Using SCOR to Integrate Your Supplier's Supplier Into Your

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<ul><li> 1. Using SCOR to Integrate Your Suppliers Supplier Into YourSupply Chain Module 4: Fall Conference Dallas, TX November 24, 1997</li></ul><p> 2. Copyright 1997 The Supply-Chain Council 15662Module 4 The Supply Chain Operations Reference-model (SCOR) has been developed and endorsed by the Supply-Chain Council (SCC), an independent not-for-profit corporation, as the cross-industry standard for supply-chain management SCOR is freely available to all who wish to use the standard reference model The SCC was organized in 1996 by Pittiglio Rabin Todd &amp; McGrath (PRTM) and Advanced Manufacturing Research (AMR), and initially included 69 voluntary member companies Council membership is now open to all companies and organizations interested in applying and advancing state-of-the-art supply-chain management systems and practices Member companies pay a modest annual fee to support Council activities All who use the SCOR model are asked to acknowledge the SCC in all documents describing or depicting the SCOR model and its use All who use SCOR are encouraged to join the SCC, both to further model development and to obtain the full benefits of membership Further information regarding the Council and SCOR can be found at the Councils Web site, www.supply-chain.com 3. Agenda </p> <ul><li>Imperative:Why are Companies Integrating their Supply Chains? </li></ul><ul><li>Benefits of Integrating Supply Chains </li></ul><ul><li>What does Integration Mean? </li></ul><ul><li>How to Initiate the Integration Effort </li></ul><ul><li>Case Study </li></ul><p> 4. Session objectives and take-away </p> <ul><li>Session objective </li></ul><ul><li><ul><li>Discuss the imperative of integrating your supplier into your supply chain </li></ul></li></ul><ul><li><ul><li>Discuss the benefits of integration </li></ul></li></ul><ul><li><ul><li>Demonstrate how to use SCOR to engage a supplier </li></ul></li></ul><ul><li><ul><li>Review an example of dual-company supply-chain integration approach </li></ul></li></ul><ul><li>Session take-away </li></ul><ul><li><ul><li>Enable session participants to successfully engage their suppliers in supply-chain integration </li></ul></li></ul><p> 5. Imperative:Why are Companies Integrating their Supply Chains? Copyright 1997 The Supply-Chain Council 15662Module 4 6. Historically, intercompany relationships consisted of one-way, sequential flow of material and information </p> <ul><li>Activities were not coordinated </li></ul><ul><li>Communication flow was interrupted </li></ul><ul><li> Full-stream decision-making was not possible </li></ul><p> Walls of separation prevented supply-chain optimization Customer Activities Manufacturer Activities Supplier Activities Deliver Make Source Deliver Make Source Deliver Make Source 7. Competition is driving intercompany integration </p> <ul><li><ul><li> Establish flexibility to weather unpredictability </li></ul></li></ul><p>Reliability </p> <ul><li><ul><li> Retain our customers and secure new ones </li></ul></li></ul><p>Growth </p> <ul><li><ul><li> Reduce our cost and increase our margin </li></ul></li></ul><p>Margin </p> <ul><li><ul><li> Develop products that meet customer needs </li></ul></li></ul><p>Product Differentiation 8. coupled with new enablements which make it easier </p> <ul><li>Electronic CommerceEDI, provides seamless links of data </li></ul><ul><li>Joint Service Agreementsprovides a relationship of agreement </li></ul><ul><li>Supplier value-added services promote collaboration </li></ul><ul><li><ul><li>Vendor Managed Inventory </li></ul></li></ul><ul><li><ul><li>Consignment </li></ul></li></ul><ul><li><ul><li>Consumption-based replenishment </li></ul></li></ul><ul><li><ul><li>Schedule sharing </li></ul></li></ul><ul><li><ul><li>Pull mechanisms </li></ul></li></ul><ul><li>ERP Systemspotential for better information </li></ul><p> 9. Leaders are increasing theirmarketsharethrough supplier integration </p> <ul><li>Partnering with suppliers has increased flexibility, and on-time delivery, yielding satisfied customers </li></ul><ul><li>Satisfied customers are responding by awarding more business to predictable manufacturers </li></ul><ul><li>Elimination of redundant supplier/manufacturer activities has yielded increased customers/market share </li></ul><p>Supplier Activities Manufacturing Activities =Increased Market Share = Customer Customer Customer Manufacturing Activities Supplier Activities Customer Activities