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Advanced Supply Chain ManagementSurath Pralongsil
December 2009
Advanced Supply Chain Management
Surath Pralongsil
December 2009
Value Chain ManagementSupply Chain ManagementLogistics Management
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Outline of today
09:00 09:15 (15 min) Overview of supply chain management
09:15 09:45 (30 min) Strategic supply chain management
09:45 11:30 (1hr 45 min) Supply chain simulation (beer game) + Break
11:30 12:30 (60 min) Integrated supply chain planning
12:30 13:30 (60 min) Lunch
13:30 14:00 (30 min) Supply chain collaboration & efficientconsumer response (ECR)
14:00 15:30 (1hr 30 min) - Synchronized production/supply
15:30 15:45 (15 min) Break
15:45 16:00 (15 min) - Vendor-managed inventory (VMI)
16:00 16:45 (45 min) IT in supply chain management
16:45 17:00 (15 min) Wrap-up
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Objective of today
To understand the concept, process and benefit of SCM in business,and utilize SCM in his/her own work.
To be aware of the real applications of SCM in SCCC context and
other industries. To be able to work from a holistic point of view (looking at big picture)
To promote collaboration within and across organization, andunderstand supply chain partners' capability
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Contents of Supply Chain Management
Overview of Supply Chain Management Value Management
Customer Value
Value-Based Pricing
Customer Relationship Management Strategic Supply Chain Management
Supply Chain Network Design andOptimization
Integrated Supply Chain Planning
Sales & Operation Planning (S&OP) Enabling Technology
Outsourcing
Inventory Management
Warehouse Management Transport Management
International Logistics Management
Reverse Logistics
Supply Chain Costing / Activity-Based
Costing / Cost-To-Serve Supply Chain Collaboration
Efficient Consumer Response (ECR) Continuous Replenishment and
Synchronized Production / Supply
Vendor-Managed Inventory (VMI)
Strategic Sourcing and Procurement
Supplier Relationship Management
Supply Chain Performance Management
Just-in-time
Lean and Six Sigma
Green Supply Chain Supply Chain Traceability and Security
The Future Supply Chain
Supplementary
Supply-Chain Operations Reference-model (SCOR)
Supply Chain/Logistics Scorecard
Supply Chain Simulation: Beer Game
Product Code Classification
ABC Analysis Best Practice
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Supply Chain
Manufacturer Retailer ConsumerDistributor/WholesalerSupplier
Information Flow and Financial FlowInformation Flow and Financial Flow
Physical FlowPhysical Flow
Process and PeopleProcess and People
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Supply Chain
All interactions, from order entry through paid invoices, end to end from yoursuppliers supplier to customers customer scope of SCM as SCC determined
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Value Chain
Michael Porter of Harvard university said that A business is profitableif the value it creates exceeds the cost of performing the valueactivities. To gain a competitive advantage over its rivals, a company
must either perform these activities at a lower cost or perform them ina way that leads to differentiation and a premium price (more value).
MA
RGIN
MARGIN
INBOUNDLOGISTICS
OPERATIONS OUTBOUNDLOGISTICS
MARKETING& SALES
SERVICE
PROCUREMENT
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PRIMARY ACTIVITES
SUPPORT
ACTIVITIES
MA
RGIN
MARGIN
INBOUNDLOGISTICS
OPERATIONS OUTBOUNDLOGISTICS
MARKETING& SALES
SERVICE
PROCUREMENT
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PRIMARY ACTIVITES
SUPPORT
ACTIVITIES
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Value Chain
Focus on how a business creates customer value by examining contributionsof different internal activities to that value
Allow better identification of a firms strengths and weaknesses since thebusiness is viewed as a process
The activities within the value chain are split into two sections:
Primary activities
These are activities associated with physical creation of the product,marketing activities, activities involved with the transfer to the buyer & after-
sale support
Support activities
These activities provide support to the organization as a whole to keep it
functioning & provide the infrastructure of the company
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Supply Chain Management / Surath Pralongsil
Holcim Value Chain
Transactional
Mortars
Ready - mix
Concrete
Asphalt
ConcreteProducts
Cementitious
Materials
(cement,
mineral
components)
Direct Sales
Infrastructure
Commercial /
Industrial
Building
Housing
DemandSupply
Basic Materials
Processing
Direct Sales
Aggregates
(sand, gravel,
stone, recycled
aggregates)
Traders
Wholesalers
Retailers
Traders
Wholesalers
Retailers
A
p
p
li
c
a
t
i
on
s
Applications andConstruction Fields
End - users
General
Contractors
Civil
Engineering
Channels
Transformational
Masons
Self - builders
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Supply Chain Management / Surath Pralongsil
Ready mix
Transactional
Basic MaterialsProcessing
Supply
End - users
Channels
Transformational
-mix
Concrete
Traders
Wholesalers
RetailersGeneral
Contractors
Civil
Engineering
Masons
Self - builders
Product End-user
AggregatesAsphalt
Mortars
Ready MixConcrete
ConcreteProduct
Cementitious
Materials
(cement,mineral
components)
Channel / Distribution
Demand
ConstructionFields
Infrastructure
Commercial /
Industrial
Building
Housing
ConstructionField
Modern Trade
Direct Sales
Direct Sales
Value chain defines the scope, relating to SCCC corebusinesses
SCCC-investing businessSource: adapted from Holcim Value Chain
Co-Processing
Energy
MineralComponents
Supplier
R/M, Supply
CoreForwardIntegration
BackwardIntegration
VerticalIntegration
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Supply Chain Management / Surath Pralongsil
Cement flow total market 2006
End user
Producer
Transformationalchannel
Contractor
65%
Contractor
65%
Transactional
channel
30.1 Mio t100%
CPM
18%
CPM
18%
RMX
26%
RMX
26%
Agent
20%
Agent
20%
Direct
sales5%
Bulk40%
Bag60%
Selfbuilder /Mini-contractor
17%
Constructionfield
Drymortar
1%
Whole-saler48%
Retailer
38%
Simple house28%
Simple house28%
Single house
20%
Single house
20%
Highrise6%
Highrise6%
Infrastructure
20%
Infrastructure
20%Comm.
11%
Comm.
11%Indust.
6%
Indust.
6%Inst.
1%
Inst.
1%
Townhouse
4%
Townhouse
4%
Multist.
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Value creation* for SCCCs key stakeholders from 2010 to 2013?
Input factor (cost of all goods,materials and services purchased)
Depreciation and amortization
Benefit to employees, government,
shareholders and creditors
Benefit to shareholders
Retained in business
Benefit to employees
Benefit to government
Benefit to creditors
32%
Dividend
Employee
Tax
*Illustration
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Value Added
Refers to the additional value created at a particular stage ofproduction or through branding and marketing. In modern neo-classical economics, especially in macroeconomics, it refers to the
contribution of the factors of production, i.e. land, labor and capitalgoods, to raising the value of a product and corresponds to theincomes received by the owners of these factors.
