Chapter 8 Integrating the supply chain

Content Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain

Integration in the supply chain Key issue 1 How can we integrate internally, externally and electronically?

Integration in the supply chain What is Supply Chain Integration the degree to which the firm can strategically collaborate with their supply chain partners and collaboratively manage the intra- and inter-organization processes to achieve the effective and efficient flows of Product and services Information Money Decisions With the objective of providing the maximum value to the customer at low cost and high speed

Integration in the supply chain Measures of integration Access to planning system Sharing production plans Joint EDI access / networks Knowledge of inventory mix / levels Packaging customization Delivery frequencies Common logistical equipment / containers Common use of third-party logistics

Integration in the supply chain Internal integration: function to function Purchasing Production Distribution Low price Unreliable delivery and low quality High productivity of machine and labor High batch size Poor available distribution Keep warehousing operation smooth Post-manufacturing operation being resisted Additional complexity of customizing products

Strategic Collaboration Integration in the supply chain Inter-company collaboration: a manual approach Strategic Collaboration Decision Flow RAW MATERIALS END CUSTOMERS Information & Knowledge Flow Products & Services Flow Financial Flow Enterprise A B

Integration in the supply chain Electronic collaboration Transactional The electronic execution of transaction Electronic collaboration Information sharing The electronic sharing or exchange of information Collaboration planning Strategic, tactical and operational exchange

Integration in the supply chain Information flow in apparel supply chain

Content Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain

Efficient consumer response Key issue 1 How can collaboration be extended across the supply chain to focus on meeting consumer demand?

Efficient consumer response Category management Establish infrastructure Optimize introductions Optimize assortments Optimize promotions Integrated suppliers Synchronized production Continuous replenishment Automated store ordering Category management Product replenishment Reliable operations Cross-docking EDI EFT Item coding and database maintenance ABC Enabling technologies

Continuous replenishment

Efficient consumer response Enabling technologies Scanning data Data warehousing Data mining The data include Demand / consumption / sales information Cash flow Stocks of finished goods / work in progress Delivery and output status

Efficient consumer response Category management Continuous replenishment Enabling technologies Required capability Account management Demand management Multifunctional selling teams Price list restructuring Effective and customized promotions Joint inventory management Cross-dock operations Effective logistics and product flows Quick response Effective information sharing Automated order generation Bar-coding and the use of other scanning technology

Content Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain

Collaborative planning, forecasting and replenishment Key issue 1 How can collaboration be extended to strategic as to well as operational levels?

Collaborative planning, forecasting and replenishment CPFR Model Develop front-end agreement Create joint business plans Create individual sales forecasts Identify exceptions to sales forecasts Resolve / collaborate on exception items Create order forecast Identify exceptions to order forecast Generate orders Planning Forecasting replenishment

Wal-mart’s CPFR Process Buyer Seller FRONT END AGREEMENT JOINT BUSINESS PLAN Once Qtr. Collaborative Planning CREATE SALES FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS Wk, Mo Collaborative Forecasting Goal : Link buyer and Seller Electronically CREATE ORDER FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS Wk, Mo Collaborative Replenishment GENERATE ORDER

Wal-Mart’s CPFR Program CPFR has “blurred the lines between supplier and customer” Suppliers buy into their program because they have to to work with Wal-Mart, but more importantly, because Wal-Mart’s Systems provide increased profits for Wal-Mart and their suppliers Wal-Mart “teaches” their suppliers how to minimize shipping, inventory and other costs by showing them their own model.

Content Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain

Managing supply chain relationships Key issue 1 How can broader-based relationships be formed between trading partners in the supply chain?

Managing supply chain relationships Creating closer relationships Partnership Arm’s length transaction R&D Marketing R&D Marketing Logistics Operations Logistics Operations Information system Information system Information system Information system supplier customer supplier customer Bow tie Diamond

Managing supply chain relationships Factors in forming supply chain relationships The order winner The method making sourcing decisions The nature of electronic collaboration The attitude to capacity planning Call-off requirements Price negotiations Managing product quality Managing research and development The level of pressure

Content Integration in the supply chain Efficient consumer response Collaborative planning, forecasting and replenishment Managing supply chain relationships A framework for managing the supply chain

A framework for managing the supply chain Key issue 1 What are the management implications of integrating the supply chain?

A framework for managing the supply chain 6 Develop measurement system for supply chain performance 4 Pilot new supply chain solutions 5 Organize for supply chain performance 1 Develop a supply chain strategy 2 Gather supply chain information 3 Develop effective partnerships and alliances

A framework for managing the supply chain Develop a supply chain strategy Customer service requirements Plant and distribution center network design Inventory management Outsourcing and third-party logistics relationships Business processes Organizational design and training requirements Performance metrics and goals

A framework for managing the supply chain Pilot new supply chain solutions Successful supply chain improvement including Involvement of key stakeholders, suppliers, customers and employees Selection of scope and environment, focusing on avoiding risk Identification of the key questions that the pilot must answer

A framework for managing the supply chain Develop measurement systems for supply chain performance On time in full, outbound On time in full, inbound Internal defect rates New product introduction rate Cost reduction Stock turns Order to delivery lead time Fiscal flexibility