SCM - Bharath
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This document discusses supply chain systems and key concepts in supply chain management. It introduces the basic supply chain model involving suppliers, manufacturers, distributors, and customers. It then covers current issues like supply chain integration challenges, new supply chain designs, and trends in enterprise resource planning systems. Finally, it discusses key success factors for supply chain management including supply chain design, organizational infrastructure, and achieving high performance.
SCM - Bharath
- 1. Supply Chain Systems Manufacturers Suppliers Customer Products Distributors Products Products Demand Demand Demand Prepared By, Bharath M – 1MS09IM401
- 2. Today‟s Objective Introduce Supply Chain Management – Share my definition & perspective – Develop a common understanding Identify current issues and trends in SCM Propose SCM key success factors Provide you with some learning & fresh perspective
- 3. Supply Chain Management SCM - what is it? – Broad scope - raw material to end customer & return (reverse logistics) – Flows - Information, Material, Funds, Knowledge – Customer-focused, process-oriented – Systems thinking “When I say logistics, someone else says SCM and someone else says that’s just transportation” Sr. Executive - Food Processor
- 4. “ The traditional supply chain is a dysfunctional process.” Jim Morehouse A.T. Kearney, Inc.
- 5. Internal Supply Chain - Linear Flows Along the To Suppliers Process To Customers Requirements Requirements Capabilities Procure Order Capabilities Planning Mgt. ment Invoice Invoice Payment Payment Make/ Distribute Receive VALO Convert Deliver Key: Information, Funds, Knowledge Information processing Material processing
- 6. External Supply Chain Flows Across Network Raw Mat‟l VALO Distr. Supplier Component Retailer Mfg Mfg Customer OEM Raw Mat‟l Supplier Distr. Component Retailer VALO Mfg Raw Mat‟l Supplier ...and back through Reverse Logistics
- 7. Supply Chain Integration Obstacles – Functional silo mentality – Functional measures – Incentives – Infrastructure – New roles and responsibilities – Basic requirement for fundamental CHANGE Challenges – Global markets – E-business – Short product life cycles
- 8. Supply Chain Integration requires... Connecting & Raw Mat‟l VALO coordinating the Supplier Component Distr. Retailer flows... Mfg – Information – Knowledge Mfg Customer – Materials OEM Raw Mat‟l – Funds Supplier Alignment Distr. – Incentive Component VALO Retailer Mfg – Measures Raw Mat‟l – Organizations Supplier – Goals ...and back through Reverse Logistics
- 9. Current trends in SCM New supply chain designs Evolutionary nature of the supply chain Enterprise Resource Planning (ERP) Systems “...you're never going to get to 100% (from IT) ... you'll never be on time; you'll be over budget, and not know how to use it.” - Food Products Retailer*
- 10. Current Trends - New supply chain designs Multiple extended supply chain designs attempted – Virtual Supply chain Internet supply chain Monorail – Dis-aggregated Nike, Sara Lee, Trends in automotive OEMs – The Dell Model – Outsourcing “...outsourcing is a great solution if you’re not the one responsible for managing the relationship” - Apparel Manufacturer*
- 11. Current Trends - The Dell Model („we want to be like Mike‟) Is the Dell model right for every company? – It works for Dell in the „90s – What is right for one may not be right for another. Should steel companies make-to-order like Dell? Should Compaq abandon its model to compete like Dell? Is the direct model state-of-art? – Amazon.com profitability... when? – Calyx & Corolla direct model only moderate success – How will direct web-based model work where population does not own or use computers?
