Supply Chain Ch. 13 Supply Chain Process Integration

Supply Chain Security System Response

1. Basic Initiatives: Physical security measures; personnel security; standard risk assessment; basic computing security; continuity plan; freight protection 2. Reactive Initiatives: Larger security organization; C-TPAT compliance; supply base analysis; supply continuity plan; limited training 3. Proactive Initiatives: Director of security; personnel with military experience; formal security risk assessment; advanced computing security; participation in security groups 4. Advanced Initiatives: Customer/supplier collaboration; learning from the past; formal security strategy; supply chain drills, simulations, exercises; emergency control center

Five: Activities Causing the Bullwhip Effect

1. Demand Forecast Updating: Using various customer orders to create and update forecasts, production schedules, and purchase requirements -Solutions: -The buyer makes its actual demand data available to its suppliers -Using the same forecasting techniques and buying practices -Reduce the length of the supply chain -Reducing the lead times from order to delivery 2. Order Batching: Making large orders for goods from suppliers on an infrequent basis to reduce order and transportation costs -Solution: -More information visibility -Frequent of smaller order sizes 3. Price Fluctuations: Offering price discounts to customers, causing erratic buying patterns -When suppliers offer special promotions, quantity discounts, or other special discounts, these pricing fluctuations result in significant forward buying activities -Solutions: -Eliminate price discounting among supply chain members -Everyday Low Pricing 4. Rationing and Shortage Gaming: Allocating short product supplies to customers, causing them to increase future orders beyond what they really need Rationing: A strategy that can occur when demand exceeds a supplier's finished goods available. In such cases, the supplier may allocate product in proportion to what buyers ordered Shortage Gaming: A strategy that occurs when buyers figure out the relationship between their orders and what is supplied, and they then tend to inflate their orders to satisfy their real needs -Solutions: -Sellers allocate short supplies based on the demand histories of their customers -Sharing future order plans with suppliers allows suppliers to increase capacity if needed

Activities Used to Manage Supply Chain Risk

1. Increase safety stocks and forward buying: Can be costly--A stopgap, temporary alternative 2. Identify backup suppliers and logistics services: Can create ill will with current partners; requires additional time and relationship building 3. Diversify the supply base: Use of suppliers from geographically dispersed markets to minimize the impacts of disruptions 4. Utilize a supply chain IT system: Collection and sharing of appropriate information with supply chain partners 5. Develop a formal risk management program: Identifies potential disruptions and the appropriate response--Most proactive risk

Supply Chain Security Management

A method that is concerned with reducing the risk of intentionally created disruptions in supply chain operations including product and information theft and activities seeking to endanger personnel or sabotage supply chain infrastructure

Obstacles to Process Integration Along the Supply Chain

A number of factors can impede process integration along the supply chain and cause value loss in a variety of ways

Step Six: Develop Supply Chain Performance Measures for the Key Processes

Develop external performance measures to monitor the links with trading partners regarding the key supply chain processes

Step Nine: Reevaluate the Integration Model Annually

Due to frequent changes occurring due to the development of new supply chain communication technologies and new products, suppliers, and markets, trading partners should revisit their integration model annually and make updates where needed

Step Seven: Assess and Improve External Process Integration and Supply Chain Performance

Eliminating poor-performing suppliers and develop beneficial relationships and strategic alliances with their remaining suppliers and customers. Set performance metrics and monitor them to identify the lack of integration and supply chain competitive weaknesses Knowledge Management Solutions: A system that uses internet applications tied to desktop applications that enable real-time collaboration and flow of information between supply chain partners

One: The Silo Mentality

I win, you lose kind of attitude that causes a firm to be reactive and short term oriented. At this stage, no internal functional integration is occurring Eventually the lack of internal or external collaboration will create quality, cost, delivery timing, and other customer service problems that are detrimental to supply chains

Step One: Identify Critical Supply Chain Trading Partners

Key trading partners: Suppliers that have come to be trusted and that provide a large share of the firm's critical products and services; and repeat, satisfied customers that buy a significant portion of the firm's products

Four: Lack of Knowledge

Lack of process and information system skills and lack of knowledge regarding the benefits of SCM among management and other employees, within the firm and among partners Collaborative Education: Providing training for supply chain partner employees

Step Three: Align Supply Chain Strategies with Key Supply Chain Process Objectives

Managers need to identify the important processes linking each of the supply chain trading partners and establish process objectives to assure that resources and efforts are effectively deployed within each firm to support the end-product strategy The Eight Key Supply Chain Business Processes: 1. Customer Relationship Management: Identifying key customer segments, tailoring product and service agreements to meet their needs, measuring customer profitability and firm's impact on customers 2. Customer Service Management: Providing information to customers such as product availability, shipping dates, and order status; administering product and service agreements 3. Demand Management: Balancing customer demand with the firm's output capacity; forecasting demand and coordinating with production, purchasing, and distribution 4. Order Fulfillment: Meeting customer requirements by synchronizing the firm's marketing, production, and distribution plans 5. Manufacturing Flow Management: Determining manufacturing process requirements to enable the right mix of flexibility and velocity to satisfy demand 6. Supplier Relationship Management: Managing product and service agreements with suppliers; developing close working relationships with key suppliers 7. Product Development and Commercialization: Developing new products frequently and getting them to market effectively; integrating suppliers and customers into the process to reduce time to market 8. Returns Management: Managing used product disposition, product recalls, packaging requirements; and minimizing future returns

Step Two: Review and Establish Supply Chain Strategies

Policies and processes should be geared toward supporting the overall strategy of the supply chain

Step Four: Develop Internal Performance Measures for Key Process Effectiveness

Procedures and metrics must be in place to collect and report internal performance data

Process Integration

Sharing information and coordinating resources to jointly manage a process or processes

Step Eight: Extend Process Integration to Second-Tier Supply Chain Partners

Supply chain software used to link supply chain partners' information systems evolves and becomes more widely used an relied upon therefore it creates the ability of integrating processes to second-tier partners and beyond Radio Frequency Identification Tag (RFID): The chips used to store information about a specific product or carton using RFID Passive RFID Tags: RFID tags that are without an internal power source an require power from a tag reader -Ex: Placed on pallets and cases Active RFID Tags: An RFID tag that is equipped with an onboard power supply to power the integrated circuits and broadcast it signal to the tag reader -Ex: Used to track whereabouts of expensive equipment in a hospital

Two: Lack of Supply Chain Visibility

The inability to easily share or retrieve trading partner information in real time, as desired by supply chain participants Information visibility: The degree that information is communicated and made available to various constituents, typically on the internet Cloud-based communication platform: An internet-based platform that provides greater visibility, ensures faster time to market, and offers faster response to changing market dynamics and demands

Step Five: Assess and Improve Internal Integration of Key Supply Chain Processes

To achieve internal integration, personnel must have management support, resources, and empowerment to make meaningful organizational changes to foster cooperation -Ex: Cross-functional teams Primary Enabler: -ERP Systems Internal Supply Chains: An organization's network of internal suppliers and internal customers. Internal supply chains can be complex, particularly if the firm has multiple divisions and organizational structures around the globe Legacy Systems: A firm's existing software applications Data Warehouses: Information system structures used to store data that was collected from the various divisions of the firm

Three: Lack of Trust

Unwillingness to work together or share information because of the fear that the other party will take advantage of them or use the information unethically Six Ways of "getting to yes" 1. Start small 2. Look inward 3. Gather 'round 4. Go for the win-win 5. Don't give away the store 6. Just do it