The enhancement added to a product or service by a company beforethe product is offered to customers.
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Overview of Supply Chain Management
Supply Chain & Logistics
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Logistics EvolutionLogistics Evolution
Journey of SCCC Logistics to
Logistics Solution Provider
Transportation
Distribution
IntegratedLogistics
Supply ChainManagement
ValueManagement
SolutionProvider
Outbound
Inbound
Warehouse
Dispatching
Packing
3rd and 4th
Logistics
Service
Provider
(LSP)
Application
Service
Provider
(ASP)
Value
Management
Customer
Proposition
Network
Synchronize
& Optimize
Supply
Planning
Demand
Planning
Outbound
Inbound
WarehouseOutbound
Inbound
Source: Khun Nopporn Thepsithar, SCCC
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Supply Chain and Logistics
A position of enduring superiority over competitors in terms ofcustomer preference may be achieved through logistics. (ProfessorMartin Christopher)
The prizes in todays markets go only to those companies which arecapable of providing added value in ever-shortening time scales.(Professor Martin Christopher)
Nowadays, its supply chains that compete with supply chains, notcompanies with companies. (Allan Waller, Price Waterhouse
Coopers)
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Supply Chain Management
the design, planning, execution, control, and monitoring of supplychain activities with the objective of creating value, building acompetitive infrastructure, leveraging logistics capability,
synchronizing supply with demand and measuring performance.(Source: APICS)
The goal of supply chain management is to link the marketplace, thedistribution network, the manufacturing process and the procurement
activity in such a way that customers are serviced at higher levels butat lower costs. (Professor Martin Christopher)
the management of upstream & downstream relationships withsuppliers & customers to deliver superior customer value at less cost
to the supply chain as a whole
The word Supply Chain is not just about supply. It is about bothsupply and demand, better called Integrated Supply ChainManagement
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Logistics Management
Is the means whereby the needs of Customers are satisfied throughthe co-ordination of the materials and information flows that extendfrom the market place, through the firm and its operations and beyond
that to suppliers. (Professor Martin Christopher) Logistics is part of the supply chain process that plans, implements,
and controls the efficient, effective forward and reverse flow andstorage of goods, services, and related information between the point
of origin and the point of consumption in order to meet customersrequirements. (The Council of Logistics Management)
Logistics is all about getting the right goods to the right place at theright time in the right quantity at the right quality at the right price.
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Supply Chain Management v.s. Logistics
Logistics management involves the strategy & operations relating tothe movement of goods within the enterprise & with its immediatesuppliers & customers. Logistics management develops a plan for the
flow of products & information through a business.
Supply chain management involves managing the relationshipsamong all members in the supply chain. Supply chain management
aims at coordinating the processes of all supply chain members, bothdownstream towards customers & upstream towards suppliers.Supply chain management is linked together with cross-companystrategies and processes
A companys Logistics strategy needs to be closely aligned with thesupply chains overall strategy.
A E i I i
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An Enterprise Integration
PHASES Functional Integration
Phase 1Phase 1
BaselineBaseline
Phase 3Phase 3
InternalInternal
IntegrationIntegration
Phase 2Phase 2
FunctionalFunctional
IntegrationIntegration
Phase 4Phase 4
ExternalExternal
IntegrationIntegration
Purchasing Material Control Production Sales Distribution
Material Management Manufacturing Management Logistics
Material Management Manufacturing Management Logistics
Suppliers
Internal Supply Chain
Customers
Ch i i f S l Ch i E l i
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Characteristics of Supply Chain Evolution
FragmentedPyramid
IntegratedEnterprise
IntegratedSupply Chain
Value Network /Virtual Company
Strategy
Functional
integration
Driven by cost andefficiency
Cross-functional integration
Driven by customer satisfaction
Process owners
Integrated applications
Process automation
Cross-functional integration
Intra-enterprise focused
Limited co-operation (within anenterprise)
One team
Empowered, self-directedteams
Flattened pyramid
We sell semi-customizedproducts.
Which of our products would a
bunch of customers buy?Semi-customized products inneed of a market segment.
Inter-enterprise
integration
Driven by supply chainoptimization
Core competency, agility, opportunity
Driven by change and uncertainty
People Subject matter experts Knowledge workers Knowledge workers with smart agents
TechnologyIndependent systems
Islands of automation
Electronic commerce enabled
Scaleable cross-platformportable
Electronic marketplace enabled
Plug compatible and inter-operable
Process
Functional silos
Department focused
Cross-company integration
Supply-Chain focused
Dynamic, end-to-end integration
Opportunity and value-add-focused
Culture
Adversarial, mutualtrust
Ill do my job, you doyours
Mutual truth and fullcooperation (extended
enterprise)
One team
Need-based, value-add cooperation
What true value does everyone add?
StructureHeavy command and
control
Pyramid
Partnership / alliance
Pipeline
Virtual / fungible
Network / Web
Product /
Service
We sell products.
What products can wemake?
Mass-producedproducts in need of a
market
We offer semi-customizedsolutions.
How can we offer best totalvalue to a customer segment?
Fully optimized semi-customized solution in need of
a market niche
We help our customer (s) to get thebest possible solution.
