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Write a short summary to describe the 3 levels of Strategic Planning (No more than 400 words)

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Chapter 2

Supply Strategy

Key Questions Addressed in Chapter 2

How can supply and the supply chain contribute effectively to organizational objectives and strategy?

How can the organizational objectives and strategy properly reflect the contribution and opportunities offered in the supply chain?

Three Levels of Strategic Planning

Corporate: Decisions and plans that answer:

What business are we in?

How will we allocate resources among these businesses?

Business unit: Decisions mold the plans of a particular business unit to contribute to corporate strategy

Function: Plans concern:

How each functional area contributes to business strategy

Allocation of internal resources

Supply Strategy Interpreted in Organizational Strategy

Supply Strategy Links Current and Future Markets to Current and Future Needs

Normal Organizational and Supply Objectives

Three Challenges in Setting Supply Objectives and Strategies

Effective interpretation of corporate objectives and supply objectives

The choice of the appropriate action plan or strategy to achieve the desired objectives

The identification and feedback of supply issues to be integrated into organizational objectives and strategies

Six Major Supply Strategy Areas

1.Assurance of supply

2.Cost reduction

3.Supply chain support

4.Environmental change

5.Competitive edge

6.Risk management

Three Categories of Supply Risk

1.Operational:

Risk of interruption of the flow of goods or services

2.Financial:

Risk that the price of the goods or services acquired will change significantly

3.Reputational:

Risk that the organizations reputation will be harmed by a supply decision

Managing Supply Risks

Identify and classify risks

Assess impact and probability of risk event

Develop a risk management strategy

Corporate Risk Management

All organizations are exposed to supply risk and other forms of risk

In large organizations, a corporate risk management group headed by a risk manager or chief risk officer (CRO) assesses total risk exposure and seeks the best ways of managing all risks

The chief purchasing officer works with the CRO in the three areas of supply risks

Strategic Purchasing Planning Process

Examples of Organizational Strategies Involving Supply

1.Materials management

2.Project management

3.Logistics management

4.Supply chain management

5.JIT purchasing/production

6.Make or buy/insource or outsource

Supply Strategy Questions

What

Make or buy/insource or outsource

Standard versus special

Quality

Quality versus cost

Supplier involvement

How much

Large versus small quantities (inventories)

Supply Strategy Questions

Who

Centralized or decentralized

Location of staff

Top management involvement

When

Now versus later

Forward buy

What Price

Premium, standard, lower

Cost-based, market-based

Lease/make/buy

Supply Strategy Questions

Where

Local, regional

Domestic, international

Large versus small

Multiple, single versus sole source

Current, new versus newly developed supplier

High versus low supplier turnover

Supplier certification

Supplier ownership

Supply Strategy Questions

Supply Strategy Questions

Why?

Objectives congruent operationally and strategically

Market conditions current and future

Internal reasons

Outside supply

Inside supply