose importance has grown as companies have used it to become both more efficient and more responsive. The tremendous growth of the importance of information technology is a testimony to the impact information can have on improving a company. Like all the other drivers, however, even with information, companies reach a point when they must make the trade-off between efficiency and responsiveness.
The main objective of supply chain management is to meet the requirements of customers through the optimal use of resources, including the distribution of capacity, inventories and employment. In theory, the supply chain is seeking to link supply and demand, and to do so with minimal inventory. Different aspects of improving the supply chain and coordination with suppliers are also included in order to eliminate bottlenecks and sources of a strategy to achieve a balance between transportation and less material cost, and implementation of Jet (just in time) and techniques to improve the flow of manufacturing industries; to maintain the right mix and location of factories and warehouses to serve Alamla markets , site / customization and car steering and dynamic analysis, programming and use, and of course, the traditional insurance optimized to achieve maximum efficiency on the part of the distribution.
And there is often confusion about the terms of the supply chain and services Altamoanah.omn is now generally accepted that the Supply term applied to activities within the same company or organization involving product distribution while the supply in the short also includes manufacturing and procurement chain, and therefore has a much broader focus because it involves multiple companies, including suppliers, processors, retailers, and work together to meet the customers' need for a product or service.
I apologize for the answer, I leave the answer to experts specialists in this field that's not my specialty field
Agree with MR. Saiyid Maududi<<<<<<<<<<<<<<<<<<<<,
The performance of a supply chain is determined by decisions in the areas of inventory, transportation, facilities and information. Hence these four areas are identified as drivers of supply chain performance.
Definition/Explanation of Four Drivers
Major Drivers of Supply Chain Performance are:-
Facilities
Inventory
Transporation
Information
Sourcing
Pricing
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