SCM 410 MC 1 Ch 5 & 6

IT Challenges and Solutions

- IT cannot compel ill-conceived SCs to be productive, make adversarial firms collaborate, or make use of poor DATA - CSC study identifies the major barriers and challenges that must be addressed to make SC technology work as intended

Performance Categories

- Key Performance Indicators (KPIs) - Scorecard -Process Measure Categories - Time, Quality, and Cost

IT Challenges: SC Processes and Poor Planning/Preparation

- Often, companies will automate existing/outdated activities instead of improving SC processes or streamline the SC network to take full advantage of the technologies capability - Other companies do not prepare employees for new technology. This leads to suboptimal use of technology as employees do not understand the full array of software capabilities

RFID

- RFID tags consist of silicon chips and an antenna that can transmit data to a wireless receiver, accordingly, RFID tags do not require line of sight for reading - Unique protect ID #DATA, in terms of a universal electronic product code (EPC), identifies the manufacturer, product category, and an individual item, and is stored on 96-bit tags - It is simultaneously described as a great SCIS tool and as an overpriced feature that does little more than what is accomplished by a much cheaper barcode (lies between)

Barcodes

-A barcode is a series of parallel black and white bars, both of varying widths, whose sequence represents letters or numbers. Systems are simple and accurate. -This sequence is a code that scanners can translate into important information such as shipment's origin, product type, place of manufacture, and the product's price. -Barcoding improves data collection speed and accuracy, reduces receiving operation time and data collection labor, and helps to integrate data collection with other areas

Visibility

-Demand - Inventory Stock Levels - Customer Orders, - Delivery Status - production schedules Allow managers to make situational assessments and develop appropriate responses

Information Requirements

1. Accessible 2. Relevant 3. Accurate 4. Timely 5. Transferable

Characteristics of a Good Measure/Metric

1. Is it Quantitative 2. Defined and Mutually Understood 3. Easy to Understand 4. Encourages Appropriate Behavior 5. Facilitates Trust 6. Measure What is Important 7. Cost-Benefit Analysis 8. Is it Visible 9. Multidimensional 10. Does it Encompass Inputs and Outputs

4. Encourage Appropriate Behavior

A basic principle of management is that i is the measures/metrics will drive behaviors (productive vs playing games with system) Ex. If a warehouse manager is measured by cubic space utilization, she will attempt to keep the warehouse filled (increase ICC)

KPIs

A measure/metric that is of strategic importance to a department or company. Properly chosen KPI's offer several benefits, including (transportation ex): - Objective measures of hired or private fleet performance that are significant to the success of the organization - Utilized to evaluate current performance versus historical results, internal goals, and carrier commitments - Often applied to benchmark against those that have been achieved by competitors, and world-class organizations

Role of Information and Requirements

A wide variety of information is needed for supply chain to perform as anticipated. Information must effectively flow both within a company and between all supply chain participants

Abbott Lab Negative C2C - C2C Interpretation

Abbott is paid by their customer for the final goods 16 days before they have to pay their supplier for the materials. During this time, rather than having working capital tied up in inventory (POSITIVE C2C), Abbott basically has the use of other people's money that they may use for other purposes (NEGATIVE C2C)

IT Challenges: People

According to CSC study, people are the major barrier to the effective use of information technology, whereby, 50% cite "lack of understanding" as the primary issue - Business Executives - IT Executives

9. Multidimensional

Although a single metric is not multidimensional, a metric program can be with a few strategic metrics (balancing utilization, productivity, performance)

1. Is it Quantitative

Although not all metrics are quantitative, this is often a requirement when measuring outputs of processes or functions (Qualitative vs Quantitative) - Qualitative metrics are suited to measure perceptions or assign performance categories (excellent, good, poor) - Qualitative metrics can be converted into qualitative data. Ex. A transportation carrier is rated "excellent" if it has one late delivery for 100 attempts

TMS tools provide the real time visibility necessary to make appointments scheduling easier and more accurate (automate the scheduling function)

Appointment Scheduling

Abbott Lab Negative C2C - Days Receivable

At day 39, Abbott is paid by the customer for goods sold on the sixth day but does not pay the supplier until the 55th day. Abbott has the use of other people's money for 16 days that they must use for other purposes

