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SCM-Lectures - Lecture notes 1-10

Supply Chain Management (The University of Warwick)

Studocu is not sponsored or endorsed by any college or university

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Supply Chain
Management

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Lecture 1
Understanding Supply Chains

Supply Chain Management plays a significant role in the development of civilization. It is

much about managing suppliers as about managing customers – must consider both sides.

https://www.theguardian.com/business/2017/sep/29/food-regulator-chicken-supplier-
food-safety-dates-2-sisters-food-group
New SCM laws; if organizations benefit from slave labour (or illegal working principles)
then they are directly responsible

Evolution of SCM
1950s-1970s – Traditional Mass Manufacturing
1960s-1980s – Inventory Management/Cost Optimization
1980s-1990s – JIT, TQM, BPR and Alliances
1990s-2000s – SCM Formation/Extension
2000s+ - Further refinement of SCM Capabilities (relatively new concept)

Future?
 Uber – largest taxi company, owns no vehicles
 Facebook – largest social media, owns no content
 Alibaba – most valuable retailer, has no inventory
 Airbnb – largest accommodation provider, owns no real estate

Visual Representation of a Supply Chain

First-Tier Customers =
Customers with whom there is
direct contact

Physical Distribution is
usually outsourced to logistics
companies

Apple, eg., dictates what type

of machinery
second/third/fourth-tier
suppliers must use

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Kellogg’s SCM

Upstream = supplier relations, downstream = customer relations

Innovation of iPhone: Most innovations of iPhones come from government-funded research

for safety purposes; developments that the government are unable to make themselves
(Professor Mariana Mazzucato)

What is a Supply Chain?

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A network of connected and interdependent organizations mutually and cooperatively

working together to control, manage and improve the flow of materials and information
from suppliers to end users (Christopher M., 2011)

What does a SC Manager’s Job Consist of?

 Mitigate risks
 Supply monitory
 Scheduling
 Supplier selection
 Storage/inventory/logistics
 New ways of adapting into market
 Information flow and material management

What a Supply Chain Management Looks Like:

Problems:
 Retailers
decide when they put 2-for-1 offers, but the farmers usually have to pay for the extra
one
 US Aviation Department did not allow transatlantic flights with two engines; Boeing
paired up with GE, who convinced the Aviation Department that it was safe to do so –
more demand for Boeing flights

Why is SCM Important?

 Up to 75% of companies’ expenditure spent on supply chains (Tent, 2004)
 “Supply Chain is the most dominant function within modern organizations” (Miles and
Snow, 2006)
 Supply chains compete, not companies…
o Eg. mobile phones (Apple, Google, Microsoft)

Porsche was forced to suspend production for 2 weeks in 2009 when the firm which
supplied the thread for its seat belts went bankrupt

Why are Suppliers Important?

Case Studies: Henry Ford Black Cars, Mini-Coopers 10m Combinations

Supply Chain Operations Reference (SCOR)

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*learn model

Aim of model is to create a universal language for all supplier

Achieving an Integrated Supply Chain

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Triple A by Lee
Being cost effective is not enough amongst competitive; actual winners of the supply chain
context are companies that are agile (responding to short-time changes, contingency
plans), adaptable (responding to long-term changes, social/political/environmental and
tracking customer demand in long-term) and aligned (having similar motivations and
incentives in the industry)

4R by Christopher (2001)
 Responsiveness (ability to meet customer demands by responding to changes in the
market)  Agile/Adaptability
 Resilience (ability to cope with unexpected disturbances)  Agile
 Reliability (quality of being reliable, dependable or trustworthy, increasing
standardization and decreasing process variability generally contributes to reliability)
 Adaptability/Aligned
 Relationships (ability to manage relationships- every business is built on relationships)
 Aligned
Zara Case Study Notes
 Design

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o Right information required; “what we should have but do not”

o Information from store manager to product/commercial developers
o Stock control used as method of product demand
o All departments work and organized in the same way
 Sourcing and Manufacturing
o Most produced in Europe (80%-90%), manufactured in Spain
o Fabrics from Italy, France and Spain
o Minimize waste of fabric
o “Like a puzzle” to further then go to the cutting team
o 120-130 layers of fabric cut together
o Each garment checked one by one for quality control
 Distribution
 Retail
 Cycle – back to Design!

Important to Notice!
 Design
o How to get the right information from the stores?
 What was sold
 What could have been sold
o Three options for something that doesn’t sell:
1. Take it out
2. Amend it
3. Introduce something new
 Sourcing and Manufacturing
o Where is the merchandise made?
 80%-90% in Europe
 Local, no culture barriers, agile/adaptable/aligned
o Cutting (internal)
o Assembly (external)
o Quality control and final preparation (internal)

Lecture 2
Outsourcing and SC Strategies

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Outsourcing is the starting point of supply chain management; currently organizations

faced with the challenges of what to produce in house and what to outsource

Oliver 1990 – Determinants of Inter-organizational Relations

 Necessity- refers to the desire of one organization to acquire resources of the
partnering organization which it cannot produce effectively or efficiency
 Asymmetry- relates to relations driven not just by resource scarcity (which is the
condition of necessity) but also by the potential of an organization to exert its power
over other organizations and acquire the needed resources
 Reciprocity- refers to the aim to have mutual advantage or the aim to share mutual
risk; in contrast to asymmetry, this dimension emphasizes cooperation between
organizations rather than the exercise of power and control
 Efficiency- refers to the objective of improving internal performance and not the need
to conform to the dictates of a more powerful organization or environmental forces
 Stability- refers to the desire to minimize the effects of environmental uncertainty,
which is generated by resource scarcity and the lack of perfect knowledge about
environment conditions
 Legitimacy- refers to the aim of an organization to improve the reputation and image
by conforming to the prevailing norms and values imposed by the institutional
environments in which the organization is embedded

Outsourcing
The process of transferring an existing business activity, including the relevant assets, to a
third party. The difference between outsourcing and subcontracting is that outsourced
products have the capacity of being in-house, whereas subcontracted products do not.

Outsourcing: Make or Buy Decision

Determinants of Outsourcing Decision

- Dependency on Capacity
o Firm has knowledge and sills, but not capacity
- Dependency on Knowledge
o Firm does not have knowledge and skills- how to select suppliers if don’t
have knowledge?
- Toyota Engines
o Engines- knowledge and capacity- 100% in-house
o Transmissions- knowledge, designed in-house, made by suppliers

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o Electronics System- designed and made by suppliers

Outsourcing and Offshoring

Offshoring can be done in-house as well; just in different country.

