Supply Chain Management

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  • 1. “ Best Practices in Supply Chain” Anand Subramaniam
  • 2. Agenda
    • Overview of Supply Chain Management (SCM)
    • What are the key objectives of SCM?
    • What are the challenges with SCM integration?
    • What benefits are derived from SCM?
    • What are the key components of SCM solutions?
    • Where are the improvements found?
    • What is the next generation SCM solution?
    • What benefits can be derived from these trends?
  • 3. Agenda (Contd.)
    • An approach to implement SCM strategies?
    • How do you measure success?
    • How do you overcomes these challenges?
    • SCM Excellence Road Map
    • SMEs’ in APAC region & research findings
    • SCOR Framework & Implementation
  • 4. Overview of SCM Process
    • Custom packaging
    • Consolidation
    • Pre-assembly
    • Material management
    • JIT delivery
    • Kitting
    • Hub operations
    • Sub-assembly
    • Custom packaging
    • Outsourcing
    • Inventory & Labour management
    • Transport
    • Cross-dock
    • Customs clearance
    • Global forwarding
    • Secondary
    • Reverse logistics
    • Inventory factoring
    • L/C financing
    • freight payment
    • Equipment leasing
    • Equipment financing
    • Private fleet financing
    • Equipment financing
    • Project financing
    • L/C financing
    • Credit servicing
    • EDI services
    • VMI services
    • MRP systems
    • RFID systems
    • Integrated supply chain & Production planning tools
    • WMS
    • DRP systems
    • Transport routing
    • Command & control
    • Satellite tracking
    Suppliers Inbound Logistics Manufacturing Distribution Centres Finished Product Distribution Customer Physical Services Financial Services Information Services
  • 5.
    • SCM is a network of business partners from raw materials to the consumer including :
      • manufacturing,
      • distribution,
      • transportation,
      • wholesaler,
      • retailer and
      • any other supplier that participates in the production, delivery and the sale of a product or service.
    What is Supply Chain Management (SCM) ?
  • 6. 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 ?
  • 7. 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?
  • 8.
    • 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 ?
  • 9. 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
  • 10. 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
  • 11. 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
  • 12. What is Next Generation SCM Solution?
    • Supply chain innovations are being driven by 4 major themes
    Value Chain Transformation Globally The Customer Driven Supply Chain Networked Value Chains Globalization Virtualization Collaboration Web Enablement B2B Gets Real
  • 13. What are the benefits from these trends ?
    • Global Supply Chain Restructuring & Outsourcing
    • Collaboration with Trading Partners
    • 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
    • Reduce customization
    • Increase new product introductions
    • Integrate multiple enterprise systems
    • Outsource for rapid transformation
    • Asset Optimization
    • Tax advantaging
    • Greater efficiencies
    • Higher performance
    • 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
  • 14. 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
  • 15. 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
  • 16.
    • Using a framework enables a Holistic, Incremental and Iterative Approach :
    • Business Domain - best practices, redesign processes
    • Organization Domain - redesign organization / roles, manage changes, training
    • Application Domain - design, configure, integrate, document, test, migrate data
    • Architecture Domain - IT infrastructure
    • Operations Domain - skills transfer, manage operations
    • Project Management Domain - manage project, risk, quality and communication
    Best Practice approach (Contd.)
  • 17. 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
  • 18. 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
  • 19.
    • Limited knowledge / experience in Supply Chain practices.
    • Supplier-Retailer relationships are limited to buy-sell transactions – no strategic planning, forecasting , etc.
    • Communications and operations are outdated legacy models (phone, fax, email, etc.)
    • Significant amount of time and effort spent on manual, labor intensive operations.
    • Best practice tools and technology are expensive and out of reach for independent small to mid-size businesses.
    What are some of the challenges ?
  • 20.
    • Supply Chain education – develop a knowledge and understanding of best practices and how they apply to your specific organisation (disciplines, tools, costs, benefits, opportunities).
    • Develop a short-term and long-term strategic plan for building a world-class, competitive supply chain.
    • Prioritise your goals with “SMART” objectives.
    How to overcome these challenges ?
  • 21. Supply Chain Excellence - Road Map
  • 22. How are SMEs’ in APAC region, reaping the benefits of SCM practices ?
  • 23. SMEs’ in APAC Region
    • Many SMEs’ are playing a vital role at critical supply chain links (eg. suppliers of parts, manufacturers of products or distributors to customers).
    • SME are finding it easier to re-engineer existing business processes and adopt SCM approaches than the large organisations. They are not faced with organisational structure and cultural barriers.
    • SME Managers are continuously improving the SCM process as their organisation grows. They find managing change easier (eg. size and flexibility advantages).
    • SME are not free from global competition. They are introducing SCM best practices and information systems in an integrated manner , as a method of addressing the competitive environment.
  • 24. Issues addressed
    • Cross-organisational integration
    • Long-term relationships
    • Information sharing
    • EDI
    • E-commerce
    • Total quality management
    • Just-in-time (JIT)
    • Timely, real-demand driven information
    • Planning collaboratively
    • Cost transparency
    • Risk and benefit sharing
  • 25. Research undertaken on SMEs’ in the SCM arena
  • 26. 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
  • 27. 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.
  • 28. Supply Chain Operations Reference-Model (SCOR) Overview
  • 29.
    • 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
      • Cross-industry representation
      • 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.
    Supply Chain Council (SCC)
  • 30. Cross Functional Framework
    • 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
  • 31. 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
  • 32. 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
  • 33. SCOR Boundaries
    • SCOR Spans:
      • All supplier / customer interactions
        • Order entry through paid invoice
      • All physical material transactions
        • From your supplier’s supplier to your customer’s customer, including equipment, supplies, spare parts, bulk product, software, etc.
      • All market interactions
        • From the understanding of aggregate demand to the fulfillment of each order
      • Returns
  • 34. SCOR Boundaries (cont’d)
    • SCOR does not include:
      • Sales administration processes
      • Technology development processes
      • Product and process design and development processes
      • Some post-delivery technical support processes
    • SCOR assumes but does not explicitly address:
      • Training
      • Quality
      • Information Technology (IT) administration (non-SCM)
  • 35. 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
    • Performance Metrics
    • Supply Chain Scorecard
    • Scorecard Gap Analysis
    • Project Plan
    • AS IS Geographic Map
    • Design Specifications
    • TO BE Geographic Map
    Information and Work Flow
    • AS IS Maps
    • Disconnects
    • Design Specifications
    • TO BE Maps
    Develop, Test, and Roll Out
    • Organization
    • Technology
    • Process
    • People
  • 36. 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
  • 37. 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
  • 38. 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
  • 39. 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
  • 40. Conclusion
    • Review of the SCM Process, the importance of integration and the benefits.
    • Next generation SCM solution and the benefits that can be derived from these trends.
    • Best Practice approach in Implementing SCM strategies
    • SCM Excellence Road Map
    • SCOR Framework & Implementation