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Supply chain information flows & technologies. Professor Cecil Bozarth College of Management North Carolina State University. Premise. All supply chains consist of: Physical flows Information flows Monetary flows

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supply chain information flows technologies
Supply chain information flows& technologies

Professor Cecil Bozarth

College of Management

North Carolina State University

premise
Premise
  • All supply chains consist of:
    • Physical flows
    • Information flows
    • Monetary flows
  • There is a difference between the supply chain’s logical information flows and the information technologies (IT) used to support them
  • The technologies are constantly changing; the logical flows are not …
  • … with one major exception that we will discuss.
sources supply chain information flows
Sources –Supply chain information flows
  • Manufacturing Planning & Control for Supply Chain Management, by Vollmann, Berry, Whybark and Jacobs. McGraw-Hill / Irwin, 5th Edition, 2005.
    • Rigorous and comprehensive treatment of S&OP, master scheduling, MRP, etc.
  • Sales & Operations Planning: The How-To Handbook, by Thomas Wallace, T.F. Wallace & Company, 1999.
    • High-level workbook for understanding and implementing S&OP
learning objectives
Learning Objectives

After completing this module you will be able to:

  • Discuss at a high level the different levels and types of supply chain information flows
  • Contrast the traditional top-down approach to supply chain planning and control with the emerging horizontal supply chain perspective.
outline
Outline
  • Supply chain information flows
  • Supply chain information technologies
  • Managing individual information flows
a map of supply chain information flows
A map of supply chain information flows

Supplier Internal Customer

Linkages Production Logistics Linkages

Strategic

decision-making

Planning systems

Execution systems

a map of supply chain information flows9
A map of supply chain information flows

Supplier Internal Customer

Linkages Production Logistics Linkages

Strategic

decision-making

Planning systems

Execution systems

Capture and control transactions

a map of supply chain information flows10
A map of supply chain information flows

Supplier Internal Customer

Linkages Production Logistics Linkages

Strategic

decision-making

Planning systems

Execution systems

Set boundaries on what can be done

Plan lower-level activities

Capture and control transactions

a map of supply chain information flows11
A map of supply chain information flows

Supplier Internal Customer

Linkages Production Logistics Linkages

Strategic

decision-making

Planning systems

Execution systems

Set boundaries on what can be done

Plan lower-level activities

Capture and control transactions

perspective 1 classic top down model

Suppliers?

Sales & Operations Planning

Master Scheduling

Material Planning

Detailed Scheduling

Push & pull systems

Shop Floor Control

Customers?

Perspective 1Classic top-down model

Tactical

Short-term

Execution

perspective 2 horizontal supply chain flows

Network Planning

Sales & Operations Planning

Master Scheduling

Material Planning

Detailed Scheduling

Push & Pull systems

Shop Floor Control

Supplier

Relationship

Management

Customer

Relationship

Management

Perspective 2Horizontal supply chain flows
key points
Key Points
  • Firms still need solid internal systems in place before they can interface well with supply chain partners
  • Perspective 2 emphasizes supply chain vs. firm-level performance (more on this later)
  • Impossible to evaluate specific IT solutions if you don’t have a solid understanding of Perspectives 1 and 2
sales operations planning
Sales & Operations Planning
  • “Provides the key communication links for top management to coordinate the various planning activities in the business”
  • Fundamentals:
    • Balancing supply & demand
    • Volume vs. precise mix
    • Operations plan <> forecast
slide17

Business-level plan

Market plan

Financial plan

Resource planning

Sales & operations planning

(volume)

Sales plan Operations plan

Demand management

Master scheduling &

detailed material planning

pay offs
Pay-offs
  • “Top-management’s handle on the business”
    • Clarifies interaction points between functions
    • Formalizes negotiations
    • Established clear functional-level goals
    • Planning vs. “organizational slack”
the monthly s op planning process

Run sales

&

Forecast

reports

Demand

planning

phase

Supply

planning

phase

Executive

SOP

meeting

Pre-SOP

meeting

… present plan

and bring forward

any issues

requiring top

management

resolution

Starts with

Marketing &

Sales …

… come to

Agreement…

…picked up

By operations…

This meeting should be

short and very focused

The monthly S&OP planning process
other managerial issues
Other managerial issues
  • Top management
    • Commit to the process
    • Force resolution of trade-offs before approving plans
  • Functional managers
    • “Hit the plan”
    • Communicate when plan may be missed
other managerial issues21
Other managerial issues
  • Keep analysis level high -- no more than a dozen “families.”
  • Structure analysis around “how you go to market”, not how you make things:
    • Yes: product lines, cases of Product X, etc.
    • No: Manufacturing units, work cells, raw material costs, etc.
  • The operations and supply chain areas can later translate to production plans
slide22

Total

company

Business Unit

Product family

Product subfamily

Model / brand

Package size

Stock keeping unit (SKU)

