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- 1. Automotive Best Practices Forum Supply Chain Management 0
- 2. WELCOME! Today’s meeting will focus on the results of the Supply Chain Management Assessment, completed by 22 automotive supplier executives and 3 vehicle manufacturer executives.Introduction1
- 3. Table of ContentsIntroduction 4 - 13 Supply Chain Management 14 - 21 Definitions and Strategy 22 - 32 Understanding Expectations 33 - 38 Supply Chain Management 39 - 47 Performance Measurement 48 - 55 Technology Solutions 56 - 60 SCM Opportunities 61 - 72Page Number2
- 4. Industry Forces and IssuesIntroductionThe automotive supply chain is going through a period of unprecedented change in order to meet increasing consumer expectations with regard to price, delivery, and product customization. The managing of the supply chain pipeline is therefore faced with a number of key issues including;Elevating supply chain management as a critical success factor to achieving competitive advantage Aligning the organizational structure to support global supply chain management Establishing a process oriented, functionally integrated supply chain Forecasting the impact of changing global markets on supply chain costs and capabilities Defining key performance indicators and measuring supply chain performance Understanding, selecting and integrating supply chain management enabling technology Anticipating and responding to the impact of supplier consolidations Anticipating and responding to the impact of OEM consolidations Defining and tracking total supply chain costs 3
- 5. IntroductionDefine supply chain management and its components Understand the elements of a supply chain strategy Position the role of a supply chain executive Identify the elements of supply chain management Understand the role of information technology applications Identify how to utilize performance measures in the supply chain process Understand how to use best practices and benchmarking in support of supply chain management Understand role of customers, suppliers, and third parties for collaborative support.Today’s Objectives4
- 6. The integrated supply chain concept has gone through three distinct phases...“Push” era focused on distribution of finished goods Managed WIP, raw materials, and finished goods as separate functions Mgmt required production to be balanced with customer requirementsPhase I 1960-1975Importance realized in integrating operations within the enterprise Computer horsepower applied to manage material flow Companies began to migrate from “inventory push” to a “customer pull” channelPhase II 1975-1990Significant productivity increases could only be realized through managing relationships, information and material flow across enterprise borders Recognized the “delivery of enhanced customers and economic value through the synchronized management of the flow of physical goods and associated information from sourcing to consumption”Phase III late 80’s - presentSource: Bernard LaLonde, professor emeritus of logistics at Ohio State UniversityHistory of SCMSCM Overview5
- 7. The following represent some of the other initiatives which have either helped develop or have been spawned from the SCM movementAgile ManufacturingEfficient Consumer ResponseTotal Quality ManagementDirectivesChannel ManagementShared ServicesConstraint Based SchedulingChannel IntegrationValue Chain (extended)Flow Replenishment/ Fluid DistributionDistribution Resource PlanningVendor Managed InventoryTheory of ConstraintsChange Based StrategyVendor Managed Inventory (VMI)Flexible ManufacturingTime based mfg. /logisticsContinuous Replenishment Planning (CRP)Quick Response (QR) Reverse Flow LogisticsTheory of ConstraintsSynchronous ManufacturingJust-in-time (JIT)Third Party Logistics (3PL)Flexible DistributionCategory Management Continuous Replenishment PlanningSCM Related ConceptsSCM OverviewJust-in-time (JIT)Total Quality ManagementSynchronous ManufacturingTheory of Constraints6
- 8. ValueComplexityFunctional “Silos” Virtual Extended ChainsIntegrated Internal Supply ChainIntegrated External Supply ChainSelect Vendor/Customer CollaborationSelected Cross-functional TeamingInternally Focused Optimization COLLABORATIONPULLPUSHSCM ContinuumSupply Chain ContinuumSCM Overview7
- 9. A survey conducted on supply chain essentials resulted in a management response from 451 companies in 25 countries Almost one-third (29%) of the companies surveyed do not involve their suppliers in inventory management Nearly one-quarter of the companies (22%) do not involve their customers in planning manufacturing requirements Only 13% rated their ability to communicate with customers on forecasting as strong1. Planning and deploying inventory effectively 2. Providing predictable delivery performance 3. Creating new products and services 4. Reducing order fulfillment cycle time5. Having products in stock 6. Decreasing manufacturing cycle time 7. Reducing transportation costs 8. Reducing customer returns 9. Communicating electronically with customers and suppliersTop Supply Chain EssentialsSource: 1997 KPMG / Northwestern Supply Chain StudyCurrent State of SCM MovementSCM Overview8
- 10. Degree of CompletionThe majority of companies are implementing supply chain initiatives. This figure has increased dramatically from 10% reported in 1996.Question 35%35%60%0%0%0%0%10%20%30%40%50%60%70%80%90%100%Improvement initiatives are completePlan to begin addressing initiatives beyond 2000No initiatives or opportunities plannedPlan to begin addressing initiatives during 1999Currently evaluating improvement opportunitiesCurrently implementing an improvement initiative(s)% of RespondentsSCM Overview9
