1. Benchmarking the Supply Chain
Introductions – Names, prior work experience including summer, what do students hope to get from class?
Mention some prototypical supply chains we will use repeatedly in class – Wal-Mart, 7-Eleven, Dell and Compaq, Amazon and Borders, Supermarket and e-grocer, W.W. Grainger and McMaster Carr - our goal is to identify factors that drive supply chain success and make a comparison between different supply chains.
Administration of course - We will discuss concepts and methodologies for supply chain management. The context within which both will be learnt and discussed is provided by cases. Discuss role of case packet readings, cases and book.
5 cases due - 10% for each case
25% for final project
20% for final exam
5% for electronic posting
Discuss key dates for submitting project. Three groups will be selected to present.
Show course web page and its organization

2. Outline Benchmarking the supply chain
Supply chain mapping and throughput efficiency
Supplier and distributor benchmarking
Supply-Chain Operations Reference Model
Managing the supply chain of the future - the new organizational paradigm
The seven principles of supply chain management

3. What is Benchmarking? Competitive Benchmarking is Who are doing it?
the continuous measurement of the company’s products, services, processes and practices against the standards of best competitors and other companies who are recognized as leaders
Who are doing it?
Xerox started the practice in 1981, then became popular in all major international companies, e.g. Motorola
There are international organizations specialized in this service, e.g., Global Benchmarking Council, American Productivity and Quality Center
Asian Benchmarking Clearinghouse, Hong Kong Benchmarking Clearinghouse

4. Key Consideration Dimensions in Logistics Benchmarking
Logistics output, i.e., achieving customer service goals and customer’s perception of performance
Performance should be compared to the ‘best of the class’. Don’t limit your effort to players inside the industry only!
Logistics processes, i.e., not enough to just measure the output, processes which generate the output should also be measured!

5. Benefits of Benchmarking
Enable best practices from any industry to be creatively incorporated into the benchmarked process
Provide stimulation and motivation to professionals involved in implementing benchmarked findings
Breaks down ingrained reluctance to change (more receptive to ideas from another industry)
May identify technological breakthroughs from other industries (e.g. bar-coding)

6. Benchmarking Logistics Process
Key Steps
Understand the structure of the process, i.e., process mapping, process analysis, flow charts
Identify the critical processing steps, i.e., process bottlenecks, critical path
Benchmark those critical processing steps against ‘best in class’
Measure performance at supplier/customer interface
Derive the most effective processes and adopt the best control and measurement tools

7. Understand the Process
Customer
Order
Inventory
available
Credit
checking
file
order
status
Shipping
customer
Process
Sales and
marketing
function
Production
Accounting
Invoicing
Back
schedule
Material
procurement
documents
Warehouse
withdrawal
Transport
scheduling

8. Identify Critical Points
Customer Service
Customer
Order
Inventory
available
Credit
checking
file
order
status
Shipping
customer
Process
Sales and
marketing
function
Production
Accounting
Invoicing
Back
schedule
Material
procurement
documents
Warehouse
withdrawal
Transport
scheduling
Inventory Mgmt
Order fulfillment
Production Mgmt
Supplier Mgmt

9. Benchmark against ‘Best in Class’
Supplier
Performance
& Mat. Inv.
Service level
performance
Inventory
availability
Perfect order
fulfillment
Consumer
satisfaction
Production
plan vs actual
Supplier
Mgmt
Prod.
Mgmt
Inventory
Mgmt
Order
Fulfill
Customer Service
End user

10. Practices Uncovered by Xerox via Non-competitive Benchmarking
Type of company
Practice
Drug wholesalers
Electronic ordering between store and distribution center
Appliance components
Forklift handling of up to six appliances at once
Electrical components manufacturer
Automatic in-line weighing, bar code labeling, and scanning of packages
Photographic film manufacturer
Self-directed warehouse work teams
Catalogue fulfillment service bureau
Recording of item dimensions and weight to permit order-filling quality assurance based on calculated compared with actual weight

11. Supply Chain Mapping and Throughput Efficiency

12. Throughput Efficiency
Value-adding time is time spent doing something which creates a benefit for customer (i.e., the right product in the right place and at the right time)
Non-value-adding time is time spent on activities that can be eliminated with no reduction in benefit to the customer
Throughput efficiency is defined as:
Value-added time
End-to-end pipeline time
X 100

13. Value Added Through Time2 10 6 14 18 22 26 30 34 38
10%
50%
100%
Throughput efficiency
is only around 25%!
% of Total Value Added
Supplier lead time
Inbound material
Primary conversion
Secondary conversion
Packaging
Shipping
Distribution center pick
Ship to customer
Weeks in Supply Chain

14. Product Variety Through Time2 10 6 14 18 22 26 30 34 38 5 25 50
Weeks in Supply Chain
No of Variety
Packaging
2nd Conversion

