Strategic Supply Chain Design

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Title: How To Do Strategic Supply-Chain Planning. Authors: Sodhi, ManMohan S. Source: MIT Sloan Management Review; Fall2003, Vol. 45 Issue 1, p69, 7p Document Type: Article Subject Terms: *BUSINESS planning *MANAGEMENT science *STRATEGIC planning *SUPPLY chains Abstract: Any company that has a global supply chain should consider introducing its strategic left hand to its operational right hand. Senior managers formulate strategy to maximize shareholder value; supply-chain planners run optimization models to minimize costs. Consider a strategic supply-chain planning exercise at a polyvinyl chloride (PVC) manufacturer that we will call Acme Vinyl Co. Acme's North American revenues came from PVC for building (55%), packaging (15%), consumer goods (10%), the electronic industry (10%), the automotive industry (4%) and from non-PVC products (6%). Although business-strategy formulation also uses tools and flame-works, it requires much more creativity than tactical planning. For tactical supply-chain planning, the decision options and the factors affecting them (production capacity, distribution capacity, variable costs, demand forecast) are clearly defined. Optimization models for tactical supply-chain planning and models for strategic supply-chain planning differ only slightly in their design, but markedly in their use. In scenario planning, senior managers build internally consistent, alternative views of possible future outcomes. Full Text Word Count: 4476 ISSN: 1532-9194 Accession Number: 11162982 Database: Business Source Premier

How To Do Strategic Supply-Chain Planning

Senior managers formulate strategy to maximize shareholder value; supply-chain planners run optimization models to minimize costs. Combining scenario planning with supply-chain planning achieves the best of both worlds, which leads to long-term competitive advantage. Any company that has a global supply chain should consider introducing its strategic left hand to its operational right hand. Strategic supply-chain planning that combines aspects of business-strategy formulation with aspects of tactical supply-chain planning can make each far more valuable to the planning effort than either would be alone. Strategic supply-chain planning is the Pegasus of strategy: It can soar, but it also needs to keep its feet on the ground. Although companies routinely weigh long-term supply-chain-related decisions in light of alternative sources of supply, new geographic markets or new products, various levels of management use different approaches, often in isolation. Senior managers make such decisions as part of formulating business strategy; supply-chain planners, as an extension of their tactical supply-chain planning. How should companies ensure that relevant supply-chain details inform the business-strategy formulation and that strategic direction and the supply chain are in alignment? They can do so through early communication between senior managers and supply-chain planners, which shortens strategy-implementation time while letting each group pursue its forte: senior managers formulating strategy to maximize shareholder value; supply-chain planners running optimization models to minimize total supply-chain costs.

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One Company's Story
Consider a strategic supply-chain planning exercise at a polyvinyl chloride (PVC) manufacturer that we'll call Acme Vinyl Co. Acme's North American revenues came from PVC for building (55%), packaging (15%), consumer goods (10%), the electronic industry (10%), the automotive industry (4%) and from non-PVC products (6%). At the end of the 1990s about 4% of those revenues came from Asia. Acme had been seeing revenue growth for several years, mostly as a result of acquiring...
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