managing the supply chains of the future rhonda r. lummus, cfpim, cirm associate professor of...
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Managing the Supply Chains of the Future
Rhonda R. Lummus, CFPIM, CIRM Associate Professor of Operations &
Supply Chain ManagementIowa State University
Today’s Headlines
From our files - Manufacturing expectations in 2005
From the experts - Supply chain issues
Supply chain headlines today What are your headlines? Looking ahead
From our Files - 1995 Projections for Manufacturing in 2005
We are in an era of never-before-seen global competition and ever-increasing customer expectations.
The explosion of technological breakthroughs has overloaded the cognitive abilities of individuals in traditional organizations.
Lightening fast communication has brought global competition to our doorstep.
Gregoire & Correll, “Imagineering Our Future: Manufacturing in the Year 2005,” Proceedings ofThe APICS 1995 International Conference
Looking Back in Our Files Manufacturing in the Year 2005
New customer expectations: Highly customized products Delivered in record time Made as low cost as mass-produced
products, but with low inventories Factories sell gratification
Looking Back in Our FilesManufacturing in the Year 2005
Agile manufacturing: Making only exactly what is needed With tight schedules No excess inventory Smaller factories with smarter machine
tools Producing a wide variety of products with
short setup times
Agile suppliers: Do all that manufacturers do Are located close to major customers Short shipping times Electronic requirements are sent directly to
supplier machines.
Looking Back in Our FilesManufacturing in the Year 2005
Software systems: Companies are networked to their entire
supply chain Applications have grown in size and
complexity Are integrated with personal computer
software and with customers and suppliers
Information is available in real time Factory job structure:
Smaller factories Running specialized jobs making one-of-a-
kind items More white collar jobs emerge as
manufacturing is more automated
From the Experts -Supply Chain Challenges
1. Collaboration is becoming the most strategic capability. Companies may focus on product design
and development and may outsource the rest
2. Assets and functions that are not core to value delivery may be divested to specialists. Develop shared-profit arrangements Suppliers benefit from your success
Anderson and Delattre, ‘Supply Chain Innovations: Five Big, Bold Trends,’ www.accenture.com 2005
From the Experts -Supply Chain Challenges
3. The greatest margin potential may occur after a product ships Products are becoming commodities Service and support become as important at the
product Customers value total service as they look at the
total cost of ownership
4. The front end of the supply chain is as important as the back end in maximizing returns Understanding and responding to customer
needs will be a major part of supply chain strategy
Anderson and Delattre, ‘Supply Chain Innovations: Five Big, Bold Trends,’ www.accenture.com 2005
From the Experts –Supply Chain Challenges
5. The ability to integrate new and innovative capabilities with corporate strategy will drive higher supply chain value Rapid and “virtual” partnering will be key to
new supply chain management strategies.
Anderson and Delattre, ‘Supply Chain Innovations: Five Big, Bold Trends,’ www.accenture.com 2005
From the Experts – Supply Chain Challenges
Quality of demand information is vital – what customers are actually buying
Kanban-style replenishment for reduced inventory costs
Supply chain visibility – knowing where your products are in the supply chain will be critical (doesn’t imply RFID).
Wheatley, ‘Five Top Tips’, www.manufacturer.com 2005
From the Experts - Supply Chain Challenges
Need for flexibility when automating or outsourcing – don’t let supply chain redesign reduce flexibility to respond to customer changes
Simplified IT may be the best choice – complex, costly systems may not be necessary for simpler products and supply chains
From the Experts - Supply Chain Challenges
Become an “On demand enterprise” Flexibly respond with no long-term
commitments Dynamically grow or shrink based on
demand Operate anytime, anywhere, under any
condition and be resilient to any disturbance Minimize asset and labor content per unit of
production Provide real-time transparency of operations
both for external and internal visibility.
