Supplier Collaboration - the next Step in Supply Chain integration · 2015-11-04 · Supply chain Management with Sap’ published by Sap and capgemini in 2006, focused on the processes

SAP Capgemini InsightThought Leadership

Supplier Collaboration -the next Step in Supply Chain integrationSupplier collaboration Survey in the Dutch buSineSS worlD

DoCument DetailS

Date

25 June 2008

Company

Sap nederland b.v.capgemini nederland b.v.

Contact people

Eric Tielsproduct Manager, Sap ScMSap nederland b.v.telephone: 073-6457527e-mail: [email protected]

Jan WoutersDepartment Manager, Sap ScMcapgemini nederland b.v.telephone: 06-15030096e-mail: [email protected]

the following individuals contributed to this survey, in addition to the participants from the Dutch business world: axel visser, Jan heerema, Janne van heijst, christian brinkhuizen, ellen witmer, Kees van wijnen, nick van der Sanden and rob van neck

DoCument DetailS

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91.1 aim of the survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101.2 current trends in Supply chain Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101.3 Design of the survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111.4 background of the participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121.5 internal and external integration of logistics processes . . . . . . . . . . . . . . . . . . . . . . . .13

2 Processes, Maturity and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152.1 processes in Supplier collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .162.2 the Supplier collaboration Maturity Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .162.3 Sap and Supplier collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

3 Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .193.1 introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .203.2 results of the survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .213.3 current communication means in the procurement process . . . . . . . . . . . . . . . . . . . .223.4 points for improvement and plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .223.5 conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

4 Supplier-Managed Inventory & Replenishment: . . . . . . . . . . . . . . . . . . . . . . . . . . . .254.1 introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .264.2 results of the survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .264.3 current communication means in the SMi & replenishment process . . . . . . . . . . . . . .284.4 points for improvement and plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .284.5 conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

5 Outsourcing and Co-manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .315.1 introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .325.2 results of the survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .335.3 current communication means in the outsourcing and co-manufacturing process . . . .345.4 points for improvement and plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .345.5 conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

6 Kanban . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .376.1 introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .386.2 results of the survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .386.3 current communication means in the kanban process . . . . . . . . . . . . . . . . . . . . . . . .396.4 points for improvement and plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .406.5 conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

7 Master Data, Alerts and Performance Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . .437.1 introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .447.2 results of the survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .447.3 current communication means in the sharing of master data, alerts and reports . . . .457.4 points for improvement and plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .457.5 conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

8 Specific Results by Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .478.1 introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .488.2 chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .488.3 pharma/life Sciences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .498.4 high-tech and electronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .498.5 Metal/construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .508.6 consumer products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .508.7 wholesale and retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

Appendix A . Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

the answer to most business questions today is supposedly a combination of innovation and collaboration, but for many supply chain professionals these seem to be more the cause of their problems rather than a solution.

a short conversation with almost any senior executive in a multinational enterprise will throw up three challenges: first will be the impact of globalization on their markets and suppliers, second the new pressures this has created for cost management, and finally and most importantly, the need for enterprises to enter and exit new markets with new products faster than ever before. in the past, the three challenges could be dealt with separately. Supply chain management was and is a specialized subject which is the responsibility of a defined group within the enterprise with its own metrics.

prefaCe

unfortunately, in today’s complex and dynamic society, barriers and separation of activities are on the one hand breaking down and calling for more integrated approaches, whilst on the other hand the need for specialization in using experience to manage events is becoming more demanding. little wonder that a survey of Supply chain professionals shows their confusion about business expectations, as well as a lack of investment to allow them to address these new challenges.

the answer to most business questions today is supposedly a combination of innovation and collaboration, but for many supply chain professionals these seem to be more the cause of their problems rather than a solution. they are directly feeling the pressure of their enterprises being driven to new, innovative responses in their products and go-to-market operations as they face increasing global competition. For too many supply chain professionals, this is bringing about a reversal of the hard-won effort over recent years to streamline suppliers and bought-in elements.

Sadly, we have to recognize in ourselves that we too are the drivers of these competitive forces, when as consumers we use the internet for global connectivity and the web to search for our options. with full knowledge of those options, we decide on an exacting personal specification for what we want to buy and where we can get the best price. this behavior should only serve to help us recognize the inevitability of having to change our attitude, methods and tools to adjust to the new reality.

the key question is where and how to start this, especially when it will not be limited to our own area of operation. add the confusion of an apparently endless sea of new technology products, and it clearly seems to be a daunting proposition. however, the recognition that it must be addressed was well-recognized by the supply chain professionals who took part in this survey. the use of technology to facilitate the various ways of exchanging information to improve both long-term planning, as well as to solve immediate issues, is of vital importance.

So what are the barriers? there are the usual barriers of existing systems and practices that must be incorporated, and then, of course, there are budgets, but first and foremost is a lack of understanding about exactly what new technologies and products can do. to put it another way, it's the challenge of “i don’t know what i don’t know”, which of course means the inability to specify the change you want to make or the value it will produce. this is exacerbated by the problem of whether colleagues in other parts of the enterprise are confronted by the same challenge, and therefore are not able to contribute to changing the processes.

Supply chain professionals seem to be clear about what they want, but not so clear about how to achieve it – so are there answers to be found in innovation and collaboration? you seem to believe there are answers in collaboration, citing that better or at least timelier information exchange is a crucial success factor. but what about innovation? not so easy, as you clearly state that it’s very difficult to understand and successfully apply new technologies across the business.

at Sap and capgemini, we believe we understand this, and set out with different solutions and programs to offer answers to the challenge, most importantly in a way that doesn’t demand in-depth technology knowledge and focuses on achieving high-value change that's easy to deliver. if you truly believe in the findings of this survey, i earnestly encourage you to at least find out more. as we say, it’s time to free up your energies!

Andy Mulholland, Global cto capgemini

management Summary

Simple adherence to all legislation, regulations (compliance) and the principles of operational excellence is not enough to achieve and maintain success in the global marketplace. in addition to optimizing their operational processes, many companies have also optimized their planning processes internally. the next step is to optimize the external logistics chain. the aim of this survey is therefore to determine what and how companies communicate with each other and the level of maturity they show in this communicative endeavor.

the companies participating in the survey indicated that collaboration must play a key role in realizing their business strategy and maintaining profitability. in this context, the ‘clash of the supply chains’ focuses on fine tuning, communication and, above all, synchronization, and strives to create new collaboration models within the company's strategy. narrowing the focus on core competencies, for example by outsourcing production activities to low-wage countries in order to cut costs entails additional risks and loss of control over the internal supply chain. the existing network of suppliers must be recategorized and possibly expanded. in doing so, the evaluation of individual suppliers also changes from valuation at the lowest cost and best quality to the creation of added value in design, production and new forms of service provision.

the target group of this survey consisted of companies with an office in the netherlands in six different sectors that use Sap as the most important it support for their company processes. the results of the survey were drawn up based on the Supply chain collaboration Maturity Matrix. this matrix has maturity phases in the five most important collaboration processes. in their progress toward improvement in collaboration with suppliers, companies must pass through each of the different phases. this also brings us to the main theme of this survey: ‘Supplier collaboration, the next step in supply chain integration’.

the most important conclusions of this survey are:• effective and efficient collaboration

with suppliers must be based on the internal maturity of both the operatio nal and planning processes of a company

• Minimizing inventories and risks within the supply chain are the most important areas of interest in the participating companies as far as supplier collaboration is concerned. this is in contrast to the fact that more than half of the companies still communicate with suppliers by fax, telephone and e-mail

• Many companies fail to take full advantage of the different data exchanges in their processes with suppliers, such as order acknowled-gements, advance Shipping notifications and long-term plans

• in general, the importance of efficient collaboration with suppliers is considered very important; however, there is a much lower score regarding the effectiveness of this collaboration.

in summary, we can conclude that companies that can be shown to be more mature in their collaboration processes make more use of the different possibilities for exchanging multiple data, especially do this in an automated way by means of eDi or XMl or via the internet technology of Supplier collaboration portals.

to continue growing toward the following phases of the matrix, companies must primarily invest in expanding their collaboration with suppliers, involving the periodic and structured exchange of information based on the available technology. in the following chapters, the above conclusions are elaborated with concrete recommendations for improvements.

how do different partners, with the focus on clients and suppliers, collaborate in their supply chain management activities? Globalization, the pressure to innovate, time to market and cost reduction are issues in our rapidly changing world to which companies must be able to respond.