What must we do to give the best total
solution to this individual customer?Information-rich mass-customized
solution configured for one customer
Source: KPMG Transportation & Distribution
S l h i f k
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Source: McKinsey
Supply chain framework
3. Production management
Translate market requirements intoproduction requirements, andmanage the resulting constraints
2. Forecast and demand management
Ensure appropriate supply at low costthrough accurate demand forecastingand efficient order management
6. Supply chain integration
Create integratedprocesses to facilitateinformation flow supportedby a supply chain focusedorganization
5. Distribution management
Ensure reliable logisticsand optimal material flowin the outbound network
0. Supply chain configuration
7. Supply chain transformation
Ensure sustainability and constant improvement in whole network
Understand market and network dynamics and configure network with optimal cost and flexibility
1. Service-levelmanagement
Understand cus-tomer requirementsand serve themaccordingly
4. Supply
managementEnsure reliablesupply and inte-grate with suppliers
32
5
4 16
Internal Supply Chain Management
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Internal Supply Chain Management& Logistics Management
Supply Chain Management
Flow Management
Distribution Management
Logistics Management
Import & Export
Quality control
Simulate
warehouse space
and workload
Simulate
Trucking Plan
Simulate
International
Transport Plan
Break down and
consolidate logistical
costsCheck subcontractor
invoices
SC deployment result
analysis
Benchmarking
Import
and
exportorder
Transfer
Order
Track & trace
(including Log Book
monitoring in line with
KPI definition,
operational audit)
Control
Check
Sell
Supply Chain Supply Chain Execution
Production
Optimisation of Supply Chain Configuration
Steer, plan and
schedule warehouse
operation basing on
warehousing policy
Contract establishment and follow up
Logistics project steering
Information system requirement
Multi product lines service requirements arbitration
Deployment
Resources and investment planning
Check compliance with Service Specification
Justification: Trade off service / CostsPerformance control
(KPI definition and
result)
Cost & Budget
control
Steeringof
Operation
Strategic
Steering Define Service
Specification
Supply Chain
Planning
Plan & schedule
productionTacticalSteering
Proposaloflogisticsalternatives(Project)
Quality & 3PL Audit
Steer, plan and
schedule
transport
operation basing
on trucking
policy
Steer, plan and
schedule
internationaltransport
operation basing
on transport
policy
Physical
Execution
Transport Operation
Handle
Claims
Warehouseoperations
Invoice
productsLocal International
Nature&
Typeof
Function
Storage Transport Project
Source: Capgemini
Supply Chain Competence Framework
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Supply Chain Competence Framework
A. StrategyB. PlanningC. Plant OperationsD. DistributionE. Human ResourcesF. Information TechnologyG. Capital ManagementH. Performance
Management
A. Strategy1. Supply Chain Strategy Development2. Make vs Buy / Contract Manufacturing3. Network Design / Optimization /
Rationalization4. Product Configuration / De-proliferation /
Complexity Reduction
B. Planning5. Forecasting6. Sales & Operation Planning7. Inventory Planning8. Supply Chain Planning
C. Plant Operations9. Production Optimization10.Maintenance Management11.QA / QCc
D. Distribution12.Transportation
i. Inboundii.Outbound
13.Warehouse Management /Inventory Management
E. Human Resources14.Organization Alignment15.Readiness to Change16.Professional Development /
Training / Rewards andRecognition
F. Information Technology17.Architecture
G. Capital Management18.Fixed Capital Management
i. Capital Planningii.Capital Project
Management
H. Performance Management19.Integrated Strategic
Measurement20.Performance Dashboard21.Continuous Improvement
Source: A T Kearney
Top Down Bottom Up
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Top Down, Bottom Up
EXECUTIONIdentificationStandardizationOptimization
OperationalOrders, Commitments,Asset Tracking
TACTICALPlanning,Optimization,
Arbitration
STRATEGICStructure,Costs, Policies
PHYSICAL
ERP
TACTICAL PLANNING
STRATEGIC DIRECTION
Effective and Efficient Supply Chain
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Effective and Efficient Supply Chain
Key factors:
Understanding end customer needs
Adopting effective supply chain strategies to meet end customer
needs Integration of the members of the supply chain
Successfully tackling operational issues
Successfully handling the impact of internationalization on the supplychain
Managing the information systems & technology which hold thesupply chain together
Ensuring value for the customer provided by the supply chain
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Strategic Supply Chain Management
Supply Chain Philosophy
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Supply Chain Philosophy
Demand Supply
Logistics: Cost and Service Trade-Off
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Supply Chain Strategy
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Supply Chain Strategy
a planning activity focused on the long-term decisions of the supplychain
The choice of products & services to offer to customers
The structure of the logistics network & the supply chain The capabilities the supply chain will specialize in
The types of relationship between supplier & customers
Creating competitive advantage, which is sustainable over a longperiod & reliant on systems of capabilities rather than a singlecapability
Opportunities in global markets
The provision of tailored services for customers
Rapid communication with customers & suppliers
The need for time compression strategies in order to cope with shorterproduct life cycles
Competitive Advantage in Supply Chain
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Management
Globalization
Integration
Internal Integration
External Integration
Capability Integration
Relationships
Time-based competition Responsiveness
Reliability
Globalization
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Globalization
Organizations today have the opportunity to be global companiesregarding the world as a potential market or source of supply
Many companies are finding competitive advantage through cateringto the world market while coordinating dispersed procurement,manufacturing & logistics activities
Homogenous marketing concept
Borderless geography
No differentiation in language, look, customs, tastes, value etc.
No time limitation
Going Global
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Going Global
Proactive Additional resources Taxes Lowered costs
Economies of Scales Incentives Synergy Market extension Power and prestige Exploitation of firm-specific
advantages Protect home market through
offending competitors market
Reactive Trade barriers International customers International competitions Regulations
Integration
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Integration
Supply chain members need to be integrated in terms of theirprocesses, activities & systems
Integration is vital for companies operating internationally
Advantages of integration include improved quality, innovationsharing, reduced costs, & improved scheduling of production &
delivery
Levels of integration:
Internal Integration External Integration
Capability Integration
Relationships
An Enterprise Integration
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An Enterprise Integration
PHASES Functional Integration
Phase 1Phase 1
BaselineBaseline
Phase 3Phase 3
InternalInternal
IntegrationIntegration
Phase 2Phase 2
FunctionalFunctional
IntegrationIntegration
Phase 4Phase 4
ExternalExternal
IntegrationIntegration
Purchasing Material Control Production Sales Distribution
Material Management Manufacturing Management Logistics
Material Management Manufacturing Management Logistics
Suppliers
Internal Supply Chain
Customers
Internal Integration
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Internal Integration
The companys internal structurehas to be aligned & integrated
Internal functions must alignalong processes that lead tospecific product & service value
Goals must align to anoverarching corporate strategy
Communication barriers must bereduced between activities toenhance information flowthroughout the organization
External Integration
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te a teg at o
External integration can only occur when internal integration &functional strategies have been aligned
There must be consistent competitive goals, objectives & criteriaacross the supply chain, without conflicting priorities
Cost reduction at the expense of other supply chain members simply
transfers cost to the end customer, leading to higher prices -companies have to take into consideration all costs within the supplychain
Capability Integration
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p y g
Under supply chain management each member of the supply chainrealizes that they cannot be the best at every activity & need to relyon capabilities outside of the organization
In order to add the most value on the whole supply chain,organizations must decide which activities & capabilities to invest in &perform
Relationships
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p
A key focus of supply chainmanagement is developing &understanding cooperation, trustand the management ofrelationships
Many relationships within supply
chain management are basedon the partnership idea whichinvolves mutually beneficiallong-term relationships
