The SC's Strategic Importance & STO - Supreme Energy Case

8/3/2019 The SC's Strategic Importance & STO - Supreme Energy Case

1/44

THE SUPPLY CHAINS STRATEGIC

IMPORTANCE & THE DEVELOPMENT OF SCMSTRATEGY, TACTICAL AND OPERATIONAL

SUPREME ENERGY CASE

WIN SUKARDI

PMBSJuly 2011


2/44

Quote of the Day

PRO

PROAKTIF

RAJINOPENMIND


3/44

Win Sukardi

Sr. Manager SCMSupreme Energy Group

Education:

Mechanical Engineering (Ir.), Brawijaya University Petroleum Engineering (M. Eng), Tulsa University

Management (MM), SGU-Asia University

Business Administration (MBA), Konstanz University

Business Law (M. Hum), Gadjah Mada University Certified Purchasing Manager (C.P.M.)ISM


4/44

What we discuss?

What is SCM?

Why is it important?

Developing the SCM Strategy, Tactical &OperationalConsiderations

Supreme Energys Case

Strategy

Tactical & Operational

Enablers


5/44

What is SCM?

Many definitions

It is an evolving field since early 1990s

Usually related to scope of activities and type ofindustries

Lets explore from APICS (operation/manufacturing),

SCOR (six sigma), ISM (process), CSCMP (functional

integration, logistics) and others


6/44

What is SCM?

APICS

The processes from the initial raw materials to the

ultimate consumption of the finished product linking

across supplier & user companies"


7/44

What is SCM?

SCOR

Four basic processes plan, source, make,

deliverbroadly define these efforts, which include

managing supply and demand, sourcing raw

materials and parts, manufacturing and assembly,

warehousing and inventory tracking, order entry and

order management, distribution across all channels,

and delivery to the customer"


8/44

What is SCM?

ISM

The design and management of seamless, value-

added processes across organizational boundaries to

meet the real needs of the end customer"


9/44

What is SCM?

CSCMP

Supply Chain Management encompasses the

planning and management of all activities involved in

sourcing and procurement, conversion, and all

logistics management activities. Importantly, it also

includes coordination and collaboration with channel

partners, including suppliers, intermediaries, third

party service providers, and customers. In essence

SCM integrates supply and demand management

within and across companies"


10/44

What is SCM?

David Ross (Through Supply Chain Management, 1997):

"A continuously evolving management philosophy that

seeks to unify the collective productive competencies andresources of the business functions found both within theenterprise and outside the firm's allied business partnerslocated along intersecting supply channels into a highly

competitive, customer-enriching supply system focused on

developing innovative solutions and synchronizing theflow of marketplace products, services, and information

to create unique, individualized sources of customervalue."


11/44

David Simchi-Levi, Philip Kaminsky, Edith Simchi-Levi

(Designing & Managing the Supply Chain, 2003):

Supply chain management is a set of approaches utilized

to efficiently integrate suppliers, manufacturers,

warehouses, and stores, so that merchandise is produced

and distributed at the right quantities, to the right locations,

at the right time, in order to minimize system-wide costs

while satisfying service level requirement


12/44

What is SCM?

In Supremes perspective, SCM has at least 3

elements:

Procurement (sourcing and operation/ tactical

buying)

Logistics (warehousing, inventory, import-export,

explosives, waste management)

Performance and Support (internal and external

performance management, general administration,

reporting, ERP, and any other IT support)


13/44

The importance?

How deep? Is it really important?

Lets watch the video!

Some cases


14/44

Renault and Nissan

Case cited from Elevating Supply to the Executive Agenda

by David Bonet and Phil Toy (ISM Article)

Carlos Ghosn, named as COO Renault in 1996. He set a

goal of USD 2 billion of savings over 3 years How? He has 2 questions:

How can Renault and its suppliers improve performance

drastically and permanently in terms of total costs, cycle time

and innovation? Are Renault's processes, organization, management systems

and people suited to achieve these ambitious goals?

