SCM Exam #2

Key Groups of Production Metrics

1. Customer experience and responsiveness 2. Quality 3. Efficiency 4. Inventory 5. Compliance 6. Maintenance 7. Flexibility and innovation 8. Cost and profitability

Seven Principles of Supply Chain Management

1. Segment customer based on needs 2. Customize logistics networks 3. Listen to market signals and plan accordingly 4. Differentiate products closer to customers 5. Source strategically 6. Develop supply chain technology strategy 7. Adopt channel-spanning measures Update on the Seven Principles: • The seven principles basically survive the test of time. • We still have a long way to go on supply chain strategy implementation. • Technology and data will be the major game changer going forward.

The Velocity of Data

Every 60 seconds: • 98,000+ tweets • 695,000 status updates • 11 million instant messages • 698,445 Google searches • 168 million+ emails sent • 1,820TB of data created • 217 new mobile web users

Financial Implications of Supply Chain Service Supply Chain Service Improvement

Example: Strategic Profit Model & On-Time Delivery Improvement

Production Tradeoffs

1. Volume vs. Variety 2. Responsiveness vs. Efficiency 3. Production costs vs. Supply chain costs 4. In-house (Make) vs. Outsource (Buy)

Imperative for Collaborative Relationships Elements of Successful Collaboration

1. Well-understood goals and objectives 2. Trust and commitment 3. Organizational compatibility and communication 4. Equitable sharing of gains and losses 5. Benefits greater than going it alone 6. Dedication to continuous improvement 7. Strategic plan to provide direction to the collaboration

Production Execution Decisions Assembly Processes

Assembly Processes • Make-to-Stock (MTS) • Make-to-Order (MTO) −Assemble-to-Order (ATO) −Build-to-Order (BTO) −Engineer-to-Order (ETO)

Automation

Automation: M2M Vehicle-to-Infrastructure (V2I) - Car manufacturers such as Volvo and Ford have V2I vehicles in production that are capable of reading new smart road signs now used in France and Germany. Intelligent Robotics - Emphasize "autonomous" learning that has become an AI aspect of assets, advanced (predictive and prescriptive) analytics, AI-driven automation, and business intelligence software. Internet Of Things (IoT) - 3D printing technology creates physical objects from digital models. Potential uses will continue to broaden as the range of printable materials continues to expand.

Imperative for Collaborative Relationships Barriers and Benefits

Benefits • Focus on core competencies of supply chain organizations • Increased sharing of information and knowledge • Greater responsiveness to customers' needs • Creation of competitive advantage over competing supply chains • More productive and satisfying relationships Barriers • Resistance to change • Conflicting business objectives • Inconsistent goals and key performance indicators • Lack of trust • Unwillingness to share information • Lack of managerial support • Turf protection

SCM Software: Analytics & Intelligence Tools

Capabilities • The data collection & "big data" analytics • Self-service reporting • Performance scorecarding versus goals • Development of graphical dashboards • Activity monitoring supporting event mgmt. • Access to data residing on multiple SCIS Opportunity Areas • Generating valuable insights about complex global operations • Providing more granular visibility of spending • Improving S&OP & demand forecasting • Resolving logistics bottlenecks

Responsiveness vs. Efficiency in Production Facility Decisions

Centralized vs. Regional • Centralized production facilities provide operating cost and inventory efficiencies. • Regional production facilities allow companies to be closer to customers and more responsive Large vs. Small • Larger facilities with excess capacity provide the flexibility to respond to demand spikes. • Smaller facilities that are better utilized are more cost efficient. Product-focused vs. Process-focused • Product-focused facilities performing many processes on a single product type are more responsive. • Process-focused facilities concentrating on a few functions across multiple product types are more efficient at its limited scope of activities.

Model for Successful Supply Chain Relationships Step 2: Decision to Form Relationship

Core competency assessment is key in relationship decision that involves an external provider of logistics services. "Drivers" and "facilitators" are identified in relationship decision that involves channel partners Drivers: Compelling reasons to partner − Asset/cost efficiency; customer service; marketing advantage; profit stability/growth Facilitators: Supportive corporate environmental factors that enhance partnership growth & development − Corporate compatibility; management philosophy; mutuality of commitment; symmetry on key factors (e.g. size) • Neither drivers nor facilitators present: More transactional, or "arm's length" • Common drivers with facilitating factors: More structured, formal relationship

In-house (Make) vs. Outsource (Buy)

In-house (Make) • Internal production processes are more directly visible. • Internal processes are easier to control from a quality standpoint. Outsource (Buy) • Lower product costs • Free-up resources for other, more strategic needs BUT • More difficult to maintain visibility and synchronize activities. • More difficult to control over quality, intellectual property rights, and customer relationships.

