pesa oil 101 may 21, 2015 - energy workforce

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PESA Oil 101 Supply Chain Overview May 21, 2015 Presentation by: Brad Wise Vice President Marketing distributionnow.com

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Page 1: PESA Oil 101 May 21, 2015 - Energy Workforce

PESA ‐ Oil 101Supply Chain OverviewMay 21, 2015

Presentation by:  Brad Wise ‐ Vice President Marketingdistributionnow.com

Page 2: PESA Oil 101 May 21, 2015 - Energy Workforce

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Countries 20+Locations 300+Employees 5,000+ERP System SAPTM

Page 3: PESA Oil 101 May 21, 2015 - Energy Workforce

Agenda – Supply Chain Overview

1. Overview of Supply Chain2. Supply Chain Scenario3. Discussion

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Page 4: PESA Oil 101 May 21, 2015 - Energy Workforce

What is a Supply Chain?

A supply chain consists of the flow of products and services from:

• Raw materials manufacturers• Component and intermediate manufacturers• Final product manufacturers• Wholesalers and distributors• Retailers

Connected by transportation and storage activities, andIntegrated through information, planning, and integration activities

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Page 5: PESA Oil 101 May 21, 2015 - Energy Workforce

Supply Chain ‐ A Graphical Representation

‐ A supply chain consists of 

- aims to Match Supply and Demand, profitably for products and services

SUPPLY SIDE DEMAND SIDE

The rightProduct

HigherProfits

The rightTime

The rightCustomer

The rightQuantity

The rightStore

The rightPrice =++ ++ +

- achieves

Supplier Manufacturer Distributor Retailer Customer

UpstreamDownstream

Page 6: PESA Oil 101 May 21, 2015 - Energy Workforce

Paradigm Shift

Old Paradigm for Firms:  • Vertically integrated• Has ownership and coordination of supply chain activities• Culture emphasized short‐term, company focused performance.

New Paradigm:  Firm is supply chain focused in areas of specialization, enters into voluntary and trust based relationships with supplier and customer firms.

• All participants in supply chain benefit• Boundaries are dynamic and extend from firm’s suppliers’ 

suppliers to its customers’ customers• Supply chains now deal with reverse logistics to handle returned 

products, warranty repairs, and recycling

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Page 7: PESA Oil 101 May 21, 2015 - Energy Workforce

Supply Chain Management

Firms using Supply Chain Management:1. Start with key suppliers2. Move on to other suppliers, customers, and 

shippers3. Integrate second tier suppliers and customers 

(second tier refers to the customers’ customer and suppliers’ suppliers)

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Page 8: PESA Oil 101 May 21, 2015 - Energy Workforce

Why Employ Supply Chain Management?

Cost savings and better coordination of resources:• Reduced Bullwhip Effect:  the magnified reduction 

of safety stock costs based on coordinated planning and sharing of information

• Collaborative planning, forecasting and replenishment activities reduce the Bullwhip Effect.

• Leads to better customer service, lower inventory costs, improved quality, reduced cycle time, better production methods

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Page 9: PESA Oil 101 May 21, 2015 - Energy Workforce

Origins of Supply Chain Management

1950s & 1960s: U.S. manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies

1960s‐1970s: Introduction of new computer technology lead to development of Materials Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory management and improve internal communication

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Page 10: PESA Oil 101 May 21, 2015 - Energy Workforce

Origins of Supply Chain Management

1980s & 1990s: Intense global competition led U.S. manufacturers to adopt  Supply Chain Management along with  Just‐In‐Time (JIT),  Total Quality Management (TQM), and  Business Process Reengineering (BPR) practices

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Page 11: PESA Oil 101 May 21, 2015 - Energy Workforce

Origins of Supply Chain Management

2000s and BeyondIndustrial buyers will rely more on third‐party service providers (3PLs)  to improve purchasing and supply management

Wholesalers/retailers will focus on transportation and logistics more & refer to these as quick response, service response logistics, and integrated logistics

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Page 12: PESA Oil 101 May 21, 2015 - Energy Workforce

Flows in a Supply Chain

Customer

Material

Information

FundsSupplier

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SCM in a Supply Network

Supply Chain Management (SCM) is concerned with the management and control of the flows of material, information, and finances in supply chains.