Manufacturing Activities Supplier Activities SatisfiedCustomers Reliability Growth Margin ProductDifferentiation 10. Leaders are increasing theirmarginsthrough supplier integration </p> <ul><li>Best-in-class companies work with theirsuppliers to co-develop products and jointlydrive R&amp;D costs down </li></ul><ul><li>Alliances with fewer suppliers and customerslower supply-chain management cost </li></ul><ul><li><ul><li>Inventory carrying cost </li></ul></li></ul><ul><li><ul><li>Material acquisition cost </li></ul></li></ul><ul><li>Best-in-class companies lower operational cost by focusing in core competencies </li></ul><p>Vendor Managed Inventory Pull Mechanisms Consignment Inventory Supplier Customer Supplier Manages Customers Source Joint Ownership of Inventory Rapid Replenishment Rapid Replenishment Customer FG RAWWIP Supplier FG RAWWIP Your Company FG RAWWIP Source Plan Make Make Plan Deliver Reliability Growth Margin ProductDifferentiation 11. Leaders are stabilizing operationsthrough supplier integration</p> <ul><li>Interdependent activities are coordinated </li></ul><ul><li><ul><li>Use of joint service agreements based onagreed goals </li></ul></li></ul><ul><li><ul><li>Sequential dependencies identified and parallel activities implemented where appropriate </li></ul></li></ul><ul><li>Communication flows accurately and freely </li></ul><ul><li><ul><li>Efficient communication of key inputsand outputs</li></ul></li></ul><ul><li><ul><li>Across functional and company boundaries </li></ul></li></ul><ul><li>Decision-making is effective </li></ul><ul><li><ul><li>Informed with the required information </li></ul></li></ul><ul><li><ul><li>Timely and predictable </li></ul></li></ul><ul><li><ul><li>Empowerment to make decisions at theappropriate level </li></ul></li></ul><p>Material Flow Supplier Mfg. Customer Information Flow Customer Activities Supplier Activities Mfg Activities Material Flow Information Flow Reliability Growth Margin ProductDifferentiation 12. Leaders are realizing product differentiation through supplier integration</p> <ul><li>Manufacturers are leveraging their suppliers to develop differentiated products and services </li></ul><ul><li><ul><li>Customized raw materials </li></ul></li></ul><ul><li><ul><li>Technical assistance </li></ul></li></ul><ul><li><ul><li>Joint development programs </li></ul></li></ul><ul><li>Early involvement by suppliers has proven instrumental in product and service differentiation </li></ul><ul><li>Best-in-class companies have reduced R&amp;D cycle times by forging partnerships with suppliers </li></ul><p>Survival Is Increasingly Dependent on a Willingness to Integrate With Suppliers Reliability Growth Margin ProductDifferentiation 13. Benefits ofIntegrating Supply Chains Copyright 1997 The Supply-Chain Council 15662Module 4 14. Quantifiable time and quality benefits can be dollarized and carried to the bottom line Delivery Performance Inventory Reduction Fulfillment Cycle Time Forecast Accuracy Overall Productivity Lower Supply-Chain Costs Fill Rates Improved Capacity Realization 16% 28% Improvement 25% 60% Improvement 30% 50% Improvement 25% 80% Improvement 10% 16% Improvement 25% 50% Improvement 20% 30% Improvement 10% 20% Improvement Typical Quantified Benefits from Integrating the Supply Chain Source: 1997 PRTM ISC Benchmark Study 15. Supplier involvement is linked directly to time, quality, and cost improvements </p> <ul><li>Time is now a competitive weapon </li></ul><ul><li><ul><li>Reduced development cycle-times </li></ul></li></ul><ul><li><ul><li>Higher responsiveness due to reduced source/makecycle times </li></ul></li></ul><ul><li>Quality is assured vs. controlled </li></ul><ul><li><ul><li>Better product designs </li></ul></li></ul><ul><li><ul><li>Better fit for use </li></ul></li></ul><ul><li><ul><li>Higher product and process yields </li></ul></li></ul><ul><li>Cost is jointly managed down </li></ul><ul><li><ul><li>Development cost significantly reduced </li></ul></li></ul><ul><li><ul><li>Cost of quality is less (material acquisition cost) </li></ul></li></ul><ul><li><ul><li>Inventory carrying cost drastically reduced </li></ul></li></ul><p>S S 16. Integrating the supply chain creates awin-win environment </p> <ul><li>Improved working environment </li></ul><ul><li>Mutual awareness of business needs and improvements </li></ul><ul><li>Improved speed and consistency indecision-making </li></ul><ul><li>Common supply-chain language that facilitates communications </li></ul><ul><li>Creation of a true virtual chain of chains </li></ul><ul><li>Improved customer satisfaction due to improved responsiveness </li></ul><p> 17. What does Integration Mean? Copyright 1997 The Supply-Chain Council 15662Module 4 18. Planning links suppliers and customers supply-chain management processes </p> <ul><li>Each intersection of two execution processes(Source-Make-Deliver) is a link in the supply chain </li></ul><ul><li>Planning processes manage these customer-supplier relationships </li></ul><p>Customer and Supplier Supply Chain Customer and Supplier Customer and Supplier Plan Plan Plan Plan Source Make Deliver Manages relationship with supplier Manages source/make relationship Manages make/deliver relationship Manages relationship with customer 19. Supply-chain integration is based on sharing </p> <ul><li>Shared objectives </li></ul><ul><li><ul><li>A clear understanding and mutual respect for each others objective </li></ul></li></ul><ul><li>Shared expertise </li></ul><ul><li><ul><li>Leveraging each others skill sets, processes and core competencies </li></ul></li></ul><ul><li>Shared knowledge </li></ul><ul><li><ul><li>Leveraging models, frameworks, benchmarking and best practices </li></ul></li></ul><ul><li>Shared information </li></ul><ul><li><ul><li>Synchronization of activities (schedules, demand, inventory, marketing data, sales data, design and technology plans) </li></ul></li></ul><ul><li>Shared experiences </li></ul><ul><li><ul><li>Communicating experiences which may save time and cost </li></ul></li></ul><ul><li>Shared responsibility </li></ul><ul><li><ul><li>Inventory Cycle times </li></ul></li></ul><ul><li><ul><li>Quality Cost </li></ul></li></ul><p> 20. Supplier integration requires joint planning, schedule sharing, and rapid replenishment Plan Source Make Deliver Plan Source Make Deliver Supplier Customer Joint Planning Rapid-Replenishment Manufacturing Schedule Sharing Issue Resolution 21. Integration can mean new process, new infrastructure or new systems and tools Practices Results The integration technique may be different for each effort 22. Integration can mean new process, new infrastructure or new systems and tools The integration technique may be different for each effort Continued Practices Results 23. Integration can mean new process, new infrastructure or new systems and tools Practices Results The integration technique may be different for each effort Continued 24. How to Initiate the Integration Effort Copyright 1997 The Supply-Chain Council 15662Module 4 25. Integration changes focus from internal to external process management </p> <ul><li>Intra-company (Inward Focus) </li></ul><ul><li>Each business optimizes inside its own supply chain </li></ul><ul><li>Problems tend to be limited to internal solutions </li></ul><ul><li>Intra-company relationships are built </li></ul><ul><li>Inter-company (Outward Focus) </li></ul><ul><li>Links the output activities of one company to the input activities of another </li></ul><ul><li>Processes are integrated by macro level planning </li></ul><ul><li>Allows for maximum reduction in cost and interval </li></ul><p>Migration from intra- to intercompany assumes you have optimized internally first Supplier Customer Customers Customer Suppliers Supplier (internal or external) (internal or external) Your Company Outward Focus Inward Focus Outward Focus 26. There are three stages to integrate your supplier into your supply chain Stage 1 Overall Supply-Chain Process Stage 2 Supply-Chain Configurations Stage 3 Intra-/Intercompany ProcessImprovement Educate the suppliersassumes internal optimization has occurred Gain an understandingof how the two configurations interlockImplement with help of aJoint Service Agreement (JSA) </p> <ul><li>Identify target supplier accounts </li></ul><ul><li>Provide SCOR education to supplier </li></ul><ul><li>Share your supply-chain configuration </li></ul><ul><li>Explain benefits of interlocking supply chains </li></ul><ul><li>Setup a session to help your supplier configure their supply chain </li></ul><ul><li>Bring them to a similar level of understanding of supply-chain configurations and how to use it </li></ul><ul><li>Connect your configurations with theirs </li></ul><ul><li>Discuss redundancies </li></ul><ul><li>Discuss mutual benefits </li></ul><ul><li>Develop plan to address redundancies and optimize benefits </li></ul><ul><li>Develop a JSA to capture new responsibilities of both parties</li></ul><ul><li>Implement the JSA </li></ul><p>JSA 27. Stage 1:Educate the supplier on the overall Supply-Chain process </p> <ul><li>Identify