Operations Strategy Planning Production Planning

Planning Horizon - Long range (1 year or more): Product group or families - Medium range (6 to 18 months): end items - Short review (few days to few weeks): components/ subassemblies Capacity Plan - Resource requirement planning - Rough-cut capacity planning - Capacity requirements planning Materials Plan - Aggregate production planning - Master production scheduling (MPS) - Material requirements planning (MRP)

Sustainability Four "R's" of Sustainability

Reuse - Reuse often requires disassembly, which is a systematic method of separating a product into constituent parts, components, subassemblies, or other component parts. The parts or components may be reassembled for reuse after cleaning, checking, and repair, or the individual components may be reused. Remanufacturing - Remanufacturing essentially means that a product or part is returned to the market as "good as new." Auto parts, tires, and electronics are frequently remanufactured. Reconditioning - Reconditioning usually means returning used products to working order but not "as good as new." Recycling - Recycling generally refers to the secondary use of materials. It usually includes glass bottles, cans, newspapers, corrugated material, tires, etc. The recycling is usually performed for individual households by municipal government agencies.

Third-Party Logistics Important 3PL IT Capabilities

Shippers • Transportation management (planning) • Warehouse/DC management • Visibility (order, shipment, inventory, etc.) • Electronic Data Interchange (EDI) • Transportation management (scheduling) • Transportation sourcing Providers • Transportation management (planning) • Visibility (order, shipment, inventory, etc.) • Transportation management (scheduling) • Electronic Data Interchange (EDI) • Warehouse/DC management • Customer relationship management (CRM)

Sustainability Considerations

Sustainability requires companies to consider and manage the impact that their supply chain has on both the ecological and social environment in which they operate.

Sustainability Includes Many Dimensions

Sustainability: • Political • Economic • Social • Technological • Environmental • Legal

Supply Chain Transformation in the Disruptive Age

• Commerce is changing (rapidly). • Supply chain must evolve to meet strategic needs. • Tradeoffs between efficient and customer-focused. • People, process and tech must be aligned. • Added complexity and expectations. • View supply chain as "end-to-end" and not as function(s). • Collaboration and leadership is KEY. • Four themes—technology, analytics, ecosystems, and talent.

Sustainability Reverse Flows: Key Observations

• Global supply chains − Global supply chains present both challenge and opportunity for reverse flows. • Cash/value & technology − Cash/value from returns, and power of technology has not received enough emphasis in return flows. • Necessary evil/cost center − Reverse direction needs continual scrutiny to control and reduce. • Increased reverse flow − Easy return as part of customer service policies. − Increased consumer recycling programs. − High obsolescence rate in technological products.

Successful Development of a Supply Chain Metrics Program

• Is a result of a team effort. • Involves customers and suppliers (where appropriate). • Develops a tiered structure. • Identifies metric "owners" and ties metric goal achievement to an individual's or division's performance evaluation. • Establishes a procedure to mitigate conflicts. • Is consistent with corporate strategy. • Establishes top management support.

Sustainability The Business Case for Sustainability

• Regulation − Legislation & compliance • Risk −Short-term cost & long-term supply • Reputation −Brand loyalty, sentiment & awareness • Profit − Cost reduction & competitive advantages

Chapter 13 Summary

• Successful metric development for logistics and supply chains is consistent with corporate strategy, focuses on customer needs, carefully selects and prioritizes metrics, focuses on processes, uses a balanced approach, and uses technology to improve measurement effectiveness. • Four principal categories for performance metrics are: time, quality, cost, and miscellaneous or support; OR: operations cost, service, revenue or value, and channel satisfaction. • Supply chain management impacts ROA via decisions regarding channel structure management, inventory management, order management, and transportation management. • Supply chain service failures result in lost sales and rehandling costs. The financial impact of modifications to supply chain services can be analyzed using the strategic profit model which shows the relationship of sales, costs, assets, and equity.

