Академический Документы
Профессиональный Документы
Культура Документы
ASCET
Demand-driven supply networks are replacing factory-based push supply chains as leading companies learn how customer-centered businesses operate. The change is bigger than you may think.
emand-driven supply networks (DDSN) may seem like just another term for supply chain management. Dont be fooled. DDSN tackles business areas overlooked by traditional supply chain management and promises huge new efficiencies and growth. Proclaiming that the customer is king is not enough. Rebuilding the supply chain is essential for profitable growth in the 21st century business world. This paper will describe how demand-driven supply networks operate differently and how you can design and build one. We start by addressing what is wrong with todays supply chain; we then define DDSN and its organizational and process components; and finally, we offer a four-stage maturity model to chart your companys progress.
Result: about $3 trillion worth of inventory locked in the U.S. and European supply chain as of March 2005. Linear optimization techniques Failing to account for variability is fine in a factory with known task cycle times, but its no good across a network of flexible productive nodes. Result: 20 percent order error rate across U.S. industry. No support for product innovation The black box approach to research and development assumes that new products go through the same chain as existing ones. This approach is slow, wasteful and error prone. Result: 75 percent new product failure rate globally. One big food and beverage company exemplifies what is wrong. Asked about measurement, this companys supply chain leader described a rich set of manufacturing utilization and throughput metrics, but little or nothing tied to commercialization. In this model, efficiency as well as growth suffers. New products are hard to launch, promotions are impossible to coordinate and margins shrink in a deflationary spiral.
20th Century Supply Chains Are Based on the Factory, Not the Consumer
The last century was all about the factory. What marvelous advances were made possible through the application of mass production techniques! Henry Fords fabled River Rouge auto plant was a legend of productive efficiency rubber, glass and iron in one end and cars out the other. However, consumers had to be satisfied with any color you want, as long as its black. The biggest oversight of this 20th century factory-centered supply chain was management of consumer demand. Current key metrics of supply chain performance indicate that the efficiency of the chain still remains limited by this oversight. Consider the following data: Median time to market for a new product in consumer packaged goods: 27.5 months. Median days of supply on hand for semiconductor manufacturers: 190 days; and Median order error rate for industrial electronic equipment suppliers: 26 percent. Todays supply chain still mainly serves the factory, not the consumer. As a result, several critical deficiencies persist: The bullwhip effect Disruptions downstream ripple back ever more loudly, creating tremendous demand uncertainty.
Kevin OMarah is vice president at AMR leading research in demand-driven supply networks and product life cycle management. He was former vice president at Oracle, a principal with the MAC Group and Mercer Management, and has 20 years of experience in supply chain strategy. Mr. OMarah holds a bachelors degree in economics from Boston College, an M.Sc. from Oxford University and an M.B.A. from Stanford University.
Chapter 5: Collaboration
181
Demand drives a network of 25 key suppliers who account for 75 to 80 percent of total spending and provide 80 percent of the R&D effort that gets new product to market. Dell ships 20 million products per quarter with only three days of inventory. Inventory in this model is a liability (0.6 percent component price declines per week), not an asset. The business is based on three master performance metrics growth, profitability and liquidity. The first two measure consumer value; the third measures Dells independence from physical assets. This is in fact the perfect business dashboard for the 21st century. Dell is the worlds best-known example of a demand-driven supply network.
Figure 1
4.00
Source: AMR Benchmark Analytix, 2004
3.00
2.00
100%
30%
20%
15%
10%
>>>
182
Figure 2
At
tra
ct
Se ll
Pla
n
So
Best practice means lean flow manufacturing in plants, crossdocking, kitting and customized late-stage assembly in distribution centers and optimized parts and labor provisioning in field service.
ce ur
Demand
ef
e in
Supply
De s
n ig
ve
Ser
vic e
Product
ote
Sup
ply
respond to demand. These processes include functions in marketing, sales, service, price management and demand forecasting/planning. Research into supply chain tends to forget that half of the supply/ demand balancing problem is demand management. In a DDSN, these groups collaborate to manage demand sales forecast is a trusted input to operations whose capacity constraints are transparent; marketing collaborates with supply chain for promotions and new launches; and sales and service rely on logistics for order status. Ongoing demand visibility is also what RFID is all about. Seeing demand pulsing in, rather than batched periodically, gives business a chance to price higher when the customer is willing to pay. Economists talk about pricing along the demand curve as a way to maximize profits (something the airlines pioneered). Price management fed with unit-level demand data allows for supplydemand balancing with discounts, tiered pricing and options pricing that do not rely exclusively on physical fulfillment (see AMR Researchs Price Management Model, May 2004, for more on this).
