SCM is a network of business partners from raw materials to the consumer including :
any other supplier that participates in the production, delivery and the sale of a product or service.
What is Supply Chain Management (SCM) ?
Supply Chain Management (SCM) and Execution (SCE) are the interactive and collaborative processes and tools that leverage strategic relationships within the supply chain for the sharing of confidential and mission critical sales, forecasting, planning, purchasing and replenishment data with the ultimate objective of maximizing efficiencies, reducing costs and increasing profits by proactively insuring that the right product is delivered to the right place at the right time . What are SCM & SCE key objectives ?
The basic supply chain should be integrated to manage the a complex flow of information, both between and within enterprises The challenge is to integrate this information and make it accessible where, when and how needed What are some of the challenges?
Get the right product in the right place at the right time .
Create an awareness of the supply chain structure including organizations, capabilities, strengths, weaknesses and opportunities for improvement.
Build a stronger supply chain through the development of bonded and collaborative relationships with business partners.
Increase supply chain end-to-end visibility with real time communications of inventory requirements, orders, shipments, payments and performance.
Improve forecast, planning and replenishment accuracy
Reduce costs and increase profits through increased efficiencies, negotiations and compliance.
Reduce inventory levels through inventory management disciplines.
Improve service levels through performance management .
What benefits are derived from SCM ?
Store In-Stock Channel Design Network Rationalization Flow of Merchandise Distribution Operations/ Transportation Planning, Buying, Allocation Supporting Infrastructure Right goods, right place, right time, right cost The optimum combination of facilities and transportation modes that achieve service targets The cost effective Distribution Channels at the lowest cost Synchronized flow of merchandise to optimize inventories and meet customer demand The most appropriate operational linkage between client and vendors Functions and processes consistent with vendor operating strengths and needs The most appropriate information systems and support areas to plan and manage the flow of goods strategy Key components of SCM solutions
Overview of SCM Process Suppliers Inbound Logistics Manufacturing Distribution Centres Finished Product Distribution Customer Suppliers Manufacturing Distribution Centres Finished Product Distribution Customer Make to Stock Make to Order
Where are the improvements found ? Value Chain Diagnostic Component Selection and Sourcing Production Scheduling Demand Management Warehouse Management Strategy and Network Design Logistics Supply Planning (Inventory, Master and Distribution Planning) Value Chain Transformation Operations Performance Improvement
Collaboration for New Product Development and Market Launch
Continuous Supply Chain Value Improvement
Applications Integration and Outsourcing of Application Management
Incremental cost efficiencies from suppliers through eSourcing
Reducing costs, increasing responsiveness and flexibility
Bringing products to market more effectively
Increase new product introductions
Integrate multiple enterprise systems
Outsource for rapid transformation
Networked value chains
Eliminating functional and asset redundancies
Accelerate time to market
Global capabilities capture
Leverage existing ERP investments
Expand functionality to deliver benefits
Optimized cost, service, margins, profits
Business Trends Potential Benefits Globalization Virtualization Collaboration Web Enablement
How to implement SCM strategies? Transformation Operations Technology Enablement Process Change Technology Implementation Operations Outsourcing Application Management Business Performance Management Security & Privacy Business Intelligence Product Lifecycle Management Sourcing and Procurement Enterprise Asset Management Logistics and Distribution Supply Chain ERP Supply Chain Strategy & Operations Integrated Supply Chain Planning
What is the best approach? Prepare Focus Redesign/ Design Configure Deploy Business Domain Organization Domain Application Domain Architecture Domain Project Management Domain Operations Domain Engagement Launch Engagement Close Run and Maintain
Project Management Domain - manage project, risk, quality and communication
Best Practice approach (Contd.)
The success of YOUR SCM initiative is the sum of many elements. How do you measure success ? Skills Education and Training Implementation Methodology Business Transformation Project and Risk Management Application & Architecture Change Management ERP Applications Data Migration Operations Application Integration
What are the 8 CSF ? Clarity of Direction Disciplined Project Management Visible & Committed Leadership Targeted & Effective Communications Measurable Goals Broad-based Participation Single Program Focus Compelling Need for Change Critical Success Factors
Research findings Caldwell, Harland, Powell, Woerndl and Zheng (2002, p. 124) identified: SMEs’ tend to focus more on achieving operational efficiencies but overlook the strategic potential of IT
Research findings (Contd.) Levy, Powell and Yetton (2001, p. 133-144) found: The introduction of information and communication technologies into SMEs is usually fragmented . They are concentrated on operational support and transaction processing. The organisation structure, owners’ attitude, limited IT infrastructure, limited knowledge and limited expertise in integrated system tend to decrease their ability to plan effectively.
The SCC is an independent, not-for-profit, global corporation with membership open to all companies and organizations interested in applying and advancing state-of-the-art supply chain management systems and practices.
Over 800 Company Members
Chapters include Australia, New Zealand, South East Asia
The Supply-Chain Council (SCC) has developed and endorsed the Supply Chain Operations Reference-model (SCOR) as the cross-industry standard for supply chain management.