1. introDuCtion

1. introDuCtion

1 .1 Aim of the survey

the previous survey, ‘From logistics to Supply chain Management with Sap’ published by Sap and capgemini in 2006, focused on the processes of supply chain execution, planning and reporting. the most important conclusions of this survey were that the efficient implementation of logistics processes within a company succeeds or fails based on the thoroughness of the planning and the reliability of the information supply between the parties involved, both within and outside of the company.

looking further into the future and recording this in a rolling forecast provides more stable daily operations, while also making it possible to share a long-term plan with suppliers. of course, this is only one component of the total communication with these partners within the chain. this is what makes this new survey a logical continuation of its predecessor. when a company successfully controls its logistics execution (operational excellence) and planning processes (sales & operations planning) internally, the next step in supply chain optimization is the structured and regular sharing of information with business partners such as clients and suppliers. this survey aims to describe these forms of information sharing and communication, as well as giving an insight into what and how companies and suppliers communicate on a daily basis.

1 .2 Current trends in Supply Chain Management

across all sectors, a number of trends and developments can be identified as having a direct or indirect influence on the Supply chain Management of companies in 2008.

Demand planning as procurement sources and production capacities have increased rapidly, companies have switched their focus from factory-controlled production planning to demand-driven planning so as to better plan and influence the demand for products. this approach results in more customer orientation and focus on the future market, which contributes to a reduction of total logistic costs and improved supply reliability.

Globalizationespecially through improvements in communication and the use of the internet, globalization has had the biggest impact on how companies do business. it goes without saying that the trend toward a worldwide business environment has the greatest impact on the supply chain. in the fields of transportation, (re)location of factories and distribution centers, globalization creates a constant need for supply chain design and rationalization of logistics activities.

Stronger competition and price pressureJust a few years ago, the only factors required to differentiate a product within a market were price, product characteris-

tics and brand. however, continuous standardization and the easy availability of products have compelled companies to differentiate their products in other ways. innovation and brand recognition alone are no longer sufficient to justify a higher market price. companies therefore need to stand up to their competitors with cost savings and the innovative application of technology.

outsourcingthe pressure to reduce costs has also led to the outsourcing of noncore activities in a number of areas. outsourcing of transportation and storage occurs most frequently, followed by outsourcing of production activities the efficient application of outsourcing relies primarily on good supply chain design, integration of suppliers into the information chain, control mechanisms for monitoring suppliers and information systems that join the links in the chain as seamlessly as possible. companies that have outsourced many activities are gravitating toward a 'control tower' model for controlling the supply chain.

Shorter and more complex product life cycles Many companies are under pressure to develop innovative products and services and launch them more quickly onto the market without overly cannibalizing sales of their current products. this process of creative destruction places great emphasis on product introduction and phaseout and a product design that takes account of the ease of production.

10 Supplier Collaboration - the next step in supply chain integration

these questions were posted as follows for the different processes constituting the scope of this survey: procurement, supplier-managed inventory, outsourcing and co-manufacturing, kanban and exchanges of master data and reports.

approximately 150 companies were approached for this survey. these companies have been using Sap for a number of years as the most important it solution for the support of their supply chain processes. a total of 56 companies participated in the survey. of these organisations, 50 filled out the questionnaire completely. the other 6 companies only responded to certain parts of the questionnaire.

in processing the results, the answers were recorded for each question, but unexpected connections were also found between the results of different ques-tions. Finally, conclusions and recommen-dations were formulated for each process based on the survey results.

collaboration between members of the extended Supply chainas supply chains continue to develop and mature, a movement has arisen toward more intensive collaboration with clients and suppliers. this collaboration ranges from the linking of information systems to complete integration of business processes and organisational structures. the virtual networks that arise this way form the basis of the ‘clash of the supply chains’, whereby it is the chains that compete with one another, not individual companies.

the trends described are also evident in the answers to the question in the current survey where the focus within companies is on supply chain improvements. half of the survey respondents state they are working with sales & operations planning, while two out of three companies place their focus on improving demand planning and sales forecasting. tied for third place are collaboration with clients and suppliers, the subject of this survey.

the above-mentioned developments often lead to more coordination, more consultation, increased complexity and an acceleration of goods flows within the supply chain. companies are now looking for ways to meet these challen-ges. the best-known approaches are:• More efficient organisation and

reduction of deviations in companies' own business processes (lean manufacturing, lean operations) thus striving for operational excellence

• the integral and centralized control of the supply chain: less fragmentation in different departments and regions with standardized processes

• the continuing professionalization of the supply chain organisation: by developing a planning process at the tactical level, whereby a longer planning horizon is used to anticipate midterm market changes at the opportune moment

• investments in it solutions for the support of Supply chain Management processes.

1 .3 Design of the survey

an internet-based questionnaire was used for the execution of this survey. via the internet, the participants could answer a list of 46 questions. as well as a number of general questions about the background of each participating company, the content-related questions were subdivided according to the different subjects of the survey:the nature and professionalism of the supply chain activities, possible points for improvement to these activities and the current means of communication.

Figure 1.1. Focus within companies on points for improvement of supply chain processes

11Supplier Collaboration - the next step in supply chain integration

1. introDuCtion

1 .4 Background of the participants

Sectorcompanies from a wide variety of different sectors participated in this survey. the sectors high-tech & electronics and Metal and construction are well-represented, with 23% of the total number of respondents. the sectors consumer products, chemicals and pharma/life Sciences follow with a share of 20 to 14% of the total number of participants.

Sizethe size of the participating companies can be expressed both in turnover and number of employees. For both indicators, there is a reasonable spread in the size of the respondents.based on the responses about turnover, the participating companies were subdivided into a number of groups: • Small companies: turnover of less

than 250 million euros• Medium-sized companies: turnover of

250 to 500 million euros• Medium-to-large companies: turnover

of 500 million to 1 billion euros• large companies: turnover of more

than 1 billion euros.

the majority of the participants come from the small and medium-sized segment: companies with an annual turnover of up to 500 million euros.

the spread of the companies corresponds well to the existing client base of Sap in the netherlands.

position More than three quarters of the participants in this survey have a position as a Supply chain manager or purchasing manager. around 7% of the


Figure 1.2. respondents by sector

Figure 1.3. respondents by turnover

participants are involved in the logistics activities of their company from another position: as a member of the manage-ment, production manager, head of the company office or transportation manager. Fourteen percent have an it position, whereby this group consists primarily of chief information officers.

n high-tech & electronicsn Metal/constructionn consumer productsn chemicalsn pharma/life Sciencesn retail

n <250n 250 - 500n 500 - 1000n >1000


Figure 1.4. respondents by position

1 .5 Internal and external integration of logistics processes

the logistic processes of a company primarily exist to support other primary processes. although production, purchasing, sales and r&D are standalone processes with their own responsibilities, the level of integration in planning and implementation with other processes is highly important for the good operation of a company. the survey shows that the integration of logistics processes is best in the production and sales process. the level of integration is much lower in the Finance department, while we notice that Marketing and r&D have the lowest scores in this area.