Do or Buy?
Depends on aspects such as significant of process, maturity of process and the products
relativity to competitors

Outsourcing – Organizational Effects

Benefits/Opportunities Risks/Disadvantages
Failure to identify core and non-core may
Enable focus on core
lead to outsourcing core
Reduce costs, providing short-term balance
Difficulty in insourcing later
sheet and P&L benefits
Difficulty in deciding how close to core
Increased flexibility to configure resources
outsourcing should get
Increased ability to meet changing market Lack of skills and competence to manage
needs outsource relationships
Provision of benefit through economies of
Increased costs in relationship management
scale and scope
Ability to access best in class skills and
Lack of understanding, skills and
capabilities
competence to design appropriate service
Freeing of constraints of in-house cultures
level agreements with outsource company
and attitudes
Provision of fresh ideas and objective
creativity

Outsourcing – Sector Effects

Benefits/Opportunities Risks/Disadvantages
Provides opportunities for niche players to
enter a sector, enabling original sector Privatization by stealth
players to focus on core
Improvement of products and services from Reduction of government control over
the sector sector

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Improved ROI, leading to increased Creation of powerful outsource companies

investment in the sector who gain leverage over a sector
In public sector, policy can be redirected to Possible adverse impact on employment in
focus on improvement of services the sector
Possible reduced consistency of training and
development
May conflict with some stakeholders’
objectives

Outsourcing – National Effects

Benefits/Opportunities Risks/Disadvantages
Increased use of world-wide “best in class” Possible adverse affect on national
capabilities employment
Enables national focus on improved services
Downward pressure on domestic salaries
to citizens and taxpayers
Improved GNP and employment for nations Mismatch of international cultures, belief
who become outsource centers of excellence and traditions
Risks of foreign control of critical resources
and possible subversion
International exploitation of less developed
nations human resources and environment

Most outsourced services are considered failures (60%). Service reliability are the key
drivers for successful outsourcing partnerships.

Outsourcing Logistics- What is the difference between 3PL and 4PL?

A 4PL where they control the cash flow and accounts and inventory for the employing
company, whereas a 3PL simply ensures the building of the product/service.

Purchasing v Procurement
Purchasing refers to actual buying.

Procurement can include different types of acquisition: purchasing, rental, contracting and
so on as well as associate work of:
- Selecting suppliers - Monitoring supplier performance
- Negotiating - Warehousing & receiving goods
- Agreeing terms
- Expediting

Re-Shoring – An Emerging Practice (eg. Adidas)

- Bringing back operations from outsourced destinations to produce near the customer
markets (localization)
- Outsourcing is criticized and seen by some as a “herd mentality”- eg. it is not always a
rational decision to outsource to China
- Expanding to China gives boost to shareholder value and reputation but most cases are
only assessed based on unit cost rather than total cost, so transportation, delay and
incompatibility issues are not taken into account

Labour cost plays a major role in determining the decision to outsource or offshore. China’s
labour costs have increased drastically over the years, whereas other countries have
remained stable. In terms of total cost, 53% of the time, it was cheaper to outsourcing to
America than China.

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Lecture 3
Relationships Management

Recent news: Bombardier (all supply chains affect each other, either directly or indirectly)

What is a Relationship?
Social Exchange Theory Perspective: the essence of any personal relationship is interaction
(individual emit behaviours in each other’s presence, create products for each other of
communicate with each other), on a repeated occasion

Social Network Perspective: a collection of ties of a given kind among pairs of actors;
establishes a true linkage

Business Relations (Inter-Organizational Relationship) - 7 Principles of IORs

1. Separate entity outside organizational boundaries
2. Interactions or linkages amongst organizations
3. Not an entity purely controlled by one organization only
4. Between two or more organizations
5. Collection of both direct and indirect interactions
6. Multi-dimensions; vertical (buyer-supplier) and horizontal (alliance-partners-joint
ventures) [to note; even though an organization is bought, does not mean that their
relationships are bought too]
7. Context specific

An inter-organization relationship is an entity outside organizational boundaries which is

a collection of direct or indirect interactions amongst the actors and organizations
involved.

What Influences a Relationship?

Customer Relationship
Customer is the main driver behind all supply chain relationships
 Competitive landscape has changed over the past decades; customers have become
more demanding – eg. Nike/Adidas: providing customized shoes

What influences a relationship, apart from customer?

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Trust- different levels of trust; organizations must trust each other in terms of performance
targets met, individuals must trust the organization in terms of quality and price

Reputation- being a supplier to high branded companies gives organizations a good

reputation, enticing more customers to buy from them rather than their rivals

Mutual Respect and Interpersonal Relationships- information transfer, not taking

advantage of each other

Loyalty- price loyalty from organization, brand loyalty from customers

Common Goals Objectives- between organizations, all entities in the supply chain to
understand and respect each other’s goals, should be similar goals

Culture- organizational culture; innovation, quality – manifested in different manners

Government Rules and Politics- in terms of taxation policies, minimum quality required +
issues such as BREXIT

Social Pressure- have ethical considerations in mind during the entire product life cycle

National Context- eg. Boeing applied to US economy only, permission power

Localization- eg. Patro case study, all material made in the same area

*photo of class discussion

What Useful Relationship Typologies (Classifications) Would you Suggest?

Typologies of Inter-Organizational Relationships
Key Dimensions:
 Structure
o A dyad (two main actors, eg. buyer-supplier)
o A triad (three main actors, eg. supplier-supplier-buyer)
 Governance (way in which it is managed)
o Formal (legally binding contractual documents & creation of
memorandum/article of association stating in what manner to behave)
o Informal (interpersonal relations based on trust)
 Duration

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o Long-term (over time, you develop trust and mutual understanding, systems
and process and people – collaborative relationships are usually long-term)
o Short-term
 Development stage
o Earlier stages: signing/deciding contract
o Then develop the contract
o Then you multiply the contract towards others in the industry
 Nature of exchange (most important)
o Adversarial (arms-length, transactional) – short term, based on transaction,
does not involve integrated teams, usually does not involve too much
information sharing, interaction driven by cost, always representing company
in the short-term, lower levels of trust [case study example: GM]
o Collaborative (partnering, relational) – long term, win-win mentality, driven by
innovation and quality rather than cost, lot of trust [case study example:
Toyota]

Adversarial Collaborative
Large/Market Number of Suppliers Few
Short-term Time Horizon Long-term
Win-Lose Mentality/Orientation Win-Win
Low or none Risk-Reward Sharing Fair
Low or none Information Exchange High
Infrequent/Few Communication Frequent/Many
Low Levels of Trust High
Low Levels of Commitment High
Superficial Understanding In-depth
Tends to Formal Governance Tends to Informal

When Dealing with External Firms, Where/Why do we Apply Specific Typologies?

Peter Kraljic, published in 1983 and still in use today- in order to classify suppliers
1. Classification – profit impact v supply risk
2. Market Analysis – assess bargaining power
3. Strategic Positioning – identify opportunities and vulnerabilities
4. Action Plans –

BUT- how to we management, measure and differentiate strategic relationships?