Type of Relationship in Supply Chain
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yp p pp y
Arms length
Long-term relationship
Partnership
Third-party / Outsourcing Strategic alliance
Joint venture
Network organization Vertical integration / Acquisition
Time-Based Competition
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p
Low cost and high quality have now become standards by whichcompanies can enter and compete in markets; and they are no longera guarantee for customer demand
Time has become a source of competitive advantage within manyindustries
Companies have to focus their supply chain capabilities on: Responsiveness
Reliability
Responsiveness
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The ability to respond to changing demands is called agility
Agility means meeting customer demands quickly so that customers
do not turn to substitutes from competitors
In order to provide time compression benefits to customers,companies need to posses the following skills:
New product development and introduction competencies
Cross functional development team abilities
Appropriate & timely feedback from customers
Lead time management
Product Life Cycle
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Time
Sales
Introduction
Growth
Maturity
Saturation
Decline
Sales
Introduction
Growth
Maturity
Saturation
Decline
Reliability
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To provide reliability at times of uncertainty in demand, safety stockswere carried by companies
Traditionally trade-offs were perceived as existing between providinghigh quality, low cost & quick delivery of products
Successful supply chains can now deliver rapidly at low cost with high
quality. This reliability comes from reducing inventory levels as wellas reducing the need for quality detection throughout the supply chain
Different Supply Chain Characteristics in EachIndustry
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Industry
Manufacturing CustomerDistribution CentreSupplier
ship
to
sto
ck
maketo
sto
ck
asse
mble
to
orde
r
buyto
order
engin
eerto
orde
r
Finished goods storeR/M store
maketo
order
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Strategic Supply Chain Management
Lean v.s. Agile Supply Chain
Lean Philosophy
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The lean philosophy is based on eliminating all waste from thesupply chain
Thus, seven types of waste have been identified as detrimental forthe supply chain:
1. Overproduction
2. Waiting
3. Transporting4. Inappropriate processing
5. Unnecessary inventory
6. Unnecessary motions
7. Defects
Inventory Hiding Underlying Problems
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Restricted
InformationFlow
Quality
Problems
InventoryInventory
Inadequate
Processes
Restricted
InformationFlow
Quality
Problems
Inventory
Inadequate
Processes
Lean v.s. Agile Supply Chain
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Lean (efficient) supply chains using JIT work when: Demand is relatively stable & predictable
Product variety is low
Price & quality are key to advantages in the market place
Agile (responsive) supply chains :
Are characterized by very flexible structures, production capabilities &
people within each part of the supply chain Focus on responsiveness over waste elimination
Work best when customer service & responsiveness lead tocompetitive advantage
Push Strategies
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Push strategies means working to long-term forecasts & estimatingthe number of products being produced
Each company throughout the supply chain has its own forecast
Forecasts are not aligned with suppliers or customers
Long term forecasts are difficult to predict with many variables disruptingthe forecast
Limited forecasting ability results in build up of inventory
Pull Strategies
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Pull strategies mean that there is no production until the customer hassignaled demand by ordering a product or service
Advantages: No inventory costs as the product is made as soon as the order is
received
Information flow throughout the supply chain
Collaboration between supply chain members
Disadvantages:
Smoothing demand is difficult
Time taken to build final product or service might be longer as the supplychain has to make the order
Supply Chain of PC, with Postponement
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Positioning of Decoupling Point
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driven by forecast
driven by order
Postponement
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Postponement or push-pullstrategies aim at preventing thedisadvantages of both push & pullstrategies
Under postponement, certain partsof the supply chain are undertakinga push strategy while other parts
perform a pull strategy: Upstream suppliers provide
commodity parts & componentsusing a push strategy as demand issmoother & more predictable
Downstream suppliers employ a pullstrategy & do not customizeproducts & services until an orderfrom the final customer has beenmade
Determining the decoupling point in the supplychain from PUSH to PULL - factors
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Supply Chain Management / Surath Pralongsil 57
Demand change & forecast reliability (all we know about the forecastis that it will be wrong)
Required product configurations & variability
Required customer response time (balancing capacity with inventory)
? ? ? ? ?
PUSH & PULL
Where in the supply chain and how much inventoryto keep?
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Supply Chain Management / Surath Pralongsil 58
CostFlexibilityService level
Response time
CostFlexibilityService level
Response time
Materialssuppliers
RetailerComponentmanufacturer
Assembler Storage
? ? ? ? ?
Postponement & its impact on reducing variety ininventory
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Supply Chain Management / Surath Pralongsil 59
Variety
Pi
peline
Materials in
Finished goods out
BA
Postponement(delaying
customisation)
=
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Strategic Supply Chain Management
Advantage of Supply Chain Management
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Key Performance Objectives
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Supply Chain Management / Surath Pralongsil 62
Long term supply chain efficiency and success rely on performanceadvantages which other supply chains will not have
These performance objectives include: Cost
Quality
Flexibility
Speed Reliability / Dependability
etc.
Cost Reduction
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Supply Chain Management / Surath Pralongsil 63
The reduction of total cost ofownership is key to costadvantage
Total cost of ownershipmeasures include bothownership & post-ownershipcosts
Logistics cost advantagesinclude:
Efficient use of capacity
Reduction in inventory levels Faster & more reliable
information exchange
Ownership costs include: Processing inventory
Repair
Maintenance
Warranty Training
Operating
Inventory carrying
Contract administration Downtime cost of operating
equipment
Post-Ownership costs: Disposal or environmental
consequences of product orservice
Quality and Service Level Improvements
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Supply Chain Management / Surath Pralongsil 64
Quality is the most visible aspect of the supply chain
The quality objective is the foundation for the other objectives & is
considered necessary just to compete
Quality affects other objectives, such as:
Cost
Flexibility
Speed
Reliability / Dependability
Flexibility Enhancement
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Supply Chain Management / Surath Pralongsil 65
The survival of the supply chain is dependent on its ability to meet thechanging needs of customers & to adapt to uncertain marketconditions
Flexibility is essential in turbulent markets
A company can focus on four possible types of flexibility:
Product (variety) flexibility
Mix flexibility
Volume flexibility
Delivery flexibility
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Reliability
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Supply Chain Management / Surath Pralongsil 67
Reliability means being able to tell customers reliablywhen their product or service will be delivered
Reliability refers to: Dependability of timetables
On time deliveries
On-Time In-Full (OTIF)
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Supply Chain SimulationBeer Game
Beer Game
23
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Supply Chain Management / Surath Pralongsil 70
Competing among each supply chain to be the most efficient supply chain, which means the lowest
total supply chain cost.
Consumer
Distributor /Wholesaler
Retailer
Manufacturer Supplier
ReduceCost
ReduceCost Enhance
Revenue
Enhance
Revenue
Reducing inventory
operating costsMatching merchandise
with consumer demands
Resources
23
4 5
Order
Delivery
Order
Delivery
Order Delivery
Order
Delivery
Order
Delivery
Rule
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Supply Chain Management / Surath Pralongsil 71
Inventory at the beginning = 10 unoits No talking
No information sharing
Cost Inventory carrying cost: 1 THB/unit/week
Back order: 2 THB/unit/week
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Strategic Supply Chain Management
Bullwhip Effect (Forrester Effect)
What Management Wants...
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Quantity
Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998Time
DemandDemandProductionProduction
What Management Gets...
