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International Supply chain management

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Title: International Supply chain management


1
International Supply chain management
  • dr. Peter Trkman
  • docent

2
Outline
  • Part 1 Intro
  • Part 2 SCM Strategy
  • Part 3 What e-business can offer
  • Part 4 Performance measurement
  • evaluation of e-procurement benefits
  • use of simulations
  • Part 5 Standards in SCs
  • Part 6 SCM selected future trends

3
Learning objectives
  • Be able to understand the importance of SCM and
    the main challenges
  • Be able to understand each of the covered topics
  • its importance
  • its connection to SC strategy/performance
  • Be able to apply it to real-world examples

4
Course materials
  • Partly based on
  • Chopra, S., Meindl, P. (2007). Supply Chain
    Management strategy, planning and operation.
    Upper Saddle River, New Jersey Pearson Prentice
    Hall.
  • Supplemented with materials from various sources
    (listed in the references section)
  • Note if any of you is particularly interested in
    a specific topic I can recommend/send additional
    materials

5
Intro what is a supply chain
6
What is a supply chain?
Main flows products (services), information,
money
7
a nice picture
8
SC in practice a network of connections
http//www.gscg.org8080/opencms/export/sites/defa
ult/gscg/images/supplychain_simple.gif
9
SC definiton
  • the flow of material, information and money from
    suppliers of raw material, production and
    transport companies to the final customer,
  • the connection of business processes between
    various links (companies) in the chain,
  • usually includes more than one company
  • (several different but similar definitions
    exist)

10
Why is SCM important
It has become a competitive differentiator!
11
Why is SCM important?
  • http//www.youtube.com/watch?v6rmV__Yrk7Q

12
The main goals

13
Part 2Supply chain strategy
14
Content (part 2)
  • importance of strategy
  • information flow
  • problems in real world
  • bullwhip effect

15
Strategic actions
16
and the main problems
17
It all comes down to
  • information flow/sharing
  • and what to do with this information
  • trust

18
Information flow in theory
19
Information flow in practice
20
Problems (1) Volvo and green cars
  • 1995 excessive inventory of green cars
  • sales and marketing group started aggressively
    offering special deals, discounts, and rebates
  • green cars started to sell
  • supply chain planning group decided to produce
    even more green cars to meet the seemingly
    increased demand.
  • Volvo was left with a huge inventory of green
    cars at the end of the year

21
Problems (2) Bullwhip effect
  • Theoretically described in the 60s
  • practical case study in the 80s (Pampers diapers)
  • the use of diapers is constant
  • the orders for Procter Gamble fluctuate quite a
    bit
  • the orders for their suppliers even more

22
Demand fluctuation
23
One of the reasonssupplier discounts
Source Mason-Jones et al., 2000
24
Achieving strategic fit
  • Competitive strategy and functional strategy must
    fit togetger to form a coordinated overall
    strategy
  • The different functions in a company must
    appropriately structure their processes and
    resources to be able to execute these strategies
  • (remember Volvo ?)
  • the design of the SC must be aligned to support
    this strategy

25
Connection of strategy, planning and operation
Strategy/design
Planning
Operation
26
Last but certainly not least
  • Cooperation in the SC
  • How to achieve it? Which are the main barriers?
  • How to cooperate with suppliers in e.g. product
    development
  • What are the potential consequence of supplier
    non-performance
  • (more in the section on SC risks)

27
Sidenote process redesign AS-IS model
Source Trkman et al., 2007
28
Process redesign TO-BE model
29
Part 3 the role of e-business
30
Content
  • information sharing
  • new business models
  • CPFR
  • VMI
  • case studies
  • Henkel/Eroski
  • Dell
  • Amazon

31
What e-business can offer
  • better information flow
  • closer cooperation between companies
  • new business models

32
Information sharing
  • point-of-sale data sharing (retailer and
    supplier)
  • production plans
  • development plans
  • etc.

33
New business models
  • E.g. vendor managed inventory
  • collaborative planning, forecasting and
    replenishment (CPFR)
  • mass customization
  • etc.

