1. Strategic Supply Chain Management
The Moravian MBA

2. General information
MBA Supply Chain Management Concentration Implemented 2004
Strategic Supply Chain Management
Integrated Logistics Systems
Supply Chain Management Technology
Approximately 70 students enrolled to date
Monczka, Robert M. (2011, 2009 Fifth Edition). Purchasing & Supply Chain
Management. Mason, OH: South-Western Cengage Learning
Moravian business program awarded “Accreditation Council for Business
Schools and Programs (ACBSP)” May 2015
Grading - Strategic Supply Chain Management Class participation 20%
Review questions/Principles 10%
Take-home Exam 30%
Group Paper 25%
Paper Presentation 15%
Total 100%

3. Course Objectives
Awareness of internal & external demands on supply chain managers
Understand supply chain impact on competitive success and profitability
Appreciate ethical, contractual, risk management, sustainability, legal issues
Understand increasing strategic nature of supply chain management
Influence on other major functions…IT, engineering, manufacturing, HR
Crucial role of negotiations
Internal & external integration - customers & suppliers
Technology & innovation – e-commerce & e-systems (the future is now)

4. Supply chain excellence
Why purchasing/sourcing is important – Builds relationships, drives innovation,
improves quality, reduces time to market, generates economic impact, competitive advantage
Supply Chain & Value Chain....what’s the difference??
Capable supply chain professionals - enabler
Manage critical relationships
Fact based decision making
Appropriate organizational design - enabler
Center led; centralized, decentralized teams
Executive commitment & coordination
Coordinated strategy with business units
Executive council with suppliers
Information & innovation technology - enabler
ERP or legacy systems must interface with internal/external stakeholders
e-commerce – many buyers to one portal to many suppliers; translation services
Measurement & continuous improvement - enabler
Established goals linked to corporate objectives
RASCI (responsible, accountable, supportive, consulted, informed)
Balanced scorecard for executive awareness & feedback
Supply chain as a profit producer contributing to increased EPS

5. Fundamentals Overall & tactical
Overall goals
Supply continuity – right> price, source, specification, quantity, time, customer
Efficiently manage sourcing process – staff, budget, training, P2P channels
Develop supply base management - select, develop & maintain the right suppliers
Align goals with internal stakeholders
Develop integrated strategies that support organization goals
Tactical
Process requisitions
Develop bidder lists
Prepare & issue POs/contracts
Invoice resolution
Measure supplier performance

6. Policies and procedures
Effective structure
Action oriented
Relevant
Concise
Unambiguous – well understood
Timely & current
Helpful in solving problems
Key areas
Define supply chain role in facilitating overall organization success
Define supply chain personnel conduct with internal & external stakeholders
Define social & minority business objectives including metrics
Define buyer/supplier relationships
Define operational issues & alternative solutions supporting the organization
Procedures versus policies
Provide guidelines on implementation of policies
Detail functional duties and tasks
Examples: sole/single sourcing, bidders list, contract formation/administration,
Contract approvals & DOA

7. Supply chain management organization
Centralized – single authority over all divisions/locations
Decentralized – separate authority resides at divisions/locations
Center-led
Coordinates consistent policy/procedure/strategy
Leverages purchase volumes
Ensures goals attainment
Trend is CPO reporting to executive management (CFO,CEO)
Develop separate strategic & tactical sourcing teams with clear duties
SC may include: sourcing, logistics, AP, operations, IR, administration
Future organization trends
Horizontal/process focus
Team decisions helping all to succeed
Co-location in business lines
Virtual social networks

8. Supplier evaluation and selection
Develop & use structured pre-qualification process consistently
Manage qualified suppliers on an approved supplier list (ASL) database
Anticipate & enable “churn” – out with the old….in with the new
Avoid growth creep through ongoing rationalization & purging process
Use spend analytics to manage supply base on reliable data
Provide diverse suppliers with appropriate bid opportunities & awards
Determine if supplier is sole source, single source or strategic
Evaluate performance - continuous improvement; correction; elimination
Measure risk of preferred & critical suppliers – initial & ongoing process
Other factors – e-commerce, SRM, philosophy; goals alignment

