Innovative and Integrated Supply Chains

in the 21st Century

Innovative Supply Chains Principles (Pre-Meeting)

Dr. Manu Vora, ASQ Fellow and CQE

Chairman and President, Business Excellence, Inc., USA

Advisor of Eminence, Business Excellence, ASQ India, New Delhi, India Adjunct Faculty, School of Professional Studies, Northwestern Univ., USA

Adjunct Faculty, Great Lakes Institute of Management, Chennai, India

ASQ Section 1208, Warrenville, IL, 11/03/15

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Introduction Importance of Supply Chain Management

(SCM) Conventional to Contemporary Supply

Chain Drivers of Supply Chain Performance Supply Chain Performance Measurements Major References

25th Annual State of US Logistics - 2013

4

Importance of Supply Chain: Logistics in the Manufacturing Firm

Profit 4%

Logistics Cost 21%

Marketing Cost 27%

Manufacturing Cost 48%

Profit

Logistics Cost

Marketing Cost

Manufacturing Cost

Typical Supply Chains

Supply Chain Configuration

Supply Chain Configuration

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Push/Pull View of Supply Chains

Procurement, Manufacturing and Replenishment cycles

Customer Order Cycle

Customer Order Arrives

PUSH PROCESSES PULL PROCESSES

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Supply Chain Decisions: Structuring Drivers

Strategy (Design)

Planning

Operation

A Framework for Structuring Drivers

Competitive Strategy

Supply Chain Strategy

Efficiency Responsiveness

Facilities Inventory Transportation

Information

Supply chain structure

Cross Functional Drivers

Sourcing Pricing

Logistical Drivers

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Role of Inventory in the Supply Chain Improve Matching of Supply

and Demand

Improved Forecasting

Reduce Material Flow Time

Reduce Waiting Time

Reduce Buffer Inventory

Economies of ScaleSupply / Demand

VariabilitySeasonal

Variability

Cycle Inventory Safety Inventory

Seasonal Inventory

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Supplier Assessment Factors

Replenishment Lead Time

On-Time Performance Supply Flexibility Delivery Frequency/

Minimum Lot Size Supply Quality Inbound Transportation

Cost

Pricing Terms Information

Coordination Capability

Design Collaboration Capability

Exchange Rates, Taxes, Duties

Supplier Viability

Product Categorization by Value and Criticality

Critical Items – Long lead time and specialty chemicals

(Ensure availability – coordinate production

plan at buyer & supplier)

Strategic Items – Electronics at auto Mfg.

(Life-time value/cost of relationship – collaborate with

supplier for design and production)

General Items – Indirect materials (Lower acquisition or

transaction costs)

Bulk Purchase Items – Packaging &

bulk chemicals (Auctions – total cost of

ownership)

Low

Low

High

High

Crit

ical

ity

Value/Cost

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Macro Processes in a Supply Chain – IT Framework

Supplier

Relationship Management

(SRM)

Internal Supply Chain Management

(ISCM)

Customer Relationship Management

(CRM)

Transaction Management Foundation (TFM)

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B2B E-Business Value Proposition

Reduced Transaction Charges

Market Efficiencies

Supply Chain Benefits

Ease

of I

mpl

emen

tatio

n

Easy

H

ard

Value Created Low High

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Collaborative Planning, Forecasting & Replenishment (CPFR)

https://www.bisg.org/docs/VICS-CPFR.pdf

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Supply Chain Council (SCC) SCOR Model

Industry Groups Covered: – Aerospace – Computer & electronics – Pharmaceuticals & chemicals – Utilities – Retail – Defense – Semiconductors

Supply Chain Operations Reference (SCOR) Model (source: Supply Chain Council, SCC);

SCOR Model (Supply Chain Council - SCC)

SCOR Model Decomposition (SCC)

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SCOR Model (Supply Chain Council)

Supply Chain Metrics (SCC)

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Balanced Measures for Supply Chains Customer:

Customer order response time Customer perception of supply chain value

Internal Business Process: Value added time/total time in supply chain No. of choices/order cycle time

Learning & Growth: Time between product finalization and customer delivery No. of shared data sets/total data sets

Financial: SC costs of purchasing, inventory, poor quality & delivery failure % of SC target costs achieved % SC profits earned Cash-to-cash cycle time Return on supply chain assets

Source: “Principles of Supply Chain: A Balanced Approach”, Wisner et al., Thompson, South-Western, 2005.

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Major References Sunil Chopra and Peter Meindl (2012). Supply Chain Management: Strategy, Planning, and Operation, 5th Edition,

Prentice Hall, Upper Saddle River, NJ. Manu K. Vora (2015). 7 Steps to Link Quality Improvement to Your Supply Chain, Supply Chain Management Review,

Vol. 19, No. 4, pp. 44-51, July/August, Framingham, MA. Reuben E. Slone, J.. Paul Dittmann, & John T. Mentzer (2010). The New Supply Chain Agenda: The 5 Steps that Drive Real

Value, Harvard Business Press, Boston, MA , 2010. “The Reverse Supply Chain” by V. Daniel R. Guide, Jr. and Luk N. Van Wasenhove, HBR Reprint No. F0202D – 2/2002. “Rapid-Fire Fulfillment” by Kasra Ferdows, Michael A. Lewis, and Jose A.D. Machuca, HBR Reprint No. R0411G ($3.70) – 11/2004. “Aligning Incentives in Supply Chains” by V. G. Narayanan and Ananth Raman, HBR Reprint No. 8363 – 11/2004. “Mass Customization at Hewlett-Packard: The Power of Postponement” by Edward Feitzinger and Hau L. Lee, HBR Reprint No.

97101 – 1-2/1997. “What is the Right Supply Chain for Your Product?”, Marshall L. Fisher, HBR Reprint No. 8509 – 3-4/1997. “Fast, Global, and Entrepreneurial: Supply Chain Management, Hong Kong Style” by Joan Magretta, HBR Reprint No. 2020 - 8-

9/199 “The Power of Virtual Integration: An Interview with Dell Computer’s Michael Dell” by Joan Magretta, HBR Reprint No. 7907 – 3-

4/1998. “The Achilles’ Heel of Supply Chain Management” by Ananth Raman, Nicole DeHoratius, and Zeynep Ton, HBR Reprint No. F0105C

– 5/2001. “How to Ensure Information Integrity for Effective and Economic Health Care” by Vijay V. Mandke, Sharon R. Miller, Paul R.

Prabhaker, Manu K. Vora, and Nila M. Vora, AHIMA 2003 National Convention, Minneapolis, MN, 10/21/2003. “Deep Change: How Operational Innovation Can Transform Your Company” by Michael Hammer, HBR reprint No. 6573 – 4/2004.

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Pre-Meeting

Thanks!

Any Questions?