The Process of Setting up an e-Supply Chain

APEC Workshop one-Business and Supply Chain Management

The Process of Setting up an e-Supply Chain

By Michael Baker, Australia

Transforming The Digital Divide

Into A Digital Opportunity Phase II

August 28 – 30 Bangkok, Thailand

Contents

• IntroductionIntroduction• What are the characteristics of e-Supply What are the characteristics of e-Supply

chains chains • Pitfalls and BarriersPitfalls and Barriers• Change processChange process• BenefitsBenefits• The Step By Step Planning ProcessThe Step By Step Planning Process• Reengineering of Organizations and Reengineering of Organizations and

ProcessesProcesses• The Measurement of Cost/BenefitsThe Measurement of Cost/Benefits

Introduction Introduction

• How does this presentation relate to the later How does this presentation relate to the later sessionssessions– The The e-Marketplace and its Implications for Businese-Marketplace and its Implications for Busines

s - Mr. Krizz Chantjiraporns - Mr. Krizz Chantjiraporn – The Cornerstone of The Cornerstone of the e-Supply the e-Supply

Chain: ERPChain: ERP - - Dr. Jaehwan YangDr. Jaehwan Yang – The Implementation of e-Supply The Implementation of e-Supply

ChainChains - s - Mr. Richard ShiehMr. Richard Shieh – Added Values Added Values of e-Supply Chains: CRM and Knoof e-Supply Chains: CRM and Kno

wledge Managementwledge Management - - Mr. Krizz ChantjirapornMr. Krizz Chantjiraporn

The “dot-com” mistakeThe “dot-com” mistake

• Just because dot-coms have failed, doesn’t Just because dot-coms have failed, doesn’t mean EC has failedmean EC has failed

• Just because SCM software and service Just because SCM software and service vendors have fallen on hard times, doesn’t vendors have fallen on hard times, doesn’t mean SCM has fallen on hard timesmean SCM has fallen on hard times

• It is a mistake to equate computer industry It is a mistake to equate computer industry entrepreneurship with an organisation’s need entrepreneurship with an organisation’s need to operate efficientlyto operate efficiently

What are the characteristics of e-supply chains What are the characteristics of e-supply chains

• Organisations linked electronicallyOrganisations linked electronically• Range from purchase orders to integrated Range from purchase orders to integrated

manufacturingmanufacturing• Aim of extracting costs from supply chainAim of extracting costs from supply chain• Streamlining the supply processStreamlining the supply process• Providing better customer serviceProviding better customer service

• But most important – accurate dataBut most important – accurate data

Accurate DataAccurate Data

• Up to date and accurate inventory informationUp to date and accurate inventory information• Accurate and up to date supplier informationAccurate and up to date supplier information• Accurate bill of materialsAccurate bill of materials• Accurate product numbers both your own and Accurate product numbers both your own and

that of your suppliersthat of your suppliers• Accurate product lead time informationAccurate product lead time information

Pitfalls and BarriersPitfalls and Barriers

PitfallsPitfalls• making manual inefficiencies into electronic making manual inefficiencies into electronic

inefficienciesinefficiencies• the speeding up of existing problemsthe speeding up of existing problems• The problem of having someone who is the The problem of having someone who is the

“knowledge repository”“knowledge repository”• The problem of the “long service” order clerkThe problem of the “long service” order clerk

Pitfalls and BarriersPitfalls and Barriers

BarriersBarriers• People and their paranoiaPeople and their paranoia• People and their skillsPeople and their skills• People and their career goalsPeople and their career goals• People and their self interestPeople and their self interest• People and their insecuritiesPeople and their insecurities• People and their interpersonal relationshipsPeople and their interpersonal relationships• People and their pridePeople and their pride• People and their “yes” abilityPeople and their “yes” ability

Change processChange process

• Often neglectedOften neglected• Education and Awareness of strategyEducation and Awareness of strategy• Understanding of the reasons for changeUnderstanding of the reasons for change• An invitation for “buy in”An invitation for “buy in”• Must include all stakeholdersMust include all stakeholders

– EmployeesEmployees– CustomersCustomers– SuppliersSuppliers– TransportTransport

The Obvious ConclusionThe Obvious Conclusion

• SCM cannot, does not, will not, can never SCM cannot, does not, will not, can never happen alone!happen alone!

• The first step is to talkThe first step is to talk

• After that, talk some moreAfter that, talk some more

• Then some more, etc etc etcThen some more, etc etc etc

BenefitsBenefits

• Not all companies will benefit in the same Not all companies will benefit in the same way.way.