Process reference models integrate the well-known concepts of business process reengineering, benchmarking, and process measurement into a cross-functional framework.
Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” results Benchmarking Characterize the management practices and software solutions that result in “best-in-class” performance Best Practices Analysis Process Reference Model Capture the “as-is” state of a process and derive the desired “to-be” future state Business Process Reengineering Capture the “as-is” state of a process and derive the desired “to-be” future state Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” results Characterize the management practices and software solutions that result in “best-in-class” performance
SCOR - 5 distinct Management Processes Supplier Customer Customer’s Customer Suppliers’ Supplier Make Deliver Make Deliver Make Source Deliver Source Internal or External Internal or External Your Company Source SCOR Model Building Block Approach Processes Metrics Best Practice Technology Plan Source Deliver Return Return Return Return Return Return Return Return
Customers Suppliers P1 Plan Supply Chain Plan P2 Plan Source P3 Plan Make P4 Plan Deliver Source Make Deliver S1 Source Stocked Products M1 Make-to-Stock M2 Make-to-Order M3 Engineer-to-Order D1 Deliver Stocked Products D2 Deliver MTO Products D3 Deliver ETO Products S2 Source MTO Products S3 Source ETO Products SCOR - Processes Return Source P5 Plan Returns Return Deliver Enable D4 Deliver Retail Products
Product and process design and development processes
Some post-delivery technical support processes
SCOR assumes but does not explicitly address:
Information Technology (IT) administration (non-SCM)
SCOR Implementation Roadmap Material Flow Operations Strategy Analyze Basis of Competition Configure supply chain Align Performance Levels, Practices, and Systems Implement supply chain Processes and Systems
Competitive Performance Requirements
Supply Chain Scorecard
Scorecard Gap Analysis
AS IS Geographic Map
TO BE Geographic Map
Information and Work Flow
AS IS Maps
TO BE Maps
Develop, Test, and Roll Out
Example - Mapping Material Flow (D1) (D1) (S1) (SR1,SR3) (S1, D1) (SR1,DR1,DR3) (D2) (DR1) (S1, D1) (SR1, DR3) (S1, D1) (SR1,DR1,DR3) (S1, D1) (SR1,DR1,DR3) (S1) (SR1,SR3) (S1) (SR1,SR3) (S1) (SR1,SR3) (S1, S2, M1, D1) (SR1,,DR1) Latin American Suppliers Warehouse Other Suppliers Manufacturing European Supplier Warehouse Warehouse Warehouse
Linking SC Performance Attributes and Level 1 Metrics Performance Attribute Performance Attribute Definition Level 1 Metric Supply Chain Delivery Reliability The correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. Delivery Performance Fill Rates Perfect Order Fulfillment Supply Chain Responsiveness The velocity at which a at which a supply chain provides products to the customer. Order Fulfillment Lead Times Supply Chain Flexibility The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. Supply Chain Response Time Production Flexibility Supply Chain Costs The costs associated with operating the supply chain. Cost of Goods Sold Total Supply Chain Management Costs Value-Added Productivity Warranty / Returns Processing Costs Supply Chain Asset Management Efficiency The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital. Cash-to-Cash Cycle Time Inventory Days of Supply Asset Turns
Level 1 Performance Metrics Customer-Facing SCOR Level 1 supply chain Management Assets Supply Chain Reliability Cost Responsiveness Delivery performance Fill rate Perfect order fulfillment Order fulfillment lead time Supply Chain Response Time Production flexibility Total SCM management cost Cost of Goods Sold Value-added productivity Warranty cost or returns processing cost Cash-to-cash cycle time Inventory days of supply Asset turns Internal-Facing Flexibility
Example - SC Scorecard & Gap Analysis 50% $30M Revenue $30M Indirect Cost 35 days 97 days 0% 63% Supply Chain SCORcard Performance Versus Competitive Population Overview Metrics SCOR Level 1 Metrics Actual Parity Advantage Superior Value from Improvements Delivery Performance to Commit Date 85% 90% 95% Fill Rates 94% 96% 98% EXTERNAL Supply Chain Reliability Perfect Order Fulfillment 80% 85% 90% Order Fulfillment Lead times 7 days 5 days 3 days Flexibility Responsiveness Production Flexibility 30 days 25 days 20 days Total SCM Management Cost 19% 13% 8% 3% INTERNAL Cost Warranty Cost NA NA NA NA NA Value Added Employee Productivity NA $156K $306K $460K NA Inventory Days of Supply 119 days 55 days 38 days 22 days NA Assets Cash-to-Cash Cycle Time 196 days 80 days 46 days 28 days Net Asset Turns (Working Capital) 2.2 turns 8 turns 12 turns 19 turns NA Supply Chain Response Time 82 days 55 days 13 days 45 days $7 M Capital Charge Key enabler to cost and asset improvements $30M Revenue