34
CPFR
  • A fundamental apsect of successful collaboration
    is the identification and resolution of
    exceptions
  • WHY are exception so problematic?
  • (p.519)

35
CPFR
Source http//www.vics.org/docs/committees/cpfr/C
PFR_Tabs_061802.pdf
36
CPFR case study
  • Henkel (detergent manufacturer) and Eroski
    (retailer)
  • Problem frequent stockouts, specially during
    promotions (15-20 products being promoted every
    month)
  • Sidenote why are promotions the most
    problematic?
  • 70 of forecasts had an average error of over 50
  • only 5 had errors under 20
  • Sidenote what is the added value of such
    forecasts?
  • after CPFR
  • 70 of sales had errors under 20 and only 5
    over 50
  • customer level of 98

37
Critical success factors
  • Front-end Agreement minimizes surprises on either
    side.
  • Formalizes the planning process
  • Clearly stated KPI metrics
  • Cross-functional project teams
  • Long-term cooperative relationship
  • Commitment and support from top management

Source www.csupomona.edu/hco/CBiz/CPFR(5)_Henkel
-Eroski.ppt
38
Results
Source www.csupomona.edu/hco/CBiz/CPFR(5)_Henkel
-Eroski.ppt
39
VMI, mass customization case studyDell - 1994
  • unimportant computer producer
  • high stock levels
  • low quality
  • low profitability

40
Main changes
  • the production for known customer (build-to-order
    model)
  • direct ordering and distribution (no
    intermediary)
  • inbound and outbound logistics vital the
    assembly of procured components
  • important role of information system (visibility
    of orders)

41
Dell - presentation
  • Movie
  • http//www.youtube.com/watch?vEEhNkzdKyrw

42
Dell - transformation
  • 1994-1998 increase in sales from 2 to 16
    billions USD
  • 2005 49 billions USD
  • information system is key
  • the customer orders over the internet and can
    follow the status of the order
  • assembly strongly supported with IT (as shown in
    the movie)

43
Dell critical success factors
  • demand management (forecasting, adaptation, price
    fluctuation)
  • product life-cycle management (what will be sold
    in the future)
  • supplier selection
  • a small number of reliable suppliers
  • liquidity management
  • 4 days cycle for customers 45 days for suppliers

44
Part 4 Performance measurement
45
Performance measurement
  • You Cant Manage What You Cant Measure

Source http//www.balancedscorecard.org
46
You get what you measure
47
Measures at SC level
  • Main measures in general
  • service level
  • final customers satisfaction
  • efficiency/profitability of the whole chain
  • But hard to measure/take actions based on these
    measures

48
Measurement performance
49
Measurement strategy
Source Santos et al., 2006
50
Main areas
  • facilities
  • inventory
  • transportation
  • information
  • sourcing
  • pricing
  • pp. 44-60

51
Facility
  • Metrics
  • Capacity
  • Utilization
  • Theoretical lead/cycle time
  • Actual cycle time
  • processing/setup/idle time

52
Inventory
  • Metrics
  • average inventory
  • average safety inventory
  • seasonal inventory
  • fraction of time out of stock

53
Transportation
  • Metrics
  • average cost per shipment
  • average outbound transportation costs
  • fraction transported by mode

54
Information
  • Metrics
  • forecast horizon
  • frequency of update
  • forecast error
  • variance from plan
  • usual mistake you plan, then you do not measure
    whether the plan was achieved
  • (practical example)

55
Sourcing
  • set of business processes required to purchase
    goods and services
  • Decisions
  • in-house or outsource?
  • supplier selection
  • (see also the section on risks)
  • procurement
  • see the case in the next (sub)section

56
Sourcing - 2
  • Metrics
  • Average and range of purchase price
  • Supply lead time
  • Fraction on-time deliveries (see lab exercise)

57
Pricing
  • profit margin
  • days sales outstanding
  • fixed costs per order
  • average order size

58
Main criteria for suppliers evaluation
  • lead time
  • reliability
  • flexibility
  • frequency (delivery lots)
  • quality of products/services kakovost
    materiala/storitev
  • transport costs
  • coordination ability
  • cooperation in development
  • exchange rates, duties etc.
  • viability (more in the risks section)
  • Both averages and variability matters!