- 11. There are many approaches, concepts, models, and ideologies developed to describe SCM PlanSourceMakeDeliverBuys from Manufacturer/WholesalerStores in warehousesMoves it to RetailersStores it on shelvesSells it to CustomersSupplierW’houseW’houseRetailRetailCustomerTrucksSCM ApproachesSCM Overview10
- 12. Source This portion of the model pertains to procurement of goods (raw materials, semi-finished, or finished) and services. Partnership building, strategic sourcing, organization compatibility, technological capabilities, and commitments to continuous improvement are all important elements. Produce This section of the model addresses the physical manufacturing process and any corresponding constraints, if applicable. Production scheduling, labor scheduling, and minimizing downtime and setup costs are all key factors in the production process and supply chain management. More importantly, the coordination of these efforts with other functional areas of a company must be evaluated to ensure the greatest supply chain efficiency.Store The Store segment of the model refers to receiving and shipping practices, inventory management, warehouse management, and selection of products for distribution. Internal vs. outsourcing alternatives, process flows, layouts, and storage-density practices must be evaluated in terms of cost, quality, and speed. The economic and competitive consequences of various warehousing strategies must be analyzed to ensure a better return on assets and long-term, bottom-line impact. Supply Chain ModelSCM Overview11
- 13. Plan Disciplined planning is needed to maximize the coordination of supply chain functions. In addition, it is important that an overall strategic plan and goals exist in order to provide a common and uniform direction to the different operating functions. This information must be accurate, timely, and freely shared. Forecasting is part of the planning process, in addition to the integration and collaboration of processes and practices. Transport This section covers the movement of goods from the supplier to the production facility and/or distribution center and from the distribution center to the customer. Regulations, litigation, technology, relationships, customer expectations, and delivery alternatives are all important components. The right strategy, including partnering relationships, can differ dramatically from one market to the next. Sell Attracting, managing, and retaining customers is the main focus of the Selling section of the model. A better understanding of customers’ needs, goals and behavior can improve product development and delivery. Policies, procedures, processes, and systems are significant factors which must be examined in order to improve service and increase customer satisfaction. Supply Chain ModelSCM Overview12
- 14. Foster A Leadership Driven Supply Chain StrategyDevelop IT Strategy and InfrastructureAssess Customer Needs & SegmentsDevelop Supply Chain StructureAlign & Monitor Key Performance IndicatorsThe following model has been developed as a guide for discussing an effective supply chain management solutionGuiding Principles of SCMDefinition and Strategies13
- 15. Develop IT Strategy and InfrastructureAssess Customer Needs & SegmentsDevelop Supply Chain StructureAlign & Monitor Key Performance IndicatorsFoster A Leadership Driven Supply Chain StrategyDevelop a strategic vision aligned with customers Focus on optimizing the entire supply chain Identify goals and develop prioritization procedures Maintain focus on “big-bang” goals but implement in stages Lead from the top Foster A Leadership Driven SC StrategyDefinition and Strategies14
- 16. SUPPLIERDISTRIBUTIONCONSUMERMANUFACTURINGCUSTOMERWhat is the Supply Chain? The supply chain is a compilation of activities, functions, and procedures which enable raw materials to be converted into products, delivered and consumed by end users. . .Supply Chain DefinitionDefinition and Strategies . . .including functional activitiesInformation TechnologySourcingOrder ProcessingProduction SchedulingProcurementCustomer ServiceInventory ManagementTransportationWarehousing15
- 17. What is Supply Chain Management (SCM)? It is the coordination and integration of all these activities... 1. The Supply Chain Council 2. Supply Chain Management“From your supplier’s supplier to your customer’s customer”1 “The art of managing the flow of materials and products from source to user”2 SUPPLIERDISTRIBUTIONCONSUMERMANUFACTURINGCUSTOMER . . .into a seamless process Supply Chain Management DefinedDefinition and Strategies16
- 18. Supply Chain Management refers to… Managing the entire supply chain flow from raw material procurement, distribution to manufacturing facilities, processing finished goods, distribution to warehouses worldwide and to end customer. Successful performance by all organizations and resources in the production and delivery of products and services to customers. Extending company boundaries to supplier network through information sharing from concept to life of product--making suppliers an integral part of the company. Use of pro-active material, acquisition planning supported by a tailored and benchmarked supply base. Logistics includes the processes and activities of … Materials management such as forecasting, sourcing and purchasing, warehousing distribution and transportation. Moving goods from supply points through the manufacturing process and to the customer. Planning, obtaining, producing, and distributing material and products in the correct quantities. The entire procurement distribution, inventory and warehouse system. Getting products or services from the supplier to your door.Supply Chain Management DefinedDefinition and StrategiesSuppliers have many definitions of supply chain management. The key is to define it in terms of the activities that are crucial to the success of the supply chain process.Questions 117