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British Standard for Collaboration

1. Awareness- strategic policy and process
2. Knowledge- development of knowledge in relation to business opportunity
3. Internal Assessment- structured look at capability to partner effectively
4. Partner Selection- evaluation and selection of partners
5. Working Together- governance roles and responsibilities for successful outcome
6. Value Creation- building and gaining value and desired results from collaboration
7. Staying Together- monitoring relationship to achieve optimum performance
8. Exit Strategy- support for effective and controlled disengagement when required

Each stage then measured within a maturity category, in which they are graded from A to
D [A being highest, most positive, D being lowest and most negative]

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Lecture 4
Supply Chain Dynamics

Bullwhip Effect (aka Demand Amplification, Forrester Effect, Inventory Variance,

Information Distortion, Demand Variability, Industrial Dynamics or Whiplash Effect)-
application of demand amongst the different tiers of the supply chain

Lead Time = the time between the initiation and completion of a production process

Customer  Retailer  Wholesaler  Distributor  Factory

Bullwhip Effect in Service Industries?

Until recently, there were no good examples of BWE in service industries; eg. supply chain
of an internet service provider. Bullwhip Effect can exist in service industries, although its
form and shape may be different

Causes and Effect of Bullwhip

Causes Effects
Demand variation/business cycles Excess of insufficient inventory
Shortage or excess employees
Price variations
(results in flexible contracting)
Forecasting errors (mistakes in
Inefficient production
determining demand)
Lead time (certain industries have
Delayed deliveries
long lead times)
Lack of communication Poor customer service
Poor public image (eg.
Order batch
documentaries)
Shortage gaming (ordering more
Lost sales
when shortage predicted)
Internal issues
Policy issues (peripheral may CHANGE IN SUPPLY CHAIN

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become central/large product)* PRACTICES

*eg. French policy stated all drivers needed a breath analyzer in their cars

Communication is Important to Counter Bullwhip Effect BUT IS NOT ENOUGH

Despite this, the Bullwhip Effect still exists today. To avoid it, communication between all
parties in the supply chain must be efficient [the blind men and the elephant story]. Supply
chains should be viewed as a system. However, systems create behaviour. Information
sharing is important but must also understand the system.

Need for a Systems View

 Bullwhip effect is an example of system dynamics in supply chain
 As long as human judgements are involved in a supply chain, such effects are almost
inevitable
 Communication of knowledge is important but they key message of beer game (and
supply chain dynamics) is that systems create behaviour
 We must recognize supply chain as a [unified] system

Type of System of Supply Chain

- Unified/Complete – failure to identify supply chains as a unified system can result in
fraud that is unable to hold someone responsible- eg. horse meat scandal
- Dynamic – word of mouth has great effect; bad word of mouth can affect supply chains
largely
- Random System – need for contingency plans, eg. in case of natural disasters
- Organized System (Complex) – internationalization could be beneficial for cost
reduction and skilled employees, but complexity means longer lead times and result in
bullwhip

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- Adaptive System – eg. 20m companies in Coca-Cola’s supply chain, but unable to
control the entire supply chain; supply chain evolve very quickly without anyone being
in charge

Supply Chains as complex, adaptive systems = “complex adaptive systems that emerge over
time into a coherent form, and adapts and organizes itself without any singular entity
deliberately managing or controlling.”

Control vs. Emergence?

“Many supply networks emerge rather than result from purposeful design by a singular
entity. Imposing too much control detracts from innovation and flexibility; conversely,
allowing too much emergence can undermine managerial predictability and work routines.
Therefore, when managing supply networks, managers must appropriately balance how
much to control and how much to let emerge.”

10 Rules of Managing Supply Chains as Complex, Adaptive Systems

1. The greater the level of shared schema (eg. shared work norms and procedures, share
language) among allied firms in a supply chain, the higher will be the level of firm
performance
2. Firms that adjust goals and infrastructure quickly, according to the changes in their
customers, suppliers and/or competitors, will survive longer in their supply network
than firms that adhere to predetermined, static goals and infrastructure and are slow
to change
3. Within a supply network, firms that are cognizant of activities across the supply chain
(including tertiary-level suppliers) will be more effective at managing materials flow
and technological developments than firms that are cognizant of activities of only their
immediate suppliers
4. Successful implementation of control-oriented schemes (eg. ERP, JIT) leads to higher
efficiencies, but it may also lead to negative consequences such as less than expected
performance improvements and reduction in innovation activities by the suppliers
5. The degree of innovation by suppliers is directly proportional to the amount of
autonomy that suppliers receive in working with customers
6. Supply networks that turn over quickly stand a better chance of exposing weak
members and thus gaining higher efficiency than supply networks that are artificially
bound by long-term relationships
7. Modularization of tasks will decrease overall inter-dependencies among firms in a
supply network, and thus offer a higher efficiency when optimizing the overall system
8. Over time, quantum changes will last longer within a supply network than incremental
changes that go against the accepted practices
9. Firms that deliberately manage their supply networks by both control and emergence
will outperform firms that try to manage their supply network by either control or
emergence alone
10. In a supply network, upstream suppliers that are more diversified are more likely to
survive than those that are not

Summary
 Bullwhip effect is demand amplification that occurs between tiers
 Such effects are embedded in supply chain dynamics because systems create behaviour
 Supply chains are complex networks and need to be managed dynamically
 Systems are random, organized and adaptive
 Rules for managing supply network as Complex, Adaptive Systems
Lecture 5
Sustainable Supply Chain Management

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News: Nike to near-shore, in order to double production via automation (emergence of new
technology changes supply chains- unlike norms, supply chains are becoming localize
instead of international)

What does Sustainability mean for Businesses? *Different views*

 “Business has a responsibility beyond its basic responsibility to its shareholders; a
responsibility to a broader constituency that includes its key stakeholders: customers,
employee, NGOs, government – the people of the communities in which it operates” –
Courtney Pratt, Former CEO of Toronto Hydro
 “Corporate social responsibility is a hard-edged business decision. Not because it is a
nice thing to do or because people are forcing us to do it… because it is good for our
business” –Niall Fitzerald, Former CEO of Unilever
 “The business of a business is business” –Friedman
o Thus sustainability is not the problem of the business (he later changed his
view)
 “It is just business as usual for companies. There is a lot of green wash but business and
economic principles have not changed. So sustainability is just another term used to do
business as usual”

The European Commission definition: “…the responsibility of enterprises for their impact
on society”

The Triple Bottom Line

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 People: eg. fair wages, impact on society, labour practices

 Planet: eg. climate change, air pollution, water contamination
 Profits: eg. return investments, profitability, market share

Adopted by most countries and corporations around the world

Three Pillars of Sustainability

The focus should not be on one aspect as the expense of others- all aspects are interlinked,
which should be embedded in all supply chains (not as such in most current supply chains).

