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Learning Objectives
What are the key supply chain performance measures? How does supply chain performance affect financial performance? Why is it necessary to ensure a god fit of the business strategy with the supply chain strategy? What are the different dimensions of customer service? What are the ways in which firm can simultaneously reduce supply chain costs and improve customer service?
High
4 to 6 20 to 25
Existing Position
High
98% 81%
10.0%
4.9%
42.0
40.0 30.0 20.0 10.0 0.0 Median BIC
66.6
40.0 30.0
24.7
8.3
CRM=557.8, CP =670.1, CS : 102.62 RM= 50.1,WIP=9.2, FG=86.5, INV=145.8 AR=238.2 , AP=181.8, NS= 1122.2, DC=89.5, ICC=0.2
Time in chain DRM = 5.01*365/55.78 = 33 ,DWIP = 0.92 *365/67.01 = 5 , DFG = 8.65 *365/ 102.62 = 31 Total Length of chain =33+5+31=70 days Supply chain inefficiency ratio: SCC = 89.5 + 145.8*0.2 =118.66, SCI =118.66 /1122.2=10.6 Supply chain working capital productivity: SWC = 145.8+ 238.2 - 181.8 =202.2 SWCP = 202.2/1122.2 =0.18 * Source: Exhibit 2 and 3 Kurlon case, Assumption : ICC=0.2
Benchmarking Supply Chain Performance: Top Ten Supply Chains : AMR Ranking
2007 rankings
1. Nokia 2. Apple 3. Procter & Gamble 4. IBM 5. Toyota Motor 6. Wal-Mart 7. Anheuser Busch 8. TESCO 9. Best Buy 10. Samsung Electronics
2005 rankings
1. Dell 2. Procter & Gamble 3. IBM 4. N0kia 5. Toyota Motor 6. Johnson & Johnson 7. Samsung 8. Wal-Mart 9. Tesco 10. Johnson Control
Business Performance
Developed by the Supply-Chain Council for SCM diagnostic benchmarking, & process improvement. The SCOR model separates supply chain operations into 5 process categories: Plan Source Make Deliver Return
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1 0
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Business Process Reengineering Capture the as-is state of a process and derive the desired to-be future state
Benchmarking
Process Reference Model Capture the as-is state of a process and derive the desired to-be future state
Quantify the operational performance of similar companies and establish internal targets based on best-inclass results
Characterize the management practices and software solutions that result in bestin-class performance
Quantify the operational performance of similar companies and establish internal targets based on best-in-class results Characterize the management practices and software solutions that result in best-inclass performance
SCOR Structure
Plan
Deliver Return
Source Return
Make
Deliver Return
Source Return
Make
Deliver Return
Source Return
Make
Deliver Return
Source
Return
Suppliers Supplier
Supplier
Internal or External
Your Company
Customer
Internal or External
Customers Customer
SCOR Model
Building Block Approach Processes Best Practice Metrics Technology
Supply Chain Management_Janat Shah
Suppliers
Source
S1 Source Stocked Products S2 Source MTO Products
Make
M1 Make-to-Stock
Deliver
D1 Deliver Stocked Products
M2 Make-to-Order
M3 Engineer-to-Order
Return Source
Return Deliver
Enable
Supply Chain Management_Janat Shah
Customers
SCOR Level 1
Material Flow
AS IS Geographic Map AS IS Thread Diagram Design Specifications TO BE Thread Diagram TO BE Geographic Map
SCOR Level 2
SCOR Level 3
SCOR Model
Pharmaceutical sales and marketing activities have their own set of logistics related activities that can be fully described using the SCOR model
Segment Analysis, Marketing Planning
Plan
Patients
Source Return
Make
Deliver
Source Make Deliver Source Return Return
Return
Return
Suppliers Supplier
Supplier
Your Company
Customer
Customers Customer
Internal or External
Internal or External
Doctors, Hospitals
Sales
Deliver Return
Source Return
Make
Deliver Return
Source
Make
Deliver
Source Make Deliver Return Source Return
Return
Return
Return
Suppliers Supplier
Supplier
Your Company
Customer
Customers Customer
Plan
Internal or External Internal or External
Deliver Return
Source Return
Make
Deliver Return
Source
Make
Deliver
Source Make Deliver Return Source Return
Return
Return
Return
Suppliers Supplier
Supplier
Your Company
Customer
Customers Customer
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Link SC trading partners to achieve breakthrough performance in satisfying the end users. Overlay the entire supply chain to assure that all contribute to supply chain strategy.
In a successful chain, members jointly agree on a SC performance measurement system. Demand driven supply networks are supply chains with enough flexibility to quickly respond to changes in the marketplace
3/9/2013 Supply Chain Management_Janat Shah
Environmental sustainability
Addressing the need for protecting the environment & reducing greenhouse gas emissions as well business & consumer needs
Sharing of environmental responsibility along the SC such that sound environmental practices predominate, & adverse global environmental effects are minimized.
Carbon footprint
Supply chains evaluate design configurations and various options for reducing total carbon emissions
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Performance Attribute
Performance Metric
Definition
Percentage of orders delivered on time and in full to the customer Percentage of orders shipped within24 hours of order receipt Percentage of orders delivered on time and in full, perfectly matched with order with no errors Number of days from order receipt to customer delivery Number of days for supply chain to respond to an unplanned significant change in demand without a cost penalty Number of days to achieve an unplanned 20% change in orders without a cost penalty
Supply Chain Management_Janat Shah
Supply Chain Delivery Delivery Reliability performance Fill rate Perfect order fulfillment Supply Chain Responsiveness Supply Chain Flexibility Order fulfillment lead time Supply chain response time Production flexibility
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Cost Internal
Assets
2.2 turns
8 turns
12 turns
19 turns
Business performance
Summary-I
A firm must ensure a smooth fit between business strategy and supply chain strategy. As a part of the business strategy, a firm decides the market segment in which it wants to operate and the level of customer service it wants to offer. Supply chain strategy results in costs that firms have to incur to provide the targeted level of customer service. Firms must recognize the nature of trade-offs between customer service and costs and arrive at an optimal decision on this front. Firms will have to decide on the optimum level of customer service by targeting performance levels across four dimensions of customer service: order delivery lead time, responsiveness, delivery reliability and product variety.
Supply Chain Management_Janat Shah
Summary-II
Supply Chain Typology order delivery time : MTS, MTO or CTO. Product Demand characteristics : efficient chain or a responsive chain Firms must monitor their supply chain performance and benchmark the same against competitors. not all supply chain measures are of equal importance. supply chain initiative planned by a firm must get translated into business performance (ROI) , since a firm is ultimately interested in improving its return on investment (ROI). strategic profit model framework to prioritize initiatives. customer service versus cost trade-offs, in the long run, firms have to find a way of increasing performance on both the costs and the services fronts. By working on supply chain innovations involving SC optimization, SC integration and SC reconfiguration firms can improve performance on these fronts on a sustained basis.
Supply Chain Management_Janat Shah