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Innovative and Integrated Supply Chains
in the 21st Century
Innovative Supply Chains Principles (Pre-Meeting)
Dr. Manu Vora, ASQ Fellow and CQE
Chairman and President, Business Excellence, Inc., USA
Advisor of Eminence, Business Excellence, ASQ India, New Delhi, India Adjunct Faculty, School of Professional Studies, Northwestern Univ., USA
Adjunct Faculty, Great Lakes Institute of Management, Chennai, India
ASQ Section 1208, Warrenville, IL, 11/03/15
2
Introduction Importance of Supply Chain Management
(SCM) Conventional to Contemporary Supply
Chain Drivers of Supply Chain Performance Supply Chain Performance Measurements Major References
25th Annual State of US Logistics - 2013
4
Importance of Supply Chain: Logistics in the Manufacturing Firm
Profit 4%
Logistics Cost 21%
Marketing Cost 27%
Manufacturing Cost 48%
Profit
Logistics Cost
Marketing Cost
Manufacturing Cost
Typical Supply Chains
Supply Chain Configuration
Supply Chain Configuration
8
Push/Pull View of Supply Chains
Procurement, Manufacturing and Replenishment cycles
Customer Order Cycle
Customer Order Arrives
PUSH PROCESSES PULL PROCESSES
9
Supply Chain Decisions: Structuring Drivers
Strategy (Design)
Planning
Operation
A Framework for Structuring Drivers
Competitive Strategy
Supply Chain Strategy
Efficiency Responsiveness
Facilities Inventory Transportation
Information
Supply chain structure
Cross Functional Drivers
Sourcing Pricing
Logistical Drivers
11
Role of Inventory in the Supply Chain Improve Matching of Supply
and Demand
Improved Forecasting
Reduce Material Flow Time
Reduce Waiting Time
Reduce Buffer Inventory
Economies of ScaleSupply / Demand
VariabilitySeasonal
Variability
Cycle Inventory Safety Inventory
Seasonal Inventory
12
Supplier Assessment Factors
Replenishment Lead Time
On-Time Performance Supply Flexibility Delivery Frequency/
Minimum Lot Size Supply Quality Inbound Transportation
Cost
Pricing Terms Information
Coordination Capability
Design Collaboration Capability
Exchange Rates, Taxes, Duties
Supplier Viability
Product Categorization by Value and Criticality
Critical Items – Long lead time and specialty chemicals
(Ensure availability – coordinate production
plan at buyer & supplier)
Strategic Items – Electronics at auto Mfg.
(Life-time value/cost of relationship – collaborate with
supplier for design and production)
General Items – Indirect materials (Lower acquisition or
transaction costs)
Bulk Purchase Items – Packaging &
bulk chemicals (Auctions – total cost of
ownership)
Low
Low
High
High
Crit
ical
ity
Value/Cost
14
Macro Processes in a Supply Chain – IT Framework
Supplier
Relationship Management
(SRM)
Internal Supply Chain Management
(ISCM)
Customer Relationship Management
(CRM)
Transaction Management Foundation (TFM)
15
B2B E-Business Value Proposition
Reduced Transaction Charges
Market Efficiencies
Supply Chain Benefits
Ease
of I
mpl
emen
tatio
n
Easy
H
ard
Value Created Low High
16
Collaborative Planning, Forecasting & Replenishment (CPFR)
https://www.bisg.org/docs/VICS-CPFR.pdf
17
Supply Chain Council (SCC) SCOR Model
Industry Groups Covered: – Aerospace – Computer & electronics – Pharmaceuticals & chemicals – Utilities – Retail – Defense – Semiconductors
Supply Chain Operations Reference (SCOR) Model (source: Supply Chain Council, SCC);
SCOR Model (Supply Chain Council - SCC)
SCOR Model Decomposition (SCC)
20
SCOR Model (Supply Chain Council)
Supply Chain Metrics (SCC)
22
Balanced Measures for Supply Chains Customer:
Customer order response time Customer perception of supply chain value
Internal Business Process: Value added time/total time in supply chain No. of choices/order cycle time
Learning & Growth: Time between product finalization and customer delivery No. of shared data sets/total data sets
Financial: SC costs of purchasing, inventory, poor quality & delivery failure % of SC target costs achieved % SC profits earned Cash-to-cash cycle time Return on supply chain assets
Source: “Principles of Supply Chain: A Balanced Approach”, Wisner et al., Thompson, South-Western, 2005.
23
Major References Sunil Chopra and Peter Meindl (2012). Supply Chain Management: Strategy, Planning, and Operation, 5th Edition,
Prentice Hall, Upper Saddle River, NJ. Manu K. Vora (2015). 7 Steps to Link Quality Improvement to Your Supply Chain, Supply Chain Management Review,
Vol. 19, No. 4, pp. 44-51, July/August, Framingham, MA. Reuben E. Slone, J.. Paul Dittmann, & John T. Mentzer (2010). The New Supply Chain Agenda: The 5 Steps that Drive Real
Value, Harvard Business Press, Boston, MA , 2010. “The Reverse Supply Chain” by V. Daniel R. Guide, Jr. and Luk N. Van Wasenhove, HBR Reprint No. F0202D – 2/2002. “Rapid-Fire Fulfillment” by Kasra Ferdows, Michael A. Lewis, and Jose A.D. Machuca, HBR Reprint No. R0411G ($3.70) – 11/2004. “Aligning Incentives in Supply Chains” by V. G. Narayanan and Ananth Raman, HBR Reprint No. 8363 – 11/2004. “Mass Customization at Hewlett-Packard: The Power of Postponement” by Edward Feitzinger and Hau L. Lee, HBR Reprint No.
97101 – 1-2/1997. “What is the Right Supply Chain for Your Product?”, Marshall L. Fisher, HBR Reprint No. 8509 – 3-4/1997. “Fast, Global, and Entrepreneurial: Supply Chain Management, Hong Kong Style” by Joan Magretta, HBR Reprint No. 2020 - 8-
9/199 “The Power of Virtual Integration: An Interview with Dell Computer’s Michael Dell” by Joan Magretta, HBR Reprint No. 7907 – 3-
4/1998. “The Achilles’ Heel of Supply Chain Management” by Ananth Raman, Nicole DeHoratius, and Zeynep Ton, HBR Reprint No. F0105C
– 5/2001. “How to Ensure Information Integrity for Effective and Economic Health Care” by Vijay V. Mandke, Sharon R. Miller, Paul R.
Prabhaker, Manu K. Vora, and Nila M. Vora, AHIMA 2003 National Convention, Minneapolis, MN, 10/21/2003. “Deep Change: How Operational Innovation Can Transform Your Company” by Michael Hammer, HBR reprint No. 6573 – 4/2004.
24
Pre-Meeting
Thanks!
Any Questions?