9. Supplier quality management
Why be concerned with supplier quality?
Impacts costs, customer satisfaction, market share, public relations
Suppliers represent about 55% of sales dollars & 50% of product problems
Reliance on suppliers for critical components & services is steadily increasing
8 key principles of Total Quality Management (TQM)
Define by customer requirements
Pursue at source
Stress objective vs. subjective analysis
Prevention vs. detection of defects
Deming’s 14 points – performance excellence for manufacturing & services
7 wastes – overproduction; waiting; delivery; process; inventory; motion; defects
LeanSigma – define; measure; analyze; improve; control (DMAIC process)
Criteria to assess supplier quality systems
ISO 9000:2008 – process vs. product standards – worldwide acceptance
ISO 14000:20004 – environmental pollution awareness & protection
Malcolm Baldrige National Quality Award (MBNQA) – recognizes quality improvement
Focus on process vs. output
Strive for zero defects
Sustain continuous improvement
Everyone’s responsible

10. Supplier management and development
What to measure & weigh; frequency & use
Quantitative – delivery; quality; cost reduction
Qualitative – problem resolution; technical ability; responsiveness; compatibility
Reporting frequency – operations daily; goals quarterly
Data use – detect performance issues; rationalize/optimize supply base
Supplier measurement & evaluation systems
Categorical – easy; minimal data; low cost
Weighted-Point – flexible; combines quantitative & qualitative ; moderate cost
Cost based – objective; specific; promotes improvement
Rationalization & optimization – right sizing the supply base
Advantages – fewer good suppliers = less risk; lower administrative costs
Disadvantages – dependency; reduced competition; supply disruption
Supplier development is a multi-step process that can take months or years
Supply base risk management - political; market; sourcing; financial
Supply base sustainability – environmental & social responsibility metrics

11. Purchasing services
Transportation/logistics management – plan, implement, control flow of goods
Inbound– shipments between supplier & buyer facilities
Intra-organizational – movement of materials between storage & production facilities
Outbound– shipments between a company & its customers
Recovery & re-cycling – obsolete, reusable, repairable item shipments
Supply chain transportation support
3rd party logistics (3PL) – logistics & transportation management specialist
Less than load (LTL) – freight broker to consolidate routine shipments
Contract hauler – specialty carrier for overweight, oversize, permitted shipments
Transportation modes – motor, rail, air, water, pipeline, intermodal
Performance based logistics (PBL) – non- traditional focus on preferred results
Mutual commitment to collaboration & alignment of interests; win-win environment
Goals aligned sourcing strategy; effective checks & balances; metrics; reporting
Indirect spend – good or service not in delivered result to customer - significant
Maverick spend – unauthorized & outside of established supply chain practices
Services contracting challenges
Unclear specifications exacerbate inherent variability
Performance monitoring, verification, measurement & scope creep
Appropriate compensation methodology & effective cost control

12. Negotiation and conflict management
What is negotiation?????
Face-to-face or electronic communication process to seek mutual agreement
BATNA – Best Alternative to a Negotiated Agreement = reservation position
Position – opening offer….optimistic or ideal demand on the table
Interest – unspoken motivation underlying the “position”….focus on this
Needs – must have outcomes vs. wants – desired outcomes used as concessions
Triangle talk – know yours & their wants….propose action they can accept
Negotiation framework in supply management
Identify or anticipate requirement
Determine negotiation vs. competitive bidding
Plan, prepare, analyze, conduct, execute & follow-up on agreement
Sources of power in negotiation
Information; reward; coercion; legitimacy; experts; referent (honesty, respect)
Concessions – fundamental…give little for more…avoids deadlock
Negotiation tactics
Low ball; high ball; honesty; caucus; BAFO; silence; trial balloon; venue
Reciprocity; consistency; authority; take offer off table; win-win (collaborative)
Electronic media enables analysis, but is impersonal & can take longer