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Supply Chain Management / Surath Pralongsil 74
Time
DemandDemand
ProductionProduction
Qu
antity
Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998
Increasing Order Variability up the Supply Chain
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Supply Chain Management / Surath Pralongsil 75
ConsumptionConsumersRetailersDistributorsManufacturersSuppliers
Bullwhip Effect (Forrester Effect)
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Supply Chain Management / Surath Pralongsil 76
ORDERS
TIME
2. Orders fromretailers to
distributors
3. Orders from
distributors tomanufacturer
4. Ordersfrom manufacturerto supplier
1 . Increase of 1 0%in orders fromconsumers to
retailers
ITC
GOODSORDERS
Manufacturer DISTRIBUTORSupplier CONSUMERSRETAILER
M11:U2:02.4-2
Explaining the Forrester effect
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Supply Chain Management / Surath Pralongsil 77ITC
ORDERS
TIME
Lagged (delayed) response
Amplification of responseSystem instability
Forrester showed how this lagged or delayed response leads toan amplification in response magnitude, resulting in supply chaininstability and increased inventory levels.
M11:U2:2.4-3
Bullwhip Effect
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Manufacturer Distributor Wholesaler Retailer Customer
Collaboration in Supply Chain
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Collaborative Planning, Forecasting & Replenishment
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Manufacturer
Retailer Forecast Drivers
In stock position
Fill Rate Consumer Demand
Price Changes
Growth Plans
Distribution Channels
Common EventCalendar
Joint Forecast
Retailer
Manufacturer Forecast Drivers
Capacity
Order Lead time Consumer Behaviour
Product Availability
Promotions
Raw material supply
Joint Business Planning
Generatejo
intforecast Generatejo
intforec
ast
Drivereplenishment
DriveMRP
Supply Chain Manager
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Integrated Supply Chain Planning
Integrated Supply Chain Planning
Purchase Order ProcurementPurchase OrderPurchase OrderPurchase Order
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Supply Chain Management / Surath Pralongsil 83Note: Inventory is to be taken into account in each step.
Retail Outlet Retail Outlet Retail Outlet Retail Outlet
Regional DC Regional DC
National DC
Demand Demand Demand Demand
DRP
Demand Planning
Production MPS
Sub-Assembly Sub-Assembly Sub-Assembly Sub-Assembly
Assembly Assembly
C1 C2 C3 C4 C5 C6 C7 C8
MRP
Supply Chain Planning Process Framework
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Supply Chain Management / Surath Pralongsil 84
ProcurementProcurement
ManufacturingManufacturing
LogisticsLogistics
Marketing& Sales
Marketing& Sales
SuppliersSuppliers
CustomerCustomer
Inventory/
WarehouseManagement
ShipmentManagement
InventoryDeployment
TransportPlanning
Master
ProductionScheduling
Detailed
ProductionScheduling
DistributionRequirement
Planning
Material Requirement Planning
ProductionActivityControl
Procurement
Capacity
Planning andSourcing
Supply Chain
NetworkDesign
Order Management Demand Planning
Executional Operational Tactical Strategic
Business Plan
Immediate - Hour Day - Week Week - Month Quarter - Year
Evolution of enterprise resource management (ERM)and manufacturing planning & control systems
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ECR
SCM/APSERP
MRP II / JIT
MRP I
DRP II
DRP I
WMS
TMSRoute Planning
Integrated Supply Chain Planning
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Sales & Operations Planning (Demand & SupplyPlanning)
Demand Planning
Distribution Requirement Planning (DRP) Distribution Resource Planning
(DRP II)
Material Requirement Planning (MRP) Manufacturing Resource Planning (MRP II)
Master Production Schedule (MPS)
Detailed Production Schedule (DPS)
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Sales & Operations P lanning(S&OP)
Sales & Operations Planning (S&OP)
S l d O ti Pl i (S&OP) i t l h i
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Sales and Operations Planning (S&OP) is core to supply chainperformance
Collaborative S&OP is the way forward and the technologies are inplace to make it a reality
Analysis & understanding of customers, suppliers and inventories areessential to develop a meaningful and workable Sales & OperationsPlan
Each step on the route to c-S&OP delivers measurable benefits In order to arrive at meaningful plans powerful constraint-based
planning tools are required
Effective and appropriate supply chain planning software is essential
for effective c-S&OP
Sales & Operations Planning (S&OP)
St t i Pl i
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Strategic PlanningStrategic Planning
Business PlanningBusiness Planning
VOLUME
Sales & Operations Planning
VOLUME
Sales & Operations Planning
Sales PlanSales Plan Operations PlanOperations Plan
MIX
Master Scheduling
MIX
Master Scheduling
Detailed Planning &Execution System: MRP,DRP, Plant Scheduling,
Supplier Scheduling
Detailed Planning &Execution System: MRP,DRP, Plant Scheduling,
Supplier Scheduling
EXECUTION
CAP
ACITYPLANN
ING
CAPACITYPLANNING
Forecast
&DemandManagement
Forecast&
DemandMan
agement
DEMAND SUPPLIER
S&OP is placed between strategic and detailed planning andexecution
Focus
Capital investments
Long term alliance/commitmentsV ti l i t ti b fit
Horizon
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90
S&OP
Supplylogistics
Productionlogistics
Customerlogistics
Fulfillment
Longterm
planning(strategic)
Operational Planning(Detailed Scheduling)
Sales &operationsplanning
Vertical integration benefits Budgeting/definition of targets for sales and
production
Strategic operational decisions regardingproduct swaps, capacity outsourcing, etc.
