Supply Chain Management - Overview for Business Analysts

Enfocus Solutions Inc. 1www.EnfocusSolutions.com

Supply Chain Management

Overview for Business Analysts

Enfocus Requirement Suite™

Enfocus Solutions Inc.www.EnfocusSolutions.com

July 2012© Copyright 2012 Enfocus Solutions Inc. All Rights Reserved.


• A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves.

• Within each organization, such as manufacturers, the supply chain includes all functions involved in receiving and filling a customer request. These functions include, but are not limited to, new product development, marketing, operations, distribution, finance, and customer service.

• A typical supply chain may involve a variety of stages. These supply chain stages include:

Customers Retailers Wholesalers/Distributors Manufacturers Component/Raw material suppliers

What is a Supply Chain?


A supply chain must have at least a set of three or more companies linked by one or more of the upstream or downstream flows of products, funds, or information.

What is a Supply Chain (continued)?


What is Supply Chain Management (SCM)?

• Supply chain management is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by the supply chain organizations to develop and run supply chains in the most efficient ways possible.

• Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.

• The organizations that make up the supply chain are “linked” together through physical flows and information flows. Physical flows involve the transformation, movement, and storage of goods and materials. They are the most visible piece of the supply chain. Information flows are just as important. Information flows allow the various supply chain partners to coordinate their long-term plans and to control the day-to-day flow of goods and material up and down the supply chain.


Supply Chain Concept

A supply change is a complex network of relationships that organizations maintain with trading partners to source, manufacture and deliver their products, including materials, information, and financial flows, as depicted below.

ProductFlow

ProductFlow

ProductFlow

ProductFlowSupplier Manufacturing Distribution Retailer Consumer

Information Flows

Payment Flows


SCM is not Traditional Materials Management

• Supply chain management is significantly different from traditional materials management. The difference lies in the coordination and commitment of all the firms in the supply chain required to implement the specific strategic objectives of each firm.

• Supply chain management requires partners to provide support for each to reach their objectives. Firms voluntarily agree to integrate human, financial, or technical resources in order to create a business model. All firms have something to gain from collaborating to create an efficient supply chain.


What are the benefits of Supply Chain Management?

• Lower inventories• Higher productivity• Greater agility• Shorter lead times• Higher profits• Greater customer loyalty


Key Issues

• The goal of SCM is to match supply to demand as effectively and efficiently as possible

• Key issues are: Determining the appropriate levels of outsourcing Managing procurement Managing suppliers Managing customer relationships


What are the Key Challenges for SCM?

• Managing supply chain complexity - Complexity within the supply chain stems primarily from handling a multiplicity of partners. And while these various partners can be integrated within the supply chain to produce a cohesive chain, a large volume of communications has the potential to compromise the integrity of supply chain processes.

• Achieving visibility into the supply chain - As businesses strive to establish a fluid network, several factors must be considered for organizations to gain visibility into their supply chains. Data management is required to ensure businesses can establish the mobility of relevant data—and rapidly identify impending issues and manage by exception.

• Managing collaboration - Within a supply chain, issues are rarely resolved by a single party, but are rather resolved through collaboration among multiple partners. The way a company connects with its partners to promote this collaboration and the benefits drawn from workflow tools are conducive to identifying the choke points within the supply chain.


Types of Supply Chains

• Integrated Make-to-Stock smoothing demand in mass production industries linked to postponement in distribution channel

• Continuous Replenishment customer-demand pull system across firms ECR – Efficient Consumer Response QR – Quick Response

• Build-to-Order efficient SCM allows return to BTO model inventory substituted with information (Dell)


Supply Chain Cycle Illustration

One way to view a supply chain is as a series of cycles. The cycles are triggered by a customer order, replenishment orders from the distributors, or by the forecast of customer demand and current product availability in the warehouse.


Order Penetration and Postponement

• Order Penetration Point: The point (in time) at which a product becomes earmarked for a particular customer. Downstream from this point, the system is driven by customer orders; upstream processes are driven by forecasts and plans.

• Postponement: A product design strategy that shifts product differentiation closer to the consumer by postponing identity changes, such as assembly or packaging, to the last possible supply chain location.


SCM Example


Example – who is this?


