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Digital Business Imperative
“The storm that’s arriving—the real disturbance in the force—is when the thousands and thousands of institutions that exist today seize the power of this global computing and communications infrastructure and use it to transform themselves. That’s the real revolution.”
- Lou Gerstner, IBM
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Agenda• Supply Chain Strategic Assessment - Focus of
Study
• Phase I • The Supply Chain Processes• Methodology Overview
• Phase II • Strategic Alignment for the Digital
Economy • Methodology Overview
• Question and Answers
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Supply Chain Management Definition
“the process of developing decisions and
taking actions to direct the activities of
people within the supply chain toward
common objectives”
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Why this multi-year study?
• The need to determine the decision making processes that are key to effective supply chain performance.
• The need for further definition of practices and PRINCIPLES that impact performance of the decision processes.
• The need for a “conversation framework” to share issues and information about the decision processes.
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Focus of Study• Explores the current decision making
practices, principles and decision process performance in the four SCOR process areas:
PLAN, SOURCE, MAKE, and DELIVER.
• Attempts to identify the practices and principles that best correlate to superior decision-making performance in Supply Chain Management.
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The Supply Chain Decision Process Groupings
Suppliers’Supplier
Supplier
Internal or External
Your Company Customer
Internal or External
Customer’sCustomer
Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source
Plan
Operational Strategy Planning
Procurement
Planning & Scheduling
Promise Delivery
Distribution Management
Demand Management
Balancing Change
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Methodology Overview Research Objectives
• Determine what Supply Chain Management practices relate to superior performance.
• Determine the Best Practices that relate to superior supply chain performance.
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• Determine how the “common themes” questions relate to performance.
• Determine what practices "go together“. (strongest inter-correlation, factor analysis).
• Determine the frequency and institutionalization for Best Practices.
Methodology Overview Research Objectives
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Methodology Overview • Questions were developed through
hundreds of interviews with practitioners.
• Questions were organized by SCOR model area.
• A survey questionnaire was developed using a scale measuring the frequency of the principle or practice.
1- never or does not exist2- sometimes3- frequently4- mostly5- always or definitely
exists
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How Effective is Your Supply Chain Management?
The Supply Chain Strategic Assessment Will Show You
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The Supply Chain Maturity Model
What Is It ?
The means to assess the quality and effectiveness of the supply chain management process.
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The Supply Chain Maturity Model
How Is It Used?
The model currently defines five levels of supply chain management maturity ranging from Ad hoc to Extended (world class).
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The Supply Chain Maturity Model
How Is It Used? (Continued)
The model extends the value and capabilities of the SCOR Model by looking at
• integration, strategy, cooperation, collaboration, • jobs, organization structure, • measurement systems, best practices, • customer focus and • the level of cross-functional and cross-company
process definition, interaction and understanding.
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The Supply Chain Maturity ModelPhase I
What Can I Learn From The Model?
Understanding and insight into the degree
of maturity and level of sophistication of
your supply chain management processes
relative to other enterprises and industries.
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Levels of Supply Chain Maturity
Ad Hoc , Level 1:
The supply chain and the SCM practices are unstructured
and ill-defined. Process measures are not in place and the
jobs and organizational structures are based upon the
traditional functions, not horizontal supply chain
processes. Individual heroics and “working around the
system” are what make things happen.
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Levels of Supply Chain Maturity
Defined, Level 2:
The basic SCM processes are defined and documented.
The order commitment, procurement and other processes,
for example, are available in flow charts, and changes to
these processes must now go through a formal procedure.
Jobs and organizational structures include an SCM aspect,
but remain basically traditional.
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Levels of Supply Chain Maturity
Linked, Level 3:
The breakthrough level. Managers employ SCM with
strategic intent and results. Broad SCM jobs and
structures are put in place outside of traditional
functions. One common indicator is the appearance of
the title "supply chain manager."
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Levels of Supply Chain Maturity
Integrated, Level 4:
The company, its vendors and suppliers, take cooperation to the
process level. Organizational structures and jobs are based on
SCM procedures, and traditional functions, as they relate to the
supply chain, begin to disappear altogether. SCM measures
and management systems are deeply imbedded in the
organization. Advanced SCM practices
take shape.
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Levels of Supply Chain Maturity
Extended, Level 5, World Class:
Competition is based upon multi-firm supply chains.
Collaboration between legal entities is routine to the point
where advanced SCM practices that allow transfer of
responsibility without legal ownership are in place. Trust
and mutual dependency are the glue holding the extended
supply chain together. A horizontal,
customer-focused, collaborative culture
is firmly in place.
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Understanding the Supply Chain Management Maturity (SCM) Model
•Using this framework, managers can pinpoint areas of
progress and stagnation.
•A maturity scale matrixed against six measurement
categories provides a powerful visual scorecard of the
current situation in each area of opportunity.
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The Supply Chain Management Maturity Model
ProcessView
Process Structures
Process Jobs
Process Values/ Beliefs
Process Management / Measurement
Best Practices
Ad Hoc
Defined
Linked
Integrated
Extended
Basic ProcessStructure
Basic Process
Jobs
Basic Operation Strategy
BasicSCM
Advanced ProcessFocus
AdvancedSCM
Measures
Basic SCM
Measures
Advanced Process
Documentation
AdvancedProcess
Structure
AdvancedSCM
Practices
Basic SCM
PracticesBasic Process
Documentation
Engine GroupChassis
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Examples of Supply Chain Management Process
Opportunities (SCOR View)
•PLAN Example Opportunities to Consider
• Engage your suppliers /customers in plan
development, execution and review.
