Question

1.) Define the key metrics that track the performance of the supply chain in terms of each driver.

2.) Explain why achieving strategic fit is critical to a company’s overall success.

Answer 1

Que-1

Facility-related metrics:

• Capacity

• Utilization

• Processing/setup/down/idle time

• Production cost per unit

• Quality losses

• Theoretical flow/cycle time of production

• Actual average flow/cycle time

Inventory-related metrics:

• Cash-to-cash cycle time
• Average inventory
• Average replenishment batch size
• Average safety inventory
• Seasonal inventory
• Fill rate
• Fraction of time out of stock
• Obsolete inventory

Transportation-related metrics:

– Average inbound transportation cost

– Average incoming shipment size

– Average inbound transportation cost per shipment

– Average outbound transportation cost

– Average outbound shipment size

– Average outbound transportation cost per shipment

Information-related metrics:

– Forecast horizon

– Frequency update

– Forecast error

– Seasonal factors

– Variance from plan

– Ratio of demand variability to order variability

Sourcing-related metrics:

– Days payable outstanding

– Average purchase price

– Range of purchase price

– Average purchase quantity

– Supply quality

– Supply lead time

Pricing-related metrics:

– Profit margin

– Days sales outstanding

– Incremental fixed cost per order

– Incremental variable cost per unit

– Average sale price

– Average order size

– Range of sale price

– Range of periodic sales

Que-2

Necessity of strategic fit:

• A Competitive strategy defines the set of customer needs a firm seeks to satisfy through its products and services, hence a fit and synchronization is a pre-requisite
• Supply chain strategy determines the infrastructure needed, the structure of the supply chain network and the nature of material procurement, transportation of materials, manufacture of product or creation of service, distribution of product for any organization. Amalgamation of all above can give the right strategic fit to deliver business successfully in today’s cut throat market
• The competitive strategy and all functional strategies must align together to form a coordinated overall strategy
• The different functions in a company must appropriately structure their processes and resources to be able to execute these strategies successfully