45417181 091218-advanced-scm

Advanced Supply Chain ManagementSurath PralongsilDecember 2009

Advanced Supply Chain Management

Surath PralongsilDecember 2009

Value Chain ManagementSupply Chain ManagementLogistics Management

Supply Chain Management / Surath Pralongsil 2

Outline of today

09:00 – 09:15 (15 min) Overview of supply chain management09:15 – 09:45 (30 min) Strategic supply chain management09:45 – 11:30 (1hr 45 min) Supply chain simulation (beer game) + Break11:30 – 12:30 (60 min) Integrated supply chain planning

12:30 – 13:30 (60 min) Lunch

13:30 – 14:00 (30 min) Supply chain collaboration & efficient consumer response (ECR)

14:00 – 15:30 (1hr 30 min) - Synchronized production/supply15:30 – 15:45 (15 min) Break15:45 – 16:00 (15 min) - Vendor-managed inventory (VMI)16:00 – 16:45 (45 min) IT in supply chain management16:45 – 17:00 (15 min) Wrap-up


Objective of today

• To understand the concept, process and benefit of SCM in business, and utilize SCM in his/her own work.

• To be aware of the real applications of SCM in SCCC context and other industries.

• To be able to work from a holistic point of view (looking at big picture)• To promote collaboration within and across organization, and

understand supply chain partners' capability


Contents of Supply Chain Management• Overview of Supply Chain Management• Value Management• Customer Value• Value-Based Pricing• Customer Relationship Management• Strategic Supply Chain Management• Supply Chain Network Design and

Optimization• Integrated Supply Chain Planning• Sales & Operation Planning (S&OP)• Enabling Technology• Outsourcing• Inventory Management• Warehouse Management• Transport Management• International Logistics Management• Reverse Logistics• Supply Chain Costing / Activity-Based

Costing / Cost-To-Serve• Supply Chain Collaboration

• Efficient Consumer Response (ECR)• Continuous Replenishment and

Synchronized Production / Supply• Vendor-Managed Inventory (VMI)• Strategic Sourcing and Procurement• Supplier Relationship Management• Supply Chain Performance Management• Just-in-time• Lean and Six Sigma• Green Supply Chain• Supply Chain Traceability and Security• The Future Supply ChainSupplementary• Supply-Chain Operations Reference-

model (SCOR)• Supply Chain/Logistics Scorecard• Supply Chain Simulation: Beer Game• Product Code Classification• ABC Analysis• Best Practice


Overview of Supply Chain Management


Supply Chain

Manufacturer Retailer ConsumerDistributor/WholesalerSupplier

Information Flow and Financial FlowInformation Flow and Financial Flow

Physical FlowPhysical Flow

Process and PeopleProcess and People


Supply Chain

All interactions, from order entry through paid invoices, end to end from your supplier’s supplier to customer’s customer… scope of SCM as SCC determined


Value Chain

• Michael Porter of Harvard university said that “A business is profitable if the value it creates exceeds the cost of performing the valueactivities. To gain a competitive advantage over its rivals, a company must either perform these activities at a lower cost or perform them in a way that leads to differentiation and a premium price (more value).”

MARGINMARGIN

INBOUND LOGISTICS

OPERATIONS OUTBOUNDLOGISTICS

MARKETING& SALES

SERVICE

PROCUREMENT

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PRIMARY ACTIVITES

SUPPORTACTIVITIES

MARGINMARGIN

INBOUND LOGISTICS

OPERATIONS OUTBOUNDLOGISTICS

MARKETING& SALES

SERVICE

PROCUREMENT

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PRIMARY ACTIVITES

SUPPORTACTIVITIES


Value Chain

Focus on how a business creates customer value by examining contributions of different internal activities to that value

Allow better identification of a firm’s strengths and weaknesses since the business is viewed as a process

The activities within the value chain are split into two sections:

• Primary activitiesThese are activities associated with physical creation of the product, marketing activities, activities involved with the transfer to the buyer & after-sale support

• Support activitiesThese activities provide support to the organization as a whole to keep it functioning & provide the infrastructure of the company

10

Supply Chain Management / Surath Pralongsil

Holcim Value Chain

Transactional

Mortars

Ready - mixConcrete

Asphalt

Concrete Products

CementitiousMaterials

(cement,mineral

components)

Direct Sales

Infrastructure

Commercial / IndustrialBuilding

Housing

DemandSupplyBasic Materials Processing

Direct Sales

Aggregates

(sand, gravel, stone, recycled

aggregates)

Traders

Wholesalers

Retailers

Traders

Wholesalers

Retailers

Appl icat ions

Applications and Construction Fields

End - users

General Contractors

Civil Engineering

ChannelsTransformational

Masons

Self - builders

11


Ready mix

TransactionalBasic MaterialsProcessing

Supply

End - usersChannels

Transformational

- mix

Concrete Traders

Wholesalers

Retailers General Contractors

Civil

Engineering

MasonsSelf - builders

Product End-user

AggregatesAsphalt

Mortars

Ready MixConcrete

ConcreteProduct

CementitiousMaterials

(cement,mineral

components)

Channel / Distribution

Demand

ConstructionFields

Infrastructure

Commercial / IndustrialBuilding

Housing

Construction Field

Modern Trade

Direct Sales

Direct Sales

Value chain defines the scope, relating to SCCC core businesses

SCCC-investing businessSource: adapted from Holcim Value Chain

Co-Processing

Energy

Mineral Components

Supplier

R/M, Supply

Core ForwardIntegration

Backward Integration

VerticalIntegration

12


Source: adapted from Holcim Value Chain

Core ForwardIntegration

Backward Integration

mix

TransactionalBasic Materials

Processing End - usersChannels

Transformational

-

Concrete SCT

Wholesalers

Retailers

Sekisui – SCG Industry

SCG – Sekisui Sales

Civil

Engineering

Masons

Self - builders

Product End-user

CPAC Aggregate Asphalt

Tiger Mortar

CPAC

• Roof tiles, • Ceramic floor / wall tile• Paving block• Light weight concrete block • Gymsum board

Channel / Distribution

Cement Thai Home mart

Direct Sales

SCI Eco Service

SCT

Mineral Components

Supplier

R/M, Supply

Refractory

SCG Value Chain

Gray Cement

White Cement

13


Cement flow total market 2006

End user

Producer

Transformational channel

Contractor65%

Contractor65%

Transactionalchannel

30.1 Mio t100%

CPM18%CPM18%

RMX26%RMX26%

Agent20%

Agent20%

Directsales5%

Bulk40%

Bag60%

Selfbuilder /Mini-contractor

17%

Constructionfield

Dry mortar

1%

Whole-saler48%

Retailer38%

Simple house28%

Simple house28%

Single house20%

Single house20%

Highrise6%

Highrise6%

Infrastructure20%

Infrastructure20%

Comm.11%

Comm.11%

Indust.6%

Indust.6%

Inst.1%

Inst.1%

Townhouse

4%

Townhouse

4%

Multist.<64%

Multist.<64%

14


Value creation* for SCCC’s key stakeholders from 2010 to 2013?

