Transcript Document

Chapter 8
Integrating the supply
chain
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
Integration in the supply chain

Key issue
1
How can we integrate
internally, externally and
electronically?
Integration in the supply chain
•
What is Supply Chain Integration
• the degree to which the firm can strategically
collaborate with their supply chain partners
and collaboratively manage the intra- and
inter-organization processes to achieve the
effective and efficient flows of
•
•
•
•
Product and services
Information
Money
Decisions
• With the objective of providing the maximum value to
the customer at low cost and high speed
Integration in the supply chain

Measures of integration
– Access to planning system
– Sharing production plans
– Joint EDI access / networks
– Knowledge of inventory mix / levels
– Packaging customization
– Delivery frequencies
– Common logistical equipment / containers
– Common use of third-party logistics
Integration in the supply chain

Internal integration: function to function
Purchasing
Production
Distribution
Low price
High productivity of
machine and labor
Keep warehousing
operation smooth
Unreliable delivery
and low quality
High batch size
Post-manufacturing
operation being resisted
Poor available
distribution
Additional complexity of
customizing products
Integration in the supply chain
Inter-company collaboration: a manual approach
Strategic Collaboration
Decision Flow
Products & Services Flow
Enterprise
Information & Knowledge Flow
Enterprise
A
B
Financial Flow
Information & Knowledge Flow
Financial Flow
Decision Flow
END CUSTOMERS
RAW MATERIALS
Products & Services Flow
Integration in the supply chain

Electronic collaboration
Transactional
The electronic execution of
transaction
Information sharing
The electronic sharing or
exchange of information
Collaboration planning
Strategic, tactical and
operational exchange
Electronic
collaboration
Integration in the supply chain
Information
flow in apparel
supply chain
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
Efficient consumer response

Key issue
1
How can collaboration be extended
across the supply chain to focus
on meeting consumer demand?
Efficient consumer response

Category management
Category
Establish
management infrastructure
Product
replenishment
Integrated
suppliers
Optimize
introductions
Optimize
assortments
Optimize
promotions
Synchronized
production
Continuous
replenishment
Automated
store ordering
Reliable
operations
Enabling
technologies
EDI
Crossdocking
EFT
Item coding
and database
maintenance
ABC
Continuous replenishment
Efficient consumer response

Enabling technologies
– Scanning data
– Data warehousing
– Data mining

The data include
– Demand / consumption / sales information
– Cash flow
– Stocks of finished goods / work in progress
– Delivery and output status
Efficient consumer response
Category
management
Account
management
Demand
management
Required Multifunctional
selling teams
capability
Price list
restructuring
Effective and
customized
promotions
Continuous
replenishment
Joint
inventory
management
Cross-dock
operations
Continuous
replenishment
Effective
logistics and
product flows
Quick response
Enabling
technologies
Effective
information
sharing
Automated
order
generation
Bar-coding
and the use of
other scanning
technology
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
Collaborative planning,
forecasting and replenishment

Key issue
1
How can collaboration be extended
to strategic as to well as
operational levels?
Collaborative planning,
forecasting and replenishment

CPFR Model
1.
Planning
2.
3.
4.
Forecasting 5.
6.
7.
8.
replenishment 9.
Develop front-end agreement
Create joint business plans
Create individual sales forecasts
Identify exceptions to sales forecasts
Resolve / collaborate on exception items
Create order forecast
Identify exceptions to order forecast
Resolve / collaborate on exception items
Generate orders
Wal-mart’s CPFR Process Seller
FRONT END AGREEMENT
Collaborative
Planning
JOINT BUSINESS PLAN
CREATE SALES FORECAST
Collaborative
IDENTIFY
EXCEPTIONS
Goal : Link
buyer and Seller Forecasting
Electronically
RESOLVE
EXCEPTIONS
CREATE ORDER FORECAST
Collaborative
Replenishment
IDENTIFY EXCEPTIONS
RESOLVE EXCEPTIONS
Buyer
GENERATE ORDER
Wal-Mart’s CPFR Program



CPFR has “blurred the lines between supplier
and customer”
Suppliers buy into their program because they
have to to work with Wal-Mart, but more
importantly, because Wal-Mart’s Systems
provide increased profits for Wal-Mart and their
suppliers
Wal-Mart “teaches” their suppliers how to
minimize shipping, inventory and other costs by
showing them their own model.
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
Managing supply chain relationships

Key issue
1
How can broader-based
relationships be formed between
trading partners in the supply chain?
Managing supply chain relationships

Creating closer relationships
Partnership
Arm’s length transaction
R&D
Marketing
R&D
Marketing
Logistics
Operations
Logistics Operations
Information
system
Information
system
InformationInformation
system
system
supplier
customer
Bow tie
supplier
customer
Diamond
Managing supply chain relationships

Factors in forming supply chain
relationships
– The order winner
– The method making sourcing decisions
– The nature of electronic collaboration
– The attitude to capacity planning
– Call-off requirements
– Price negotiations
– Managing product quality
– Managing research and development
– The level of pressure
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
A framework for managing
the supply chain

Key issue
1
What are the management
implications of integrating the
supply chain?
A framework for managing
the supply chain
6
Develop measurement
system for supply chain
performance
4
5
Pilot new supply
chain solutions
1
Develop a supply
chain strategy
Organize for supply
chain performance
2
Gather supply chain
information
3
Develop effective
partnerships and
alliances
A framework for managing
the supply chain

Develop a supply chain strategy
– Customer service requirements
– Plant and distribution center network design
– Inventory management
– Outsourcing and third-party logistics
relationships
– Business processes
– Organizational design and training
requirements
– Performance metrics and goals
A framework for managing
the supply chain

Pilot new supply chain solutions
– Successful supply chain improvement including
Involvement of key stakeholders, suppliers,
customers and employees
 Selection of scope and environment, focusing on
avoiding risk
 Identification of the key questions that the pilot must
answer

A framework for managing
the supply chain

Develop measurement systems for
supply chain performance
– On time in full, outbound
– On time in full, inbound
– Internal defect rates
– New product introduction rate
– Cost reduction
– Stock turns
– Order to delivery lead time
– Fiscal flexibility