Every Company Produces Positive and Negative Externalities

Positives- eg. create jobs, economic development, new technology, innovative working ways
and businesses, development of new skills
Negatives- eg. pollution of environment and impact to climate change, issues of labour
exploitation (health and safety of employees, unfair wages – may cause human rights
issues)

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Many scandals in supply chains in the last 20 years. Improvement in the last couple years,
however.
 Nike publicly accused of using child labour
 Barbie products contained contaminated lead-paint, shown to be poisonous
 Apple accused for causing possible environmental indiscretions
 Horse-meat scandals

Rana Plaza Factory collapsed in Bangladesh; killing over 1000 people – supplying products
to Primark/M&S/etc. Employees were forced to keep working even when fire started in the
building. Only factory owners went to jail, nobody else was held accountable.

Chinese Labour Laws broken by Dell- making people work 30 weeks straight, without
maternity or paternity holiday.

Why do Supply Chains fail so often?

 Complexity of global supply chains- difficult to translate moral ideas into practicality
 Lack of visibility
 Lack of transparency
 Lack of traceability
 Lack of regulation- inability to regulate supply chain that occurs in over x countries
 Lack of accountability/governance- eg. on the way goods are being delivered

UN Principles: unified principles that corporations are directly accountable if illegal labour
acts (eg. child labour)  not legally binding yet though

Status Quo-
 Only 9% of 335 respondents of 2013 KPMG survey say they have complete visibility of
their supply chain
 49% have “limited tier 1 supplier visibility but not tier 2 and beyond”
 Only 53% have a strategy to mitigate risk in their supply chains
 11% of UK businesses say slavery in their supply chains “is likely”
 Apple, which has topped the Gartner Supply Chain Top 25 for the seventh year, said it
found 23 instances of child labour in its supply chain in 2013

Supply Chain Sustainability & Related Concepts

Sustainability has lots of different names and each company comes up with its own (eg.
closed loop SCs, ethical SCs, CSR and SCs, green SCs, sustainable procurement, reverse
logistics, through-life capability, inclusive business, etc.)

There are different perceptions on Supply Chain Sustainability; considering it as a risk that
needs to be managed, an opportunity for innovation (to reduce negative outcomes and
increase positive ones) or as simply doing the right thing for the environment and the
society (not necessarily profitability, eg. recycling).

Sustainable Supply Chain Practices should be Underpinned by a Lifecycle

Approach
Several frameworks on the sustainability of supply chains, however all/majority start from
the moment a corporation sources a product and end at the point where it is recycled
(cradle to cradle thinking).

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Sustainable Supply Chain Decisions Framework

(Christopher, 2011)
Design- using characteristics that do not cause social or environmental harm
Source- ensure suppliers abide by ethical standards (visible tiers required)

(Brammer et al., 2011)

4 stages whereby one can create
a standardized process of how to
select/develop/audit suppliers.

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1. creating a code of conduct, defining sustainability, what is allowed in your SC

2. create a supplier selection criteria, agreement of KPI and performance indicators
3. auditing and constant monitoring of the suppliers
4. continuously evolve and change this code of conduct, speaking to governing
organizations for ways of improvement

When sustainability as a topic is brought up, climate change is the first thing that comes to
mind. However, in the context of supply chains, working conditions is the main issue due to
exploitation of labour. Does not degrade environmental issues, but shows that labour is a
greater issue.

Guest Lecturer: Rajiv Maher

Sustainability in Supply Chain – Focus on Human Rights

 An externality or dark side of globalization in the search of low cost for low-priced
consumer goods in a competitive world
o Garments/textiles/footwear (more focus on the cost of a garment than the
creating procedure of it)
o Building and construction (usually immigrants)
o Computer hardware (most developed in conflict mineral zones, customers
unaware/do not care)

Consumers are more cost-driven than anything else

Nike – called out for slave labour, mid 90s. Also Adidas and GAP – who were unaware of
this process as they outsourced their work, who further outsourced it. This is what began
the concept of supply chain sustainability.

Should a company need a social license to operate?- Green market/ethical consumer?

Having a label of being green, does it make it true? We live in a world of real-time
communication but often the people physical making these product do not have this luxury.

Rana Plaza, April 2013 – Case Study

How could issues like this be prevented? Work with government and unions, could be a
start. Case of management issue!

UN Guiding Principles of Business and Human Rights (2011)

GUIDING PRINCIPLE 13- The responsibility to respect human rights requires that business
enterprises:
a) Avoid causing or contributing to adverse human rights impacts through their own
activities, and address such impacts when they occur;
b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to
their operations, products or services by their business relationships, even if they have
not contributed to those impacts;
c) Should identify general areas where the risk of adverse human rights impacts is most
significant, whether due to certain suppliers’ or clients’ operating context, the
particular operations, products or services involved, or other relevant considerations,
and prioritize these for human rights due diligence. [RESPECT FOR LABOUR]

Many activists trying to hold businesses/multinational accountable; to exploit them for the
activities that they contribute to. Attempt to create hard/binding law; but this was resisted.
Only soft law was created, annual meeting about business human rights.

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Examples of non-legal “complicity” could be situations where a business enterprise is seen

to benefit from abuses committed by others, such as when it reduced costs because of slave-
like practices in its supply chain… Even though enterprises have not yet been found
complicity by a court of law for this kind of involvement in abuses, public opinion sets the
bar lower and can inflict significant costs on them. Corporations themselves “police” their
own activities, sometimes.

HR Issues in Supply Chains

 Child labour
 Working conditions
 Living wage (eg. decent lifestyle)
 Health and safety
 Denying of unionization of freedom of association (eg. in China)
 Conditions for migrant workers (eg. fruit-pickers)

UK Modern Slavery Act 2015- any company that carries out business in the UK with a
global turnover exceeding £36m must produce a report on modern day slavery in its supply
chains (eg. their policies, labour type, descriptions) – so corporations can no longer say
that they were unaware of the labour exploitation.

Response to Pressure on Companies

 Mainly private sector/business lead through voluntary initiatives and standards –
minimal governmental or legal role (multi-stakeholder initiatives)
 Creation of corporate “sustainable of human rights” supplier codes or policies
 Screening of Tier 1 suppliers visa self-assessment questionnaires around policies and
practices
 Audit levels dependent on sector (policing themselves)

Multi-Stakeholder Initiatives (MSIs)

 No single solution
 Businesses must be financially profitable and response- what should be prioritized?
 “interactive process in which business, civil society organizations and possibly other
stakeholder groups interact to make business processes more socially and/or
environmentally sustainable) –Hujistee 2012
 Mene and Palazzo (2012) identify MSI input legitimacy criteria as
o Inclusion, procedural fairness, consensual orientation, and transparency and
output legitimacy as;
o Rule coverage, efficacy and enforcement
o Consensus-building
What is the point of such initiatives if some of the largest companies still do not adhere to
human rights? Certain companies put “fundamental rights” for the labour on their
contract.