He again adopted the same in Nissan


15/44

Legrand



French company, bought by KKR and Wendel in 2002. John

Selldrof named as CEO. He then set a goal of USD 20 Millionsavings of USD 285 Million spending

He put supply management initiatives as a high priority to

achieve the goal


16/44

IBM



First CPO, the late Gene Richter, with John Paterson, the CEO,

continued in focusing on shared processes and linkedobjectives with all the business units across the world to

have scale economies in spending (sourcing effort)

View the importance of SCM function as strategic


17/44

DELL

Remember the popular example of what is Dell doing in

selling their computer?


18/44

The simple one..

Up Sustainable and growProfit

Up Sustainable and growRevenue

Down Meeting the quality standards, acceptable to

marketCost


19/44

Strategic Importance Supremes Perspective

Who and what is Supreme Energy doing?

To understand more and to have check & balances on the

strategic importance, we shall transform it the Strategy,

Tactical, and Operational


20/44


Who and what is Supreme Energy?





21/44

Supreme Energy

Jakarta HQ, geothermal business focus. Joint venture of

National + France + Japan

3 WKPs in Sumatera (each WKP is 220 MW capacity); three

project companies; total of 660 MW Each WKP has a 35-year contract from exploration to

operation & maintenance (5 years exploration + 30 years

O&M)

Total cost exposure: app. USD 660 Millions each for the allstages (USD 2 Billions in total)


22/44

Supreme Energy

Stages: preliminary survey, exploration, development &

construction, and O&M

Major works (Civil Construction, Drilling, EPC, and O&M) of 3

projects (2 consecutive projects and another 1 project will bein parallel)

Involving 3 remote areas

Considered low and sensitive margin (IRR Project 16%)

Project financed (limited to the low interest of source of fund)

100% equity on the pre-exploration and exploration works


23/44

The strategic importance

The integration and management of all flows (flow of

information, flow of product-goods/services, and flow of

funds)

Driving force to reduce cost (TCO in some types) and deliverthe goods/services at the required time with satisfactory

performance in all project phases

Driving force to maintain good relationships with key

suppliers Add value to the targeted COD (Commercial Operation

Date) and maintain production at the service level during the

concession contract period


24/44


Who and what is Supreme Energy?





25/44

Development of the STO

Merriam-Webster:

Strategy: is defined as a long term plan of action designed

to achieve a particular goal

Tactical: is defined as involving or pertaining to actions, ends,or means that are immediate or short-term in duration,

and/or lesser in importance or magnitude, than those of a

strategy or a larger purpose.

Operational: is defined as of or relating to operation or toan operation


26/44

Considerations

Nature of Company Company/Project Risks

Common Practice Stakeholder Value Business Relationships Laws & Regulations


27/44

Nature of Company

Public sectororganizations

Privateenterprises

Non-profitorganizations

Type of Institution

Size of InstitutionPhase of project


28/44

Company/Project Risks

Exploration risk (upstream and downstream)

Development risk (upstream and downstream)

Operational risk (upstream and downstream)

Financial risk

Market risk

Business risk


29/44

Common Practice (OG & GEO)

1. Exploration

2. Drilling

3. Production & Maintenance

Phase of the project

Internal Chain OG & GEO


30/44

RECEIVING

CUSTOMS WAREHOUSE &INVENTORY CONTROL

USAGESURPLUS

WRITE OFF

REORDERROCUREMENT

Suppliers

Common Practice (OG & GEO)
http://../i-appi/bidang-1/logistic/tim%20receiving.ppthttp://../i-appi/bidang-1/logistic/tim%20customs.ppthttp://../i-appi/bidang-1/logistic/tim%20warehousing%20inventory.ppthttp://../i-appi/bidang-1/logistic/tim%20warehousing%20inventory.ppthttp://../i-appi/bidang-1/logistic/usage.ppthttp://../i-appi/bidang-1/logistic/tim%20surplus.ppthttp://../i-appi/bidang-1/logistic/penghapusan.ppthttp://../i-appi/bidang-1/logistic/tim%20procurement.ppthttp://../i-appi/bidang-1/logistic/tim%20procurement.ppthttp://../i-appi/bidang-1/logistic/penghapusan.ppthttp://../i-appi/bidang-1/logistic/tim%20surplus.ppthttp://../i-appi/bidang-1/logistic/usage.ppthttp://../i-appi/bidang-1/logistic/tim%20warehousing%20inventory.ppthttp://../i-appi/bidang-1/logistic/tim%20customs.ppthttp://../i-appi/bidang-1/logistic/tim%20receiving.ppt


