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Advanced Supply Chain ManagementSurath Pralongsil

December 2009

Advanced Supply Chain Management

Surath Pralongsil

December 2009

Value Chain ManagementSupply Chain ManagementLogistics Management

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Supply Chain Management / Surath Pralongsil 2

Outline of today

09:00 09:15 (15 min) Overview of supply chain management

09:15 09:45 (30 min) Strategic supply chain management

09:45 11:30 (1hr 45 min) Supply chain simulation (beer game) + Break

11:30 12:30 (60 min) Integrated supply chain planning

12:30 13:30 (60 min) Lunch

13:30 14:00 (30 min) Supply chain collaboration & efficientconsumer response (ECR)

14:00 15:30 (1hr 30 min) - Synchronized production/supply

15:30 15:45 (15 min) Break

15:45 16:00 (15 min) - Vendor-managed inventory (VMI)

16:00 16:45 (45 min) IT in supply chain management

16:45 17:00 (15 min) Wrap-up

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Objective of today

To understand the concept, process and benefit of SCM in business,and utilize SCM in his/her own work.

To be aware of the real applications of SCM in SCCC context and

other industries. To be able to work from a holistic point of view (looking at big picture)

To promote collaboration within and across organization, andunderstand supply chain partners' capability

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Contents of Supply Chain Management

Overview of Supply Chain Management Value Management

Customer Value

Value-Based Pricing

Customer Relationship Management Strategic Supply Chain Management

Supply Chain Network Design andOptimization

Integrated Supply Chain Planning

Sales & Operation Planning (S&OP) Enabling Technology

Outsourcing

Inventory Management

Warehouse Management Transport Management

International Logistics Management

Reverse Logistics

Supply Chain Costing / Activity-Based

Costing / Cost-To-Serve Supply Chain Collaboration

Efficient Consumer Response (ECR) Continuous Replenishment and

Synchronized Production / Supply

Vendor-Managed Inventory (VMI)

Strategic Sourcing and Procurement

Supplier Relationship Management

Supply Chain Performance Management

Just-in-time

Lean and Six Sigma

Green Supply Chain Supply Chain Traceability and Security

The Future Supply Chain

Supplementary

Supply-Chain Operations Reference-model (SCOR)

Supply Chain/Logistics Scorecard

Supply Chain Simulation: Beer Game

Product Code Classification

ABC Analysis Best Practice

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Supply Chain

Manufacturer Retailer ConsumerDistributor/WholesalerSupplier

Information Flow and Financial FlowInformation Flow and Financial Flow

Physical FlowPhysical Flow

Process and PeopleProcess and People

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Supply Chain

All interactions, from order entry through paid invoices, end to end from yoursuppliers supplier to customers customer scope of SCM as SCC determined

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Value Chain

Michael Porter of Harvard university said that A business is profitableif the value it creates exceeds the cost of performing the valueactivities. To gain a competitive advantage over its rivals, a company

must either perform these activities at a lower cost or perform them ina way that leads to differentiation and a premium price (more value).

MA

RGIN

MARGIN

INBOUNDLOGISTICS

OPERATIONS OUTBOUNDLOGISTICS

MARKETING& SALES

SERVICE

PROCUREMENT

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PRIMARY ACTIVITES

SUPPORT

ACTIVITIES

MA

RGIN

MARGIN

INBOUNDLOGISTICS

OPERATIONS OUTBOUNDLOGISTICS

MARKETING& SALES

SERVICE

PROCUREMENT

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PRIMARY ACTIVITES

SUPPORT

ACTIVITIES

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Value Chain

Focus on how a business creates customer value by examining contributionsof different internal activities to that value

Allow better identification of a firms strengths and weaknesses since thebusiness is viewed as a process

The activities within the value chain are split into two sections:

Primary activities

These are activities associated with physical creation of the product,marketing activities, activities involved with the transfer to the buyer & after-

sale support

Support activities

These activities provide support to the organization as a whole to keep it

functioning & provide the infrastructure of the company

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10

Supply Chain Management / Surath Pralongsil

Holcim Value Chain

Transactional

Mortars

Ready - mix

Concrete

Asphalt

ConcreteProducts

Cementitious

Materials

(cement,

mineral

components)

Direct Sales

Infrastructure

Commercial /

Industrial

Building

Housing

DemandSupply

Basic Materials

Processing

Direct Sales

Aggregates

(sand, gravel,

stone, recycled

aggregates)

Traders

Wholesalers

Retailers

Traders

Wholesalers

Retailers

A

p

p

li

c

a

t

i

on

s

Applications andConstruction Fields

End - users

General

Contractors

Civil

Engineering

Channels

Transformational

Masons

Self - builders

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11


Ready mix

Transactional

Basic MaterialsProcessing

Supply

End - users

Channels

Transformational

-mix

Concrete

Traders

Wholesalers

RetailersGeneral

Contractors

Civil

Engineering

Masons

Self - builders

Product End-user

AggregatesAsphalt

Mortars

Ready MixConcrete

ConcreteProduct

Cementitious

Materials

(cement,mineral

components)

Channel / Distribution

Demand

ConstructionFields

Infrastructure

Commercial /

Industrial

Building

Housing

ConstructionField

Modern Trade

Direct Sales

Direct Sales

Value chain defines the scope, relating to SCCC corebusinesses

SCCC-investing businessSource: adapted from Holcim Value Chain

Co-Processing

Energy

MineralComponents

Supplier

R/M, Supply

CoreForwardIntegration

BackwardIntegration

VerticalIntegration

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13


Cement flow total market 2006

End user

Producer

Transformationalchannel

Contractor

65%

Contractor

65%

Transactional

channel

30.1 Mio t100%

CPM

18%

CPM

18%

RMX

26%

RMX

26%

Agent

20%

Agent

20%

Direct

sales5%

Bulk40%

Bag60%

Selfbuilder /Mini-contractor

17%

Constructionfield

Drymortar

1%

Whole-saler48%

Retailer

38%

Simple house28%

Simple house28%

Single house

20%

Single house

20%

Highrise6%

Highrise6%

Infrastructure

20%

Infrastructure

20%Comm.

11%

Comm.

11%Indust.

6%

Indust.

6%Inst.

1%

Inst.

1%

Townhouse

4%

Townhouse

4%

Multist.

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14


Value creation* for SCCCs key stakeholders from 2010 to 2013?