For the external integration of logistics processes, we must pay attention to relationships with suppliers, clients, subcontractors and logistics service providers. it is noticeable from the responses about the extent to which these types of processes are integrated with the business partners that the weighted responses are very close to each other. the integration with logistics service providers has the highest score, followed closely by clients and suppliers.

Figure 1.5. integration of logistics processes with other processes within a company

Figure 1.6. integration of logistics processes with business partners outside of the company

n Supply chain/logistics Managern purchasing Managern chief information officern vp/Manager of Supply chain applications

n highly integrated

n well integrated

n integrated

n poorly integrated

n not integrated

n highly integrated

n well integrated

n integrated

n poorly integrated

n not integrated

0

0

production

Marketing

Sales

Finances

logistics partners

outsource/contract manufacturers

clients

Suppliers

r&D

5

5

10

10

15

15

20

20

25 30

2. proCeSSeS, maturity anD teChnology


2. proCeSSeS, maturity anD teChnology

2 .1 Processes within Supplier Collaboration

the results of this survey will be presen ted in subsequent chapters for each process of supplier collaboration. the below figure shows a clear relation-ship between the different processes.

For this survey, we distinguished between a set of four processes, in addition to the exchange of master data and reports: • procurement: this is understood to

mean all forms of communication with suppliers concerning purchasing processes with regard to direct, production-related goods

• Supplier-Managed inventory & replenishment: the supplier is responsible for the presence and compliance of the right inventory at the right time with the client

• outsourcing and co-manufacturing: the supplier of a company has

complete or partial production responsibility for a client

• Kanban: production inventory control together with the supplier, whereby deliveries to the client are based on kanban signals

• Master data, alerts & performance monitoring: synchronization and exchange of materials inventory, for example, with suppliers and evalua-tion/adjustment of delivery processes together with suppliers on the basis of quality reports, for example.

the most important drivers of collaboration within the logistics chain are cost reduction, limiting incidences of the bull-whip effect by means of good communication and increasing the turnover rate of articles in the chain.

there are a number of boundary conditions for making this collaboration proceed successfully:• common interest of the parties in

collaborating• openness in communication and

sharing of information• trust between the collaborating

parties• Sharing of the risks and advantages

of collaboration• technology which is robust and

widespread enough to support all forms of collaboration technically.

these boundary conditions then apply as the challenges for being successful and for changing the image of the supplier as a party who must reduce its standard prices every year into a strategic partner in the contest between supply chains.

2 .2 The Supplier Collaboration Maturity Matrix

in this survey, the Supplier collaboration processes are divided into four subprocesses. these processes form the basis for the representation of the survey results. within these subprocesses, five stages of maturity are identified, as shown in Figure 2.2. in addition to the processes, master data and reports are added as extras, as well as the use of it and technology. here too, a distinction into different stages can be made.

Figure 2.1. the most important Supplier collaboration processes for this survey


the level of maturity of the different processes within Supplier collaboration is explained in the table below. the maturity can be defined by two aspects:• what information is exchanged• how is this information exchanged.

Five phases are defined, from recognition to leadership, provided with some typifying descriptions, in such a way as to determine the level of maturity of a company's collaboration processes. in this survey, a score is given to each process for every participant with the values 1 to 5. this score forms the basis for analyses into the supply chain maturity in each sector, as described in chapter 8.

2 .3 SAP and Supplier Collaboration

Sap has proven in recent decades that it anticipates market needs by developing software and the renowned erp system.

within the Sap business Suite, in the Sap ScM subcomponent, a module has been developed called Sap Supply network collaboration. this module is based on the Sap netweaver platform and gives widespread visibility within a logistics chain and supports collaboration with business partners.

through the use of internet technology linked to the Sap erp system, real-time collaboration with suppliers is possible. client and supplier portals forming the basis of Sap Supply network collaboration support data exchange and the synchronization of processes and information between partners in a chain.

Figure 2.2. the Supply chain collaboration Maturity Matrix

Supply Chain Collaboration Maturity Matrix

Recognitionseeing problems

Understandingknowing where the problems are

located

Handlingaddressing theproblem areas

Masteryinternal optimization

Offer/lead external optimization

innovation

Procurement

• communication of procurement orders via e-mail/fax

• ad-hoc communication with suppliers

• electronic communication of procurement orders

• use of procurement contracts and calloff orders

• electronic exchange of order confirmations, aSn invoice data

• exchange of long-term demand

• procurement/communication without manually actions

• procurement is in line with S&op process

• real-time availability of all client demands and procurement-related documents

• Supplier is completely integrated into the value chain

SupplierManaged

Inventory and Replenishment

• transmission of inventory levels via e-mail/fax

• trust in the supplier

• Focus on inventory reduction• regular electronic communication of inventory levels

• in addition to inventory, also exchange of demand information

• aSn, delivery information and invoice information is also exchan-ged automatically in real time

• long-term production and procure-ment planning expressed as supplier needs

• electronic exchange of replenishment activities

• inventory, demand and order status for supplier available in real time

• integration with sales and production processes at supplier

Outsourcing and Co-manufacturing

• exchange of procurement orders via e-mail/fax

• limited fine-tuning with supplier about delivery and services

• exchange of order confirmation and parts lists

• electronic links to subcontractor

• Sharing of production plans in the longer term

• exchange of capacity and work order data

• electronic communication about work orders and master data

• integrated materials and capacity planning with subcontractor

• online insight into work order data and planning

Kanban• limited integration with production• ad-hoc communication with supplier

• Kanban signals electronically to supplier

• Supplier submits aSn and delivery information to client

• automatic communication of kanban signals and aSn

• real-time exchange of kanban status• in addition to kanban, aSn, poD

and invoice information is also available

Master data and reports

• no exchange or ad-hoc exchange of master data with supplier

• exchange of materials and/or packaging data with supplier via fax or e-mail

• electronic automatic exchange of master data

• ad-hoc delivery reliability and quality reports

• Fine-tuned information exchange about multiple master data

• Mutually coordinated Kpi reports

• exchange of master data updates via the internet

• Kpi reports transparent online for all supplier

Technology/IT

• information difficult to find• a lot happens outside of the erp

system• inaccurate or non-maintained

master data

• Functional silos within the use of it• conflicting information• communication with suppliers via

e-mail/fax

• Mrp ii systems introduced• coordinated internal systems• electronic data exchange via eDi

• internal integrated systems• erp, bi and extranet implemented• Suppliers integrated into business

processes

• completely integrated planning, execution and reporting environment with the use of the internet for collaboration with suppliers

3. proCurement


3. proCurement

3 .1 Introduction

procurement includes all activities aimed at the control and sending of the incoming goods flow up to the moment when the goods are used in the produc-tion process or the outgoing goods flow. procurement is a broader term than purchasing and also includes mate-rials requirement planning, inventory management and transportation. the activities relate to the acquisition of goods and services, including negotiations and the drawing-up of contracts in relation to the delivery.

the purchasing process is subdivided into strategic, tactical and operational purchasing. purchasing is also subdivided into direct purchasing - everything directly related to an end product/service, and indirect purchasing (also called non-product-related). indirect is everything which is suppor-ting, such as maintenance, energy, temporary employees, office supplies, etc. in the context of this survey, the focus is on direct purchasing; indirect purchasing is left out of consideration.

on drawing up the supplier policy, there must be a clear picture of the power the enterprise has toward the suppliers. to be able to do this accurately, the purchasing range is divided into four groups. by means of this subdivision, it can be seen how the negotiations must proceed:• Leverage products products which make the difference

for a company due to their low subcontracting risk and high impact on the financial result. these are products for which several suppliers are available and it is also possible to use substitutes.

the purchaser then also has a strong position in the negotiations with suppliers.

• Strategic products these are products which have a high

impact on the financial result, but also involve high risk. For these products, it is difficult to change suppliers, because there are often few suppliers and even for those suppliers there is little certainty.

