supply chain evolution how to successfully outsource – partnership not antagonism © the delos...
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Supply chain EvolutionSupply chain Evolution
How to successfully outsource – partnership not antagonism
© The Delos Partnership 2008 page 1
Traditional Supply Chain ManagementTraditional Supply Chain Management
© The Delos Partnership 2008 page 2
Our business
Supply Chain visibility
Pur
chas
ing
Sal
esSupplierTier Two
SupplierTier One
CustomerTier One
Manufacturing
CustomerTier Two
Operation
Inventory
Features of “Traditional” supply chan Features of “Traditional” supply chan managementmanagement1. Each company works to their own Vision and Strategy,
plans and management processes2. Our company’s visibility of customer requirements is poor,
determined by inaccurate forecasts3. Demand swings are amplified across the supply chain as
each level attempts to destock or restock4. Purchasing is done with sales on the basis of minimum
purchase price, with little acknowledgement of true cost/value
5. Multiple suppliers are used in order to manage risk of lack of source of supply
6. Inventory used at each step of the supply chain to buffer against failure of supply [made or bought].
© The Delos Partnership 2008 page 3
We are now operating in a Global We are now operating in a Global market for both supply and demandmarket for both supply and demandThis brings new challenges
“Think global, act local” Optimise global resource React to demand swings across the globe Outsource our non-core business to suppliers
Brings New risks• Longer-lead times across the globe• Failure to supply means need to switch production “at a
moment’s notice”• We are committed to suppliers on low-cost product in low-cost
countries who do not necessarily have to supply us
© The Delos Partnership 2008 page 4
We also choose to focus on our core We also choose to focus on our core business – Pareto analysisbusiness – Pareto analysis
1. We review our product portfolio, and decide that 20 % of products account for 90 % of our margin – we eliminate many products, much to the resistance of Marketing
2. 20 % of our purchased parts account for 80 % of our spend, so we seek to outsource our supply base
© The Delos Partnership 2008 page 5
““Focussed” Supply Chain Focussed” Supply Chain ManagementManagement
© The Delos Partnership 2008 page 6
Our business
Supply Chain visibility
Pur
chas
ing
Sal
esSupplierTier Three
SupplierTier Two
CustomerTier Two
Manufacturing
CustomerTier Three
Operation
Inventory
Cust-omerTier One
SupplierTier one
Key featuresKey features
• Suppliers have responsibility for management of inventory – reorder point system used
• Relationship is contractual – long-term blanket orders, and call-offs against blanket orders
• Some electronic messaging of orders, and use of internet portals to download information
• Rigorous use of performance measures on time in full to quality.
• Large suppliers dominant force in relationship with small to medium size suppliers
© The Delos Partnership 2008 page 7
Focussed Supply Chain ManagementFocussed Supply Chain Management
POSITIVE OUTCOMES•Reduced Cash Flow as inventory responsibility rests with suppliers/customers•Reduced administrative requirement and purchasing overheads and order entry overheads•Ability to have one or few suppliers handle multiple materials - less risk of failure to deliver
RISKS TO FACE•Lack of visibility•Issues with quality of plan – particularly if e-enabled•Development of New Products becomes difficult over a number of suppliers [used to be all in-house]•Greater risk of supply chain failure – longer chain, more people involved•Buffers get bigger..
© The Delos Partnership 2008 page 8
““Focussed” Supply Chain Focussed” Supply Chain ManagementManagement
© The Delos Partnership 2008 page 9
Our business
Supply Chain visibility
Pur
chas
ing
Sal
esSupplierTier Three
SupplierTier Two
CustomerTier Two
Manufacturing
CustomerTier Three
Operation
Inventory
Cust-omerTier One
SupplierTier one
•More Inventory•Less Satisfaction•More Demand Volatility
The choices to solve the problemsThe choices to solve the problems
ARMS LENGTH Enforce contractual clauses
on: Delivery Quality – send back product Insist on more safety stock Manage your customers’
processes
Build in risk-management by having more suppliers
TRUE PARTNERSHIP•Share vision and strategy•Share true demand information across the whole of the supply chain
Flowcasting at the consumer end
Replenishment planning replaces forecasting at every level of supply chain
•Help customers and suppliers develop their processes•Have fewer suppliers to you who manage effectively
© The Delos Partnership 2008 page 10
Are you always that strong opposite all keySuppliers ? Requires trust and real
partnership
Delos PartnershipDelos Partnership
• The Delos Partnership supports the development of systems, processes and behaviour that generate real partnerships.
• Where processes are not in line with our platinum standards, then we will educate and facilitate the development of these between companies and more importantly across company boundaries.
• Successful implementation is not just about e-enablement, but about common-sense integration of people processes and tools
• It is also about sharing vision and strategy and having mutually beneficial measures of performance.
• We also support the development of a single set of numbers across the supply chain to reduce demand volatility and inventory – it is more about having inventory at the right place and at the right time to support the end-consumer, and not about offloading the risk to everyone else.
© The Delos Partnership 2008 page 11
The Delos Partnership solutionThe Delos Partnership solutionPartnership along extended supply Partnership along extended supply chainchain
© The Delos Partnership 2008 page 12
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
InnovationInnovation
VisionVision
StrategyStrategy
PrioritidsationPrioritidsation
DemandDemand
SupportSupport
SupplySupply
Prime/Supply ChainLeader
Prime/Supply ChainLeader
© The Delos Partnership 2007page 13
Extended Enterprise Leadership – shared process, aims Extended Enterprise Leadership – shared process, aims measures, improvement programmes …..measures, improvement programmes …..
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
Principles of Supply Chain partnershipPrinciples of Supply Chain partnership
1. Share Vision and Strategy as well as data and information2. Promise only what you can realistically deliver3. Communicate when you have a problem. Tell it as it is and
not how you would like your partner to think it is.4. Measure performance openly and transparently, and work
to continuously improve.5. Improve the processes, and don’t blame the people.6. Systems are only as good as the quality of the data. Make
sure data is 100 % accurate. Accuracy is an attitude of mind and not the product of audits.
7. Relationships are based on openness, honesty and trust, and don’t enter into a partnership unless these foundations are there.
© The Delos Partnership 2008 page 14
““Focussed” Supply Chain Focussed” Supply Chain ManagementManagement
© The Delos Partnership 2008 page 15
Our business
Supply Chain visibility
Ope
ratio
nsT
eam
Cu
sto
me
rT
eam
SupplierTier Three
SupplierTier Two
CustomerTier Two
ManufacturingTeam
CustomerTier Three
Operation
Inventory
Cust-omerTier One
SupplierTier one
•Less Inventory•More Satisfaction•Less Demand Volatility
The Delos Partnership solution - The Delos Partnership solution - Benefits and prerequisitesBenefits and prerequisites
Key BenefitsImproved visibility Reduction of riskIncreased flexibility
Joint Lean programmes Co-managed inventories Improved New product
IntroductionRisk ReductionCost reductionLower working capital requirementLower cash flow requirementBetter Management of change
Prerequisites•Understanding of benefits of partnership rather than antagonism
•Shared benefits and costs
•Understanding of Vision and Strategy across the supply chain
•Common strategy
•Common measures
•Understanding of how and where to optimise the supply chain
•Education
© The Delos Partnership 2008 page 16