Supply

Demand

Products and ServicesCash

Supply Side OEM Demand Side

CHINA KOREA MEXICO TEXAS USN-Tier Suppliers Suppliers Logistics Distributors Retailers

Information

The task of SCM is to design, plan, and execute the activities at the different stages so as to provide the desired levels of service to supply chain customers profitably

Page 14: PESA Oil 101 May 21, 2015 - Energy Workforce

Importance of Supply Chain Management

In 2000, the US companies spent $1 trillion (10% of GNP)  on supply‐related activities (movement, storage, and control of products across supply chains). Source: State of Logistics Report

Eliminating inefficiencies in supply chains can save millions of $.

Tier 1 Supplier

Manufacturer Distributor Retailer Customer

Inefficient logistics

High stockouts

Ineffective promotions

Frequent Supply shortages

High landed costs to the shelf

High inventories through the chain

Low order fill rates

Glitch-Wrong Material, Machine is Down –

effect snowballs

Page 15: PESA Oil 101 May 21, 2015 - Energy Workforce

Foundations of Supply Chain Management

Supply Management:  Supplier management, supplier evaluation, supplier certification, strategic partnerships

Operations:  Demand management, MRP, ERP, inventory visibility, JIT, TQM

Distribution:  Transportation management, CRM, distribution network, order fulfillment, logistics, service response

Integration:Process integration, performance measurement

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Page 16: PESA Oil 101 May 21, 2015 - Energy Workforce

Purchasing Trends

Long term relationshipsSupplier management:  improve performance through

• Supplier evaluation• Supplier certification

Strategic Partnerships

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Page 17: PESA Oil 101 May 21, 2015 - Energy Workforce

Operations Trends

Demand Management – match demand to available capacityLinking buyers and suppliers via MRP and ERP systemsUse JIT to improve the pull of materials to reduce inventory levelsEmploy TQM to improve quality compliance among suppliers

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Page 18: PESA Oil 101 May 21, 2015 - Energy Workforce

Distribution Trends

Transportation management‐ tradeoff decisions between cost & timing of delivery/customer service via trucks, rail, water & air

Customer relationship management‐ strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements

Network design‐ creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system 

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Page 19: PESA Oil 101 May 21, 2015 - Energy Workforce

Integration Trends

Supply Chain Process Integration‐ when supply chain participants work for common goals. Requires intra‐firm functional integration. Based on efforts to change attitudes & adversarial relationships

Supply Chain Performance Measurement‐ Crucial for firms to know if procedures are working

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Page 20: PESA Oil 101 May 21, 2015 - Energy Workforce

Reducing Supply Chain Costs

Cost reduction achieved through:• Reduced purchasing costs• Reducing waste• Reducing excess inventory, and• Reducing non‐value added activities

Continuous Improvement through• Benchmarking‐ improve over competitors’ performance• Trial & error• Increased knowledge of supply chain processes 

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Page 21: PESA Oil 101 May 21, 2015 - Energy Workforce

What Makes Supply Chain difficult?

• Supply chain strategies cannot be determined in isolation, they are affected by a development chain

• Product design phase• Global Optimization

• Complex network of facilities• Different facilities, different (conflicting) objectives• Dynamic system (customer wants vs supply)• System Variation over time

• Uncertainty and risk are inherent in every supply chain• Matching supply and demand• Inventory and back‐order levels fluctuate• Forecasting accuracy• Demand is not only source of uncertainty (lead times, mfg yields, 

transportation times, component availability)• Lean manufacturing, outsourcing, offshoring that focus on cost reduction 

increase risks significantly

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Page 22: PESA Oil 101 May 21, 2015 - Energy Workforce

Supply Chain Management Structure

Supply Chain Management

SCM Strategy

Organization

Catalogue

Procurement Processes

Materials Management & Planning

Risk & Controls

• Strategic Management (goals, KPIs, key principals, segregation of duties)

• Function and Organization Structure, multi‐functional groups, centralization of major groups and services and materials

• Implementation of services and materials catalogue, matrix of accountability segregation due to category

• Demand planning, purchases, contract administration, management of commitments, materials management, etc.

• Supplier evaluation, supplier efficiency• Optimization of materials management 

system, including liquid and non‐liquid assets• Risk matrix, control matrix, risk management 

procedures• IT Component

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Discussion

Financial Impact• 26 hours of lost time, equates to lost revenue.  $700,917• $15,000 in parts and freight expense• Crew and operating expense standby time

Where did the supply chain fail?• Gunslinger’s on board stock…• DBD’s Shorebase warehouse…• DBD regional inventory…• Replenishment systems with DBD• What about the consolidation of inventory by DBD?

The rig was suspended in a state of risk, what would have prevented it?• Spare mud pumps outfitted…• Proper inventory on board…• Forecasted demand…plan for the unanticipated

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