Value creation through  supply chain integrations:  relationship management & technology issues Prof. Xiande Zhao  Directo...
Enhancing competitive advantages  through supply chain integration <ul><li>What is Value and how do you create value? </li...
Some Basic Questions <ul><li>How do you win over your customers? </li></ul><ul><li>What is value? </li></ul><ul><li>How do...
What is value?
Some Basic Questions <ul><li>How do you provide better value to your customer? </li></ul>
What are the Order Qualifiers and Order Winners? Exhibit 2.5
Time Line for Operations Strategies
What can we do to enhance our capabilities in: <ul><li>Delivery speed/Dependability? </li></ul><ul><li>Flexibility? </li><...
The Answer is: <ul><li>Supply chain Integration (SCI) </li></ul>
What is Supply Chain I ntegration? <ul><li>the degree to which the firm can  strategically collaborate  with their supply ...
Supply Chain Integration Strategic Collaboration Decision Flow Decision Flow
How LI & FUNG Adds Value? Li & Fung does the high-value-added front-and back-end tasks      front end   back end   design ...
<ul><li>What are some of the major types of integrations? </li></ul>
Strategic Integration <ul><li>Focus on core competencies </li></ul><ul><li>Outsource  other activities </li></ul><ul><li>L...
Internal Integration <ul><li>Linking the internally performed work by different functional units into a seamless process t...
External Integration <ul><li>the degree to which a firm can partner with its key supply chain members (customers / supplie...
Customer Integration <ul><li>Building lasting and distinctive relationships with customers of choice </li></ul><ul><ul><li...
Supplier Integration <ul><li>Linking externally performed work into a seamless congruency with internal work process </li>...
Information Integration <ul><li>the degree to which a firm can coordinate the activities of information sharing and combin...
Some cases of SCI   <ul><li>Luen Thai’s D2S supply chain model  </li></ul><ul><li>ASTEC’s SCI with Customers and Supplier ...
Winning Model in the New Era 新时代的 致胜 模型 Manufacturing 生产 Logistics 物流 Store 零售店 Design & Development 设计及开发 Sourcing 采购 Win...
雅达电子产品 DC/DC Industry standard pin-out  Series (10W - 150W) - Industry standard pin-out - High efficiency - Zero load oper...
Example: Nokia customer hub process ASTEC Bao’an, China Hub Planning <ul><li>1 week trans-shipment </li></ul>13 weeks Fore...
 
FORD’s Case
Supply chain nodes  of Ford Distant Suppliers Other Plants Logistic Centre Local Suppliers Almussafes  Ford Plant Seq/ JIT...
Relationships and flows <ul><li>Products & services flow;  Information & knowledge flow; and Financial flow </li></ul>J.I....
<ul><li>The V-CHAIN Virtual Enterprise Reference Model, the TO-BE Model, has been conceived as the framework needed to obt...
Our Research on Relationship Management  and Supply Chain Integration in China <ul><li>Research Questions: </li></ul><ul><...
Research Methods <ul><li>Surveys of manufacturers in 12 industries and 5 cities :  </li></ul><ul><ul><li>Chongqing, Tianji...
Internal Integration (II) <ul><li>Data integration among internal functions  </li></ul><ul><li>Enterprise application inte...
Customer Integration (CI)   <ul><li>The level of linkage with major customer through information network </li></ul><ul><li...
Supplier Integration (SI)   <ul><li>The level of information exchange with our major supplier through information network ...
 
Financial Performance <ul><li>Growth in sales </li></ul><ul><li>Growth in profit </li></ul><ul><li>Growth in market share ...
Supply Chain Performance <ul><li>Our supply chain has the ability to quickly modify products to meet customer’s requiremen...
Manufacturer (Customer-oriented) Performance <ul><li>Our company can quickly modify products to meet our major customer’s ...
Supplier Performance <ul><li>Our major supplier can quickly modify products to meet our company’s requirements  </li></ul>...
 
What are some of the patterns of supply chain integrations?