15. Supply Chain Map
A time-based representation of the processes and activities involved as the materials/products move through the supply chain.
Horizontal time – time spent in process (manufacturing, transit, assembly/packaging, etc.)
Time required for system to respond to increase in demand
Vertical time – time spent by product/WIP standing as inventory
(Horizontal + vertical time) = time required to ‘drain’ system of inventory
Multi-component products – total pipeline determined by the slowest moving item

16. Pipeline Mapping Length 60 days Volume 175 days Commodity market
End user
Fiber store
(20)
Spinning (15)
Yarn finished
store (10)
Yarn store
(5)
Knitting (10)
Grey stock
(15)
(7)
Dyeing &
finishing
Raw material
(10)
Finished fabric
Component
cutting (5)
Sewing (18)
Finished goods
store (20) DC
Store
(2)
Spinning
Fabric supplier
Manufacturer
Retailer

17. How to Use Supply Chain Mapping
It provides a powerful basis for logistics reengineering projects
It makes the total process and its associated inventory transparent
It measures product or service supply chain efficiency (i.e., value-added vs. non-value-added time)
It highlights the consequences of some ‘rules’ and ‘policies’ the company is imposing (or has inherited) in the areas of inventory, purchasing, production planning, and vendor management

18. Assignment?
Define the supply chains of the products or services for the company you are working for. And map out those supply chains suing the tools learnt in this class;
Calculate the supply chain efficiency of your company, and benchmark it against other players in the industry;
Identify issues in the supply chain and propose reengineering projects for the company.

19. Supplier and Distributor Benchmarking
In reviewing your supplier and distributor relationship and benchmark it against the ‘best in class’, the emphasis should be on assessing their contribution to overall supply chain performance (efficiency and effectiveness). Some of the key issues are:
willingness to work as a partner / co-maker
commitment to continuous improvement
acceptance of innovation and change
focus on throughput time reduction
utilization of quality management procedures
use regular and formal benchmarking processes themselves
do they seek to improve communication with you?
are they flexible? Customer-focused?

20. Supplier and Distributor Benchmarking - some typical measures
Internal
Distributor
Quality
On-time performance
Stock availability
Communications
Schedule integration
Co-makership
Throughput times
Requirements planning
Partnership
Value-added services
Customer concern
Delivery performance
e.g.
Interfaces

21. Setting Benchmarking Priorities
Which processes and entities in the supply chain are of strategic importance
Which processes and entities have a high relative impact on the business economics (costs, revenue, asset performance, and human productivity)
Where there is a choice between ‘make’ and ‘buy’ (processes of high impact on performance /productivity and hard to source from suppliers)
Where there is internal readiness to change

22. Who to Benchmark against?
The Supply Chain Council represents a wide spectrum of industries and other related institutions (700+ members)
Supply Chain Operations Reference-model (SCOR)
Council of Logistics Management
The CLM has more than 10,000 members and hosts one of the most valuable Annual Conferences in the field
Institute of Logistics and Transport
The ILT has over 24,000 members, forged by the merger of two UK Logistics & Transport entities in May 1999
International Warehouse Logistics Association
The IWLA has over 550 members including 3PL, 4PL, public and contract warehouses as well as their suppliers

23. The Balance Scorecard
Identify key performance indicators for management to meet strategic goals
Articulate logistics and supply chain strategy
To fit with overall corporate and marketing goals
What are the measurable outcomes of success?
“Better, faster, cheaper”
What are the processes that impact these outcomes?
Processes leading to better “order achievement”, shorter pipelines, lower costs
What are the drivers of performance within these outcomes?
Identify by “cause-and-effect” analysis, devise measurement indices

24. Supply Chain Operations Reference-model (SCOR)
Build around five major processes: Plan, Source, Make, Deliver and Return, as the cross-industry standard for supply chain management
Provides a standard way to measure supply chain performance and to use common metrics to benchmark against other organisations
The model is regularly updated based on most recent study and research results. The latest version is V5.0.
The Supply Chain Council provides regular workshop for its members to understand the model
Website address:

25. What is a Process Reference Model?
Process reference models integrate the well-known concepts of business process reengineering, benchmarking, and process measurement into a cross- functional framework. A Process Reference Model can:
Capture the "as-is" state of a process and derive the desired "to-be" future state
Quantify the operational performance of similar companies and establish internal targets based on "best-in-class" results
Characterize the management practices and software solutions that result in "best-in-class" performance

26. What Does a Process Reference Model Contains?
Standard descriptions of management processes
A framework of relationships among the standard processes
Standard metrics to measure process performance
Management practices that produce best-in-class performance
Standard alignment to software features and functionality

27. How Can a Process Reference Model be Used?
Once a Complex Management Process is captured in Standard Process Reference Model form, it can be:
Implemented purposefully to achieve competitive advantage
Described unambiguously and communicated
Measured, managed, and controlled
Tuned and re-tuned to a specific purpose
A powerful management tool