- 19. My Company has a well documented supply chain strategy 3.1 The supply chain strategy is directly linked to the corporate strategy 3.3Supply Chain StrategyIn general most companies have high level goals and measures but lack implementation content such as budget and systems integration plans.Questions 4 & 514%18%27%36%36%36%36%36%41%41%45%59%64%68%68%0%10%20%30%40%50%60%70%80%90%100 %Facility Network Evaluation and DesignThird Party Relationship Management PlansWarehousing Management PlanMission StatementManufacturing RequirementsInformation Systems IntegrationBudget and Investment RequirementsCompetitive EnvironmentTransportation Management RequirementsOrganizational ResponsibilitiesInventory Management RequirementsCustomer Requirements and RelationshipsSourcing/Procurement RequirementsPerformance MeasuresPerformance Goals and Objectives*Level of Agreement*Where 1=Disagree, 2 = Somewhat Disagree, 3= Neutral, 4 = Somewhat Agree, 5 =Agree% of RespondentsDefinition and Strategies18
- 20. Title: Director or Vice President Department: Purchasing or Supply Chain Management Responsibilities:Supply Chain Executive ProfileOrganizational ResponsibilitiesIn general, Supply Chain executives are not responsible for customer facing sales activities or manufacturing, but rather traditional purchasing and logistical operations.Most Common: 1. Sourcing and Purchasing (68%) 2. Supply Chain Planning and Network Design (64%) 3. Inventory Management (50%) 4. Warehouse Operations Planning & Management (50%) Transportation (50%)Least Common 1. Manufacturing (14%) 2. Linkages with Sales, Promotions and Marketing (14%) 3. Packaging Design (18%) 4. Sales Order Management (18%)Questions 11 & 1219
- 21. Management of the Supply Chain*Where 1=Disagree, 2 = Somewhat Disagree, 3= Neutral, 4 = Somewhat Agree, 5 =AgreeSenior executives are aware of the importance of Supply Chain Management but lack financial resources for implementationQuestion 13Senior executives are forward thinking and keep up with the latest management techniques for optimizing the supply chain and enhancing shareholder value.12345Senior executives understand the complexities of optimizing supply chain performance and are willing to make the required investments.Senior executives are dedicated to taking supply chain management from theory to practice.Supply chain management is a top priority with senior executives.Senior executives are keenly aware of the competitive advantage that can be gained through effective management of the supply chain process. Supply chain management has elevated in importance and visibility due to increasing growth and profitability pressures.4.23.83.53.63.33.2Organizational ResponsibilitiesLevel of agreement with regards to supply chain management:20
- 22. Develop business unit strategies to support achievement of company objectives. Appoint a supply chain executive to serve as a natural facilitator and integrator between the divergent needs of sales and manufacturing, quality and price, cost and service, and financial and qualitative measures. Clearly define supply chain functions, processes, and activities and articulate throughout the organization. Translate business unit strategies into supply chain strategies with quantifiable goals and objectives. Identify critical processes essential to the achievement of the business strategy and goals. Establish action plans detailing the steps required to achieve the goals and objectives.Best Practices Definitions and Strategies21
- 23. Automotive suppliers define supply chain management differently. The activities comprising automotive suppliers’ supply chains also differ dramatically. The majority of respondents were unsure whether supply chain strategies are aligned with business unit and corporate strategies. Companies with supply chain strategies place emphasis on performance measurement and supplier and customer facing issues, but little emphasis on defining action plans, budgets, investment requirements, and resources required to implement those plans. Companies assessed that they were best prepared to respond to global supply chain issues, but less capable of capturing supply chain costs, measuring performance, and selecting and integrating software solutions. Key Findings Definitions and Strategies22
- 24. Suppliers supply chain executives roles and responsibilities vary, as does the level and department within the organization. Suppliers feel that senior executives may only partially understand the complexities of optimizing supply chain performance and are willing to make the required investments necessary to achieve optimal performance.Key Findings Organizational Responsibilities23
- 25. Understand customers and segment based upon needs and preferences Analyze cost of service by customer Develop a channel strategy to target and serve different segmentsFoster A Leadership Driven Supply Chain StrategyDevelop IT Strategy and InfrastructureDevelop Supply Chain StructureAlign & Monitor Key Performance IndicatorsAssess Customer Needs & SegmentsAssess Customer Needs & SegmentsUnderstanding Expectations24