Input factor (cost of all goods, materials and services purchased)

Depreciation and amortization

Benefit to employees, government, shareholders and creditors

Benefit to shareholders

Retained in business

Benefit to employees

Benefit to government

Benefit to creditors

32%

Dividend

Employee

Tax

*Illustration


Value Added

• Refers to the additional value created at a particular stage of production or through branding and marketing. In modern neo-classical economics, especially in macroeconomics, it refers to the contribution of the factors of production, i.e. land, labor and capital goods, to raising the value of a product and corresponds to the incomes received by the owners of these factors.

• The enhancement added to a product or service by a company before the product is offered to customers.


Overview of Supply Chain Management

Supply Chain & Logistics

17

Logistics EvolutionLogistics EvolutionJourney of SCCC Logistics to

“Logistics Solution Provider”

Transportation

Distribution

Integrated Logistics

Supply Chain Management

Value Management

Solution Provider

Outbound

Inbound

Warehouse

Dispatching

Packing

3rd and 4th

Logistics

Service

Provider

(LSP)

Application

Service

Provider

(ASP)

Value

Management

Customer

Proposition

Network

Synchronize

& Optimize

Supply

Planning

Demand

Planning

Outbound

Inbound

WarehouseOutbound

Inbound

Source: Khun Nopporn Thepsithar, SCCC


Supply Chain and Logistics

• “A position of enduring superiority over competitors in terms of customer preference may be achieved through logistics.” (Professor Martin Christopher)

• The prizes in today’s markets go only to those companies which are capable of providing added value in ever-shortening time scales.”(Professor Martin Christopher)

• “Nowadays, it’s supply chains that compete with supply chains, not companies with companies.” (Allan Waller, Price Waterhouse Coopers)



• the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating value, building a competitive infrastructure, leveraging logistics capability, synchronizing supply with demand and measuring performance. (Source: APICS)

• “The goal of supply chain management is to link the marketplace, the distribution network, the manufacturing process and the procurement activity in such a way that customers are serviced at higher levels but at lower costs.” (Professor Martin Christopher)

• “the management of upstream & downstream relationships with suppliers & customers to deliver superior customer value at less cost to the supply chain as a whole”

• The word “Supply Chain” is not just about supply. It is about both supply and demand, better called “Integrated Supply Chain Management”


Logistics Management

• Is the means whereby the needs of Customers are satisfied through the co-ordination of the materials and information flows that extend from the market place, through the firm and its operations and beyond that to suppliers. (Professor Martin Christopher)

• Logistics is part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’requirements. (The Council of Logistics Management)

• Logistics is all about getting the right goods to the right place at the right time in the right quantity at the right quality at the right price.


Supply Chain Management v.s. Logistics

• Logistics management involves the strategy & operations relating to the movement of goods within the enterprise & with its immediatesuppliers & customers. Logistics management develops a plan for the flow of products & information through a business.

• Supply chain management involves managing the relationships among all members in the supply chain. Supply chain management aims at coordinating the processes of all supply chain members, both downstream towards customers & upstream towards suppliers. Supply chain management is linked together with cross-company strategies and processes

• A company‘s Logistics strategy needs to be closely aligned with the supply chain‘s overall strategy.


An Enterprise IntegrationPHASES Functional Integration

Phase 1Phase 1BaselineBaseline

Phase 3Phase 3Internal Internal

IntegrationIntegration

Phase 2Phase 2Functional Functional IntegrationIntegration

Phase 4Phase 4External External


Purchasing Material Control Production Sales Distribution

Material Management Manufacturing Management Logistics


SuppliersInternal Supply Chain

Customers


Characteristics of Supply Chain Evolution

FragmentedPyramid

IntegratedEnterprise

IntegratedSupply Chain

Value Network /Virtual Company

Strategy

Functionalintegration

Driven by cost and efficiency

Cross-functional integrationDriven by customer satisfaction

Process owners

Integrated applicationsProcess automation

Cross-functional integrationIntra-enterprise focused

Limited co-operation (within an enterprise)One team

Empowered, self-directed teams

Flattened pyramid

We sell semi-customized products.

Which of our products would a bunch of customers buy?

Semi-customized products in need of a market segment.

Inter-enterpriseintegration

Driven by supply chain optimization

Core competency, agility, opportunityDriven by change and uncertainty

People Subject matter experts Knowledge workers Knowledge workers with smart agents

Technology Independent systemsIslands of automation

Electronic commerce enabledScaleable cross-platform

portable

Electronic marketplace enabledPlug compatible and inter-operable

Process Functional silosDepartment focused

Cross-company integrationSupply-Chain focused

Dynamic, end-to-end integrationOpportunity and value-add-focused

CultureAdversarial, mutual

trustI’ll do my job, you do

yours

Mutual truth and full cooperation (extended

enterprise)One team

Need-based, value-add cooperationWhat true value does everyone add?

StructureHeavy command and

controlPyramid

Partnership / alliance

Pipeline

Virtual / fungible

Network / Web

Product /Service

We sell products.What products can we

make?Mass-produced

products in need of a market

We offer semi-customized solutions.

How can we offer best total value to a customer segment?

Fully optimized semi-customized solution in need of

a market niche

We help our customer (s) to get the best possible solution.

What must we do to give the best total solution to this individual customer?Information-rich mass-customized

solution configured for one customer

Source: KPMG Transportation & Distribution

24

Source: McKinsey

Supply chain framework

3. Production managementTranslate market requirements into production requirements, and manage the resulting constraints

2. Forecast and demand managementEnsure appropriate supply at low cost through accurate demand forecasting and efficient order management

6. Supply chain integrationCreate integrated processes to facilitate information flow supportedby a supply chain focused organization

5. Distribution managementEnsure reliable logistics and optimal material flow in the outbound network

0. Supply chain configuration

7. Supply chain transformationEnsure sustainability and constant improvement in whole network

Understand market and network dynamics and configure network with optimal cost and flexibility

1. Service-level managementUnderstand cus-tomer requirements and serve them accordingly

4. SupplymanagementEnsure reliable supply and inte-grate with suppliers

32

5

4 16


Internal Supply Chain Management & Logistics Management


Flow Management

Distribution Management

Logistics Management

Import & Export

Quality control

Simulate warehouse space

and workload

Simulate Trucking Plan

Simulate International

Transport Plan

Break down and consolidate logistical

costsCheck subcontractor

invoicesSC deployment result

analysisBenchmarking

Import and

export order

Transfer Order

Track & trace (including Log Book

monitoring in line with KPI definition,

operational audit)

