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Managing the Supply Chains of the Future Rhonda R. Lummus, CFPIM, CIRM Associate Professor of Operations & Supply Chain Management Iowa State University.

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Presentation on theme: "Managing the Supply Chains of the Future Rhonda R. Lummus, CFPIM, CIRM Associate Professor of Operations & Supply Chain Management Iowa State University."— Presentation transcript:

1 Managing the Supply Chains of the Future Rhonda R. Lummus, CFPIM, CIRM Associate Professor of Operations & Supply Chain Management Iowa State University

2 Today’s Headlines  From our files - Manufacturing expectations in 2005  From the experts - Supply chain issues  Supply chain headlines today  What are your headlines?  Looking ahead

3 From our Files Projections for Manufacturing in 2005 We are in an era of never-before-seen global competition and ever-increasing customer expectations. The explosion of technological breakthroughs has overloaded the cognitive abilities of individuals in traditional organizations. Lightening fast communication has brought global competition to our doorstep. Gregoire & Correll, “Imagineering Our Future: Manufacturing in the Year 2005,” Proceedings of The APICS 1995 International Conference

4 Looking Back in Our Files Manufacturing in the Year 2005 New customer expectations: Highly customized products Delivered in record time Made as low cost as mass-produced products, but with low inventories Factories sell gratification

5 Looking Back in Our Files Manufacturing in the Year 2005 Agile manufacturing: Making only exactly what is needed With tight schedules No excess inventory Smaller factories with smarter machine tools Producing a wide variety of products with short setup times Agile suppliers: Do all that manufacturers do Are located close to major customers Short shipping times Electronic requirements are sent directly to supplier machines.

6 Looking Back in Our Files Manufacturing in the Year 2005 Software systems: Companies are networked to their entire supply chain Applications have grown in size and complexity Are integrated with personal computer software and with customers and suppliers Information is available in real time Factory job structure: Smaller factories Running specialized jobs making one-of-a- kind items More white collar jobs emerge as manufacturing is more automated

7 From the Experts - Supply Chain Challenges 1.Collaboration is becoming the most strategic capability. Companies may focus on product design and development and may outsource the rest 2.Assets and functions that are not core to value delivery may be divested to specialists. Develop shared-profit arrangements Suppliers benefit from your success Anderson and Delattre, ‘Supply Chain Innovations: Five Big, Bold Trends,’

8 From the Experts - Supply Chain Challenges 3.The greatest margin potential may occur after a product ships Products are becoming commodities Service and support become as important at the product Customers value total service as they look at the total cost of ownership 4.The front end of the supply chain is as important as the back end in maximizing returns Understanding and responding to customer needs will be a major part of supply chain strategy Anderson and Delattre, ‘Supply Chain Innovations: Five Big, Bold Trends,’ 2005www.accenture.com

9 From the Experts – Supply Chain Challenges 5.The ability to integrate new and innovative capabilities with corporate strategy will drive higher supply chain value Rapid and “virtual” partnering will be key to new supply chain management strategies. Anderson and Delattre, ‘Supply Chain Innovations: Five Big, Bold Trends,’

10 From the Experts – Supply Chain Challenges Quality of demand information is vital – what customers are actually buying Kanban-style replenishment for reduced inventory costs Supply chain visibility – knowing where your products are in the supply chain will be critical (doesn’t imply RFID). Wheatley, ‘Five Top Tips’, 2005

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12 From the Experts - Supply Chain Challenges Become an “On demand enterprise” Flexibly respond with no long-term commitments Dynamically grow or shrink based on demand Operate anytime, anywhere, under any condition and be resilient to any disturbance Minimize asset and labor content per unit of production Provide real-time transparency of operations both for external and internal visibility. Kadifa, The ‘On Demand Enterprise’ 2005www.corio.com

13 From the Experts - Supply Chain Challenges Property hazards and supply chain disruptions are major threats to revenue According to financial officers of the top 1000 global companies in North America and Europe Elkins, Handfield, Blackhurst, and Craighead, ‘Ways to Guard Against Disruptions,’ Supply Chain Management Review, 2005

14 Major Disruptions in Distribution in the Last Five Years A major train derailment in Arizona in November of 2000 The World Trade Center disaster of September of 2001 Consolidated Freight’s bankruptcy of September of 2002 The ILWU labor block out of the west coast ports of October of 2002

15 Major Disruptions in Distribution in the Last Five Years An east coast hurricane in August of 2003 Fires on the west coast in October of 2003 Multiple hurricanes in the south in fall of 2004 and 2005 The transportation capacity crunch

16 The Dark Side of Supply Chain Management “The Age of Fragility” The intersection of supply chain management and lean practices Supply fragility in the event of a catastrophic disruption “Never satisfied” customer, and short product life cycles Lean reduced the inventory buffers Formal plans are needed that minimize the time and cost of a business disruption Zsidisin, Ragatz, Melnyk, ‘The Dark side of SCM’ Supply Chain Management Review