Rana Plaza Accord- unprecedented in its scope and legally binding in nature, The Accord
covers 180 brands to share costs, responsibilities and risk, providing a cost-effective way for
smaller companies to ensure safety standards; if they don’t adhere to it legal action can be
taken against them.

Benefits/Challenges of MSIs
 The term “stakeholder involvement” is open to interpretation (Fransen and Kolk, 2007)
 Only 27% of the multi-stakeholder standards include joint monitoring and
implementation of both company and societal actors (Fransen and Kolk, 2007)

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o Can we really trust businesses to police themselves?

Dark Side of CSR Impact Assessments (Lund Thomsen)

 Ethical and political dilemmas that arise in the process of carrying out impact studies
 May do more harm than good to the intended beneficiaries – developing country firms,
farmers, workers and communities – unless these ethical and political dilemmas are
given serious consideration
 Last minute orders – stress on workers
 Few academic studies on CSR in global value chains that seek to investigate how
economic, social and environmental issues interact in developing countries
 Impact assessments of CSR standards criticized for using anecdotal evidence, having no
baseline data for allowing for systematic comparison of indicators over time (cannot
determine x after one day of analyzing)
 Not employing control groups, and generalizing findings based in single of few
snapshot case studies – tilted towards interests of the funder
 Obtaining accurate information from stakeholder interviews; workers may have been
coached to provide particular answers to auditors
 Double book-keeping systems (to show auditors false times of work)
 Informed consent? Illiteracy
 Workers that openly criticize their employers may have their salaries reduced, be fired,
physically harassed, and/or arrested/thrown in jail, particularly where local networks
exist between employers and police officers
 Are assessments/auditors so neutral and dispassionate?
 CSR impact assessment is a story to be written by those conducting the assessment,
involving negotiation and resistance strategies by the assessors and those being
assessed
 Auditors depend upon repeat business have no incentives to aggravate their clients

Impossible for auditors to be independent? (slides)

Continuous Challenges
 How successful have the corporate responses been to tackling HR abuses in the SC?
 The stories and events of abuses continue…
 However, individual companies have made improvements such as original guilty
parties such as Nike, Adidas and Gap

Some find a difference between labour-force being happy and being protected by human
rights…

Easy to bring up problems that associate with the 47 Human Rights, therefore easier to
implement. But change happens slow! However, no resistance to not implement problems
not associated with the 47 points.

Lecture 6
Supply Chain Risks

News:
 Robot revolution helps Adidas bring shoemaking back to Germany
o First time in 3 decades

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 Nike’s focus on robotic threatens Asia’s low-cost workforce

o Nike has 200 less members in its supply chain, compared to what it had 5years
ago

What is Risk?
 Risk is the likelihood of a negative outcome.
 Not focusing on financial risks (eg. return on investment)- focus on unplanned events in
the supply chain, and how to manage them.
 To have a risk, there must be an idea of uncertainty. If there is certainty, there is no risk.

Risk Management
 We cannot eliminate risk in all parts of business, no matter how much fore-planning
goes into a process. Therefore, we need to learn how to manage risk.
 Risk Management is the process of defining and analyzing risks, and then deciding on
the appropriate course of action in order to minimize these risks, whilst still achieving
business goals.
 Continuous process
 Cost-Benefit Analysis in risk migration strategies

Managing/Mitigating Risks
Risk Mitigation covers efforts taken to reduce either the probability or consequences of a
threat

How can Risks be Managed?

 Visibility  Is the risk too great?
o No- react only o Yes- avoid it
 Can you/do you wish to invest?  Can someone else manage it better?
o No- ignore it o Yes- transfer
 Conscious decision?  Do you have capital?
o Yes- accept it o Yes- mitigate

First Step: Identify and Map the Risk

Enterprise Vulnerability Mapping (example below)

Disruption Probability (Low-

High) v Consequences (Light-
Severe)

Using Specific Tools (eg.

Bloomberg Terminals)
BT allows to map entire supply chain of supply chains (US Legislation for all companies to
show their supply chains); Bloomberg condenses this information- allows companies to see
if competitions have same suppliers (can dictate buyer-power)

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BT allows maps out areas of natural disasters and their probabilities, so companies can
predict where to focus their productions and where not to (eg. Japan would be a dangerous
zone)- requirement of a severe contingency plans, such as increase in productions in
another area

Risk Management in Supply Chains

 “Supply Chain risk management is the systematic identification, assessment and
quantification of potential supply chain disruptions with the objective to control
exposure to risk or reduce its negative impact on supply chain performance”
o Risk management is used interchangeably
 Potential disruptions can either occur within the supply chain (eg. insufficient quality,
unreliable suppliers, machine break-down, uncertain demand, etc.) or outside the
supply chain (eg. flooding, terrorism, labour strikes, natural disasters, large variability
in demand, etc.)
 Management of risk includes the development of continuous strategies designed to
control, mitigate, reduce or eliminate risk

Organizations are increasing exposed to risk because of:

o Increased out-sourcing
o Increased offshoring
o Globalization
o Reduction in supplier base
o Increased demands from customers
o Shorter product life cycles
o Focus on cost-cutting
The complexity and inter-connectedness of modern supply chains increases their
vulnerability to disruption. Therefore, organizations must proactively manage supply chain
risk.

Example of Supply Chain Breakdown

 Financial crisis
o Created much consolidation, lots of businesses went bankrupt, lead to more
vertical integration, was an unforeseen event that occurred outside the SC
 Flu vaccine in the US
o Two large companies supplied vaccine, one was contaminated and closed
down, cause dramatic impact, price rose, impact as US is a money-drive health
service
 Lightning strike on a supplier of Nokia & Ericsson (Phillips factory)
o Supplier specific type of chip for many devices, entire factory burned down due
to lightning strike, Nokia has strategy for alternative factory production and
managed to continue operations in two weeks, Ericsson did not have
alternative supply strategy, it was a key component, searched for six months for
supplier and did in-house meanwhile which was not the same quality, costed
them $600m (believe it was a major reason for bankruptcy)
 Outsourcing from Mexico to Asia
o GM car component supplier, consultant told them major savings would happen,
but experience congestions at port and strikes, ended up flying out these those
charter flights, costed them $20m
 Bankruptcy of Chrysler supplier
 Fukishima
o Earthquake and tsunami, impacted Toyota supply chain, complete break down

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7/11 pays attention to supply chain risk very much- have contingency plans for
earthquake- helicopters did their shipping

Identifying Supply Chain Risks and their Drivers

Endogenous Uncertainty
 INSIDE THE SC
 Turbulent conditions are characterized by frequent and unpredictable:
o Market change
o Technological
o Supplier going bankrupt
o Facing customer issues
o Changes in technology