Alignment in Supply Chain Management

• Supply chain & Organizational strategies • Supply chain & Trading partners • Supply & Demand

Chapter 14 Summary

• To produce actionable knowledge, supply chain information must be high quality, readily flow between organizations, and support a variety of decision types. • A well-designed SCIS links people, processes, and technology in a manner that provides actionable information and enhances decision making. • four general categories of supply chain software are: (1) planning tools for forecasting and related activities, (2) execution systems for management of dayto-day processes, (3) event management tools to monitor supply chain flows, and (4) business intelligence applications used to analyze performance. • To maximize SCIS investment success, managers must effectively assess the SCM requirements, understand software options, and address the technical issues.

Supply Chain Analytics Big Data and the Supply Chain

A primary goal of big data is to help organizations better understand the information that resides within the data, and to focus attention on those factors that are most relevant to making well-informed supply chain decisions. Big data may be thought of as the process of accumulating, organizing and analyzing very large sets of data to identify patterns, trends and other information of interest.

Supply Chain Analytics Analytical Resources

Descriptive (Operational) (Low) • Standard and ad hoc reporting • Data from supply chain partners • Alerts and notifications • Query/drill down Predictive • Forecasting • Heuristic analysis • Simulation • Statistical analysis • Predictive modeling Prescriptive • Stochastic optimization • Scenario planning Cognitive (Strategic) (High) • IBM Watson Analytics

Supply Chain Talent Management Effective Talent Management

Linking People Strategy to Business Strategy

Production Costs vs. Other Supply Chain Costs

Make to stock - (Nothing) Make to order - Assemble to order - Build to order - Engineer to order

Third-Party Logistics Management and Relationship Issues

Customers' Expectations of 3PL Providers • Superior service and execution (proven results and performance) • Trust, openness, and information sharing • Solution innovation and relationship reinvention • Capable information technologies to support the relationship • Ongoing executive level support • Service offering aligned with customer strategy and deep industry knowledge 3PL Providers' Expectations of Customers • Mutually beneficial, long-term relationship with company • Trust, openness, and information sharing • Dedicating the right resources at the right levels, including executives • Access to useful data to design solutions and provide desired services to customers • Clearly defined service level agreements • Fiduciary responsibility and overall fairness relative to pricing

Volume vs. Variety in Production Process Decisions

Economies of Scale • Higher-volume production with lower cost per unit of output • Suitable in situations where production processes have high fixed costs and equipment. Economies of Scope • Low-volume production with flexible capabilities of producing a wide variety of products • Important in markets characterized by changing customer demand.

Model for Successful Supply Chain Relationships Step 6: Implementation & Continuous Improvement

Future success of relationship is a direct function of the ability of involved organizations to achieve both continuous & breakthrough improvement. Supply Chain Value: 1. Customer value research 2. Process Mapping 3. Data Analytics 4. Cost Analytics 5. Benchmarking and Intelligence 6. Supply Chain Transformation

Operations Strategy and Planning Production Strategy Challenges

Mass Production (1970's) • Limitation on producer's responsive-ness • Potential for the bullwhip effect Lean Manufacturing (1980's) • Difficult to achieve economies of scale • Require technological capabilities to achieve the supply chain visibility and synchronization • Increased risk of disruption Flexible Manufacturing (1990's) • High capital investment • System complexity • Require skilled technician • Require disciplined & high level of planning Adaptive Manufacturing (2000's) • Require seamless transfer of knowledge and real-time information Smart Manufacturing (2010's) • Require capabilities of a network with messaging standards • Require analytical toolkit • Require flexible automation

Manufacturing Execution System

Technology that connects, monitors, and controls complex manufacturing systems and data flows on the factory floor. Core Functionality: • Data collection & acquisition • Scheduling • Staff controls • Resource management • Production tracking & dispatch • Product traceability & genealogy • Quality management • Process management • Performance analysis • Document management • Maintenance management

Systems Capabilities Link Network Elements

A cohesive network of integrated technologies, skilled people, and robust processes must be established.

Supply Chain Talent Management Key Steps to Building A High Quality SCM Team

Acquiring new staff - Deploy active recruiting techniques such as building recruiting relationships with leading universities, leveraging employee referrals, and creating online communities via LinkedIn and other sites to facilitate candidate interaction. Developing talent - Development programs that include effective onboarding, ongoing training, and individual guidance, coupled with a strong culture of development and supply chain-human resources collaboration. Fostering the advancement of top supply chain talent - Deploy a proactive combination of career guidance and challenging assignments, while providing compelling SCM advancement opportunities via logical career paths, retention strategies, and succession planning.

