Lecture 5

1. Lecture 5 Ch.8 Supply Chain Process Management

2. Agenda (to p3) • 1. Supply Chain Process Management • 2. Guidelines for Horizontal Implementation • 3. Flowcharting the SC Execution Process • 4. High Level SC Planning Processes • 5. Key Performance Indicators • 6. Making a successful SCM • 7. Questions to Ponder (to p12) (to p16) (to p21) (to p25) (to p29) (to p32)

3. 1. Supply Chain Process Management (SCPM) • Prior studying what is SCPM, we first gain understanding on what are: • Processes • supply chain processes • The purpose of SCPM is …. (to p4) (to p6) (to p9)

4. Defining Process As noted by Harrington [1991], a process can be defined as “any activity or group of activities that takes an input, adds value to it, and provides an output to an internal or external customer.” Traditional view (two different processes): • Production Process – deal with tangible goods (products) • Business Process – deal with intangible goods (services) (to p5) Harrington, H.J., Business Process Improvement, McGraw-Hill, NY, NY, 1991

5. Traditional Views on Processes • Production process transforms raw materials into tangible goods through physical contact with the production system. • Business process consists of all service processes that support production processes. [Harrington, 1991] (to p3)

6. Supply Chain Processes Supply chain processes can be classified into two major groups: • Planning • Execution (to p7) (to p8) (to p3)

7. SC Planning Process • SC planning process deals with strategic aspects of cross-enterprise supply chain processes. • Examples of planning processes include recycling, product and process development, and concurrent production and distribution. (to p6)

8. SC Execution Process • SC execution process involves more operational dimensions of supply chain processes. • SC execution processes generally comprise fulfillment, production, procurement, quality control, customer service, and business support processes. (to p6)

9. SCPM • The aim of SCPM is to deal with process workflow, visibility, collaboration, reengineering, event management, and continuous improvement along the supply chain. • To achieve the above, our focus is on linking everyone in the process chain and aligning process objectives across all of the firms in the supply chain. • SCPM attempts to make processes that ……. (to p10)

10. SCMP Objectives Making processes(major lists): • Effective – doing the right things • Efficient – doing things right • Adaptable – enable to adopt changes of environment • Customer friendly – service delivery with courtesy • Supplier friendly – synchronization & integration of data • Environmentally friendly – green environment (a new trend!) • Mistake-proof – preventing errors from happening Way to achieve them in SCM practice …. (to p11)

11. Supply Chain Management – The SAP (Process) View Employees Order to Cash Procure to Pay Idea to Project Hire to Retire Customers Business Partners Suppliers SAP R/3 (to p2) Processes that handle/execute by SAP software

12. 2. Guidelines for Horizontal Implementation The lack of proper guidelines for a supply chain process management implementation will result in sub-optimization and inefficiencies. Solution to the problem … (to p13)

13. Guidelines for Horizontal Implementation Our next slide illustrates how such guidelines could be developed to align processes across multiple organizations, assist management with better synchronization plans, and sustain a competitive advantage. (to p14)

14. Guidelines for Horizontal Implementation Reengineering? Processes Long-Term Vision/Competitive Strategy SC Initiatives (e.g. Benchmarking) Yes Processes Documentation (Planning and Execution) Control /Improvement? Control/ Improvement Plan Performance Measurement Process Assessment No Reengineering Plan Yes Next Planning/ Execution Period (to p15) Note:

15. Guidelines for Horizontal Implementation Specifically, the entire supply chain needs to utilize a flow chart approach to ensure the visibility of workflows, and make use of performance indicators to ensure that process optimization efforts are in alignment with supply chain’s competitive position. (to p2) (to p16)

16. 3. Flowcharting the SC Execution Process Flowcharting is an invaluable tool for reviewing and examining the overall sequence of supply chain processes at the operational level. How flow chart works? (to p17)

17. Flow Chart • In the most basic form, rectangle boxes are normally used to represent activities, and arrows are used to show the connections between activities (see next two slides). • The objective of a flow chart is to show how different activities fit together, so that knowledge about the process can be developed. • Example 1: Fulfillment process • Example 2: Quality control process • Optional exercise (to p18) (to p19) (to p20)