Exogenous Uncertainty
 OUTSIDE THE SC
 SC disruptions due to the environment
o Continuous risk (eg. inflation, exchange rates)
o Discrete events (eg. disasters)

Can reduce probability of endogenous uncertainties, whereas for exogenous uncertainties,

companies attempt to reduce the consequences

SC Risk Perspectives
All risks must be classified to its source

Chopra and Sodhi (2004) – 9 Types of Risks

Category of Risk Drivers of Risk
Disruptions - Natural disaster
- Labour dispute
- Supplier bankruptcy

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- War & social unrests

- Dependency on single source of supply
- High capacity utilization at supply source
- Inflexibility of supply source
Delays
- Poor quality or yield at supply source
- Excessive handling
- Information infrastructure failure
Systems - System integration or extensive systems networking
- E-commerce
- Inaccurate forecasting (eg. long-lead times)
Forecast
- Bullwhip effect
- Vertical integration of the supply chain (eg. used with
Intellectual Property other customers)
- Global outsourcing and markets
- Exchange rate risk
- Single sourcing strategies
Procurement (Supplier) - Industry-wide capacity utilization
- Long-term v short-term contracts
- Post contractual shifts in power
- Number of customers
Receivables (Customer) - Financial strength of customers (takes too long to get
payment from customers, eg. Asda not paying farmers)
- Rate of product obsolescence
- Inventory holding costs (excess or under)
Inventory
- Product value
- Demand and supply uncertainty
- Cost of capacity
Capacity
- Capacity flexibility

Supply Chain Risk Management Approaches

Generic Supply Network Risk Framework

 Map (company A may own company
B, C and D  all of whom have a
common supplier, E. If E goes
bankrupt, then A is in deep trouble)
 Identify
 Assess
 Manage
 Form strategy
 Implement strategy

SC Risk Management Framework

(Chapter 10)
Understand the SC  Improve the SC 
Identify critical paths  Manage critical
paths  Improve network visibility 
Establish a SC continuity team  Work with suppliers & customers to improve SC risk
management

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Strategies for Reducing SC Risk: Developing Supplier Relationships

 Shared investment & reward policies
 Shared research and development activities
 Finance (eg. providing finance to suppliers)
 Information sharing (eg. sharing sales, capacity, inventory data)
 Transparency (or visibility) in the supply chain (eg. computer assisted ordering,
electronic data interchange)
 Alignment of supply chain operational objectives

EVERY SUPPLY CHAIN MITIGATE/RISK MANAGEMENT STRATEGY IS A TRADE-OFF- EVEN

THE COSTS AND BENEFITS REAPED. “Perhaps the biggest challenge companies fact is
mitigating supply-chain risks without eroding profits”.

GM had a problem in their cars, in which touching the key of a car during drive would
“lock” the engine and prevent the airbag from coming out. They believed that the cost of
compensation would be lower than the cost of fixing each car, therefore they did nothing.
Major law-suit filed, still ongoing.

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Lecture 7
Supply Chain Integration- Guest Lecturer

Ford River Rouge, 1928 – All facilities needed are within the compound of Ford, from raw
materials until the end product, fully integrated. One of the only suppliers they had was
Standard Oil, who controlled 90% of the US oil consumption.
Smartville, JV of Daimler and Mercedes-Benz, 1998 – All JIT production, 8,5h for an entire
car to be made. Direct production line, they have no inventory but all demands are
immediately sent to all suppliers too. Small part of supply chain but still very highly
integrated.

Manufacturing Productivity Development

 Scientific Management, 1880-1930 (Taylor)
o Productivity of factory
o Specialization of work tasks
o Organization of functions within an organization
 Emergence of Supply Chains: 1950s
o Specialization of processes
o “containerization” and development of shipping
o Organization according to processes within the chain
 Globalization: late 1980s
o Vast relocation of processes across the globe
 What will happen in the next 5 years? Due to Brexit and Trump
o Ever narrower specialization into sub-processes
o High supply chain intermediation
 Effects of Technology: ICT, ERP, CRM: late 1990s
o Sourcing directly from producers- by-passing retailers: online shopping, e-
business
o New possibilities for supply chain disintermediation

How have the following companies disrupted (service) supply chains? – Airbnb, Amazon,
Uber, MeetDoc, Wolt, Trivago, Momando
 Some effects in travel industry:
o Brick and mortar travel agencies – operations online
 Single service provider linking customer with accommodation 
number of providers sharing the networking function (intermediation)
o Travel agency actively providing solutions for the (passive) customer 
customer actively serving self through the web interface
 Manual labour in the agencies replaced by automation through
software and hardware
 Customers can self-compare a huge range of accommodation prices
o From the customer’s perspective: lower prices, more choices, better
transparency to services
o From the provider’s perspective: more competition, more transparency, higher
efficiency of agencies, better demand information available

Vertical Integration
3 main choices – direction (towards supplier or customers?), span (narrow or far in supply
chain?) and balance (selling to and purchasing from the same supply chain or another?)

Direction:

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Upstream: Samsung
Downstream: Apple

Span:

Narrow: own part of supply chain, eg. H&M (own stores but outsourced production)
Wide-Process Span: own entire supply chain, eg. Zara (own production and own
distribution)

Balance:

Balance: part of only one supply chain, no interaction with other companies/supply chains,
eg. Ericsson
Less than Full Balance: part of several supply chains, eg. Nokia
*can be seen from the case where the factory burned down but Nokia asked other supplier
to increase production but Ericsson had no alternative and suffered huge losses due to this

Supply Integration to Benefit All?

Benefits of looking at the whole supply chain include:

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 Helps to identify the significant links in the networks

 Helps focusing on long-term issues
 Improved understanding of competitiveness?

Walmart Supply Chain- Video

 How come so profitable when selling things for so cheap?
 Employees are underpaid, they have no health benefits
 Most employers rely on public health services- receive money from taxpayers
 Employees who speak out are often dismissed
 Items made abroad, transported and stored in warehouses
 Terrible working conditions
 Due to strict production times, all members in supply chain force their employees to
work under poor conditions too
 After Rana Plaza incident, Walmart signed contract to improve working conditions in
Bangladesh

Push-Me-Pull-You

Push Planning and Control

 Demand forecast
 Centralized operation planning and control based on forecast
 Different parts of production produce against the forecast
 Characteristics of Materials Requirements Planning (MRP)
o Anticipated future demands
o Inventory in all stages, which will buffer the company
o Can benefit from economies of scale, working at full capacity
o Copes with product and process complexity
o Ok even for infrequent, low-volume parts
 Strategies
o Production decisions based on long-term forecast
o Ordering decisions based on inventory & forecasts
o Problems with push strategies
 Inability to meet changing demand patterns
 Obsolescence
 Bullwhip effect:
 Excessive inventory
 Excessive production variability
 Poor service levels
Pull Planning and Control