Kadifa, The ‘On Demand Enterprise’ www.corio.com, 2005
From the Experts - Supply Chain Challenges
Property hazards and supply chain disruptions are major threats to revenue According to financial officers of the top
1000 global companies in North America and Europe
Elkins, Handfield, Blackhurst, and Craighead,‘Ways to Guard Against Disruptions,’ Supply Chain Management Review, 2005
Major Disruptions in Distribution in the Last Five Years
A major train derailment in
Arizona in November of 2000 The World Trade Center disaster
of September of 2001 Consolidated Freight’s
bankruptcy of September of 2002
The ILWU labor block out of the west coast ports of October of 2002
Major Disruptions in Distribution in the Last Five Years
An east coast hurricane in August of 2003 Fires on the west coast in October of 2003 Multiple hurricanes in the south in fall of
2004 and 2005 The transportation capacity crunch
The Dark Side of Supply Chain Management “The Age of Fragility”
The intersection of supply chain management and lean practices
Supply fragility in the event of a catastrophic disruption
“Never satisfied” customer, and short product life cycles
Lean reduced the inventory buffers Formal plans are needed that minimize the
time and cost of a business disruption
Zsidisin, Ragatz, Melnyk,‘The Dark side of SCM’Supply Chain Management Review
Incorporate Supply Chains into Business Strategy
Execute Effectively against Defined Goals and Metrics
Develop effective linkages with trading partners
Adopt Leading-Edge TechnologiesAnd Practices
Make strategic in-source versus out-source decisions • Customer-centric
• Supplier linkage
• Collaboration
• Service-level agreements• Innovation agenda
• Industrialization
• Workforce capability
• Continuous improvement programs
• Board mandate
• Customer insights
• Segment-specific value propositions
• Competitive advantage
• Extended enterprise-wide, high-level metrics
• Incentive alignment across functions and potentially enterprises
• Measurement & continuous improvement
• Channel strategy
• Internal & external coordination
• Supply & demand balancing
End-to-end integrated operating model• Strategic
partnerships
• Performance framework
• ‘make’ or ‘buy’ framework
From the Experts - Supply Chain Challenges
Accenture – Mulani 2005
From the Experts - Supply Chain Challenges
Stanford Professor Hau Lee:1. Great supply chains are agile and react speedily to sudden changes in demand or supply
2. They adapt over time as market structures and strategies evolve
3. They align the interests of all the firms in the network so that companies optimize the chain’s performance when they maximize their interests
Only supply chains that are agile, adaptable, and aligned provide companies with sustainable competitive advantage
Harvard Business Review, 2004
“The Moment of Truth”
The product the customer wants is actually on the shelf when the customer makes his choice Supply chain leaders change how they
replenish a shelf, pack a box, load a truck, or dispatch a fleet to meet customer needs
They make what the customer wants rather than try to sell what the company makes
AMR Research – Procter & Gamble
Supply Chain Headline News
RFID and Retail: Little Return for Case and Pallet Tagging
Supply Chains Adapt to Disruptions When There is No Time for a Huddle
Difficult ERP Rollout Slows Furniture Maker
Double the Inventory is Not Double the Fun
The "greening" of the supply chain
Companies announce RFID drug-tracking project
Supply Chain Headline News
Car Navigation Not Catching on in U.S.
Inventory Headaches PersistFees For Services, But Will Customers Pay?
More Demanding Markets
Katrina Damage Threatens Hydrogen Supply
The Cost of Compliance
Global Needs Propel Product Life-Cycle Management Efforts
Supply Chain Headline News
Distributors Fight For Scraps During Economic Downturn
RoHS: The Biggest Headache the Industry Has Ever Seen
Distribution in China
Company Restructuring to Eliminate 3,500 Employees
Demand Will Continue to Outpace Supply in China, Firm Says
Local Headline News
Exercise - Identifying your key supply chain headlines
News Gathering
Find your news source Interview them to get their supply chain
headlines Identify your source Reverse roles
Delivering the News
Interviews with the man on the street Gathering the news Identifying the top stories Posting the news www.bus.iastate.edu/rlummus/
Self Improvement Programs
Develop a sound human resource strategy Get the right people with the right skills with a
broad view of business activities into supply chain jobs
The right people on the bus in the right seats Coordinate across functions Hire for collaboration skills
Create an organizational design which focuses on supply chain objectives Include formal systems for communication Assign coordination, control, authority and
responsibility.
Trent, ‘What Everyone Needs to Know About SCM ,’ Supply Chain Management Review, 2004
Self Improvement Programs
Develop supply chain information systems
Capture and share information in real time
Implement the right measurement system to support fact-based decision making
Promote continuous improvement
Measures must be tied to desired business outcomes
Trent, ‘What Everyone Needs to Know About SCM ,’ Supply Chain Management Review, 2004
Your Next Reporting Assignment
Who are your competitors today – who will they be in the future?
What is the basis of your competitive advantage today – what will it be in the future?
Which capabilities make your firm unique today – which ones will make it unique in the future?
How agile is your supply chain – how will you measure this?
Your Next Reporting Assignment
Which supply chain disruptions are most likely to occur and have you managed your risk by creating a supply chain continuity plan?
What are your key suppliers’ competencies and challenges?
How well have you developed the skills of your supply chain employees?
Things to Think About
•Managers devote < 3% of their time developing a corporate view of the future
•Senior managers’ first task is to develop a process for pulling together the collective wisdom within an organization
Your most important skill may be relationship management!!
Be Ready to Seek out New Opportunities
In America, any profession (such as a doctor, lawyer, architect) must be good at the touchy-feely service stuff
Anything that can be digitized will be outsourced. A significant number of service and professional jobs will move out of the US by 2015
The challenge today – rapid change, which requires leadership, flexibility and the imagination to adapt
Thomas Friedman, The World is Flat
News Flash!!
Today’s connectivity allows you to work 24/7
How do you balance work with your personal and professional life?
OUR OPINIONEveryone Has One!
The supply chain is still a “Get it done” function. You can try and glamorize it with technology, but it is still a “Roll up your sleeves” business, and those that are not scared to get their hands dirty and get in the trenches will have a great deal of success.
Summary of Today’s News
1995 predictions have come true! Supply chains must be agile, adaptable
and aligned The “Moment of Truth” arrives More news will be posted to the Web Dig out the news at your company Keep an eye on the news on the home
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