Supply Chain Management Strategies

1、Supply Chain Managment 10 Mar, 2014CHEN Fengxia1Topics Here Define and explain how supply chain management can provide competitive advantage; Discuss how different supply chain strategies can offer different advantages and the situations in which this might be relevant; Describe the IT capabilities

2、required to support these strategies.1. Modern business thinking requires the supply chain to focus on more than just cost Categorize the costs arising from different aspects of supply chain and its management activities; Summarize some key costing management approaches that tackles the costs; Propo

3、se a general approach toward supply chain cost management.2. Observing and analysing supply chain from the cost perspective as one of the key strategic performance measures10 Mar, 2014CHEN Fengxia2More Than Cost StrategiesHow SCM can provide competitive advantagesHow SC strategies can offer advantag

4、es and its relevanceIT support for SCM strategies10 Mar, 2014CHEN Fengxia3DefinitionThe Well-known and Published Supply Chain Management definition:It starts with customer and it ends with customer.It requires looking at your business as one continuous process.A sequence of events which creates the

5、value of a specific good. This sequence may include conversion, assembling and/or disassembling, movement and placement.Supply chain management by definition is about the management of relationships across complex networks of companies that whilst legally independent are in reality inter-dependent.

6、Firms must expand their integrated behaviour to incorporate customers and suppliers. This extension, through external integration, is referred to as supply chain management.10 Mar, 2014CHEN Fengxia4DefinitionSupply Chain has four basic flowsMaterial flowInformation flowFinance flowCommercial flow10

7、Mar, 2014CHEN Fengxia5Supply Chain has three levels OperationsPlanningStrategySCM provide competitive advantages by Reducing costContribution to value creationDifferentiated customer serviceEnhanced trade partners collaborationLong term equity improvement (such as brand image)through the four basic

8、flows at three different levelsExplanationStrategyGrown business; Long term equity PlanningValue creation; Customer service; Supplier relationship.OperationsCommunication bridge; Reduce operation cost10 Mar, 2014CHEN Fengxia6Inter-companyExter-companyX-functional dept.RD, QA, PUR, Sales, Finance, et

9、c.Suppliers; CustomersAccelerate NPI; S&OP; Regularly demand & supply review; etc. Better forecasting; Shorten supply lead time; etc. PR; Compliance; Brand image; etc.Alignment with global business strategyMaterial flowInfo FlowFinancial FlowCommercial FlowExplanation1%3%2%1%4%3%12%9%6%18%32

10、%42%41%42%40%64%43%48%51%37%0%10%20%30%40%50%60%70%80%90% 100%Redece operating cost Strategic supplier engagementDifferentiated customer service capabilitiesInrecase revenueLong term equity improvementNot at all importantSomewhat importantNeither important nor importantImportantVery impotant10 Mar,

11、2014CHEN Fengxia7How SCM provide competitive advantages? The Chief Supply Chain Officer Report 2012 by Dr Hau Lee, Chairman of SCM WorldMore Than Cost StrategiesHow SCM can provide competitive advantagesHow SC strategies can offer advantages and its relevanceIT support for SCM strategies10 Mar, 2014

12、CHEN Fengxia8SCM Strategies10 Mar, 2014CHEN Fengxia9SCM StrategySourcingSupplier MgtBusiness IntelligenceOrganizational StructurePeopleSCM TechnologyBusiness Intelligence Demand, supply and sales best practice sharing Transparency of SCM KPIs Six value creation strategies. Here will talk Business In

13、telligence Strategy which can only be provided SCM.Sourcing Strategic sourcing Operational sourcing based on best practicesSupplier Management Qualify, evaluate and classify suppliers The right number of suppliersPeople Select and up-skill the right peoples Functional development and career pathsSCM

14、 Technology System solutions to enable SCM operationsOrganizational Structure Embedding SCM to get the most benefit for companySCM Business Intelligence StrategyStrategyAdvantagesRelevant SituationDemand planning standardization Understand customer requests. Better know the market trend. Distributio

15、n efficiency. Align and adjust business strategy. Visible plans. Customized products/ services. Innovation and short product life cycle in Ecommerce time. Top to down business awareness and risk management.Variable supply model Shorten supply lead time, quick response. Time efficiency. Lower risk, r

16、educe inventory. Cost efficiency. Share liability, trade-off between inventory and customer satisfaction. Flexibility and Agility. Make to stock, build FG buffer stock, for reliable & repeatable products. Make to order, no replenishment until firm customer order, for unique & specialist &

17、; short LT products/ services. Assemble to order, build raw materials stock, make production till firm order, for project/ bidding based products.Sales Forecast Accuracy Overview of target, forecast, actual, and financial budget. Increase revenue and grow business. All long term business/ equity. 10

