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hain isions V © Supply Chain Visions 2002 – All Rights Reserved

The Fundamentals of Supply Chain Mapping

Kate Vitasek Managing Partner, Supply Chain Visions

September 27, 2002



1© Supply Chain Visions 2002 – All Rights Reserved

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Agenda

The AcademicsKey Thoughts Before Mapping

Understanding SCM Processes and Participants

The Cool Stuff Supply Chain Mapping Case Studies

The Practical Stuff SCM Measurements



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Key Thoughts Before Mappinga Supply Chain



© Supply Chain Visions 2002 – All Rights Reserved

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Defining SCM – Some Caveats

SCM is like artMultiple ter exist

Everyone has their own interpretationThe key is understanding the clients own terminology

SCM is a strategy

“It is not about moving stuff”

SCM is not a fiefdomIt crosses organizations and functions

SCM is not rocket scienceOr is it?




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Defining SCM - Terminology

! Supply Chain

! Demand Chain

! Value Chain

! eChain

Regardless of the term used, the goal is to create create competitive advantage

Doing things right--efficiency Doing the right things--value-added

SCM impacts both




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SCM Definitions

A resource or network of resources that supports the fulfillment andsatisfaction of a customer through effective, efficient, anddifferentiated flows of product, services, information, and finances.

An extension of integrated logistics to include suppliers andcustomers (Bowersox and Closs)

An offshoot of the logistics function (Battaglia)

The “art” of managing the flow of materials and products fromsource to user


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SCM – The Strategic Perspective

Managing the business process from the initial supplier to the ultimate customer,

focusing on speed and ibility resulting in the lowest total cost and the highest customer satisfaction.

Edith Kelly-Green

Vice PresidentStrategic Sourcing & Supply



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SCM – The Strategic Perspective

Managing the business process from theinitial supplier to the ultimatecustomer , focusing on speed andibil ity resulting in the lowest total cost and the highest customer

satisfaction.

Edith Kelly-Green Vice President

Strategic Sourcing & Supply




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SCM – Integrated Process Perspective

The integration of key business processes from enduser through original suppliers that provides

products, services, and information that add valuefor customers and other stakeholders.

The integrated set of activities completed by the fullsupply chain of participants (suppliers,manufacturers, distributors, resellers & consumers),where technology is used to seamlesslyinform the supply chain from end-to-end




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SCM – Integrated Process Perspective

The integration of key business processes fromend user through original suppliers that provides

products, services, and information that add valuefor customers and other stakeholders .

The integrated set of activities completed by thefull supply chain of participants (suppliers,manufacturers, distributors, resellers & consumers) ,where technology is used to seamlesslyinform the supply chain from end-to-end



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Supply Chain Mgmt Processes andParticipants




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hain isions V

SCM Processes

The SCM process is made up of many activities thatmust be performed within the supply chain

Purchasing

Transportation

Production Planning

Inventory Control

Warehousing

Distribution

Forecasting



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SCM Processes: SCOR Model PerspectiveSCM Processes: SCOR Model Perspective

Source: Supply Chain Council Source: Supply Chain Council

The SCOR Model is a standard Supply Chain Operations Reference M The SCOR Model is a standard Supply Chain Operations Reference M odel odel

developed by a coalition of companies involved in the Supply Cha developed by a coalition of companies involved in the Supply Cha in Council in Council




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SCM Processes: SCOR Model PerspectiveSCM Processes: SCOR Model Perspective

Plan

DeliverMakeSource

Your Company

Plan

DeliverMakeSource

Plan

DeliverMakeSource

Plan

DeliverMakeSource

Your CompanySupplier Customer

Source: Supply Chain Council Source: Supply Chain Council




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Integrated Supply Chains

DC

Intranet

2-Tier Supplier

Plant Plant

Goods

Demand Plant

Intranet

Manufacturer

DC Plant

Plant DC Demand

Intranet

Retailer

Store DC

Store

Consumer

Demand DC

Goods Goods

Products

Information

Financial Resources




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SCM Processes

Source: Andersen Consulting Source: Andersen Consulting




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Supply Chain Participants

The supply chain requires input from nearly every aspect of the organization. Thus, it involves:

Source: Andersen Consulting




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Supply Chain Participants: Inter-CompanySupply Chain Participants: Inter-Company

Suppliers. Source of raw materials, component parts, semi-manufactured products, and other ite that occur early in the supplychain - unfinished or non-consumable products.

