supply chain value chain business system © k.e.homa

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Supply Chain Value Chain Business System © K.E.Homa

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Page 1: Supply Chain Value Chain Business System © K.E.Homa

Supply ChainValue Chain Business System

© K.E.Homa

Page 2: Supply Chain Value Chain Business System © K.E.Homa

Supply Chain

For product-based companies, “it” all comes together in the supply chain … a.k.a. value chain, business system … the underlying infrastructure for procuring, transforming, delivering, and servicing.

Page 3: Supply Chain Value Chain Business System © K.E.Homa

OrderEntryDEMAND

Del’y &Service

SUPPLY

OperationsLINKINGPROCESSES

Customer’s View

Page 4: Supply Chain Value Chain Business System © K.E.Homa

OrderEntryDEMAND

Del’y &Service

SUPPLY

OperationsLINKINGPROCESSES

CCost

QQuality

SService

FFlexibility

Customer’s View

Page 5: Supply Chain Value Chain Business System © K.E.Homa

MatlLabor$$$

INPUTS

Goods& Svcs

OUTPUTS

Operations

TRANSFORMINGPROCESSES

EEfficiency

PProductivity

AAdvantage

Producer’s View

Page 6: Supply Chain Value Chain Business System © K.E.Homa

SUPPLY CHAINValue Chain Business System

Design Purch. Mfg. Distrib. Service

Complementary / synergistic combinations

Page 7: Supply Chain Value Chain Business System © K.E.Homa

Suppliers CustomersLogistics Purch. Mfg. Distrib. Service

TRADITIONAL SITUATION • Operations focused• Sequential processes• Sub-optimization

PROGRESSIVE ACTIONS• More integration• Concurrent processing• Better information flow

Supply ChainPrototypical View

Page 8: Supply Chain Value Chain Business System © K.E.Homa

From a strategic / tactical perspective …

Ownership is usually a legal detail and financial impracticality, not necessarily a strategic imperative.

Allied networks (formal & virtual) of best providers are increasingly prevalent.

Supply Chain

Page 9: Supply Chain Value Chain Business System © K.E.Homa

Caveat Virtual There is nothing virtual about merely shifting investment and costs

from one supply chain partner to another.

If someone is left holding the investment or cost, it’s real not virtual!

Supply Chain

Page 10: Supply Chain Value Chain Business System © K.E.Homa

Strategic advantage usually requires a creative (unique and synergistic) combination of options across supply chain activities.

Supply Chain

Page 11: Supply Chain Value Chain Business System © K.E.Homa

Technology Product Design

Manufacturing Marketing Distribution Service

– Idea source– State of art– Prod./process

integration– Patents

– Function– Physical

characteristics– Aesthetics– Quality

– Integration– Technology– Raw materials– Capacity– Location– Procurement

– Prices– Advertising/

promotion– Sales force– Package– Brand

– Channels– Integration– Inventory– Warehousing– Transport

– Warranty– Speed– Captive/

independent– Prices

Complementary / synergistic combinations

Supply Chain Leverage Points

Page 12: Supply Chain Value Chain Business System © K.E.Homa

Global Optimization Objective is too deliver appropriate service level at lowest

cost across the system. Locally optimizing processes in one ‘silo’ sometimes increases total system costs.

Supply Chain

Page 13: Supply Chain Value Chain Business System © K.E.Homa

Value Added Each stage of the supply chain must add valueadd value …

consistent with globally optimizing CQFS*CQFS* … and provide adequate financialfinancial returnsreturns to the provider

Supply Chain

* Cost Quality Flexibility Service

Page 14: Supply Chain Value Chain Business System © K.E.Homa

Supply Chain : Value Added

ValueAdded

ValueAdded

ValueAdded

Profit

Profit

Profit

Parts &Matl

SUPPLIER MANUFACTURER DISTRIBUTOR RETAILER

PRICEPROFIT

R.O.S. R.O.I

Page 15: Supply Chain Value Chain Business System © K.E.Homa

OrderEntry

Del’y &Service

MatlLabor$$$

Goods& Svcs

Operations

Demand

Supply

Inputs Output

2-DimensionalIntegrated View

Page 16: Supply Chain Value Chain Business System © K.E.Homa

OrderEntry

Del’y &Service

MatlLabor$$$

Goods& Svcs

Operations

PRODUCTIVITY

SERVICE LEVEL

Fill rateOn-time

CostR.O.I.

PerformanceMetrics

Page 17: Supply Chain Value Chain Business System © K.E.Homa

• Better service

• Lower costs

• Less investment

Supply Chain ManagementMega-Objectives

Page 18: Supply Chain Value Chain Business System © K.E.Homa

• Appropriate Q, F, S

• Lowest Cost

• Lowest Investment)

Supply Chain Performance Requirements: CQFS*

* Cost Quality Flexibility Service

Page 19: Supply Chain Value Chain Business System © K.E.Homa

• Hassle-free order entry

• High fill rates

• Consistent cycle times

• Dependable deliveries

• Timely order tracking

• Accurate invoicing

Customers’ requirements escalating...

Customer ServiceMinimum Requirements

Page 20: Supply Chain Value Chain Business System © K.E.Homa

• Full Availability (100%)

• Near-immediate delivery

• Scheduled Deliveries

• Perfect Orders, Shipments, Bills

Zero tolerance !

Customer ServiceEmerging Requirements

Page 21: Supply Chain Value Chain Business System © K.E.Homa

• Ship complete … or cancel

• Near-immediate deliveries

• Electronic shipping notices

• Continuous replenishment(Vendor managed inventory)

Customer ServiceEscalatinging Requirements

Page 22: Supply Chain Value Chain Business System © K.E.Homa

InvestmentInvestment

J. I. T. / Quick Response

Long Payment Terms

Consignment / Buy-Backs

Vendor Managed Inventory

CostsCosts

Slotting Fees

Pre-Tagging

Precisely Built Loads

In-Store Service

New Games …Shifting investment, costs and risk back to suppliers

Page 23: Supply Chain Value Chain Business System © K.E.Homa

Caveat Virtual There is nothing virtual about merely shifting investment and costs

from one supply chain partner to another.

If someone is left holding the investment or cost, it’s real not virtual!

Supply Chain

Page 24: Supply Chain Value Chain Business System © K.E.Homa

Product design and operations’ process efficiency are inextricably linked.

Operations efficiency is ultimately limited by product ‘design for manufacturing’.

Supply Chain

Page 25: Supply Chain Value Chain Business System © K.E.Homa

Information (logical assets) moves faster and is usually cheaper (after infrastructure is in place) than physical assets (people, plants, trucks, inventory, etc.).

Best operators support physical assets with logical assets … and substitute logical for physical whenever possible.

Supply Chain

Page 26: Supply Chain Value Chain Business System © K.E.Homa

Suppliers CustomersLogistics Purch. Mfg. Distrib. Service

Product DesignEstablishes the “upper bound” on supply chain efficiency

Information TechnologyEnables and institutionalizes supply chain processes

Complementary / synergistic combinations

Supply ChainPrototypical View

Page 27: Supply Chain Value Chain Business System © K.E.Homa

Supply ChainValue Chain Business System

© K.E.Homa