• Depends on their position in the supply chain Depends on their position in the supply chain and their sizeand their size

• Position and size can work against gaining Position and size can work against gaining significant financial benefit.significant financial benefit.

• Still be many significant reasons for allStill be many significant reasons for all

Some benefitsSome benefits

• Customer loyaltyCustomer loyalty– Important for everyoneImportant for everyone

• Supplier loyaltySupplier loyalty– Important for small businessImportant for small business

The Step By Step Planning ProcessThe Step By Step Planning Process

• Investigative steps to be taken Investigative steps to be taken – Issues surrounding supplier and customer Issues surrounding supplier and customer

informationinformation– Internal proceduresInternal procedures– Data integrity Data integrity – Internal and external personnel skills and Internal and external personnel skills and

capabilitiescapabilities

Issues surrounding supplier Issues surrounding supplier and customer informationand customer information

• Do you know what your suppliers are doing?Do you know what your suppliers are doing?• Do you know the effects that you supplier’s Do you know the effects that you supplier’s

supplier can have on your ability to deliver?supplier can have on your ability to deliver?• How much do you know about your How much do you know about your

customer’s requirements?customer’s requirements?• Do the promotion plans of your customer’s Do the promotion plans of your customer’s

customer affect your production planscustomer affect your production plans• Does your customer trust you to supply on Does your customer trust you to supply on

time, on price and on quality?time, on price and on quality?

Internal proceduresInternal procedures

• Are your internal procedures documented?Are your internal procedures documented?• Do you use standards?Do you use standards?• Do you staff understand the whole purchasing Do you staff understand the whole purchasing

and supply processand supply process• Do you sales staff understand the effect their Do you sales staff understand the effect their

actions have on manufacturing and actions have on manufacturing and procurementprocurement

Data integrityData integrity

• Is your computerised data accurate?Is your computerised data accurate?• Is all of your customer date accurate?Is all of your customer date accurate?• Is all of your supplier data accurate?Is all of your supplier data accurate?• Do you have effective procedures that are Do you have effective procedures that are

used to maintain data integrity?used to maintain data integrity?• Does your staff understand the need for data Does your staff understand the need for data

integrity.integrity.

Internal and external personnel Internal and external personnel skills and capabilitiesskills and capabilities

• Do you have the appropriate skill set in your Do you have the appropriate skill set in your organisation?organisation?

• Are your staff multi skilled?Are your staff multi skilled?• Do your outsourced applications have Do your outsourced applications have

adequate backup?adequate backup?• Do you have succession planning in place?Do you have succession planning in place?• Do your customers and suppliers have the Do your customers and suppliers have the

skills required to implement an effective SCM skills required to implement an effective SCM system?system?

Reengineering of Organizations and ProcessesReengineering of Organizations and Processes

• Extract cost, uncertainty and delay from the supply Extract cost, uncertainty and delay from the supply chainchain

• Processes and procedures need to be changedProcesses and procedures need to be changed• Some changes represent minimal impactSome changes represent minimal impact• Others could potentially involve a fundamental shift in Others could potentially involve a fundamental shift in

business practicesbusiness practices• Sophisticated techniques to identify blocks and Sophisticated techniques to identify blocks and

bottlenecksbottlenecks• ““bullwhip effect” bullwhip effect” • Existing marketing and supply techniques can cost Existing marketing and supply techniques can cost

organisations moneyorganisations money

Extract cost, uncertainty and delay from the Extract cost, uncertainty and delay from the supply chainsupply chain

• Cash tied-up in inventory can easily pay for a new Cash tied-up in inventory can easily pay for a new Supply Chain Management system. Supply Chain Management system.

• Get cash out of inventory beforehand to invest in a Get cash out of inventory beforehand to invest in a new supply chain system. new supply chain system.

• No necessary to change business process to achieve No necessary to change business process to achieve significant inventory significant inventory

• Minor process changes and better utilization of Minor process changes and better utilization of processes and systems already in place will allow processes and systems already in place will allow many companies to achieve inventory reduction many companies to achieve inventory reduction

• Analytical techniques, enhanced planning Analytical techniques, enhanced planning mechanisms, "essential to know" information mechanisms, "essential to know" information feedback and effective decision support. feedback and effective decision support.

Processes and procedures need to be changedProcesses and procedures need to be changed

• In most cases procedures both internal and In most cases procedures both internal and external have been in place for many years.external have been in place for many years.

