Supply Chain Design

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Description of Supply Chain Design. Explanation.




Definition Supply Chain Design. Description.

Supply Chain Design involves the determination of how to structure a supply chain. Design decisions include the selection of partners, the location and capacity of warehouse and production facilities (reduce Bullwhip Effect), the products, the modes of transportation, and supporting information systems.

Four Levels of Supply Chain Improvement

According to Charles C. Poirier and Michael J. Bauer (E-supply chain), a supply chain improvement may occur at 4 levels:

  1. Sourcing and Logistics — The driver is the Vice President of Supply or Sourcing, who focuses on project logistics, inventory and order fulfillment, organized by team and function.
  2. Internal Excellence — The drivers are the Supply Chain Leader (COO) and the Chief Information Officer. The focus is system improvement and process redesign. The tools are best practices, benchmarks and activity-based costing.
  3. Network Construction — The primary drivers are the business unit leaders. Their focus is on forecasting, planning and inter-enterprise. The tools are database mining, electronic commerce and metrics.
  4. Industry Leadership — The drivers are the CEO and the management team. They focus on the network and the consumer. Their tools are virtual information systems, the intranet and the Internet.

Reducing Supply Chain Cost

The AIM & DRIVE method is a system for reducing costs by working with your entire supply chain while improving quality and delighting your end customers. The steps are:

  1. “Agreeing” to manage costs with a supply-chain approach.
  2. “Identifying” where you are incurring costs and which costs you can lower by working cooperatively with your suppliers.
  3. “Measuring” second- and third-level costs.
  4. "Defining” your mutual chief cost drivers and your strategic options.
  5. “Reducing,” altering or removing the operations that create those costs.
  6. “Implementing” your action plan.
  7. “Verifying” the plan by monitoring the costs.
  8. “Eternally” refining your cost structure and sharpening your processes.

Source: Jimmy Anklesaria, Supply Chain Cost Management.

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