Chapter 2 - Develop an End-to-end Process Architecture
- 1. DEVELOP AN END-TO-END PROCESS ARCHITECTURE CHAPTER 2 MAGISTER MANAJEMEN UNIVERSITAS TRISAKTI OPERATIONS & SUPPLY CHAIN MANAGEMENT Prepared & Presented by: • Patrick Kaligis • Raymond Harris • Riska Muharram Lecturer: Dr. Dadang Surjasa, S.Si., MT
- 3. CONTENT 1. Abstract 2. Four Tests of Supply Chain Architecture 3. Architectural Toolkits 4. Top Three Levels of SCOR Model 5. Five Processes for End-to-End Supply Chain Management 6. Next-Generation Processes 7. Case Study: AVON - Calling on Customers Cost-Effectively 3
- 4. ABSTRACT The Introduction of Supply Chain Architecture 1
- 5. ▸ Supply chain improvement needs a blueprint to succeed like any major construction project because blueprint able to envision how the many pieces fit together within the existing infrastructure to form an integrated whole, encounter delays, rework, and escalating costs. 5 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 6. ▸ Companies with supply chain architectures in sync with business goals have better business performance, easier to implement and operate and most importantly, reconfigure quickly as business needs change. 6 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 7. FOUR TESTS OF SUPPLY CHAIN ARCHITECTURE 2
- 8. ▸ The test of strategic fit. The company’s overall supply chain strategy must drive the choices you make in your supply chain architecture truly support the basis of competition. 8 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 9. ▸ The test of end-to-end focus. Supply chain processes must ensure end-to- end management. This requires having an architecture that provides an end-to-end vision of the supply chain and a set of shared objectives that orchestrates the work of each player in your supply chain. 9 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 10. ▸ The simplicity test. A good supply chain architecture is made up of simple, streamlined processes that minimize the complexity that adds cost and reduces manageability. Processes should be clear and easily understood by those who use them. 10 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 11. ▸ The integrity test. The company’s architecture must be highly reliable, ensuring coherent and robust links among processes, data, and information systems. 11 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 13. ▸ Recognizing the need for a true cross-industry standard, in 1995 PRTM joined forces with AMR Research, an independent research firm committed to providing unbiased analysis of the enterprise software sector. 13 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 14. ▸ Together, PRTM and AMR founded the Supply-Chain Council (SCC), which initially included 69 member companies. Over the course of a year, the three organizations further developed and refined this standard, called the Supply-Chain Operations Reference-model (SCOR) that defined best practices, performance metrics, and software functionality requirements for each core supply chain process, sub process, and activity. 14 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 15. TOP THREE LEVELS OF SCOR MODEL 4
- 16. “ The SCOR model provides a supply chain scorecard for setting and managing supply chain performance targets across the organization. 16
- 17. 17 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 18. FIVE PROCESSES FOR END-TO-END SUPPLY CHAIN MANAGEMENT 5
- 19. THE CONCEPT These processes enable better decision making and guides all supply chain activities related to the execution processes — Plan, Source, Make, Deliver, And Return. 19
- 20. ▸ Plan Every supply chain process has inputs and outputs. Plan’s input is information on demand, supply, and supply chain resources. For example, plan source and plan make outline the raw materials needed, the source of those materials, and the quantities of inventory to be produced. Plan deliver provides the information needed to commit to customer orders. And plan return provides the information needed to schedule returns and replacement orders. 20 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 21. Planning excellence has five key principles: 1. Use timely, accurate information. 2. Focus resources on business priorities. 3. Aim for simplicity. 4. Integrate all supply chain requirements. 5. Create explicit actions and accountabilities. 21 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 22. ▸ Source Using the plan generated by plan source, the supply chain source process procures all needed materials and services, performing the operational activities of purchasing, scheduling, receiving, inspecting, and authorizing supplier payment. The source activity also involves supplier selection and relationship management. 22 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 23. Process excellence in source is built on four key principles: 1. Aim for the lowest total cost of ownership (TCO). 2. Set procurement strategies according to category. 3. Maintain an enterprise wide focus. 4. Measure and manage performance. 23 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 24. ▸ Make The supply chain make process transforms the resources procured by source into goods and services according to agreed-on specifications and any regulatory requirements. 24 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 25. There are four principles for process excellence in make: 1. Focus on business priorities. 2. Aim for speed and flexibility, not just low costs. 3. Set and monitor quality standards. 4. Synchronize all manufacturing activities. 25 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 26. “ For the supply chain to operate effectively, make must be integrated with the plan, source, deliver, and return processes. 26
