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  • 1. Using SCOR to Integrate Your Suppliers Supplier Into YourSupply Chain Module 4: Fall Conference Dallas, TX November 24, 1997

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 & 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, 3. Agenda

  • Imperative:Why are Companies Integrating their Supply Chains?
  • Benefits of Integrating Supply Chains
  • What does Integration Mean?
  • How to Initiate the Integration Effort
  • Case Study

4. Session objectives and take-away

  • Session objective
    • Discuss the imperative of integrating your supplier into your supply chain
    • Discuss the benefits of integration
    • Demonstrate how to use SCOR to engage a supplier
    • Review an example of dual-company supply-chain integration approach
  • Session take-away
    • Enable session participants to successfully engage their suppliers in supply-chain integration

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

  • Activities were not coordinated
  • Communication flow was interrupted
  • Full-stream decision-making was not possible

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

    • Establish flexibility to weather unpredictability


    • Retain our customers and secure new ones


    • Reduce our cost and increase our margin


    • Develop products that meet customer needs

Product Differentiation 8. coupled with new enablements which make it easier

  • Electronic CommerceEDI, provides seamless links of data
  • Joint Service Agreementsprovides a relationship of agreement
  • Supplier value-added services promote collaboration
    • Vendor Managed Inventory
    • Consignment
    • Consumption-based replenishment
    • Schedule sharing
    • Pull mechanisms
  • ERP Systemspotential for better information

9. Leaders are increasing theirmarketsharethrough supplier integration

  • Partnering with suppliers has increased flexibility, and on-time delivery, yielding satisfied customers
  • Satisfied customers are responding by awarding more business to predictable manufacturers
  • Elimination of redundant supplier/manufacturer activities has yielded increased customers/market share

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

  • Best-in-class companies work with theirsuppliers to co-develop products and jointlydrive R&D costs down
  • Alliances with fewer suppliers and customerslower supply-chain management cost
    • Inventory carrying cost
    • Material acquisition cost
  • Best-in-class companies lower operational cost by focusing in core competencies

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

  • Interdependent activities are coordinated
    • Use of joint service agreements based onagreed goals
    • Sequential dependencies identified and parallel activities implemented where appropriate
  • Communication flows accurately and freely
    • Efficient communication of key inputsand outputs
    • Across functional and company boundaries
  • Decision-making is effective
    • Informed with the required information
    • Timely and predictable
    • Empowerment to make decisions at theappropriate level

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

  • Manufacturers are leveraging their suppliers to develop differentiated products and services
    • Customized raw materials
    • Technical assistance
    • Joint development programs
  • Early involvement by suppliers has proven instrumental in product and service differentiation
  • Best-in-class companies have reduced R&D cycle times by forging partnerships with suppliers

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

  • Time is now a competitive weapon
    • Reduced development cycle-times
    • Higher responsiveness due to reduced source/makecycle times
  • Quality is assured vs. controlled
    • Better product designs
    • Better fit for use
    • Higher product and process yields
  • Cost is jointly managed down
    • Development cost significantly reduced
    • Cost of quality is less (material acquisition cost)
    • Inventory carrying cost drastically reduced

S S 16. Integrating the supply chain creates awin-win environment

  • Improved working environment
  • Mutual awareness of business needs and improvements
  • Improved speed and consistency indecision-making
  • Common supply-chain language that facilitates communications
  • Creation of a true virtual chain of chains
  • Improved customer satisfaction due to improved responsiveness

17. What does Integration Mean? Copyright 1997 The Supply-Chain Council 15662Module 4 18. Planning links suppliers and customers supply-chain management processes

  • Each intersection of two execution processes(Source-Make-Deliver) is a link in the supply chain
  • Planning processes manage these customer-supplier relationships

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

  • Shared obje