Manufacturers. Makers of products. Many consider them to be theheart of the supply chain.

Distributors. Responsible for the packaging, storing, and handling of

materials at receiving docks, warehouses, and retail outlets.

Retailers. These are the manufacturer's customers - the stores thatbuy the actual products. Throughout this course, retailers will also be

referred to simply as customers.

Consumers. This is the ultimate user - the person who goes into astore and buys the product.

Source: Andersen Consulting



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Supply Chain Mapping Case Studies

Example 1: Intuit (Quicken, QuickBook,




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Example 1: Intuit (Quicken, QuickBook,TurboTax) As-Is Supply Chain

Retailer

Disti

CustomerOwnedFacility

Supplier #1

Supplier #2

Supplier #3

Returns Vendor

Intuit

61% (80%)

61% (20%)

39%

RetailBusinessRetailer

Directto EndUser

Business




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Customer

OwnedFacility

Retailer

• Consolidates Supplier #2 and Supplier #3 manufacturing to Manufacturer #1

• Reduced admin to manage vendors

• Core competency shift to Supplier increases productivity and reduces HC at Client

• Consolidated manufacturing leverages MRP/Production runs for high volume SKUs

• Consolidates

shipment volumes

which decreases

cost

• Reduced # of shipments to

manage

Returns Vendor

Intuit

Supply Chain Redesign Phase 1

Retail

Business

Supplier #1

Dist Retailer

Directto EndUser

Business




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• Intuit shifted retail customers to

direct relationship - improvesmargins as do not have to give

Disti discount on 70% of retail

volume

Supply Chain Redesign Phase 2

61% (80%)

Retailer

61% (20%) Intuit

Supplier #1

Disti RetailBusiness

Retailer

Directto EndUser

Business

• Intuit takes direct customer

orders and Supplier #1 combines

direct and retail volume for

improved economies of scale inpurchasing and manufacturing

CustomerOwnedFacility

39%

Returns Vendor




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Overall Supply Chain Improvements

Typical Quantified Benefits

from Integrating the Supply Chain

• Delivery Performance• Inventory Reduction

• Fulfillment Cycle Time

•

Forecast Accuracy• Overall Productivity

• Lowered Supply Chain Costs

• Fill Rates

• Improved Capacity Realization

• 16% - 28%• 25% – 60%

• 30% - 50%

•

25% - 80%• 10% - 16%

• 25% - 50%

• 20% - 30%

• 10% – 20%

Intuit and their supplier were able to realize most of the significant Supply Chain improvements they were hoping for.

" "

"

" "

"

"

"

Source: PRTM/Supply Chain Management benchmarking studySource: PRTM/Supply Chain Management benchmarking study




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Any Other Possibilities?

Example 2: Software for Servers




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Example 2: Software for Servers

As-Is Model: Manufacturing and Distribution Supply Chain

Processes

CPI

M M I

Japan

M M I

Cumbernauld

US Print

Bindco

M M I

North America ES APACCLS Sydney

SPP No Amer icaCLS Hayward

SPP Nether lands(CLS Almere)

CS Nether lands

(Franz Maas / M ontfort )

CS Christy St.(FedEx)

ES Apeldoorn(MMI)

E N D

C U S T OME R

Distributors

Resellers

Distr ibutors

Resellers

Distr ibutors

Resellers

Distr ibutors

Resellers

Distr ibutors

Resellers

Distributors

Resellers

ESJapan

Distr ibutors

Resellers

C S Japan

(Nippon Express)

Distr ibutors

Resellers

Mitac

Distributors

Resellers

SalesLink

7 D istributors

Celestica

Distributors

Resellers

CS Scotland(Banta / BG)

Solectron(Mi lpi tas/Montfort )

33 %

7 %

15 %

9 %

40 %

1 %

15 %

4 %

2 %

5 %

6 %

5 %

2 %

1 %

3 %

5 %

11 %

66 %

25 %

9 %

58 %

Turnkeys 1st Tier W hse 2nd Tier W hse D istr ibutor R esellerO EM

M M I

North Am er ica

31 %

5 %

30 to 45 daylead-time


Fujitsu / Toshiba


(24 to 46 for Asia)

M M I

Cumbernauld

Current Supply Base ModelAs-Is Model:




