Lecture 5

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Lecture 5

Ch.8 Supply Chain Process Management

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Agenda

• 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

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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 ….

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Defining Process

As noted by Harrington [1991], a processprocess 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):1. Production Process – deal with tangible goods (products)

2. Business Process – deal with intangible goods (services)

Harrington, H.J., Business Process Improvement, McGraw-Hill, NY, NY, 1991

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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]

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Supply Chain Processes

Supply chain processes can be classified into two major groups:

1. Planning 2. Execution

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• SC planning process deals withdeals with strategic aspects of cross-enterprise supply chain processes.

• Examples of planning processes include recycling, product and process development, and concurrent production and distribution.

SC Planning Process

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SC Execution Process

• SC execution process involvesinvolves more operational dimensions of supply chain processes.

• SC execution processes generally comprise fulfillment, production, procurement, quality control, customer service, and business support processes.

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SCPM

• The aim of SCPM is to deal withto 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 linking everyoneeveryone in the process chain and aligning aligning process objectivesprocess objectives across all of the firmss in the supply chain.

• SCPM attempts to make processes that …….(to p10)

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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)

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Supply Chain Management – The SAP (Process) View

CustomersBusiness Partners

Suppliers

Employees

SAP R/3

Order to CashOrder to CashProcure to PayProcure to PayIdea to Project Idea to Project Hire to RetireHire to Retire

Processes that handle/execute by SAP software(to p2)

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2. Guidelines for Horizontal Implementation

The lack of properlack of proper guidelines for a supply chain process management implementation will result in sub-optimization and inefficiencies.

Solution to the problem … (to p13)

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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.

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Guidelines for Horizontal Implementation

Control/

Improvement

Plan

Processes Documentation (Planning and

Execution)

Performance Measurement

Process Assessment

Long-Term Vision/Competitive

Strategy

Control

/Improvement?

Reengineering?

Yes

Yes

No

Reengineering

PlanNext Planning/ Execution Period

SC Initiatives (e.g. Benchmarking)

Processes

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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.

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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)

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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

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Book Publishing - A Fulfillment Process (Happy Day Scenario)

Bookstore

Publisher’s Head Quarter

Suppliers

Bookstores order items

Get items from the stock room

Update inventory information

Ending Inv. Level < Reorder Point

HQ places orders

Deliver items to bookstores

Orders arrived

Orders arrived

Acceptable?

Update inventory information

Reject the Shipment

Organize items in the stock room

Return items to suppliers

Un-fulfill Orders?

Go Back to Availability Checking Point

Wait for next orders

Yes

Inform the bookstore when items are ready

No Yes

Yes

No

No

Yes

No

Availability Checking Point

Day 1 Day 2 Day 3 Day 4

Available?

Orders approved

Confirm with HQ on quantity, due date,..

Update inventory information

Deliver items to the HQ

Order Reviewing Sub-process

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Book Publishing - A Quality Control Process

Bookstore

Publisher’s Head Quarter

Suppliers

Bookstores order items

Get items from the stock room

Update inventory information

Ending Inv. Level < Reorder Point

HQ places orders

Deliver items to bookstores

Orders arrived

Orders arrived

Acceptable?

Update inventory information

Reject the Shipment

Organize items in the stock room

Return items to suppliers

Un-fulfill Orders?

Go Back to Availability Checking Point

Wait for next orders

YesAvailable?

Inform the bookstore when items are ready

No Yes

Yes

No

No

Yes

No

Availability Checking Point

Orders approved

Downstream FailureDownstream Failure: Bookstores call at all times for immediate delivery

Enterprise FailureEnterprise Failure: Inventory lists don’t match the inventory items on the shelves

Enterprise FailureEnterprise Failure: Inventory items are not labeled and organized appropriately

Upstream FailureUpstream Failure: Suppliers did not handle packages properly

Confirm with HQ on quantity, due date,..

Update inventory information

Deliver items to the HQ

Order Reviewing Sub-process

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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.

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4. High Level SC Planning Processes

• Through the development of planning processes, supply networks can accomplish three critical tasks:

1. Understand the interdependent relationships between trading partners

2. Evaluate strategic, high-level cross-enterprises processes

3. Direct every effort toward the common aimsExamples (to p22)

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Typical Examples

• Product and process development• Recycling

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Planning for Product-and-Process- Development Process

SC Process Design

Product Design

Product Market Concept

Concurrent Production Distribution

SC Network

Product Attributes Consumption

Vendor Development

Marketplace(Focal Firm) Product and SC Process Development

Suppliers

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Planning for Recycling Process

Inbound Logistics

Product/Process Development

Production

Outbound Logistics

Marketplace

Secondary Materials Industries

Product/Packaging Materials

Green Product/ Process Design

Production Process

Order Delivery

ConsumptionWaste and Disposal

Collection

Processing for recyclable

New

Ma t

e ri a

ls F

low

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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)

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Key Performance Indicators

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

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SC Excellence

Business Results Social Cost

Supply Chain Quality

Supply Chain Productivity

Supply Chain Excellence and Performance Indicators

Note … (to p28)

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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.

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6. Making a successful SCMProcess management alone could notalone could not

increase efficiency and effectiveness. Rather, the integration withintegration 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

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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.

A Holistic View

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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.

A Strategic Approach

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7. Questions to Ponder

• What is supply chain process management?

• What is its significance to any organization?

• What does it involve?

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