- 12. Current Trends - Evolutionary nature of the supply chain The rules and economics change Supply chain strategy evolves – Cost focused versus “I guess the supply chain per se business-building kind of falls in place....” - Packaged Consumer – Strategy Products Manufacturer* Amazon Evolution of the supply chain organization – Practices – Structures – Culture
- 13. Current Trends - Evolutionary Nature of the Supply Chain Company Evolved Practice Old Practice Bose JIT II Arm‟s length supply relationship, Bose Prod. development Chrysler Extended Enterprise, Antagonistic supply SCORE Dell Account selection, One system serves all, Transparent OE, Cust adjusts OE Metrics, LSP process, Fcnl metrics GM Factory-wide Separate Mfg & Dist. scheduling Schedules P&G VMI, CRP, Account We ship – you stock, teams, SLOG, Metrics Over-the-wall Mktg- Mfg-Dist
- 14. Current Trends Enterprise Resource Planning (ERP) Systems ERP SCM software versus „best-of-breed‟ modules Expect dip in performance – Quantify benefits and real costs of implementation Training and skill development and maintenance “...you're never going to get to 100% (from IT) ... you'll never be on time; you'll be over budget, and not know how to use it.” - Food Products Retailer*
- 15. SCM Key Success Factors Supply chain design Organization infrastructure The path to high performance
- 16. Key Success Factors Supply Chain Design Make thoughtful choices for your supply chain. – Choice of channels – Business and SC priorities – What to outsource, what to keep in house – What is the proper role for the SC in your company? Likely to vary by industry, stage in life cycle, company strategy, company culture Understand best practices of leaders – But do what makes sense for your company – Thoughtful reapplication of learning
- 17. Key Success Factors Organization Infrastructure Measurement systems – Measure processes end-to-end – Customer-connected measures – Congruent goals (e.g., perfect orders) Communication systems Compensation & incentive systems Career and skill development systems „Systems orientation‟ – Shared authority – Horizontal Process Management model – Managing processes - key for SCM organizations
- 18. Key Success Factors Organization Infrastructure - A Testimony Which is the driver for your business‟ success, information technology or the people in the organization? “Absolutely THE PEOPLE, no question.” Don Schneider, CEO Schneider National March 5, 1999
- 19. Horizontal Process Management Model - Choosing “What‟s right” for your business How should one resolve conflict between function and process? Matrix as an analytical tool – Primary business strategy vs. functional interdependence – Primary business strategy Differentiated Service Differentiated Product Low Cost – Functional interdependence (subjective) Low (functions operate independent of each other) Medium High (rapid, immediate impact across functions)
- 20. Key Success Factors The Path to High Performance Change Management / Implementation – Evolution or revolution – Process-dominant organization Customers and Suppliers First Envision and articulate the potential Expect continuous change – Reengineering is not a one-time event
- 21. The Path to High Performance SCM … Three Choices Customers & suppliers first! Mgt. understands the potential - works with supplier and/or customers to drive change internally Systemic customer-oriented measures, decision- making criteria What happened? Reacting Traditional to the crisis Functional Realizes the problem possibly too late Organization Management supports but doesn‟t fully understand (fad) Limited willingness to challenge entrenched barriers Attempted use of teams, some process-based practices Avoiding change Avoiding change Alignment doesn‟t apply to us - “We are unique” Another „fad‟…. We‟ll wait it out….
- 22. The Path to SCM „Customers & Suppliers first!‟ High performance Internal & external alignment Profits through reduced cost, increased revenues, reduced working capital Customers & suppliers first! Mgt. understands the potential - works with supplier and/or customers to drive change Systemic customer-oriented measures, decision- In transition making criteria Low-hanging fruit leads to bigger opportunities „Right‟ levels of alignment & process/function focus Decision-making based on processes Traditional & customer Functional Authority & responsibility shared by Organization cross-fcnl teams
- 23. Not Getting to SCM - „Avoiding Change‟ Traditional Functional Organization Poor Avoiding change performance Avoiding change Missed opportunities Alignment doesn‟t apply - “We are unique” Drifting with mgt. Another „fad‟…. We‟ll wait it out…. fads
- 24. The Path to SCM…... High performance Internal & external alignment Which path is for you? Profits through reduced cost, increased revenues, reduced working capital In transition Low-hanging fruit leads to bigger opportunities„Right‟ levels of Customers & suppliers first! alignment & process/function focus Mgt. understands the potential - works with supplier Decision-making based on processes & and/or customers to drive change customer. Authority & responsibility Systemic customer-oriented measures, decision- shared by cross-fcnl teams making criteria Traditional Reacting to the crisis Functional Realizes the problem possibly too late Management supports but doesn‟t fully Organization understand Limited willingness to challenge entrenched barriers Attempted use of teams, some process-based practices Avoiding change Avoiding change Poor Alignment doesn‟t apply - performance “We are unique” Missed opportunities Another „fad‟…. We‟ll wait it out…. Drifting with mgt. fads
- 25. HPM Matrix - Choose “What‟s right” Differentiated Informal Formal Formal Service Coordination Structure Structure Strategy Focus on Customer Balance Process-Function Process Dominant Strategy Differentiated Ad hoc Informal Formal Product Coordination Coordination Structure Strategy Focus on Operation Function Dominant Balance Process- Function Informal Ad hoc Informal Coordination Low Cost Coordination Coordination Strategy Balance Process- Optimize Cost Driver Optimize Cost Driver Function Optimize Cost Driver Low Medium High Functional Interdependence
- 26. HPM Matrix - Choose “What‟s right” Differentiated Informal Coord Formal Formal Service Xerox - 2000? Strategy P&G - 2000? Strategy Differentiated Ad hoc Informal Coord Formal Product Xerox Strategy P&G (early 80‟s) P&G (80-90s) Xerox - 2000? Corning Consumer P&G - 2000? Am. Std. Kaytok (Make-to-Invty) Kaytok ( MTO) Ad hoc Informal Informal Low Cost Strategy Wal-Mart Low Medium High Functional Interdependence
- 27. Summary SCM Introduction MFG Current Issues SCM Key Success Factors – Supply chain design Strat – Organization infrastructure – Path to high performance Fcnl Interdep
- 28. Target‟s Supply Chain 11 Regional distribution centers 859 Stores in 41 states Flow strategy “Door per store concept” Forecasting and ordering is centralized and automatic
- 29. Leveraging total supply chain strategies to reduce expense in a retail environment and how Target utilizes emerging trends in supply chain management.