- 26. Company’s Expectations of Self Understanding ExpectationsQuestion 7SuppliersOEMs100% on-time delivery Cost improvements Define, Track, and Reduce Supply Chain costs Reduce purchased product/supplier costs Reduce parts cost every model year Reduce Inventory and obsolescence Reduce premium freight and distribution costs Quality Improvements Integrate / leverage supplier capabilities and technologies for competitive advantage Improve PPM performance Technology Implement / upgrade EDI/ERP/WMS capabilitiesExpectationsX X X X X X X X X X X X25
- 27. Understanding Expectations Questions 8 & 9 Tier One SupplierOEM Customer SupplierExpectations of CustomersExpectations of SuppliersExpectations of SuppliersUnderstanding ExpectationsExpectations of OEM26
- 28. Expectations of Customers Questions 8 & 9To be rewarded for superior performance, to be dealt with as a partner, to be paid on time Stable orders (subjective), communication of key issues affecting suppliers Reduced number of design alterations during design development, improved forecast stability and accuracy, risk sharing of raw materials cost exposure Understanding Expectations Tier One SupplierOEM Customer Supplier SupplierExpectations of CustomersExpectations of CustomersSchedule stability, recognize our full value, share technology expectations Sharing program or cycle plans information, fairness in customer supplier relations, providing business opportunities to support Larger orders, limited customization, quality forecasts, EDI ordering Expectations of OEM (Supplier)To meet or improve all quality targets, to meet or improve all cost targets, to meet or improve all delivery targets. Stable production scheduling, optimal capacity planning, integrate supply chain into our business Consistent, accurate communications, share benefits of continuous improvements, respect supplier technology Expectations of OEM (OEM) Tier One SupplierExpectations of OEM27
- 29. Expectations of Suppliers Questions 8 & 9To be EDI capable - stay current, to manage their suppliers to our requirements, to implement lean across their supply base Small lot delivery, on-time delivery, low ppm Cost reduction, improved performance, technological supportManage the supply chain to their benefit, invest in technology to their benefit, reduce our total acquisition cost 100% on-time delivery, cost competitive, short lead-times Ongoing price reductions at 3-5% per year rate, flawless delivery and quality performance Competitive quoting, black box engineering design work, supply chain agreementsExpectations of SuppliersExpectations of Suppliers (Supplier)Expectations of Suppliers (OEM)Improving new product development timing, to continue productivity improvement activities, to expand regressive replication of supply chain optimization philosophy. Be more integrated in our business process - lean production practices, reduce lead times - fast to market, inventory management Be aware of position in supply chain and communicate, manage supply chain, not just supplier, continuously improve quality, cost, cycle time, human resource efficiencyUnderstanding Expectations Tier One SupplierOEM Customer Supplier Tier One SupplierExpectations of Suppliers OEM CustomerExpectations of Suppliers28
- 30. Ensure that the management control structure facilitates cross-functional support and communication within the organization. Actively solicit input from internal stakeholders at tactical, operational, and strategic levels within the organization. Establish mechanisms or forums for exchanging supply chain information with suppliers and customers. Refine management style to ensure strong trust and communication with supply chain partners. Best PracticesUnderstanding Expectations29
- 31. Key Practices Suppliers Customers Willingness to share knowledge 3.1 3.3 Inter-enterprise knowledge and skills are valued 3.1 3.1 Committed to pursuing higher levels of performance 3.1 3.8 End-consumer focused 2.9 4.1 Inter-consumer focused 2.7 3.0 Willingness to share risk 2.7 2.6 Embrace electronic commerce 2.7 3.8 Transaction systems support collaborative processes 2.5 3.1 Collaborative use of decision support tools 2.3 2.6 Integration of Key Practices into Supplier and Customers Supply ChainsSupply Chain ManagementWhere 1 = Not Integrated, 2=Slightly Integrated, 3 = Fairly Integrated, 4 = Highly Integrated, 5 = Extensively Integrated OEMs are driving integration on the customer side with Tier 1 Suppliers, however, the relationships between tiered suppliers have limited integration success.Question 2030
- 32. Customize your supply chain structure to focus on targeted customer segments Identify constraints using cross-functional teams Quantify leverage points in sourcing, manufacturing and distribution Utilize vendor/customer alliances across the chainFoster A Leadership Driven Supply Chain StrategyDevelop IT Strategy and InfrastructureAssess Customer Needs & SegmentsAlign & Monitor KPIsDevelop Supply Chain StructureDevelop Supply Chain StructureSupply Chain Management31
