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SUPPLY CHAIN MANAGEMENT(SCM)
Supply chain management involves planning,design,& control of flow of material, information
and finance along the supply chain to deliver
superior value to the end customer in an effective &
efficient manner
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comprehensiveapproachtomanaginganenterprise'sinteractionswiththeorganizationsthatsupplythegoodsandservicesituses.
Thegoalistostreamlineandmakemoreeffectivetheprocessesbetweenanenterpriseanditssuppliersjustascustomerrelationshipmanagement(CRM)
.SRMincludesbothbusinesspracticesandsoftware
andispartoftheinformationflowcomponentofsupply
chainmanagement(SCM)
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ContdWithmorefirmsinterestedinworkingmoreclosely
withtheirsupplychainpartners,highprioritiesare:
Developingandimplementingsuccessfulsupplychainrelationships;
Theneedforcollaborationtoachievesupply
chainobjectives;and, Valuecreatedbythird-partylogistics.
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TheSCMrelationshipprocessbeginsbyanalyzingopportunitiesforsourcingcostandoperational
improvements.
Informationandpracticesacrossalldepartmentsand
functionsarecollectedandaggregatedforfurtheranalysis.
SCMrelationshipincreasestheefficiencyof
processesassociatedwithacquiringgoodsandservices,managinginventory,andprocessing
materials.
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DesignCollaboration
Source
Negotiate
Buy SupplyCollaboration
SRMprocessesarewellintegratedwithappropriateCRMandISCMprocesses.
TheuseofSRMsoftwarecanleadtolowerproductioncostsandahigherquality,butlowerpricedendproduct.
SRMproductsareavailablefromanumberofvendors,including12Technologies,Manugistics,PeopleSoft,andSAP.
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Types of Relationships Vertical
Refertothetraditionallinksbetweensupply
chainmemberssuchasretailers,distributors,manufacturersandsuppliers.
Horizontal
Firmsthathaveparallelorcooperatingpositions
inthesupplychainsuchasatransportationfirmandawarehousingfirmservingthesamecustomer.
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Successful Supply Chain Relationships
Six step process for forming and sustainingsupply chain relationships:
Step One
Perform strategic assessment
Step Two Decision to form relationship
Step Three Evaluate alternatives
Step Four
Select partners Step Five Structure operating model
Step Six Implementation and continuousimprovement
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StepOnePerformstrategicassessment
Manufacturerbecomesfullyawareofits
logisticsandsupplychainneedsandoverallstrategiesthatwillguideits
operations.
Timespentattheoutsetiswellspent.
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StepTwoDecisiontoformrelationship
Whenusinganexternalsupplier,willthefirmsservicesbeneeded.
Ifthefirmhascorecompetenciesintheareathatexternalsupplierprovides,thenthefirmcanprovideitsownservices.
Usingchannelpartnersdependsonwhethertherearecompellingdriversandfacilitatorsforpartnershipsarepresent.
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StepThreeEvaluatealternatives Measureandweighdriversandfacilitators.
Decideontypeofrelationship.
Matchmanufacturersneedswithcapabilitiesofeachpotentialpartner.
Involveotherfunctionalmanagersinthe
overallselectionprocess.
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StepFourSelectpartners Madeonlyaftercloseconsiderationofthe
credentialsofthemostlikelycandidates. Interactwithandgettoknowthefinalcandidates
onaprofessionallyintimatebasis.
Attemptconsensustomaximizebuy-in
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StepFiveStructureoperatingmodel
Planning
Jointoperatingcontrols
Communication
Risk/Rewardsharing
Trustandcommitment
Contractstyle Scopeoftherelationship
Financialinvestment
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StepSixImplementationandcontinuous
improvement
Dependinguponthecomplexityofthe
relationship,theimplementationperiodmayvaryinlength.
Futuresuccesseswillbeadirectfunctionof
theabilityofthepartnerstoachieveboth
breakthroughandcontinuousimprovement
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OutcomesofSCMRelationship
Integratesexternalorganizationsintocompanyscrossfunctionalteams
Develops an environment of trust between companySuppliersandInternalCustomers
Managesexternalfunctionstomeetbusinessobjectives
Ensuresrelationshipismutuallybeneficial Engagestalentandskillsofsupplierspersonnelinachievingcompanysbusinessgoals
Extendscompanysinfluenceonsupplierssupplier
Delivermaximumvaluetocompany
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Optimize supplier relationships,
Create a competitive advantage and morecustomer-centric solutions to market faster. Lengthen and strengthen critical supplier
relationships
Drive profit enhancement through reduced
supply chain and operational costs
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Lackoftrust
Littleunderstanding/commitmenttoSCprinciples
Differentgoalsandobjective
Inadequateinformationsystem
Shorttermemphasisonoutcome
Involvementintoomanysupplychain
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Developanewbreedofmanagers
Buildrelationshipmanagementskill Establishinterorganizationalteams
Createnewperformancemeasure
Investininformationtechnology
Developlongtermfocus
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Communication
Planning Sourcing
Procurement
Collaboration DataMining
Scorecarding
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SCM-StrategicPartnership
Strategicpartnering(SP)iswhentwoormorefirms
thathavecomplementaryproductsorservicesjoinsuchthateachmayrealizeastrategicbenefit.
itisaformalalliancebetweentwocommercial
enterprises,usuallyformalizedbyoneormore
businesscontractsbutfallsshortofformingalegalpartnershipor,agency,orcorporateaffiliate
relationship
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firstacompanyhastodefineitsown
strategy. Theexistingrelationshipshavetobe
evaluated
generationprocessshouldbemadetransparent.
