MBA 518 Operations Management Supply Chain Management

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MBA 518 Operations Management Supply Chain Management

  1. 1. MBA 518 Operations Management Supply Chain Management Greg Magnan, PhD Fall, 2004
  2. 2. AGENDA <ul><li>SC Defined </li></ul><ul><li>SC Strategy </li></ul><ul><li>SC Benefits </li></ul><ul><li>SC Challenges </li></ul><ul><li>Summary </li></ul>
  3. 3. Business Environmental Factors <ul><li>Global Competition </li></ul><ul><ul><li>Cost, Quality, Delivery, Flexibility, Innovation </li></ul></ul><ul><li>Increasing Stockholder Demands </li></ul><ul><ul><li>ROIC, Asset Efficiency, EVA, etc. </li></ul></ul>SCM Uniquely Positioned to Address BOTH
  4. 5. Core SC Functions
  5. 6. SCM Defined (Fawcett & Magnan, 2001) <ul><li>“ Supply Chain Management involves collaboration across the enterprise and among channel members to design and manage value-added material, information and cash flows to meet the needs of the end customer . The development and integration of people and technological resources underlie successful supply chain integration.” </li></ul>
  6. 7. Potential Benefits from SCM <ul><li>Increased market share and sales growth </li></ul><ul><li>Reduced inventory levels and total SCM costs </li></ul><ul><li>Decreased order cycle/fulfillment time </li></ul><ul><li>Increased asset and capital utilization </li></ul><ul><li>Improved delivery performance </li></ul><ul><li>Faster response to changing customer requirements </li></ul><ul><li>Improved return on assets and sales </li></ul><ul><li>Increased forecast accuracy </li></ul><ul><li>Reduced cash-to-cash cycle time </li></ul>
  7. 8. SCM Definition: SC Council “Suppliers’ Supplier to Customer’s Customer” SCOR Model (www.supply-chain.org) NOTE: Barriers to SCM are concentrated here Supplier Customer Customer’s Customer Make Deliver Make Deliver Make Source Deliver Source Internal or External Internal or External Your Company Source Plan Source Deliver Return Return Return Return Return Return Return Return
  8. 9. Information : Visibility / Collaboration / Sharing Organization : Strategy / Structure / People / Processes Demand Planning Design Sourcing, Ordering & Logistics Customer interface Supplier interface External Suppliers Customers Production Engineering Production Entities Lean Manufacturing Manufacturing Supply Chain Management Internal Suppliers Factory CRM SRM
  9. 11. Supply Chain Flows Source: Lee (2000)
  10. 12. Proc, Eng, Log, S/Mktg Yes <ul><li>Schedule; Ordering </li></ul><ul><li>Inventory; Specs </li></ul>Manufacturing S/Mktg, Mfg, Proc, Log Yes <ul><li>Disasters, interruption </li></ul><ul><li>Reverse logistics </li></ul>Risk / Returns S/Mktg, Mfg, Proc Yes <ul><li>Logistics; Inventory </li></ul><ul><li>Transportation </li></ul>Fulfillment S/Mktg, Mfg, Proc Yes <ul><li>Forecasting </li></ul><ul><li>Collaboration </li></ul>Demand Mgt. / SC Planning Finance, Mfg, Eng. Yes <ul><li>Supplier Mgt. </li></ul><ul><li>Aggregation/Leverage </li></ul>Sourcing/Proc./Sup. Rel’p Mgt Mktg, Proc., Finance; Mfg Yes <ul><li>Innov.; Make-Buy </li></ul><ul><li>Project Mgt., X-Funct. </li></ul>Product Dev’t Eng., Mfg., Proc. Yes <ul><li>ID/Segment.; Promo </li></ul><ul><li>Category Mgt., Pricing </li></ul>MKTG / CRM / Merchandising Other Fn? IT? Elements SC Process
  11. 13. Supply Chain Performance Timme & Timme, 2000 <ul><li>C-level Executives: CEO, CFO, COO, etc. </li></ul><ul><ul><li>What is their view of SCM? </li></ul></ul><ul><ul><li>What language is needed to articulate benefits? </li></ul></ul><ul><li>Growth, Profitability, Capital Utilization </li></ul><ul><ul><li>How do they affect Economic Profit (EP)? </li></ul></ul>Source: Timme and Timme, “The Financial-SCM Connection,” SCMR , 2000 .