Input factor (cost of all goods,materials and services purchased)

Depreciation and amortization

Benefit to employees, government,

shareholders and creditors

Benefit to shareholders

Retained in business

Benefit to employees

Benefit to government

Benefit to creditors

32%

Dividend

Employee

Tax

*Illustration

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Value Added

Refers to the additional value created at a particular stage ofproduction or through branding and marketing. In modern neo-classical economics, especially in macroeconomics, it refers to the

contribution of the factors of production, i.e. land, labor and capitalgoods, to raising the value of a product and corresponds to theincomes received by the owners of these factors.

The enhancement added to a product or service by a company beforethe product is offered to customers.

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December 2009

Overview of Supply Chain Management

Supply Chain & Logistics

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17

Logistics EvolutionLogistics Evolution

Journey of SCCC Logistics to

Logistics Solution Provider

Transportation

Distribution

IntegratedLogistics

Supply ChainManagement

ValueManagement

SolutionProvider

Outbound

Inbound

Warehouse

Dispatching

Packing

3rd and 4th

Logistics

Service

Provider

(LSP)

Application

Service

Provider

(ASP)

Value

Management

Customer

Proposition

Network

Synchronize

& Optimize

Supply

Planning

Demand

Planning

Outbound

Inbound

WarehouseOutbound

Inbound

Source: Khun Nopporn Thepsithar, SCCC

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Supply Chain and Logistics

A position of enduring superiority over competitors in terms ofcustomer preference may be achieved through logistics. (ProfessorMartin Christopher)

The prizes in todays markets go only to those companies which arecapable of providing added value in ever-shortening time scales.(Professor Martin Christopher)

Nowadays, its supply chains that compete with supply chains, notcompanies with companies. (Allan Waller, Price Waterhouse

Coopers)

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Supply Chain Management

the design, planning, execution, control, and monitoring of supplychain activities with the objective of creating value, building acompetitive infrastructure, leveraging logistics capability,

synchronizing supply with demand and measuring performance.(Source: APICS)

The goal of supply chain management is to link the marketplace, thedistribution network, the manufacturing process and the procurement

activity in such a way that customers are serviced at higher levels butat lower costs. (Professor Martin Christopher)

the management of upstream & downstream relationships withsuppliers & customers to deliver superior customer value at less cost

to the supply chain as a whole

The word Supply Chain is not just about supply. It is about bothsupply and demand, better called Integrated Supply ChainManagement

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Logistics Management

Is the means whereby the needs of Customers are satisfied throughthe co-ordination of the materials and information flows that extendfrom the market place, through the firm and its operations and beyond

that to suppliers. (Professor Martin Christopher) Logistics is part of the supply chain process that plans, implements,

and controls the efficient, effective forward and reverse flow andstorage of goods, services, and related information between the point

of origin and the point of consumption in order to meet customersrequirements. (The Council of Logistics Management)

Logistics is all about getting the right goods to the right place at theright time in the right quantity at the right quality at the right price.

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Supply Chain Management v.s. Logistics

Logistics management involves the strategy & operations relating tothe movement of goods within the enterprise & with its immediatesuppliers & customers. Logistics management develops a plan for the

flow of products & information through a business.

Supply chain management involves managing the relationshipsamong all members in the supply chain. Supply chain management

aims at coordinating the processes of all supply chain members, bothdownstream towards customers & upstream towards suppliers.Supply chain management is linked together with cross-companystrategies and processes

A companys Logistics strategy needs to be closely aligned with thesupply chains overall strategy.

A E i I i

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An Enterprise Integration

PHASES Functional Integration

Phase 1Phase 1

BaselineBaseline

Phase 3Phase 3

InternalInternal

IntegrationIntegration

Phase 2Phase 2

FunctionalFunctional


Phase 4Phase 4

ExternalExternal


Purchasing Material Control Production Sales Distribution

Material Management Manufacturing Management Logistics


Suppliers

Internal Supply Chain

Customers

Ch i i f S l Ch i E l i

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Characteristics of Supply Chain Evolution

FragmentedPyramid

IntegratedEnterprise

IntegratedSupply Chain

Value Network /Virtual Company

Strategy

Functional

integration

Driven by cost andefficiency

Cross-functional integration

Driven by customer satisfaction

Process owners

Integrated applications

Process automation

Cross-functional integration

Intra-enterprise focused

Limited co-operation (within anenterprise)

One team

Empowered, self-directedteams

Flattened pyramid

We sell semi-customizedproducts.

Which of our products would a

bunch of customers buy?Semi-customized products inneed of a market segment.

Inter-enterprise

integration

Driven by supply chainoptimization

Core competency, agility, opportunity

Driven by change and uncertainty

People Subject matter experts Knowledge workers Knowledge workers with smart agents

TechnologyIndependent systems

Islands of automation

Electronic commerce enabled

Scaleable cross-platformportable

Electronic marketplace enabled

Plug compatible and inter-operable

Process

Functional silos

Department focused

Cross-company integration

Supply-Chain focused

Dynamic, end-to-end integration

Opportunity and value-add-focused

Culture

Adversarial, mutualtrust

Ill do my job, you doyours

Mutual truth and fullcooperation (extended

enterprise)

One team

Need-based, value-add cooperation

What true value does everyone add?

StructureHeavy command and

control

Pyramid

Partnership / alliance

Pipeline

Virtual / fungible

Network / Web

Product /

Service

We sell products.

What products can wemake?

Mass-producedproducts in need of a

market

We offer semi-customizedsolutions.

How can we offer best totalvalue to a customer segment?

Fully optimized semi-customized solution in need of

a market niche

We help our customer (s) to get thebest possible solution.

What must we do to give the best total

solution to this individual customer?Information-rich mass-customized

solution configured for one customer

Source: KPMG Transportation & Distribution

S l h i f k

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24

Source: McKinsey

Supply chain framework

3. Production management

Translate market requirements intoproduction requirements, andmanage the resulting constraints

2. Forecast and demand management

Ensure appropriate supply at low costthrough accurate demand forecastingand efficient order management

6. Supply chain integration

Create integratedprocesses to facilitateinformation flow supportedby a supply chain focusedorganization

5. Distribution management

Ensure reliable logisticsand optimal material flowin the outbound network

0. Supply chain configuration

7. Supply chain transformation

Ensure sustainability and constant improvement in whole network

Understand market and network dynamics and configure network with optimal cost and flexibility

1. Service-levelmanagement

Understand cus-tomer requirementsand serve themaccordingly

4. Supply

managementEnsure reliablesupply and inte-grate with suppliers

32

5

4 16

Internal Supply Chain Management

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Internal Supply Chain Management& Logistics Management