Financial Implications of Supply Chain Strategies Supply Chain Decision and ROA

CLGN Example: Comparison of Supply Chain Alternatives Example: CLGN 2020 and Reduced Transportation Costs

Financial Implications of Supply Chain Strategies Supply Chain Strategic Areas Affecting ROA

Channel structure management - Use of outsourcing - minimize channel inventories - Improve information - Efficient channel structure Order management - Reduce stockouts - Optimize order fill rates - Reengineer order-to-cash cycle - Improve information Inventory Management - Minimize safety stock - Optimize availability - Improve information - Eliminate obsolete excess items Transportation management - Improve on time delivery - improve information - Optimize mode mix - Reduce transit time variability (ROA increased)

SCM Software: Facilitating Tools

Facilitating systems and applications provide critical links between supply chain processes, the organization, and external stakeholders. Collectively, they create a holistic view of the supply chain. Enterprise resource planning (ERP) systems • Incorporate internal and external systems into a single unified solution that spans the enterprise. Supplier relationship management (SRM) • A controlled and systematic approach to managing an organization's sourcing activities for goods and services. Customer relationship management (CRM) • Focuses on practices, strategies & technologies used to manage and analyze customer interactions & data throughout relationship lifecycle. Automatic identification (auto-ID) & data capture technologies • Recognize objects, collect relevant information, and feed the data directly into the SCIS

Mobility

Mobile internet (MI) and communication - Combinations of mobile devices (e.g. smartphones and tablets), high-speed wireless networks, and associated applications. Multipurpose mobile computing device - Commercial grade device with features such as builtin processor, memory and operating system (OS); camera; barcode and label printers; scanners; RFID readers; GPS; voice recognition software. Mobile cloud - The combination of mobile development with cloudbased storage, applications, computing and services. • GPS technologies integrated with wireless telecommunication and computing devices • Maximize fleet and asset utilization − Real-time routing − Response to weather conditions − Dynamic driver dispatching

Performance Categories SCOR Process D1 Metrics

Process Category: Deliver Stocked Product Process Number: D1 Reliability • Perfect order fulfillment Responsiveness • Order fulfillment cycle time Agility • Upside Supply Chain Flexibility • Upside Supply Chain Adaptability • Downside Supply Chain Adaptability • Overall Value at Risk Costs • Total cost to serve Asset Management • Cash-to-Cash Cycle Time • Return on Supply Chain Fixed Assets • Return on Working Capital

Production Execution Decisions Production Process Layout

Production process layout involves the arrangement of machines, storage areas, and other resources within the four walls of a manufacturing or an assembly facility. The layout is influenced by a number of factors. • The production strategy and assembly process employed • Product characteristics (weight, fragility, size) • Demand characteristics (volume & variability) • Service commitments • Production mixes • Facility costs Production process layouts generally fit into a spectrum of work flow that moves from projects to continuous processes.

SCM Software: Planning Applications

SCM planning applications help organizations shift from autonomous planning activities to synchronized planning processes that use real-time data for collaboration across departments, suppliers & customers. • Available/capable to promise • Sales and operations planning/integrated business planning • Collaborative planning, forecasting, and replenishment • Vendor-managed inventory/direct point of sale • Event planning • Demand planning • Inventory planning • Distribution planning • Strategic network design • Inventory strategy optimization • Supply planning • Production/multiplant capacity planning • Production/factory planning and scheduling

Model for Successful Supply Chain Relationships Steps 1-3

Step 1: Perform Strategic Assessment • Involves the conduct of a logistics audit, which provides a perspective on the firm's logistics and supply chain needs and a wide range of useful information. Step 2: Decision to Form Relationship • Decision involving external logistics service provider focuses on whether or not to have a relationship (core competency assessment) • Decision involving channel partners focuses on type of relationship that works best. Step 3: Evaluate Alternatives • Thorough assessment of the company's needs and priorities in comparison with the capabilities of each potential partner. • A broad representation and involvement of people throughout the company

Supply Chain Technology Innovations Smart Technologies

To enable the supply chain evolution, companies must effectively digitize their supply chains and deploy smart technologies • Supply Chain Digitization • Artificial Intelligence & Machine Learning • IoT • Blockchain • Digital Twin • Quantum Computing

Range of Relationship Types

Transactional (Vendor) - Little or no integration or collaboration Collaborative (Partner) Strategic (Alliance) - More strategic and highly relational