 
What influences Integration? <ul><li>Trust </li></ul><ul><li>Has been shown to significantly influence supply chain cooper...
What are some of the major types of trust? <ul><li>Competence Trust </li></ul><ul><ul><li>Refers to the technical and mana...
What are some of the major types of trust? <ul><li>Calculative Trust </li></ul><ul><ul><li>Refers to a trustor’s expectati...
What is Relationship Commitment? <ul><li>Relationship commitment can be defined as the willingness of a party to invest re...
What are the major types of relationship commitment? <ul><li>Affective Commitment: </li></ul><ul><li>can be defined as one...
What are the major types of relationship commitment? <ul><li>Calculative Commitment: </li></ul><ul><ul><li>can be viewed a...
Relationship Between Trust, Relationship Commitment and Process Integration? Business Sense & Judgment Ability & Expertnes...
Conclusions <ul><li>Supply chain integrations (II, CI and SCI) significantly influence supply chain performance and the fi...
THANK YOU Li & Fung Institute of Supply Chain Management/Logistics http://lf-scml.baf.cuhk.edu.hk/index/ Q & A
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  • Relationship Management & Technology Issues

    1. 1. Value creation through supply chain integrations: relationship management & technology issues Prof. Xiande Zhao Director, Center for Supply Chain Management & Logistics Li & Fung Institute of Supply Chain Management/ Logistics Chinese University of Hong Kong http://lf-scml.baf.cuhk.edu.hk/index/
    2. 2. Enhancing competitive advantages through supply chain integration <ul><li>What is Value and how do you create value? </li></ul><ul><li>What is Supply Chain Integration (SCI)? </li></ul><ul><li>What are the different types of SCIs? </li></ul><ul><li>Cases and Research Findings on SCIs </li></ul><ul><li>What are the key factors that influence SCI? </li></ul><ul><ul><li>Relationship Management Issues: </li></ul></ul><ul><ul><ul><li>Trust, </li></ul></ul></ul><ul><ul><ul><li>Relationship Commitment </li></ul></ul></ul><ul><ul><li>Technology Issues </li></ul></ul>
    3. 3. Some Basic Questions <ul><li>How do you win over your customers? </li></ul><ul><li>What is value? </li></ul><ul><li>How do you provide better value to your customer? </li></ul>
    4. 4. What is value?
    5. 5. Some Basic Questions <ul><li>How do you provide better value to your customer? </li></ul>
    6. 6. What are the Order Qualifiers and Order Winners? Exhibit 2.5
    7. 7. Time Line for Operations Strategies
    8. 8. What can we do to enhance our capabilities in: <ul><li>Delivery speed/Dependability? </li></ul><ul><li>Flexibility? </li></ul><ul><li>Services? </li></ul><ul><li>Innovation? </li></ul>
    9. 9. The Answer is: <ul><li>Supply chain Integration (SCI) </li></ul>
    10. 10. What is Supply Chain I ntegration? <ul><li>the degree to which the firm can strategically collaborate with their supply chain partners </li></ul><ul><li>and collaboratively manage the intra- and inter-organization processes to achieve the effective and efficient flows of </li></ul><ul><ul><li>Product and services, </li></ul></ul><ul><ul><li>Information, </li></ul></ul><ul><ul><li>Money, </li></ul></ul><ul><ul><li>Decisions </li></ul></ul><ul><li>With the objective of providing the maximum value to the customer at low cost and high speed </li></ul>
    11. 11. Supply Chain Integration Strategic Collaboration Decision Flow Decision Flow
    12. 12. How LI & FUNG Adds Value? Li & Fung does the high-value-added front-and back-end tasks front end back end design quality control engineering testing production planning logistics it organizes the lower-value-added middle stages through its network of 7,500 suppliers, 2,500 of which are active at any one time. raw material and component sourcing managing production
    13. 13. <ul><li>What are some of the major types of integrations? </li></ul>
    14. 14. Strategic Integration <ul><li>Focus on core competencies </li></ul><ul><li>Outsource other activities </li></ul><ul><li>Leverage over the strength of the strategic partners to gain competitive advantages </li></ul><ul><li>Jointly develop strategies with partners </li></ul><ul><li>structure the strategic goals and objectives into consensus and contractual agreements </li></ul><ul><li>share resources, rewards and risks across organizations in order to achieve competitiveness. </li></ul>SCI