Supply Chain Management

Flow Management

Distribution Management

Logistics Management

Import & Export

Quality control

Simulate

warehouse space

and workload

Simulate

Trucking Plan

Simulate

International

Transport Plan

Break down and

consolidate logistical

costsCheck subcontractor

invoices

SC deployment result

analysis

Benchmarking

Import

and

exportorder

Transfer

Order

Track & trace

(including Log Book

monitoring in line with

KPI definition,

operational audit)

Control

Check

Sell

Supply Chain Supply Chain Execution

Production

Optimisation of Supply Chain Configuration

Steer, plan and

schedule warehouse

operation basing on

warehousing policy

Contract establishment and follow up

Logistics project steering

Information system requirement

Multi product lines service requirements arbitration

Deployment

Resources and investment planning

Check compliance with Service Specification

Justification: Trade off service / CostsPerformance control

(KPI definition and

result)

Cost & Budget

control

Steeringof

Operation

Strategic

Steering Define Service

Specification

Supply Chain

Planning

Plan & schedule

productionTacticalSteering

Proposaloflogisticsalternatives(Project)

Quality & 3PL Audit

Steer, plan and

schedule

transport

operation basing

on trucking

policy

Steer, plan and

schedule

internationaltransport

operation basing

on transport

policy

Physical

Execution

Transport Operation

Handle

Claims

Warehouseoperations

Invoice

productsLocal International

Nature&

Typeof

Function

Storage Transport Project

Source: Capgemini

Supply Chain Competence Framework

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Supply Chain Competence Framework

A. StrategyB. PlanningC. Plant OperationsD. DistributionE. Human ResourcesF. Information TechnologyG. Capital ManagementH. Performance

Management

A. Strategy1. Supply Chain Strategy Development2. Make vs Buy / Contract Manufacturing3. Network Design / Optimization /

Rationalization4. Product Configuration / De-proliferation /

Complexity Reduction

B. Planning5. Forecasting6. Sales & Operation Planning7. Inventory Planning8. Supply Chain Planning

C. Plant Operations9. Production Optimization10.Maintenance Management11.QA / QCc

D. Distribution12.Transportation

i. Inboundii.Outbound

13.Warehouse Management /Inventory Management

E. Human Resources14.Organization Alignment15.Readiness to Change16.Professional Development /

Training / Rewards andRecognition

F. Information Technology17.Architecture

G. Capital Management18.Fixed Capital Management

i. Capital Planningii.Capital Project

Management

H. Performance Management19.Integrated Strategic

Measurement20.Performance Dashboard21.Continuous Improvement

Source: A T Kearney

Top Down Bottom Up

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Top Down, Bottom Up

EXECUTIONIdentificationStandardizationOptimization

OperationalOrders, Commitments,Asset Tracking

TACTICALPlanning,Optimization,

Arbitration

STRATEGICStructure,Costs, Policies

PHYSICAL

ERP

TACTICAL PLANNING

STRATEGIC DIRECTION

Effective and Efficient Supply Chain

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Effective and Efficient Supply Chain

Key factors:

Understanding end customer needs

Adopting effective supply chain strategies to meet end customer

needs Integration of the members of the supply chain

Successfully tackling operational issues

Successfully handling the impact of internationalization on the supplychain

Managing the information systems & technology which hold thesupply chain together

Ensuring value for the customer provided by the supply chain

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December 2009

Strategic Supply Chain Management

Supply Chain Philosophy

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Supply Chain Philosophy

Demand Supply

Logistics: Cost and Service Trade-Off

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Supply Chain Strategy

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Supply Chain Strategy

a planning activity focused on the long-term decisions of the supplychain

The choice of products & services to offer to customers

The structure of the logistics network & the supply chain The capabilities the supply chain will specialize in

The types of relationship between supplier & customers

Creating competitive advantage, which is sustainable over a longperiod & reliant on systems of capabilities rather than a singlecapability

Opportunities in global markets

The provision of tailored services for customers

Rapid communication with customers & suppliers

The need for time compression strategies in order to cope with shorterproduct life cycles

Competitive Advantage in Supply Chain

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Management

Globalization

Integration

Internal Integration

External Integration

Capability Integration

Relationships

Time-based competition Responsiveness

Reliability

Globalization

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Globalization

Organizations today have the opportunity to be global companiesregarding the world as a potential market or source of supply

Many companies are finding competitive advantage through cateringto the world market while coordinating dispersed procurement,manufacturing & logistics activities

Homogenous marketing concept

Borderless geography

No differentiation in language, look, customs, tastes, value etc.

No time limitation

Going Global

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Going Global

Proactive Additional resources Taxes Lowered costs

Economies of Scales Incentives Synergy Market extension Power and prestige Exploitation of firm-specific

advantages Protect home market through

offending competitors market

Reactive Trade barriers International customers International competitions Regulations

Integration

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Integration

Supply chain members need to be integrated in terms of theirprocesses, activities & systems

Integration is vital for companies operating internationally

Advantages of integration include improved quality, innovationsharing, reduced costs, & improved scheduling of production &

delivery

Levels of integration:

Internal Integration External Integration


Relationships


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PHASES Functional Integration

Phase 1Phase 1

BaselineBaseline

Phase 3Phase 3

InternalInternal


Phase 2Phase 2

FunctionalFunctional


Phase 4Phase 4

ExternalExternal


Purchasing Material Control Production Sales Distribution



Suppliers

Internal Supply Chain

Customers


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The companys internal structurehas to be aligned & integrated

Internal functions must alignalong processes that lead tospecific product & service value

Goals must align to anoverarching corporate strategy

Communication barriers must bereduced between activities toenhance information flowthroughout the organization

External Integration

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te a teg at o

External integration can only occur when internal integration &functional strategies have been aligned

There must be consistent competitive goals, objectives & criteriaacross the supply chain, without conflicting priorities

Cost reduction at the expense of other supply chain members simply

transfers cost to the end customer, leading to higher prices -companies have to take into consideration all costs within the supplychain


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p y g

Under supply chain management each member of the supply chainrealizes that they cannot be the best at every activity & need to relyon capabilities outside of the organization

In order to add the most value on the whole supply chain,organizations must decide which activities & capabilities to invest in &perform

Relationships

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p

A key focus of supply chainmanagement is developing &understanding cooperation, trustand the management ofrelationships

Many relationships within supply

chain management are basedon the partnership idea whichinvolves mutually beneficiallong-term relationships

Type of Relationship in Supply Chain

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yp p pp y

Arms length

Long-term relationship

Partnership

Third-party / Outsourcing Strategic alliance

Joint venture

Network organization Vertical integration / Acquisition

Time-Based Competition

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p

Low cost and high quality have now become standards by whichcompanies can enter and compete in markets; and they are no longera guarantee for customer demand