- 27. ▸ Deliver The deliver process starts with the receipt of a customer order and includes all the activities needed to complete that order, from providing a price quote to collecting payment from the customer. ▸ Deliver makes the order visible to source and make for execution, ensuring that customer requirements are communicated clearly. Deliver also includes all warehousing, transportation, and distribution activities. 27 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 28. Here are the four recommended principles for deliver process excellence: 1. Balance service with the cost to serve. 2. Cut costs and time with straight-through processing. 3. Set up end-to-end tracking and traceability. 4. Manage data for ongoing accuracy and timeliness. 28 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 29. ▸ Return The return process ensures that previously sold products are supported, collected, and disposition according to business policies and customer agreements and covers all activities from return authorization to financial settlement. ▸ The primary drivers behind return differ by industry but typically include the return of defective, wrong, or unsatisfactory products; maintenance, repair, and overhaul (MRO) based on service agreements; excess channel inventory returns; and recycling/refurbishment/reuse. Different activities may be associated with each of these return “types.” 29 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 30. “ Return is a reverse supply chain process and has specific requirements and characteristics that differ from the forward supply chain. 30
- 31. For return process excellence, follow these four key principles: 1. Create a distinct supply chain for return. 2. Feed back return information quickly. 3. Base return policies on total cost of returns. 4. Maximize revenue opportunities. 31 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 33. “ In the next generation of process architecture, companies will be able to rapidly translate strategies into new supply chains. 33
- 34. ▸ In the next generation of process architecture, companies will be able to rapidly translate strategies into new supply chains. ▸ These architectures will seamlessly integrate business processes and information systems. And they’ll include the key performance indicators needed to ensure value creation and ongoing management. ▸ Besides providing a unified view of the internal supply chain, the next generation of process architecture will define the integration points among suppliers, customers, and partners. 34 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next- Generation Processes Case Study: AVON - Calling on Customers Cost-Effectively
- 35. CASE STUDY AVON CALLING ON CUSTOMERS COST-EFFECTIVELY 7
- 36. AVON Calling on Customers Cost-Effectively What do you do when you have an enormous growth opportunity but can’t capitalize on it with your existing supply chain? If you’re Avon, you embark on a radical transformation—a high-risk venture with no guaranteed returns. 36
- 37. ▸ Avon is the world’s leading direct seller of beauty and related products, with $6.2 billion in annual revenue. ▸ In addition to its cosmetics, skin care products, fragrances, and personal care products, the company offers a wide range of gift items, including jewelry, lingerie, and fashion accessories. ▸ Avon sells to customers in 145 countries through 3.9 million independent sales representatives, providing an earnings opportunity to women throughout the world. 37 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost- Effectively
- 38. 38 A GROWING BUSINESS— AND GROWING PROBLEMS Fundamental mismatch between the company’s selling cycle and its supply chain cycle. In most European markets, Avon begins a new sales campaign every three weeks. 1 MAKING THE BUSINESS CASE AND MOVING FORWARD It required a lengthy, detailed analysis to prove that Avon’s supply chain wouldn’t be able to handle the projected growth of the business. 2 RETHINKING THE SUPPLY CHAIN Avon put in place a regional planning group empowered to make decisions about service levels, inventory, and costs. 3 END-TO-END VISIBILITY Avon created a centralized inventory hub in Poland to service the company’s branches throughout Europe. 4 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost- Effectively
- 39. 39 COLLABORATING WITH SUPPLIERS Avon had to change its own approach so that suppliers could manufacture its products more cost- effectively. 5 MAKING THE BUSINESS CASE AND MOVING FORWARD It required a lengthy, detailed analysis to prove that Avon’s supply chain wouldn’t be able to handle the projected growth of the business. 6 BUILDING ON SUCCESS: COLLABORA TIVE DESIGN The company recently conducted a collaborative design workshop that included suppliers, a design firm, and representatives from marketing and the supply chain 7 REORGANIZATION AND THE CHANGE- MANAGEMENT CHALLENGE Avon was very clear on the fact that its supply chain transformation would be process- driven, not systems- driven. 8 ABSTRACT Four Tests of Supply Chain Architecture Architectural Toolkits Top Three Levels of SCOR Model Five Processes for End-to-End Supply Chain Management Next-Generation Processes Case Study: AVON - Calling on Customers Cost- Effectively
- 40. 40 THANKS!