• Routine products with regard to purchasing, these

products cause few problems, but there is also little to be gained in terms of financial results. however, the overwhelming majority of purchases generally consist of these products.

• Bottleneck products these are the products which have

the greatest potential for causing problems.

these products are also known as constraint products. they can only be purchased from one supplier and produc tion succeeds or fails based on these products. in negotiations on this type of products, the supplier has a great deal of power, which may result in waiting lists, high prices and poor service.

For each of these products, a basis strategy is available, which is in fact a solution to the problems faced by the specific product group. Most information exchange with suppliers occurs in the context of strategic and routine products. to keep control of these purchasing flows, good information systems are required.

in the communication with the supplier, the purchase order or contract calloff are the legal documents that must provide the validity of a mandate.

Figure 3.1. overview of data exchange in the procurement process


the supplier may indicate that he has received the order (order confirmation) and, on sending the goods to the client, he may include an electronic shipping report (advance Shipping notification). if this aSn is processed correctly in the system by the client, this document can form the basis for the goods receipt. the latter can be reprocessed by the supplier into an acknowledgement of receipt. the invoice is the last step in the purchasing process.

3 .2 Results of the survey

as expected, all participants were familiar with the procurement process. More than half of the respondents found the procurement process to be highly important, and of those respondents, almost half evaluated it as very efficient to extremely efficient. none of the respondents evaluated it as inefficient. nevertheless, only 1 of 6 evaluated it as not very efficient. table 3.2 shows the discrepancy between the participants ascribe to the procurement process and their evaluation of the efficiency of this process.

the top three information flows exchanged within the procurement process consist of:• purchase orders and purchase order

updates to suppliers• Delivery schedules/contract

calloffs to suppliers• purchase order acknowledgements

from suppliers

half of the participating companies exchange their midterm and even their long-term forecast data with their supplier, so that the supplier can in turn maintain its inventory at the appropriate level and is able to optimize its service quality towards its client.

Importance

Efficiency

Figure 3.2. indicated importance and efficiency of the procurement process

Figure 3.3. information sharing in the procurement process

0% 0%

11%

32%

57%

0%

16%

38%

29%

18%


44% of the participants exchange the packaging and label instructions. For the advance Shipping notification (aSn), this is 40%, because only the aSn can make an important contribution to improving the receipt process. invoicing collaboration is named by only 38% of the participants.

a limited number (1 of 5) sends a proof of Delivery to the supplier. with a proof of Delivery, it can be determined that a delivery has arrived in order, which puts the supplier in a position to send out an invoice directly.

For the purchasing process, the information exchange is only well-managed during the initialization (the first parts of the process, such as sending purchase orders and confirmations) of the process. Goods receipt and the financial settlement are areas that lag behind in information sharing.

3 .3 Current communication means in the procurement process

in the context of procurement, one half of communication still occurs with the aid of manual communication means such as e-mail, MS excel, fax and telephone.

the delivery schedules/contract calloffs to the supplier and the purchase order acknowledgements are only exchanged electronically by half of the respondents.

only 2% of the respondents exchange the following information flows electronically:• long-term demand to the supplier and

planned orders from the supplier• Midterm demand to the supplier and

planned orders from the supplier• packaging and label instructions to

the supplier.

it is noticeable that, in spite of many investments in links between it systems with eDi or XMl, the

majority of the communication with suppliers is via human actions, i.e. via fax, e-mail (with or without an MS excel worksheet) or by telephone. it is doubtful whether this method is entirely risk-free.

3 .4 Points for improvement and plans

all respondents state that they have points for improvement for procurement processes. at the top of the list is reduction of inventory. an improvement area accorded almost as much importance is the reduction of supply chain risks. in addition, the improvement of data/information quality and the accuracy therefore, and the sharing of forecast data with suppliers are given as possible improvement areas.

these plans are in line with the possibilities offered by Mrp, erp and eDi. they facilitate the planning of complex production processes. because the information from sales, production and purchasing is linked, the control of the primary process is improved. For every end product, it is known at what point in time a quantity of raw materials must be purchased. it is easier for a supplier to issue a forecast for a longer period when the S&op process of the client is mature. although a quantity and delivery time are indicated, an adjustment is still generally possible provided it does not cause any problems for the purchasing and selling parties. because two parties have a more realistic planning, the deviation between the desired and the actual delivery time will decrease in the entire value chain.

3. proCurement

Figure 3.4. use of communication means in the procurement process


Figure 3.5. improvement areas for procurement

the complete traceability of all steps and responsibilities in the procurement process is linked to strict compliance rules, and high risks are associated with this method of communication. the perceived lower efficiency of the procurement processes is probably linked to the fact that a lot of communication is still performed manually.

recommendation: reduce all manual communication steps in the procurement process and replace them with automatic data exchange via eDi or XMl, for example.

• companies that score higher in the maturity matrix in terms of procurement exchange several forms of information, in addition to the purchase order or contract calloff. this facilitates the synchronization of the supply chain: an aSn provides information about the actual receipt

date and quantity and can be used to make the planning of the production process and the atp controls run better.

recommendation: distribute the number of communication documents with the supplier; more information means better synchronization.

• the use of the internet by companies is increasing rapidly. the two companies with the highest score in the maturity matrix both have a Supplier collaboration portal on which the supplier can obtain information at any time and can perform updates on the client's system.

recommendation: if the communication with suppliers is standardized and formalized, the use of a Supplier collaboration portal is the next step in achieving supply chain integration.

together with leverage products, strategic products generally constitute 80% of the turnover. there is actually a large financial result for each product, whereby the supply frequency can be lower than for routine products. Due to the high risk with this type of products, strategic collaboration and information exchange with the suppliers is always aimed for. open and reliable collaboration is important. around 3 of 4 respondents states that they intend to work on these points for improvement within the next 3 years.

3 .5 Conclusions and recommendations

on the basis of the supply chain collaboration maturity matrix, many of the respondents switch to the handling stage. there is still no possibility of achieving complete integration with the supplier in the value chain. in addition, the total client demand and the purchasing-related documents are still not available in real time. therefore, the offer/lead stage has not yet been reached. all respondents also indicate that communication without manual actions is still appropriate, so the control stage has not yet been reached.

the most important conclusions and recommendations are as follows:• it is notable that one half of the infor-

ma tion exchange is still performed by people via e-mail, telephone or fax, and the question can be raised about whether this is in line with international legislation/regulations and the internal procedures of the company.

4. Supplier-manageD inventory & repleniShment



4 .1 Introduction

the concept whereby the supplier manages the client's inventory and is responsible for replenishing it is known as supplier-managed inventory (SMi). this can be performed by means of concrete agreements between the supplier and the client, whereby different forms of data exchange take place between the two parties. though SMi is a concept which can be assumed to be performed no more than once per day, in the replenishment process this can occur several times per day, for example in a store. Different activities and communication methods are used and the goal here is to reduce the inventory in order to achieve a higher service level. this must ultimately lead to the optimization of the processes between the client and the supplier and their supply chain.

the desire to use SMi in a company with suitable characteristics is a good step. however, the actual implementation of optimization measures in the supply chain processes by means of SMi and replenishment depends on the level of maturity of this process within a company. the form and extent of the maturity is determined by means of the information sharing and communication means applied in the SMi and replenishment areas.

in the communication with the supplier, the information about inventory levels and the forecast form the basis of the SMi process. SMi can also be performed with Min/Max inventory levels.

For replenishment, the net product requirements or the replenishment plans calculated by the client are the

Figure 4.1. overview of data exchange in the SMi and replenishment process

trigger for the supplier. the latter can send a purchase order. on the shipping of the goods to the client, an electronic shipping report (advance Shipping notification) can be sent. if this aSn is processed correctly in the system by the client, it can form the basis for the goods receipt. the latter can be reprocessed by the supplier into an acknowledgement of receipt. the invoice is the last step in the purchasing process.