Third-Party Logistics Types of 3PL Providers

Transportation-based • 3PL providers founded as a subsidiary or major division of a large transportation firm. • Examples: FedEx Supply Chain, UPS Supply Chain Solutions, DHL, Ryder Supply Chain Solutions, Schneider Logistics, Penske Logistics, and XPO Logistics. Contract Logistics-based • Generally referring to services relating to warehousing and distribution. • Examples: CEVA Logistics, DSC Logistics, Exel/DHL, Geodis, Penske Logistics, Saddle Creek Corporation. Freight Forwarding-based • Organizations performing services for the daily flow of global commerce, purchasing shipping capacity from asset-based providers, then re-selling to supply chain customers. • Examples: C.H. Robinson, DHL, DSV, Expeditors, Hub Group, and Kuehne & Nagel. Financial-based • Firms providing services such as freight payment and auditing, cost accounting and control, tools for managing shipment visibility, information, and tracking, and consulting and advisory services. • Examples: Tranzact Technologies, CTSI, and Cass Information Systems. Information-based • A newer, innovative type of third-party provider emerged as a result of growth and development of Internetbased, business-to-business, electronic markets for transportation and logistics services. • Example: Transplace, Inc. Corporate Subsidiaries-based • 3PL organizations that initially were divisions or subsidiaries of manufacturing or distributor organizations. • Examples: Neovia, Inc. (formerly Caterpillar Logistics), IBM Global Business Services, Odyssey Logistics.

Game-Changing Technologies

• Mobility • Digitization • Automation

Third-Party Logistics: Industry Overview

"A third-party logistics firm may be defined as an external supplier that performs or manages the performance of all or part of a company's logistics functions." Participants who are involved in the buying and selling of outsourced logistics services range from 1PL's to 5PL's: • 1PL - Shippers or receivers of product moved through supply chain. • 2PL - Asset-based logistics providers that physically move product through the supply chain (transport carriers of various modes). • 3PL - Firms that manage and/or provide logistics services on behalf of their clients and customers. Most of these organizations are non-asset based. • 4PL - Firms that provide broader scope of services to help manage elements of the supply chain, and typically may be more strategically involved than 3PLs would be. • 5PL - Companies that aggregate demands of 3PLs into bulk volumes to negotiate better rates with logistics service providers.

Characteristics of Good Performance Measures Raising the Performance Bar

- 1960's: Production costs - 1970's: Manufacturing and inventory costs - 1980's: Transport costs - 1990's: Distribution and logistics costs - 2000's: Supply chain and customer service costs

Imperative for Collaborative Relationships Three Important Types of Collaboration

- Vertical collaboration - Horizontal collaboration - Full collaboration

Third-Party Logistics: Future 3PL Industry Trends

1. Continued expansion, acquisition and consolidation of 3PL industry 2. Expansion of global markets and needed services 3. Broadening of service offerings across supply chain, and business process outsourcing 4. Increased efforts to update, enhance, and improve 3PL-customer relationships 5. Growing range of "strategic" services offered by 3PLs and 4PLs 6. Innovation and transformation to meet needs of e-Commerce businesses 7. IT capabilities to become an even greater differentiator 8. Increased adoption of shared service networks and sometimes collaborative initiatives with traditional competitors 9. Emphasis on relationship reinvention, mechanisms for continual improvement, and solution innovation

SCM Technology Implementation Golden Rules for Success

1. Get sponsorship of senior leaders 2. Choose the right technology solutions 3. Select an implementation leader with project management skills 4. Choose the right consultants to support implementation 5. Staff the project team with the best and brightest people 6. Manage "scope creep" to avoid implementation delays 7. Secure adequate resources for training and post-go-live support

Characteristics of Good Performance Measures

1. Is quantitative 2. Is easy to understand 3. Encourages appropriate behavior 4. Is visible 5. Is defined & mutually understood 6. Encompasses outputs & inputs 7. Measures only what is important 8. Is multidimensional 9. Uses economies of effort 10. Facilitates trust

Performance Categories Logistics Quantification Pyramid

1. Looks at how logistics cost and service are perceived by channel members. 2. Focuses on how a seller's cost influences a customer's profit and on how a seller's service impacts a customer's revenue. 3. Example: Transportation cost tradeoffs between less expensive (slower & less reliable) and more expensive (faster & more reliable) transportation. 4. • Product availability • Order cycle time • Logistics operations responsiveness • Logistics system information • Post-sale logistics support