18、 Mar, 2014CHEN Fengxia10Demand Planning StandardizationDemand RequestCustomerDemand Planning Cluster/ CountryMater PlanningGlobal/ Region10 Mar, 2014CHEN Fengxia11Sales DemandForecast quantity per Product family/ SKUS & OP meetingForecast correctedNet requirementS & OP meeting.Forecast adjus

19、t. Material optimization, capability and allocation balance. Variable Supply Modelmake to stock34%make to order64%assemble to order2%Order Quantity10 Mar, 2014CHEN Fengxia12make to stock44%make to order42%assemble to order14%Order Value Variable Supply ModelBackgroundThe 2 pies reflect FY2013 supply

20、 model of one business unit from a company leading the lighting industry. What we can see from the pies: Make to stock quantity 44%, value 34%. The 10% gap implies maybe the repeatable/ traditional product is losing the competitiveness.Make to order quantity 64% and value 42% tells this BU relies on

21、 customized/ specialist/ short lead time(common) products. It is a two-edged weapon, it has a strong design team while cannot develop high-end products.Assemble to order quantity only 2% yet value is 14%. It shows that winning a project or a bidding will contribute a lot to revenue, however, it is n

22、ot good at doing project/ bidding.The results will definitely impact the top business strategies. 10 Mar, 2014CHEN Fengxia13Sales Forecast Accuracy (SFA)10 Mar, 2014CHEN Fengxia14M 3%-22%10%25%-14%-15%12%-9%20%18%20%-16%21%M 2%-15%5%21%-9%-12%16%-9%12%10%6%-15%10%M 1%-8%3%15%-5%-7%16%-1%16%10%-8%10%

23、15%M 0%-10%5%30%8%-3%18%6%18%9%18%15%15%Up line10%10%10%10%10%10%10%10%10%10%10%10%Low line-10%-10%-10%-10%-10%-10%-10%-10%-10%-10%-10%-10%Jan/13 Feb/13 Mar/13 Apr/13 May/13 Jun/13Jul/13 Aug/13 Sep/13 Oct/13 Nov/13 Dec/13-40%-20%0%20%40%Jan/13Feb/13Mar/13Apr/13May/13Jun/13Jul/13Aug/13Sep/13Oct/13Nov

24、/13Dec/13坐標(biāo)軸標(biāo)題坐標(biāo)軸標(biāo)題SFA of ASales Forecast Accuracy (SFA)10 Mar, 2014CHEN Fengxia15M 3%-40%10%25%20%20%2%-51%12%40%56%10%-5%M 2%-22%40%32%20%-15%10%-20%40%10%20%-15%10%M 1%-12%-47%-40%40%10%21%-5%-10%30%-10%5%5%M 0%-30%4%-20%-10%-20%-5%-29%-20%-2%18%-15%15%Up line10%10%10%10%10%10%10%10%10%10%10%10%L

25、ow line-10%-10%-10%-10%-10%-10%-10%-10%-10%-10%-10%-10%Jan/13 Feb/13 Mar/13 Apr/13 May/13 Jun/13Jul/13 Aug/13 Sep/13 Oct/13 Nov/13 Dec/13-60%-40%-20%0%20%40%60%Jan/13Feb/13Mar/13Apr/13May/13Jun/13Jul/13Aug/13Sep/13Oct/13Nov/13Dec/13坐標(biāo)軸標(biāo)題坐標(biāo)軸標(biāo)題SFA of BSales Forecast Accuracy (SFA)10 Mar, 2014CHEN Feng

26、xia16BackgroundA is a grown BU of a previous Fortune 500 company.B is a new BU of a leading lighting company.SFA logicM is month, M 0 is “current month”, M 3 “is current month -3”.SFA = (Actual sales Mx forecast)/ Mx forecast.Up/low line means the acceptable Mx forecast gap is +/-10%.The data showsS

27、FA of A is relatively stable, and the actual FY result is 115% target meet(not shown here).SFA of B is a mass, sometimes sales are passionate to have 50% over target, sometimes lack of confidence to -47%; The actual FY result is only 40% target meet.Good SFA will help adjust the sales strategy and e

28、xpand business.More than cost Strategies10 Mar, 2014CHEN Fengxia17How SCM can provide competitive advantagesHow SC strategies can offer advantages and its relevanceIT support for SCM strategiesSCM IT SupportThe top 10 SCM software in Y2009 according to . 10 Mar, 2014CHEN Fengxia18RankNameSCMWMSMES/M