More than half of the survey respondents indicate that SMi and replenishment are used within their supply chain processes. in addition, one quarter of the participants state that they intend to do this in the future, which means that more than 75% of the participants indicate that they are

consciously involved with SMi and replenishment. the level of importance and the efficiency and effectiveness of the SMi and replenishment process can be a starting point for a company in spreading and optimizing information sharing and communication methods about this process.

For SMi and replenishment, 15% of the respondents state that it is very important within the supply chain processes that the company operates. in addition, 40% of the participants indicate that it is very important within their company management. More than three quarters of the companies that participated in the survey state that they have set up their SMi and replenishment processes efficiently and effectively. the other participants state that, at this point in time, they have not yet set up their SMi and


replenishment process efficiently and effectively, and there is plenty of scope for improvement.

the most frequent form of information exchange in the field of SMi and replenishment is the provision of the current inventory level for each product. More than 60% of the participants provide this information to their supplier. a little more than 40% of the respondents indicate that they exchange order requirements and advance Shipping notifications, whereby they keep one another informed about the planned delivery of goods for a specific date. when suppliers and clients share

Importance

Efficiency

Figure 4.2. importance/efficiency by SMi

the above information with each other, this can be called basic vMi.

to take the step toward advanced vMi, one of the chain partners creates a forecast that is shared with the other chain partner. More than half of the participating companies exchange their forecast data with their supplier, so that the supplier in turn can take account of what he must deliver in the coming period. the supplier himself can also take account of his upstream supply chain, because at an early stage he is in possession of future sales information, from which he can derive his production and purchasing plan.

only a few companies optimize their SMi and replenishment processes by exchanging a proof of Delivery and minimum and maximum inventory levels to suppliers. one third of the respondents indicate that they make use of a proof of Delivery and inventory exchange with suppliers.

the sending of a proof of Delivery can simplify the process on the supplier's side, because he receives a signal directly when a delivery is made to the client, and this can be anticipated directly by an invoice. in this way, it can also be prevented that a delivery does not arrive correctly, whereby the delivery reliability of the client to his clients will not be placed at risk.

only a very small number of the respondents makes use of sending reorder point triggers to suppliers. a small 20% of the companies that participated in the survey share this information with their supplier. the functionality of reorder point triggers is that every time an article falls under the security inventory, a report is triggered automatically toward the supplier stating that the inventory must be replenished with a predetermined lot size.


4. Supplier manageD inventory & repleniShment

4 .3 Current communication means in the SMI & Replenishment process

the information exchanged between clients and suppliers can be communicated in different ways. communication methods that have already existed for a long time are the manual communication means such as e-mail, MS excel, fax and telephone.these communication methods are generally the most used methods by the companies that participated in the survey.

in each SMi and replenishment process, this method was used by at least 2 of 5 participants in this survey.

it is noticeable that, for reorder point triggering, no use is made of eDi and, to a greater extent, XMl, whereas this is the other way round for all other communication methods. little use is made of XMl and eDi, because only in two SMi and replenishment processes is the use of these communication methods clearly above 30%.

the internet and web portals are used by only 10% of the respondents in the

updating of the forecast. a rather regular combination used is the combination of manual communication methods with one of the other possible methods.the manual method is then often used as a control on the automated process.

the replenishment planning to suppliers is the most automated SMi and replenishment process. around 32% of the respondents use a manual tool and the other 68% indicates that they use an automated communication method. XMl and eDi are both used by around 15% and the internet/web portal is named by two thirds of the companies in the survey as the primary communication method.


a large number of the respondents state that they have points for improvement for SMi and replenishment processes. these points for improvement vary from optimization of processes which are at present already performed to general information exchange with the supplier.

almost 4 of 5 participants in the survey indicate that they wish to reduce the inventory level in the future, and more than 70% state that they wish to limit the supply chain risks with the use of SMi and replenishment processes.

a little less than half of the companies that participated indicate that they wish to discontinue the use of manual activities to communicate the forecast and inventory, and thus optimize the

Figure 4.3. overview of current data exchange in the SMi and replenishment process

Figure 4.4. overview of communication methods in the SMi and replenishment process


process by making use, for example, of eDi, XMl or other tools. the same number of companies also states that, in the future, they wish to share their long-term and midterm planning with their chain partner, so that they can better anticipate the future demand of their client and guarantee deliveries.

the standardization of communication with the supplier is viewed by a little more than one third of the respondents as a possible point for improvement in the future. here they are considering clear agreements with suppliers regarding which communication methods should be used and the associated Slas that describe the relevant responsibilities that the parties must comply with to make this possible. Just less than 30% of the participants also state that they not only look at the functionality of the communication method used, but also the cost aspect and whether the investment will be

Figure 4.5. points for improvement in the SMi and replenishment process

recouped in the future.

it is notable that only one of the five companies is considering 24/7 availability of inventory and forecast information. this is a step where the supplier always has the ability to inspect information that is valuable to the client. this will then also be one of the reasons why the reaction to this point for improvement has been restrained.

approximately one third of the respondents indicate that they see a clear point for improvement in placing the control in the hands of the supplier in planning and replenishing the client's products.

of all the points for improvement, the timeframe in which the companies wish to implement this was also looked into. it is notable that almost one quarter of the respondents indicate that they already want to do it this year.

in addition, 13% state that they wish to implement their points for improvement next year and 3 of 10 participants in the survey intend to do this within two to three years. only one third of the companies state that they intend to invest in improvement plans in the coming year. this also includes participants who realize that there are a number of points for improvement, but for various reasons they do not wish to invest in this in the coming years. this may be due to budgets, but companies also indicate that their priorities lie in other areas of their supply chain, such as production and distribution.


regarding the scores arising from the results of the SMi and replenishment processes, it can be concluded that maturity in this area is still quite low.

only slightly more than half of the respondents exchange information with their suppliers in the field of SMi and replenishment. looking at the number of SMi and replenishment processes, it can also be seen that most companies still limit themselves to exchanging non-sensitive business information. this relates especially to trust between the chain partners.



the most important conclusions and recommendations are as follows:• it is notable that almost one half of

the information exchange within SMi and replenishment processes is still performed by mail or fax, and the question can again be raised about whether this is in line with the compli-ance regulations of the company.

recommendation: reduce all manual communication steps in the SMi and replenishment process and replace them with automatic data exchange by eDi or XMl, for example.

• For SMi and replenishment, both parties must realize that there is profit to be made from the integration of processes, whereby the number of activities in the future in the field of SMi and replenishment can be expanded.

recommendation: by analyzing the purchasing portfolio and the classifi ca-tion of partners, companies can create the basis for SMi and replenishment. if the selected partners are open to SMi and good Slas can be created, SMi and replenishment offers the possibility of more synchronization and optimiza-tion within the supply chain.

• the use of the internet by companies is increasing rapidly. the companies with the highest score in the maturity matrix have given suppliers the ability to see real-time client information via a Supplier collaboration portal and to adjust their delivery plans accordingly.

recommendation: if the Slas are agreed with the suppliers, the Supplier collaboration portal can be used as a cornerstone of the SMi and replenishment process.

5. outSourCing anD Co-manufaCturing:



5 .1 Introduction

outsourcing can be said to occur as soon as a product or service is purchased by an external enterprise. however, this is not similar to an ordinary purchasing decision. outsourcing is a strategic decision to distance a part of the internal execution of a business activity and to transfer it to another company.

a third party thus performs the management and/or day-to-day execution of one or more business functions. outsourcing is said to occur when a company uses an external company to provide a necessary business function which would be able to be done differently in house. the

Figure 5.1. overview of data exchange in the outsourcing and co-manufacturing process

outsourcing must therefore always be preceded by a make-or-buy decision; when internal production is not an option for whatever reason, it is an ordinary purchase only. the type of activities that are outsourced determines the breadth of the outsourcing and not its depth. Depth can be described as the extent to which a company outsources the value of a specific activity. only when the outsourcing strategy of a company is described by both its breadth and depth can a complete picture be obtained of the extent to which a company resorts to outsourcing.

communication and collaboration between the client and the outsourcer are of great importance.