SCM Technology Implementation Informed Decision Making

1. Need assessment. Understand the supply chain that the technology is intended to support. 2. Software selection. A multifaceted decision, involving development alternatives (off the shelves vs. in-house), types of applications (individual applications vs. integrated suite), and purchase options (on-premise vs. SaaS) 3. Implementation issues. Training, cultural change, systems interoperability, data synchronization, data standardization, and application integration

Seven Immutable Laws of Collaborative Logistics

1. Real and recognized benefits to all members 2. Dynamic creation, measurement, and evolution of collaborative relationships 3. Co-buyer and co-seller relationships 4. Flexibility and security 5. Collaboration across all stages of business process integration 6. Open integration with other services 7. Collaboration across essential logistics flows

Digitization

Augmented Reality (AR) AR in warehouse operations - AR technology, which could come in the form of integrated smart phone cameras or wearable headsets and accessories, could guide a worker who needs to find, move, pick, pack, and ship a particular product; and allow him/her to scan barcode and capture image. Deep Learning - Emphasize "autonomous" learning that has become an AI aspect of assets, advanced (predictive and prescriptive) analytics, AIdriven automation, and business intelligence software. Additive Mfg. - 3D printing technology creates physical objects from digital models. Potential uses of will continue to broaden as the range of printable materials continues to expand. Cloud Computing - Offering access to a shared pool of computing resources (e.g. servers, storage, software) over the Internet. Augmented Reality - Integrates contextual information into individuals' field of view through an AR headset, providing virtual images, videos, animation or informational content to users who wear them.

Systems Capabilities Mitigate Technology Risks

Common risks must be identified and mitigated to maximize the return on technology investments. The pitfalls associated with systems adoption or upgrades • Unrealistic assumption that supply chain technologies will readily solve or fix flawed supply chains. • Weak technology-process alignment, leading to ill-fitting solutions that fail to achieve their promise • Technology gaps as a result of piecemeal purchases and deployment of technologies • Challenges in cross-chain systems integration with suppliers, service providers, and customers • Poor planning and preparation for technology implementation

SCM Software: Execution Applications

Companies deploy a variety of execution software to facilitates desired performance of day-to-day operating tasks required to support customer demand. Warehouse Management Systems • Inventory management • Labor management • Order processing • Yard/dock management • Returns management Order Management Systems • Sales order entry • Pricing and credit checks • Inventory allocation • Invoice generation Distributed Order Management • Order assignment Transportation Management Systems • Mode and carrier selection • Route planning and optimization • Dispatching and scheduling • Freight audit and payment • Performance analysis Global Trade Management • Trade compliance • International logistics • Global order management • Global trade financial management Manufacturing Execution Systems • Work-in-process management

Example Process Elements and Details

INPUT Basically, the state of the supply chain prior to the intended transformation ("asis" state) • Supply chain goals and objectives • Configuration/mapping of current supply chain • Details relating to facilities, customers, suppliers, capital, cost, and growth • Economic and competitive environments • Macro and micro changes in product and service markets PROCESS Conversion or transformation of inputs into outputs • Supply chain innovations • Flows of products, information, capital, throughout the supply chain • Alignment within and among organizations • Essentially, what needs to be converted, changed, or added to achieve results of the transformation OUTPUT Results of the transformation ("tobe" state) • Improvements in supply chain processes • Measurable results • Impacts on customers, cost, capital, and growth of organization • Enhanced competitive advantage Resources Capabilities needed to accomplish the transformation • People • Information • Technology • Financial support • Change management capabilities Constraints Constrain the process and/or outputs • Organizational policies • Budget/financial capabilities • Supply chain partner capabilities • Culture/environmental • Government/regulatory • Contract terms • Risk Feedback Assess process and process outcomes with desired goals and objectives—use as basis for needed revisions to process inputs or changes to process steps • Comparisons of outputs with goals and objectives • Identify elements of the process map that are in need of rethinking or revision • Valuable step to make mid-course modifications to improve process outputs Governance Rules or policies of how the process works—actually, governance itself is a process • Who is to be involved, and what are their roles • Protocols for decision making • Documentation of information and status relating to steps in transformation process

Measure vs. Metric vs. Index

Index • Combines two or more metrics into a single indicator, usually used to track trends in the output of a process. • Logistics example: Perfect order Metric • Involves a calculation or a combination of measurements, often in the form of a ratio. • Logistics examples : Inventory future days of supply, Inventory turns, Sales dollars per stockkeeping unit Measure • Requires no calculations and with simple dimensions. • Logistics examples: Units of inventory, Backorder dollars