29、RPTMS1SAP*2Oracle*3JDA Software*4Manhattan Associates *5RedPrairie*6i2 Technologies*7Infor*8ILOG*9IBS*10Microsoft*WMS warehouse Mgt System; MES Manufacturing Executive System; MRP Manufacturing Resource Planning ; TMS Transition Mgt System SAP for SCMAbout SAPFrom SAP websiteHeadquartered in Walldor

30、f, Germany, with locations in more than 130 countries.SAP AG is the world leader in enterprise software and software-related services. Explore our 40-year history of innovation and access late-breaking company news, financial and investor information, career opportunities, and more.SAP in my viewSAP

31、 is a powerful system, it is able to do various data analysis, data consolidation and reporting. It provides easy, quick and transparent SCM.It is only applied at SCM but also at Purchasing, Finance, RD, Logistics, Quality.Its output is accurate and extensive based on correct input. 10 Mar, 2014CHEN

32、 Fengxia19SAP for SCM Demand/ Supply/ Sales10 Mar, 2014CHEN Fengxia20Microsoft for SCMAbout Microsoft Excel From WikipediaMicrosoft Excel is a spreadsheet application developed by Microsoft for Microsoft Windows and Mac OS. It features calculation, graphing tools, pivot tables, and a macro programmi

33、ng language called Visual Basic for Applications. It has been a very widely applied spreadsheet for these platforms, especially since version 5 in 1993, and it has replaced Lotus 1-2-3 as the industry standard for spreadsheets. Excel forms part of Microsoft Office.Microsoft Excel in my viewSCM is a

34、work about “table better than words, graphic better than table”, Mc Excel make this possible.It is powerful at calculating, graphing, consolidating.By combination with SAP, it is able to provide any forecast/ demand/ sales/ supply data.It works for you as you wish as long as you know its logic.10 Ma

35、r, 2014CHEN Fengxia21Microsoft for SCMDemand/ Supply/ Sales Consolidated analysis 10 Mar, 2014CHEN Fengxia22Costing The Supply ChainSupply Chain cost and management activitiesKey costing management approachesGeneral cost approach10 Mar, 2014CHEN Fengxia23What is Supply Chain CostFrom WikipediaSupply

36、 chain costs are operating costs associated with business functions related to the procurement, manufacturing and distribution of a product.On the contrary, costs associated with overhead functions, sales, promotion and marketing are not considered supply chain costs. The term is not strictly define

37、d and definitions may vary by industry and situation. For example, delivery costs are sometimes classified as sales costs, rather than supply chain costs.In my viewSupply chain cost is end-to-end pipeline cost.It involves many trading partners, from raw materials to finished goods to service, goes t

38、hrough supplier to factory to distribution center to customer.It includes procurement cost, manufacturing cost, inventory cost and logistics cost. 10 Mar, 201424CHEN FengxiaSupply Chain Cost Category10 Mar, 2014CHEN Fengxia25Supply Chain CostProcurement CostRaw Material CostSupplier Mgt Cost Manufac

39、turing CostInventory CostInventory Carrying CostWarehousing CostLogistics CostInbound CostOutbound CostSupplier FactoryFactory & DC, (Factory or DC)Supplier, Factory and Customer Cost Flow and SharingProcurement cost Two situations: Buy raw materials to produce or buy finished goods to sell. Sup

40、plier numbers, Supplier powers and location impact the supplier mgt cost.Manufacturing cost If buy finished goods to sell, then no in-house manufacturing cost. labor, automation and location impact manufacturing cost.Inventory cost Inventory includes holding stock to support sales, also about SMI. W

41、arehousing is about storing, distribution center numbers and location.Logistics cost Inbound is from supplier/ factory to DC. Outbound is from DC to customer. Maybe shared between supplier, factory and customer.Quality Cost (Quality cost is not defined as a categorized SC cost in here) But Quality p

42、enetrates into each cost aspects: Exquisite quality links to high procurement price; Quality issues increase logistics/ manufacturing/ inventory cost due to return of goods/ production rework/ sales suspended. 10 Mar, 2014CHEN Fengxia26Supply Chain Cost Category10 Mar, 2014CHEN Fengxia27Procurement

43、Cost Dual or multiple souring Substitute materials or products. Supplier optimization. Key supplier management.Manufacturing Cost Maintain/ spare in-house production capacity. Location optimization, location considering both labor cost and government policy support. Inventory cost Set up inventory l

44、evel. Clear slow moving inventory or risk inventory. Reduce warehousing cost.Distribution center optimization.Logistics Cost Shipping model optimization. Reach the optimal trading terms with both supplier and customer.Supply Chain Cost ManagementCosting The Supply Chain10 Mar, 2014CHEN Fengxia28Supp

45、ly Chain cost and management activitiesKey costing management approachesGeneral cost approachCost Management ApproachesProcurement72%Manufacturing7%Inventory15%Logistics6%Total Supply Chain Cost10 Mar, 2014CHEN Fengxia29This is the SC cost from one BU of a leading lighting company.This is in-house m