• Technology has changed but the procedure Technology has changed but the procedure hasn’thasn’t

• Examine every step to fully understand its Examine every step to fully understand its relevance to current business processesrelevance to current business processes

Some changes represent minimal impactSome changes represent minimal impact

• Changing some internal activities may merely Changing some internal activities may merely increase the transparency of the process increase the transparency of the process while providing little change to existing while providing little change to existing practices e.gpractices e.g– Have extra reports or changed reports available Have extra reports or changed reports available

for management to use.for management to use.• Sometimes it is best to ask the people who are using to Sometimes it is best to ask the people who are using to

report to identify the actual value of the information report to identify the actual value of the information provided. provided.

Others could potentially involve a Others could potentially involve a fundamental shift in business practicesfundamental shift in business practices

• A process that removes several steps from a A process that removes several steps from a business process could change the dynamics business process could change the dynamics of the organisationof the organisation

• Sharing of forecast data among customers Sharing of forecast data among customers and supplier can change the role of the sales and supplier can change the role of the sales staff dramatically causing a complete re think staff dramatically causing a complete re think of their remuneration procedures.of their remuneration procedures.

Sophisticated techniques to Sophisticated techniques to identify blocks and bottlenecksidentify blocks and bottlenecks

• Software is available to model the supply Software is available to model the supply chainchain

• Problem areas can be easily identifiedProblem areas can be easily identified

• A management tool for the modern Supply A management tool for the modern Supply Chain ManagerChain Manager

““bullwhip effect” bullwhip effect”

• Unplanned demand oscillationsUnplanned demand oscillations• distortions which can upset the supply chain distortions which can upset the supply chain • Caused byCaused by

– PromotionsPromotions– SalesSales– ManufacturingManufacturing– PoliciesPolicies– ProcessesProcesses– SystemsSystems– Supplier Supplier

• Demand oscillations will launch a "mad scramble" in Demand oscillations will launch a "mad scramble" in manufacturing manufacturing

Existing marketing and supply techniquesExisting marketing and supply techniquescan cost organisations moneycan cost organisations money

• Sales incentivesSales incentives• Promotion programsPromotion programs• End of month/end of year rushesEnd of month/end of year rushes• Discount for bulkDiscount for bulk• Collusion with sales staffCollusion with sales staff

• All of these can cause a hump in the supply chain All of these can cause a hump in the supply chain (see bullwhip) and cause extra costs through (see bullwhip) and cause extra costs through increased inventory, returns or reduced future orders increased inventory, returns or reduced future orders causing cash flow and forecasting problemscausing cash flow and forecasting problems

Evaluation of Technology PlatformsEvaluation of Technology Platforms

• Technology options for organisations and consider Technology options for organisations and consider • What other people in the same or related industry are What other people in the same or related industry are

using using • The strategies used by major trading partnersThe strategies used by major trading partners• Using existing technologies in order to speed up the Using existing technologies in order to speed up the

implementation process.implementation process.• Effects and issues of e-Supply chains on small and Effects and issues of e-Supply chains on small and

micro enterprises. micro enterprises. • Your provider should have the capability of delivering Your provider should have the capability of delivering

some results in months.some results in months.

The Measurement of Cost/BenefitsThe Measurement of Cost/Benefits

• Measure of the costs and benefits of an e-Measure of the costs and benefits of an e-Supply chain strategy Supply chain strategy

• Influence of costs over a decision to proceed Influence of costs over a decision to proceed with making the necessary changes. with making the necessary changes.

• Non-financial benefitsNon-financial benefits

Measure of the costs and benefits Measure of the costs and benefits of an e-Supply chain strategy of an e-Supply chain strategy

Influence of costs over a decision to proceed with Influence of costs over a decision to proceed with making the necessary changes.making the necessary changes.

Non-financial benefitsNon-financial benefits

• Make sure that staff and management Make sure that staff and management understand the non financial benefits that can understand the non financial benefits that can accrue to the organisation such as better accrue to the organisation such as better customer service, improved reputation as a customer service, improved reputation as a reliable supplier and intelligent customer, reliable supplier and intelligent customer, reputation as a forward thinking and cost reputation as a forward thinking and cost cutting organisation.cutting organisation.

ConclusionConclusion

• e-SCM will be a part of all manufacturer’s e-SCM will be a part of all manufacturer’s futurefuture

• The first and biggest step is to “house clean” The first and biggest step is to “house clean” first – you are, after all, inviting people to visit!first – you are, after all, inviting people to visit!