Mid-term demand plan Mid-term rough cut capacity, inventory,
and material plan Mid-term feed stock supply plan and
replenishment plan
Short-term capacity and material planning Adjustment of mid-term plan as per order
portfolio and short-term disturbances
Efficient implementation and managementof day-to-day business
Order fulfillment
Execution
1-5years
planning
1-4weeks
planning
1-12month
planning
Source: McKinsey
S&OP process creates a cross-functional platform for internalcollaboration on an ongoing basis
From . . .Traditional siloed and fragmented functional planning
St t gi
. . . toCross-functional integrated planning
Strategic
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91
Source: McKinsey
Demandmanage-
ment
Productionmanage-
ment
Supplymanage-
ment
Distributionmanage-
ment
Detailedscheduling
Orderfulfillment
Shortageallocation
Low responsiveness to demand changes
High inventory levels to account for internal inefficiencies
Volume-based mentality
Sales vs. production dispute
Firefighting and short-term view Lack of clear accountability and ownership
Data issues and lack of results
Strategicbusiness planning
High cost, low service
Production
manage-ment
Demand
management
Supply
manage-ment
Distribution
manage-ment
Detailedscheduling
Orderfulfillment
Shortageallocation
Better responsiveness to demand changes
Lower inventory levels due to reduced internalinefficiencies
Value-driven decision making
Collaborative process across functions Proactive planning for business disturbances
Clear accountability and ownership of decisions
Full transparency and common set of data
Strategicbusiness planning
Low cost high service, enabler for growth
A typical monthly S&OP calendar follows 4 generic phases in arepetitive sequence - however details may vary between industries
Data consolidation,
regular updateand maintenance
Premeeting sales and
operations agreements Monthly S&OP meetings
Adjustments,
modifications anddecision implementation
Week 1 Week 2 Week 3 Week 4
EXAMPLE
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92
Review KPIs
Evaluate escalateddemand / supply gaps
and potential resolutionscenarios based onfinancial and strategicimpact and makeresource allocationdecisions
Demand Planning Creation of unconstrained
forecast Updating current
order portfolioInventory Planning Regional inventory level
monitoring and updatesProduction Planning Evaluation of available
capacity and potential
constraintsOverall Master data maintenance
and changes
Demand / Supply balancing
Rough cut capacity planning byproduction and generation of
capacity constrainedconsensus demand,procurement andreplenishment plans
Identification of unresolveddemand and supply gaps and
escalation to S&OP committee
Development of scenarios /options as an input to S&OPdecision meeting
Implementation of decisionstaken at cross functionalmeetings
Communication of decisionsand follow-up
Function specific Problem and business specific
Source: McKinsey
regular update,and maintenance operations agreements Monthly S&OP meetings modifications anddecision implementation
CLIENT EXAMPLEKey Performance Indicators are an essential tool to increasethe level of accountability and support the S&OP process
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93
KPI performancedialoguesconducted at 3
levels Executive level S&OP meetings Site / Pre-
meetings
Service
Concentrateproduction
Formula-tion
Filling andpackaging
Distribu-tion
Sales
Cost
Efficiency/performance
Customer service level
Order-line Fill Rate Stock out
Inventory level
Scrap/Accruals
Plan adherence Vs. annual supply budget (as of 2008) Vs. 3 month frozen period
Forecast accuracy Vs. changes Vs. actual sales
Lead time, e.g. Product release lead time at internal sites Product lead time at external mfg site
Typical frequency of S&OP by industryS&OP frequency by industry in percent Monthly
Daily
Weekly
Quarterly or less
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94
Source: Aberdeen Group, July 2006
AutomotiveChemicals
Consumer durable goods
Consumer electronics
CPG
Mining/oil/gas
Industrial equipment
Food/beverage
Paper/lumber/timber
Pharma
S&OP is traditionally done outside MRP II
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SCO System make Collaborative S&OP happening inreality
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S&OP Process Map
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Integrated S&OP Process
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Integrated Supply Chain Planning
Demand Planning
Acronym
Demand managementD d l i
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Supply Chain Management / Surath Pralongsil 101
g Demand planning
Demand plan
Real demand
Enriched demand plan
Sales forecast
Sales target
Sales plan
Budget
Financial plan
Operational plan
Why do we need Demand Plan / Forecast?
PP--Time = Process Lead TimeTime = Process Lead Time
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Supply Chain Management / Surath Pralongsil 102Delivery Lead Time (to react to demand)Delivery Lead Time (to react to demand)
Supply of Raw& Packaging
Materials
ManufacturingPackaging &
Release
Warehouse &Distribution
Retailer
MakeMake--toto--orderorder
Assembly / PackagingAssembly / Packaging--toto--orderorder
MakeMake--toto--stockstock
PPTime = Process Lead TimeTime = Process Lead Time
Demand Plan is used to prepare stockDemand Plan is used to prepare stock
Demand
Dependent Demand vs Independent Demand
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Supply Chain Management / Surath Pralongsil 103
p p Only demand plan of independent demand is required.
Total number of table X 4 legs = Total number of legs
Remark:
Performance measurement: Demand Plan Accuracy and Bias
Consistent positive or negative bias demonstrates error pattern
Forecast helps to identify gap against Budget
01808 xxxxGap
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Budget vs Act/For
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
CASES
Budget
Act. & For
Gap
How to Complete the Forecasting Horizon...
The 3-Component Model: Baseline, Impactors, Uplifts
Large, Planned Large,
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Supply Chain Management / Surath Pralongsil 105
?
Months
Volume
HistoricalDemand
g ,Exceptional
Events
Past EventsUplifts
Baseline
Projected
Baseline
Planned
Events Uplifts
g ,Exceptional
Events
Forecast Techniques
QualitativeB d i t iti d t i i
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Q Based on intuition and expert opinion
In many cases, bottom up.
Quantitative Statistical forecasting
Remark:
Forecast is always wrong
More detail, higher inaccuracy
Further timeline, higher inaccuracy
Demand Pattern
1 Trends:
a) b) c)
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PAST FUTURE
2. Seasonality
PAST FUTURE
3. Random Variation
PAST FUTURE PAST FUTURE PAST FUTURE
4. Cyclical Variation
To Counter Forecasting Error
Customer Relationship Management (CRM)Supply chain visibility
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Supply Chain Management / Surath Pralongsil 108
Supply chain visibility
Vendor-Managed Inventory (VMI)
Variety reduction Re-design supply network e.g. cross-docking operation
Postponement (Push-Pull)
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Integrated Supply Chain Planning
Distribution Requirement Planning (DRP)
Distribution Resource Planning (DRP II)
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Impact of Multi-Echelons
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Supply Chain Management / Surath Pralongsil 111
Distribution Requirement Planning (DRP)
DRP is aimed at improving the management of finished productinventory & controlling the transport of goods in multi-level distribution
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Supply Chain Management / Surath Pralongsil 112
supply chains
DRP is a simulation system that models all expected activitiesinvolved in shipping goods through distribution networks over adefined planning time horizon
DRP is driven by a demand forecast for each product
Lead Time: 1 week
Delivery
Distribution Requirement Planning (DRP)Time-bucket matrix display
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Forecast Demand
Shipments on Order (in transit)
Projected Stock on Hand
Received Shipment Quantity
Planned Shipment Quantity
PastDue Week
200 210 220 200 180 200 210 160
500
495 615
500 500500
500 500 500
1 2 3 4 5 6 7 8Min. Safety Stock: 250
Lead Time: 1 week
Order Quantity: 500
195
500 500 500
500
500
ALERT
500
Time Horizon: 8 Weeks
Max. Stock Limit: 600
Over
limit
Delayed
receipt
Deliverycancelled
ITC M11:U2:2.5-25
285 775485185365565
Inventory Deployment
National DC
National DC
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Supply Chain Management / Surath Pralongsil 114
How do we deploy the inventory along the distribution network?
What if actual demand does not follow the forecast?
Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H
Regional DCRegional DC Regional DCRegional DC
OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutletOutletOutlet OutletOutlet
EXCE
SS
Forecast > Actual Demand
SHORTA
GE
Forecast < Actual Demand
Re-Deployment
National DC
National DC
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Supply Chain Management / Surath Pralongsil 115
Need to concern about the distribution cost of re-deployment
Cross-docking is one way to avoid this situation, but lead-time will bestretched
Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H
Regional DCRegional DC Regional DCRegional DC
OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutletOutletOutlet OutletOutlet
EXCESS SHORTAGE
Cross-Docking
is a distribution system in which merchandise received at the warehouse ordistribution centre is not put away, but immediately turned around forshipment to retail stores
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Supply Chain Management / Surath Pralongsil 116
p
StoreA StoreB StoreZ
Plant1
Plant2
PlantN Receiving
Shipping
FullPalletsSingleProduct
StoreA StoreB StoreZ
Plant1
Plant2
PlantN
FullPalletsSingleProduct
Cross-DockingPlatform
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Integrated Supply Chain Planning
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Integrated Supply Chain Planning
Material Requirement Planning (MRP)
Material Requirement Planning
Are calculated based on the Bill-of-Materials (BOM) Is driven by MPS to make the end items and drive to Shop-floor
t l d P h i
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Supply Chain Management / Surath Pralongsil 119
control and Purchasing
Objectives:
To determine the materials required
What is required
How much is required When it is required
To establish and maintain priorities
Source: APICS
Table 100
Legs 206
Base 200 Top 025
Leg Bolts216
Frame 280
MasterProductionSchedule
Materials requirements planning - closing theloop
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Supply Chain Management / Surath Pralongsil 120
u
Inventoryrecords
Operational capacityconstraints (e. g. , machine,
labour & lead- times)
Bill of
materials
Materialsmovements
Productionorders
Materialsrequirements
plan
Purchaseorders
ITC M11:U2:2.5-6
PRODUCT02
PRODUCT03
Bill of Materials (BOM)
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EXAMPLE - CALCULATION OFREQUIREMENT FOR PART 022
02 03
SUB-ASSEMBLY12
SUB-ASSEMBLY13
PART20 29 28 22 20 21 22 27 29
1 Off 1 Off 2 Off 1 Off 2 Off
4 Off 3 Off 3 Off 3 Off 2 Off 2 Off
PART PART PART PART PART PART PART PART
ITC M11:U2:2.5-11
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Supply Chain Collaboration
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Efficient Consumer Response (ECR)
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ECR Overview
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Supply Chain Management / Surath Pralongsil 125
"WORKINGTOGETHER TO
FULFIL CONSUMER
WISHES BETTER,FASTER AND AT
LESS COST"
Scope The ECR Thailand project focuses on the Fast Moving Consumers Goods(FMCG) that are sold through modern retail stores (the Modern Trade
Channel), although future ECR initiatives will include the Traditional Trade
Channel.
Product Groups Study Areas
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Dry Grocery
Food
General Merchandise
Supermarkets
Convenience Stores
Department Stores
Specialist Stores
Retail Formats
Consumer
OptimizeIntroductions
OptimizeAssortments
OptimizePromotions
Demand Management
Electronic DataInterchange(EDI)
Electronic FundsTransfer (EFT)
Item Coding andDatabase Mgmt
Activity BasedCosting (ABC)
Enabling Technologies
SynchronizedSupply
SynchronizedProduction
ContinuousReplenishment
AutomatedStore Ordering
Supply Management
ReliableOperations
CrossDocking
Soft Drinks
Integrators
Value Creation
Collaborative PlanningForecasting and Replenishment
E-BusinessE-Procurement, E-Supply Chain
Demand Management
Establish Strategy
and Capabilities
Optimise Product
Introductions
Optimise
AssortmentsOptimise
Promotions
ECR Improvement Concepts
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Supply Management
Integrated
Suppliers
Synchronised
Production
Continuous
Replenishment
Automated Store
Ordering
ReliableOperations
Cross Docking
Enabling Technologies
Activity BasedCosting
Electronic DataInterchange (EDI)
Electronic FundsTransfer (EFT)
Item Bar Codingand DatabaseMaintenance
Electronic Commerce
Human FactorsStrategy and
StructureCulture Skills Relationships
Through the adoption of ECR in Thailand for all channels, it isThrough the adoption of ECR in Thailand for all channels, it is expected to reduceexpected to reduce
consumer price by 7.7%, which is equivalent toconsumer price by 7.7%, which is equivalent to Baht 38 billion saving across theBaht 38 billion saving across the IndustryIndustry
CR il
M fS li
Benefits
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Supply Chain Management / Surath Pralongsil 128
Consumer
Traditional
Channel**
Store
Retailer
Plant D.C.
Modern
Channel*
Consumer
pricereduction
=
7.7%
Total Supply Chain
Inventory
costs = 5.4%
Operating
costs = 2.3%
*Modern Trade: Supermarket chains, hypermarket chains, convenience stores,
**Traditional: Mom & Pop Store, independent Supermarket
ManufacturerSupplier
Interesting Web Sites
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Interesting Web Sites
www.gci-net.org
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www.globalscorecard.net
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Supply Chain Management / Surath Pralongsil 131
GCI Benchmarking Tool: Maturity Assessment
DefinitionCriteria 0 1 2 3 4
Nothing done
No plans
Nothing done but
plans developed
Early
implementation
Further
implementation
Fully
implementedMaturity Measure Criteria
*
Who
The extent to which
stocks at all stages in
Changes in stock
replenishment
Agreement established
between trading
Prototype CRP being
tested using CRP
CRP being rolled out to
cover at least half of
CRP fully installed for
all targeted productsReplenishment
Method and
M
W
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* Manufacturers (M) , Wholesalers (W) , Retailers (R)
stocks at all stages in
the supply chain are
replenished in
response to an estimate
of consumer demand(demand signal)
Replenishment may be
via continuous
replenishment process
(CRP) orders
calculated by the
retailer, or via vendor
managed inventory(VMI), where
appropriate
replenishment
quantities and timings
are driven primarily by
price / quantity deals,
rather than consumerdemand
between trading
partners to match
replenishments more
closely to consumer
demand
tested using CRP
orders or VMI (where
appropriate) to
generate the demand
signal
CRP or VMI orders not
integrated into order
management system:
proprietary electronic
commerce standards
still used
cover at least half of
long term target
volume
CRP or VMI ordersintegrated into order
management systems
via industry standard
electronic commerce:
used by manufacturer
to plan loads
Retailer gets
information ofshipments via EDI
all targeted products
and volume and fully
integrated into order
processing systems
Method and
Application
W
R
Replenishment driven
by inventory and
offtake. Need
visibility for that at alllevels.
Agreement to get
visibility.
A fully implemented
demand management
system (DMS)
integrated with ERP.
www.supply-chain.org
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www.ecrnet.org
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cscmp.org
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www.cscmpthailand.org
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www.supplychainasia.com
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www.gs1.org
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www.epcglobalinc.org
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Continuous ReplenishmentSynchronized Production/ Supply
d d
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Advanced Supply Chain ManagementSurath PralongsilDecember 2009
Vendor-Managed Inventory
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Business Process
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Order To Cash (O2C) Process
Purchase To Pay (P2P) Process
Order To Cash (O2C) Process
Order entry
Credit limit
StockAvailable-To-Promise (ATP)
Customer Order Cust. No.
