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THE “DRAGON BOAT”SYSTEM
(ORCHESTRATING YOUR SUPPLY CHAIN)
Mr. Julius S. Kabiling
Course Instructor
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THE NEED FOR ORCHESTRATING SUPPLY
CHAIN
Some parts of the chain is somewhatdisconnected Each stage tends to optimize their own performance
This may result to inventory and, longer leadtimes, ineffectiveness, and higher cost
Chain need to act like a train
Sharing of information
Demands, forecasts, production schedules, newproduct launch, and other necessary changes in thesystem
High process of alignment of EVERYONE
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KEY PROCESSES THAT NEED TO BE LINKED
1. Planning and Scheduling
2. Design
3. Launching of New Product4. Management of Product Contents
5. Order Management
6. Sourcing and Procurement
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THE SYNCHRONIZED CHAIN
Stage 7
(Manufacturer)
Customer
Stage 4
Customer
Stage 3
Stage 2 Stage 5
Stage 1 Stage 6
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THE EXTENDED ENTERPRISE MENTALITY
Business knows no boundaries
Extending the Enterprise is to change theway the business compete
Main foundation of an Extended Enterprise isto have a common information highway
Information sharing among partners in the
system Virtual enterprise or supply chain is a series
of relationship between partners based uponthe “Value-added Exchange of Information”
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Partnership vs. adversarial relationship within
the pipeline
Supply chains is a confederation of
organizations that agree to a common goal
Bring about overall value creation and value
delivery system
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THE INTERNET…
Changed the way supply chain members canconnect with each other
Provided perfect vehicle for the establishment of
a virtual supply chain Enables easy access to global markets at less
cost
Customers have easier way to search forsuppliers at less cost
Exchanges of information among partners in thesupply chain made easy
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THE EXTRANET…
Can be used to access data from customers
on sales or product usage
Organizations use these data to management
replenishments and possible demands
Some companies use extranets to link with
its suppliers to share point-of-sale data
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THE INTRANETS…
Enables information to be shared between
stores
Facilitates faster and more efficient
communication across the business
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SOME BUSINESS SECRETS REVEALED…
Efficient information gathering, processing, andusage Successful companies share the same methodology
Improved customer response
Because of technology, Information provides thedriving force for competitive logistics strategy
Information reshaped the way logistics is donetoday
Efficient use of information systems will help thebusiness anticipate the demand more effectivelyand respond on a timely basis
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THE DILEMMA FOR LOGISTICS
Some approach runs counter to therequirements of a synchronized supply chain Customers were forced to order in large quantities
thru price penalties
Trying to optimize efficiency of routes
Under the philosophy of synchronization, smallshipments are to be made more frequently
How to improve total supply chain costeffectiveness without uneconomically escalatingthe cost?
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Early identification of shipping andreplenishment requirements
Planning
Contracting a number of suppliers delivering
small quantities of suppliesUse of third-party distribution and logistics
companies specializing in in-bound
consolidation serviceCross-dock facility (Stockless distribution
centers)
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THE “QUICK RESPONSE” LOGISTICS
To take advantage of the time-basedcompetition, develop systems that areresponsive and fast
Information Systems (+) Logistics Systems (=)providing the right product in the right place atthe right time
Emergence of IT-based systems helped a lot in
achieving this goal: Bar coding, Electronic Point of Sale (EPOS) system,
internet, etc.
Capturing data ASAP
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STRATEGIES FOR A QUICK RESPONSE LOGISTICS
Quick response (=) shorter time-frame for the varietyof a certain product
To achieve this, the system has to be FLEXIBLE
[Flexible Manufacturing System (FMS)] The lesser the “set-up time”, the quicker the response
to customer requirements
Japanese technique “Single Minute Exchange of Die
(SMED), focusing on finding ways to reduce set-uptime
Technology may be involved
Process reengineering.
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ECONOMIES OF SCALE VS. ECONOMIES OF SCOPE
Economies of Scale: Volume-based, long production run with few change-
overs
Economies of Scope: Production of small quantities of a wider range,
requiring more change-overs
Today, the marketplace is more “individualists”,
seeking higher customization Competitive advantage can be gained by linking
production flexibility to the need for variety
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STRATEGIZING FOR “MASS CUSTOMIZATION”…
Tailoring solution for specific requirements
Old-style logistics would require increased
finished goods inventory, higher cost of
production associated with made-to-orders
How to achieve?
POSTPONEMENT
Computer-aided design/manufacturing
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LOGISTICS SYSTEM DYNAMICS
Logistics systems are prone to “Bullwhip” or“Forrester Effect” Study of information feedback characteristics of
industrial activity showing how organizationalstructure, amplification (in policies) and time delays(in decisions and returns) interact to influence thesuccess of the enterprise
Provides a single framework for integrating the
functional areas of management (marketing,production, accounting, research, and developmentand capital investment)
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Involves 3 levels in the distribution channel:
1. Retailer’s Inventory 2. Distributor’s Inventory
3. Factory Inventory
Each level was interconnected through information flowsand flows of goods
Used real-time information and included severalparameters (transmission time, order processing time,factory lead time, shipment delivery time)
The model shows that small disturbances in one part canbe very quickly become magnified as the effect spreadsthrough the pipeline
The “Acceleration Effect” can cause self -generatedfluctuations in the operating characteristics of a system
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THE CCC APPROACH IN THE SUPPLY CHAIN
Coordination, Collaboration, Communication
CCC approach in the system is vital to
success
Without these, the system (or part of it) will
be out of tune
The benefits of CCC can be illustrated by the
“prisoner’s dilemma”
“Baka ibenta ako ni criminal A, unahan ko na”
The best strategy is one based on trust
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CONCEPT OF CO-MAKERSHIP
Also known as “partnership sourcing”
Developing long-term relationship with limitednumber of suppliers on the basis of mutual
confidence Developing strategies together to achieve a win-
win outcome
The new competitive paradigm:
Supply chain competes with supply chain and thesuccess of one part of the system will depend uponhow well it manages its supply chain relationship
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VENDOR MANAGED INVENTORY
AKA Co-Managed Inventory (CMI)
Instead of customers placing orders on thesuppliers, they SHARE information with the
vendor Information such as actual usage or sales,
current on-hand inventory, other marketing
activitiesNo order was received, but a forecast is
provided by the customer
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Customer will have reduced inventory level
and reduced risk of stock-outs
Supplier will have direct access to
information on REAL DEMAND, transmitted
through Electronic Data Interchange (EDI)
Improved planning and scheduling of production
and distribution
Improved capacity utilizationReduced safety stock
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REMEMBER…
Synchronization of the whole system is a key
to a more responsive supply chain
Collaboration among stages of the supply
chain help achieve better visibility both
upstream and downstream, leading to better
forecasting and planning