1/14/2024 0 Comments Sparkle one facilities![]() Companies and supply chains continually adjust their mix of responsiveness and efficiency as situations change. The table below summarizes what can be done to guide the five supply chain drivers toward responsiveness or efficiency. WHEN TO BE EFFICIENT AND WHEN TO BE RESPONSIVE This enables companies in these supply chains to respond quickly to situations and new market demands in the high-change and unpredictable world of electronic devices (smartphones, sensors, home entertainment and video game equipment, etc.). Companies in these supply chains, the manufacturers, distributors, and the big retailers all collect and share data about customer demand, production schedules, and inventory levels. An example of this is the supply chains that serve the electronics market they are some of the most responsive in the world. 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. 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. The power of this driver grows stronger every year as the technology for collecting and sharing information becomes more wide spread, easier to use, and less expensive. Transportation can also be made more efficient if it is originated out of a central hub facility or distribution center (DC) instead of from many separate branch locations. The use of transportation modes such as ship, railroad, and pipelines can be very efficient. Efficiency can be emphasized by transporting products in larger batches and doing it less often. And now Amazon is expanding and operating its own transportation services in high volume markets to be more responsive to customer desires. FedEx and UPS are two companies that can provide very responsive transportation services. ![]() ![]() Many companies that sell products through catalogs or on the Internet are able to provide high levels of responsiveness by using transportation to deliver their products often within 48 hours or less. Responsiveness can be achieved by a transportation mode that is fast and flexible such as trucks and airplanes. (click on screenshot to see larger image - from Cincinnati Seasonings case study) 4. An example of this is the way e-commerce retailers serve large geographical markets from only a few central locations that perform a wide range of activities. Efficiency can be achieved by operating from only a few locations and centralizing activities in common locations. For example, fast-food chains use location to be very responsive to their customers by opening up lots of stores in high volume markets. LOCATIONĪ location decision that emphasizes responsiveness would be one where a company establishes many locations that are close to its customer base. Also, economies of scale and cost savings can be gotten by stocking inventory in only a few central locations such as regional distribution centers (DCs). Efficiency in inventory management would call for reducing inventory levels of all items and especially of items that do not sell as frequently. 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. Responsiveness can be had by stocking high levels of inventory for a wide range of products. Further efficiency can also be gained by centralizing production in large central plants to get better economies of scale, even though delivery times might be longer. If efficiency is desirable, then a company can build factories with very little excess capacity and have those factories optimized for producing a limited 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 delivery times would be shorter. This driver can be made very responsive by building factories that have a lot of excess capacity and use flexible manufacturing techniques to produce a wide range of items. The five drivers are illustrated in the diagram below: Decisions made about how each driver operates will determine the blend of responsiveness and efficiency a supply chain is capable of achieving. The five drivers provide a useful framework for thinking about supply chain capabilities. Adjust the supply chain drivers as needed to get those capabilities. As you investigate how a supply chain works, you learn about the demands it faces and the capabilities it needs to be successful. Each of these drivers can be developed and managed to emphasize responsiveness or efficiency depending on changing business requirements. Supply chain capabilities are guided by the decisions you make regarding the five supply chain drivers.
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