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US Print

PSC

Univenture

CPI

Bindco

US Print

MMI - Fremont

RRD - Portland

Cal Lithograph

MMI - Salt Lake

Bindco

Zomax

Metatec

US Print

Bindco

CPI

MMINorth America

14Major

Component

Suppliers(CD, Box, &

Print)

49Unique

Negotiations /

Relationships

4Major North

American

Supply BaseCoordinators

Tharco

Distribution

As Is Model:Supply Base

Large Supply BaseDrives

Transactions Up,Reduces

NegotiatingLeverage, and

Adds InventoryTouch Points

Example 2 – Server Manufacturer




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US Print

PSC

Univenture

CPI

Bindco

US Print

MMI - Fremont

RRD - Portland

Cal Lithograph

MMI - Salt Lake

Bindco

Zomax

Metatec

US Print

Bindco

CPI

MMINorth America

14Major

ComponentSuppliers

(CD, Box, &Print)

49Unique

Negotiations / Relationships

4Major North

AmericanSupply BaseCoordinators

Tharco

Distribution

Current Supply Base Model

pStep 1: A Simplified Supply Base

Reduced # of CD

Replicators

Reduced # of Pretty

Box Mfrs

Corrugated Mfr

Reduced # ofPrinters

Major

Component

Suppliers

(CD, Box, &

Print)

9Unique

Negotiations /

Relationships

1Major North

American

Supply Base

Coordinator

MMI NorthAmerica

Solution Center

Resident Planners @ Suncontrol:

* AVL* Aggregate Purchase &

Price Negotiations

Proposed Supply Base Model

Distribution

2nd Tier Turnkey

9

Step 2: Move to a Pull-Based, Direct to End-Customer Distribution Model to reduce complexity lead-times




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Distribution Model to reduce complexity, lead-times,inventory, and obsolescence.

CPI

MMIJapan

MMICumbernauld

US Print

Bindco

MMINorth America ES APAC

CLSSydney

SPP No AmericaCLSHayward

SPPNetherlands

(CLS Almere)

CSNetherlands

(Franz Maas /Montfort)

CSChristy St.(FedEx)

ES Apeldoorn(MMI)

E N D

C U S T OME R

Distributors

Resellers

Distributors

Resellers

Distributors

Resellers

Distributors

Resellers

Distributors

Resellers

Distributors

Resellers

ESJapan

Distributors

Resellers

CSJapan

(Nippon Express)

Distributors

Resellers

Mitac

Distributors

Resellers

SalesLink

7 Distributors

Celestica

Distributors

Resellers

CS Scotland(Banta /BG)

Solectron(Milpitas/Montfort)

33 %

7 %

15 %

9 %

40 %

1 %

15 %

4 %

2 %

5 %

6 %

5 %

2 %

1 %

3 %

5 %

13 %

67 %

25 %

9 %

58 %

Turnkeys 1 st Ti er Wh se 2 nd Ti er Wh se Distributor ResellerOEM

MMINorth America

31 %

5 %

30 to 45 dayleadtime

30 dayleadtime

Fujitsu / Toshiba

7 to 10 dayleadtime

MMICumbernauld

Solution CenterJapan

Solution CenterAmericas

Solution CenterSydney

Solution CenterEurope

E N D

C U S T O

ME R

R e d u c e d # of C om p o

n en t S u p pl i er s

4 RegionalSolution

Centers

NOTE: Each solution center handlesonly its region's languages

5 %

20 %

25 %

50 %

Leverages "S2C" (Supplier-to-Customer) ModelIf applicable, software arrives prior to delivery of hardware

Reseller

ResellerReseller

Reseller

ResellerReseller


7 to 10 daylead-time(24+ for Asia)

SupplyCh i

SupplierE

Example 3:f




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Capacity PlanningDemand Planning / ForecastingSupply PlanningMaterial Verification / Consumption