Time has become a source of competitive advantage within manyindustries

Companies have to focus their supply chain capabilities on: Responsiveness

Reliability

Responsiveness

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The ability to respond to changing demands is called agility

Agility means meeting customer demands quickly so that customers

do not turn to substitutes from competitors

In order to provide time compression benefits to customers,companies need to posses the following skills:

New product development and introduction competencies

Cross functional development team abilities

Appropriate & timely feedback from customers

Lead time management

Product Life Cycle

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Time

Sales

Introduction

Growth

Maturity

Saturation

Decline

Sales

Introduction

Growth

Maturity

Saturation

Decline

Reliability

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To provide reliability at times of uncertainty in demand, safety stockswere carried by companies

Traditionally trade-offs were perceived as existing between providinghigh quality, low cost & quick delivery of products

Successful supply chains can now deliver rapidly at low cost with high

quality. This reliability comes from reducing inventory levels as wellas reducing the need for quality detection throughout the supply chain

Different Supply Chain Characteristics in EachIndustry

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Industry

Manufacturing CustomerDistribution CentreSupplier

ship

to

sto

ck

maketo

sto

ck

asse

mble

to

orde

r

buyto

order

engin

eerto

orde

r

Finished goods storeR/M store

maketo

order

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December 2009


Lean v.s. Agile Supply Chain

Lean Philosophy

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The lean philosophy is based on eliminating all waste from thesupply chain

Thus, seven types of waste have been identified as detrimental forthe supply chain:

1. Overproduction

2. Waiting

3. Transporting4. Inappropriate processing

5. Unnecessary inventory

6. Unnecessary motions

7. Defects

Inventory Hiding Underlying Problems

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Restricted

InformationFlow

Quality

Problems

InventoryInventory

Inadequate

Processes

Restricted

InformationFlow

Quality

Problems

Inventory

Inadequate

Processes

Lean v.s. Agile Supply Chain

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Lean (efficient) supply chains using JIT work when: Demand is relatively stable & predictable

Product variety is low

Price & quality are key to advantages in the market place

Agile (responsive) supply chains :

Are characterized by very flexible structures, production capabilities &

people within each part of the supply chain Focus on responsiveness over waste elimination

Work best when customer service & responsiveness lead tocompetitive advantage

Push Strategies

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Push strategies means working to long-term forecasts & estimatingthe number of products being produced

Each company throughout the supply chain has its own forecast

Forecasts are not aligned with suppliers or customers

Long term forecasts are difficult to predict with many variables disruptingthe forecast

Limited forecasting ability results in build up of inventory

Pull Strategies

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Pull strategies mean that there is no production until the customer hassignaled demand by ordering a product or service

Advantages: No inventory costs as the product is made as soon as the order is

received

Information flow throughout the supply chain

Collaboration between supply chain members

Disadvantages:

Smoothing demand is difficult

Time taken to build final product or service might be longer as the supplychain has to make the order

Supply Chain of PC, with Postponement

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Positioning of Decoupling Point

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driven by forecast

driven by order

Postponement

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Postponement or push-pullstrategies aim at preventing thedisadvantages of both push & pullstrategies

Under postponement, certain partsof the supply chain are undertakinga push strategy while other parts

perform a pull strategy: Upstream suppliers provide

commodity parts & componentsusing a push strategy as demand issmoother & more predictable

Downstream suppliers employ a pullstrategy & do not customizeproducts & services until an orderfrom the final customer has beenmade

Determining the decoupling point in the supplychain from PUSH to PULL - factors

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Demand change & forecast reliability (all we know about the forecastis that it will be wrong)

Required product configurations & variability

Required customer response time (balancing capacity with inventory)

? ? ? ? ?

PUSH & PULL

Where in the supply chain and how much inventoryto keep?

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CostFlexibilityService level

Response time

CostFlexibilityService level

Response time

Materialssuppliers

RetailerComponentmanufacturer

Assembler Storage

? ? ? ? ?

Postponement & its impact on reducing variety ininventory

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Variety

Pi

peline

Materials in

Finished goods out

BA

Postponement(delaying

customisation)

=

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Advanced Supply Chain ManagementSurath PralongsilDecember 2009


Advantage of Supply Chain Management

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Key Performance Objectives

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Long term supply chain efficiency and success rely on performanceadvantages which other supply chains will not have

These performance objectives include: Cost

Quality

Flexibility

Speed Reliability / Dependability

etc.

Cost Reduction

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The reduction of total cost ofownership is key to costadvantage

Total cost of ownershipmeasures include bothownership & post-ownershipcosts

Logistics cost advantagesinclude:

Efficient use of capacity

Reduction in inventory levels Faster & more reliable

information exchange

Ownership costs include: Processing inventory

Repair

Maintenance

Warranty Training

Operating

Inventory carrying

Contract administration Downtime cost of operating

equipment

Post-Ownership costs: Disposal or environmental

consequences of product orservice

Quality and Service Level Improvements

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Quality is the most visible aspect of the supply chain

The quality objective is the foundation for the other objectives & is

considered necessary just to compete

Quality affects other objectives, such as:

Cost

Flexibility

Speed

Reliability / Dependability

Flexibility Enhancement

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The survival of the supply chain is dependent on its ability to meet thechanging needs of customers & to adapt to uncertain marketconditions

Flexibility is essential in turbulent markets

A company can focus on four possible types of flexibility:

Product (variety) flexibility

Mix flexibility

Volume flexibility

Delivery flexibility

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Reliability

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Reliability means being able to tell customers reliablywhen their product or service will be delivered

Reliability refers to: Dependability of timetables

On time deliveries

On-Time In-Full (OTIF)

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Supply Chain SimulationBeer Game

Beer Game

23

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Competing among each supply chain to be the most efficient supply chain, which means the lowest

total supply chain cost.

Consumer

Distributor /Wholesaler

Retailer

Manufacturer Supplier

ReduceCost

ReduceCost Enhance

Revenue

Enhance

Revenue

Reducing inventory

operating costsMatching merchandise

with consumer demands

Resources

23

4 5

Order

Delivery

Order

Delivery

Order Delivery

Order

Delivery

Order

Delivery

Rule

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Inventory at the beginning = 10 unoits No talking

No information sharing

Cost Inventory carrying cost: 1 THB/unit/week

Back order: 2 THB/unit/week

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Bullwhip Effect (Forrester Effect)

What Management Wants...

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Quantity

Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998Time

DemandDemandProductionProduction

What Management Gets...