(Source: Agarwal, A. et.al. 2006)

Comparison of Lean, Agile, and Leagile Supply Chains


Getting Started

1. Understand industry specifics2. Start with customer expectations3. Reduce cycle time to gain competitive advantage4. Consider starting with internal supply chain5. Focus on problem areas


#1 Understand Industry specifics

• Type of product• Complexity of production process• Type(s) of customers• Complexity of supply chain (e.g., lead times)• Complexity of demand function (e.g., seasonality)

These attributes determine the strategies that are suitable.


#2 Start with Customer Expectations

• Product availability• Length of order cycle time• Consistency of order cycle time• Invoice/billing procedure accuracy• Information requests responsiveness• Flexibility in resolving problems• Distance to suppliers warehouse• Special customer request• Frequency of damaged goods• Quality of order department• On time delivery

A combination of these will add to customer satisfaction.


#3 Reduce Cycle Time to Gain Competitive Advantage

• Reducing supply chain cycle time means decreasing the days of inventory held and reducing the cash conversion cycle. The savings mean that capital is available for other uses.

• By focusing on key processes, the supply chain can significantly improve its performance and become a source of competitive advantage for the organization.

• Opportunities for cycle-time reduction exist on both an intra-organizational and inter-organizational basis.


#4 Internal Supply Chains

• The internal supply chain is that portion of a given supply chain that occurs within an individual organization.

• Internal supply chains can be quite complex. Given the multidivisional, international organizational structures found in many business enterprises, it is not uncommon for the internal part of a supply chain to have multiple “links” that span the globe.

• Developing an understanding of the organization's internal supply chain is often an appropriate starting point for firms considering an SCM initiative.


#5 Typical SCM Areas that Require Attention

• Lack of knowledge of the end-to-end demand function – high levels of uncertainty

• Erratic variations in demand (Bull whip effect)• Inconsistent / out-of-date data about SC (poor decision making)• Fragmentation of processes and operations• Lack of process integration with partners• Need for fundamental structural changes• Need for integrated information systems


Key Components for SCM Automation

• Demand management and planning• Warehouse management• Order management• Transportation management• Collaboration and integration• Supplier relationship management• Supply chain analytics


Demand Management and Planning

• S&OP – Sales and Operations Planning• Vendor Managed Inventory

Replenishment• DRP – Distributed Requirements Planning• APS – Advanced Planning & Scheduling• DDM – Demand Driven Manufacturing• Mathematical Forecasting• Promotion Planning• Pricing and Profit Optimization• Forecasting• Merchandise Planning

• Life-Cycle Planning• Consensus Planning• Collaborative Planning• Event Planning• Metrics and Reporting• Demand Management

Architecture


Warehouse Management

• Product Setup• Warehouse Configuration• Bin Location Setup• Inventory Control• License Plate Tracking• Receiving• Quality Control• Put Away• Picking• Packing• Shipping• RFID• Reports, Documents, and Queries

• Warehouse Optimization• Kitting and Assembly• Cross-Docking• Available to Promise• Vendor Managed Inventory• Reverse Logistics• Multi-Term Aliases


Order Management

• Order Promising• Inventory Management and Visibility• Sourcing• Execution Visibility• Inbound Assembly Coordination• Shipping and Outbound Management


Transportation Management

• System Definition• Interfaces and Integration• Planning• Execution• Shipment Tracking• Transportation Network Optimization• Analysis


Collaboration and Integration

• Portals• Commerce Platform (EDI)

Purchase Order Processing Sales Order Processing Payment Processing Outbound Shipments Inbound Shipments Accounting

• Workflow• Content Management

Product Compliance Logistics

• Integrative Technologies


Supplier Relationship Management

• Design and Setup• Sourcing• Supplier Management• Supplier Scorecard• RFI/RFP and Bid management• Contract Management• Risk, Liability, and Flexibility• Catalog Management• MRP Driven Procurement• Requisition Driven Procurement• Procurement Reporting, and Queries• Prices, Discounts, and Cost

Management

• Returns• Manufacturing• Settlement• Project Management• Bill of Materials Explosion• Activity Based Costing• Supplier and Buyer Portal• Analytics


Supply Chain Analytics

• Supply chain network optimization• Transportation network optimization• Inventory management optimization• Supply chain event management• Production and supply planning• Sales and operations planning• Supply pipeline planning• Operational planning• Process manufacturing• Repetitive manufacturing• Discrete manufacturing• Engineer to Order

• Procurement collaboration• Order management and fulfillment