supply chain doctors scm fundamentals introduction planning sourcing making warehousing transporting...
TRANSCRIPT
Supply Chain Doctors
SCM Fundamentals• Introduction
• Planning
• Sourcing
• Making
• Warehousing
• Transporting
• Sharpening the Saw
Supply Chain Doctors
Sourcing• Supply Base Consolidation
• Source Selection
• Make-Buy Decision
• Supplier Performance Evaluation
• Supplier Certification
• Supplier Relations – Understanding Customer Loyalty
Supply Chain Doctors
What is Supply Base Consolidation?
Consolidation: A reduction in the number of suppliers.
Supply Chain Doctors
Why Consolidate?
• Cost of Procurement• Price Decreases through
Consolidated Purchases
• Lead time reduced• Quality improved• Focus
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The Ideal Supply Base
• Powerful improvement engine
• Fast• Flexible• Efficient• Good communicators
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SurveillanceLow spend - high risk
Long-term RelationshipHigh spend - high risk
Contractual High spend - low risk
High
Low High
Ris
k
Annual Spend
Supplier Characterization Matrix
TransactionalLow spend - low risk
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Surveillance Long-term Relationship
Contractual
High
Low High
Ris
k
Annual Spend
Supplier Characterization Matrix
Transactional
Consolidate
Supply Chain Doctors
Surveillance Long-term Relationship
Contractual
High
Low High
Ris
k
Annual Spend
Supplier Characterization Matrix
Transactional
Consolidate
Consolidate
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Surveillance Long-term Relationship
Contractual
High
Low High
Ris
k
Annual Spend
Supplier Characterization Matrix
Transactional
Consolidate
ConsolidateRisk reduce &Consolidate
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Barriers to Consolidation
• Fear of loss of competition
• Doubtful savings• Dilbert• Lack of commitment
to the selection process
• Pets
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How Can I Be Successful? Keys to a Successful Plan
• Plan with your customers in mind– Transaction costs– Leverage– Capability development– Project support
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How Can I Be Successful? Keys to a Successful Plan
Understand your internal customers’ supplier evaluation / selection process
& market accordingly.
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Structured Supplier Evaluation
Evaluation Criteria
MaterialsMethods
TechnologyPeopleMoney
Environment
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Supply Base Consolidation: Summary
• Consolidation can yield savings in:– transaction costs– leverage– inventory reduction– quality– loss of focus
• It is a key enabling strategy to other supply chain improvements.
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Sourcing• Supply Base Consolidation
• Source Selection
• Make-Buy Decision
• Supplier Performance Evaluation
• Supplier Certification
• Supplier Relations – Understanding Customer Loyalty
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• Quality Assurance
• Cost (Labor, Overhead, Inventory, Transportation)
• Delivery Performance
• Lead Times
Factors in Choosing a Supplier
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• Reputation and financial stability
• Location
• Flexibility
• Total Solution
Factors in Choosing a Supplier (cont’d)
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Sourcing• Supply Base Consolidation
• Source Selection
• Make-Buy Decision
• Supplier Performance Evaluation
• Supplier Certification
• Supplier Relations – Understanding Customer Loyalty
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Outsourcing• Purchased items account for 50 to 70% of
the cost of goods sold.
• Outsourcing allows firms to focus on their core competencies.
Organizations outsource when they decide to purchase something or some service they
previously supplied themselves.
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Make or Buy• Current trend favors outsourcing all
activities that do not directly represent or support core competencies.
• What concerns would a company have about outsourcing products or services?
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Global Sourcing
• Original strategy was to reduce production costs.
• The primary focus was on labor cost reduction.
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New Focus of Global Purchase• Local content / market access• Product availability• Technology / information management• Delivery• Lead times• Labor availability and quality.