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onlybuyer/sellerinteraction
closercollaborationbetweenbuyingandselling(accountmanagement);
relationshipbetweencompanies,where
thereisdirectinteractionbetweenarangeoffunctionsandusuallysubstantialinvestment
intherelationship
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Hereaspectslikeinformationsharing
ordataaccuracycomeintoplay. Itisthesensitivepartsofpartnership
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Thechangetowardsacompanywhich
embracesstrategicrelationshipsisnotaneasyone.
Managingpeoplethroughthischangeis
anessentialpartofpartnershipmanagement
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Monitoringcanbedoneinaformaland/
orinformalway. Theimportantpointhereisnottoloose
trackofwhathasbeenachievedand
howitwasachieved.
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Quickresponse,
Continuousreplenishment, Advancedcontinuousreplenishment
Vendormanagedinventory(VMI
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InquickresponseSPvendorsreceive
point-of-sales(POS)datafromretailers.
Thedataarethenusedtosynchronize
productionandinventorymanagementat
thesupplier.
thePOSdataisusedtoimproveforecastingandscheduling.
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SCM-StrategicPartnership
IncontinuousreplenishmentSP
vendorsagainreceivePOSdataandusethemtoprepareshipmentsat
previouslyagreedtointervalsaswell
astomaintainagreedtoinventory
levels.
ThisapproachisusedbyWalMart.
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InadvancedcontinuousreplenishmentSP
supplierswillgraduallydecreaseinventorylevels
attheretailerslocationaslongastheycanstill
meetservicelevels.
Theresultisthatinventorylevelarecontinuously
improved. Kmartusesthisapproach.
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SCM-StrategicPartnership
InvendormanagedinventorySPthesupplierwill
decideontheappropriateinventorylevelsfor
eachoftheproductsitsuppliesandthe
appropriateinventorypoliciestomaintainthese
levels.
OneofthebestexamplesofthisistheSPbetweenWalMartandProctor&Gamble.
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Contractualnegotiations
Ownership
Creditterms
Orderingdecisions
Developorintegrateinformationsystems
Developeffectiveforecastingtechniques
Developatacticaldecisionsupporttool
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Increaseincapitalforresearchandproductdevelopmentandyetlowerrisk(Innovation)
Decreaseinproductleadtimesandlifecycles.(timepressures)
Abilitytobringtogethercomplementaryskillsand
assets.
Accesstoknowledgeandexpertisebeyond
companyborders.
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Contd Rapidlyachievescale,criticalmassand
momentumExpansionofchanneland
internationalmarketpresence. Buildingcredibilityintheindustryandbrand
awareness.
Providingaddedvaluetocustomers.
Establishingtechnologicalstandardsforthe
industrythatwillbenefitthefirm.
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Expensivetechnologyisrequired
Mustdevelopsupplier/retailertrust Supplierresponsibilityincreases
Expensesatthesupplieralsooften
increase
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Conclusion
TheSCMapproachimpliesmanagingthe
relationshipsbetweenthebusinesses
responsiblefortheefficientproductionand
supplyofproductsfromfarmlevelto
consumers,toreliablymeetconsumers'
requirementsintermsofquantity,qualityandprice.
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Reference http://searchsap.techtarget.com/definition/supplier-relationship-management
SCMRelationships,http://www.ebizq.net/topics/scm/features/3881.html,
downloadedon24/01/2012.
http://doi.ieeecomputersociety.org/10.1109/ICMECG.2008.21TheApplianceofSupplyChainManagementTheorytoTourismDevelopment;LiyingWei,
KeLu;referredon26/01/2012
EllenO'Brien,2002,Gartner'sKarenPetersononABC'sofSCM,browsed
on28/8/12,http://searchsap.techtarget.com/news/833189/Gartners-Karen-
Peterson-on-ABCs-of-SCM
AmirH.Khataie,2011,Activity-BasedCostinginSupplyChainCostManagementDecisionSupportSystems,browsedon29/8/12,
http://spectrum.library.concordia.ca/7332/1/Khataie_PhD_S2011.pdf
SupplyChainManagement:Concepts,TechniquesandPractices,
EnhancingvaluethroughCollaboration,LingLi
http://searchsap.techtarget.com/definition/supplier-relationship-managementhttp://www.ebizq.net/topics/scm/features/3881.htmlhttp://doi.ieeecomputersociety.org/10.1109/ICMECG.2008.21http://spectrum.library.concordia.ca/7332/1/Khataie_PhD_S2011.pdfhttp://spectrum.library.concordia.ca/7332/1/Khataie_PhD_S2011.pdfhttp://doi.ieeecomputersociety.org/10.1109/ICMECG.2008.21http://www.ebizq.net/topics/scm/features/3881.htmlhttp://searchsap.techtarget.com/definition/supplier-relationship-managementhttp://searchsap.techtarget.com/definition/supplier-relationship-managementhttp://searchsap.techtarget.com/definition/supplier-relationship-managementhttp://searchsap.techtarget.com/definition/supplier-relationship-managementhttp://searchsap.techtarget.com/definition/supplier-relationship-management -
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