31/44

Stakeholder Value

Profitable

Growth

CostMinimization

TaxMinimization

Working CapitalEfficiency

E

V

A

Time

$ Market Cap

Fixed-CapitalEfficiency

Source: Cap Gemini E&Y Research

For OG, GEO Energy

Five Key Drivers of Stakeholder Value


32/44

Business Relationships

PROJECT

COMPANY

LOCALGOV.

ESDM

(EBT-KE)

PT. PLN(PERSERO)

PPALICENSE

PRIVATE COMPANY


33/44

Laws and Regulations

Indonesian laws and regulations

International laws (especially affecting France and Japanese

companies)


34/44

StrategySupreme Energy

Gain the Top management support

Fit-for-purpose (relevant) organization

Different focus in each stage, based on companys objectives

SCM as a center of coordination, prime-mover and as afinancial commitment gate-keeper

Simple and accountable process, minimize approvals but

having a sound control mechanism

Limited financial authority (going bigger as approaching thedevelopment and O&M, part of risk management)


35/44

Tactical & OperationalSupreme Energy

To be part of management team, controls from

Procurement Committee, BOD Contract Review

Three sections in all project stages, functional scope:

Procurement (sourcing, tactical), Logistics (warehousing,inventory, importation, re-exportation, transportation), and

Performance & Support

Speed and flexible on exploration stage

Lead and drive the process, appropriately Simple procedures, less bureaucracy but two-signatures

principle (control)

Use standard forms as much as possible


36/44

Tactical & OperationalSupreme Energy

No ERP, simple database and process tracking system (prior

to exploration only)

Less paper, use of IT, email, scan, use of standard forms but

modifiable Direct import if possible, narrow down the supplier base,

use of the relationship type of procurement and selected

arms-length (transactional) type


37/44

Enablers

Top Management Support

People

(Relevant) Organization

Information Technology


38/44

Top Management Support

View SCM as part of management team

Obtain continuous trust and appropriate authority

Potential improvement: promote the Head of SCM to be

an equal level to Engineering, Project, or Operations (VPlevel).


39/44

People

Best and fit-for-purpose people

Can-do attitude, good interpersonal skills, strategic

thinking, value oriented, and relationship management

skills Technical and project management skills

Multi background and experience. Work with less

supervision and less or nil of staff

Avoid under paid: You pay cheap, you will get monkey!.Seek a balance between buy and make/develop


40/44


To be effective, relevant (fit-fur-purpose), viewed as VALUE,and as part of Management Team

Set up Procurement Committee (members are VP level)

Small to grow larger (budget constraint)exploration risks Speed, experienced task-force, multi-tasking to a mixed

type towards the O&M stage

Keep the three sections: One manager, 3 staffs (4, prior to exploration)

One manager, 3 heads, 3 fields, 4 staffs (11, exploration &development)

One manager, 3 heads, 3 fields, 8 staffs (15, O&M)


41/44


Set up performance objectives for each section, develop

KPI and measure and improve. The fact: less number of

people, can do this later


42/44

Information Technology

Depends on the project stage, fit-for-purpose, less cost if

possible, satisfying the basic needs

Moving to the O&M stage, use of the latest proven

technology; use of a full scale of e-proc, suitable ERP


43/44

Closing remarks

Dont we think that SCM is strategically important?

If yes, it is then up to you, as the SCM professional and

Manager or VP, to bring and drive it to maximize value

to the success of your company!

You, us, as the key enabler, keep learning and improve!


44/44

Thank You, Wish You All The Best!

Email: [email protected]

The SC's Strategic Importance & STO - Supreme Energy Case

Documents

Transcript of The SC's Strategic Importance & STO - Supreme Energy Case