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 Produce exactly that what is demanded by order, no forecasting

 This manner “pulls” through the entire supply chain (bullwhip effect?)
 Characteristics of Just-in-Time (JIT)
o Reacts to demand
o Best for simple products and routings
o Requires level scheduling
o No inventory, must have quick reaction times
 Strategies
o Production demand driven
 Production and distribution coordinated with true customer
demand
 Firms respond to specific orders
o Pull strategies result in
 Decreased inventory levels at retailers and manufacturers
 Decreased system variability
 Reduced production lead times
 Better responsiveness to changing markets
o But…
 Harder to leverage economies of scale
 Doesn’t work in all cases, especially when lead times are long

Choosing between Push and Pull

Supply Pipeline Performance – P Time > D Time

Lead Time- sourcing to delivering the final product to the end customer
Order Fulfilment- time between customer ordering product and receiving it (varies per
customer)

Producer’s perspective: if big difference between P Time and D time, companies are likely to
keep large amount of stocks in order to shorten this time.

Uncertainty Framework

Demand Uncertainty- [1] functional products, something customers want as soon as

possible and in a relatively cost efficient manner – steady demands (eg. oil and gas) [2]
innovative products, such as iPhone X and other fashionable products – unsteady demands
Supply Uncertainty- (eg. energy, such as renewable energy like wind and solar are usually
only possibly during the day, therefore it is uncertain how the supply can be managed)

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The usefulness of this framework-

4 different quadrants, can come up with different supply chain strategies for each one
 [1] go for efficient strategy
 [2] go for responsive strategy
 [3] go for risk-hedging strategy (eg. build system with different suppliers)
 [4] go for an agile strategy (eg. be responsive and react on the supply and demand
side of uncertainties)

Decoupling Point – The Push-Pull Boundary

Using a strategic inventory

Push works well for downstream strategies- efficiency during producing components
Pull works well for demands- very responsive and reactive

Strategic inventory = decoupling point = when you separate supply from demand in order
to have a buffering area

Framework allows strategic inventory at different points within the supply chain

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Push or Pull depends on where you locate the decoupling point within the supply chain

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Lecture 8
Supply Chain Performance and Customer Value

News: Mitsubishi faked aircraft and vehicle parts data (aluminum standards not legally
acceptable, buyers unable to measure their performance, very lucky that no damages were
caused) // Asia Pacific leaders to boost supply chain performance by 10%

Why Measure Performance?

 Strategic decision making and learning
o Eg. cost efficiency
 Influence behaviours and attitudes
o Eg. bonuses in banking
 Reporting and compliance
o Eg. legal obligations

A performance measurement system fulfills three main aims: acquisitions, analysis and
representation of information (Micheli and Mari, 2010) – if not collecting key data about
your supply chain, you are not measuring it

Why is it Important to Measure SC Performance?

 Up to 75% of expenditure spent on managing supply chain (Trent 2004)
 “Supply Chain is the dominant function within modern organizations” (Miles and Snow,
2006)
 Supply chains compete, not companies
 Supply chains are as strong as their weakest links

eg. – Boeing 787

Very broadly, 19 parts – out of which Boeing manufactures only 3 and the rest are
outsourced. Therefore more important to manage the supply chain than internal
operations.

SC Performance
“The financial impact of purchasing and supply management goes well beyond cost
reduction. It extend to such critical performance areas as business growth, profitability,
cash flow and asset utilization” (Ellram and Liu, 2002)

If we get it wrong-
 Failure to meet consumer/end-user expectations
 Sub-optimization of company performance
 Missed opportunity to outperform the competition
 Conflict within the organization and supply chain

But- there is no evidence that meaningful measures that span the supply chain actually
exist; there is no silver bullet (no “one fits all”)

When SC performance is discussed, it must be discussed in context, which means that it

must be customized.

Use of Big Data in Supply Chains

Recent times show availability of data that was not available before. Different types of
data/methods. This impacts today’s supply chains a lot.

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Eg- beer company used Twitter geographical areas to determine where their product was
talked about the most

Emergency of Big Data as a Performance Measurement Tool

 Allows firms to see:
o Waste, inefficiencies
o CO2 emissions
o Labour abuses
o Trends, patterns
 Timely, accurate and useful data
 Time to collect and analyze data sometimes gets in the way of actually improving value
for all stakeholders
 Data is a means to achieve competitiveness, data overload is an important challenge
for performance measurement
 An emerging practice for supply chains (retrospective and historical trends – can have
disadvantages too)

Technology does not always counter all problems!

Challenges in Supplier Performance Management

Video Notes- [For sustainability]
 Responsible sourcing- brand most concerned
 Meeting expectations for one company does not meet for others; may have similar too
 Most companies want same assurances but have different manners of doing so-
suppliers struggles to establish the same programme with different needs
 Adoption of common system by companies is helpful for suppliers- prevents
duplications, enhances collaborations and coordination
 Common/consistent audit methodologies  to spend less time on this and more time
on the product management itself for better usage
 Natural leaders are used as examples
 Top-down model needs to become bottom-up to help suppliers
 Companies should share information and policies

Performance measurement hinders performance?

Simple solution: unify, come up with a single-compliance strategies  but they are
competitors, they are trying to get ahead of each other, thus difficult to cooperate  but
they compete for ethical behaviours also therefore there is a possibility for this to occur in
the future

Principles for Performance Measurement

 Consider stakeholders while developing the PM system, eg. shareholders, employees,
customers, suppliers and society (CSR)
 Consider the introduction of joint indicators
 Balance financial and non-financial indicators
o Emphasis on bonuses; companies will work to get the bonuses, not to innovate
or to be more efficient
 Test the indicators and develop an anti-gaming strategy
o About bullwhip effect
 PM should be linked to strategy
o Primark  cost efficiency
o Prada  quality
 Creating value for the customer is key

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o SCM is as much about customers; begins with this as they put demand into the
market
o Customer Value drives changes and improvements in the supply chains

