Studied by 16 people
THE SCM INTEGRATION MODEL
Identify Critical SC Trading Partners
Review & Establish SC strategies for
Align SC Strategies with key SC process objectives
Develop internal performance measures for key processes
Assess & Improve internal integration of key SC processes
Develop SC performance measures for key processes
Assess & Improve external process integration & performance
Extend process integration to 2nd tier supply chain partners and beyond
Reevaluate annually for as required
1. Identify Critical SC Trading Partners
Use trusted suppliers that provide a large share of the firm’s critical products and services
Identifying primary trading partners allows the firm the concentrate on managing links with these companies
Firms should map the network of primary trading partners
2. Review & Establish SC strategies for
Parts purchased & suppliers
Manufacturing processes
Design of the products manufactured
Mode of transportation
3. Align SC Strategies with key SC process objectives
Key processes and methods used to manage process links will vary among supply chain partners
Functional silos (departments whose only concern is about itself) may affect integration
A process is a set of activities designed to produce a product or service
The Eight Key Supply Chain Business Processes
Customer Relationship Management
Customer Service Management
Demand Management
Order Fulfillment
Manufacturing Flow Management
Supplier Relationship Management
Product Development and Commercialization
Returns Management
Customer Relationship Management
Identifying key customer segments, tailoring product and service agreements to meet their needs, measuring customer profitability and firm’s impact on customers.
Customer Service Management
Providing information to customers such as product availability, shipping dates and order status; and administering product and service agreements.
Demand Management
Balancing customer demand with the firm’s output capacity; forecasting demand and coordinating with production, purchasing and distribution.
Order Fulfillment
Meeting customer requirements by synchronizing the firm’s marketing, production and distribution plans.
Manufacturing Flow Management
Determining manufacturing process requirements to enable the right mix of flexibility and velocity to satisfy demand.
Supplier Relationship Management
Managing product and service agreements with suppliers; developing close working relationships with key suppliers.
Product Development and Commercialization
Developing new products frequently and getting them to market effectively; integrating suppliers and customers into the process to reduce time to market.
Returns Management
Managing used product disposition, product recalls, packaging requirements; and minimizing future returns
4. Develop internal performance measures for key processes
Performance measures should be designed for each key processes and functional objectives
Performance should be continuously measured using metrics designed for each process
Firm can track progress toward meeting each objectives
5. Assess & Improve internal integration of key SC processes
Coordination and collaboration internally and externally between firm trading partners
Transition from functional silos to teamwork and cooperation across business functions
Formation of cross-functional teams
ERP systems that link business processes and facilitate communication
6. Develop SC performance measures for key processes
External performance measures should align with internal performance measures
Monitor links with trading partners in key SCM processes
Design measures consistent with overall supply chain strategies
7. Assess & Improve external process integration & performance
Share knowledge management solutions, such as forecast information, new products, expansion plans
Monitor performance metrics to identify lack of process integration and supply chain weaknesses
Knowledge management solutions enable real-time collaboration and flow of information between supply chain partners
What is SOP?
An integrated process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans with the management of the supply chain
SOP is performed at least once a month and is reviewed by management at an aggregate (product family) level. Reconcile all supply, demand, and new product plans at both the detail and aggregate levels and tie to the business plan
Purpose of SOP
On a monthly basis align relevant Sales Marketing and SC developments (forecast, assortment, market options) with key decision moments (cost, pricing, introductions, capacity,...) to respond to demand and supply variations and risks
The level of subject review is covering relevant deviations and developments in the business, short term as as well as long term, resulting in financial or operational adaptations to the plan
The work is prepared and/or executed outside he SOP platform to provide the right information for appropriate decision making
Key integrated steps
Sales forecast report: Annual sales, backlog, inventory
Demand planning: Translate demand in net requirements
Supply planning: Review production capacity and ability
Pre SOP meeting: Resolve issues, recommendations and alternative plans
Execute SOP meeting: Single company wide plan
The four pillars of SOP
Neutral position between sales and production
Sponsorship/representation on a senior management level
Do accountable, consult, inform matrix
Business processes/flow shemes
Communication structure/meeting
Functional description
KPI’s and bonus schemes
ICT application & IT system
1.3. When would Operational Obstacles occur?
Ordering in large lots
Large replenishment lead times
Rationing and shortage gaming
1.4. Behavioral Obstacles
Failing to see the big picture and acting only in regard to a single department within the firm or a single firm within the supply chain.
The inability to easily share or retrieve trading partner information in real
time, as desired by the supply chain participants.
Unwillingness to work together or share information because of the fear that
the other party will take advantage of them or use the information unethically.