Mutual respect and understanding contribute to the quality of the collaboration. this is all in the interests of the longevity of the collaborative relationship. if this is not the case, then the result may be loss of control over the process and its flexibility. by definition, outsourcing of processes implies collaboration with other links in the chain. even when a company outsources its production and/or logistics, it still remains important. For a client to be able to tell when the order was received, it's necessary to inspect the current inventory level. and if something is no longer present in the warehouse, the sales department would really like to know when it will be produced again. in short: integration between the different links is becoming ever more important.

outsourcing of production activities requires many, often intensive, forms of communication. the client can pass on the long-term planning to the supplier so as to permit the latter to adapt the investments and planning accordingly. the results of this, an insight into the capacity data, can then be communicated to the client periodically. by means of purchase orders, the supplier is give operational guidance. via order confirmations, work order updates and inventory updates, the client is kept updated on the outsourcing process. here too, the supplier can send an aSn on shipping the goods, and the client can send an acknowledgement of receipt.



in 3 of 4 participants, outsourcing and co-manufacturing takes place now or will do so in the immediate future. More than half of these participants consider outsourcing to be very important to extremely important, and just less than half evaluate it as very efficient to extremely efficient. nevertheless, 1 of 7 evaluate the outsourcing and co-manufac-turing process as inefficient or not very efficient.

Importance

Efficiency

Figure 5.2 Stated importance and efficiency of the outsourcing & co-manufacturing process

the three most commonly exchanged information flows are:• (Sub)contracting purchase orders

and updates to suppliers• purchase order acknowledgements

from suppliers• long-term forecasts to suppliers

in the top three information flows, the percentage is above 40% in all cases.

the capacity data/availability from suppliers, packaging and label instructions to suppliers and the inventory & component (boM) updates are typical information types that are also frequently cited. in this case, 'frequently' is taken to mean 35-40%.

infrequent to little information is exchanged in the form of:• proof of delivery/Goods receipt data

to suppliers • work order updates from suppliers• notification of delivery (advance Shipping notifications) from

suppliers • inventory monitoring at the supplier's

establishments.

in this group of information, the exchange percentage is less than 20%. For the outsourcing process, the information exchange is not yet complete. even the initialization of the process is not yet completely shared, in spite of the progress in outsourcing orders, goods receipt and financial settlement. information flows to the supplier are more frequently exchanged than information exchange from the supplier.



5 .3 Current communication means in the outsourcing and co-manufacturing process

in the case of outsourcing, manual communication means such as e-mail, MS excel, fax and telephone are also the most frequent. these communica-tion methods are generally the most used methods by the companies that participated in the survey. in each outsourcing and co-manufacturing process, this method was used by at least 3 of 5 participants in this survey.

the most important forms of data for outsourcing are exchanged electroni-cally. it must be noted here that, in half of all cases, the information from (sub-)contracting purchase orders and acknowledgements from the supplier is exchanged both electronically and manually. the capacity data/availability from suppliers and packaging and label instructions to suppliers are typical information types that are also frequently cited but then exchanged manually. the inventory & component (boM) updates are exchanged electronically.


a large number of the respondents state that they have points for improvement for their outsourcing and co-manufac tu-ring processes. one of the most impor-tant improvement areas recognized is that more insight is desired into the capabilities and performance of the supplier. Many companies apparently shy away from the sometimes difficult task of determining the performance criteria of suppliers.

another improvement area named as important is the reduction of supply chain risks. the greatest risk of outsourcing is the loss of core competencies or critical skills. in addition, outsourcing can lead to the decline of the internal expertise required to implement the necessary innovation.power and opportunistic behavior by the supplier have been put forward as a significant risk. outsourcing of core activities does not create the feeling that the company is forfeiting its own strategic flexibility.

around half of the improvement ideas named have an it component and inclu-de, among others, the improvement of data/information quality and the accuracy thereof, the tracking of activities, impro-ve ment of communica tion, concrete proposals for exchange of notifications of deliveries and the reduction of manual communication regarding forecasting.

Many companies indicate a number of points for improvement that to a large extent they already wish to implement within 3 years.

Figure 5.3. information exchange in the outsourcing & co-manufacturing process

Figure 5.4. use of communication means in the outsourcing & co-manufacturing process



More than half of the respondents exchange information with their suppliers in the field of outsourcing and co-manufacturing. looking at the number of outsourcing and co-manufacturing processes, it can also be seen that most companies do not limit themselves to exchanging non-sensitive business information. trust is the basis for outsourcing and co-manufacturing.

the most important conclusions and recommendations are as follows:• apart from selecting an appropriate

supplier, the management of an outsourcing relationship is just as important as defining and creating the relationship itself. when an activity is transferred to an external supplier, the company must establish a formal communication process that permits meeting with the supplier at regular intervals and discussing possible problems. in other words, it must be agreed that a form of feedback must be given in the field of performance indicators (for example, quality, delivery times, costs). this observance of the outsourced activities permits timely intervention when problems arise.

recommendation: before outsourcing, agreements with the supplier are of vital importance. in addition, not only must the client have set up the internal processes at a mature level, but this must also be set as a requirement for the supplier and stipulated within an Sla. communication is essential in addition to the monitoring of the agreed Kpis.

• For the forms of communication, it must be concluded that companies that score higher in the maturity matrix use almost all forms and have organized this via electronic communication (eDi/XMl). the less mature companies often work with manually controlled communication.

recommendation: considering that outsourcing itself reduces a company's control over the production process, the risks of poor communication become higher. automatic communication with more widespread exchange of data reduces these risks considerably. in addition, the more mature companies use Supplier collaboration portals to exchange real-time information with their suppliers and co-manufacturers.

Figure 5.5. improvement areas for outsourcing & co-manufacturing

6. Kanban


6. Kanban

6 .1 Introduction

Kanban is a cornerstone of lean manufacturing principles. the essence is that materials are only ordered when they are actually required, in contrast to hypothesized or planned orders, the so-called pull principles. the reordering or the production of materials is only triggered when a consuming production process actually requires the material.

Kanban is actually a system, normally a map, that indicates when a product is required, which ultimately helps to keep the inventory at the correct level. a kanban map contains information about the required material, the quality of the material and where the material must be delivered.

this information is transmitted in many situations as an electronic report, either

Figure 6.1. overview of data exchange in the kanban process

internally to a warehouse or externally, for example via the internet to suppliers.

one advantage of kanban is that replenishment data is sent automatically, at least, a production employee must only scan in the barcode of materials to transmit the data for replenishment. the data from the goods receipt proof can also be transmitted automatically. via the internet, the supplier can gain an insight into the status of the kanban and acknowledge planned deliveries immediately. Scanning in the barcode becomes unnecessary when working with rFiD tags. these can also be used as kanban, which is in the interests of the automation of processes.

communication about kanban with the supplier can be performed in an easy

and formalized way because the principles of kanban invite this. the kanban signal to the supplier triggers the replenishment by the client of a fixed quantity. in kanban, it is assumed that the required agreements on price, delivery times and quality have been stipulated in Slas. in this process, the client can also send an acknowledgement of receipt to the supplier and the invoice is the last component in this process.


to the question of whether the kanban method is used, one quarter of the respondents answered in the affirmative, while 17% hoped that the kanban method could be able to be used in their company in the future.

the level of importance and the efficiency and effectiveness of kanban is very promising, according to the respondents. Forty percent of the participants find kanban to be not very important. however, 20 percent of the participants also find kanban to be extremely important. the same pattern is also shown in regard to the efficiency of kanban. in general, the participants find kanban to be not very efficient through to efficient. but here too, opinions are divided. 25 percent of the participants find kanban to be extremely efficient.

in the data exchange, it can be noted that the majority of the companies transfer the kanban signals directly to the supplier. however, in many cases, they did not communicate about the kanban signal itself, but the latter was published on a Supplier collaboration portal or sent to the supplier via downloads in excel as an overview.