    15. 15. Internal Integration <ul><li>Linking the internally performed work by different functional units into a seamless process to support customer requirements </li></ul><ul><li>Cross-functional team work: managers of cross functional teams use information from multiple sources to and are empowered to make immediate decisions. </li></ul><ul><li>Standardization: Establishment of cross-functional policies and procedures to facilitate synchronous operations </li></ul><ul><li>Simplification: Identification, adoption, implementation, and continuous improvement of best practices </li></ul><ul><li>Compliance: Adherence to established operational and administrative policies and procedures </li></ul>SCI
    16. 16. External Integration <ul><li>the degree to which a firm can partner with its key supply chain members (customers / suppliers) </li></ul><ul><ul><li>to structure their inter-organizational practices, procedures and behaviors </li></ul></ul><ul><ul><li>into collaborative, synchronized and manageable processes in order to fulfill the customer requirement. </li></ul></ul>SCI
    17. 17. Customer Integration <ul><li>Building lasting and distinctive relationships with customers of choice </li></ul><ul><ul><li>development of customer specific programs designed to generate maximum customer success. </li></ul></ul><ul><ul><li>customer focus to continuously match changing expectations </li></ul></ul><ul><ul><li>Accommodation of unique and/or unplanned customer requirements </li></ul></ul>SCI
    18. 18. Supplier Integration <ul><li>Linking externally performed work into a seamless congruency with internal work process </li></ul><ul><ul><li>development of a common vision of the total value creation process and planning clarity concerning shared responsibility </li></ul></ul><ul><ul><li>linkages of systems and operational interfaces to reduce duplication, and redundancy while maintaining operational synchronization. </li></ul></ul><ul><ul><li>extended management to include the supplier’s suppliers </li></ul></ul>SCI
    19. 19. Information Integration <ul><li>the degree to which a firm can coordinate the activities of information sharing and combine core elements from heterogeneous data management systems, content management systems, data warehouses, and other enterprise applications into a common platform in order to substantiate the integrative supply chain strategies. </li></ul><ul><ul><li>Commitment and capabilities to facilitate supply chain resource allocation through seamless transactions across the total order to delivery cycle </li></ul></ul><ul><ul><li>Capability to exchange information across internal factional boundaries in a timely, responsive and usable format </li></ul></ul><ul><ul><li>Capability to exchange information with external supply chain partners in a timely, responsive and usable format </li></ul></ul><ul><ul><li>Collaborative Forecasting and Planning: Customer Collaboration to develop shared visions and mutual commitments to jointly generated action plans. </li></ul></ul>SCI
    20. 20. Some cases of SCI <ul><li>Luen Thai’s D2S supply chain model </li></ul><ul><li>ASTEC’s SCI with Customers and Supplier </li></ul><ul><li>Ford Motor Company’s integration with its suppliers </li></ul>
    21. 21. Winning Model in the New Era 新时代的 致胜 模型 Manufacturing 生产 Logistics 物流 Store 零售店 Design & Development 设计及开发 Sourcing 采购 Winning Model: Design and Logistics Driven 致胜 模型﹕由设计及物流所推动 Pioneering the New Model 新模型的先驱 联泰 Information Technology Platform 信息科技平台 Logistics and Compliance Platform 物流及 推行 平台
    22. 22. 雅达电子产品 DC/DC Industry standard pin-out Series (10W - 150W) - Industry standard pin-out - High efficiency - Zero load operation AC - DC Family 1W – 6KW DC - DC Modules 1W - 1200W Adapter (7.5W - 100W) - Multi - O/P - Wide-range AC input - OVP, S/C protection - High efficiency - High MTBF Lower Power Series (25W - 350W) - Auto ranging input - Build-in EMI filter - Active power factor correction - Multi - O/P - Medical safety approval - OVP, OCP Medium Power Series (400W - 1200W) - Wide-range AC input - C-share - Power factor correction - Multi - O/P - Warning signal DC/DC module (50W-300W) - Secondary side control - 24V, 48V, 300V input - High efficiency - Low noise/ripple Fast Transient VRM (100W) - Programmable output - High efficiency Server PSU (250W - 3000W) - Active power factor correction - N+1 parallel redundant operation, hot pluggable - I 2 C port for Vital Product Data and fault status - Built-in fans (in series) with temperature controlled speed Mobile phone charger (2W-5W) - standard/Custom design - constant current AC, DC Router 1360W - N+1 redundancy - Hot plug, hot swap - Current share on all outputs - Status signals - EEprom