SKU by customer

SKU by customer location

Sweet spot:Enough detail to make

planning relevant,

but not overwhelming

1 developing the foundation
1. Developing the foundation
  • Education
  • Developing appropriate planning families & information support
  • Establishing the S&OP process
2 integrating streamlining the process
2. Integrating / streamlining the process
  • Integrate financials into the analysis
  • Revamp organization / info. gathering as needed
  • Emerging SOP database
  • “What if” analyses
3 gaining a competitive advantage
3. Gaining a competitive advantage
  • You know you are here when:
    • Well-integrated demand planning process
    • Proactive vs. reactive approach to capital equipment planning
    • CI tied to S&OP process
    • Simulation commonplace
    • S&OP database easily accessible
master scheduling
Master scheduling
  • Controls the timing and quantity of production-related activities
  • Coordinates forecasted demand or actual orders with actual production-related activity
  • Serves as tool for agreement between production and other functional areas (most notably, sales)
  • Feeds more detailed planning
link between the master schedule and sales operations planning
Link between the Master Scheduleand Sales & Operations Planning

Month January February March

Output 200 300 400

January (weeks)

1 2 3 4

Push Mowers 25 25 25 25

Self-propelled 35 40

Riding 12 13

key points30
Key points:
  • Master scheduling serves as a coordinating mechanism for sales, production, and other functional areas
  • There are a variety of ways to carry out master scheduling, depending on the nature of the product and the level of customization
    • Vollmann, Berry, Whybark, and Jacobs, 2005
  • As we will see, changes driven by the supply chain perspective are changing how master scheduling works
engine back end activities
“Engine” & “Back end” activities …

Vary greatly

from one

environment to

the next, but

there are some

general truths …

general truths about engine and back end processes
General truths about “engine” and “back-end” processes

1. These processes are constrained by resource decisions made at higher levels (S&OP, master scheduling, etc.)

2. The longer our lead times are in comparison to customers’ requirements, the more we will need to execute from a plan (“push” systems)

general truths cont d
General truths (cont’d)

3. The further downstream customization occurs, the easier “engine” and “back-end” processes become:

Before:

After:

general truths cont d34
General truths (cont’d)
  • The “lumpier” and more unstable downstream requirements are, the more we will need to depend on downstream signals – NOT plans – to control activities

What kind of signals do I mean?

5. As information systems improve, firms will depend more on these systems – rather than excess production resources or inventory – to respond to market dynamics

horizontal information flows vs up over and down

Horizontal information flowsvs.“Up-over-and-down”

The major change to supply chain information flows I mentioned earlier

traditional information flows between the partners
*Traditional* information flowsbetween the partners …

… What is the problem here? Can you think of an example? What is the solution?

a map of supply chain information technologies current view
A map of supply chaininformation technologies – current view
  • Where do such technologies as RFID go? Executive dashboard applications?
up to the 1990s islands and loose links

Demand

Management

Financial

Reporting

Periodic

reconciliation

Sales & Ops Planning

Master Scheduling

Material Planning

Scheduling

Batch

transfer

Distribution

Purchasing

Periodic

reconciliation

Up to the 1990sIslands and loose links
tighter links feedback

Demand

Management

Financial

Reporting

Sales & Ops Planning

Master Scheduling

(+ rough-cut capacity)

MRP (+ CRP)

(Finite) Scheduling

Periodic

reconciliation

Batch

transfer

Distribution

Purchasing

Tighter Links & Feedback
mrp ii manufacturing resource planning

Financial

Reporting

Demand

Management

Production

Planning &

Control

Purchasing

HRM

A/R, A/P

Distribution

MRP IIManufacturing Resource Planning
piecemeal enterprise planning typical problems
“Piecemeal” Enterprise PlanningTypical Problems
  • “Add-on,” customized approach
  • Multiple hardware / platform considerations
  • Maintenance nightmares
  • Awkward data movement
  • Functional vs. business process perspective
supplier relationship management srm
Supplier relationship management (SRM)

Examples:

www.matrixone.com

www.ariba.com

slide49

Strategic Management

Strategic

Trans.

Content

Demand

Content

Transp.

Planning

Component

Supplier

Management

APS

Demand

Planning

Planning / Tactical

Invent.

Planning

Prod.

Data

Mgmt.

Order

Mgmt.

MES

ERP

Trans.

Execution

Execution

Wareh.

Mgmt.