28. SCOR: Three levels of process detail
Top level
Defines the scope and content for the SCOR model
Basis of competition performance target set
Configuration level
Representation of the company’s supply chain using 30 core “process categories”
Process Element level
Defines company’s ability to compete in chosen market
Process element definitions, inputs, outputs, systems/tools;
Performance metrics, best practices, systems capabilities
Implementation level
Defines practices to achieve competitive advantage and adapt to change

29. SCOR Level 1: Core Process Definitions
Plan
Processes that balance aggregate supply and demand to develop strategies to best meet sourcing, production and delivery requirements
Source
Processes that procure goods and services to meet demand
Make
Processes that transform product to a finished state to meet planned or actual demand
Deliver
Processes that provide finished goods or services to meet demand (order management, transportation, distribution)
Return
Processes associated with returning or receiving returned products; post-delivery customer support

30. SCOR Level 2:
Each SCOR process can be further described by process type:
Planning
Balance aggregated demand and supply
Occur at regular intervals, consistent planning horizon
Contribute to supply-chain response time
Execution
Scheduling/sequencing, transform product and/or moving product
Contribute to order fulfilment cycle time
Enable
Prepares, maintains, or manages information or relationships on which planning and execution processes rely
“SCOR Configuration Toolkit”
30 categories of process-type combinations

33. SCOR configurability A supply-chain configuration is driven by:
Plan levels of aggregation and information sources
Source locations and products
Make production sites and methods
Deliver channels, inventory deployment and products
Return locations and methods
SCOR must accurately reflect how a supply-chain’s configuration impacts management processes and practices.
Each intersection of two execution processes (Source-Make-Deliver) is a “link” in the supply chain
Each process is a customer of the previous process and a supplier to the next
Every link requires an occurrence of a plan process category

34. Configuring supply chain threads
Each thread can be used to describe, measure, and evaluate supply-chain configurations.
1. Select the business entity to be modelled (e.g. product set)
2. Illustrate the physical locations of:
Production facilities (Make)
Distribution activities (Deliver)
Sourcing activities (Source)
3. Illustrate primary point-to-point material flows using “solid line” arrows
4. Place the most appropriate Level 2 execution process categories to describe activities at each location
5. Describe each distinct supply-chain “thread” (the set of Source-Make-Deliver supply-chain processes) to understand common, and distinct, execution process categories
6. Place planning process categories (using dashed lines) to show links with execution processes

35. Summary of Supply Chain Operations Reference-model (SCOR)

36. Managing the Supply Chain of the Future - the new organizational paradigm

37. CLM Study: How the Leading-edge Firms Manages Logistics?
Concerning organization structure, leading-edge firms:
Have had formal logistics organization longer
Are more apt to have logistics headed by an officer-level executive
Adopt a more fluid approach to logistics organization and encourage frequent re-org to take advantage of opportunities that arise
Tend to favor centralized control
Are more apt to execute boundary-spanning or externally-oriented logistics functions

38. CLM Study: How the Leading-edge Firms Manages Logistics?
Concerning strategic posture, leading-edge firms:
Have a greater tendency to manage logistics as a value-added process
Reflect a stronger commitment to achieving and maintaining customer satisfaction
Place a premium on flexibility, particularly in regard to accommodating special or non-routine requests
Are better positioned to handle unexpected events
Are more willing to use outside service providers
Are more apt to view service provider relationship as strategic alliance

39. CLM Study: How the Leading-edge Firms Manages Logistics?
Concerning managerial behavior, leading-edge firms:
Expend more effort on formal logistics planning
Are more apt to publicize their performance commitments and standards
Are more apt to have chief logistics officers involved in business strategic planning
Respond effectively to non-planned events
Regularly use a wider range of performance measures, including asset mgmt, cost, customer service, productivity, …
Invest in state-of-the-art information technology

40. New Logistics Organization Paradigm
From functions to processes
From profit to performance
From products to customers
From inventory to information
From transaction to relationship

41. What Does It Take to Manage the Supply Chain of the Future?

42. The Seven Principles of Supply Chain Management

43. Seven Principles of Supply Chain Management
Segment customers based on service needs
Customize the logistics network
Listen to signals of market demand and plan accordingly
Differentiate product closer to the customer
Source strategically
Develop a supply chain-wide technology strategy
Adopt channel-spanning performance measures

44. Summary of Learning Objectives
Benchmarking the supply chain
Supply chain mapping and throughput efficiency
Supplier and distributor benchmarking
SCOR
Managing the supply chain of the future - the new organizational paradigm
The seven principles of supply chain management

45. References
Christopher, M., Logistics and Supply Chain Management, 2nd edition, FT-PrenticeHall, 1998.
Kaplan, R.S. and Norton, D.P., The Balanced Scorecard, Harvard Business School Press, 1996.
“Supply-Chain Operations Reference-model: Overview of SCOR Version 5.0”, Supply Chain Council, Inc., 2001.
Shapiro, B., V.K. Rangan and J.V. Sviokla, “Staple yourself to an order”, Harvard Business Review, July-August, 1992.