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)