Delphi Auto Positive C2C - Days Receivable

At day 60, although Delphi is able to sell the product of their customer, it takes 10 more days for Delphi to receive their payment (C2C)

4. Business Intelligence: TMS

Build untraditional reports and I'll put that provide historical data on functional performance for internal planning, operations, and control (graphic display). Two applications are: - Performance Reporting & Scoreboarding - Freight bill Auditing

3. Event Management: TMS

Collects real time data from multiple sources across the supply chain. The main goal of the following TMS tool is to provide timely information regarding potential delivery expectations so that corrective action can be taken (Oversee only when there is a problem) -Status Tracking

Abbott Lab Negative C2C - Days payable

Despite Abbott selling the product on day 6, they do not have to pay the supplier until the 55th day. But I'm paying the supplier early, Abbott wait the full 55 days to pay for the inventory

Delphi Auto Positive C2C - Days of Payables

During the first 44 days, Delphi essentially holds the inventory for "free "since they do not have to pay the supplier until the 44th day. For the next 16 days, Delphi must borrow money or use cash to pay the supplier

1. Planning: TMS

Ecompasses comprehensive set of software tools to help managers gain more accurate, detailed insight into issues that affect the development and planning of SC activities. Two main TMS planning applications include: -Routing & Scheduling - Load Planning

Business Executives

Expectations of IT capabilities are too high purchase (based on hype/promised benefits without real knowledge on business impact) -Software can do "anything"

6. Measure what is Important

Firms oftentimes measure processes for which large amounts of data are available. - just because DATA are available to calculate a metric does not mean the metric is important. In some cases, data are difficult to generate for important metrics

Supply Chain C2C

First true metric that can bridge across three companies within the supply chain

Automate the manual transportation carrier invoice process via reconciling invoices to contract; thus, avoiding under/over-charging for freight services

Freight Bill Auditing

Transferable

Has two meanings: - Ability can you transfer a supply chain data from one format to another to make it understandable and useful (harder to integrate software) - Transfer #DATA quickly from one location to another in order to facilitate accessibility and timeliness - information must reside in electronic format that can be readily transmitted and converted via supply chain IT

5. Facilitate Trust

If a measure/metric does not facilitate trust between departments or supply chain firms, complying with the prior characteristics make little-to-no difference

7. Cost-Benefit Analysis

In many cases, too much time and effort are devoted to collecting data to generate the specific metric, while the resulting actions are minimal

Combines two or more supply chain performance metrics into a single value Ex. C2C, Logistics Performance Index

Index

3. Easy to Understand

Individuals better understand a measure/metric when they are involved in its definition and calculation (origin and purpose) ex. A most commonly-used and misunderstood logistics metrics is on-time delivery (what is airline on-time departure)

Role of Information

Information is said to be the "lifeline" of a business and supply chain, driving effective decisions and actions -formation offers managers with visibility into supply chain activities that take place at distant locations

Accessible

Information must be available do those supply chain members that have a legitimate need for it (firms or managers), regardless of their location or employer - Difficult because SC data are often dispersed across multiple locations and different information systems that are owned by a number of external organizations - Technical issues must be addressed and trust built between the organization sharing information

Timely

Information must be up to date as well as shared in a reasonable timeframe - supply chain managers need the knowledge embedded in real time data - Importantly, accuracy and timeliness are at odds with one another. For ex, conditions may change over time -Military time often used -Accuracy and time are at odds with each other

Delphi Auto Positive C2C - C2C Interpretation

It takes 26 days from which Delphi pays their supplier for materials to when their customer pays Delphi for the final goods. During this time, or capital is tied up in inventory and cannot be used for other purposes. What does this sentence mean? - for 26 days Delphi cannot produce/be competitive/invest. If Delphi wants to stay competitive, might be forced to take out loans and pay interest

Cash-to-Cash (Cash Conversion Cycle)

Length of time a firm's cash is tied up in working capital before money is finally returned when customers pay for the products - C2C is a unique financial performance metric that indicates how well an entity is managing its capital

Builds database of package dimensions, loading instructions (top load, upright), and equipment capability - within seconds optimizes container utilization