13. cost management
Managing life cycle costs – concept generation; design/development; pilot
launch; ongoing production; product end of life
Cost management framework
Commodities – high value; many suppliers
Critical products – high value; few suppliers
Generics – low value; many suppliers
Unique products – low value; few suppliers
Price analysis – market structure; economic conditions; supplier strategy;
pricing models; hedging; cash discounts; Producer Price Index (PPI)
Cost analysis techniques
Cost-based models – cost markup; margin; rate of return
Standard vs. custom specifications impact cost
Reverse price analysis – deduce cost using published data sources
Break-Even analysis – point where revenue = cost
Total cost of ownership (TCO) – present value of all costs over expected life
Collaborative approaches – target pricing; cost-savings sharing pricing

14. Contract management Types of contracts
Firm, fixed price – should have well defined scope
Fixed price with escalation, re-determination, incentives, liquidated damages
Cost plus incentive fee, fixed fee, productivity results sharing
Not-to-exceed price - unit pricing with calculated usage
Time & materials – greatest buyer exposure to cost….no cost control incentive
Long-term contracts
Advantages – supply assurance; volume leverage; lower cost/price; technology
Disadvantages – supplier lock; lost opportunity; price/cost creep
Non-traditional contracting
IT systems – access to costly networks, software, cloud, high service levels
MWBE – Executive Orders; niche segments (MRO); community development
Consultants – objectivity; non-core resource; need well-defined/controlled scope
Construction – scope; cost control; safety exposure; claims resolution/arbitration
Other contract types
Purchasing agreements – annual; national; blankets; VMI
e-Catalogs; trading partner agreements (TPA)
Strategic alliances – collaborative; operations integral; productivity improvements

15. Purchasing law & ethics
Legal authority & personal liability
Agent – binding authority to act on behalf of Principal
Actual (documented); apparent (perceived); implied (validated) authority – all binding
Personal liability – exists if actual and/or apparent authority is exceeded
Essential contract elements - offer; acceptance; consideration; competent
parties; legal subject matter
Boilerplate terms & conditions – battle of forms; oral vs. written
Cancellation – default (breach & cure); convenience; mutual consent
Damages & remedies
Damages – restitution; reliance; expectancy; consequential; liquidated
Damages can not be punitive or speculative
Uniform Commercial Code (UCC) – Article 2: written offer; confirmed verbal
contracts valid; battle of forms (conduct); implied warranties; title; infringement
Uniform Electronic Transactions Act (UETA)
Electronic records & signature = written records & signature
Facilitates interstate & global commerce

16. Purchasing law & ethics
Warranties of goods
Express – seller promise that goods shall conform to specified quality or standard
Implied – merchantability & fitness for purpose unless expressly disclaimed
Title – supplier has it, not stolen or liens; Infringement – not illegally violating patent
Transportation terms & risk of loss
Bill of lading = details; freight bill = invoice (prepaid or collect)
Risk of loss remains with seller until title passes to buyer….FOB point
Intellectual property – patents, copyrights; trade secrets…..usually indemnified
Antitrust & unfair trade practice laws
Sherman Antitrust – prohibits actions restrain or monopolize trade
Clayton & Robinson-Patman – prohibits price discrimination & “tying” agreements
Unethical behavior – reciprocity; favors; sharp practices; conflict of interest
ISM Professional Code of Ethics
Principles = loyalty to company; justice in dealings; faith in profession
Ten standards derived from principles – e.g. denounce bribery; avoid sharp practice
Corporate social responsibility
Environment & sustainability - EUISSCA Green Alliance (decrease greenhouse gases)
ISM principles – community initiatives; business conduct; health & safety;

17. Strategic Overall & Strategic
Overall goals
Supply continuity – right> price, source, specification, quantity, time, customer
Efficiently manage sourcing process – staff, budget, training, P2P channels
Develop supply base management - select, develop & maintain the right suppliers
Align goals with internal stakeholders
Develop integrated strategies that support organization goals
Strategic
Spend analysis – foundation of strategic sourcing
Demand management & specifications or Statements of Work (SOW)
Commodity & category management
Contract & cost management – Price volatility management (PVM)
Procure to pay cycle – requisition, source, bid, award, administer, receive, pay
Supplier Relationship Management (SRM) – collaborative improved productivity
Supply management strategy – defined, repeatable, aligned, communicated

