MBA 518 Operations Management - PowerPoint PPT Presentation

MBA 518

Operations Management

Supply Chain Management

Greg Magnan, PhD

Fall, 2004

SC Strategy

SC Benefits

SC Challenges

Summary

• Global Competition
• Cost, Quality, Delivery, Flexibility, Innovation
• Increasing Stockholder Demands
• ROIC, Asset Efficiency, EVA, etc.

SCM Uniquely Positioned

to Address BOTH

Core SC Functions

“Supply Chain Management involvescollaborationacross theenterpriseand amongchannel membersto design and manage value-addedmaterial, information and cash flowsto meet the needs of the endcustomer. The development and integration ofpeopleand technologicalresources underlie successful supply chain integration.”

• Increasedmarket shareandsalesgrowth
• Reducedinventorylevels andtotal SCM costs
• Decreased ordercycle/fulfillment time
• Increased asset and capitalutilization
• Improveddeliveryperformance
• Fasterresponseto changing customer requirements
• Improvedreturn on assetsand sales
• Increasedforecastaccuracy
• Reducedcash-to-cash cycle time

Plan

Source

Return

Return

Deliver

Return

Return

Return

Return

Return

Return

Make

Deliver

Source

Make

Deliver

Source

Deliver

Make

Source

Customer’sCustomer

Your Company

Supplier

Customer

Internal or External

Internal or External

SCOR Model

(www.supply-chain.org)

NOTE: Barriers to SCM are

concentrated here

Manufacturing Supply Chain Management

Customer

interface

Supplier interface

Production Entities

Factory

Internal Suppliers

Demand Planning

SRM

CRM

Sourcing, Ordering & Logistics

External

Suppliers

Lean Manufacturing

Customers

Design

Production Engineering

Information: Visibility / Collaboration / Sharing

Organization: Strategy / Structure / People / Processes

Source: Lee (2000)

• C-level Executives: CEO, CFO, COO, etc.
• What is their view of SCM?
• What language is needed to articulate benefits?
• Growth, Profitability, Capital Utilization
• How do they affect Economic Profit (EP)?

Source: Timme and Timme, “The Financial-SCM Connection,” SCMR, 2000.

• Economic Profit
• SCM supports:
• Revenue growth
• Customer service
• Cost reduction
• Asset efficiency
• Purchasing 100

“Companies are investing resources--of both time and capital--to improve their supply chain capabilities. But many are not pleased with the return on these investments. The lack of coherent supply chain strategy typically lies at the root of the problem.” [emphasis added]

-- Derocher and Kilpatrick, “Six Supply Chain Lessons for the Millenium,” SCMR, 2000

Q: What happens when you have BOTH kinds of products??

A: Ought to have BOTH kinds of supply chains.

Source: Poirier & Quinn, “A Survey of SC Progress,” SCMR, 2003

Source: Poirier & Quinn, “A Survey of SC Progress,” SCMR, 2003

http://www.capsresearch.org

47%

34%

11%

8%

0%

• Lack of Trust
• Little Understanding or Commitment to SC Principles
• Fear of Relinquishing Control
• Different Goals & Objectives
• Inadequate Information Systems
• Short-term / “Wall Street” emphasis on outcomes
• Involvement in too many supply chains

Source: Moberg, Speh & Freese, “SCM: Making the Vision a Reality,” SCMR, 2003

Source: Handfield & Straight, “What Sourcing Channel is Right for You,” SCMR, 2003

• Develop a New Breed of Manager
• Build “Relationship-Management” Skills
• Establish Inter-organizational Teams
• Create New Performance Measures
• Invest in Information Technology
• Develop Long-term Focus (Boards, too)
• Engage in More Practical and Applied Research

Source: Moberg, Speh & Freese, “SCM: Making the Vision a Reality,” SCMR, 2003

Source: Lee, et al., “The Bullwhip Effect In Supply Chains, SMR, 1997.

Source: Lee, et al., “The Bullwhip Effect In Supply Chains, SMR, 1997.

Source: Vitasek, et al., “Solving the Supply–Demand Mismatch,” SCMR, 2003.

Source: Vitasek, et al., “Solving the Supply–Demand Mismatch,” SCMR, 2003.

Source: AMR Research, 2000

Source: Taylor, David A. “A Master Plan for Software Selection,” SCMR, 2004

Source: Taylor, David A. “A Master Plan for Software Selection,” SCMR, 2004

• What are the steps in procurement?
• Need / Requisition
• Supplier Selection
• RFx, Negotiation, Auction, Criteria
• Contract
• Transactions
• PO through payment
• Relationship Maintenance
• Performance
• Which can be automated?

PO change?

ASN receipt

Tracking

Receiving / Inspection

Accounting: matching

Payment

Supplier Performance

PO Ack. / Sales Order

Fulfillment (stock / mfg)

ASN

Transportation

Invoice

Payment received

Buyer

Supplier

Other issues: Forecasting, collaboration, planning systems, cost improvement (product and trans.)

• “Applying standard analytics-driven processes for sourcing any category of spend.”
• Purchasing Magazine
• “Sourcing will be key to unlocking value.”
• ISM/Forrester
• Focus on procurement automation limits payback
• Spend Management must begin with a sourcing strategy
• Spend analysis, aggregation, supplier reduction
• Online sourcing will catch up
• “real value is in using enterprise-wide tools to enforce employee compliance with strategic sourcing agreements.”

• Adoption of online purchasing continues to grow
• Large companies: 20% fully adopted
• More companies are saving $ as a result
• 45% of large volume
• Materials purchased:
• Indirect (89% bought some / 12% of indirect online)
• Direct (74% bought some / 9.9% of direct online)
• Auctions (25% used...large volume) and eMarketplaces (33%): about 45% increased use
• Enterprise-wide tools: 46%
• Online tools strengthen relationships: collaboration
• Buyers mostly dissatisfied w/ Supplier online capability
• Integration with suppliers was biggest challenge

SC Strategy

SC Processes

Organizational Model

Integrated Info. Sys.

Perf. Mgt. Framework

Setting Your Strategy

Define the Performance Criteria of SC

Set Perform. Targets

ID Operational Processes (order mgt., dist, etc.)

Select integration level for customers & suppliers

Source: PRTM, “Managing Your SC in the 21st Century,” 2002

Technology Enabled Supply Chain

Source: Porter, A.M. (2004), “The Case for Holistic Strategies,” Purchasing, March 18, pp. 55-59.

Source: Carbone, James (2004), “Using TCO to Rate Suppliers,” Purchasing, Feb. 19, pp. 30-34.

• Supply Chain Management
• People, processes, technology
• Materials, information, cash
• Supply Chain Performance
• Growth, profitability, capital utilization
• Growing gap between haves and have-nots
• Supply Chain Solutions
• Strategy: Align internal and external processes & resources to business strategy and company performance objectives
• Diagnostic: Pinpoint improvement needs
• Education: Relationships, process change, executives