Load Planning

Rather subjectively assigning loads, a TMS database verifies which carriers are eligible to move the freight and then tenders the load to the best carrier

Load Tendering

Easily defined with no calculations and with simple dimensions Ex. Inventory Levels

Measure

2. Defined and Mutually Understood

Measure/metric has been defined by and/or agreed upon by the main process parties (both internal and external parties)

Needs definition, involves calculation or a combination of measurements, and often a ratio ex. Inventory Turnover

Metric

8. Is it VISIBLE

Metrics should be readily available to those individuals that use them. When distinction can be made between two types of metrics with regards to their availability: - Reactive Metric - Proactive Metric

Accounting C2C

Offers a measure of liquidity(how quickly can a company convert assets to cash)

IT Executives

Often fail to fully understand the business processes for which technology is being purchased (poor technology selection and implementation)

Delphi Auto Positive C2C - Days of Inventory

On day 1, Delphi received an inventory shipment from their supplier. It takes 60 days for Delphi to manufacture the final product and sell it to their customers

Abbott Lab Negative C2C - Days Inventory

On day one, abbott receives an inventory shipment for their supplier. It takes only 6 days for abbott to manufacture the final good and sell it to the customer

Internal KPI Performance

Organizations must balance customer expectations with operation expenses (focal firm operational performance - improvements) Ex. Order Shipment Complete

Automates the collection of data, measurement of KPI's and dissemination of periodic reports - capable of generating custom reports

Performance Reporting & Scoreboarding

Scorecard

Performance measurement tool used to capture a summary of KPIs. Scorecards have color-coded indicators to flag when a company is not meeting its metric targets.

Leading firms push metrics to their owners so they can react immediately. Employees may act upon more quickly due to little/no effort to see them

Proactive Metric

10. Does it encompass inputs and outputs

Process metrics need to incorporate causes and effects into their calculation as well as the overall evaluation Ex. A decreasing on-time delivery rate might be cause by late pick-ups, shipments not being ready on time Inputs > Process > Outputs

Some organizations state that metrics are available in the system for employees to see and use. This means that the employees must attempt to find them

Reactive Metric

Automatic Identification (AUTO-ID) ***

Refers to technology that helps machines identify objects: - Barcodes (Linear and 2D symbols) - Radio Frequency Identification (RFID)

Uses mathematical methods and optimization routines to evaluate possible combinations in which routes could run and choose the most economical

Routing and scheduling

Golden Rule for Success (Solution to IT Challenges)

Secure the commitment of senior management

C2C Interpretation

Simplest terms, C2C is defined as the time between when it company pays its supplier to when their customer pays them (how the final number is interpreted) - Math: (-) days Pay (+) days inventory (+) days receivable

The in transit progress of shipments can be monitored by using TMS tools in conjunction with satellite capabilities and other visibility tools

Status Tracking

SCM Software Categories

Supply chain software tools into harness to computational power and communication abilities of technologies so to plan, execute, control, and report on SC activities 4 Main Categories: 1. Planning 2. Execution 3. Event Management 4. Business Intelligence

Relevant

Supply the managers need pertinent information to make decisions. They must know what information is needed and be able to quickly acquire only that which is applicable to their current situation - Goal: avoid being overwhelmed by extraneous data that are not valuable to the decision makers and essentially waste their time

Supply Chain Technology

Technology innovation has facilitated the evolution of SCM. Ultimately, innovative tech enable fast execution of SC strategies

External KPI Performance

The Objective is to meet the customers expectations (customer-facing KPIs - measure the customer's experience or perceptions) Ex. Orders Delivered Complete

Accurate

The formation must be correct and depicted reality, otherwise, it will be impossible to make appropriate decisions (inaccurate data leads to many problems) ex. Retailers rely upon checkout clerks to accurately scan each item sold - scans drive replenishment systems

2. Execution: TMS

This category of software tools carry out task from the time in order is placed until it is fulfilled. Consist of a group of integrated tools that link with the SC partners systems to share data. 2 major applications include: -Loading Tendering - Appointment Scheduling

Dimensions of SC Performance

Two Questions need to be answered: 1. What is the difference between a measure, a metric, and an index? 2. What are the 10 characteristics of a good measure and metric?