target supplier accounts </li></ul><ul><li>Provide SCOR education to supplier </li></ul><ul><li>Share your supply-chain configuration </li></ul><ul><li>Explain benefits of interlocking supply chains </li></ul><p> 28. Stage 2:Understand each others Supply-Chain configurations </p> <ul><li>Setup a session to help your supplier configure theirsupply chain </li></ul><ul><li>Bring them to a similar level of understanding of supply-chain configurations and how to use it </li></ul><ul><li>Connect your configurations with theirs </li></ul><p>Supplier Customer 29. Stage 3:Implement intra-/intercompany process improvements with the help of a JSA </p> <ul><li>Discuss redundancies </li></ul><ul><li>Discuss mutual benefits </li></ul><ul><li>Develop plan to address redundancies and optimize benefits </li></ul><ul><li>Develop a JSA to capture new responsibilities of both parties</li></ul><ul><li>Implement the JSA </li></ul><p>JSA 30. </p> <ul><li>Review with your supplier their critical suppliers</li></ul><ul><li><ul><li>Discuss issues, concerns, possibilities </li></ul></li></ul><ul><li>Encourage your supplier to educate their supplier </li></ul><ul><li>Link the entire supply-chain and beginadditional discussions to improve entiresupply chain </li></ul><p>Integrating your suppliers supplier should follow a similar but collaborative approach Educate their Supplieron SCOR Share Configurations Drive Intercompany Process Improvements Supplier Suppliers Supplier Your Company Supplier Suppliers Supplier Your Company JSA 31. Case Study Copyright 1997 The Supply-Chain Council 14849Module 4 32. To illustrate, we will walk through an integration effort between two companies </p> <ul><li>ABC is a primary customer of XYZ </li></ul><ul><li><ul><li>Two manufacturing plants </li></ul></li></ul><ul><li>XYZ is a supplier of injection molded plastics </li></ul><ul><li><ul><li>Produces plastics products in two manufacturing facilities </li></ul></li></ul><ul><li><ul><li><ul><li>Savannah plant produces products to stock </li></ul></li></ul></li></ul><ul><li><ul><li><ul><li>Houston plant produces a major intermediate to stock </li></ul></li></ul></li></ul><ul><li><ul><li>Both manufacturing facilities purchase and receive their materials independently </li></ul></li></ul><ul><li><ul><li>After final production, all products are shipped from the Savannah plant </li></ul></li></ul><p> 33. Stage 1:ABC educates the supplier on SCOR, and shows them their configuration Customers Suppliers P1Plan Supply Chain Plan P2Plan Source P3Plan Make P4Plan Deliver Source Make Deliver S3Source Engineer-to-Order Products S0Source Infrastructure M0Make Infrastructure D0Deliver Infrastructure D3 Deliver Engineer-to-Order Products P0Plan Infrastructure S1Source Purchased Materials S2Source Make-to-Order Products M1Make-to-Stock - Process M2Make-to-Order - Process M3Make-to-Order - Discrete M4Make-to-Stock - Discrete M5Engineer-to-Order - Discrete D1Deliver Stocked Products D2Deliver Make-to-Order Products 34. Stage 1:ABC discusses its current SCOR processes and the threads that link them XYZ P2 P3 S1 S3 P4 Sub- Assembly D3 M1, M2 ABC Supply-Chain Configuration S3 D1 D2 M1 D2 S1 S1 S1 P2 P3 D1 P4 ABC 35. Stage 1:ABC identifies supply-chain redundancies Customers P2 P3 S3 P4 Sub- Assembly D3 M1, M2 S3 D2 D2 S1 S1 S1 P2 P3 D1 P4 ABC has two distinct internal supply chains without significant integration D1 S1 M1 XYZ 36. Stage 1:ABC identifies where it can leverage savings from vendors Independent sourcing from common supplier Customers P2 P3 S3 P4 Sub- Assembly M1, M2 D2 D2 S1 S1 S1 P2 P3 D1 P4 S1 D3 S3 D1 M1 XYZ ABC 37. Stage 1:ABC identifies supply-chain improvement opportunities Customers P2 P3 S3 P4 Sub- Assembly D3 M1, M2 S3 D2 D2 S1 S1 S1 P2 P3 D1 P4 Planning is not rolled-up across the supply chain D1 S1 M1 XYZ ABC 38. Stage 1:ABC creates and shares to-be supply-chain configuration sketch Customers S3 Sub- Assembly D3 S3 D3 D2 S1 S1 P4 D2 S1 M1 P3 P1 P4 D1 S1 P2 M1, M2 XYZ ABC 39. Stage 1:ABC helps XYZ understand its standard processes and the threads that link these processes Suppliers XYZ Coatings XYZ Final Production XYZ Intermediate Production Add-It Chemicals P2 P3 M1 D1 S1 P2 P4 P3 M2 D1 D6 S1 D3 S1 P1 P4 P1 Suppliers Supplier Customers Customer S3 D1 XYZ ABC 40. Stage 1:ABC helps XYZ understand integration opportunities such as planning Suppliers XYZ Coatings XYZ Final Production XYZ Intermediate Production Add-It Chemicals P2 P3 M1 D1 S1 P2 P4 P3 M2 D1 D6 S1 D3 S1 P1 P4 P1 Suppliers Supplier Customers C...</p>