- 33. Activities in Supply ChainSupply Chain ManagementThere is consensus among all regarding activities in the supply chain and evidence that improvement opportunities are plentiful.Performance (1=None, 2=Poor, 3= Fair, 4=Good, 5=Excellent)SuppliersOEMsQuestion 20%10%20%30%40%50%60%70%80%90%100 %Capacity PlanningSourcing and PurchasingInventory ManagementTransportationForecasting/Demand PlanningCustomer ServiceProduction SchedulingMaterials PlanningWarehouse ManagementSupply Chain Planning/ Network Design123450%10%20%30%40%50%60%70%80%90%100 %Included in SCM (% of Respondents) 12345Scope of Supply Chain Activities32
- 34. Organizational ResponsibilitiesManufacturingSales, Promotions and MarketingPackaging DesignSales Order ManagementCustomer ServiceFleet ManagementCapacity PlanningReverse Logistics and ReturnsProduction SchedulingInformation Technology SolutionsForecasting/Demand PlanningDistribution Materials PlanningInventory Management TransportationWarehouse Operations Planning & MgtSupply Chain Planning and Network DesignSourcing and Purchasing9%14%14%18%18%23%23%27%27%32%32%36%36%41%50%50%50%64%68%0%10%20%30%40%50%60%70%80%Other: Percent of RespondentsSupply Chain Executive ResponsibilitiesQuestion 12The responsibilities of the supply chain executive do not encompass all supply chain activities, thus reducing the ability to influence overall supply chain performance.33
- 35. Activities versus ResponsibilitiesThere is a significant disconnect between what companies define as activities of supply chain and what companies value as principal activities of supply chain executives.Question 2 & 12Capacity PlanningSourcing and PurchasingInventory ManagementTransportationForecasting/Demand PlanningCustomer ServiceProduction SchedulingMaterials PlanningWarehouse ManagementSupply Chain Planning/ Network DesignInformation Technology SolutionsPackaging DesignSales Order ManagementManufacturingDistributionLink w/ Sales, Promotions, and MarketingReverse Logistics and ReturnsFleet ManagementActivities of Supply ChainResponsibilities of Supply Chain Executive% of Respondents77%77%77%77%73%68%68%68%64%64%64%64%59%55%55%50%50%41%0%10%20%30%40%50%60%70%80%90%100%Supply Chain Management34
- 36. Outsourcing ActivitiesThird party relationships are expected to grow as companies outsource Supply Chain responsibilities.Question 14Customs ClearanceBonded WarehousingPackage Engineering and DesignWarehouse ManagementFleet ManagementKitting and SequencingBilling and CollectionsOverseas DistributionReverse Logistics and ReturnsOther:After-Market Parts DistributionSupply Chain Information SystemsTransportation ManagementCall Center Operations/Order EntryCustomer ServiceInventory Management64%32%27%27%18%18%14%9%9%9%5%5%5%0%0%0%0%10%20%30%40%50%60%70%80%90%100%12345Outsourcing Potential ( 1 = No Potential, 2 = Slight Potential 3 = Moderate Potential, 4 = Good Potential, 5 = High Potential) Currently OutsourcedSupply Chain Management% of RespondentsOutsourcing Potential35
- 37. Currently Planned Importance Used Suppliers 68% 23% 4.6 Consultants 45% 0% 3.8 Customers 41% 23% 4.3 Third Party Service Providers 32% 14% 3.6 Software Vendors 32% 18% 3.7 Distributors 18% 18% 3.1 Professional Associations 9% 5% 3.2 Trade Associations 5% 5% 3.5 Supply Chain Management PartnersSupply Chain ManagementOn a limited basis, suppliers are looking to their own suppliers, customers and other third parties to help fill resource and skills deficienciesQuestion 19Where 1 = Not at all Important, 2=Slightly Important, 3 = Fairly Important, 4 = Very Important, 5 = Essential 36
- 38. Best PracticesSupply Chain ManagementUtilize external resources on an as-needed basis to fulfill supply chain resource and skill deficiencies. Establish criteria for selecting and measuring supply chain partner performance. Retain those functions or processes that give the company a competitive advantage; outsource processes where the company lags in expertise of efficiency. Develop an outsourcing strategy that reflects the corporate vision. Work with trusted outsourcers, yet clearly communicate expectations in original contracts. Define requirements and expectations in terms of outcomes, not tasks or activities. Link outsourcer compensation to outsourcer performance. Integrate third-party outsourcing goals, objectives and resource requirements into the supply chain strategic plan.37
- 39. The list of activities included in the definitions of supply chain are broader than the scope of the supply chain executive’s responsibilities. Supply chain responsibilities are shared in most organizations. Most notably, supply chain executives are not responsible for manufacturing and customer-facing sales activities. Companies with shared responsibilities for supply chain management require flexible organizational structures to facilitate communication among supply chain executives to foster optimization of the total supply chain. On a limited basis, suppliers are looking to their own suppliers, customers and other third parties to help fill resource and skill deficiencies. Third party relationships are expected to grow as the outsourcing trend increases.Key Findings Supply Chain Management38
- 40. Develop key performance measurers which span the entire supply chain (including vendors & customers) Use balanced measures Utilize exception reporting to monitor results Measure & reward change behaviorsFoster A Leadership Driven Supply Chain StrategyDevelop IT Strategy and InfrastructureAssess Customer Needs & SegmentsDevelop Supply Chain StructureAlign & Monitor Key Performance IndicatorsAlign & Monitor Key Performance IndicatorsPerformance Measurement39
- 41. Poor Quality Low Fill RatesHigh Inventory/Low TurnsPoor Demand Forecasting PerformanceDecreasing MarginsLong Cycle TimesSymptoms of a “Strained” SCPerformance Measurement40