18. Wait for next orders Orders approved Available? Confirm with HQ on quantity, due date,.. Update inventory information Deliver items to the HQ Order Reviewing Sub-process Book Publishing - A Fulfillment Process (Happy Day Scenario) Bookstores order items Bookstore Orders arrived No Get items from the stock room Update inventory information Deliver items to bookstores Update inventory information Organize items in the stock room Un-fulfill Orders? Yes Yes Yes Ending Inv. Level < Reorder Point No Reject the Shipment Go Back to Availability Checking Point Acceptable? Availability Checking Point No No Yes Inform the bookstore when items are ready HQ places orders Publisher’s Head Quarter Orders arrived Return items to suppliers Suppliers (to p17) Day 1 Day 2 Day 3 Day 4

19. Book Publishing - A Quality Control Process Wait for next orders Confirm with HQ on quantity, due date,.. Update inventory information Deliver items to the HQ Order Reviewing Sub-process Bookstores order items Bookstore Orders arrived No Orders approved Get items from the stock room Update inventory information Deliver items to bookstores Update inventory information Organize items in the stock room Un-fulfill Orders? Yes Yes Yes Available? Ending Inv. Level < Reorder Point No Reject the Shipment Go Back to Availability Checking Point Acceptable? Availability Checking Point No No Yes Inform the bookstore when items are ready HQ places orders Publisher’s Head Quarter Orders arrived Return items to suppliers Suppliers Downstream Failure: Bookstores call at all times for immediate delivery Enterprise Failure: Inventory lists don’t match the inventory items on the shelves Enterprise Failure: Inventory items are not labeled and organized appropriately Upstream Failure: Suppliers did not handle packages properly (to p17)

20. A Quality Control Process • Optional Internet Assignment: Visit and explore the Internet site for Poka-Yoke applications. Explain how Poka-Yoke might help companies to enhance their process quality. (to p2)

21. 4. High Level SC Planning Processes • Through the development of planning processes, supply networks can accomplish three critical tasks: • Understand the interdependent relationships between trading partners • Evaluate strategic, high-level cross-enterprises processes • Direct every effort toward the common aims Examples (to p22)

22. Typical Examples • Product and process development • Recycling (to p23) (to p24) (to p2)

23. SC Process Design Product Market Concept Consumption Planning for Product-and-Process- Development Process (Focal Firm) Product and SC Process Development Suppliers Marketplace Vendor Development Product Design Concurrent Production Distribution Product Attributes SC Network (to p22)

24. Planning for Recycling Process Processing for recyclable Inbound Logistics Product/Packaging Materials Product/Process Development Green Product/ Process Design New Materials Flow Production Production Process Outbound Logistics Order Delivery Waste and Disposal Collection Marketplace Consumption Secondary Materials Industries (to p22)

25. 5. Key Performance Indicators • From Table 8.1, Key Performance Indicators Used in the Process Chain (in our text), it is observed that the initiation of supply chain excellence programs should be both strategic and operational in scope. • The benefits of such programs should also be tangible as well as intangible. • Our thesis … (to p26)

26. Key Performance Indicators Upon reviewing those performance indicators (in Table 8.1) and our theses presented in previous sections, we suggest that supply chain excellence should be built around issues such as business results, social impact (or social cost), and supply chain quality and productivity. (to p27)

27. Supply Chain Excellence and Performance Indicators SC Excellence Supply Chain Productivity Supply Chain Quality Business Results Social Cost (to p28) Note …

28. Key Performance Indicators Since performance measures are not all equally important, the relative importance of each performance indicator presented in Table 8.1 must be identified first before devoting any resource to the program. (to p2)

29. 6. Making a successful SCM Process management alone could not increase efficiency and effectiveness. Rather, the integration with strategic, tactical, operational, and IT (information technology) elements such as ERP can help a supply chain realize the potential gains of process management. • A Holistic View • A Strategic Approach (to p30) (to p31) (to p2)

30. A Holistic View A complete supply chain system as a result is an aggregation of a variety of processes and critical elements. Managers of a single organization in the supply chain need to extend their view to embrace the new reality. (to p29)

31. A Strategic Approach Every supply chain manager must be aware of the relationships and interactions between processes and critical elements, and subsequently develop a plan for systemic implementation. (to p29)

32. 7. Questions to Ponder • What is supply chain process management? • What is its significance to any organization? • What does it involve? (to p2)