59
Part 5 Standards in SCs
60
Content
  • Presented standards
  • SCOR
  • GS1
  • Global Evalog

61
The SC without standards
Complex processes
Source Mateja Podlogar
62
The SC with standards
Unified language
Source Mateja Podlogar
63
SCOR
  • Process view of SC
  • a systematic hierarhic set of processes

Source Supply Chain Council, www.supply-chain.org
64
SCOR model
65
Level 1
Source Supply Chain Council, www.supply-chain.org
66
Level 2
Source Supply Chain Council, www.supply-chain.org
67
Level 4
Source Supply Chain Council, www.supply-chain.org
68
(No Transcript)
69
SCOR model measurement
SourceTheeranuphattana, Tang, 2008
70
SCOR metrics
71
Popis bodocega želenega stanja procesov 4.
stopnje v Danofossovi Diviziji daljinskega
ogrevanja
Source Danfoss, Mr. Mihelic
72
GS1
  • GS1 a set of standards for efficient management
    of SCM with unique identification of products,
    transport vehicles , locations and services

73
(No Transcript)
74
(No Transcript)
75
GLOBAL EVALOG
  • MMOG/LE Materials Management Operations
    Guideline/Logistics Evaluation
  • Standard by
  • Oddette http//www.odette.org/html/home.htm in
  • AIAG (Automotive Industry Action Group)
    http//www.aiag.org/scriptcontent/index.cfm?sectio
    nhome
  • Several main car manufacturers

76
Categories
  • 6 chapters, 206 criteria

77
Processes
78
Measurement
  • The main criteria
  • delivery performance
  • supplier performance
  • internal performance

79
Why Renault chose MMOG LE to assess its
suppliers ?
  • 100 of Renault suppliers have to remain or to
    reach the world class level, in terms of
    logistics results and organization
  • Renault doesnt assess all suppliers
  • ? It was decided to use self assessments in order
    to
  • 1) get a diagnostic of suppliers logistics
    current level, compared to benchmarks detailed in
    MMOG LE
  • 2) check suppliers progress planning

Source www.smmt.co.uk/businessimprovement/DenisMo
zzo.ppt
80
PART 7 SCM Selected Future Trends
Picture source http//cutlerynewsjournal.files.wo
rdpress.com/2008/10/futuristic-sci-fi-01.jpg
81
Content
  • Assorted topics
  • RFID
  • analytics
  • environment

82
Supply chain management future trends
  • http//www.youtube.com/watch?vUS5lO1HfmEo
  • Summary
  • information, information and its utilization
  • collaboration working together
  • barriers environment, regulatory, price changes,
    congestions

83
New promising technology - RFID
  • Advantages over bar-code
  • no physical contact needed
  • new data can be written
  • a larger quantity of data
  • increased visibility/transparency in SCs
  • Several potential uses
  • see e.g. http//en.wikipedia.org/wiki/Rfid

84
RFID main components
  • System components
  • tag
  • either active (own batery) or passive (without
    energy source)
  • either read-only, write-once or full read-write
  • reader devices that convert radio waves from
    RFID tags into a form that can be passed to
    middleware software
  • middleware for retrieving data,filtering data
    feeds to application software, generating
    inventory movement notifications, monitoring tag
    and reader network performance, capturing
    history.

Source www.theiia.org/download.cfm?file93793
85
RFID - problems
  • relatively expensive
  • relatively unreliable
  • so we have acquired lots of data what to do
    with it now?

86
All kinds of possible uses ?
87
(No Transcript)
88
RFID
  • What is a RFID
  • http//www.youtube.com/watch?vyNPDgudPmXE
  • Kind of a joke
  • http//www.youtube.com/watch?veob532iEpqk

89
Business analytics
Some companies have built their very businesses
on their ability to collect, analyze, and act on
data. Every company can learn from what these
firms do (Davenport, 2007).
90
The main challenge
  • How to make correct relevant business decision
    based on bundles of very large volumes of both
    internal and external data.