Pr
om
ak
De
li
Supp
ort
Chapter 5: Collaboration
183
cost of goods sold, perfect order fulfillment rate and inventory turns. To function well it should include purchasing, manufacturing and logistics. Product In over six years of product life cycle management research, AMR has seen many different potential leaders for the product domain engineering, R&D, product development, marketing and even supply chain itself. Product domain leadership is so fundamental to developing a DDSN that general management may need to create a role accountable for time to market, new product contribution and perfect product launch. Some companies have created chief innovation officers that might serve this role. Demand The obvious starting point is head of sales. Also critical to managing demand, however, are marketing and service. Appropriate business metrics to assign to this may include market share, total revenue growth and gross margin.
What about the CIO? CIO has overall accountability for technical infrastructure supporting DDSN. This means enforcing standards, identifying critical enablers and the timing and sequence of their availability. It also means charting a path that leaves existing systems in place wherever possible and managing all new investment by reallocating existing capitalized IT spending.
Recommended Action
Identify leaders for demand, supply and product domains who are able to drive DDSN; also plan for those who will resist. Benchmark current performance on key metrics of DDSN excellence (e.g., forecast accuracy, perfect order performance and time to market). Finally, look over your shoulder (or ahead) to competitors who are good at responding to demand to see where you are losing business, money and time.
Figure 3
Road Map Transforming Demand, Supply and Product Management Stage 1: Reacting Stage 2: Anticipating
Opportunity reconciled with targets to set forecast. At least manual sales & operations planning (S&OP).
Stage 3: Collaborating
POS and other actual demand data drive forecasting algorithms. Demand signal repository in use. S&OP reconciles with customers downstream. Product/brand platform strategies drive top-level forecast while price and promotion manipulation clears sunken inventory.
Stage 4: Orchestrating
RFID-enabled demand management. Proactive dynamic pricing. S&OP still delivers forecast adapted to various supply lead times. Demand creation campaigns on business platforms. Price, product, placement, promotion set in automated stage gate and S&OP. Global work order and inventory visibility. Networkoptimized parts inventory includes manufacturing, logistics and NPD stage gate. Global inventory and order visibility. Lead time optimization of inventory accounting for transport and holding costs. Lean global mass customization capability. Design for manufacture and assembly. Automated global change management. Strategic sourcing spans all current internal and external capacity as well as future product forecasts.
Sales
Demand
Marketing
Manually connected campaigns, manually synched catalogs, price lists, promotions. Active in stagegate NPD process.
Service
Regional work order provisioning and visibility. Some spare parts optimization planning. Manual tie to customer database
Global work order and inventory visibility, including at customer sites. Network-optimized parts inventory. Active in stage gate.
Logistics
Site-specific inventory, order Supply network modeling with and freight capacity visibility. at least continental multi-site Isolated from corporate financials. inventory visibility and dispatch
Global inventory and order visibility within owned and outsourced operations. Network optimization of transport capacity.
Supply
Site-specific manufacturing resource planning. Manual demand forecast input. Isolated from corporate financials.
Supply network modeling with at least regional multisite capacity planning and production capability. Active in stage gate and S&OP. Strategic sourcing applied across commodity categories with some link to design part creation process; active in stage gate NPD process. Accessible and catalogued design and specification documentation. Manual stage gate processes. Some link to sourcing for parts and materials.
Global capacity visibility within owned and outsourced operations. Lean production and materials supply.
Sourcing
Vendor lists, RFPs, parts and price lists isolated from engineering and design systems. Link only Accts. Payable for PO creation.
Strategic sourcing spans internal manufacturing capacity as well as key suppliers. Capacity and NPD collaboration with suppliers.
Engineering
Product
Isolated design and specification data vaults. Manual, undisciplined and slow engineering change process with manufacturing.
Single enterprise product information repository. Integrated product & process development with key suppliers. Manufacturing process planning.
Optimal reuse of intellectual property internally and externally for shortest possible time to volume. Total associativity between digital design and physical product. Optimal reuse of intellectual property for shortest possible time to volume. Total track and trace of discovery geneology. Dell, c. 2015 Dynamically reconfigure the supply network. Demand Driven Supply Network. 1100
R&D
Isolated research documentation. Manual, undisciplined and slow creative process with marketing.
Single enterprise product information repository. Integrated product & process development. Centralized compliance repository. Procter & Gamble, c. 2010 Connect partners to create network process flows. Collaborative Supply Chain. 500
Ford, c. 1950
Remove variability and waste Connect functions to create within functions. Time and motion internal process flows. Business studies, work automation. Process Re-engineering. 100 300