Supply Chain Monitoring

Rickard Holm, Volvo Car Corporation

Odette SCM Group 2

Why is the Automotive Industry interested in Supply Chain Management?

Efficient built-to-order strategies and short time to delivery goals require fast, flexible and reliable supply networks

inter-company visibility and transparency of relevant data inter-company business processes and collaboration for

optimised decision taking

Modern Supply Chain Management (SCM) concepts address important root-causes of current limitations in logistics networks

Modern SCM is targeting to overcome the local, company-centric view by looking from a global perspective on value adding networks

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Supply Chain Monitoring (SCMo) - BackgroundThe Odette SCM Group Established in March 2001

Goal of Odette SCM Group is to identify and tackle the reasons for slow implementation of SCM-concepts in automotive industry

bringing together the know-how and experience create recommendations (SCMo & DCP) enable interoperability

This presentation refers to the recommendation for the SCM building block ”Supply Chain Monitoring” (SCMo)

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Participants SCMo Project Audi Roland Scheidler BMW Jan Kühner (replaced Manfred Wiltschek) DaimlerChrysler Andreas Basche Ford Thomas Lieb GM Angelika Gillmann*, Peter Scherer (since 2003) PSA Rob Exell Renault Didier Canals Volvo Rickard Holm VW Martina Hemken (till 11.2002)

Bosch Oliver Merle** Faurecia Michel Godin Siemens VDO Karlheinz Dietz Treves Hugues de Quercize

Galia Jean-Pierre Le Bot Odette Int Patrick Lucchesi SMMT John Luscombe VDA Hans-Guenter Bodlien (till 11.2002)

OEMs

Suppliers

Organizations

* no direct participation in meetings in 2002

** Project Leader

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Supply Chain Monitoring (SCMo)One-Page-Summary Problem:

High stock levels, premium freight, frequent stock-out situations and high administrative efforts in difficult to manage supply networks.

Long leadtime for demand information to reach x tier

Basic Concept: Generate automatically alerts, based on demand and

inventory information. Synchronization of demand and inventories

Result: smooth and secure supply with minimal safety

inventories in critical/difficult to manage supply networks optimized allocation in bottleneck situations

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Supply Chain Monitoring - Introduction Positioning of SCMo

Supply Chain Monitoring (SCMo) is a multi-level SCM concept supporting the fulfilment/execution process

SCMo applications are an add-on to existing backend-system

Key success factor for SCMo is to keep complexity low (e.g. number of parameters, detail of modelling)

main benefits come from speed of information flow, cross-enterprise visibility and synchronisation

only the critical part of the supply network is considered

SCMo is a complement to existing backend systems

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Supply Chain Monitoring - IntroductionFocus on Critical Part of Supply Network

System Supplier

OEM

OEM-level

Tier 1Tier 2Tier 3Tier 4

in general it is sufficient to concentrate on the critical part of the supply network

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SCMo level SCMo

SCMo applications are an add-on to existing backend-systems (e.g. ERP), which remain the leading systems for every organisation

Supply Chain Monitoring - Introduction Basic Information Flow in SCMo

Tier n

Tier n-1

Tier n+1

material flow

back-endsystemslevel

Information Flow

= back-end system, = SCMo-Screen

SCMo provides all companies/users with customised views

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Supply Chain Monitoring - Introduction Initialisation Steps (1) Determination of the potentially critical part of the supply network

Criteria: high shortage risk and effect long lead and reaction times high total inventory cost frequent engineering changes creation of variants on low tier level bottleneck and/or allocation situation at a low tier level, etc.)

Mapping of the structure of the selected network to the SCMo model (mathematical graph)

Control points Transportation and production links

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Supply Chain Monitoring - Introduction Network-Elements of SCMo Model

production Wo

warehouse - outbound

Wi

warehouse - inbound

production linktransportation link

organizational unit

control point

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Supply Network Representation in the SCMo-Model Standard Scenario

Wi

Tier 2

Woproduction

Wi Woproduction

Tier 1

Wi Woproduction

Wi Woproduction

Tier 3

Wi Woproduction

Wi warehouse inbound

Wo warehouse outbound

production link

transportation link

control point

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Supply Chain Monitoring - Introduction Initialisation Steps (2) Entry of parameters for the SCMo model:

organisational units (e.g. contact persons, organisation ID) control points (e.g. minimum/maximum inventory levels) production link (e.g. production lead-times, bill of material) transportation link (e.g. transportation lead-time, part

number reference table)

After completion of these steps, the SCMo system contains a model of the supply chain with all the necessary permanent/master data

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Supply Chain Monitoring - Introduction Example for SCMo Model

Tier 2 Tier 1 OEMTier 3

headlamp

housing

wire-harness

glass lens

H7 bulb

connector 1

connector 2

Organisational unit in supply network (node)

car model x

plant 1

plant 2

plant 3

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Supply Chain Monitoring - Introduction Core of SCMo Basically SCMo generates automatically alerts (e.g. by

sending an email) if at least one actual inventory level in the supply network is too high or too low regarding the demand of the next days/weeks

multi-level approach allows to take into account the cumulated inventory across the supply chain and enables a fast and transparent demand calculation

every company will get early and clear signals whether to speed up or to slow down production

high benefit especially for suppliers on lower tier levels, suffering most from”bull-whip effect”