17 Incorporate Supply Chains into Business Strategy Execute Effectively against Defined Goals and Metrics Develop effective linkages with trading partners Adopt Leading-Edge Technologies And Practices Make strategic in-source versus out-source decisions Customer-centric Supplier linkage Collaboration Service-level agreements Innovation agenda Industrialization Workforce capability Continuous improvement programs Board mandate Customer insights Segment-specific value propositions Competitive advantage Extended enterprise-wide, high-level metrics Incentive alignment across functions and potentially enterprises Measurement & continuous improvement Channel strategy Internal & external coordination Supply & demand balancing End-to-end integrated operating model Strategic partnerships Performance framework ‘make’ or ‘buy’ framework From the Experts - Supply Chain Challenges Accenture – Mulani 2005

18 From the Experts - Supply Chain Challenges Stanford Professor Hau Lee: 1. Great supply chains are agile and react speedily to sudden changes in demand or supply 2. They adapt over time as market structures and strategies evolve 3. They align the interests of all the firms in the network so that companies optimize the chain’s performance when they maximize their interests Only supply chains that are agile, adaptable, and aligned provide companies with sustainable competitive advantage Harvard Business Review, 2004

19 “The Moment of Truth” The product the customer wants is actually on the shelf when the customer makes his choice Supply chain leaders change how they replenish a shelf, pack a box, load a truck, or dispatch a fleet to meet customer needs They make what the customer wants rather than try to sell what the company makes AMR Research – Procter & Gamble

20 Supply Chain Headline News RFID and Retail: Little Return for Case and Pallet Tagging Supply Chains Adapt to Disruptions When There is No Time for a Huddle Difficult ERP Rollout Slows Furniture Maker Double the Inventory is Not Double the Fun The "greening" of the supply chain Companies announce RFID drug-tracking project

21 Supply Chain Headline News Car Navigation Not Catching on in U.S. Inventory Headaches Persist Fees For Services, But Will Customers Pay? More Demanding Markets Katrina Damage Threatens Hydrogen Supply The Cost of Compliance Global Needs Propel Product Life-Cycle Management Efforts

22 Supply Chain Headline News Distributors Fight For Scraps During Economic Downturn RoHS: The Biggest Headache the Industry Has Ever Seen Distribution in China Company Restructuring to Eliminate 3,500 Employees Demand Will Continue to Outpace Supply in China, Firm Says

23 Local Headline News Exercise - Identifying your key supply chain headlines

24 News Gathering Find your news source Interview them to get their supply chain headlines Identify your source Reverse roles

25 Delivering the News Interviews with the man on the street Gathering the news Identifying the top stories Posting the news

26 Self Improvement Programs Develop a sound human resource strategy Get the right people with the right skills with a broad view of business activities into supply chain jobs The right people on the bus in the right seats Coordinate across functions Hire for collaboration skills Create an organizational design which focuses on supply chain objectives Include formal systems for communication Assign coordination, control, authority and responsibility. Trent, ‘What Everyone Needs to Know About SCM,’ Supply Chain Management Review, 2004

27 Self Improvement Programs Develop supply chain information systems Capture and share information in real time Implement the right measurement system to support fact-based decision making Promote continuous improvement Measures must be tied to desired business outcomes Trent, ‘What Everyone Needs to Know About SCM,’ Supply Chain Management Review, 2004

28 Your Next Reporting Assignment Who are your competitors today – who will they be in the future? What is the basis of your competitive advantage today – what will it be in the future? Which capabilities make your firm unique today – which ones will make it unique in the future? How agile is your supply chain – how will you measure this?

29 Your Next Reporting Assignment Which supply chain disruptions are most likely to occur and have you managed your risk by creating a supply chain continuity plan? What are your key suppliers’ competencies and challenges? How well have you developed the skills of your supply chain employees?

30 Things to Think About Managers devote < 3% of their time developing a corporate view of the future Senior managers’ first task is to develop a process for pulling together the collective wisdom within an organization Your most important skill may be relationship management!!

31 Be Ready to Seek out New Opportunities In America, any profession (such as a doctor, lawyer, architect) must be good at the touchy-feely service stuff Anything that can be digitized will be outsourced. A significant number of service and professional jobs will move out of the US by 2015 The challenge today – rapid change, which requires leadership, flexibility and the imagination to adapt Thomas Friedman, The World is Flat

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33 News Flash!! Today’s connectivity allows you to work 24/7 How do you balance work with your personal and professional life?

34 OUR OPINION Everyone Has One! The supply chain is still a “Get it done” function. You can try and glamorize it with technology, but it is still a “Roll up your sleeves” business, and those that are not scared to get their hands dirty and get in the trenches will have a great deal of success.

35 Summary of Today’s News 1995 predictions have come true! Supply chains must be agile, adaptable and aligned The “Moment of Truth” arrives More news will be posted to the Web Dig out the news at your company Keep an eye on the news on the home front

36 THANK YOU! Questions? Rhonda R. Lummus, CFPIM, CIRM


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