Control

CheckSell

Supply Chain Supply Chain Execution

Production

Optimisation of Supply Chain Configuration

Steer, plan and schedule warehouse operation basing on warehousing policy

Contract establishment and follow up

Logistics project steering

Information system requirement

Multi product lines service requirements arbitration

Deployment

Resources and investment planning

Check compliance with Service Specification

Justification: Trade off service / Costs Performance control (KPI definition and

result)

Cost & Budget control

Ste

erin

g of

Ope

ratio

n

Stra

tegi

c

Ste

erin

g

Define Service Specification

Supply Chain Planning

Plan & schedule productionTa

ctic

al S

teer

ing

Pro

posa

l of l

ogistic

s alte

rnat

ives

(Pro

ject

)

Quality & 3PL Audit

Steer, plan and schedule transport

operation basing on trucking

policy

Steer, plan and schedule

international transport

operation basing on transport

policy

Phy

sica

l

Exe

cutio

n

Transport Operation

Handle Claims

Warehouse operations

Invoice products

Local International

Nat

ure

&

Type

of

Func

tion

Storage Transport Project

Source: Capgemini


Supply Chain Competence FrameworkA. StrategyB. PlanningC. Plant OperationsD. DistributionE. Human ResourcesF. Information TechnologyG. Capital ManagementH. Performance

Management

A. Strategy1. Supply Chain Strategy Development2. Make vs Buy / Contract Manufacturing3. Network Design / Optimization /

Rationalization4. Product Configuration / De-proliferation /

Complexity Reduction

B. Planning5. Forecasting6. Sales & Operation Planning7. Inventory Planning8. Supply Chain Planning

C. Plant Operations9. Production Optimization10.Maintenance Management11.QA / QCc

D. Distribution12.Transportation

i. Inboundii.Outbound

13.Warehouse Management / Inventory Management

E. Human Resources14.Organization Alignment15.Readiness to Change16.Professional Development /

Training / Rewards and Recognition

F. Information Technology17.Architecture

G. Capital Management18.Fixed Capital Management

i. Capital Planningii.Capital Project

Management

H. Performance Management19.Integrated Strategic

Measurement20.Performance Dashboard21.Continuous Improvement

Source: A T Kearney


Top Down, Bottom Up

EXECUTIONIdentificationStandardizationOptimization

OperationalOrders, Commitments, Asset Tracking

TACTICALPlanning, Optimization, Arbitration

STRATEGICStructure,Costs, Policies

PHYSICAL

ERP

TACTICAL PLANNING

STRATEGIC DIRECTION


Effective and Efficient Supply Chain

Key factors:• Understanding end customer needs• Adopting effective supply chain strategies to meet end customer

needs• Integration of the members of the supply chain• Successfully tackling operational issues• Successfully handling the impact of internationalization on the supply

chain• Managing the information systems & technology which hold the

supply chain together• Ensuring value for the customer provided by the supply chain


Strategic Supply Chain Management


Supply Chain Philosophy

Demand Supply

Logistics: Cost and Service Trade-Off


Key Objectives of Supply Chain Management

• Delivery of value • Responsiveness• Reliability


Supply Chain Strategy

• a planning activity focused on the long-term decisions of the supply chain– The choice of products & services to offer to customers– The structure of the logistics network & the supply chain– The capabilities the supply chain will specialize in– The types of relationship between supplier & customers

• Creating competitive advantage, which is sustainable over a longperiod & reliant on systems of capabilities rather than a singlecapability– Opportunities in global markets– The provision of tailored services for customers– Rapid communication with customers & suppliers– The need for time compression strategies in order to cope with shorter

product life cycles


Competitive Advantage in Supply Chain Management

• Globalization• Integration

– Internal Integration– External Integration– Capability Integration– Relationships

• Time-based competition– Responsiveness– Reliability


Globalization

• Organizations today have the opportunity to be global companies regarding the world as a potential market or source of supply

• Many companies are finding competitive advantage through catering to the world market while coordinating dispersed procurement, manufacturing & logistics activities

• Homogenous marketing concept– Borderless geography– No differentiation in language, look, customs, tastes, value etc.– No time limitation


Going Global

Proactive• Additional resources• Taxes• Lowered costs• Economies of Scales• Incentives• Synergy• Market extension• Power and prestige• Exploitation of firm-specific

advantages• Protect home market through

offending competitor’s market

Reactive• Trade barriers• International customers• International competitions• Regulations


Integration

• Supply chain members need to be integrated in terms of their processes, activities & systems

• Integration is vital for companies operating internationally

• Advantages of integration include improved quality, innovation sharing, reduced costs, & improved scheduling of production & delivery

• Levels of integration:– Internal Integration– External Integration– Capability Integration– Relationships


An Enterprise IntegrationPHASES Functional Integration

Phase 1Phase 1BaselineBaseline

Phase 3Phase 3Internal Internal


Phase 2Phase 2Functional Functional IntegrationIntegration

Phase 4Phase 4External External


Purchasing Material Control Production Sales Distribution



SuppliersInternal Supply Chain

Customers


Internal Integration

• The company’s internal structure has to be aligned & integrated

• Internal functions must align along processes that lead to specific product & service value

• Goals must align to an overarching corporate strategy

• Communication barriers must be reduced between activities to enhance information flow throughout the organization


External Integration

• External integration can only occur when internal integration & functional strategies have been aligned

• There must be consistent competitive goals, objectives & criteria across the supply chain, without conflicting priorities

• Cost reduction at the expense of other supply chain members simply transfers cost to the end customer, leading to higher prices -companies have to take into consideration all costs within the supply chain


Capability Integration

• Under supply chain management each member of the supply chain realizes that they cannot be the best at every activity & need to rely on capabilities outside of the organization

• In order to add the most value on the whole supply chain, organizations must decide which activities & capabilities to invest in & perform


Relationships

• A key focus of supply chain management is developing & understanding cooperation, trust and the management of relationships

• Many relationships within supply chain management are based on the partnership idea which involves mutually beneficial long-term relationships


Type of Relationship in Supply Chain

• Arm’s length• Long-term relationship• Partnership• Third-party / Outsourcing• Strategic alliance• Joint venture• Network organization• Vertical integration / Acquisition


Time-Based Competition

• Low cost and high quality have now become standards by which companies can enter and compete in markets; and they are no longer a guarantee for customer demand

• Time has become a source of competitive advantage within many industries

• Companies have to focus their supply chain capabilities on:– Responsiveness– Reliability


Responsiveness

• The ability to respond to changing demands is called agility

• Agility means meeting customer demands quickly so that customersdo not turn to substitutes from competitors

• In order to provide time compression benefits to customers, companies need to posses the following skills:– New product development and introduction competencies– Cross functional development team abilities– Appropriate & timely feedback from customers– Lead time management


