SCM Overviewand APS

BA 295 Fall 2002

Prof. Fred Coleman, III

October 1, 2002

Generalized Supply Chain Model

SUPPLIERNETWORK

INTEGRATEDENTERPRISE DISTRIBUTIVE

NETWORK

Information, Product, Service, Financial and Knowledge Flows

MATERIALS

Capacity, Information, Core Competencies, Capital and Human Resources

Relationship Management

Procurement

Manufacturing

Distribution

END

CONSUMERS

Integrated Management in Logistics Operations

Customers

Enterprise

MarketDistribution

ManufacturingSupport

Procurement Suppliers

Information Flow

Inventory Flow

Integrative Management Value Proposition

Market ValueEconomic Value Relevancy Value

Customization

Segmental Diversity

Attractive Assortment

Economy-of-Scope Effectiveness

Product/ Service Presentation

Lowest Total Landed Cost

Economy-of-Scale Efficiency

Product/ Service Creation Product/ Service Positioning

Procurement/ Manufacturing Strategy

Market/ Distribution Strategy Supply Chain Strategy

Logistical Synchronization

Node

Transportation Links

CommunicationLinks

MaterialSource

Lead Supplier(Tier 1)

ManufacturingPlant

Distributors

Customer

PurchasingCycle

ManufacturingSupport

Cycle

PhysicalDistribution

Cycle

Performance Cycles

OrderTransmission

Time Range - Days1/2 31

CustomerDelivery

Time Range - Days1/2 31

OrderTransportation

Time Range - Days2 104

OrderSelection

Time Range - Days1 202

OrderProcessing

Time Range - Days

1 42

Total Performance Cycle

Time Range - Days

5 4010

Supply Chain Integration—Implementation Challenges

• Risk—who has the most to gain or lose from the collaboration. Drives commitment to collaborative arrangements and plays major role in determining leadership.

• Measurement—conventional measurement devices do not yet exist for supply chains.

• Risk/Reward Sharing—how to share? No appropriate metrics, no effective means to share risk/rewards.

Successful Supply Chain StrategiesA recent Andersen Consulting study revealed six different, but equally successful, supply chain strategies. Market Saturation Driven: Focusing on generating high profit margins, through strong brands and ubiquitous marketing and distribution. Operationally Agile: Configuring assets and operations to react nimbly to emerging consumer trends along lines of product category or geographic region. Freshness Oriented: Concentrating on earning a premium by providing the consumer with product that is fresher than competitive offerings. Consumer Customizer: Using mass customization to build and maintain close relationships with end-consumers through direct sales. Logistics Optimizer: Emphasizing a balance of supply chain efficiency and effectiveness. Trade Focused: Prioritizing "low price, best value" for the consumer (as with the logistics optimizer strategy but focusing less on brand than on dedicated service to trade customers).

Supply Chain FrameworkPRODUCT-SERVICE VALUE FLOWPRODUCT-SERVICE VALUE FLOW

MARKET ACCOMMODATION FLOWMARKET ACCOMMODATION FLOW

EENNDD CCUUSSTTOOMMEERRSS

INFORMATION FLOWINFORMATION FLOW

FINANCIAL FLOWFINANCIAL FLOW

BEHAVIORAL CONTEXTBEHAVIORAL CONTEXTRelationship

Measurement

OPERATIONAL CONTEXTOPERATIONAL CONTEXT

Technology and Planning

PLANNING AND CONTROL CONTEXTPLANNING AND CONTROL CONTEXT

Material andService Supplier

Integration

CustomerIntegration

InternalOperations

RREESSOOUURRCCEE

BBAASSEE

Supply Chain Context, Competencies, and Supportive Capabilities

Customer Integration

Internal Integration

Material/Service Supplier

Integration

Technology and Planning

Integration

Measurement Integration

Relationship Integration

Segmental Focus Cross- Functional Unification

Strategic Alignment

Information Management

Functional Assessment

Role Specificity

Relevancy Standardization Operational Fusion

Internal Communication

Activity Based and Total Cost

Methodology

Guidelines

Responsiveness Simplification Financial Linkage

Connectivity Comprehensive Metrics

Information Sharing

Flexibility Compliance Supplier Management

Collaborative Forecasting and

Planning

Financial Impact Gain/Risk Sharing

Structural Adaptation

Factors Increasing Likelihood of Supply Chain Relationship Success

Retailers• High level of cooperation

• Similarity of goals/ objectives

• Clear communications

• Senior management support

• Control of inventory

Manufacturers• Information sharing

• Recognition of mutual benefits

• Controlled implementation

• Joint task force

• Commitment/ resource dedication

• Benefits realization

Common Obstacles Confronted When Creating Supply Chain Relationships

Retailers• Low-volume stockkeeping

units (SKU’s)

• Resistance of manufacturers to change

• Information systems

• Noncompatible data formats

Manufacturers• Lack of communication

• Trust level

• Noncompatible systems

• Understanding of technical issues

• Resistance of customers to change

• Readiness of retailers

CPFR in the Retail Info Tech Environment

Trading Partner

Trading Partner

CollaborateTrading Partner

Trading Partner

Trading Partner

Trading Partner

CRMCRM

APSAPS

ERPERP

Promotions

Forecasts

Item Catalog

Orders

CPFR Solution

Supplier

GenerateDemand

DetermineRqmts

Make toDemand

Internet

EDI

Estimated Total Cost for First-Year EDI and Internet Technologies

Characters per Month

VAN Internet Savings

10K—20K $1,580 $400 75%

150K-200K $1,880 $400-746 60—79%

5OOK—1M

$2,788—6,235

$412—758 85—88%

10MM-100MM

$24875—47,792

$9,920 63—81%

Collaborative Inventory Planning

• Quick Response

• Continuous Replenishment and VMI—See Industry Insight 10-2, pg. 319 and 10-3, pg. 321

• Profile Replenishment

Summary

• SCM is …….

• Successes are prevalent, but require major shifts in all of above.

• Advanced Planning and Scheduling applications are now routine.

• APICS review in SPRING will bring hands-on examples of APS. (Keep Bowersox)