- 42. Assessment of Performance Measurement Activity Performance targets are established and performance is routinely reviewed Performance measures are integrated and encompass quality, cost and time Executive level measures are used to provide indications of whether the supply chain is performing according to its strategic intent Measures are aligned to supply chain performance objectives Managerial level measures are used to evaluate whether tactical and operational types of activities are working efficiently Internal, external and/or non-competitive benchmarking is used to help set performance targets Measures are focused on developing enterprise-wide excellence in cross-functional processes rather than within individual functional departments A well-balanced, limited set of function, process, and cross-enterprise based measures are used Question 21 3.8 3.8 3.6 3.5 3.5 3.3 3.1 3.0Performance*Performance Measurement*Where 1=Disagree, 2 = Somewhat Disagree, 3= Neutral, 4 = Somewhat Agree, 5 =Agree41
- 43. Level of Performance SatisfactionLevel of Satisfaction with Supply Chain PerformanceCurrent Performance LevelTier 1 compliance with OEM mandates have placed OEMs ahead of suppliers on the Supply Chain Continuum and ahead in terms of overall Supply Chain performance.Questions 22 & 23SuppliersOEMsSomewhat Dissatisfied32%Neutral18%Somewhat Satisfied45%Completely Satisfied5%Completely Dissatisfied0%Fair45%Poor5%Uncertain5%World Class9%Excellent0%Good36%Completely Dissatisfied0%Completely Satisfied0%Somewhat Satisfied100%Neutral0%Somewhat Dissatisfied0%Good67%Excellent0%World Class33%Uncertain0%Poor0%Fair0%Performance Measurement42
- 44. Supply Chain Issues Defining supply chain costs is an issue that plagues Supplier and OEM alike.Question 6Importance of IssueCompany Capability4.0 Insufficient Data2.52.52.0SuppliersOEMs77%3.533%73%3.433%73%3.367%68%3.567%55%3.133%Aligning the organizational structure to support global supply chain management Elevating supply chain management for competitive advantage Defining and tracking total supply chain costs Defining & measure key performance indicators Selecting & integrating supply chain management software Capability (1=None, 2=Poor, 3= Fair, 4=Good, 5=Excellent)Importance of IssueCompany CapabilityPerformance Measurement43
- 45. Barriers that prevent companies from achieving desired level of supply chain performance: Barriers to achieving desired performanceScarcity of resources and integration of information systems are the number one obstacles preventing companies from achieving a desired level of supply chain performance. Question 10Competing initiativesSupply chain information systemsAvailability of accurate dataInformation systems integrationResource availabilityHuman resource/labor policiesSupply chain management skillsInformation systems integrationAvailability of accurate dataSupply chain information systemsSuppliersOEMs0%20%40%60%80%100%100%67%67%67%33%0%20%40%60%80%100%64%50%50%45%45%% of Respondents% of RespondentsPerformance Measurement44
- 46. Best PracticesPerformance MeasurementAdopt enterprise-wide performance measures that provide indicators of whether the supply chain is performing according to its strategic intent. Derive performance measures from the mission statement. Establish measures that balance quality, cost and time across the organization, its processes and its people.45
- 47. Previously: Supply chain was not elevated in importance and visibility. Senior executives were not aware of the advantages to be gained by effective supply chain management. Today: OEMs and suppliers are identifying similar barriers to achieving a desired level of supply chain performance. They have executive support and attention but are lacking the resources, skills and systems required to achieve targeted levels of performance. Suppliers have implemented performance measurement programs but generally lack confidence in the program’s overall level of performance. The lack of integrated or automated systems to capture performance-related data and the availability of accurate and timely data are primary contributors. OEM’s are more satisfied with the overall performance of their supply chains than suppliers and rate overall supply chain performance significantly higher than suppliers. Key FindingsPerformance Measurement46
- 48. Develop an integrated IT system to support strategic objectives across the entire supply chain - at all levels Require easy to understand actionable reports Develop an IT system with multi-level capabilities: Short-term: transaction processing Mid-term: planning and decision support Long-term: strategic modeling & scenario planning Foster A Leadership Driven Supply Chain StrategyAssess Customer Needs & SegmentsDevelop Supply Chain StructureAlign & Monitor Key Performance IndicatorsDevelop IT Strategy and InfrastructureDevelop IT StrategyTechnology Solutions47
- 49. Currently Used Planned Proprietary Packaged Electronic Data Interchange 82% 14% 23% 77% Bar Coding Technologies 73% 14% 38% 62% Warehouse Management System 59% 5% 37% 63% Advance Planning & Scheduling 50% 5% 50% 50% Enterprise Resource Planning 41% 27% 20% 80% Transportation Mgt. System 41% 5% 60% 40% Manufacturing & Distribution 32% 9% 56% 44% Facilities Network Modeling Knowledge Management Systems 23% 5% 100% 0% E-Commerce 14% 18% 33% 67% Information SystemsQuestion 17* Percent of Respondents Technology Solutions48
