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Force or Farce?
K.L.Bhaskaran
External Environment
Global competition
Evolution of Info.Technology
Shorter product life cycle
Impatient customers
Product variety
Changing customer
requirements
Customer expectations
Quality
Price
Delivery
After Sales service
Global Business
A Canadian meets his Indonesian counterpart
in a French restaurant, located in London,
owned by an Indian.
One is dressed in an Italian suit, wearing a
Brazilian pair of shoes while other wears
Hong Kong suit and Thai shoes.
Shirts are made of Egyptian Cotton.
Business is discussed over a cup of coffee
from Ivory Coast accompanied by Syrian
pastries and ends with a Cuban cigar.
4
Born Local
Business Global
6
Brand?
Niche Product
Brand?
Easy Availability?
Customer Needs
Right product, at the right quality, at
the right time, with the right packing, at
the right price , backed up by right
service.
12
13
Supplier
Supplier
Raw Materials
Components
Supply Items
Electricity
Janitorial Services
Manufacturer
Manufacturer
Manufacturer of
Products
Service providers
Customer
Customer
Retailer
Wholesaler
Distributor
End Customer
(Consumer)
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Retailer
Tier 1
Supplier
Retailer
Tier 2
Supplier
Services
Tier 2
Supplier
Manufacturer
Tier 1
Supplier
Retailer
Distributor
Tier 2
Supplier
Tier 2
Supplier
Distributor
Tier 1
Supplier
Retailer
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Supplier
Supplier
Manufacturer
Manufacturer
Orient towards
customer
Customer
Customer
Information Flow
Reverse
Logistics Flow
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Information Flow
Raw
RawMaterial,
Material, Component
ComponentSupply
Supplystatus,
status,
Production
Status,
Delivery
status,
Order
Production Status, Delivery status, Orderstatus,
status,
sales
literature,
invoice,
etc
sales literature, invoice, etc
Returns
Returnsfor
forrepair,
repair,replacement,
replacement,recycling,
recycling,disposal,
disposal,
return
of
rejected
items
to
suppliers
return of rejected items to suppliers
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An example
A Restaurant
Suppliers
Supplier
Supplier
Gas Suppliers
Gas Manufacturer
Utilities
Agriculturists
Milk Supplier
Manufacturers Provision Suppliers
Producer
chef
Retailer
Waiters
Consumer
Consumers
Utilities
18
Beware!!!
A Supply Chain is NOT
Manufacturing
Logistics
Purchasing
Supplies
Or
any combination of the above
19
A simple definition
Supply Chain begins with the Customer
[order placement ] and ends with the
customer [ delivery ]
In some cases, after sales service is a
part of supply chain
21
DEFINITION OF SCM
It is a process orientated, integrated
approach to procuring, producing and
delivering products and services to the
customers. Integrated SCM has a broad
scope and and it includes sub-suppliers,
suppliers,
internal
operations,
trade
customers, retail customers, and end users. It
covers management of material, information
and funds flows.
22
SC Management includes
Forecasting
Demand driven Sourcing and Procurement
Production Scheduling
Order Processing
Inventory Management
Transportation
Warehousing
Customer Service
Collection of money
Location
A proper information system
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SCM DRIVERS
Cost
Inventory
Logistics
Information
Cycle Time
After Sales Service
Responsiveness
Reliability
26
Cost Reduction
Improving reliability
Improving responsiveness
Improving agility
Improving asset utilization
27
SUPPLY CHAIN
2: Functional
Integration
Unplanned
activity
Pep talks,
threats
No teamwork
Little
information
exchange
3: Internal
Integration
New focus on
process
Internal process
integration
ERP
Intranets, etc.,
across functions
Design teams
Enhanced
warehousing,
logistics,
forecasting, etc.
4: External
Integration
Process integration
across entity
boundaries
Eventual electronic
information
connections among
multiple partners
ERP-to-ERP links
E-commerce
Supply chain vs.
supply chain
competition
29
Supplier
Producer
customer
Stakeholder
Value
30
Stakeholders Value
Firm
End
customer
Investors
Lenders
Society
Government
Employees
Competition
31
Customer value
Social value (for community,
environment, etc.)
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Affordability Availability
Service
Social/cultural
implications
Public and military
impact
Effects on jobs,
taxes, economy
Avoiding
negative
effects
Environmental impacts of
extraction, logistics,
distribution, etc.
