Holistic SCM Context

1. Holistic SCM Context The “bottom line” in SCM is the degree of contribution to the overall ROI. Effective SCM can contribute to: • reduced costs in material flows • improved revenue - through better & more responsive customer service Thus the challenge is how best to manage the SCM system to maximise ROI

2. Supply Chain Interfaces Supply Chain Sourcing/ Purchasing Manufacturing Physical Distribution How many suppliers/product Lead time concept Channels Strategic location of suppliers Stock out performance Segments Business agreement with suppliers Price/product concept Production utilisation levels Process planning & Control “mini company”

3. Supply Chain Interfaces continued • in 50s, 60s and 70s logistics part of marketing • emphasise on product promotion and development • warehousing, transport, inventory control & customer service neglected • in 1970s and 80s separate logistics function with responsibility for warehousing, inventory, transportation (inbound/outbound), communications, materials management • in the 1990s interface management problems, to remain competitive • 2000+ important to manage potential conflicts at interfaces

4. SC Interactions with Marketing These include: • Product design • Pricing • Market and Sales forecast • Customer service policies • Number and location of warehouses • Inventory policies • Order processing • Channels of distribution • Customer service

5. Four Management Stages To 1960s Stage 1 1970s-80s Stage 2 1980s-90s Stage 3 1990s-2000+ Stage 4 Total Cost Management Supply Chain Management Integrated Logistics Management Warehousing & Transportation Management Focus Management Focus Management Focus Management Focus Optimising Operations Cost & Customer Service Tactics/ Strategies Logistics Planning Supply Chain Visions, Objectives & Goals Operations Performance Organisation design Organisation design Organisation design Organisation design Partnering,Virtual Organisation Market Co-evolution Integration of Logistics Functions Decentralised Functions Centralised Functions

6. Customer Focus Logistics often responsible for sourcing & management of raw materials. Thus by developing effective functional interfaces and utilising technology strategically, organisations can adopt JIT policies that: • see manufacturing costs incurred closer to the point of sale • substantially reduce raw materials inventories • result in finished goods inventory profiles more closely aligned to customer demands • help reduce buffers of prohibitively costly finished goods inventory

7. Principles of Manufacturing • the key to manufacturing is to keep the distance between the goods coming in and goods going out to a minimum and you will make a profit • the day you let it lengthen you start increasing costs

8. Interfaces with Manufacturing Two primary questions: • How to maintain or enhance its responsibilities to the changing needs of the marketplace • How to maintain or enhance profitability

9. Strategic issues • the key success factors for the industry • its basis for competing in its chosen markets • the relevant elements of customer service The organisations must consider the following strategic issues:

10. Three aspects to consider • The competitive stance of the business and how it impacts the manufacturing and logistics functions • The manufacturing-logistics network within the SC context • Customer Service issues at functional interface level (i.e. purchasing-manufacturing-distribution)

11. Holistic View • treating the purchasing-manufacturing-logistics network in a holistic manner • developing sustainable improvement programmes to co-ordinate activities across various functions (e.g.. delivery service, production priority control, purchasing and so on) & capitalise on synergies To maintain competitive position in a dynamic environment, the manufacturing and logistics functions must respond positively to the strategic issues by:

12. SC Management Focus