Address Product Code Quantity Requested
Delivery Date
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Available-To-Promise (ATP)
Soft allocation
Processed orders with thesame requested date
Route allocation
Load configuration
Picking as per load
Picking confirmation, stockupdated, AR generated, Invoicing
Collection & payment
y
Picking Slip
Product Code Quantity Loading bay
Invoice & DO XXX XXX XXX XXX
Enabling Technologyin Supply Chain Management
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Supp y C a a ag
IT Systems
What are Legacy System?
Legacy IT systems were developed prior to 1990 and have a
functional focus
Legacy systems are used for simple operations like order entry &processing, managing inventory, customer & product databases
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processing, managing inventory, customer & product databases
Each activity within the organization has its own proprietary systemand there is little integration or communication between the systems
HumanResources Engineering
Finance &Accounting
Sales &Marketing
LogisticsHQ &
BranchesOperations
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
HumanResources Engineering
Finance &Accounting
Sales &Marketing
LogisticsHQ &
BranchesOperationsHuman
ResourcesHuman
ResourcesHuman
ResourcesHuman
Resources EngineeringFinance &AccountingFinance &AccountingFinance &AccountingFinance &Accounting
Sales &MarketingSales &
MarketingSales &
MarketingSales &
MarketingLogistics
HQ &Branches
HQ &Branches
HQ &Branches
HQ &Branches
Operations
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
FunctionServer &Database
What are ERP System?
ERP stands for Enterprise Resource Planning & ERP systems are used to
integrate business systems & processes. ERP systems allow all areas &functions of an organization to combine & analyze data.
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Central Databaseand Servers
Engineering Operations
Sales &Marketing
HumanResources
Headquartersand Branches
Finance &Accounting Logistics
SupplierRelationshipManagement
CustomerRelationshipManagement
Central Databaseand Servers
EngineeringEngineering OperationsOperations
Sales &MarketingSales &
MarketingHuman
ResourcesHuman
Resources
Headquartersand BranchesHeadquartersand Branches
Finance &AccountingFinance &Accounting LogisticsLogistics
SupplierRelationshipManagement
CustomerRelationshipManagement
What ERP Covers?
A sales order is made and recorded (Sales)
Parts are reserved or purchased & delivered (Purchasing & Supply)
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Labour is scheduled & charged (Human Resources)
The cost of parts is taken from general ledger inventory accounts, &
the revenue is booked & billed when the order is completed (Finance)
The required goods are manufactured or assembled(Production)
The completed order is shipped to the customer (Logistics)
Module in SAP R/3
FI - Financial Accounting
FI-GL General Ledger Accounting
FI-LC Consolidation
FI-AP Accounts Payable
CO Controlling
CO-OM Overhead Costing (CostCenters, Activity Based Costing,Internal Order Costing)
CO-PA Profitability Analysis
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FI-AR Accounts Receivable FI-BL Bank Accounting
FI-AA Asset Accounting
FI-SL Special Purpose Ledger
FI-FM Funds Management
CO PA Profitability Analysis
CO-PC Product Cost ControllingAM- Asset Management
PS Project System
FS Insurance
FS-CD Collections anddisbursements
FS-CM Claims management
FS-CS Commissions management
FS-PM Policy management FS-RI Reinsurance management
FS-PE Payment Engine (BankingPayments Solution still indevelopment)
Module in SAP R/3
IS Industry Solution
IS-A Automotive IS-ADEC Aerospace and Defense
IS-AFS Apparel and Footwear
IS B B ki
IS-PS Public Sector
IS-R Retail
IS-REA Recycling Admin
IS-SP Service Provider
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IS-B Banking
IS-BEV Beverage IS-CWM Catch Weight
Management (Variable WeightItems such as Meats and Cheeses)
IS-DFS Defense and Security IS-H Hospital
IS-HER Higher Education
IS-HSS Hospitality Management
IS-HT High tech IS-M Media
IS-MIN Mining
IS-MP Milling (or IS-MILL)
IS-OIL Oil
IS-T Telecommunications IS-U Utilities
HR Human resources
HR-PA
Personnel Administration HR-PD
Personnel Development
HR-RC
Recruitment
Module in SAP R/3
PM - Plant Maintenance
MM - Materials Management
QM - Quality Management
PP - Production Planning
SCM - Supply Chain Management
SEM - Strategic EnterpriseManagement
WM - Warehouse Management
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SD - Sales and Distribution Helps to optimize all the tasks and
activities carried out in sales,delivery and billing. Key elementsare: pre-sales support, inquiryprocessing, quotation processing,sales order processing, deliveryprocessing, billing and salesinformation system.
HUM - Handling Unit Management
AF&R - Advanced Forecasting &Replenishment
Advance Planning & Scheduling (APS) System:Architecture of Advanced Planner & Optimizer (APO)
Partner
Internet/
APO
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Customer
Partner/EDI/XML/RosettaNet
Source: SAP
SCM Application
Supply Chain Collaboration (Linkage among trading partners in
supply chain) Collaborative Planning
Network Planning
Supply Chain Planning
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Supply Chain Planning
Material Requirement Planning
Advanced Planning and Scheduling
Demand and Supply Planning
Supply Chain Execution
Procurement
Warehouse Management System
Transport Management System
Sales Order Processing System
Manufacturing System
Source: Tokuii Corporation
Advanced Supply Chain Management
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December 2009
Value Chain Management
Supply Chain ManagementLogistics Management
Wrap-Up: Advanced SCM
Value chain
Value creation
Supply chain Logistics
Enterprise integration
Strategic, Tactical, Operational SCM:Balance demand and supply
Advantage of robust SCM Match demand and supply
Reduced cost Improved quality and service
Higher value
Demand variability: beer game bullwhipeffect
Integrated supply chain planning
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SCM objectives Delivery of value
Responsiveness
Reliability
Competitive advantage in SCM Globalization
Integration
Time-based competition
Supply chain characteristics Ship to stock
Make to stock
Assemble to order
Make to order
Buy to order
Engineer to order
Lean v.s. Agile supply chain
Push and pull
Postponement (mass customization):
decoupling point
Integrated supply chain planning
Sales & Operations Planning (Demand &Supply Planning)
Demand Planning
Distribution Requirement Planning (DRP)
Distribution Resource Planning (DRP II)
Material Requirement Planning (MRP)
Manufacturing Resource Planning (MRP II)
Master Production Schedule (MPS)
Detailed Production Schedule (DPS)
Efficient Consumer Response (ECR)
Synchronized Production/Supply
Vendor-Managed Inventory
O2C, P2P ERP: Enterprise Resource Planning
APS: Advanced Planning & Scheduling
EPC: Electronic Product Code
RFID: Radio Frequency Identification
Recommended