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Time

DemandDemand

ProductionProduction

Qu

antity

Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Increasing Order Variability up the Supply Chain

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ConsumptionConsumersRetailersDistributorsManufacturersSuppliers

Bullwhip Effect (Forrester Effect)

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ORDERS

TIME

2. Orders fromretailers to

distributors

3. Orders from

distributors tomanufacturer

4. Ordersfrom manufacturerto supplier

1 . Increase of 1 0%in orders fromconsumers to

retailers

ITC

GOODSORDERS

Manufacturer DISTRIBUTORSupplier CONSUMERSRETAILER

M11:U2:02.4-2

Explaining the Forrester effect

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Supply Chain Management / Surath Pralongsil 77ITC

ORDERS

TIME

Lagged (delayed) response

Amplification of responseSystem instability

Forrester showed how this lagged or delayed response leads toan amplification in response magnitude, resulting in supply chaininstability and increased inventory levels.

M11:U2:2.4-3

Bullwhip Effect

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Manufacturer Distributor Wholesaler Retailer Customer

Collaboration in Supply Chain

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Collaborative Planning, Forecasting & Replenishment

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Manufacturer

Retailer Forecast Drivers

In stock position

Fill Rate Consumer Demand

Price Changes

Growth Plans

Distribution Channels

Common EventCalendar

Joint Forecast

Retailer

Manufacturer Forecast Drivers

Capacity

Order Lead time Consumer Behaviour

Product Availability

Promotions

Raw material supply

Joint Business Planning

Generatejo

intforecast Generatejo

intforec

ast

Drivereplenishment

DriveMRP

Supply Chain Manager

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Purchase Order ProcurementPurchase OrderPurchase OrderPurchase Order

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Supply Chain Management / Surath Pralongsil 83Note: Inventory is to be taken into account in each step.

Retail Outlet Retail Outlet Retail Outlet Retail Outlet

Regional DC Regional DC

National DC

Demand Demand Demand Demand

DRP

Demand Planning

Production MPS

Sub-Assembly Sub-Assembly Sub-Assembly Sub-Assembly

Assembly Assembly

C1 C2 C3 C4 C5 C6 C7 C8

MRP

Supply Chain Planning Process Framework

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ProcurementProcurement

ManufacturingManufacturing

LogisticsLogistics

Marketing& Sales

Marketing& Sales

SuppliersSuppliers

CustomerCustomer

Inventory/

WarehouseManagement

ShipmentManagement

InventoryDeployment

TransportPlanning

Master

ProductionScheduling

Detailed

ProductionScheduling

DistributionRequirement

Planning

Material Requirement Planning

ProductionActivityControl

Procurement

Capacity

Planning andSourcing

Supply Chain

NetworkDesign

Order Management Demand Planning

Executional Operational Tactical Strategic

Business Plan

Immediate - Hour Day - Week Week - Month Quarter - Year

Evolution of enterprise resource management (ERM)and manufacturing planning & control systems

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ECR

SCM/APSERP

MRP II / JIT

MRP I

DRP II

DRP I

WMS

TMSRoute Planning


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Sales & Operations Planning (Demand & SupplyPlanning)

Demand Planning

Distribution Requirement Planning (DRP) Distribution Resource Planning

(DRP II)

Material Requirement Planning (MRP) Manufacturing Resource Planning (MRP II)

Master Production Schedule (MPS)

Detailed Production Schedule (DPS)

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Sales & Operations P lanning(S&OP)

Sales & Operations Planning (S&OP)

S l d O ti Pl i (S&OP) i t l h i

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Sales and Operations Planning (S&OP) is core to supply chainperformance

Collaborative S&OP is the way forward and the technologies are inplace to make it a reality

Analysis & understanding of customers, suppliers and inventories areessential to develop a meaningful and workable Sales & OperationsPlan

Each step on the route to c-S&OP delivers measurable benefits In order to arrive at meaningful plans powerful constraint-based

planning tools are required

Effective and appropriate supply chain planning software is essential

for effective c-S&OP

Sales & Operations Planning (S&OP)

St t i Pl i

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Strategic PlanningStrategic Planning

Business PlanningBusiness Planning

VOLUME

Sales & Operations Planning

VOLUME

Sales & Operations Planning

Sales PlanSales Plan Operations PlanOperations Plan

MIX

Master Scheduling

MIX

Master Scheduling

Detailed Planning &Execution System: MRP,DRP, Plant Scheduling,

Supplier Scheduling

Detailed Planning &Execution System: MRP,DRP, Plant Scheduling,

Supplier Scheduling

EXECUTION

CAP

ACITYPLANN

ING

CAPACITYPLANNING

Forecast

&DemandManagement

Forecast&

DemandMan

agement

DEMAND SUPPLIER

S&OP is placed between strategic and detailed planning andexecution

Focus

Capital investments

Long term alliance/commitmentsV ti l i t ti b fit

Horizon

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90

S&OP

Supplylogistics

Productionlogistics

Customerlogistics

Fulfillment

Longterm

planning(strategic)

Operational Planning(Detailed Scheduling)

Sales &operationsplanning

Vertical integration benefits Budgeting/definition of targets for sales and

production

Strategic operational decisions regardingproduct swaps, capacity outsourcing, etc.

Mid-term demand plan Mid-term rough cut capacity, inventory,

and material plan Mid-term feed stock supply plan and

replenishment plan

Short-term capacity and material planning Adjustment of mid-term plan as per order

portfolio and short-term disturbances

Efficient implementation and managementof day-to-day business

Order fulfillment

Execution

1-5years

planning

1-4weeks

planning

1-12month

planning

Source: McKinsey

S&OP process creates a cross-functional platform for internalcollaboration on an ongoing basis

From . . .Traditional siloed and fragmented functional planning

St t gi

. . . toCross-functional integrated planning

Strategic

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91

Source: McKinsey

Demandmanage-

ment

Productionmanage-

ment

Supplymanage-

ment

Distributionmanage-

ment

Detailedscheduling

Orderfulfillment

Shortageallocation

Low responsiveness to demand changes

High inventory levels to account for internal inefficiencies

Volume-based mentality

Sales vs. production dispute

Firefighting and short-term view Lack of clear accountability and ownership

Data issues and lack of results

Strategicbusiness planning

High cost, low service

Production

manage-ment

Demand

management

Supply

manage-ment

Distribution

manage-ment

Detailedscheduling

Orderfulfillment

Shortageallocation

Better responsiveness to demand changes

Lower inventory levels due to reduced internalinefficiencies

Value-driven decision making

Collaborative process across functions Proactive planning for business disturbances

