Chapter 8 Integrating the supply chain

1. Chapter 8Integrating the supply chain

2. Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain Content

3. How can we integrate internally, externally and electronically? 1 Integration in the supply chain • Key issue

4. 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

5. 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

6. Low price Keep warehousing operation smooth High productivity of machine and labor Post-manufacturing operation being resisted Unreliable delivery and low quality High batch size Poor available distribution Additional complexity of customizing products Integration in the supply chain • Internal integration: function to function Purchasing Production Distribution

7. Strategic Collaboration Decision Flow Products & Services Flow Enterprise Enterprise Information & Knowledge Flow A B Financial Flow Products & Services Flow END CUSTOMERS RAW MATERIALS Information & Knowledge Flow Financial Flow Decision Flow Integration in the supply chain Inter-company collaboration: a manual approach

8. Integration in the supply chain • Electronic collaboration Transactional The electronic execution of transaction Electronic collaboration Information sharing The electronic sharing or exchange of information Collaboration planning Strategic, tactical and operational exchange

9. Integration in the supply chain Information flow in apparel supply chain

10. Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain Content

11. How can collaboration be extended across the supply chain to focus on meeting consumer demand? 1 Efficient consumer response • Key issue

12. Category management Establish infrastructure Optimize introductions Optimize assortments Optimize promotions Product replenishment Integrated suppliers Synchronized production Continuous replenishment Automated store ordering Reliable operations Cross-docking Enabling technologies EDI EFT Item coding and database maintenance ABC Efficient consumer response • Category management

13. Continuous replenishment

14. 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

15. Efficient consumer response

16. Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain Content

17. How can collaboration be extended to strategic as to well as operational levels? 1 Collaborative planning, forecasting and replenishment • Key issue

18. Collaborative planning, forecasting and replenishment • CPFR Model • 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 Planning Forecasting replenishment

20. Wal-mart’s CPFR Process Seller FRONT END AGREEMENT CollaborativePlanning Once JOINT BUSINESS PLAN Qtr. CREATE SALES FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS CollaborativeForecasting Wk, Mo CollaborativeReplenishment CREATE ORDER FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS Wk, Mo GENERATE ORDER Buyer Goal : Link buyer and Seller Electronically

21. 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.

22. Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain Content

23. How can broader-based relationships be formed between trading partners in the supply chain? 1 Managing supply chain relationships • Key issue

24. Managing supply chain relationships • Creating closer relationships Partnership Arm’s length transaction R&D Marketing R&D Marketing Logistics Operations Logistics Operations Informationsystem Informationsystem Informationsystem Informationsystem supplier customer supplier customer Bow tie Diamond

25. 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

26. Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain Content

27. What are the management implications of integrating the supply chain? 1 A framework for managing the supply chain • Key issue

28. A framework for managing the supply chain 6 Develop measurement system for supply chain performance 4 Pilot new supply chain solutions 5 Organize for supply chain performance 1 Develop a supply chain strategy 2 Gather supply chain information 3 Develop effective partnerships and alliances

29. 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

30. 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

31. 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