Importance

Efficiency

Figure 6.2. indicated importance and efficiency of the kanban process

Figure 6.3. overview of data exchange in the current kanban process

it is also noticeable that other data exchanges are used to a very limited extent.

6 .3 Current communication means in the kanban process

information exchange in the kanban process between clients and suppliers can occur via different communication methods. traditional communication methods such as e-mail, MS excel, fax and telephone are most commonly used among the respondents. in around 2 of 5 respondents, these are used as communication methods. the traditional communication means are applied for practically every form of data exchange. the manual methods of communication are often used as a control on the automated process.

it is notable that only 7 percent used eDi as a communication method with their suppliers. eDi is used by the participants for aSn and also for invoice collaboration.

the use of the internet and web portals differs among the participants. around 18% used these communication methods for kanban signals to the supplier, goods receipt data or for invoice collaboration.


6. Kanban


approximately half of the respondents recognize no improvement areas in the kanban processes they use. one of four respondents recognize being able to improve the kanban process by reducing the number of manual actions and thus optimizing the process through the use, for example, of eDi, XMl or other tools like web portals.

web portals and the internet will also be the methods for taking improvement steps for real-time collaboration with suppliers and also to gain more insight in this way into the kanban status at the supplier. thirteen percent of the participants see points for improvement in real-time collaboration as well as in gaining insight into the kanban status of the supplier. in addition, a small group of respondents see points for improvement in gaining more insight into the inventory status of the supplier.

ninety percent of companies indicate that they will not be investing in kanban processes in the coming year. this may be due to budgets, but companies also indicate that their priorities lie in other areas of their supply chain, such as production and distribution. 6 .5 Conclusions and

recommendations

the principles of kanban have been adopted, especially in high-tech & electronics and the automotive industry. by determining the optimal number of kanbans and the quantity of materials in

a kanban, a stable supply flow can occur from supplier to client. the continuous provision of components so that there is always the right quantity of materials at the right place, fine-tuned to the produc-tion process, provides clients with many advantages. this is one of the implemen-tations of Just-in-time principles.

Figure 6.4. use of communication means in the kanban process

Figure 6.5. improvement areas for kanban


the most important conclusions and recommendations are as follows:• the advantages of using kanban

within specific industries have been known for years. Good consultation and agreements are also vital in this process to ensure effectiveness and efficiency.

recommendation: before using kanban with a supplier, good Slas are important, as well as good planning by the client himself. it is also recommended that the data exchange be designed as broadly as possible and electronically.

• For the forms of communication, it must be concluded that companies that score higher in the maturity matrix use almost all forms and have organized this via electronic communication (eDi/XMl). the less mature companies often work with manually controlled communication.

recommendation: Kanban is directly related to the production process. Disturbances of communication can lead to severe risks. automatic communication with more widespread data exchange reduces these risks considerably. here too, Supplier collaboration portals can be used to exchange real-time information.

7. maSter Data, alertS anD performanCe reporting



7 .1 Introduction

the exchange of information between two or more organisations in the supply chain is a topic that receives above average attention. this stems from the need to reduce costs, work more efficiently and strive for a common database with master data that can be used in other communication processes.

the successful exchange of information requires a certain level of data integration between companies and their suppliers. this data integration consists of two aspects:

1) The content of the information to be exchanged

the importance of high-quality information within companies, with the master data as the basis, has in the mean time become generally recognized in companies. article data, inventory levels, alerts, order levels, results of quality measurements and delivery quality (performance reporting) are examples of the information that is shared. it is a challenge to ensure that the information with regard to content is fined-tuned via the different parties, both within an organisation and with suppliers.

2) The method of information exchange the method of exchange can vary

from exchange via fax or mail to a completely automated exchange via eDi, XMl.

Many companies start by sharing the material master data and packaging and label instructions. if it is a question of outsourcing, parts lists, designs and additional documents are shared.

out-of-stock alerts are used in the procurement and SMi process. in addition, quality reports, quality notifications and also delivery reliability reports can be sent to the supplier or made available via portals.


the survey asked what information is shared between clients and suppliers in relation to master data, alerts and performance reporting.

the level of data integration is an indication of the maturity of the relationship between the company and the supplier. Data integration therefore consists of both of the above-mentioned elements. the survey inventorizes the level of data integration that can be found between the respondents and suppliers and the potential improvement areas that can be identified. in addition, an analysis is performed of whether and on what date there are plans to invest in these potential improvements.

as discussed earlier, there is a direct relationship between the data that is exchanged with a supplier and the common processes shared by client and supplier.

Figure 7.1. overview of data exchange of master data, alerts and Kpis.


Figure 7.2. overview of data exchange for master data, alerts and reports

Figure 7.3. use of communication means in the exchange of master data, alerts and performance reports

Figure 7.4. improvement areas for the exchange of master data, alerts and reports

it is also apparent from this survey that material master data and packaging and label instructions receive high scores. it is noticeable that the highest percentage is received by quality notifications and high scores are also obtained on performance reports (deliveries and quality). in the field of order levels and out-of-stock alerts, data is exchanged in only 30% of cases.

7 .3 Current communication means in the sharing of master data, alerts and reports

From the results of this survey, it is apparent that the means of exchange is primarily manual. only a small number of respondents exchange reports via eDi, XMl and the internet.


the emphasis on improvements in most respondents lies in reducing manual activities to communicate master data to suppliers and to improve data quality and accuracy. consequently, the real-time exchange of data in the field of performance, quality and possible stockouts comes high on the list of points for improvement. a number of the respondents (18%) indicate that they have not identified any individual points for improvement.


half of the respondents indicate that they are planning to invest in the identified points for improvement, whereby half are planning to make the investment this year or next year, and the other half within a period of 2 to 3 years.


Data exchange is directly related to the processes between client and supplier. the reduction of the number of manual activities and the improvement of the data/information are important recognized improvement areas in data exchange.

For a number of processes, data exchange has been set up with the supplier, including master data, packaging and label instructions, quality and delivery performance reports, and quality notifications.

the most important conclusions and recommendations are as follows:

• the sharing of master data, such as ean codes, with suppliers to support different information flows is structured and widely used in many companies that can be noted as more mature.

recommendation: for the different information flows, map out with your suppliers what the current and future needs for master data exchange are. the difference between the current situation and the desired future situation shows potential points for improvement and can give direction to planning for the future.

the advice is to determine for each improvement point how much effort is necessary to obtain the desired situation and what this delivers. via plotting in a matrix with the effort (including the costs) on the X-axis and the returns on the y-axis, the priority for your company can be determined.

• For a mature collaboration with suppliers, the exchange of structured and fine-tuned quality and delivery reliability reports is necessary and/or desired.

recommendation: quality and delivery reliability are the most important criteria in evaluation of suppliers. the determination of the key performance indicators between the business partners and the regulated and structured exchange of these reports facilitates the client-supplier relationship. in the more mature companies in this field, it can be noted that these reports are made available via Supplier collaboration portals.



8. SpeCifiC reSultS by SeCtor



8 .1 Introduction

as described in chapter 1, for this survey, the participants were grouped into six industrial sectors. by means of the Supplier collaboration Maturity Matrix, the individual companies were evaluated for each process on which data they exchange, whether they are familiar with this process, and how they exchange this data. For every process, the averages were calculated for all sectors; the same was done for the form of communication.

8 .2 Chemicals

in the analysis of the results of participants from the chemical industry, it is noticeable that this sector scores lower in many processes than the average for all the sectors. the lower maturity in the procurement and outsourcing process is particularly noticeable. the causes of this are possibly the more conservative strategies within the sector and the lower turnover rates in the chemical supply chain. For SMi, this industry has an average score, because supplier-managed inventory is a reasonably common practice in this industry.