Clear accountability and ownership of decisions

Full transparency and common set of data

Strategicbusiness planning

Low cost high service, enabler for growth

A typical monthly S&OP calendar follows 4 generic phases in arepetitive sequence - however details may vary between industries

Data consolidation,

regular updateand maintenance

Premeeting sales and

operations agreements Monthly S&OP meetings

Adjustments,

modifications anddecision implementation

Week 1 Week 2 Week 3 Week 4

EXAMPLE

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92

Review KPIs

Evaluate escalateddemand / supply gaps

and potential resolutionscenarios based onfinancial and strategicimpact and makeresource allocationdecisions

Demand Planning Creation of unconstrained

forecast Updating current

order portfolioInventory Planning Regional inventory level

monitoring and updatesProduction Planning Evaluation of available

capacity and potential

constraintsOverall Master data maintenance

and changes

Demand / Supply balancing

Rough cut capacity planning byproduction and generation of

capacity constrainedconsensus demand,procurement andreplenishment plans

Identification of unresolveddemand and supply gaps and

escalation to S&OP committee

Development of scenarios /options as an input to S&OPdecision meeting

Implementation of decisionstaken at cross functionalmeetings

Communication of decisionsand follow-up

Function specific Problem and business specific

Source: McKinsey

regular update,and maintenance operations agreements Monthly S&OP meetings modifications anddecision implementation

CLIENT EXAMPLEKey Performance Indicators are an essential tool to increasethe level of accountability and support the S&OP process

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93

KPI performancedialoguesconducted at 3

levels Executive level S&OP meetings Site / Pre-

meetings

Service

Concentrateproduction

Formula-tion

Filling andpackaging

Distribu-tion

Sales

Cost

Efficiency/performance

Customer service level

Order-line Fill Rate Stock out

Inventory level

Scrap/Accruals

Plan adherence Vs. annual supply budget (as of 2008) Vs. 3 month frozen period

Forecast accuracy Vs. changes Vs. actual sales

Lead time, e.g. Product release lead time at internal sites Product lead time at external mfg site

Typical frequency of S&OP by industryS&OP frequency by industry in percent Monthly

Daily

Weekly

Quarterly or less

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94

Source: Aberdeen Group, July 2006

AutomotiveChemicals

Consumer durable goods

Consumer electronics

CPG

Mining/oil/gas

Industrial equipment

Food/beverage

Paper/lumber/timber

Pharma

S&OP is traditionally done outside MRP II

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SCO System make Collaborative S&OP happening inreality

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S&OP Process Map

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Integrated S&OP Process

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Demand Planning

Acronym

Demand managementD d l i

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g Demand planning

Demand plan

Real demand

Enriched demand plan

Sales forecast

Sales target

Sales plan

Budget

Financial plan

Operational plan

Why do we need Demand Plan / Forecast?

PP--Time = Process Lead TimeTime = Process Lead Time

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Supply Chain Management / Surath Pralongsil 102Delivery Lead Time (to react to demand)Delivery Lead Time (to react to demand)

Supply of Raw& Packaging

Materials

ManufacturingPackaging &

Release

Warehouse &Distribution

Retailer

MakeMake--toto--orderorder

Assembly / PackagingAssembly / Packaging--toto--orderorder

MakeMake--toto--stockstock

PPTime = Process Lead TimeTime = Process Lead Time

Demand Plan is used to prepare stockDemand Plan is used to prepare stock

Demand

Dependent Demand vs Independent Demand

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p p Only demand plan of independent demand is required.

Total number of table X 4 legs = Total number of legs

Remark:

Performance measurement: Demand Plan Accuracy and Bias

Consistent positive or negative bias demonstrates error pattern

Forecast helps to identify gap against Budget

01808 xxxxGap

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Budget vs Act/For

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

CASES

Budget

Act. & For

Gap

How to Complete the Forecasting Horizon...

The 3-Component Model: Baseline, Impactors, Uplifts

Large, Planned Large,

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?

Months

Volume

HistoricalDemand

g ,Exceptional

Events

Past EventsUplifts

Baseline

Projected

Baseline

Planned

Events Uplifts

g ,Exceptional

Events

Forecast Techniques

QualitativeB d i t iti d t i i

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Q Based on intuition and expert opinion

In many cases, bottom up.

Quantitative Statistical forecasting

Remark:

Forecast is always wrong

More detail, higher inaccuracy

Further timeline, higher inaccuracy

Demand Pattern

1 Trends:

a) b) c)

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PAST FUTURE

2. Seasonality

PAST FUTURE

3. Random Variation

PAST FUTURE PAST FUTURE PAST FUTURE

4. Cyclical Variation

To Counter Forecasting Error

Customer Relationship Management (CRM)Supply chain visibility

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Supply chain visibility

Vendor-Managed Inventory (VMI)

Variety reduction Re-design supply network e.g. cross-docking operation

Postponement (Push-Pull)

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Distribution Requirement Planning (DRP)

Distribution Resource Planning (DRP II)

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Impact of Multi-Echelons

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DRP is aimed at improving the management of finished productinventory & controlling the transport of goods in multi-level distribution

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supply chains

DRP is a simulation system that models all expected activitiesinvolved in shipping goods through distribution networks over adefined planning time horizon

DRP is driven by a demand forecast for each product

Lead Time: 1 week

Delivery

Distribution Requirement Planning (DRP)Time-bucket matrix display

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Forecast Demand

Shipments on Order (in transit)

Projected Stock on Hand

Received Shipment Quantity

Planned Shipment Quantity

PastDue Week

200 210 220 200 180 200 210 160

500

495 615

500 500500

500 500 500

1 2 3 4 5 6 7 8Min. Safety Stock: 250

Lead Time: 1 week

Order Quantity: 500

195

500 500 500

500

500

ALERT

500

Time Horizon: 8 Weeks

Max. Stock Limit: 600

Over

limit

Delayed

receipt

Deliverycancelled

ITC M11:U2:2.5-25

285 775485185365565

Inventory Deployment

National DC

National DC

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How do we deploy the inventory along the distribution network?

What if actual demand does not follow the forecast?

Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H

Regional DCRegional DC Regional DCRegional DC

OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutletOutletOutlet OutletOutlet

EXCE

SS

Forecast > Actual Demand

SHORTA

GE

Forecast < Actual Demand

Re-Deployment

National DC

National DC

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Need to concern about the distribution cost of re-deployment

Cross-docking is one way to avoid this situation, but lead-time will bestretched

Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H Local W/HLocal W/H

Regional DCRegional DC Regional DCRegional DC

OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutlet OutletOutletOutletOutlet OutletOutlet

EXCESS SHORTAGE

Cross-Docking

is a distribution system in which merchandise received at the warehouse ordistribution centre is not put away, but immediately turned around forshipment to retail stores

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p

StoreA StoreB StoreZ

Plant1

Plant2

PlantN Receiving

Shipping

FullPalletsSingleProduct

StoreA StoreB StoreZ

Plant1

Plant2

PlantN

FullPalletsSingleProduct

Cross-DockingPlatform

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Material Requirement Planning (MRP)


Are calculated based on the Bill-of-Materials (BOM) Is driven by MPS to make the end items and drive to Shop-floor

t l d P h i

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control and Purchasing

Objectives:

To determine the materials required

What is required

How much is required When it is required

To establish and maintain priorities

Source: APICS

Table 100

Legs 206

Base 200 Top 025

Leg Bolts216

Frame 280

MasterProductionSchedule

Materials requirements planning - closing theloop

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u

Inventoryrecords

Operational capacityconstraints (e. g. , machine,

labour & lead- times)

Bill of

materials

Materialsmovements

Productionorders

Materialsrequirements

plan

Purchaseorders

ITC M11:U2:2.5-6

PRODUCT02

PRODUCT03

Bill of Materials (BOM)

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EXAMPLE - CALCULATION OFREQUIREMENT FOR PART 022

02 03

SUB-ASSEMBLY12

SUB-ASSEMBLY13

PART20 29 28 22 20 21 22 27 29

1 Off 1 Off 2 Off 1 Off 2 Off

4 Off 3 Off 3 Off 3 Off 2 Off 2 Off

PART PART PART PART PART PART PART PART

ITC M11:U2:2.5-11

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Supply Chain Collaboration

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Efficient Consumer Response (ECR)

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ECR Overview

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"WORKINGTOGETHER TO

FULFIL CONSUMER

WISHES BETTER,FASTER AND AT

LESS COST"

Scope The ECR Thailand project focuses on the Fast Moving Consumers Goods(FMCG) that are sold through modern retail stores (the Modern Trade

Channel), although future ECR initiatives will include the Traditional Trade

Channel.

Product Groups Study Areas

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Dry Grocery

Food

General Merchandise

Supermarkets

Convenience Stores

Department Stores

Specialist Stores

Retail Formats

Consumer

OptimizeIntroductions

OptimizeAssortments

OptimizePromotions

Demand Management

Electronic DataInterchange(EDI)

Electronic FundsTransfer (EFT)

Item Coding andDatabase Mgmt

Activity BasedCosting (ABC)

Enabling Technologies

SynchronizedSupply

SynchronizedProduction

ContinuousReplenishment

AutomatedStore Ordering

Supply Management

ReliableOperations

CrossDocking

Soft Drinks

Integrators

Value Creation

Collaborative PlanningForecasting and Replenishment

E-BusinessE-Procurement, E-Supply Chain

Demand Management

Establish Strategy

and Capabilities

Optimise Product

Introductions

Optimise

AssortmentsOptimise

Promotions

ECR Improvement Concepts

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Supply Management

Integrated

Suppliers

Synchronised

Production

Continuous

Replenishment

Automated Store

Ordering

ReliableOperations

Cross Docking

Enabling Technologies

Activity BasedCosting

Electronic DataInterchange (EDI)

Electronic FundsTransfer (EFT)

Item Bar Codingand DatabaseMaintenance

Electronic Commerce

Human FactorsStrategy and

StructureCulture Skills Relationships

Through the adoption of ECR in Thailand for all channels, it isThrough the adoption of ECR in Thailand for all channels, it is expected to reduceexpected to reduce

consumer price by 7.7%, which is equivalent toconsumer price by 7.7%, which is equivalent to Baht 38 billion saving across theBaht 38 billion saving across the IndustryIndustry

CR il

M fS li

Benefits

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Consumer

Traditional

Channel**

Store

Retailer

Plant D.C.

Modern

Channel*

Consumer

pricereduction

=

7.7%

Total Supply Chain

Inventory

costs = 5.4%

Operating

costs = 2.3%

*Modern Trade: Supermarket chains, hypermarket chains, convenience stores,

**Traditional: Mom & Pop Store, independent Supermarket

ManufacturerSupplier

Interesting Web Sites

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Interesting Web Sites

www.gci-net.org

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www.globalscorecard.net

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GCI Benchmarking Tool: Maturity Assessment

DefinitionCriteria 0 1 2 3 4

Nothing done

No plans

Nothing done but

plans developed

Early

implementation

Further

implementation

Fully

implementedMaturity Measure Criteria

*

Who

The extent to which

stocks at all stages in

Changes in stock

replenishment

Agreement established

between trading

Prototype CRP being

tested using CRP

CRP being rolled out to

cover at least half of

CRP fully installed for

all targeted productsReplenishment

Method and

M

W

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* Manufacturers (M) , Wholesalers (W) , Retailers (R)

stocks at all stages in

the supply chain are

replenished in

response to an estimate

of consumer demand(demand signal)

Replenishment may be

via continuous

replenishment process

(CRP) orders

calculated by the

retailer, or via vendor

managed inventory(VMI), where

appropriate

replenishment

quantities and timings

are driven primarily by

price / quantity deals,

rather than consumerdemand

between trading

partners to match

replenishments more

closely to consumer

demand

tested using CRP

orders or VMI (where

appropriate) to

generate the demand

signal

CRP or VMI orders not

integrated into order

management system:

proprietary electronic

commerce standards

still used

cover at least half of

long term target

volume

CRP or VMI ordersintegrated into order

management systems

via industry standard

electronic commerce:

used by manufacturer

to plan loads

Retailer gets

information ofshipments via EDI

all targeted products

and volume and fully

integrated into order

processing systems

Method and

Application

W

R

Replenishment driven

by inventory and

offtake. Need

visibility for that at alllevels.

Agreement to get

visibility.

A fully implemented

demand management

system (DMS)

integrated with ERP.

www.supply-chain.org

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www.ecrnet.org

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cscmp.org

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www.cscmpthailand.org

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www.supplychainasia.com

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www.gs1.org

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www.epcglobalinc.org

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Continuous ReplenishmentSynchronized Production/ Supply

d d

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Vendor-Managed Inventory

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Business Process

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Order To Cash (O2C) Process

Purchase To Pay (P2P) Process

Order To Cash (O2C) Process

Order entry

Credit limit

StockAvailable-To-Promise (ATP)

Customer Order Cust. No.