DistributionRepair / RefurbishContinuous Improvement

ChainNino

• Track • Expedite• Reconcile

Consigned

ComponentPO’s

Strategic & CommodityComponent

PO’s

Suppliers•Consigned•Strategic•Commodity

MRP

ProductionPO’s

CapacityPlan

Kevin Ada BuildPlan

Norman

ForecastDemand

PlanNorman

DCTCollaborate

with Sales

Warehouses

Manufacture DAEI

DTV

Retail

ConsumerRepairRefurb

Test

MP

PVT

DVT

EVT

MfgEng

DEV

SupplierEng

DesmondCost

ReductionOpportunities

DCPNew

Territories

Detailed Process Maps are in the Appendix

EngDesmond

• Contracts• Execute• Enforce

OperationsGroup

Game Mfg

Product Group

As-IsProcesses

SupplyChain

SupplierEng Packaged

Example 3:G Mf




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ChainNino

• Track • Expedite• Reconcile

Consigned

ComponentPO’s

Strategic & CommodityComponent

PO’s

Suppliers•Consigned•Strategic•Commodity

MRP

ProductionPO’s

CapacityPlan

Kevin Ada BuildPlan

Norman

ForecastDemand

PlanNorman

DCTCollaborate

with Sales

Warehouses

Manufacture(Wistron)

DAEI

DTV

Retail

ConsumerRepairRefurb

Test

MP

PVT

MfgEng

DEV

SupplierEng

DesmondCost

ReductionOpportunities

DCPNew

Territories

EnablingTechnologies

EngDesmond

• Contracts• Execute• Enforce

SAP BAAN

Packaged ApplicationsGame Mfg

Agile WMS

GLOS

Custom Applications

SSTProduct

Returns System

Excel

S.S. DVT

EVT

K L i




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Key Learnings

Avoid sub-optimization--minimizing an area’s costs to thedetriment of supply chain’s costs

Make appropriate tradeoffs across functions and partners inthe supply chain

Eliminate incentives that increase system costs and createteam or corporately-based incentives

Use lowest net landed cost across the supply chain as primary

goal and incentive

K L i




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Key Learnings

Understand cost tradeoffs in the supply chainCustomer service levelsInventory carrying costsLot quantity costsTransportation costs

Warehousing costsOrder processing and information costs

Reducing inventory and carrying costs by rethinking sub-optimalfunctional strategies.

Purchasing --lowest cost for higher volumesProduction --lowest cost for long runs

Sales--increase service by holding moreTransportation--low rate for full truckloadsCustomers--push inventory upstream to lower their inventories

I t / V l f SCM




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Importance/ Value of SCM

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00%

Telecom

Semiconductor

Pharmaceutical

Packaged Goods

Computer

Chemical

Appliances

Automotive

% of company revenue spent on supply-chain activitiesBest in Class Average

Source: PRTM



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Supply Chain Measurements

Process Measurement--SCOR M t M d l




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Measurement Model

Issue Metric Measure

Supply Chain

Reliability

On-time delivery Percentage

Order fulfillment lead time Days

Fill rate Percentage

Perfect order fulfillment Percentage

Flexibility and

Responsiveness

Supply chain response time Days

Upside production flexibility Days

Process Measurement--SCOR Measurement Model




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Measurement Model

Issue Metric Measure

Expenses/Costs SCM cost Percentage

Warranty cost as percentage ofrevenue

Percentage

Value added per employee Dollars

Assets/Utilization Total inventory days of supply Days

Cash-to-cash cycle time Days

Net asset turns Turns

Example Scorecard



Supply-Chain Performance Versus Custom Population

0% – 20% 20% – 40% 40% – 60% 60% – 80% 80% – 100%

Key Perspectives Level 1 Metrics Major

Opportunity Disadvantage

Average

or M edian Advantage

Best-

in-Class

On-Time Delivery to RequestPercent

68.04% 93.1%

Primary Manufacturing StrategyAverage OFLT

27.5 days 7.92 days

Ship from Stock Order ServiceLevel

86% 98%

Upside Production Flexibility: KeyComponents or MaterialAvailability

30 days 4.45 days

Upside Production Flexibility:Direct Labor Availability 7.5 days 29 days

Upside Production Flexibility:Internal Manufacturing Capacity

5.0 days 0 days

Total Supply-Chain ManagementCost

0.08 0.03

Value Added Productivity ($K) $164 $746

Total Days of Supply 76.03 28.03

Cash-to-Cash Cycle Time (Days) 85.81 days 26.57 days

Asset Turns 2.87 turns 9.16 turns

ibility &Responsiveness

Delivery

Performance/Quality

Cost

Assets

C u s t o m e r - f a c i n g

I n t e r n a l

-

f a c i n g

Your Company’s performance

Electronics All

© Copyright 1999 The Performance Measurement Group, LLCxxxxx

ThePerformanceMeasurementGroup, LLC

A PRTM Company

Example Scorecard

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