  12. 14. Supply Chain Performance Timme & Timme, 2000 <ul><li>Economic Profit </li></ul><ul><li>SCM supports: </li></ul><ul><ul><li>Revenue growth </li></ul></ul><ul><ul><li>Customer service </li></ul></ul><ul><ul><li>Cost reduction </li></ul></ul><ul><ul><li>Asset efficiency </li></ul></ul><ul><li>Purchasing 100 </li></ul>
  13. 15. Supply Chain Performance Timme & Timme, 2000
  14. 16. Supply Chain Strategy <ul><li>“ Companies are investing resources--of both time and capital--to improve their supply chain capabilities. But many are not pleased with the return on these investments. The lack of coherent supply chain strategy typically lies at the root of the problem .” [emphasis added] </li></ul><ul><ul><ul><li>-- Derocher and Kilpatrick, “Six Supply Chain Lessons for the Millenium,” SCMR , 2000 </li></ul></ul></ul>
  15. 17. Strategic SC Alignment (Fisher, Marshall, “What is the Right Supply Chain for Your Product?,” HBR , 1997) Q: What happens when you have BOTH kinds of products?? A: Ought to have BOTH kinds of supply chains.
  16. 18. Evolutionary Status of SCM Source: Poirier & Quinn, “A Survey of SC Progress,” SCMR , 2003
  17. 19. Source: Poirier & Quinn, “A Survey of SC Progress,” SCMR , 2003
  18. 20. More from Poirier & Quinn…
  19. 21. CAPS Focus Study (2001) http://www.capsresearch.org
  20. 22. SC Integration (Fawcett & Magnan, 2002) 47% 34% 11% 8% 0%
  21. 23. SC Relationship Barriers <ul><li>Lack of Trust </li></ul><ul><li>Little Understanding or Commitment to SC Principles </li></ul><ul><li>Fear of Relinquishing Control </li></ul><ul><li>Different Goals & Objectives </li></ul><ul><li>Inadequate Information Systems </li></ul><ul><li>Short-term / “Wall Street” emphasis on outcomes </li></ul><ul><li>Involvement in too many supply chains </li></ul>Source: Moberg, Speh & Freese, “SCM: Making the Vision a Reality,” SCMR , 2003
  22. 24. “Can You Hear Me Now?” Source: Handfield & Straight, “What Sourcing Channel is Right for You,” SCMR , 2003
  23. 25. SC Relationship Barriers--Solutions <ul><li>Develop a New Breed of Manager </li></ul><ul><li>Build “Relationship-Management” Skills </li></ul><ul><li>Establish Inter-organizational Teams </li></ul><ul><li>Create New Performance Measures </li></ul><ul><li>Invest in Information Technology </li></ul><ul><li>Develop Long-term Focus (Boards, too) </li></ul><ul><li>Engage in More Practical and Applied Research </li></ul>Source: Moberg, Speh & Freese, “SCM: Making the Vision a Reality,” SCMR , 2003
  24. 26. Bullwhip Effect Source: Lee, et al., “The Bullwhip Effect In Supply Chains, SMR , 1997.
  25. 27. Bullwhip Effect – Order Variation Source: Lee, et al., “The Bullwhip Effect In Supply Chains, SMR , 1997.
  26. 28. Matching Supply & Demand Source: Vitasek, et al., “Solving the Supply–Demand Mismatch,” SCMR, 2003.
  27. 29. Matching Supply & Demand Source: Vitasek, et al., “Solving the Supply–Demand Mismatch,” SCMR, 2003.
  28. 30. Supply Chain Planning & Execution Source: AMR Research, 2000
  29. 31. SC Planning Systems Source: Taylor, David A. “A Master Plan for Software Selection,” SCMR, 2004
  30. 32. SC Planning Systems Source: Taylor, David A. “A Master Plan for Software Selection,” SCMR, 2004
  31. 33. e-Procurement: What is it? <ul><li>What are the steps in procurement? </li></ul><ul><ul><li>Need / Requisition </li></ul></ul><ul><ul><li>Supplier Selection </li></ul></ul><ul><ul><ul><li>RFx, Negotiation, Auction, Criteria </li></ul></ul></ul><ul><ul><li>Contract </li></ul></ul><ul><ul><li>Transactions </li></ul></ul><ul><ul><ul><li>PO through payment </li></ul></ul></ul><ul><ul><li>Relationship Maintenance </li></ul></ul><ul><ul><ul><li>Performance </li></ul></ul></ul><ul><li>Which can be automated? </li></ul>
  32. 34. e-Procurement: Transactions <ul><li>Purchase Order / Order </li></ul><ul><ul><li>PO change? </li></ul></ul><ul><li>ASN receipt </li></ul><ul><li>Tracking </li></ul><ul><li>Receiving / Inspection </li></ul><ul><li>Accounting: matching </li></ul><ul><ul><li>Payment </li></ul></ul><ul><li>Supplier Performance </li></ul><ul><li>PO Ack. / Sales Order </li></ul><ul><li>Fulfillment (stock / mfg) </li></ul><ul><li>ASN </li></ul><ul><li>Transportation </li></ul><ul><li>Invoice </li></ul><ul><li>Payment received </li></ul>Buyer Supplier Other issues : Forecasting, collaboration, planning systems, cost improvement (product and trans.)
