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MBA 518 Operations Management

MBA 518 Operations Management. Supply Chain Management. Greg Magnan, PhD Fall, 2004. SC Defined SC Strategy SC Benefits SC Challenges Summary. AGENDA. Business Environmental Factors. Global Competition Cost, Quality, Delivery, Flexibility, Innovation Increasing Stockholder Demands

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MBA 518 Operations Management

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  1. MBA 518 Operations Management Supply Chain Management Greg Magnan, PhD Fall, 2004

  2. SC Defined SC Strategy SC Benefits SC Challenges Summary AGENDA

  3. Business Environmental Factors • Global Competition • Cost, Quality, Delivery, Flexibility, Innovation • Increasing Stockholder Demands • ROIC, Asset Efficiency, EVA, etc. SCM Uniquely Positioned to Address BOTH

  4. Core SC Functions

  5. SCM Defined(Fawcett & Magnan, 2001) “Supply Chain Management involvescollaborationacross theenterpriseand amongchannel membersto design and manage value-addedmaterial, information and cash flowsto meet the needs of the endcustomer. The development and integration ofpeopleand technologicalresources underlie successful supply chain integration.”

  6. Potential Benefits from SCM • Increasedmarket shareandsalesgrowth • Reducedinventorylevels andtotal SCM costs • Decreased ordercycle/fulfillment time • Increased asset and capitalutilization • Improveddeliveryperformance • Fasterresponseto changing customer requirements • Improvedreturn on assetsand sales • Increasedforecastaccuracy • Reducedcash-to-cash cycle time

  7. Plan Source Return Return Deliver Return Return Return Return Return Return SCM Definition: SC Council“Suppliers’ Supplier to Customer’s Customer” Make Deliver Source Make Deliver Source Deliver Make Source Customer’sCustomer Your Company Supplier Customer Internal or External Internal or External SCOR Model (www.supply-chain.org) NOTE: Barriers to SCM are concentrated here

  8. Manufacturing Supply Chain Management Customer interface Supplier interface Production Entities Factory Internal Suppliers Demand Planning SRM CRM Sourcing, Ordering & Logistics External Suppliers Lean Manufacturing Customers Design Production Engineering Information: Visibility / Collaboration / Sharing Organization: Strategy / Structure / People / Processes

  9. Supply Chain Flows Source: Lee (2000)

  10. Supply Chain PerformanceTimme & Timme, 2000 • C-level Executives: CEO, CFO, COO, etc. • What is their view of SCM? • What language is needed to articulate benefits? • Growth, Profitability, Capital Utilization • How do they affect Economic Profit (EP)? Source: Timme and Timme, “The Financial-SCM Connection,” SCMR, 2000.

  11. Supply Chain PerformanceTimme & Timme, 2000 • Economic Profit • SCM supports: • Revenue growth • Customer service • Cost reduction • Asset efficiency • Purchasing 100

  12. Supply Chain PerformanceTimme & Timme, 2000

  13. Supply Chain Strategy “Companies are investing resources--of both time and capital--to improve their supply chain capabilities. But many are not pleased with the return on these investments. The lack of coherent supply chain strategy typically lies at the root of the problem.” [emphasis added] -- Derocher and Kilpatrick, “Six Supply Chain Lessons for the Millenium,” SCMR, 2000

  14. Strategic SC Alignment(Fisher, Marshall, “What is the Right Supply Chain for Your Product?,” HBR, 1997) Q: What happens when you have BOTH kinds of products?? A: Ought to have BOTH kinds of supply chains.

  15. Evolutionary Status of SCM Source: Poirier & Quinn, “A Survey of SC Progress,” SCMR, 2003

  16. Source: Poirier & Quinn, “A Survey of SC Progress,” SCMR, 2003

  17. More from Poirier & Quinn…

  18. CAPS Focus Study (2001) http://www.capsresearch.org

  19. SC Integration(Fawcett & Magnan, 2002) 47% 34% 11% 8% 0%

  20. SC Relationship Barriers • Lack of Trust • Little Understanding or Commitment to SC Principles • Fear of Relinquishing Control • Different Goals & Objectives • Inadequate Information Systems • Short-term / “Wall Street” emphasis on outcomes • Involvement in too many supply chains Source: Moberg, Speh & Freese, “SCM: Making the Vision a Reality,” SCMR, 2003