Product Life Cycle

Time

Sale

s

Introduction

Growth

Maturity

SaturationDecline

Sale

s

Introduction

Growth

Maturity

SaturationDecline


Reliability

• To provide reliability at times of uncertainty in demand, safety stocks were carried by companies

• Traditionally trade-offs were perceived as existing between providing high quality, low cost & quick delivery of products

• Successful supply chains can now deliver rapidly at low cost with high quality. This reliability comes from reducing inventory levels as well as reducing the need for quality detection throughout the supply chain


Different Supply Chain Characteristics in Each Industry

Manufacturing CustomerDistribution CentreSupplier

ship

to s

tock

mak

e to

sto

ck

asse

mbl

e to

ord

er

buy

to o

rder

engi

neer

to o

rder

Finished goods storeR/M store

mak

e to

ord

er



Lean v.s. Agile Supply Chain


Lean Philosophy

• The lean philosophy is based on eliminating all waste from the supply chain

• Thus, seven types of waste have been identified as detrimental for the supply chain:1. Overproduction2. Waiting3. Transporting4. Inappropriate processing5. Unnecessary inventory6. Unnecessary motions7. Defects


Inventory Hiding Underlying Problems

RestrictedInformation

Flow

QualityProblems

InventoryInventory

InadequateProcesses

RestrictedInformation

Flow

QualityProblems

Inventory

InadequateProcesses


Lean v.s. Agile Supply Chain

• Lean (efficient) supply chains using JIT work when:– Demand is relatively stable & predictable– Product variety is low– Price & quality are key to advantages in the market place

• Agile (responsive) supply chains :– Are characterized by very flexible structures, production capabilities &

people within each part of the supply chain – Focus on responsiveness over waste elimination– Work best when customer service & responsiveness lead to

competitive advantage


Push Strategies

• Push strategies means working to long-term forecasts & estimating the number of products being produced

– Each company throughout the supply chain has its own forecast

– Forecasts are not aligned with suppliers or customers

– Long term forecasts are difficult to predict with many variables disrupting the forecast

– Limited forecasting ability results in build up of inventory


Pull Strategies

• Pull strategies mean that there is no production until the customer has signaled demand by ordering a product or service

Advantages:– No inventory costs as the product is made as soon as the order is

received– Information flow throughout the supply chain– Collaboration between supply chain members

Disadvantages:– Smoothing demand is difficult – Time taken to build final product or service might be longer as the supply

chain has to make the order


Supply Chain of PC, with Postponement


Positioning of Decoupling Point

driven by forecast

driven by order


Postponement

• Postponement or ‘push-pull‘strategies aim at preventing the disadvantages of both push & pull strategies

• Under postponement, certain parts of the supply chain are undertaking a push strategy while other parts perform a pull strategy:

– Upstream suppliers provide commodity parts & components using a push strategy as demand is smoother & more predictable

– Downstream suppliers employ a pull strategy & do not customize products & services until an order from the final customer has been made


Determining the decoupling point in the supply chain from PUSH to PULL - factors

• Demand change & forecast reliability (“all we know about the forecast is that it will be wrong”)

• Required product configurations & variability• Required customer response time (balancing capacity with inventory)

? ? ? ? ?

PUSH & PULL


Where in the supply chain and how much inventory to keep?

•Cost•Flexibility

•Service level•Response time

•Cost•Flexibility

•Service level•Response time

Materialssuppliers

Retailer Component manufacturer

Assembler Storage

? ? ? ? ?


Postponement & its impact on reducing variety in inventory

Variety

Pipeline

Materials in

Finished goods out BA

Postponement (delaying

customisation)

=



Advantage of Supply Chain Management


Advantage of Supply Chain Management

• Implementing supply chain management provides the following advantages:

– Match demand and supply

– Reduced cost

– Improved quality and service

– Value


Key Performance Objectives

• Long term supply chain efficiency and success rely on performance advantages which other supply chains will not have

• These performance objectives include:– Cost– Quality – Flexibility– Speed– Reliability / Dependability– etc.


Cost Reduction

• The reduction of total cost of ownership is key to cost advantage

• Total cost of ownership measures include both ownership & post-ownership costs

• Logistics cost advantages include: – Efficient use of capacity– Reduction in inventory levels– Faster & more reliable

information exchange

Ownership costs include:• Processing inventory• Repair• Maintenance• Warranty• Training• Operating• Inventory carrying• Contract administration• Downtime cost of operating

equipment

Post-Ownership costs:• Disposal or environmental

consequences of product or service


Quality and Service Level Improvements

• Quality is the most visible aspect of the supply chain

• The quality objective is the foundation for the other objectives & is considered necessary just to compete

• Quality affects other objectives, such as: – Cost – Flexibility– Speed – Reliability / Dependability


Flexibility Enhancement

• The survival of the supply chain is dependent on its ability to meet the changing needs of customers & to adapt to uncertain market conditions

• Flexibility is essential in turbulent markets

• A company can focus on four possible types of flexibility:– Product (variety) flexibility– Mix flexibility– Volume flexibility– Delivery flexibility


Speed Increase

• The speed objective is similar to the time concept

• Speed of delivery involves: – The production of goods & services as fast as possible – The delivery to the end-customer quicker than competitors

123

69 =


Reliability

• Reliability means being able to tell customers reliably when their product or service will be delivered

• Reliability refers to:– Dependability of timetables– On time deliveries– On-Time In-Full (OTIF)


Value Advantage

• Differentiation can be achieved by more advanced or reliable technology and/or tailored services to meet customer needs

• Customers are buying not just a product but the benefits of the product:– Intangible & psychological benefits– Tangible benefits based on superior performance

• The logistics value advantage includes:– Provision of tailored logistics service– Responsiveness to the customer– Reliability of the service to deliver to expectations


Supply Chain SimulationBeer Game


Beer Game

• Competing among each supply chain to be the most efficient supply chain, which means the lowest total supply chain cost.

Consumer

Distributor / Wholesaler

Retailer

Manufacturer Supplier

Reduce Cost

Reduce Cost Enhance

RevenueEnhance Revenue

Reducing inventoryoperating costs

Matching merchandise with consumer demands

Resources

23

4 5

Order

Delivery

Order

Delivery

Order Delivery

Order

Delivery

Order

Delivery


Rule

• Inventory at the beginning = 10 unoits• No talking• No information sharing• Cost

– Inventory carrying cost: 1 THB/unit/week– Back order: 2 THB/unit/week



Bullwhip Effect (Forrester Effect)


Qua

ntity

What Management Wants...

Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998Time

DemandDemandProductionProduction


Time

DemandDemand

ProductionProduction

What Management Gets...Q

uant

ity

Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998


Increasing Order Variability up the Supply Chain

ConsumptionConsumersRetailersDistributorsManufacturersSuppliers


ORDERS

TIME

2. Orders fromretailers todistributors

3. Orders fromdistributors to

manufacturer4. Orders

from manufacturerto supplier

1. Increase of 10%in orders fromconsumers to

retailers

ITC

GOODSORDERS

Manufacturer DISTRIBUTORSupplier CONSUMERSRETAILER

M11:U2:02.4-2

Bullwhip Effect (Forrester Effect)

Supply Chain Management / Surath Pralongsil 77ITC

ORDERS

TIME

Lagged (delayed) responseAmplification of responseSystem instability

Forrester showed how this lagged or delayed response leads toan amplification in response magnitude, resulting in supply chaininstability and increased inventory levels.

M11:U2:2.4-3

Explaining the Forrester effect


Bullwhip Effect

Manufacturer Distributor Wholesaler Retailer Customer


Collaboration in Supply Chain


Collaborative Planning, Forecasting & Replenishment

Manufacturer

Retailer Forecast Drivers• In stock position• Fill Rate• Consumer Demand• Price Changes• Growth Plans• Distribution Channels

Common Event Calendar

Joint Forecast

Retailer

Manufacturer Forecast Drivers • Capacity • Order Lead time• Consumer Behaviour• Product Availability• Promotions• Raw material supply

Joint Business Planning

Generate joint forecast Generate j

oint forec

ast

Drive replenishment

Drive MRP


Supply Chain Manager


Integrated Supply Chain Planning



Note: Inventory is to be taken into account in each step.

Retail Outlet Retail Outlet Retail Outlet Retail Outlet

Regional DC Regional DC

National DC

Demand Demand Demand Demand

DRP

Demand Planning

Production MPS

Sub-Assembly Sub-Assembly Sub-Assembly Sub-Assembly

Assembly Assembly

C1 C2 C3 C4 C5 C6 C7 C8

MRP

Purchase Order ProcurementPurchase OrderPurchase OrderPurchase Order


Supply Chain Planning Process Framework

ProcurementProcurement

ManufacturingManufacturing

LogisticsLogistics

Marketing& Sales

Marketing& Sales

SuppliersSuppliers

CustomerCustomer

Inventory/Warehouse

ManagementShipment

Management

InventoryDeployment

TransportPlanning

MasterProductionScheduling

DetailedProductionScheduling

DistributionRequirement

Planning

Material Requirement Planning

ProductionActivityControl

Procurement

CapacityPlanning and

Sourcing

Supply ChainNetworkDesign

Order Management Demand Planning

Executional Operational Tactical Strategic

Business Plan

Immediate - Hour Day - Week Week - Month Quarter - Year


ECR

SCM/APSERP

MRP II / JIT

MRP I

DRP II

DRP I

WMS

TMS

Route Planning

Evolution of enterprise resource management (ERM)and manufacturing planning & control systems



• Sales & Operations Planning (Demand & Supply Planning)

• Demand Planning• Distribution Requirement Planning (DRP)• Distribution Resource Planning

(DRP II)• Material Requirement Planning (MRP)• Manufacturing Resource Planning (MRP II)• Master Production Schedule (MPS)• Detailed Production Schedule (DPS)


Sales & Operations Planning(S&OP)


Sales & Operations Planning (S&OP)

• Sales and Operations Planning (S&OP) is core to supply chain performance

• Collaborative S&OP is the way forward and the technologies are in place to make it a reality

• Analysis & understanding of customers, suppliers and inventories are essential to develop a meaningful and workable Sales & Operations Plan

• Each step on the route to c-S&OP delivers measurable benefits • In order to arrive at meaningful plans powerful constraint-based

planning tools are required • Effective and appropriate supply chain planning software is essential

for effective c-S&OP


Sales & Operations Planning (S&OP)

Strategic PlanningStrategic Planning

Business PlanningBusiness Planning

VOLUMESales & Operations Planning

VOLUMESales & Operations Planning

Sales PlanSales Plan Operations PlanOperations Plan

MIXMaster Scheduling

MIXMaster Scheduling

Detailed Planning & Execution System: MRP, DRP, Plant Scheduling,

Supplier Scheduling

Detailed Planning & Execution System: MRP, DRP, Plant Scheduling,

Supplier Scheduling

EXECUTION

CA

PAC

ITY PLAN

NIN

GC

APA

CITY PLA

NN

ING

Forecast & D

emand M

anagement

Forecast & D

emand M

anagement

DEMAND SUPPLIER

90

S&OP is placed between strategic and detailed planning and execution

S&OP

Supply logistics

Production logistics

Customer logistics

Fulfillment

Longterm

planning(strategic)

Operational Planning (Detailed Scheduling)

Sales & operations planning

Focus• Capital investments• Long term alliance/commitments• Vertical integration benefits• Budgeting/definition of targets for sales and

production

• Strategic operational decisions regarding product swaps, capacity outsourcing, etc.

• Mid-term demand plan• Mid-term rough cut capacity, inventory,

and material plan• Mid-term feed stock supply plan and

replenishment plan

• Short-term capacity and material planning• Adjustment of mid-term plan as per order

portfolio and short-term disturbances

• Efficient implementation and management of day-to-day business

• Order fulfillment

Exec

utio

n1-

5 ye

ars

plan

ning

1-4

wee

kspl

anni

ng1

-12

mon

th

plan

ning

Source: McKinsey

Horizon

91

S&OP process creates a cross-functional platform for internal collaboration on an ongoing basis

Source: McKinsey

Demand manage-ment

Production manage-ment

Supply manage-ment

Distribution manage-ment

From . . .Traditional siloed and fragmented functional planning

Detailed scheduling

Order fulfillment

Shortage allocation

• Low responsiveness to demand changes • High inventory levels to account for internal inefficiencies • Volume-based mentality• Sales vs. production dispute• Firefighting and short-term view• Lack of clear accountability and ownership • Data issues and lack of results

Strategic business planning

High cost, low service

Production manage-ment

Demand management

Supply manage-ment

Distribution manage-ment

. . . toCross-functional integrated planning

Detailed scheduling

Order fulfillment

Shortage allocation

• Better responsiveness to demand changes• Lower inventory levels due to reduced internal

inefficiencies• Value-driven decision making• Collaborative process across functions• Proactive planning for business disturbances • Clear accountability and ownership of decisions• Full transparency and common set of data

Strategic business planning

Low cost high service, enabler for growth

92

A typical monthly S&OP calendar follows 4 generic phases in a repetitive sequence - however details may vary between industries

• Review KPIs

• Evaluate escalated demand / supply gaps and potential resolution scenarios based on financial and strategic impact and make resource allocation decisions

Demand Planning• Creation of unconstrained

forecast• Updating current

order portfolioInventory Planning• Regional inventory level

monitoring and updatesProduction Planning• Evaluation of available

capacity and potential constraints

Overall• Master data maintenance

and changes

• Demand / Supply balancing

• Rough cut capacity planning by production and generation of capacity constrained consensus demand, procurement and replenishment plans