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Supply Chain Monitoring - Introduction Day-to-day business Update of inventory information (1 or more times per day)

and demand information (close to real-time within the SCMo application)

from decentralised backend-systems

Alert generation when a monitored figure is going out of the predefined range (=exception)

Transparency allowing the user to easily understand the exceptional situation due to suitable presentation of the relevant data (alert board)

Counter measures are documented (action item board) and monitored by a workflow concept

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Supply Chain Monitoring (SCMo)Industry Status First SCMo pilots started in 1999 (DC and Audi) Number of companies using SCMo in day-to-day business:

January 2003: ca. 100 December 2003: ca. 250 (estimate based on agreed

projects)

Existing SCMo solutions have a satisfactory degree of maturity

Next Steps: Interoperability is needed for broad roll-out in the industry

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Supply Chain Monitoring (SCMo)Basic Principles & Objectives

Integration of supply chain participants in the short / medium-term fulfillment/execution process

exchange of demand and inventory information plus eventually status of production orders (future inventory)

Transparency and visibility throughout selected parts of the supply network

Fast demand calculation throughout the selected parts of the supply network

eliminate a root cause of the bull-whip-effect Instant feedback on impact of decision for every participant

of the supply network Optimize inventory in the selected parts of the supply network Avoid non-value adding activities in the selected parts of the

supply network

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Supply Chain Monitoring - Introduction Benefits Smooth and secure supply with minimal safety

inventories Increased flexibility and synchronisation of the supply

network Reduction of non value adding cost (trouble shooting,

administrative effort to manage and control material flow, etc.) Reduction of premium freight Avoidance of scrap due to obsolescence (engineering

changes, end of production)

SCMo helps to better master critical / difficult to manage supply networks

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Supply Chain Monitoring (SCMo) Comparison with Demand Capacity PlanningCriteria SCMo DCP

module 1DCPmodule 2

characteristics executionshort term

planningmedium term

planninglong term

demandinformation

releases / forecastout of MRP runs

releases / forecastout of MRP runs

planning onplatform / featurelevel

updates daily monthly 2-4 times per year

time frame* day 0 to 60+/- month 1 to 6+ up to 5 years

users operations(logistics/production)

productionplanning

sales / purchasing,project mgmt.

examples formeasures

overtime, premiumfreight

additional shifts,banking, smallinvestments

major investments(tooling, machines,etc.)

* may vary by company and product family

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central SCMo server

Central Server

SCMo monitors,individual views

Basic Information Flow with centralized SCMo Server

back-end systems

Back-end systems in every organization keep dynamic data and static data (e.g. parameters) needed in the SCMo-Model

These back-end systems need to update the central SCMo Server after every status change (e.g. “inventory level for partnumber drops to 100 units”)

actual inventory

Tier 2 Tier 1 OEM

parameters, etc.

SCMo demand

demand

not suited for interoperability

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Basic Information Flow in SCMo Interoperability Scenario

Tier n

Tier n-1

Tier n+1

EAI Information Flow

SCMo Instances

material flow

Back-end systems in every organization keep dynamic data and static data of SCMoRecursive Model

Back-end systems need to update the SCMo instances after every status change (e.g. “inventory level for partnumber drops to 100 units”) => EAI Information Flow

information flow

back-endsystems

SCIPmessages / data to

be interchanged

SCIPmessages / data to

be interchanged

Interoperability Information Flow

SCMo Instances need to synchronize adjacent SCMo Instances; Interoperability Information Flow based on Supply Chain Interoperability Protocol (SCIP)

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Basic Information Flow in SCMo Interoperability ScenarioCategories of data interchange messages to create, change, administer etc. the SCMo-

Model, i.e. parameters (clear ownership and user management)e.g. browser interface

back-end system to SCMo instance messagescompany individual integration concepts

SCMo instance to SCMo instance messagesstrict implementation of the Interoperability Standard

necessary

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What would Telecommunication look-like without Interoperability?

France Telecom

Deutsche Telecom

Vodafone AT&T Service Provider

Conversational Partners

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Telecommunication is a good example for existing Interoperability

Service Provider

Conversational Partners

Our service provider inter-operates with other service providers and builds up the connections to every external conversational partner

MyProvider

With one telephone and one service provider we are connected to everybody

We only need to know the correct telephone numbers

France Telecom

Deutsche Telecom

Vodafone AT&T

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B2B-SCM instances interoperate (based on respective Odette Interoperability Recommendation)

Company X

Why do we need Interoperability? Scenario with Interoperability

Business Partner A

Business Partner B

Business Partner C

Business Partner D

= Backend System (e.g. ERP), = B2B instance e.g. for SCMo or VMI

Interoperability is an efficient way to achieve full end-to-end integration (fast and reliable data flow) and full B2B functionality and business process

company X

integrates its own backend

systems once

companies that initiate a B2B solution integrate their backend systems once (no change)

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Presentation for SCMoRecommendation Chapter Overview

Philosophy of Supply Chain Management

Introduction to SCMo

Introduction to SCMo

Business Process Description

Business Process Description

FunctionalityFunctionality

Responsibilities

Data DescriptionData Description

Technical Aspects

1

2

3

4

5

6

7

Tack för uppmärksamheten!

Rickard Holm, Volvo Car Corporation