Manufacturing Execution System Benefits

Initial 3-12 months • Efficiency gains • Cost reductions • Quality improvements Next 12-36 months • Process improvements • Cycle time & work flow compression • Inventory carrying cost reductions 36 months + • New product development acceleration • Indirect labor cost reduction • Agility & asset utilization improvements

Supply Chain Analytics From Data to Information to Understanding

One major topic of great contemporary interest is that of supply chain analytics that center on taking a giant leap from data to information, and then from information to understanding. Understanding - Information that has been examined & studied in context of specific business situations (e.g., inventory levels in relation to overall economic conditions) Information - Data that has been gathered, processed, organized & structured in a given context (e.g. average levels of inventory and/or levels of inventory by SKU) Data - Unorganized facts that need to be processed (e.g. levels of inventory at ends of financial periods)

Establishing Production Metrics

Pursue Goals • Align metrics with corporate objectives • Limit the number of metrics used to 5 or 6 per function • Measure performance of individual activities Avoid Mistakes • Using KPIs that are too narrow. • Encouraging wrong outcomes. • Focusing on issues that are not key priorities.

Model for Successful Supply Chain Relationships Steps 4-6

Step 4: Select Partner(s) • Select a logistics or supply chain partner only after very close consideration of the credentials of the most likely candidates. • Ensure that everyone involved has a consistent understanding of the decision made. Step 5: Structure Operating Model • The activities, processes, and priorities that will be used to build and sustain the relationship. Examples of components are: − Planning − Communication − Risk/reward sharing − Contract style − Financial investment Step 6: Implementation & Continuous Improvement • Depending on the complexity of the new relationship, the overall implementation process may be relatively short, or it may be extended over a longer period of time.

Performance Categories SCOR Level-1 Metrics

Supply Chain Reliability: The performance of the supply chain in delivering: the correct product, to the correct place and customer, at the correct time, in the correct condition and packaging, and with the correct quantity and documentation • Delivery Performance • Fill Rates • Product Order Fulfillment Supply Chain Responsiveness: The velocity at which a supply chain provides products to the customer • Order Fulfillment Lead Times Supply Chain Flexibility: The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. • Supply Chain Response Time • Production Flexibility Supply Chain Costs: The costs associated with operating the supply chain. • Cost of Goods Sold • Total Supply Chain Management Costs • Value-Added Productivity • Warranty / Returns Processing Costs Supply Chain Asset Management Efficiency: The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital. • Cash-to-Cash Cycle Time • Inventory Days of Supply • Asset Turn

SCM Software: Event Management Tools

Supply chain event management tools collect data in real time from multiple sources across the network and convert them into information that allows companies to automate the monitoring of supply chain events as they occur on a day-to-day basis. • Provide the cross-chain visibility needed to detect, evaluate, and adapt to changing conditions before they snowball into major problems. • Built-in work flow rules initiate automated responses that are either preemptive or reactive. • Integrated into other applications, event management solutions help to close the loop between planning and execution to support synchronization of end-to-end activities.

The Supply Chain-Finance Connection

The cost of providing logistics service not only affects the marketability of the product (via the landed cost, or price), but also impacts its profitability. Inventory management & capital • Logistics techniques such as just-in-time and vendor-managed inventories reduce inventory levels and capital required. Lead times & inventory cost and customer service • Consistent and short lead times helps inventories and can build customer satisfaction and loyalty. Order processing time & order-to-cash cycle • Order processing time has a direct bearing on an organization's order-to-cash cycle: Longer order-to-cash cycle = higher accounts receivable and higher investment in "sold" finished goods.

Systems Capabilities Enable Process Excellence

The system must facilitate excellent performance across the plan, buy, make, move, and return processes of a supply chain. 1. Cross-chain visibility. Supports process variability reduction, performance optimization, & cost control. 2. Agility. Support analytics that help to understand volatility and respond appropriately. 3. Velocity. Adjust speeds according to situations. 4. Synchronization. Facilitates data synchronization & real-time information sharing between partners. 5. Adaptability. Enable strategic adaptation of supply chain design & capabilities to evolving conditions. 6. Segmentation. Help define customer segments, understand cost to serve & prioritize service execution. 7. Optimization. Enable consideration of trade-offs, effectively deploy resources, & make decision.