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Sourcing• Supply Base Consolidation
• Source Selection
• Make-Buy Decision
• Supplier Performance Evaluation
• Supplier Certification
• Supplier Relations – Understanding Customer Loyalty
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Supply Chain Management Performance Evaluation
• Quality
• Cost
• Delivery (Lead Time)
• Process Measures (Balanced Scorecard)– Reliability– Flexibility & Responsiveness– Expenses– Asset Utilization
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Metrics
• Reliability– On-time delivery– Order fulfillment lead time– Fill rate– Percent order fulfillment
• Flexibility/Responsiveness– Response time– Upside production flexibility
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Metrics
• Expenses– Supply chain management costs– Warranty cost as percent of revenue– Value added per employee
• Asset utilization– Total inventory days of supply– Cash-to-cash cycle time– Net asset turns
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Typical Benchmark Key Performance Indicators (KPIs)
• Total supply chain management costs: – Order processing– Acquiring materials– Managing inventory– 4 - 6 percent of sales
• Upside production flexibility– Number of days required to achieve a 20%
increase in production– <= 2 weeks
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Typical Benchmark Key Performance Indicators (KPIs)
• On time delivery– Percentage of orders fulfilled on or before the
customer’s requested date– 70 – 100 percent
• Cash-to-cash cycle time– Number of days between paying for raw
materials and being paid for product– 30 - 100 days
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Sourcing• Supply Base Consolidation
• Source Selection
• Make-Buy Decision
• Supplier Performance Evaluation
• Supplier Certification
• Supplier Relations – Understanding Customer Loyalty
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Supplier Certification• A guarantee of quality
– Good Housekeeping– UL– SAE– ISO– TNCPE– Inspection Free
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Sourcing• Supply Base Consolidation
• Source Selection
• Make-Buy Decision
• Supplier Performance Evaluation
• Supplier Certification
• Supplier Relations – Understanding Customer Loyalty
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Partnership Relationship• Continuing relationship involving
– a commitment over an extended time period,
– an exchange of information, and
– an acknowledgement of the risks & rewards of the relationship.
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Why Long-Term Relationships?
A long-term relationship between purchaser and supplier is necessary for best economy. How can a supplier be innovative and develop economy in his production processes when he can only look forward to short-term business with a purchaser?
W. Edwards Deming, Out of the Crisis
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Why Long-Term Relationships?
• Increasing trend toward global supply
• Higher baseline performance
• Increasing focus on time to market
• Dependence upon suppliers for technology
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Family Strengths Research
• Strong families
• 20+ years of research
• Over 6,000 surveyed
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Six Characteristics of Successful Supplier
Relationships• Trust
• Good communication patterns
• Ability to deal with crises (change)
• Spiritual wellness (principles-centered)
• Spending time together
• Appreciation / feedback
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Trust: Concerns
• Is this the right supplier?
• What about commitment?
• Is management committed?
• What are the implementation
issues related to maintaining
commitment?
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Special AttentionLow spend - high risk
Long-Term RelationshipHigh spend - high risk
ContractualHigh spend - low risk(Easily substituted)
High
Low High
Ris
k
Annual Spend
Supplier Relationship Matrix
TransactionalLow spend - low risk
Long-term contractsBuying Consortia
Partnerships
Distribution
Frequent visitsFMEA
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Communication: Concerns
• Replace face-to-face communication with technology?
• Good communication = $$$
• Communication between technical groups
• Role of agent
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Dealing with Change
• New product dev. process
• Common improvement process
• Performance measures
• Conflict resolution by team leaders
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Shared Principles
• Principles Centered Leadership
• Two-Way Performance Measures
• Follow-through on Commitments
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Spending Time Together
• Quarterly performance reviews
• Team building dinners
• Commitment to keep the schedule
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Appreciation
• Celebration of critical improvement
• Recognition distribution
• Other forms of recognition
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Buil ding S t r o ng C ust o mer -Suppl ierRel at io nships
Time To get herAppr ec iat io n/
Feedbac k
Capacityfor
Change
Capacityfor
Change
Strongcommitment
Strongcommitment
Commonpr incipl esCommon
pr incipl es
Excel l entCommunication
Excel l entCommunication