OPERATIONS

LOGISTICS

DEMAND

SUPPLY

From Bozarth’s 1999 lecture notes …

managerial perspectives on the relationship between it investments and supply chain management

Managerial perspectives on the relationship between IT investments and supply chain management

is supply chain management the same as erp
“Is Supply Chain Management the Same as ERP?”
  • Why was this article was written?
  • What is the article’s one-sentence definition of the purpose of ERP systems?
  • From the article, what appears to be the direction of ERP software (c. 2001, when the article was written?) Is your sense that this direction has played out?
do you have too much it
“Do You Have Too Much IT?”
  • Why does this “example of wise IT investment [come] from an unlikely source...[?]” How is Inditex Group reshaping its industry?
  • What was the author’s expectation for IT implementation at Inditex Group? What was the reality?
  • What principles of IT usage does the author infer from his study of Inditex Group?
do you have too much it mcafee s principles of it usage
“Do You Have Too Much IT?”McAfee’s Principles of IT Usage
  • IT is an aid to judgment, not a substitute for it
  • Computerization is standardized and targeted
    • “Occam’s Law of IT”
  • Technology initiatives begin from within
    • Note the antecedent—Understand, then propose
  • The process is the focus
    • Role of IT is to support the process
  • Alignment is pervasive
leveraging technology for speed and reliability

Leveraging Technology forSpeed and Reliability

A case study linking supply chain IT investments with the business strategy

3 managing individual information flows

3. Managing individual information flows

“Perfect” information

Information flow mapping & profiling

what is perfect information
What is “perfect” information?
  • Perfect information is…
    • Accurate
    • Timely
    • Correct in detail & form
    • Shared
    • Complete
    • Other—as defined by the process user
costs of imperfect information
Costs of “imperfect” information
  • What are some of the costs associated with information that is:
    • Inaccurate? (e.g.—inventory, lead time)
    • Late? (e.g.—customer orders)
    • Incorrect in detail and/ or form? (e.g.—quarterly sales forecast)
    • Not shared? (e.g.—exception conditions)
    • Incomplete? (e.g.—customer orders)
mapping information flows

Mapping information flows

Basic concepts & case study

basic steps
Basic Steps

1. Start from a process point & select boundaries

2. Each physical activity will have inflows and outflows of information

3. Build the analysis around:

Major categories of flows

Who / what / how / when?

Symbols

who what how when
Who / What / How / When?
  • WHO generates it? Uses it? Needs it?
  • WHAT is the info? Is it accurate? Timely? Correct in detail & form? Complete?
  • HOW is the information sent? Shared?
  • WHEN is the information sent? Received? Needed?
mapping symbols
Mapping Symbols*

Step or activity in the process

Decision point

Input or output (typically data or materials)

Document created

Delay

Inspection

Information records

Physical flow

Information flow

example

Example

Process mapping at a San Diego DC

facts of the case
Facts of the case
  • Process
    • Dealer faxes order to DC. 1 out of 25 lost to paper jams.
    • Fax sits in “in box” around 2 hours (up to 4) until internal mail picks it up
    • Internal mail takes about 1 hour (up to 2) to deliver to the picking area. 1 out of 100 delivered to the wrong place.
    • Order sits in clerk’s in-box until processes (0 - 2 hours). Processing time takes 5 minutes
    • If item is in stock, worker picks & packs order (ave = 20 minutes, but up to 45 minutes)
    • Inspector takes 2 minutes to check order. Still, 1out of 200 are wrong
    • Transport firm delivers order (1 - 3 hours)
guidelines for diagnosing information flows
Guidelines for diagnosing information flows
  • Attack delays
    • What causes it? How long is it? How could we reduce its impact?
  • Examine decision points
    • Is this a real decision or just a checking activity? If the latter, can we automate or eliminate it?
  • Look for loops
    • Why is this loop here?
    • Would we need to loop if we didn’t have any failures in quality, planning, etc?
advanced concepts
Advanced concepts
  • Levels of value provided by information:
    • Provide visibility
    • Replace physical flows
    • Provide new products / services
  • “How can we exploit these information flows?”
advanced concepts cont d
Advanced concepts (cont’d)
  • Gap Analysis
    • To what extent is the information flow less than perfect?
    • What are the benefits / costs associated with closing this gap?
    • Look for “low-hanging fruit”, not necessarily high-tech solutions
information flow profile

Poor

Excellent

Accurate

Timely

Correct in detail & form

Shared

Complete

Other

Information Flow Profile
example from a recent company project
(Example from a recent company project)
  • Consensus Forecasting Process
    • Only major difference was the quality of the information coming from the retailers

Retailer information flows

Poor

Excellent

Accuracy

Timeliness

Completeness

Form & Detail

Wal-Mart

conclusions
Conclusions
  • Supply chain information flows are quite broad, and are distinct from the IT solutions used to carry them out
  • Companies are experiencing a shift from “top-down” planning and control, to horizontal flows of information
  • In general, these horizontal information flows require companies to respond to downstream demand, rather than to higher level plans
conclusions cont d
Conclusions (cont’d)
  • Information flows, just like physical flows, can be mapped, diagnosed, and improved.
  • Specific IT investments must be justified based on their ultimate impact on the business’ performance