91
Potential answer
  • An application of various advanced analytic
    techniques to data to answer questions or solve
    problems related to SCM. BA is not a technology
    but rather a group of approaches, organizational
    procedures and tools that are used in combination
    with one another to gain information, analyze
    that information, and predict outcomes of the
    problem solutions in any of the four areas of
    SCOR
  • (adapted from Bose, 2009)

92
Examples by SCOR area
  • in Plan analysing data to predict market trends
    of products and services and to improve
    performances of enterprise business systems
    (Azvine, 2005)
  • in Source the use of agent-based procurement
    system with procurement model, search,
    negotiation and evalution agents to improve
    supplier selection, price negotiation and
    supplier evaluation (Lee, 2009)
  • in Make the data can show the correct production
    of each and every inventory item not only in
    terms of time, but also about each production
    belt and batch (Ranjan, 2008)
  • in Deliver various application of BA in
    logistics management have been made in order to
    bring products to market more efficiently (Reyes,
    2005)

93
Business analytics in SCOR areas
  • SourceMarcos Paulo Valadares de Oliveira,
    unpublished

94
Case - UPS
  • UPS among the worlds most rigorous
    practitioners of operations research and
    industrial engineering,
  • Its capabilities were, until fairly recently,
    narrowly focused.
  • Today, UPS is wielding its statistical skill to
    track the movement of packages and to anticipate
    and influence the actions of people assessing
    the likelihood of customer attrition and
    identifying sources of problems.
  • it is able to accurately predict customer
    defections by examining usage patterns and
    complaints.
  • When the data point to a potential defector, a
    salesperson contacts that customer to review and
    resolve the problem, dramatically reducing the
    loss of accounts.

95
It aint simple the dimensions of BA use
Source www.analytics4.co.uk/en/about.php
96
Impact of analytics
Source Davenport, 2006
97
Environment
98
Corporate responsibility
  • See e.g. http//www.ericsson.com/ericsson/corpora
    te_responsibility/index.shtml
  • Note this is just a brief intro to a very
    important topic for our future however most of
    the issues are not SC specific, therefore they
    are not presented in great detail

99
Wal-mart approach
100
Possible steps
  • Identifying Goals, Metrics, and New Technologies
  • Certifying Environmentally Sustainable Products
  • Providing Network Partner Assistance to Suppliers
  • Committing to Larger Volumes of Environmentally
    Sustainable Products
  • Cutting out the Middleman
  • Consolidating Direct Suppliers
  • Restructuring the Buyer Role
  • Licensing Environmental Innovations

Sourcehttp//www.scmr.com/article/CA6457969.html
3
101
Important areas
  • energy efficiency
  • material and resource management, efficiency and
    control
  • safe and clean production
  • distribution and logistics
  • total costs
  • risk and liability
  • secure supply
  • innovation management.

Source http//www.fivewinds.com/uploadedfiles_sha
red/EnvironmentalSupplyChainManagement040127.pdf
102
References (general)
  • (note additional references available on request)
  • Main textbook
  • Chopra, S., Meindl, P. (2007). Supply Chain
    Management strategy, planning and operation.
    Upper Saddle River, New Jersey Pearson Prentice
    Hall.
  • Other references
  • Berlak, J., Weber, V. (2004). How to make
    e-Procurement viable for SME suppliers.
    Production Planning Control, 15(7), 671-677.
  • Brun, A., Caridi, M., Fahmy Salama, K.,
    Ravelli, I. (2006). Value and risk assessment of
    supply chain management improvement projects.
    International Journal of Production Economics,
    99(1-2), 186-201.
  • Caridi, M., Cavalieri, S., Diazzi, G.,
    Pirovano, C. (2004). Assessing the impact of
    e-Procurement strategies through the use of
    business process modelling and simulation
    techniques. Production Planning Control, 15(7),
    647-661.
  • Changchien, S. W., Shen, H.-Y. (2002). Supply
    chain reengineering using a core process analysis
    matrix and object-oriented simulation.
    Information Management, 39(5), 345-358.
  • Cho, S.-H., Eppinger, S. (2005). A
    Simulation-Based Process Model for Managing
    Complex Design Projects. IEEE Transactions on
    Engineering Management, 52(3), 316-328.
  • Cohen, S., Roussel, J. (2005). Strategic supply
    chain management the five disciplines for top
    performance. New York, NJ McGraw-Hill.
  • Davenport, T. (2006). Competing on Analytics.
    Harvard Business Review, 84(5), 150-151.

103
References (cont.)
  • Fisher, M. (1997). What is the Right Supply Chain
    for your Product? Harvard Business Review, 75(2),
    105-116.
  • Gunasekaran, A., Ngai, E. W. T. (2008).
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104
References (for analytics section)
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  • .

105
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