    23. 23. Example: Nokia customer hub process ASTEC Bao’an, China Hub Planning <ul><li>1 week trans-shipment </li></ul>13 weeks Forecast Pick & pack inventory HUB Nokia manufacturing facilities Periodic Inventory Report Weekly total Pull Report Hungary Nokia in Europe Finland Germany <ul><li>6 weeks in-transit time </li></ul>ISR Forecast Production Requirements Outbound Shipment Invoicing based on pull information Global Commodity Manager Goods flow Information flow
    24. 25. FORD’s Case
    25. 26. Supply chain nodes of Ford Distant Suppliers Other Plants Logistic Centre Local Suppliers Almussafes Ford Plant Seq/ JIT Seq/JIT DAD DAD Industrial Park Seq/JIT Logistic Operator Seq/JIT Seq/JIT Logistic Operator Seq/JIT
    26. 27. Relationships and flows <ul><li>Products & services flow; Information & knowledge flow; and Financial flow </li></ul>J.I.T. Supplier Sequence Supplier D.A.D. Supplier Dealer OEM (Original Equipment Manufacturer) Carriers Planning & Sequence Info $ Order Goods $ Planning & Sequence Info. $ Sub Assemblies (JIT & Seq) Parts (O.C.) Planning Info. Sub Assembly Info. $ Constraints Constraints Parts (O.C.) /Empties Sequence Sub Assemblies Part s (O.C.) /Empties Planning & Sequence Info $ Constraints Goods Info J.I.T. Sub Assemblies Sub Assembly Info. Sub Assembly Info. D.A.D. Sub Assemblies Logistic Operator $ Routes & Material s info. Traditional Supplier Parts Planning Info $ Order Delivery Note Delivery Note Delivery Note Time Windows & M a terial s info. Time Windows & Materials Info Goods, services, revenue Information & Knowledge
    27. 28. <ul><li>The V-CHAIN Virtual Enterprise Reference Model, the TO-BE Model, has been conceived as the framework needed to obtain an integrated problem solving approach </li></ul>Assembler Logistics Operator ( O perator for P lanning and S equencing) Other actors Carriers VE BUSINESS REFERENCE MODEL: OVERVIEW Suppliers
    28. 29. Our Research on Relationship Management and Supply Chain Integration in China <ul><li>Research Questions: </li></ul><ul><li>How do SCI influence supply chain performance and the financial performance of the firm? </li></ul><ul><li>How do trust and relationship commitment influence supply chain integration (supplier integrations (SI, CI and II)? </li></ul>
    29. 30. Research Methods <ul><li>Surveys of manufacturers in 12 industries and 5 cities : </li></ul><ul><ul><li>Chongqing, Tianjin, Guangzhou, Shanghai, and Hong Kong. </li></ul></ul><ul><ul><li>Respondents are people who are most knowledgeable on SCM, customer and supplier relationships </li></ul></ul><ul><ul><li>Top three industries : </li></ul></ul><ul><ul><ul><li>Metal, Mechanical & Engineering. Textile and Apparel, Electronics & Electrical </li></ul></ul></ul><ul><li>Response rate: </li></ul><ul><li>617 usable questionnaires from 4,569 contacted companies (13.5%) or 1356 questionnaires (45.5 %) sent out. </li></ul>
    30. 31. Internal Integration (II) <ul><li>Data integration among internal functions </li></ul><ul><li>Enterprise application integration among internal functions </li></ul><ul><li>Integrative inventory management </li></ul><ul><li>Real-time searching of the level of inventory </li></ul><ul><li>Real-time searching of logistics-related operating data </li></ul><ul><li>The utilization of periodic interdepartmental meetings among internal functions </li></ul><ul><li>The use of cross functional teams in process improvement </li></ul><ul><li>The use of cross functional teams in new product development </li></ul><ul><li>Real-time integration and connection among all internal functions from raw material management through production, shipping, and sales </li></ul>