Performance Categories Process Measure Categories

Time • On-time delivery/receipt • Order cycle time • Order cycle time variability • Response time • Forecasting/ Planning cycle time Quality • Overall customer satisfaction • Processing accuracy • Perfect order fulfillment • On-time delivery • Complete order • Accurate product selection • Damage-free • Accurate invoice • Forecast accuracy • Planning accuracy: Budgets and operating plans • Schedule adherence Cost • Finished goods inventory turns • Days sales outstanding • Cost to serve • Cash-to-cash cycle time • Total delivered cost − Cost of goods − Transportation costs − Inventory carrying costs − Material handling costs • All other costs • Info systems • Administrative • Cost of excess capacity • Cost of capacity shortfall Other/Supporting • Approval exceptions to standard • Minimum order quantity • Change order timing • Availability of information

The Supply Chain-Finance Connection Revenue-Cost Savings Connection

Transform cost reductions into equivalent revenue increases Profit = Revenue − Costs Where: Cost = (X%)(Revenue) Then: Profit = Revenue − (X%)(Revenue) = Revenue (1 − X%) Where: (1 − X%) = Profit margin Sales = Profit/Profit Margin

Production Execution Decisions Packaging

Well-designed packaging can: (1) Facilitate efficient handling and shipping of the finished goods; (2) Improve labor and facility efficiency (space & equipment utilization); and (3) Provide another level of product differentiation sought by the customer. Key Considerations: • Ease of handling (materials handling & transportation) • Protection of goods in the package • Compatibility with customers' materials-handling equipment • Information provision to production & logistics personnel • Sustainability

Information Requirements

• Information connects the extended supply chain, providing cross-chain insights regarding demand, customer orders, delivery status, inventory stock levels, and production schedules. • Three principle supply chain information requirements: − Meet quality standards − Support multidirectional flows − Provide decision support Meet Quality Standards Seven information quality standards: • Accuracy • Accessibility • Relevancy • Timeliness • Transferability • Usability • Reliability Support Multidirectional Flows • Internal information sharing • External information sharing • Suppliers − Logistics service providers − Financial institutions − Government agencies Provide Decision Support • Strategic decisions: Longrange supply chain plans • Tactical planning: Crossorganization linkages and supply chain activity coordination. • Routine decisions: Rulesbased decision making. • Execution and transaction processing: Completion of fulfillment activities

Chapter 12 Summary

• Inter-firm relationships may span from transactional to relational and may take the form of vendor, partner, and strategic alliances. • Collaborative relationships have been identified as highly useful to the achievement of long-term supply chain objectives. • Third-party logistics providers are "external suppliers that perform all or part of a company's logistics functions." • 3PLs may be thought of as transportation-based, warehouse/distribution-based, forwarder-based, financial-based, and information-based. • The most prevalent 3PL services used are transportation, warehousing, customs clearance and brokerage, and forwarding.

Chapter 6 Summary

• Process functionality can create a competitive advantage such as: low cost, high quality, fast delivery speed, high delivery reliability, ability to cope with demand change, and the flexibility to offer variety. • Production strategies have advanced from forecast-driven mass production to demand-driven, lean, flexible, adaptive, and smart manufacturing approaches. • Most manufacturers use a combination of make-to-stock and make-to-order (including assembleto-order, build-to-order, and engineer-to-order) production methods to satisfy demand for their products. • Tradeoffs made regarding production are: volume vs. variety, responsiveness vs. efficiency, inhouse vs. outsource, and production costs vs. other supply chain costs and services. • Critical production KPIs address total cost, total cycle time, delivery performance, quality, and safety.

Chapter 15 Summary

• Seven landmark principles of supply chain management have withstood the test of time. These principles contribute to the objectives of revenue growth, asset utilization, and cost reduction. • Supply chains are impacted by a wide variety of external and internal factors, among which the importance of game-changing technologies to the future of SCM cannot be overstated. • Supply chains generate a wealth of data that can be transformed into information and insight through the use of supply chain analytics. • A shortage of qualified supply chain talent requires a proactive SCM talent management process to acquire, develop, and retain key individuals. • The importance of sustainability to supply chains cannot be over-stated. The four "R's" of sustainability provide useful guideposts for action. • The extent to which organizations and supply chains are able to remain relevant and competitive will be directly related to their abilities to innovate and transform themselves.