- 50. Applications Solution Providers Enterprise Resource Planning BaaN, Oracle, Glovia, SAP, QAD , JD Edwards, John Brown Advance Planning & Scheduling CAN, Future 3, Numetrix, ASI, QAD, Genzlinger Warehouse Management System CABOSS, McHugh, ROI, Genzlinger, AS/400 Bar Coding Technologies Internedal, UDC Code39, ASI, Symbol, Future 3, Genzlinger, John Brown,Variety, BCI Transportation Mgt. System UTS, Link, Outsourced to CTI Electronic Data Interchange Sterling Commerce, Trans Net, GEIS, Future 3, QAD, Trading Partner, ANSI EDIFACT Manufacturing & Distribution QAD, AS/400, Proprietary Facilities Network Modeling Knowledge Management Systems Lotus Notes, ONIS, Data Warehouse E-Commerce Net Software, Sterling CommerceInformation Technology Support SystemsTechnology SolutionsQuestion 1849
- 51. Develop integrated systems and technologies plans on a corporate/enterprisewide level to define current and future needs. Use plans to plan, prioritize, budget and allocate resources for software purchases and systems upgrades. Information systems plans: Define the functional capabilities of the software acquisition or upgrade Identify critical integration points and compatibility issues Identify resource requirements and deficienciesBest PracticesTechnology Solutions50
- 52. There is no common information systems platform among automotive suppliers. No product emerges as the leader among automotive suppliers. False assumptions regarding capabilities and functional support provided by supply chain applications. Indicates clear need for integrated supply chain systems strategies and plans. Internal and external integration of supply chain information systems will continue to be a top issue unless e-business solutions can be devised to reduce the cost, complexities and time to implement integrated systems solutions.Key FindingsTechnology Solutions51
- 53. QualityTimeCostImproved Customer Service Lower Costs Quicker Response to Market Changes “Serve the customer better, faster, and cheaper”ENHANCED PROFIT & REVENUEBenefits of SCMSCM Opportunities52
- 54. Companies participating in MIT’s integrated supply chain management program have accomplished the following:Inventory Reduction 50%40% On-time DeliveriesCumulative Cycle Time 27%Benefits of SCMSCM Opportunities53
- 55. Salesforce Promotion Overall Supply Chain Purchasing Manufacturing Logistics Shared Services Staff Functions (Finance, HR, MIS) Working CapitalAreaSalesforce effectiveness/automation Productivity/simplification Cycle compression, cross-functional integration Consolidation, supplier integration Global capacity rationalization Transportation, network reconfiguration, complexity (SKU) reduction, warehouse redesign Customer support centers, regional administrative service centers Global systems, rationalization, centralized data centers Inventories ReceivablesOpportunities 5-30% 5-15% 20-45% 5-15% 10-50% 10-30% 10-40% 15-50% 20-40% 10-30%Typical BenefitsIdentifying Leverage PointsSCM Opportunities54
- 56. Identified BenefitsQuestion 24Development of a global sourcing strategy which consolidates the supply base can provide significant cost reductions.SCM Opportunities55
- 57. Identified BenefitsQuestion 24The collection and distribution of supply chain related information can lead to reduced costs and improved customer serviceSCM Opportunities56
- 58. Identified BenefitsTechnologies and Information systems must be integrated to provide the organization, and its trading partners, with intelligent data to support business decisions.Question 24SCM Opportunities57
- 59. Supply Chain Management Best PracticesS1 Segment customers by distinct service needs and then tailor services to those particular segments. S2 Customize and design your logistics network to focus on the service requirements and profitability of the customer segments identified. S3 Listen to signals of market demand and plan accordingly by expanding the span of sales and operations planning to the entire supply chain to detect early warning signs of changing demand in order patterns, customer promotions, etc. S4 Differentiate product closer to the customer to eliminate inventory stockpiles by postponing product differentiation in the manufacturing process closer to actual customer demand. S5 Strategically manage the sources of supply by working closely with key suppliers to reduce the overall cost of owning materials and services and to enhance the margins of your company and your suppliers. S6 Develop a supply-chain wide technology strategy, which supports multiple levels of decision making and affords a clear view of the flow of products, services and information. S7 Adopt enterprise-wide performance measures that provide indicators of whether the supply chain is performing according to its strategic intent. S8 Appoint a supply chain executive to serve as a natural facilitator and integrator between the divergent needs of sales and manufacturing, quality and price, cost and service, and financial and qualitative measures. S9 Develop a framework for establishing and implementing a supply chain strategic plan. S10 Create a vision of the desired supply chain and define those actions required to close the gap between tomorrow’s supply chain vision and today’s current performance. SCM Opportunities58