18. Scm tools and techniques
Project phases & characteristics
Concept – initiate broad discussion
Definition – scope; plan; timing; resources
Planning – develop details; create management organization
Preliminary studies – validate data & assumptions
Performance – execute plan; implement controls
Post completion – confirm results; reassign personnel; restore; document
Value analysis
Fulfill intended lowest total cost
Value = function/cost
Process = gather information; speculate; analyze; recommend; summarize
Quantity discount (price break) analysis
Examine incremental cost changes between quantities
Price breaks at specific quantities or ranges in quantities
Process or value stream mapping (LeanSigma tool)
Reduce process to component parts; identify & eliminate non-value added waste
Determine current state, desired future state & gap analysis (projects)

19. Commodity/category strategy development
Align SCM & enterprise objectives – increase revenues/decrease costs
Integrative strategy development cascades corporate>SCM>category plans
Commodity vs. Category management
Pole line hardware (commodity); power distribution equipment (category)
Category SCM leads cross-functional stakeholder team as CEO leads business
Spend analysis
Foundation for strategic sourcing
What, with whom, & how much…..Pareto….aggregation…taxonomy
Instills confidence that SC is spending precious business dollars wisely
Facilitates internal stakeholder budget maximization….enabling more with less!
Strategic sourcing process
Develop team, scope of work (SOW) & plan
Research & understand supply market (suppliers/contractors)
Identify bidder(s) & develop sourcing approach
Conduct solicitation & negotiate/award win-win PO/contract
SRM – continuously improve collaborative relationships & performance

20. Commodity/category strategy development
Porter’s Five Forces – describes competitive forces in market economy
Higher levels of competition create more buyer & supplier options
Threat of new entrants
Threat of substitute products & services
Power of buyers
Power of suppliers
SWOT analysis – strengths, weaknesses, opportunities, threats
Quadrants for category strategy management - all strategic
Critical - high risk/complexity; high value/spend; few qualified suppliers
Bottleneck – high risk/complexity; low value/spend; few qualified suppliers
Leverage – low risk/complexity; high value/spend; many qualified suppliers
Routine – low risk/complexity; low value/spend; many qualified suppliers
Supplier evaluation – relevant scorecard; stakeholders; corrective actions
Supplier risk management
Capacity; agility; solvency; pending litigation
Ability to disrupt supply chain
Develop realistic mitigation strategy

21. Worldwide sourcing Cost & price benefits Lower labor rates Barriers
Increased production levels
Supplier willingness for lower profit margin
Barriers
Letters of credit; multiple bills of lading; import licenses; inspection certificates
Resistance to change; lack of skills; currency fluctuations; long lead times
Logistics; Incoterms; differing legal systems; increased supplier risk
Types of intermediaries
Trading companies – bundled full service > potential lower costs
Foreign trade consultants – located in US major cities….eager for business
Culture & language issues
Culture – language; religion; values; customs; social institutions; education
Language differences impact communication; use interpreter; document decisions
Countertrade – barter; counterpurchase; offset; buy-back; switch trading
Future trends – increased integration; part of overall sourcing strategy
Exchange rate advantages
Lower material costs
Government subsidies

22. SC integration for competitive advantage
Internal integration communication flows & linkages
Engineering
Legal/environmental/safety
Marketing
Accounting/finance/risk management
Operations/business lines
External integration
Suppliers/contractors
Local government & communities
e-Marketplace
Supplier Relationship Management (SRM)
Collaborative environment
Continuous productivity improvement
Cross-functional sourcing teams
Innovation & talent synergies
Joint decision development/ownership

23. Lean supply chain management
LeanSigma - passionate pursuit of operational excellence (mindset & toolset)
Lean (eliminate waste)+Sigma (reduce variability) = continuous productivity improvement
Principles – Maximize people; simplify processes; use technology; CPI; minimize waste
Three-V model of inventory management
Volume – how much & what types?; forecasting; VMI
Value - what is unit cost & total value of different inventory types?
Velocity – how fast is inventory moved to production & customer?
Leverage company-wide volumes – delegate standardization to suppliers
Use suppliers for inventory management – ASN & VMI maximize supplier engagement
Reduce supplier-buyer cycle times
Expand electronic capability
Facilitate supplier development
Track order cycle times…..if you don’t measure it , you can’t manage it!!
Focus on second & third tier suppliers to expand availability
Requirements planning systems
Materials Requirements Planning (MRP) – master production schedule supports order output
Distribution Resource Planning (DRP) - integrate with MRP to maximize finished inventory
Supply Chain inventory logistics planner coordinates supply, production & distribution
Automated inventory tracking systems provide computerized integrated process tracking