    31. 32. Customer Integration (CI) <ul><li>The level of linkage with major customer through information network </li></ul><ul><li>The level of computerization for our major customer ordering </li></ul><ul><li>The level of sharing of market information from our major customer </li></ul><ul><li>The level of communication with our major customer </li></ul><ul><li>The establishment of quick ordering system with our major customer </li></ul><ul><li>Follow-up with our major customer for feedback </li></ul><ul><li>The frequency of periodical contacts with our major customer </li></ul><ul><li>Our major customer shares Point of Sales (POS) information with us </li></ul><ul><li>Our major customer shares demand forecast with us </li></ul><ul><li>We share our available inventory with our major customer </li></ul><ul><li>We share our production plan with our major customer </li></ul>
    32. 33. Supplier Integration (SI) <ul><li>The level of information exchange with our major supplier through information network </li></ul><ul><li>The establishment of quick ordering system with our major supplier </li></ul><ul><li>The level of strategic partnership with our major supplier </li></ul><ul><li>Stable procurement through network with our major supplier </li></ul><ul><li>The participation level of our major supplier in the process of procurement and production </li></ul><ul><li>The participation level of our major supplier in the design stage </li></ul><ul><li>Our major supplier shares their Production Schedule with us </li></ul><ul><li>Our major supplier shares their production capacity with us </li></ul><ul><li>Our major supplier shares available inventory with us </li></ul><ul><li>We share our production plan with our major supplier </li></ul><ul><li>We share our demand forecast with our major supplier </li></ul><ul><li>We share our inventory level with our major supplier </li></ul><ul><li>We help our major supplier to improve their process to better meet our needs </li></ul>
    33. 35. Financial Performance <ul><li>Growth in sales </li></ul><ul><li>Growth in profit </li></ul><ul><li>Growth in market share </li></ul><ul><li>Return on investment (ROI) </li></ul><ul><li>Growth in ROI </li></ul><ul><li>Return on sales </li></ul><ul><li>Growth in return on sales </li></ul>
    34. 36. Supply Chain Performance <ul><li>Our supply chain has the ability to quickly modify products to meet customer’s requirements </li></ul><ul><li>Our supply chain allows us to quickly introduce new products into the markets </li></ul><ul><li>The length of the supply chain process is getting shorter. </li></ul><ul><li>We are satisfied with the speediness of the supply chain process </li></ul><ul><li>Based on our knowledge of the supply chain process, we think that it is efficient </li></ul><ul><li>Our supply chain has an outstanding on-time delivery record </li></ul><ul><li>The total inventory level in our supply chain is low </li></ul><ul><li>Our supply chain provides high level of customer services </li></ul>
    35. 37. Manufacturer (Customer-oriented) Performance <ul><li>Our company can quickly modify products to meet our major customer’s requirements </li></ul><ul><li>Our company can quickly introduce new products into the markets </li></ul><ul><li>Our company can quickly respond to changes in market demand </li></ul><ul><li>Our company has an outstanding on-time delivery record to our major customer </li></ul><ul><li>The lead time for fulfilling customers orders (the time which elapses between the receipt of customer's order and the delivery of the goods) is short </li></ul><ul><li>Our company provides high level of customer service to our major customer </li></ul><ul><li>Our company’s inventory level is low </li></ul>
    36. 38. Supplier Performance <ul><li>Our major supplier can quickly modify products to meet our company’s requirements </li></ul><ul><li>Our major supplier can quickly introduce new products into the markets </li></ul><ul><li>Our major supplier can quickly respond to changes in market demand </li></ul><ul><li>Our supplier has an outstanding on-time delivery record to our company </li></ul><ul><li>The supplier’s lead time for fulfilling our company’s orders (the time which elapses between the receipt of our order and the delivery of the goods) is short </li></ul><ul><li>Our major supplier provide high level of customer service to our company </li></ul><ul><li>Our major supplier has low level of inventory </li></ul>
    37. 40. What are some of the patterns of supply chain integrations?