2. Approaches to improve SC integration
2.1. Aligning goals and incentives
2.2. Improving information visibility and accuracy
2.3. Improving operations to Synchronize Supply and Demand
2.4. Building strategic partnerships and trust
2.1. Aligning goals and incentives
Aligning goals across the SC
Aligning incentives across functions
The pricing for integration
From sell-in to Sell-through sales force incentives altering
===> Maximize total SC profits
2.2. Improving information visibility and accuracy
Sharing customer demand data
Implementing collaborative forecasting and planning
Designing single-stage control of replenishment
2.3. Improving operations to Synchronize Supply and Demand
Rationing based on past sales & sharing information to limit gaming
2.4. Building strategic partnerships and trust
Sharing of accurate information that is trusted by every stage —-> better matching of supply and demand throughout SC
A better relationship —> lower the transaction costs between SC stages
Belief & culture: benefits of any improvement in coordination are being shared equitably.
SUPPLY CHAIN RISK
Any probabilistic event happens outside or inside the SC that either intentionally or unintentionally disrupts the flow of goods, information, or money, in either supply, manufacturing, or demand process, leading to a reduction in the economic, social and environmental performance of the supply chain
Perspective 1: Risk typology based on the characteristics of risks
Exogenous risks: disruptions from outside SC: natural disasters and political turmoil
Endogenous risks: disruptions from inside SC: internal operational failure in the planning, sourcing, making and delivering of products or services to customers
Intentional risks: disruptions deliberately perpetuated to gain personal advantages and disrupt SC performance, whereas unintentional risks occur accidentally without the same underlying motivation
Perspective 2: Risk typology based on the location of risks
The location of risks: located in different structures and flows across SC
Risk affecting SC structures:
Supply-side risks: supplier downtime & quality problem,adverse relationship with suppliers due to cultural differences, suppliers insolvency and spare parts discontinuity
Manufacturing-side risks: subpar realization in operation planning. & demand-supply mismatches
Demand-side risk: deviation in demand volume and deviation of shipping requests from customers that require either delayed or expedited shipment
Perspective 2: Risk typology based on the location of risks
Happen in 3 types of flows across supply chain
Risk disrupting flows of money: exchange rate fluctuations, trade credit risk and rating, and payment time variability
Risk disrupting flows of goods: forward-process blockage and reverse-process blockage in the remanufacturing model, supply chain disintermediation, port disruption, geographical traits, and poor transport infrastructure
Risk disrupting flow of information: sequential decision-making under uncertainty, incomprehension of supply and demand
Perspective 3: Risk typology based on the impact of risks
Social risks - disruption that prevent the establishment of honorable and equitable actions for supply chain parties and society.
Ex: labor working conditions, company ethics, unfair wages
Environmental risk - disruptions that jeopardize the the interaction of the supply chain with the environment by which causing permanent destruction.
Ex: waste treatment problems, climate condition, and environmentally related scandals within the supply chain
SUPPLY CHAIN RESILIENCE
Refers to the supply chain’s capacity to absorb stress, recover critical functionality, and thrive in altered circumstances
Benefits SUPPLY CHAIN RESILIENCE
Companies that invest in SCR turn disruption —> a competitive advantage. Gross profit growth of resilience leaders outpaced that of laggard by up to 55%
Without resilience capabilities, companies are exposed to inevitable supply chain disruptions. SCR —> minimize cost, lost revenue in times of crisis and support accelerated growth in times of expansion
Early investments in resilience —> deliver immediate benefits fund the journey.
Ex: deploying inventory more efficiently with better demand visibility & improving procurement with better upstream visibility for sourcing
SUPPLY CHAIN SECURITY
Concept
Refer to both physical security relating to products and cyber security for software and services
Very greatly from group to group, and many different organizations involved
Complete SC security strategies require following risk management principles and cyber-defense in depth
Supply chain are increasingly complex global networks comprise of large and growing volumes of third party partner who need access to data and assurances they can control who sees that data
Every touchpoint adds an element of risk that needs to be assessed, managed and mitigated
Common supply chain security concerns
Data protection: secure data exchange involves trusting the other sources: 3rd parties or an e-commerce website
Data locality: critical data exists at all tiers of the supply chain, and should be located, classified and protected
Data visibility & governance: multi-enterprise business networks=facilitate the exchange of data; control over the data, the ability to decide who share it with and what each permissioned party can see
Fraud prevention: every point at which data is exchanged between parties or shifted within systems presents an opportunity to be tampered
Third party risk: SC often relies on tiers of suppliers to deliver finished goods —> each of these external parties can expose organizations to new risks
Manage SC security
1. Basic initiatives
2. Reactive initiatives
3. Proactive initiatives
4. Advanced initiatives
Use of security badges and guards
Conducting background checks on applicants
Using anti-virus software and passwords
Shipment tracking technologies
Implement security system in response to attacks/emergencies
Creating an executive-level position such as director of corporate security
Develop formal and comprehensive approach for assessing the firm’s exposure to security risks
Use of cyber-intrusion detection systems
Development of freight security plans in collaboration with 3PLS
Active participation of employees in industry security associations and conferences
Full collaboration with key suppliers and customers in developing quick recovery and continuity plans for supply chain disruptions
Train participants to test the resilience of the SC to security disruptions
Use of emergency control center to manage responses to unexpected SC disruptions
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