This document discusses various concepts related to improving supply chain competitiveness. It covers the evolutionary stages of purchasing from clerical to strategic. It also discusses key supply chain concepts like the chain metaphor, supply networks, value chains, and the shift to supply chain management. The benefits of strategic supply chain management are reduced costs, improved responsiveness and quality. Risks can be reduced through greater transparency and collaboration with suppliers.

1. Improving the Competitiveness
of Supply Chains
Advanced Diploma
in Procurement and Supply

2. Evolutionary stages of purchasing
• Clerical (transactional)
Purchasing is perceived as a low-ranking routine function, characterised
by a focus on internal performance and efficiency.
• Commercial
The focus shifts to price and cost savings, obtained mainly through the
interface with suppliers. This stage is characterised by adversarial
relationships with suppliers and the exploitation of short-term tactical
advantages.
• Strategic (proactive)
The focus is on effective contribution to competitive advantage. Strategies
are introduced to improve the performance of external supply chains,
through a more holistic approach to logistics or supply chain
management.

3. The chain metaphor
• It emphasises ‘serial co-operation’ or ‘working
together in turn’
• It emphasises mutual dependency and collaboration,
because each link in a chain is essential to the
completeness and strength of the whole
• It emphasises the importance of ‘linkages’ or
interfaces between members
• It is continuous and non-directional

4. • Integrating the objectives of units and functions
throughout the value chain
• Encouraging procurement staff to be proactive in
planning procurements
• Reducing resistance to procurement involvement in
strategic issues and processes
• Enhancing procurement’s role and status in the
organisation
Benefits of a ‘customer-focused’
approach

5. Supply networks
• It is a more strategic model for mapping and analysing supply
chain relationships
• It raises the possibility of a wider range of collaborations
• It recognises the potential of ‘extended enterprises’ and
virtual organisations
• It recognises that extended enterprises may overlap, creating
complex patterns of relationship, competition and potential
risk
Seeing the supply chain as a network is helpful for a
number of reasons:

6. Value-adding strategies
• Value engineering
Analysing the value of products at the design and development stage
• Lean supply
Collaborating closely with the supply chain to eliminate or minimise
wastes in all activities and processes
• Agile supply
Collaborating closely with the supply chain to increase its speed and
flexibility of response to changing customer demands
• Value-adding negotiations and relationships
Working collaboratively and constructively with suppliers to find ways of
continuously improving and adding value, with mutual benefit to all
parties

7. TRADITIONAL WAYS NEW WAYS
Key feature: Independence Key feature: Integration
Independent of next link Dependency
Links are protective End-to-end visibility
Uncertainty More certainty
Unresponsive to change Quicker response
High cost, low service High service, lower cost
Fragmented internally ‘Joined up’ structures
‘Blame’ (adversarial) culture ‘Gain’ (collaborative value-adding) culture
Competing companies Competing supply chains
The shift to supply chain
management

8. Supply network design decisions
• How should the network be configured?
• Where should each part of the network owned by the
organisation be located?
• What physical capability should each part of the
network owned by the company have?

9. All manufacturing performed by
top-level purchaser

10. Top-level purchaser outsources
most manufacturing

11. • Effective supply base management, integration and
collaboration
• Effective supplier and customer relationships
• Supplier selection and contract award on the basis of
recycling or ecologically friendly disposal capacity
• Product and packaging design to facilitate return,
recycling and safe disposal
• Visibility: the ability to access and view relevant logistics
data, in order to manage the operation effectively
• Reverse logistical activities
Management issues in closed-loop
supply chains

12. Characteristics of network sourcing
CHARACTERISTIC
A tiered supply structure, with heavy reliance on a small number of firms
A small number of direct suppliers, with individual parts sourced from one supplier, but within a
competitive dual sourcing environment
High degrees of asset specificity among suppliers, and risk sharing between customer and supplier
A ‘maximum buy’ strategy by each company within the semi-permanent supplier network, but a
‘maximum make’ strategy within the network as a whole
A high degree of co-operative design and value engineering, employing the skills and knowledge of
customer and supplier
A high degree of supplier innovation in new products and processes
Close, long-term relations between network members
The use of rigorous supplier grading systems, increasingly giving way to supplier self-certification
A high level of supplier coordination by the customer company at each level of the tiered supply
structure
A significant effort made by customers at each of these levels to develop their suppliers

13. Risks of a narrow supplier base
• Over-dependence on a few suppliers, in the event of supplier
failure
• Supply disruption
• The loss of preferred suppliers’ goodwill and co-operation
• Preferred suppliers growing complacent, and ceasing to offer
competitive value
• Being ‘locked in’ to long-term relationship and co-investment
with suppliers who turn out to be under-performing or
incompatible with the culture, ethics or objectives of the
buying organisation
• Missing out on seeking or utilising new or more competitive
suppliers in the wider supply market

14. • Cost pressures
• Time pressures
• Reliability pressures
• Response pressures
• Transparency pressures
• Globalisation pressure
Drivers for supply chain
management

15. Benefits of an SCM approach
• Reduced total costs
• Improved responsiveness to customers’ requirements
• Access to complementary resources and capabilities
• Enhanced product and service quality
• Improved supply chain communication
• Improved inventory management
• Reduced cycle times
• Greater transparency for cost and risk management
• Greater supply chain visibility
• Optimising the balance of service levels and costs