• Integrate customer information into demand planning
and increase granularity of forecast by customer.
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Examples of Supply Chain Management Process
Opportunities (SCOR View)
SOURCE Example Opportunities to Consider
• Integration of suppliers early in planning and
scheduling process.
• Formalize a cross-functional “source” team that meets
on a regular basis.
• Electronic and “people” integration of
suppliers into “source” process.
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Examples of Supply Chain Management Process
Opportunities (SCOR View)
MAKE Example Opportunities to Consider
•Review and update “actual” monthly supplier
lead times.
•Integrate customers planning / scheduling
information with yours.
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Examples of Supply Chain Management Process
Opportunities (SCOR View)
DELIVER Example Opportunity to Consider
•Automatic replenishment of customer's
inventory and distribution.
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Beyond the Supply Chain Management Maturity (SCM)
Model?
Integrated
Defined
Linked
Ad Hoc
Extended
ProcessView
ProcessStructures
ProcessJobs
ProcessValues/ Beliefs
ProcessManagement /Measu rement
Best Practices
The SCM Maturity Model
Advanced Process
Documentation
Basic Proce ssStructure
Advanced Process
Structure
Basic Operation
Strategy
Basic Process
Jobs
Basic SCM
Advanced ProcessFoc us
Basic SCM Measures
Advanced SCM
Measures
Basic SCM Practices
Advanced SCM
Practices
Basic Proce ssDocumentation
Digitization and Internet?
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Supply Chain Evolution Framework
The Supply Chain configurations in this digital economy are reshaping the historical “chain” into “networks”.
These configurations are quickly demanding the evolution of supply chains beyond the “extended” stage of the SC Maturity Model.
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Digital Company-to-Company Structures
The Virtual Face
Digital form of an existing non-digital function.
Example: Web versions of newspapers
Source: Burn, J.M. and Ash, C. (1999), “Knowledge Management Strategies for Virtual Organizations”, Information Resources Management Journal, Jan-March 2000
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Digital Company-to-Company Structures
Shared partnership
Example: Collaborative design, engineering & support, and collaborative planning between a singular supplier and a customer
Co-Alliance Model
Source: Burn, J.M. and Ash, C. (1999), “Knowledge Management Strategies for Virtual Organizations”, Information Resources Management Journal, Jan-March 2000
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Digital Company-to-Company Structures
Star-alliance Model
Hub represents interconnected members of coordinated networks surrounded by satellite organizations.
Examples: New automotive “vertical” market
Source: Burn, J.M. and Ash, C. (1999), “Knowledge Management Strategies for Virtual Organizations”, Information Resources Management Journal, Jan-March 2000
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Digital Company-to-Company Structures
Value-alliance Model
Range of products or services in one package
Example: Defense contractors supplying parts and support to a certain weapons system
Source: Burn, J.M. and Ash, C. (1999), “Knowledge Management Strategies for Virtual Organizations”, Information Resources Management Journal, Jan-March 2000
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Digital Company-to-Company Structures
Market-alliance Model
Members depend upon each other for the supply of actual products and services and operate in a digital market.
Example: Amazon.com
Source: Burn, J.M. and Ash, C. (1999), “Knowledge Management Strategies for Virtual Organizations”, Information Resources Management Journal, Jan-March 2000
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Digital Company-to-Company Structures
Virtual Broker
Designers of dynamic networks or net-market makers
Example: B2B vertical marketplaces formed to bring buyers and sellers together.
Source: Burn, J.M. and Ash, C. (1999), “Knowledge Management Strategies for Virtual Organizations”, Information Resources Management Journal, Jan-March 2000
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Phase I – SC Maturity Model
The Extended Level Could Not be adequately measured.
Now, the Internet makes it…
…attainable;…affordable;…measurable.
Supply Chain Strategic Assessment
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Suggested Digital Supply Chain
Definition
“extending outward beyond company boundaries to your customers and suppliers and connecting with them through the use of digital technologies and integrating practices.”
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Methodology Overview • Phase I - Questions were organized by
SCOR model area. Include Integrating Practices for Digital Business Creation
• Phase II – Digital Technology specific questions
• A new survey questionnaire was developed using the existing scale measuring the frequency of the principle or practice.
1- never or does not exist2- sometimes3- frequently4- mostly5- always or definitely exists
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Methodology Overview Digital Technologies Sample Questions
• Do your customers place orders for your goods and services through the Internet?
• Do you gather customer data (usage, forecast, ideas, complaints) though the Internet?
• Do you gather information about your suppliers (and their products) through the Internet?
• Do you gather supplier data (performance, forecast, ideas) through the Internet?
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Methodology Overview
Integrating Practices Sample Questions from Phase I
“Extending outward to Suppliers and Customers”
P15 Does this team (operations strategy team) participate in supplier and customer relationships?
S8 Do you share planning and scheduling information with suppliers?
S10 Do you "collaborate" with your suppliers to develop a plan?
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Methodology Overview
Integrating Practices Sample Questions from Phase I
“Extending outward to Suppliers and Customers”
P25 Does your demand management process make use of customer information?
M13 Is your customer's planning and scheduling information included in yours?
D12 Do you automatically replenish a customer’s inventory?
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Beyond the Extended Digital Supply Chain
By developing a Digital Supply Chain that goes beyond the “extended” level using the enabling power of the new digital technologies, a company can build unique capabilities that lead to a sustainable competitive advantage.
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Supply Chain Strategic Assessment
Contact:
Katie KasperSapient [email protected]
614.207.9135
Questions and Answers