  33. 35. Strategic Sourcing <ul><li>“ Applying standard analytics-driven processes for sourcing any category of spend.” </li></ul><ul><ul><ul><li>Purchasing Magazine </li></ul></ul></ul><ul><li>“ Sourcing will be key to unlocking value.” </li></ul><ul><ul><li>ISM/Forrester </li></ul></ul><ul><ul><li>Focus on procurement automation limits payback </li></ul></ul><ul><ul><li>Spend Management must begin with a sourcing strategy </li></ul></ul><ul><ul><ul><li>Spend analysis, aggregation, supplier reduction </li></ul></ul></ul><ul><ul><li>Online sourcing will catch up </li></ul></ul><ul><ul><ul><li>“ real value is in using enterprise-wide tools to enforce employee compliance with strategic sourcing agreements.” </li></ul></ul></ul>
  34. 36. ISM/Forrester Report on Technology in SM: Q3/2003 <ul><li>Adoption of online purchasing continues to grow </li></ul><ul><ul><li>Large companies: 20% fully adopted </li></ul></ul><ul><li>More companies are saving $ as a result </li></ul><ul><ul><li>45% of large volume </li></ul></ul><ul><li>Materials purchased: </li></ul><ul><ul><li>Indirect (89% bought some / 12% of indirect online) </li></ul></ul><ul><ul><li>Direct (74% bought some / 9.9% of direct online) </li></ul></ul><ul><li>Auctions (25% used...large volume) and eMarketplaces (33%): about 45% increased use </li></ul><ul><li>Enterprise-wide tools: 46% </li></ul><ul><li>Online tools strengthen relationships: collaboration </li></ul><ul><li>Buyers mostly dissatisfied w/ Supplier online capability </li></ul><ul><li>Integration with suppliers was biggest challenge </li></ul>
  35. 37. PRTM’s SC Advice <ul><li>SC Critical Elements </li></ul><ul><li>SC Strategy </li></ul><ul><li>SC Processes </li></ul><ul><li>Organizational Model </li></ul><ul><li>Integrated Info. Sys. </li></ul><ul><li>Perf. Mgt. Framework </li></ul><ul><li>Setting Your Strategy </li></ul><ul><li>Define the Performance Criteria of SC </li></ul><ul><li>Set Perform. Targets </li></ul><ul><li>ID Operational Processes (order mgt., dist, etc.) </li></ul><ul><li>Select integration level for customers & suppliers </li></ul>Source: PRTM, “Managing Your SC in the 21 st Century,” 2002
  36. 39. Technology Enabled Supply Chain Source: Porter, A.M. (2004), “The Case for Holistic Strategies,” Purchasing , March 18, pp. 55-59.
  37. 40. Supplier Rating Criteria Source: Carbone, James (2004), “Using TCO to Rate Suppliers,” Purchasing , Feb. 19, pp. 30-34.
  38. 41. Lucent (con’t)
  39. 42. Summary <ul><li>Supply Chain Management </li></ul><ul><ul><li>People, processes, technology </li></ul></ul><ul><ul><li>Materials, information, cash </li></ul></ul><ul><li>Supply Chain Performance </li></ul><ul><ul><li>Growth, profitability, capital utilization </li></ul></ul><ul><ul><li>Growing gap between haves and have-nots </li></ul></ul><ul><li>Supply Chain Solutions </li></ul><ul><ul><li>Strategy: Align internal and external processes & resources to business strategy and company performance objectives </li></ul></ul><ul><ul><li>Diagnostic: Pinpoint improvement needs </li></ul></ul><ul><ul><li>Education: Relationships, process change, executives </li></ul></ul>

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