Dimensions of Customer Value

Customer value is “the way customer perceives the entire company’s offerings, including
products, services and other intangibles”. (Simchi-Levi)
1. Conformance to requirements
 Innovation products? Need to be fast-responsive company (eg. Zara)
 This requires flexible productions, cost-efficiency
 Too much flexibility and responsiveness could also prove to be a problem
2. Product selections
 Product range- one type of product, suppliers pretty fixed (eg. Subway)
 Mega-stores- large variety of products, suppliers larger (eg. Sainsbury’s)
 Online stores- connecting buyers and sellers (eg. Ebay)
3. Price and brand
 Offerings are segmented
 eg. different types of restaurants have different pricing strategies
 eg. McDonald’s suppliers are common whereas SubliMotion has the most elite
suppliers
4. Value-added services
 Additional services to improve profits
 Differentiate from competition
 More important now than before because:
o Increased commoditization of products
o Need to get closer to customers
o Increase in information technology capabilities that make this offering
possible
 Examples:
o B2B services offer additional services to increase revenue
o Most of IBM’s income today is from services
 What does good customer service look like? (eg. Lexus [below])
o Products
 Emphasis on quality
 Perfection in product engineering
 Individual identity
o Sales and Services
 Unique dealer network focused on the customer
 Customers as individuals
 Customers as advocates
5. Relationships and experiences
 Build relationship with customers
o This makes it more difficult for customers to switch to another provider
o New services to the customer will require appropriate supply chain
measurement systems
o eg. Warwick Printers- simply pay for pages printed, all other maintenance
handled by them, interesting deal as core competence is education, not
printing

Different Ways to Measure SC for Customer Value

 Service level
 Customer satisfaction
 Supply chain performance measures

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o Total SCM costs (%-expenses)

o Cash to cash cycle times (days-asset utilization)
o Upside production flexibility (days-flexibility and responsiveness)
o Delivery performance to request (%-supply chain reliability)

SCM Performance Measurement Models

- Balanced Scorecard
- SCOR
- Logistics Scoreboard
- Activity-Based Costing (ABC)
- Economic-Value added (EVA)

Balanced Scorecard
BSC is a conceptual framework for translating an organization’s vision into a set of
performance indicators distributed among four perspectives:
- Financial
- Customer
- Internal Business Processes
- Learning and Growth

Indicators are maintained to measure an organization’s progress towards achieving its

vision.

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The SCOR Model

 Supply Chain Operations Reference Model- broad, but highly structured and systematic
framework to help supply chain improvement
 Each link in the chain is made up of five types of processes:
o PLAN- focuses on meeting customer demand
o SOURCE- high quality raw materials that provide the consumer with the
experience they want
o MAKE- high quality and consistency and experience
o DELIVER- ensuring that the product gets there in the right quantities, on time
and in perfect condition
o RETURN- honesty, empathy and rapid, free and response and also green
agenda
 Critics-
o Lacks a people/learning perspective
o Rather prescriptive of 5 stages, often these decisions are made jointly

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EXAMPLES-
Not looking to be flexibility, it looks to increase flexibility
Not looking to be cost-efficient, it looks to increase cost-efficiency

SC Performance Measurement: Final Thoughts

 SC performance measurement is a central concept to any business initiative

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 Measuring one aspect of performance can have detrimental effects on another; we

must recognize the tradeoffs involved
 Often there is no such thing as a “perfect” measure: use a range of measures
 Too much emphasis on the bottom line can lead to short termism
 SCOR and BSC are the frameworks that can be used for SC performance
 Always consider added value for the customer
 Need to consider different stakeholders; shareholders, society, etc.

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Guest Presentation – Tom Gandeborn (Warwick Graduate)

Integrated Logistics – Kuehne + Nagel

Manages logistics for:

 British-American Tobacco  Sainsbury’s
 EE  GSK
 Costa Coffee  Heineken
 Waitrose  Apple
 Ministry of Defence  Amazon
 Rolls Royce  Diageo

About:
- 1300 locations in 110 countries with 70k employees
- 3PL  4PL (3 is transactional based, cost-effective solutions; 4 is about finding value in
the supply chain, from background cost to source of competitive advantage)

Transport Cost Optimization

- rates optimization
- load optimization
- modes
- equipment
- route
- incoterms

Much synergy within the industry of integrated logistics

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Lecture 9
Revision Session

News: Tighter standards of conduct for supply chains (French legislation); holds companies
to account about whether or not their supply chain is ethical; they must follow up their
supply chains – now binding so companies can be taken to court- UN laws are not binding
yet  allows better supply chain monitoring

Exam Brief
- 2 hours
- Question 1 – mandatory
- Question 2 and 3 – CHOOSE ONE
- Each question worth 50%

Questions will be combination of different topics (combinations of 3 or 4 lectures)

Preparation
- Lecture slides are good starting point but are not enough
- Read all key sources in slides
- Read relevant textbook chapters
- Learn key models/concepts introduced during model – and apply
- Revisit case studies and solve questions
- See if can apply “news” in theory

During Exam
- Time management // Read questions carefully // Answer the question
o Spend 20m planning
o Spend 45m per question
o Spend 10m rereading
- DEC  Define, Explain, Critique
o Define -
o Explain – using frameworks
o Critique – criticize the implementation of framework
- Avoid laundry list answers
o Do not write everything you know about the topic, answer the question,
ensure there is relevance

TRY TO REFERENCE – NOT PENALIZED IF NOT REFERENCED, BUT IS GOOD TO DO SO

Guidance
Exam questions are not designed to catch you out and there should be no surprises. So to
get top marks, you must be able to demonstrate:
- You understand/can define the basic principles underlying the question
- You can demonstrate an understanding of key models and make the link between
theoretical and practical application of these models
- You can bring in relevant cases or real-world examples to demonstrate your critical
understanding

Previous Exam Questions

1. What is a Balanced Scorecard and why do organizations use BSC for supply chain
management?

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Sample answer- [good aspects] good definition, historical application showing good
knowledge, good introduction also [bad aspects] very description, second paragraph has
questionable relevance to question, missing parts on which they will gain more parts, eg.
little explanation and critique shown – mark would be between 55%-60%.

2. Describe how IT systems can be used to drive cost out of a supply chain.

Can talk about this in general or take an example of a supply chain and elaborate on that.

Potential answer-
a) Define IT systems and cost drivers
b) Example of IT systems (eg. big data, info sharing) and cost drivers (eg. people,
innovation, facilities)
c) How these systems reduce costs (use company examples, eg. amazon drones)
d) SCOR- would be good framework to use (draw this out)
e) Critique each example used (eg. of big data)
See slide for full paragraph

3. A European PC/Laptop manufacturer decides to move the production of a key

component to one of their offshore plants in China. After some time, they decide to
outsource from Taiwan, and finally they decide to re-shore this operation back to
Europe. Please discuss the potential underlying reasons behind each of these three
decisions by using at least two outsourcing frameworks from the module. In answering
this question, you can make logical assumptions to avoid simplistic descriptions and
provide a scenario that is realistic and complex. Make sure to indicate all of your
assumptions.

To China from Europe  lower operating costs, keep operations internal, benefit from
economies of scale, ability to access better competencies.

Why from China to Taiwan?  [link to above] lower operation costs/better competence =
the benefits were not realized, Taiwan lower costs and better capabilities. Slack’s
outsourcing decision framework.

Why Taiwan to Europe?  How supplier in Taiwan unable to meet these expectations.
Welsch and Nayak (1992). Example of Adidas, bought back production to Germany due to
lower production costs.

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