Address Product Code Quantity Requested

Delivery Date

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Available-To-Promise (ATP)

Soft allocation

Processed orders with thesame requested date

Route allocation

Load configuration

Picking as per load

Picking confirmation, stockupdated, AR generated, Invoicing

Collection & payment

y

Picking Slip

Product Code Quantity Loading bay

Invoice & DO XXX XXX XXX XXX

Enabling Technologyin Supply Chain Management

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Supp y C a a ag

IT Systems

What are Legacy System?

Legacy IT systems were developed prior to 1990 and have a

functional focus

Legacy systems are used for simple operations like order entry &processing, managing inventory, customer & product databases

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processing, managing inventory, customer & product databases

Each activity within the organization has its own proprietary systemand there is little integration or communication between the systems

HumanResources Engineering

Finance &Accounting

Sales &Marketing

LogisticsHQ &

BranchesOperations

FunctionServer &Database







HumanResources Engineering

Finance &Accounting

Sales &Marketing

LogisticsHQ &

BranchesOperationsHuman

ResourcesHuman

ResourcesHuman

ResourcesHuman

Resources EngineeringFinance &AccountingFinance &AccountingFinance &AccountingFinance &Accounting

Sales &MarketingSales &

MarketingSales &

MarketingSales &

MarketingLogistics

HQ &Branches

HQ &Branches

HQ &Branches

HQ &Branches

Operations








What are ERP System?

ERP stands for Enterprise Resource Planning & ERP systems are used to

integrate business systems & processes. ERP systems allow all areas &functions of an organization to combine & analyze data.

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Central Databaseand Servers

Engineering Operations

Sales &Marketing

HumanResources

Headquartersand Branches

Finance &Accounting Logistics

SupplierRelationshipManagement

CustomerRelationshipManagement

Central Databaseand Servers

EngineeringEngineering OperationsOperations

Sales &MarketingSales &

MarketingHuman

ResourcesHuman

Resources

Headquartersand BranchesHeadquartersand Branches

Finance &AccountingFinance &Accounting LogisticsLogistics

SupplierRelationshipManagement

CustomerRelationshipManagement

What ERP Covers?

A sales order is made and recorded (Sales)

Parts are reserved or purchased & delivered (Purchasing & Supply)

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Labour is scheduled & charged (Human Resources)

The cost of parts is taken from general ledger inventory accounts, &

the revenue is booked & billed when the order is completed (Finance)

The required goods are manufactured or assembled(Production)

The completed order is shipped to the customer (Logistics)

Module in SAP R/3

FI - Financial Accounting

FI-GL General Ledger Accounting

FI-LC Consolidation

FI-AP Accounts Payable

CO Controlling

CO-OM Overhead Costing (CostCenters, Activity Based Costing,Internal Order Costing)

CO-PA Profitability Analysis

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FI-AR Accounts Receivable FI-BL Bank Accounting

FI-AA Asset Accounting

FI-SL Special Purpose Ledger

FI-FM Funds Management

CO PA Profitability Analysis

CO-PC Product Cost ControllingAM- Asset Management

PS Project System

FS Insurance

FS-CD Collections anddisbursements

FS-CM Claims management

FS-CS Commissions management

FS-PM Policy management FS-RI Reinsurance management

FS-PE Payment Engine (BankingPayments Solution still indevelopment)

Module in SAP R/3

IS Industry Solution

IS-A Automotive IS-ADEC Aerospace and Defense

IS-AFS Apparel and Footwear

IS B B ki

IS-PS Public Sector

IS-R Retail

IS-REA Recycling Admin

IS-SP Service Provider

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IS-B Banking

IS-BEV Beverage IS-CWM Catch Weight

Management (Variable WeightItems such as Meats and Cheeses)

IS-DFS Defense and Security IS-H Hospital

IS-HER Higher Education

IS-HSS Hospitality Management

IS-HT High tech IS-M Media

IS-MIN Mining

IS-MP Milling (or IS-MILL)

IS-OIL Oil

IS-T Telecommunications IS-U Utilities

HR Human resources

HR-PA

Personnel Administration HR-PD

Personnel Development

HR-RC

Recruitment

Module in SAP R/3

PM - Plant Maintenance

MM - Materials Management

QM - Quality Management

PP - Production Planning

SCM - Supply Chain Management

SEM - Strategic EnterpriseManagement

WM - Warehouse Management

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SD - Sales and Distribution Helps to optimize all the tasks and

activities carried out in sales,delivery and billing. Key elementsare: pre-sales support, inquiryprocessing, quotation processing,sales order processing, deliveryprocessing, billing and salesinformation system.

HUM - Handling Unit Management

AF&R - Advanced Forecasting &Replenishment

Advance Planning & Scheduling (APS) System:Architecture of Advanced Planner & Optimizer (APO)

Partner

Internet/

APO

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Customer

Partner/EDI/XML/RosettaNet

Source: SAP

SCM Application

Supply Chain Collaboration (Linkage among trading partners in

supply chain) Collaborative Planning

Network Planning

Supply Chain Planning

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Supply Chain Planning


Advanced Planning and Scheduling

Demand and Supply Planning

Supply Chain Execution

Procurement

Warehouse Management System

Transport Management System

Sales Order Processing System

Manufacturing System

Source: Tokuii Corporation

Advanced Supply Chain Management

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Surath Pralongsil

December 2009

Value Chain Management

Supply Chain ManagementLogistics Management

Wrap-Up: Advanced SCM

Value chain

Value creation

Supply chain Logistics

Enterprise integration

Strategic, Tactical, Operational SCM:Balance demand and supply

Advantage of robust SCM Match demand and supply

Reduced cost Improved quality and service

Higher value

Demand variability: beer game bullwhipeffect

Integrated supply chain planning

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SCM objectives Delivery of value

Responsiveness

Reliability

Competitive advantage in SCM Globalization

Integration

Time-based competition

Supply chain characteristics Ship to stock

Make to stock

Assemble to order

Make to order

Buy to order

Engineer to order

Lean v.s. Agile supply chain

Push and pull

Postponement (mass customization):

decoupling point

Integrated supply chain planning

Sales & Operations Planning (Demand &Supply Planning)

Demand Planning


Distribution Resource Planning (DRP II)

Material Requirement Planning (MRP)

Manufacturing Resource Planning (MRP II)

Master Production Schedule (MPS)

Detailed Production Schedule (DPS)

Efficient Consumer Response (ECR)

Synchronized Production/Supply

Vendor-Managed Inventory

O2C, P2P ERP: Enterprise Resource Planning

APS: Advanced Planning & Scheduling

EPC: Electronic Product Code

RFID: Radio Frequency Identification

091218 advanced scm

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