24. Lean supply chain management
Types of inventory
Raw material & semi-finished – from suppliers or internal to support production
Work in process – incomplete & must be transformed into finished goods
Finished – complete & available to fulfill current or future customer orders
Maintenance, Repair, Operating (MRO) – items supporting production & operations
Inventory related costs
Unit - most basic & easily calculated cost of purchased items & finished goods
Ordering – material release; acquisition; transportation; internal machine setup
Carrying – capital, storage; obsolescence; deterioration; lost opportunity
Inventory investment……asset or liability?
Max turns = max ROI
How many inventory turns are optimal? It depends on inventory complexity
Right reasons for inventory
Avoid disruptions; sustain operations; support customer service
Hedge marketplace uncertainty; negotiate quantity discounts
Wrong reasons for inventory
Offset poor quality & delivery; demand uncertainty
Custom vs. standard; extended pipelines; process inefficiencies;
5S – Sort, Set, Shine, Standardize, Sustain

25. Information systems & E-sourcing
e-Commerce/systems evolution (disillusionment to enlightenment)– MRP/DRP;
EDI; ERP; SRM/CRM; consortiums; e-marketplaces; cloud computing; RFID
New systems drivers – strategic integration; globalization; data information
management; processes; legacy systems; strategic cost management
Implementing ERP systems – define current process; determine best in class;
develop system; debug; implement; monitor; control
Purchasing database – integrated collection of files; data warehouse or
datamart– consolidated information enabling derivative reporting
e-order process – integrated vs. web-based; e-marketplace translation services
E-sourcing models – sell side; buy side; 3rd party marketplaces (many to many)
Supplier Relationship Management (SRM) systems
Spend analytics – basis for strategic sourcing
Sourcing – eRFx; reverse auctions; order/revisions; e-invoices; EFT
Contract management/compliance
Supplier performance measurement & control (scorecard)
Cost reporting & forecasting; Price Volatility Management (PVM)
Internal & external system integration – future of e-sourcing
Social networking software in SCM – collaboration; communication; negotiation

26. Performance measurement & evaluation
Why measure performance?
Support better decision making
Support better communication across supply chain & to executive management
Provide performance feedback to all stakeholders
Motivate & direct behavior toward desired results
Beware of too much data, lack of detail, wrong metrics, measuring behavior
Performance categories – price, cost, quality, delivery, innovation, safety,
integration, efficiency, customer satisfaction, supplier performance
Performance measurement system development – determine categories; develop
measures; establish objectives; finalize details; implement; review; control
Performance benchmarking – continuous comparison to best practices
Strategic – policies, practices, roadmap, philosophy, corporate goal alignment
Operational – focus on functional activity critical to success & provide greatest value
Support activity – method to determine effectiveness of internal overhead control
Balanced scorecard – periodic communication of performance to all stakeholders
Customer satisfaction – SLA; order cycle time; service; perception
Operational excellence – LeanSigma; SRM; strategic sourcing plans; metrics
Innovation – e-systems; VMI; datamart reporting
Financial – cost; budget; PVM; savings; maverick spend

27. Purchasing & supply strategy trends
Expanded mission, goals & performance expectations – continued increase
More broad & complex category strategies
Suppliers managed as true extension of organization
Multiple supply networks designed & operated to meet customer needs
Leveraged Technology enablers take additional focus
Internal & external collaboration grow in strategic importance
Attracting, developing & retaining management talent as key to success
Managing & enabling future supply management organization & measurement systems
High impact sourcing & supply chain strategies into the foreseeable future
Continuous outsourcing vs. insourcing evaluations of risk with key suppliers
Enhanced collaboration, information sharing & integration with key suppliers
Increased integration with other functions such as accounts payable & IR
Enhanced quality & number of category strategies
Requiring suppliers to take greater cost management role
Providing common customer focused metrics across supply chain