46、anufactured product.Would like to compare this with the general SC cost with the same structure, but lack of data.Will analyze the procurement cost and inventory cost in following, which weight 87% of total SC cost. 10 Mar, 2014CHEN Fengxia30Reduce Procurement CostGenerally, procurement cost constit

47、ute 60% to 80% of a manufacturer goods.Here procurement cost weights 72%, it is relatively high although within the percentage.Cost DownHow?Where?When?10 Mar, 2014CHEN Fengxia31Raw materialsPurchasing PowerSupplier managementReduce Procurement CostStart from the new product phase in stage. Define th

48、e cost structure of BOM. Dual or multi sourcing of key components. Look or develop substitute components. Global sourcing. Recyclable materials. Mainly at NPI. Bulk purchasing. Long term business Companys brand, suppliers are more willing to establish with big companies. Companys purchasing policy.

49、Buyers sourcing and negotiation capability. At any product life cycle Supplier KPI set up. Supplier numbers optimization. Discover new suppliers and phase out incapable suppliers. Assign roles to responsible for key suppliers. 10 Mar, 2014CHEN Fengxia32From SCM World, by Daniel Helmig, Group Senior

50、Vice President & Head of Supply Chain Management of ABBABB Sourcing and Procurement MethodologyContinuous Improvement Process Sourcing1. SET BENCHMARK Preliminary analysisCost structure analysis (CSA) Benchmark selection Company benchmarking Specification comparison Supplier interviews Value cha

51、in & supplier cost analysis Supplier benchmarking Gap analysis complete 2. MEASURE Target review Benchmark review Target setting 4. SUSTAIN Result reporting Opportunity database Supplier feedback Category strategy updated Future strategy workshop Implication assessment Target inputs 5. IMPROVE S

52、pecification implementation actions Price implementation actions Total cost implementation actions New business opportunity implementation actions Implementation planning and prioritization Assign roles and responsibilities 3. ANALYZE Opportunity assessment workshop Review results of previous interv

53、iews Use existing tools to discover new opportunities Get suppliers input on engineering based opportunities Supplier visits / line walks Review ABB manufacturing process Hold workshop with plant teams Create idea tracking sheet 10 Mar, 2014CHEN Fengxia33Inventory Cost Management1.Inventory and safe

54、ty stock levelRelevant to sales target, lead time and delivery service line.Set up global/ region/ cluster/ country inventory level. Monthly level is more reasonable.2.Slow Moving Inventory (SMI) or Risk Inventory level Define 3/ 6/ 12 month SMI. Calculate the weight of SMI(Risk inventory value/ Inv

55、entory value).Top 10 SMI clear way. 3.Lead time and warehousing The longer lead time, the poorer delivery service level(DSL).Lead time is closely related to re-order point (ROP, when to make replenishment and how many).Shorten lead time will reduce inventory value. Distribution Center optimization.

56、10 Mar, 2014CHEN Fengxia34Reduce Inventory Valuek2,000k4,000k6,000k8,000kJan/13Feb/13Mar/13Apr/13May/13Jun/13Jul/13Aug/13Sep/13Oct/13Nov/13Dec/13Value (EUR)Monthly Sales of Key Countries CDCAUCNIndiaThaik2,000k4,000k6,000k8,000kJan/13Feb/13Mar/13Apr/13May/13Jun/13Jul/13Aug/13Sep/13Oct/13Nov/13Dec/13

57、Value (EUR)Monthly Inventory of Key CountriesCDCAUCNIndiaThaiWhat can we see in the charts:No inventory level set up. Inventory doubled the sales.Inventory kept on going up while sales fluctuated.Especially China held the highest inventory while sales was low.How to reduce inventory cost:Set up inve

58、ntory level. Lower the inventory quantity or adjust the inventory structure. Monitor sales data. Take more effort to optimize China inventory.10 Mar, 2014CHEN Fengxia35Clear SMI or Risk InventoryThis was the Risk Inventory vs Inventory at 1H of Y2012 and Y2013.Risk inventory was relatively stable, m

59、eans no increment of slow moving items.ButHere did not define how many months holding of the slow moving.Risk inventory weighted around 20% 40% of total inventory, this was unhealthy.NeedDefine how long of holding the slow moving. 3/ 6/ 12 months?Lower the risk inventory level at percentage and take actions immediately. 10 Mar, 2014CHEN Fengxia36Shorten Lead Time25570246810121416Product Group AProduct Group BProduct Group CProduct Group DLead time by Product group (wks)Customer RequiredActualGapStatus now: The actual lead time is much longer than customer required. Longe