  21. “Can You Hear Me Now?” Source: Handfield & Straight, “What Sourcing Channel is Right for You,” SCMR, 2003

  22. SC Relationship Barriers--Solutions • Develop a New Breed of Manager • Build “Relationship-Management” Skills • Establish Inter-organizational Teams • Create New Performance Measures • Invest in Information Technology • Develop Long-term Focus (Boards, too) • Engage in More Practical and Applied Research Source: Moberg, Speh & Freese, “SCM: Making the Vision a Reality,” SCMR, 2003

  23. Bullwhip Effect Source: Lee, et al., “The Bullwhip Effect In Supply Chains, SMR, 1997.

  24. Bullwhip Effect – Order Variation Source: Lee, et al., “The Bullwhip Effect In Supply Chains, SMR, 1997.

  25. Matching Supply & Demand Source: Vitasek, et al., “Solving the Supply–Demand Mismatch,” SCMR, 2003.

  26. Matching Supply & Demand Source: Vitasek, et al., “Solving the Supply–Demand Mismatch,” SCMR, 2003.

  27. Supply Chain Planning & Execution Source: AMR Research, 2000

  28. SC Planning Systems Source: Taylor, David A. “A Master Plan for Software Selection,” SCMR, 2004

  29. SC Planning Systems Source: Taylor, David A. “A Master Plan for Software Selection,” SCMR, 2004

  30. e-Procurement: What is it? • What are the steps in procurement? • Need / Requisition • Supplier Selection • RFx, Negotiation, Auction, Criteria • Contract • Transactions • PO through payment • Relationship Maintenance • Performance • Which can be automated?

  31. Purchase Order / Order PO change? ASN receipt Tracking Receiving / Inspection Accounting: matching Payment Supplier Performance PO Ack. / Sales Order Fulfillment (stock / mfg) ASN Transportation Invoice Payment received e-Procurement: Transactions Buyer Supplier Other issues: Forecasting, collaboration, planning systems, cost improvement (product and trans.)

  32. Strategic Sourcing • “Applying standard analytics-driven processes for sourcing any category of spend.” • Purchasing Magazine • “Sourcing will be key to unlocking value.” • ISM/Forrester • Focus on procurement automation limits payback • Spend Management must begin with a sourcing strategy • Spend analysis, aggregation, supplier reduction • Online sourcing will catch up • “real value is in using enterprise-wide tools to enforce employee compliance with strategic sourcing agreements.”

  33. ISM/Forrester Report on Technology in SM: Q3/2003 • Adoption of online purchasing continues to grow • Large companies: 20% fully adopted • More companies are saving $ as a result • 45% of large volume • Materials purchased: • Indirect (89% bought some / 12% of indirect online) • Direct (74% bought some / 9.9% of direct online) • Auctions (25% used...large volume) and eMarketplaces (33%): about 45% increased use • Enterprise-wide tools: 46% • Online tools strengthen relationships: collaboration • Buyers mostly dissatisfied w/ Supplier online capability • Integration with suppliers was biggest challenge

  34. SC Critical Elements SC Strategy SC Processes Organizational Model Integrated Info. Sys. Perf. Mgt. Framework Setting Your Strategy Define the Performance Criteria of SC Set Perform. Targets ID Operational Processes (order mgt., dist, etc.) Select integration level for customers & suppliers PRTM’s SC Advice Source: PRTM, “Managing Your SC in the 21st Century,” 2002

  35. Technology Enabled Supply Chain Source: Porter, A.M. (2004), “The Case for Holistic Strategies,” Purchasing, March 18, pp. 55-59.

  36. Supplier Rating Criteria Source: Carbone, James (2004), “Using TCO to Rate Suppliers,” Purchasing, Feb. 19, pp. 30-34.

  37. Lucent (con’t)

  38. Summary • Supply Chain Management • People, processes, technology • Materials, information, cash • Supply Chain Performance • Growth, profitability, capital utilization • Growing gap between haves and have-nots • Supply Chain Solutions • Strategy: Align internal and external processes & resources to business strategy and company performance objectives • Diagnostic: Pinpoint improvement needs • Education: Relationships, process change, executives

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