Figure 8.1. process and communication Maturity in chemicals

Figure 8.2. process and communication Maturity in pharma/life Sciences


8 .3 Pharma/Life Sciences

the scores for the pharma/life Sciences industry (medicines, vitamins, etc.) are above average for almost all processes. the causes of this can be explained by the very stringent regulations (compliance) for the production and storage of these products and their semimanufactures. in addition, it can be concluded that there is an above average score for outsourcing, caused by these strict validation rules, which are also enforced on suppliers.

8 .4 High-Tech and Electronics

in no other industry has globalization and outsourcing had a greater impact than in high-tech and electronics. within the participating Dutch high-tech companies, considerably higher scores are achieved on both processes and communication maturity. the complexity of the products in this sector, together with the high turnover rate in the chain and the short life cycles of the end products, compels companies to collaborate within the supply chain. higher scores are also noted for SMi and outsourcing.

Figure 8.3. process and communication Maturity in high-tech and electronics

Figure 8.4. process and communication Maturity in Metals and construction


8 .5 Metal/Construction

in the analysis of the metal and construction materials industry, it is noticeable that average scores are achieved in most supplier collaboration processes. the score is considerably lower in SMi and outsourcing, but it is these processes that are important in this type of industry. another characteristic is that this sector scores lower in many processes on communication compared to the maturity in this process.

8 .6 Consumer Products

in the consumer products industry, especially companies active in the production of foodstuffs participated in this survey. For all processes, this sector has average scores compared to the total for all sectors. in the process of outsourcing and co-manufacturing, a peak can be seen in the process; we should think here about the outsourcing of packaging activities. as in the pharma/life Sciences sector, compliance with legislation and regulations is extremely important in this industry.

8 .7 Wholesale and Retail

For this sector, a higher than average score can be noted for procurement and outsourcing processes. because it is often a question of large volumes of products, and the turnover rate in the chain is also higher than in other sectors, it stands to reason that procurement and outsourcing (for example, (re)packaging) receive extra attention. it is also noticeable that the score is average for the exchange of master data.


Figure 8.5. process and communication Maturity in consumer products

Figure 8.6. process and communication Maturity in wholesale and retail


9. appenDix a. gloSSary



ASN

advance Shipping notification, an (electronic) document sent by suppliers to clients with information (material, quantity, packaging) about a shipment.

Bull-whip effect

the bull-whip effect refers to the problem that can arise due to the fluctuating demand for orders within a supply chain. the fluctuating demand for products makes the forecasting of the quantity to be produced difficult. the production inventory can thus get into a situation where it shifts from an inventory deficit to an inventory surplus within a short period of time, resulting in higher security inventories in the chain due to breakdowns in communication about demand.

Capacity planning

planning of the capacity requirements for machines (and employees) from planned and production orders.

Contract calloff

in addition to normal purchase orders, companies now also use calloffs. these are based on a framework agreement in which prices and delivery conditions are set. the client calls off a quantity of materials from this contract. the calloff has the same legal validity as the purchase order.

Control tower

the concept of the setup of a logistics chain whereby the most important processes of production and transportation are outsourced and the client acts as the controller of the chain by direct communication of plans to factories and logistics service providers.

EDI

electronic Data interchange, the electronic transfer of data from computer to computer, consisting of business-related documents such as orders, deliveries and invoices.

ERP

enterprise resource planning, Manufacturing resource planning (Mrpii) including planning of non-production activities such as maintenance and personnel.

Forecast

the process of forecasting and determining the expected future demand for products.

Globalization

a set of processes that lead to the integration of economic, cultural, political and social systems across geographical boundaries.

High Tech

high tech is the abbreviation of high technology. in the context of this survey, it is the business sector that produces very advanced and extremely complex products.

Just-In-Time (JIT)

Jit is a logistics method for inventory management providing a frame of reference in lean manufacturing. its aim is to fine-tune deliveries and production to each other in such a way that little or no inventories are required in a company. Deliveries are made precisely on time; no inventories need to be stored and therefore no storage costs are associated with them.

Kanban

a method developed in Japan for initiating the release of goods to clients or production on the basis of maps.

KPI

Key performance indicator is a quantifiable measure of the level of performance delivered.

Lean Operations/Manufacturing

a combination of Just in time, Kaizen, Kanban and total Quality concepts that lead to paperless production, no inventories, no downtime and 100% oK products in development, production and distribution.


Logistics execution

in the context of this survey: all receipt, storage, shipment and production supply activities within a warehouse.

Logistics

logistics is the study of the planning and efficient execution of supplying. Modern logistics focuses on the organisation, planning, control and execution of the goods flows, money flows and information flows through development and purchasing, followed by production and distribution with the required personnel, to the end user, with the goal of satisfying the market needs at low cost and low capital utilization.

Long-term planning

the process within a company consisting of planning demand, products and capacities within a horizon of 6 months to more than 5 years.

Maturity matrix

the maturity matrix is a two-dimensional presentation of the logistical maturity of a company, whereby the y-axis shows the maturity areas and the X-axis contains the elements that determine the maturity rating.

Midterm planning

the process within a company consisting of planning demand, products and capacities within a horizon of 3 months to 6 months (or sometimes up to one year).

MPS

Master production Schedule, the planning of production, especially of end products for existing orders and forecasts. the MpS is based on the Sales & operations plan in a specific period.

MRP

Manufacturing resource planning, the planning of materials, machines and employees to satisfy the demand plan. Mrp requires that the same information (sales forecast, parts lists, sales orders) is used throughout the entire company.

Production planning and scheduling a business process for planning all production activities within a location. it takes account of material and capacity restrictions. the ultimate goal is to shorten the lead time and reduce inventories.

Pull principle

the pull production process is a logistics production concept that, for the control, makes use of the “pull” control principle. this demand pulls the products through the entire logistics chain.

Purchasing requirements

purchasing request form, prepared via Mrp or manually.

Push principle

this is the opposite of pull production. in the push principle, the demand for products is estimated or calculated for a period. the products are thus pushed onto the market.

S&OP

Sales and operations planning; a sales and production plan that is generally used for sales forecasts looking two years ahead, in which the sales volumes for each product family are grouped into time intervals of one quarter or one month. within the periodic S&op process in a company, demand and supply are fine-tuned to each other, whereby new product introductions, supply and capacity constraints and the most important Kpis are discussed.

Sales forecasting

a sales forecast for each product family performed by Sales and Marketing, which is used as an input into the Sales and operations plan.

SAP

Sap is the largest software supplier in europe and belongs to the three largest software companies in the world. Sap is the market leader in the field of business software solutions.

SAP SNC

Sap Supply network collaboration, a Sap system solution for the implemen-ta tion of procurement,vMi or SMi, and outsourcing processes, based on internet technology.



SMI

Supplier-Managed inventory; a concept whereby the supplier manages the inventories of his delivered materials at his client and replenishes them at the right moment based on stocks, use and demand forecasts.

Supplier collaboration portals

a Supplier collaboration portal is a standardized web service in which a company provides access to information about purchase orders, inventories, invoices and master data so as to be able to exchange information efficiently with others.

Short-term planning

the process within a company consisting of planning demand, products and capacities within a horizon from today up to 3 months.

Supply planning

Supply planning relates to the planning of raw materials and the allocation of production orders to production locations.

Rolling forecast

this is a forecast of the future demand in the market for a specific product that is always given for the coming 12 to 24 months and is adjusted on a monthly basis in the S&op process.

Time to market

the time period required from developing a product until its appearance on the market.


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Supplier Collaboration - the next Step in Supply Chain integration · 2015-11-04 · Supply chain Management with Sap’ published by Sap and capgemini in 2006, focused on the processes

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