• Identification of unresolved demand and supply gaps and escalation to S&OP committee

• Development of scenarios / options as an input to S&OP decision meeting

• Implementation of decisions taken at cross functional meetings

• Communication of decisions and follow-up

Function specific Problem and business specific

Source: McKinsey

Data consolidation, regular update, and maintenance

Premeeting sales and operations agreements Monthly S&OP meetings

Adjustments, modifications and decision implementation

Week 1 Week 2 Week 3 Week 4

EXAMPLE

93

CLIENT EXAMPLE

KPI performance dialogues conducted at 3 levels• Executive level• S&OP meetings• Site / Pre-

meetings

Service

Concentrate production

Formula-tion

Filling and packaging

Distribu-tion Sales

Cost

Efficiency/performance

Customer service level• Order-line Fill Rate • Stock out

Inventory level

Scrap/Accruals

Plan adherence• Vs. annual supply budget (as of 2008)• Vs. 3 month frozen period

Forecast accuracy• Vs. changes• Vs. actual sales

Lead time, e.g.• Product release lead time at internal sites• Product lead time at external mfg site

Key Performance Indicators are an essential tool to increase the level of accountability and support the S&OP process

94

Typical frequency of S&OP by industry

Source: Aberdeen Group, July 2006

S&OP frequency by industry in percent

AutomotiveChemicalsConsumer durable goodsConsumer electronicsCPG

Mining/oil/gasIndustrial equipmentFood/beverage

Paper/lumber/timberPharma

Monthly

DailyWeekly

Quarterly or less


S&OP is traditionally done outside MRP II


SCO System make Collaborative S&OP happening in reality


S&OP Process Map


Sales & Operations Planning Processes (S&OP)Key to Effective Supply Chain Optimization

Sales and Operations Planning, S&OP, supports the notion that making good decisions all of the time is preferable to making outstanding decisions some of the time. Tom Wallace (MRP II: Making it happen) defines S&OP as follows:

– Sales & Operations Planning (S&OP) is a business process that helps companies keep demand and supply in balance.

– S&OP is cross functional… including the executive in charge of the business unit – Used properly S&OP enables the company’s managers to view the business

holistically and gives them a window into the future.

The processes involved in S&OP lead to one common plan for the business that is achievable as it takes into account demand, available capacity and business constraints:

– Input: customer demands, forecasts, draft Master Schedule, replenishment plan, projected inventory plan & supply constraints

– Output: agreed Master Schedule, replenishment plans, shipping plans

In order for this to happen there needs to be an agreement on priorities and objectives for the whole business. One plan is developed on-line, collaboratively, including key suppliers and customers, and signed off in a formal S&OP meeting attended by representatives of all internal stakeholders, i.e. Sales, Marketing, Logistics, Manufacturing, Purchasing, Finance, Management.


Integrated S&OP Process



Demand Planning


Acronym

• Demand management• Demand planning• Demand plan• Real demand• Enriched demand plan• Sales forecast• Sales target• Sales plan• Budget• Financial plan• Operational plan

Supply Chain Management / Surath Pralongsil 102Delivery Lead Time (to react to demand)Delivery Lead Time (to react to demand)

Supply of Raw& Packaging

Materials

ManufacturingPackaging &

Release

Warehouse &Distribution Retailer

MakeMake--toto--orderorder

Assembly / PackagingAssembly / Packaging--toto--orderorder

MakeMake--toto--stockstock

Why do we need Demand Plan / Forecast?

PP--Time = Process Lead TimeTime = Process Lead Time

Demand Plan is used to prepare stockDemand Plan is used to prepare stock


Demand

• Dependent Demand vs Independent Demand• Only demand plan of independent demand is required.

• Total number of table X 4 legs = Total number of legs

Remark:• Performance measurement: Demand Plan Accuracy and Bias• Consistent positive or negative bias demonstrates error pattern


Forecast helps to identify gap against Budget

01808 xxxxBudget vs Act/For

-10,00020,00030,00040,00050,00060,00070,00080,00090,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

CASE

S

Budget

Act. & For

Gap


?

Months

Vol

ume

How to Complete the Forecasting Horizon...

The 3-Component Model: Baseline, Impactors, Uplifts

Historical Demand

Large, Exceptional

Events

Past Events Uplifts

Baseline

Projected Baseline

Planned Events Uplifts

Planned Large, Exceptional

Events


Forecast Techniques

• Qualitative– Based on intuition and expert opinion– In many cases, bottom up.

• Quantitative– Statistical forecasting

Remark:• Forecast is always wrong• More detail, higher inaccuracy• Further timeline, higher inaccuracy


Demand Pattern

PAST FUTURE

2. Seasonality

PAST FUTURE

3. Random Variation

PAST FUTURE

1 Trends:a)

PAST FUTURE

b)

PAST FUTURE

c)

4. Cyclical Variation


To Counter Forecasting Error

• Customer Relationship Management (CRM)• Supply chain visibility• Vendor-Managed Inventory (VMI)• Variety reduction• Re-design supply network e.g. cross-docking operation• Postponement (Push-Pull)



Distribution Requirement Planning (DRP)Distribution Resource Planning (DRP II)


Multi-Level Distribution

Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H

Regional DCRegional DC Regional DCRegional DC

National DCNational DC

DealerDealer DealerDealer DealerDealer DealerDealer DealerDealer DealerDealerDealerDealer DealerDealer


Impact of Multi-Echelons


Distribution Requirement Planning (DRP)

DRP is aimed at improving the management of finished product inventory & controlling the transport of goods in multi-level distribution supply chains

• DRP is a simulation system that models all expected activities involved in shipping goods through distribution networks over a defined planning time horizon

• DRP is driven by a demand forecast for each product


Forecast Demand

Shipments on Order (in transit)

Projected Stock on Hand

Received Shipment Quantity

Planned Shipment Quantity

PastDue

Week

200 210 220 200 180 200 210 160

500

495 615

500 500500

500 500 500

1 2 3 4 5 6 7 8Min. Safety Stock: 250

Lead Time: 1 weekOrder Quantity: 500

195

500 500 500

500

500

ALERT

500

Time Horizon: 8 Weeks

Max. Stock Limit: 600

Over limit

Delayed receipt

Delivery cancelled

ITC M11:U2:2.5-25

285 775485185365565

Distribution Requirement Planning (DRP)Time-bucket matrix display


Inventory Deployment

• How do we deploy the inventory along the distribution network?• What if actual demand does not follow the forecast?




OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutletOutletOutlet OutletOutletEXCESS

Forecast > Actual Demand

SHORTAGE

Forecast < Actual Demand


Re-Deployment

• Need to concern about the distribution cost of re-deployment• Cross-docking is one way to avoid this situation, but lead-time will be

stretched




OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutletOutletOutlet OutletOutlet

EXCESS SHORTAGE


Cross-Docking

• …is a distribution system in which merchandise received at the warehouse or distribution centre is not put away, but immediately turned around for shipment to retail stores

Store A

Store B

Store Z

Plant 1

Plant 2

Plant N Receiving

Shipping

Full Pallets Single Product

Store A

Store B

Store Z

Plant 1

Plant 2

Plant N

Full Pallets Single Product

Cross-DockingPlatform


Distribution Resource Planning (DRP II)

The extension of distribution requirements planning into the planning of the key resources contained in a distribution system: warehouse space, workforce, money, trucks, freight cars, etc.

APICS Dictionary, 9th ed., 1998.



Material Requirement Planning (MRP)


Material Requirement Planning

• Are calculated based on the Bill-of-Materials (BOM)• Is driven by MPS to make the end items and drive to Shop-floor

control and Purchasing

Objectives:• To determine the materials required• What is required• How much is required• When it is required• To establish and maintain priorities

Source: APICS

Table 100

Legs 206

Base 200 Top 025

Leg Bolts216 Frame 280


Master Production Schedule

Inventory records

Operational capacity constraints (e.g., machine,

labour & lead-times)

Bill of materials

Materials movements

Production orders

Materials requirements

plan

Purchase orders

ITC M11:U2:2.5-6

Materials requirements planning - closing the loop


EXAMPLE - CALCULATION OF REQUIREMENT FOR PART 022

PRODUCT02

PRODUCT03

SUB-ASSEMBLY12

SUB-ASSEMBLY13

PART20 29 28 22 20 21 22 27 29

1 Off 1 Off 2 Off 1 Off 2 Off

4 Off 3 Off 3 Off 3 Off 2 Off 2 Off PART PART PART PART PART PART PART PART

ITC M11:U2:2.5-11

Bill of Materials (BOM)


MRP the need for accurate inventory records

• BOM must be very close to 100% accurateInventory item master file - source for BOM

• Stock records better than 95% accurateInventory transaction file - receipts and issuesInventory location file - storage locations of raw materials, finished goods, WIP and workshop floor holding areas


Supply Chain CollaborationEfficient Consumer Response (ECR)


Background of ECR

Adoption of ECR initiative throughout America, Europe and more recently Asia

1992/1993 1993 1994 1995 1996 1997 1998/1999

PLVS ARLV T

USA Italy

Hong Kong

Spain

Greece

Sweden

Switzerland

Canada

Denmark

Germany

AustraliaEuropean Union (EU)

Portugal

Finland Japan

Singapore

Thailand

Taiwan

United Kingdom (UK)

France

China

Malaysia

Philippines

Korea


ECR Overview

"WORKING TOGETHER TO

FULFIL CONSUMER WISHES BETTER, FASTER AND AT

LESS COST"


Scope The ECR Thailand project focuses on the Fast Moving Consumers Goods (FMCG) that are sold through modern retail stores (the Modern Trade Channel), although future ECR initiatives will include the Traditional Trade Channel.

Dry GroceryFood

General Merchandise

Product Groups

Supermarkets

Convenience Stores

Department Stores

Specialist Stores

Retail Formats

Study Areas

Consumer

OptimizeIntroductions

OptimizeAssortments

OptimizePromotions

Demand Management

Electronic DataInterchange(EDI)

Electronic FundsTransfer (EFT)

Item Coding andDatabase Mgmt

Activity BasedCosting (ABC)

Enabling Technologies

SynchronizedSupply

SynchronizedProduction

ContinuousReplenishment

AutomatedStore Ordering

Supply Management

ReliableOperations

CrossDocking

Soft Drinks

Integrators

Value Creation

Collaborative PlanningForecasting and Replenishment

E-BusinessE-Procurement, E-Supply Chain


Demand ManagementEstablish Strategy and Capabilities

Optimise Product Introductions

Optimise Assortments

Optimise Promotions

Supply ManagementIntegrated Suppliers

Synchronised Production

Continuous Replenishment

Automated Store Ordering

Reliable Operations Cross Docking

Enabling Technologies

Activity Based Costing

Electronic Data Interchange (EDI)

Electronic Funds Transfer (EFT)

Item Bar Coding and Database Maintenance

Electronic Commerce

Human FactorsStrategy and

Structure Culture Skills Relationships

ECR Improvement Concepts


Through the adoption of ECR in Thailand for all channels, it is Through the adoption of ECR in Thailand for all channels, it is expected to reduce expected to reduce

consumer price by 7.7%, which is equivalent to consumer price by 7.7%, which is equivalent to Baht 38 billion saving across the Baht 38 billion saving across the IndustryIndustry

Consumer

Traditional Channel**

Store

Retailer

Plant D.C.

Modern Channel*

Consumer price

reduction=

7.7%

Total Supply Chain

Inventorycosts = 5.4%

Operatingcosts = 2.3%

*Modern Trade: Supermarket chains, hypermarket chains, convenience stores,**Traditional: Mom & Pop Store, independent Supermarket

ManufacturerSupplier

Benefits


Interesting Web Sites


www.gci-net.org


www.globalscorecard.net


GCI Benchmarking Tool: Maturity Assessment

DefinitionCriteria 0 1 2 3 4

Nothing doneNo plans

Nothing done but plans developed

Early implementation

Further implementation

Fully implementedMaturity Measure Criteria

*

Who

* Manufacturers (M) , Wholesalers (W) , Retailers (R)

The extent to which stocks at all stages in the supply chain are replenished in response to an estimate of consumer demand (demand signal)

Replenishment may be via continuous replenishment process (CRP) orders calculated by the retailer, or via vendor managed inventory (VMI), where appropriate

Changes in stock replenishment quantities and timings are driven primarily by price / quantity deals, rather than consumer demand

Agreement established between trading partners to match replenishments more closely to consumer demand

Prototype CRP being tested using CRP orders or VMI (where appropriate) to generate the demand signal

CRP or VMI orders not integrated into order management system: proprietary electronic commerce standards still used

CRP being rolled out to cover at least half of long term target volume

CRP or VMI orders integrated into order management systems via industry standard electronic commerce: used by manufacturer to plan loads

Retailer gets information of shipments via EDI

CRP fully installed for all targeted products and volume and fully integrated into order processing systems

Replenishment Method and Application

MWR

Replenishment driven by inventory and offtake. Need visibility for that at all levels.

Agreement to get visibility.