- 60. Best Practices Comparison High Importance / High Performance S5. Strategically manage the sources of supply by working closely with key suppliers to reduce the overall cost of owning materials and services and to enhance the margins of your company and your suppliers. S1. Segment customers by distinct service needs and then tailor services to those particular segments. S10. Create a vision of the desired supply chain and define those actions required to close the gap between tomorrow’s supply chain vision and today’s current performance. S2. Customize and design your logistics network to focus on the service requirements and profitability of the customer segments identified. S9. Develop a framework for establishing and implementing a supply chain strategic plan.4.0/3.45.0/4.33.8/3.13.0/2.74.3/3.14.7/4.03.6/3.03.0/2.74.4/3.04.3/3.0Automotive SuppliersAutomotive OEMsQuestion 25Performance rating average on scale of 1 - 5 (N=22) OEM (N=3)SCM Opportunities59
- 61. S7. Adopt enterprise-wide performance measures that provide indicators of whether the supply chain is performing according to its strategic intent. S8. Appoint a supply chain executive to serve as a natural facilitator and integrator between the divergent needs of sales and manufacturing, quality and price, cost and service, and financial and qualitative measures. S6. Develop a supply-chain wide technology strategy, which supports multiple levels of decision making and affords a clear view of the flow of products, services and information. S3. Listen to signals of market demand and plan accordingly by expanding the span of sales and operations planning to the entire supply chain to detect early warning signs of changing demand in order patterns, customer promotions, etc. S4. Differentiate product closer to the customer to eliminate inventory stockpiles by postponing product differentiation in the manufacturing process closer to actual customer demand. 4.3/2.94.3/4.04.1/2.92.7/2.04.0/2.74.3/3.7Automotive SuppliersAutomotive OEMsQuestion 25Importance rating average on scale of 1 - 5 (N=22) OEM (N=3)3.8/2.83.3/2.73.6/2.73.3/2.7SCM Opportunities Best Practices Comparison High Importance / Low Performance60
- 62. S9. Develop a framework for establishing and implementing a supply chain strategic plan. S6. Develop a supply-chain wide technology strategy, which supports multiple levels of decision making and affords a clear view of the flow of products, services and information. S7. Adopt enterprise-wide performance measures that provide indicators of whether the supply chain is performing according to its strategic intent. S8. Appoint a supply chain executive to serve as a natural facilitator and integrator between the divergent needs of sales and manufacturing, quality and price, cost and service, and financial and qualitative measures. S10. Create a vision of the desired supply chain and define those actions required to close the gap between tomorrow’s supply chain vision and today’s current performance.PerformanceImportance3.04.42.74.02.94.13.14.3Question 25Importance rating average on scale of 1 - 5 (N=22) OEM (N=3)2.94.1SCM Opportunities Best Practices Comparison Importance - Performance Gaps61
- 63. Concurrence of Performance and ImportanceQuestion 25Suppliers have significant challenges in closing the gap in the identified importance and performance of supply chain management best practices.PerformanceImportance01020304050607080901's2's3's4's5'sPerformance/ ImportanceNumber of ResponsesAverage =2.9Average =3.9SCM Opportunities62
- 64. Beware of benchmarking pitfalls. You must understand how the measure is defined and computed to assess its relevanceQuestion 27 & 28Elements of Supply Chain Costs0%20%40%60%80%100%Installation CostsWarranty and Returns CostsCustomer Service CostsInformation Systems CostsOrder Entry CostsSupply Chain Planning CostsManufacturing CostsDistribution CostsMaterial Acquisition CostsFinished Goods Inventory Carrying CostsSupply Chain Related ManagementTransportation Costs77%73%59%55%55%45%41%41%36%32%23%9%Percent of Respondents0%5%5%9%0%0%0%55%Less than 4%4%5%6%7%8%9%10 %11-12 %13-14 %Greater than 14 %Supply Chain Costs as a Percent of Revenue9%5%5%0%20%40%60%80%100%Percent of RespondentsSCM OpportunitiesElements of Supply Chain Cost63
- 65. SCM OverviewPrioritize opportunities based upon strategic objectivesThe following are critical elements in all SCM approachesManage the entire pipelineTheory of ConstraintsUtilize the Theory of Constraints (TOC)Start with the customer to develop a strategyDevelop robust information technologyCritical ElementsDevelop KPIs to optimize the supply chainCustomer FocusedStrategy DrivenOutcome Based64
- 66. Supply chain strategy must be integrated with the overall company vision and strategy. Departmental goals and objectives must align with and support the supply chain strategy. The supply chain executive must have ultimate responsibility for the process pipeline including the defined elements of the supply chain. Information technology applications are enablers. Business processes must be defined, optimized, and efficient, in order for technology benefits to be realized. Identify and utilize performance measures for the supply chain process as a whole, not just the functional elements. Optimizing local operations lead to overall inefficiencies. Best practices and benchmarking are important elements of establishing effective supply chain management. However, each must be evaluated with regards to each suppliers unique business environment. Supply chain and and information technology skills are in high demand and short supply in the market. Look to partner with customers, suppliers, and other third parties for collaborative support. Conclusions65
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