Impact of laws and regulations
Reduce, reuse, recycle
(reverse supply chain)
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Answer: a
36
Velocity
Increase Speed
Visibility
Wider Visibility
Variability
Variety
Volume
Domestic
Standard Products
Work Orders
Vertical Integration
Disconnected
Forecast Driven
Global Operations
Mass Customization
Flow Production
Outsourcing
Networked
Customer Response
38
Business Transformation
From
Inward Centric
Push to
Inventory
Transactions
From Functions
Stand Alone
To
Customer Centric
Pull
Information
Relationship
Processes
Network
39
Risks
Unknown
Uncontrollable
Natural disasters
Political Risks
Epidemics
Terrorism
Fuel Price
Currency Fluctuation
Port delays
Market Changes
Supplier Performance
Execution Issues
Known
40
Controllable
Procurement
Manufacturing
Distribution
Logistics
41
Processes
Discrete Processes
P1
Suppliers
P2
Purchase
P3
Mfg
P4
Pn
Sales
Customers
42
Processes
Supply chain processes
P1
Raw
Materials
P2
Suppliers
P3
Producers
P4
Pn
P5
Distributors
Retailers
End
Users
43
SCOR Processes
Five SCOR processes
Plan
Source
Make
Deliver
Return
PLAN
45
SOURCE
Scope of Processes
MAKE
47
DELIVER
48
Scope of Processes
RETURN
49
SCOR Processes
Capture the complex management process
in standard process reference model
Can be implemented purposefully
Described unambiguously
Measured, managed and controlled
Tuned and retuned to a specific purpose
51
Why Measure?
To determine how effectively and efficiently the
process or service satisfies the customer.
To identify improvement opportunities.
To make decisions based on FACT and
DATA
Wisdom
Knowledge
Information
Data
53
What is Metrics?
Measure
Everything
That
Results
In
Customer
Satisfaction
Metrics
54
Individual Performance
Departments Performance
Companys performance
Based on Customer Expectations and
Internal Requirements
55
S.M.A.R.T Goals
S- Specific
M- Measurable
A- Agreed upon, Attainable
R Relevant
T - Timely
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KPIs Manufacturing
KPIs for
Replenishment
Productivity
Wastage Control
On-time delivery
Introduction lead
time
Cost Control
Order fulfillment
lead time
*Apply KPIs only to processes and activities based on corporate and supply chain strategies .
59
Measures
Customer Perspective
On-time delivery,
satisfaction, etc.
Innovation and
Learning Perspective
Goals
Measures
Measures current
performance
Goals
Measures
Business Process
Perspective
Prospecting calls,
productivity, etc.
Also flexibility, waste
reduction, other SC goals
Financial
Perspective
Goals
Measures
Financial Perspective
Traditional
Cash-to-cash, ROI, etc.
Retrospective only
Must always be present
61
Goal
Measure
Target
Actual
Goal
Measure
Meet
delivery
promises.
Supplier XYZ
delivery
performance
99%
98%
XYZ can
Downside SC
survive
adaptability
downturn.
Target
Actual
20%
fewer
orders
15%
fewer
orders
Financial Perspective
Goal
Measure
Target
Actual
Goal
Measure
Target
Actual
Supplier
sustainability.
Supplier XYZ
sustainability
conformance
100%
100%
Supplier
financial
stability.
0.35
0.40
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Performance Measurement
Description
Customer Facing
Reliability
Perfect Order Fulfillment
Cycle Time
Responsiveness
Internal Facing
Agility
Costs
Assets
Upside SC Flexibility
Downside SC Flexibility
Downside SC Adaptability
SCM Cost
COGS
Return on SC Fixed
Assets
Inventory Performance
65
Performance Attribute-Reliability
67
Metric
Definition
Calculation
Upside SC
flexibility
Upside SC
adaptability
Downside SC
adaptability
68
Definition
Formula
Direct Costs of
Manufacture
Supply chain
management cost
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Formula
Revenue- COGS- Supply Chain Costs
Fixed Assets
71
Formula:
(SC Revenue COGS SC Management Costs)
(Inventory + A/R A/P)
73
Customer-Focused Metrics
Attribute
Metric
Definition
Availability
Stockout frequency
Fill rate
Backorders
Speed of performance
Delivery consistency
Flexibility
Malfunction recovery
74
Metric
Definition
Product
support
Response time to
inquiries
Response accuracy
Customer complaints
Repeat purchases
Referrals to other
potential customers
Overall
satisfaction
75
- Bill Gates
76
Movement
From qualitative targets to quantitative ones.
From descriptive passages to crisp
statements
Other aspects are also reviewed.
- Attendance
- Team work
- Willingness to take additional responsibilities
77
Acquisition of Data
Activity Based
79
Activity Based
80
Example
A company involved in turnkey jobs, where
the company would procure all required
materials , deliver to the customers and install
them.
The procurement was back to back. There
was no inventory kept.
The target cycle time was 50 days.
The actual was
100 days!!
81
Customer Order
Date
Elapsed
Time
25
Receipt at
SCM Centre
30
Receipt of goods
in
Warehouse
35
Shipment
10
Receipt at
Customer
Site
100
Total
82
Analysis
Analysis revealed that the time from customer
order to SCM receiving the order was too
high. The reasons were gone into and
corrective action was taken.
From receipt into the warehouse till shipment
was too high. Analysis revealed that in most
cases, the customer was not ready to receive
the equipment. The sites were simply not
ready. Corrective action was taken.
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How do we overcome?
Revenue Recognition
Company A
Goods Reach
customer site
Company B
Goods are
installed
Company C
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