16. Improving quality
• Selecting suppliers with third party approved or accredited quality
management systems
• Appraising the quality management systems and ‘track record’ of
suppliers
• Preparing preferred or approved supplier lists
• Influencing the quality of product design
• Translating design requirements into clear, accurate materials and
service specifications
• Developing goods inwards procedures for quality inspection and testing
• Managing relationships with suppliers
• Monitoring and controlling suppliers’ quality performance over time
• Working with suppliers to resolve quality disputes, solve quality
problems and/or make ongoing quality improvements

17. Supporting innovation
• Enhanced access to market intelligence
• Faster and more effective product design and development processes
• Tapping into synergies and opportunities available from pooling
information, ideas and expertise
• Creating incentives for supply chain partners to innovate
• The intentional selection of long-term strategic supply chain partners
• Supporting the use of collaborative techniques
• Supporting the ongoing development of supplier innovation capability
• Supporting supply chain management techniques which are themselves
regarded as ‘innovative’ in traditional procurement settings
• Supporting continuous supply chain improvement and development

18. Reducing risk
• Encouraging the proactive monitoring, identification and assessment of
risks
• Providing greater end-to-end supply chain data sharing, transparency and
visibility
• Supporting greater transparency and trust in individual supplier
relationships
• Improving security and continuity of supply
• Promoting the intentional and rigorous selection of long-term strategic
supply chain partners
• Promoting the effective management of contracts, suppliers and supplier
performance
• Encouraging systems integration and joint development,
• Encouraging supply chain mapping and analysis
• Creating improved end-to-end supply chain visibility

19. Added value
• The core product represents the key benefits
received directly from purchasing the product
• The actual product is the key elements of the product
which differentiate one product from another
• The augmented product may include a range of
tangible and intangible elements which add value
(and often differentiate competing products)

20. Porter’s value chain

21. The value system

22. Problems with Porter’s model
• Despite its customer perspective, the model still
focuses on profitability as the primary objective
• Despite its recognition of the importance of linkages,
the model is not highly integrative
• The distinction between primary and support
functions is somewhat arbitrary
• It is a static model, based solely on American firms

23. Organisational structure
• To define work roles and relationships
• To define work tasks and responsibilities
• To channel information flows efficiently through the organisation
• To coordinate goals and activities of different units
• To control the flow of work, information and resources
• To support flexible working and adaptability to changing internal
and external demands
• To encourage and support the commitment, involvement and
satisfaction of the people who work for the organisation
• To support and improve the efficiency, effectiveness and
competitiveness of the organisation’s performance through all of
the above

24. • The flattening of organisation hierarchies, or
‘delayering’.
• Chunked structures
• Project management
• Horizontal structures
• Core-periphery structures
• Network structures
• Virtual structures
Key modern trends in flexible
organisation

25. Advantages of centralisation
• Specialisation of procurement staff
• Potential for the consolidation of requirements
• Greater co-ordination of procurement activities
• More effective control of procurement activity
• Avoidance of conflict between business divisions
• Access to specialist skills, contacts and resources

26. • Better communication and coordination between
procurement and operating departments
• Customer focus
• Quicker response to operational and user needs and
environmental changes and problems by local buyers
• Knowledge of, and relationships with, local suppliers
• Smaller purchase quantities
• Accountability
• Freeing central procurement units to focus on higher-level,
value-adding tasks
Advantages in devolving
procurement

27. Organisational systems
• Communication, data-sharing and management
information systems
• Requirements planning systems
• Inventory and warehouse management systems
• Transport planning and management systems
• Purchase to pay (P2P) systems, potentially part of a
broader e-procurement or e-sourcing system
• Quality management systems
• Environmental management systems

28. Process mapping and management
• Sources of process inefficiency and non-value-adding activity
• Sources of process ineffectiveness
• Points of process complexity
• Points of risk
• Points of cost
• Points of profit and opportunity
Identifying the nature of process flows, and the sequence of
process activities, enables the identification of:

29. Flowchart symbols

30. Process map for getting out of bed
in the morning!

31. The iDEF process map

32. Value-added flowchart
• List all steps in a process and create a simple flowchart with
the steps in a sequence of boxes
• Add to each box the time currently required to complete each
step
• Identify steps that do not add value
• Move the boxes representing non-value-added processes to
the right of the boxes representing value-added processes
• Total the times in the value-added column to derive a value-
added cycle time, and the times in the non-value-added
column to derive a non-value-added cycle time
• Calculate the percentage of the total cycle time that results
from non-value-added operations

33. Value chain analysis
• Identifying sub-activities for each primary activity and
support activity
• Identifying linkages
• Looking for opportunities to increase value

34. Managing stages of the process
STAGE
Identifying business needs
Specification
Surveying and engaging the market
Sourcing plan
Supplier pre-qualification and appraisal
Supplier selection and contract award
Contract development and communication
Contract management
Contract and supplier performance management
Relationship management

35. The 10 Cs of supplier appraisal
• Competence (or capability)
• Capacity
• Commitment
• Control
• Cash
• Consistency
• Cost
• Compatibility
• Compliance
• Communication