A fully implemented demand management system (DMS) integrated with ERP.


www.supply-chain.org


www.ecrnet.org


cscmp.org


www.cscmpthailand.org


www.supplychainasia.com


www.gs1.org


www.epcglobalinc.org


Continuous ReplenishmentSynchronized Production/Supply

Vendor-Managed Inventory


Enabling Technologyin Supply Chain Management


Business Process

Order – To – Cash (O2C) ProcessPurchase – To – Pay (P2P) Process


Order – To – Cash (O2C) Process

Order entry

Credit limit

StockAvailable-To-Promise (ATP)

Soft allocation

Processed orders with the same requested date

Route allocation

Load configuration

Picking as per load

Picking confirmation, stock updated, AR generated, Invoicing

Collection & payment

Customer Order• Cust. No.• Address• Product Code• Quantity• Requested

Delivery Date

Picking Slip• Product Code• Quantity• Loading bay

Invoice & DO• XXX• XXX• XXX• XXX


Enabling Technologyin Supply Chain Management

IT Systems


What are Legacy System?

• Legacy IT systems were developed prior to 1990 and have a functional focus

• Legacy systems are used for simple operations like order entry &processing, managing inventory, customer & product databases

• Each activity within the organization has its own proprietary system and there is little integration or communication between the systems

Human Resources Engineering

Finance & Accounting

Sales & Marketing Logistics HQ &

Branches Operations

Function Server & Database







Human Resources Engineering

Finance & Accounting

Sales & Marketing Logistics HQ &

Branches OperationsHuman ResourcesHuman

ResourcesHuman

ResourcesHuman

Resources EngineeringFinance & AccountingFinance & AccountingFinance & AccountingFinance & Accounting

Sales & MarketingSales &

MarketingSales &

MarketingSales &

Marketing Logistics HQ & BranchesHQ &

BranchesHQ &

BranchesHQ &

Branches Operations









What are ERP System?• ERP stands for Enterprise Resource Planning & ERP systems are used to

integrate business systems & processes. ERP systems allow all areas & functions of an organization to combine & analyze data.

Central Database and Servers

Engineering Operations

Sales & Marketing

Human Resources

Headquarters and Branches

Finance & Accounting Logistics

Supplier Relationship Management

Customer Relationship Management

Central Database and Servers

EngineeringEngineering OperationsOperations

Sales & MarketingSales &

MarketingHuman

ResourcesHuman

Resources

Headquarters and BranchesHeadquarters and Branches

Finance & AccountingFinance & Accounting LogisticsLogistics

Supplier Relationship Management

Customer Relationship Management


What ERP Covers?

• A sales order is made and recorded (Sales)

• Parts are reserved or purchased & delivered (Purchasing & Supply)

• Labour is scheduled & charged (Human Resources)

• The cost of parts is taken from general ledger inventory accounts, & the revenue is booked & billed when the order is completed (Finance)

• The required goods are manufactured or assembled (Production)

• The completed order is shipped to the customer (Logistics)


Module in SAP R/3

FI - Financial Accounting• FI-GL General Ledger Accounting • FI-LC Consolidation • FI-AP Accounts Payable • FI-AR Accounts Receivable • FI-BL Bank Accounting • FI-AA Asset Accounting • FI-SL Special Purpose Ledger • FI-FM Funds Management

CO – Controlling• CO-OM Overhead Costing (Cost

Centers, Activity Based Costing, Internal Order Costing)

• CO-PA Profitability Analysis • CO-PC Product Cost Controlling AM- Asset ManagementPS – Project SystemFS – Insurance• FS-CD Collections and

disbursements • FS-CM Claims management • FS-CS Commissions management • FS-PM Policy management • FS-RI Reinsurance management • FS-PE Payment Engine (Banking

Payments Solution still in development)


Module in SAP R/3

IS – Industry Solution• IS-A Automotive • IS-ADEC Aerospace and Defense • IS-AFS Apparel and Footwear • IS-B Banking • IS-BEV Beverage • IS-CWM Catch Weight

Management (Variable Weight Items such as Meats and Cheeses)

• IS-DFS Defense and Security • IS-H Hospital • IS-HER Higher Education • IS-HSS Hospitality Management • IS-HT High tech • IS-M Media • IS-MIN Mining • IS-MP Milling (or IS-MILL) • IS-OIL Oil

• IS-PS Public Sector • IS-R Retail • IS-REA Recycling Admin • IS-SP Service Provider • IS-T Telecommunications • IS-U Utilities HR – Human resources• HR-PA • Personnel Administration • HR-PD • Personnel Development • HR-RC • Recruitment


Module in SAP R/3

PM - Plant Maintenance MM - Materials Management QM - Quality Management PP - Production Planning SD - Sales and Distribution • Helps to optimize all the tasks and

activities carried out in sales, delivery and billing. Key elements are: pre-sales support, inquiry processing, quotation processing, sales order processing, delivery processing, billing and sales information system.

SCM - Supply Chain Management SEM - Strategic Enterprise

Management WM - Warehouse Management HUM - Handling Unit Management AF&R - Advanced Forecasting &

Replenishment


Advance Planning & Scheduling (APS) System:Architecture of Advanced Planner & Optimizer (APO)

Customer

PartnerInternet / ED

I / XML / R

osettaNet

Source: SAP

APO


SCM Application

• Supply Chain Collaboration (Linkage among trading partners in supply chain)– Collaborative Planning– Network Planning

• Supply Chain Planning– Material Requirement Planning– Advanced Planning and Scheduling– Demand and Supply Planning

• Supply Chain Execution– Procurement– Warehouse Management System– Transport Management System– Sales Order Processing System– Manufacturing System

Source: Tokuii Corporation


Advanced Supply Chain Management

Surath PralongsilDecember 2009

Value Chain ManagementSupply Chain ManagementLogistics Management


Wrap-Up: Advanced SCM• Value chain• Value creation• Supply chain• Logistics• Enterprise integration• Strategic, Tactical, Operational SCM:

Balance demand and supply• SCM objectives

– Delivery of value– Responsiveness– Reliability

• Competitive advantage in SCM– Globalization– Integration– Time-based competition

• Supply chain characteristics– Ship to stock– Make to stock– Assemble to order– Make to order– Buy to order– Engineer to order

• Lean v.s. Agile supply chain• Push and pull• Postponement (mass customization):

decoupling point

• Advantage of robust SCM– Match demand and supply– Reduced cost– Improved quality and service– Higher value

• Demand variability: beer game bullwhip effect

• Integrated supply chain planning– Sales & Operations Planning (Demand &

Supply Planning)– Demand Planning– Distribution Requirement Planning (DRP)– Distribution Resource Planning (DRP II)– Material Requirement Planning (MRP)– Manufacturing Resource Planning (MRP II)– Master Production Schedule (MPS)– Detailed Production Schedule (DPS)

• Efficient Consumer Response (ECR)• Synchronized Production/Supply• Vendor-Managed Inventory• O2C, P2P• ERP: Enterprise Resource Planning• APS: Advanced Planning & Scheduling• EPC: Electronic Product Code• RFID: Radio Frequency Identification

45417181 091218-advanced-scm

Documents

supply chain management16

supply chainall interactions

value chainfocus

marketing activities

processthe activities

benefit of scm

vendormanaged inventory

real applications of