- 30. Floor Ready Preticketing Prefolded towels Hanger program Removal of excess packaging
- 31. Segmentation Improves store level instocks Minimizes total inventory investment Improves supply chain efficiencies
- 32. Three Distinct Segments Slow selling items Fast selling items, unpredictable sales Fast selling items, predictable sales
- 33. Other Variables to Consider Physical characteristics of an item Receipt frequency from the vendor Vendor reliability
- 34. EDI Communications with Supplier 850 Purchase Order 870 Order Status 856 Ship Notice/Manifest or Advance Ship Notice 830 Vendor Projections or Forecast 810 Invoicing
- 35. Partners On-Line Sales and inventory reports Vendor Partnership manuals Accounts payable information Newsletters and news flashes
- 36. Instability of Today’s Supply Chain Coordination Manufacturer Forecast of Sales Volumes Consumer Demand Retailer Warehouse Retailer Orders to Shop Production Plan Time Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
- 37. Demand Buffers along the Supply Chain Consumer Sales Retailer‟s Order to Manufacturer Wholesaler‟s Order to Manufacturer Manufacturer‟s Order to Supplier Source: Bullwhip Effect , Hau Lee, Stanford University
- 38. Planning: Level of Collaboration collaboration/ trust Pantry Managed Inventory CPFR (CFAR) Vendor- Managed Inventory Category Retailer- Management Driven Continuous Replenishment Key Account Management evolution
- 39. Solution Maps as a Tool in Strategic Planning Understand company business processes Assure systems are aligned to drive improvement in major business processes Identify gaps in information availability to support business strategies Determine long-range plan for evolution to a state of improved information Determine status of legacy systems and integration requirements Determine investment in overall information technology over strategic planning period
- 40. Business Drivers for the 21st Century Globalization Consolidation Technology Each of these drivers directly impacts or is impacted by the Supply Chain…...
- 41. Companies Will Succeed... By aggressively evaluating their supply chain(s) By focusing on key business drivers By extending their enterprise thinking to include suppliers‟ suppliers and customers‟ customers By utilizing best practices, not fixed rules By implementing “advantage technology”
- 42. Impact of Technology The most valuable links on the value chain tend to belong to people who own knowledge---particularly about customers….He who controls information in many cases controls the business. Fortune Magazine
- 43. The Shift to Advantaged Applications Future Vision Strategic/Decision Support/ Inter-business Networking (e.g. Market Management) Very high ROI ERP Integrated w/ SCM Drives ROI and Supply Chain Benefits Benefits ERP as Infrastructure/ IT Renewal (High investment/ lower ROI) Costs
- 44. Changing the Goals of Business Solutions to Support Value Chains Supply Chain Business/Market ERP Management Optimization Goals Goals Goals •Infrastructure •Operational Improvement •Market Management • Y2000 Compliance (e.g., Cost Reduction, Capacity Expansion •Pricing Optimization • Integrated Systems to •Channel Management Support Operations •Improved Customer and Financials Service
- 45. The Value Shift Inventory Information Physical Assets Intellectual Assets Closed Shop Collaboration Vertical Integration Virtual Integration
- 46. Thank You