    38. 42. What influences Integration? <ul><li>Trust </li></ul><ul><li>Has been shown to significantly influence supply chain cooperation because: </li></ul><ul><li>trust is a useful lubricant in maintaining cooperation, avoiding conflicts and opportunistic behaviors </li></ul><ul><li>trust can significantly contribute to the long-term stability of a supply chain relationship </li></ul><ul><li>Trust increases the transaction specific investment </li></ul>
    39. 43. What are some of the major types of trust? <ul><li>Competence Trust </li></ul><ul><ul><li>Refers to the technical and managerial expertise that the trustee is capable of performing and will perform their roles as expected </li></ul></ul><ul><li>Contractual Trust </li></ul><ul><ul><li>Refers to an expectation that a trustee can be relied upon to maintain the ethical standard and carry out a verbal or written promise </li></ul></ul>
    40. 44. What are some of the major types of trust? <ul><li>Calculative Trust </li></ul><ul><ul><li>Refers to a trustor’s expectation that the trustee’s costs of cheating or engaging in opportunistic behavior are greater than the benefits of such actions </li></ul></ul><ul><li>Affective Trust </li></ul><ul><ul><li>Refers to the mutual expectations of open commitment to one another, and the commitment is regarded as a willingness to do more than is formally expected </li></ul></ul>
    41. 45. What is Relationship Commitment? <ul><li>Relationship commitment can be defined as the willingness of a party to invest resources into a relationship </li></ul><ul><li>It indicates the propensity for relational continuity and the establishment of long-term relationship </li></ul>
    42. 46. What are the major types of relationship commitment? <ul><li>Affective Commitment: </li></ul><ul><li>can be defined as one party’s identification with and emotional attachment to the goals and values of another party, and willingness to secure the relationship </li></ul><ul><li>Affective commitment is based on a generalized sense of liking, loyalty and belongingness towards the exchange partner and an enduring desire to continue a relationship for enjoyment </li></ul>
    43. 47. What are the major types of relationship commitment? <ul><li>Calculative Commitment: </li></ul><ul><ul><li>can be viewed as one party’s identification with the benefits and costs of the relational exchange, and willingness of maintaining the relationship for satisfying his needs </li></ul></ul>
    44. 48. Relationship Between Trust, Relationship Commitment and Process Integration? Business Sense & Judgment Ability & Expertness Predictability Confidence Benevolence Integrity Calculative Trust Competence Trust Contractual Trust Affective Trust Calculative Commitment Affective Commitment Supply Chain Integration ? - + + + + + + + + + +
    45. 49. Conclusions <ul><li>Supply chain integrations (II, CI and SCI) significantly influence supply chain performance and the financial performance of the manufacturer. </li></ul><ul><li>Customer integration and internal integration seem to have great impact on performance than supplier integration. </li></ul><ul><li>To enhance integrations with customers and suppliers, manufacturers need to build trusts and enhance relationship commitments with them. </li></ul><ul><li>Affective relationship commitment is much more effective than calculative relationship commitment in enhancing SCIs </li></ul><ul><li>The use of expert power is much more effective than the use of reward or coercive power </li></ul><ul><li>Without trust and relationship commitment, technology is of no use </li></ul>
    46. 50. THANK YOU Li & Fung Institute of Supply Chain Management/Logistics http://lf-scml.baf.cuhk.edu.hk/index/ Q & A
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