1、1999AndersenConsulting0TheEightEffectivePrinciplesofSupplyChainManagement 1999 Andersen Consulting1n What are the cost and margin implications of integration for the supply chain participants?n What level of integration is optimal?n Should integration be pursued physically or virtually?n What pieces
2、 of the supply chain are candidates for outsourcing?n What key information is required to integrate?n How will the information be sourced?n How should information be managed across the supply chain?n How do you drive value from Year 2000 systems investments?n To what degree are the supply chain part
3、icipants ready to integrate?Operational excellence?Information management?Economic incentive?Financial wherewithal?Capability to manage change?ArchitectureInformationReadinessMany questions should be asked before taking any concrete SCM initiatives.1999 Andersen Consulting2Eight fundamental principl
4、es provide the levers to balance customer service and profitable growth.Customer-DrivenManufacturingCustomize theLogistics NetworkSupply Chain-WidePerformanceMeasurementsStrategically Sourceand Procure Supply Chain-WideTechnology StrategyDesign and DifferentiateProduct Closerto the CustomerPlan Acco
5、rding toMarket DemandSignalsSegment CustomersBased on Needs 1999 Andersen Consulting3nOne-size-fits-all approach to servicenCosts and profitability averaged across segmentsnUnable to gauge likely profitability of customersnNeeds-based segmentation of customersnUnderstand the cost to serve,predict ma
6、rginal profitability for each customer segmentnIdentify segment-specific service packages which maximize profitabilitynIdentify which customers will generate the highest long-term profitability Traditional Opportunities“We dont fully understand therelative value customers place on ourservice offerin
7、gs”Service balanced with profitability Segment Customers Based on NeedsSegmentation typically groups customers by industry,product,or trade channel.Segmentation based on service needs allows a company to develop service portfolios tailored to various segments.1999 Andersen Consulting4Sales&Merchandi
8、sing NeedsLowLowHighHighOrder Fulfillment RequirementsInnovatorsGraingerHome DepotWal-MartLogistics OptimizersChryslerWestinghouseMaytagDevelopingAuto ZoneStaplesTraditionalistsSmall Retail StoresSmall Industrial Wholesale DistributorsNeeds Based SegmentationAn Example of one way in which service ne
9、eds may be segmented is to consider order fulfillment requirements and sales and merchandising needs.Segment Customers Based on Needs-Example:Need Based Segmentation 1999 Andersen Consulting5nPoor on-time delivery performance nMultiple plans functionally“optimized”nLong product delivery lead timesnF
10、ixed planning cycles and dated technologynPlanning independent of supply and demand chain partnersnLimited decision support capabilitynFast and accurate order promisingnDevelop single shared plan across the enterprisenLead time is a competitive weaponnRapid response to changes in demandnCollaboratio
11、n and synchronization with business partners on supply chain activitiesnUse of simulation technologies to support business decisions Traditional Opportunities Many organizations have identified customer-driven planning processes built around creating the“perfect order”,hitting the delivery date on t
12、ime in one complete damage-free shipment,supported by timely communication flows.Plan According to Market Demand Signals6Collaborative Planning and Execution in the PC industry has emerged as a method to improve alignment of supply and demand.Exacerbated by.Short product life cyclesProduct shortages
13、 Independent planning and execution decisionsPromoted by.Shared forecasting and demand Synchronized order fulfillmentJoint capacity planningCollaborativePlanningandExecutionSupply-Demand MismatchSupply-Demand AlignmentLaunch dateEnd of LifeTrue End Consumer DemandChannel OrdersSupplyUnitsUnitsTimeTi
14、meTrue End Consumer DemandChannel OrdersSupplyLaunch dateEnd of LifePlan According to Market Demand Signals-Example 1999 Andersen Consulting7nStandard product and service delivered to all customersnMake to stocknLong development lead timesnFunctionally based development processesnSegment based servi
15、ces with products configured to needs of customernTimely delivery of“shelf ready”product(package to order)nRapid development cycle timesnTeam-based development processesnWeb enabled design integrationnIntellectual capital leveraged for competitive advantage Traditional Opportunities Mass production
16、manufacturing efficiencies no longer provide competitive advantage.The ability to design flexibility into products and production processes will allow companies to give their customers exactly what they want faster and with less cost.Design&Differentiate Closer to CustomerPostponement is one practic
17、e of this principle.1999 Andersen Consulting8High performing global electronics companies change their demand forecasts much closer to production than low and medium performers-75%of them within a week of production.Source:Marketing and Manufacturing Managers(4/2/97 data)-How Close to Production Can
18、 Marketing Formally Change the Demand Forecast-0%25%50%75%100%LowPerformersHigherPerformers60%20%20%55%27%18%25%45%30%MediumPerformersDesign&Differentiate Closer to Customer-Example:Change Demand Forecast 1999 Andersen Consulting9nBuild to a mix of orders and forecastnComplex planning process suppor
19、ted by MRP/ERP softwarenLot sizes based on procurement and economies of scalenJust In Time delivery from vendor warehousesnSophisticated shop floor control systemsnQuality inspected into product according to part specificationnCustomer demand linked directly to manufacturingnQuick response or vendor
20、 managed replenishment(or VMI)nWeb-based integration to suppliers and customers for point of consumption datanTeam based focused factory work organization with flexible multi-skilled operators and few indirect staffnQuality engineered in the product and manufacturing process through joint developmen
21、t Traditional Opportunities Production strategies are evolving rapidly and provide a sustainable source of competitive advantage.Customer-driven manufacturing is designed to improve manufacturing operations,but the concepts apply across the supply chain.Customer-Driven Manufacturing 1999 Andersen Co
22、nsulting10High performing global electronics companies score higher on traditional internal manufacturing metrics.Andersen Consultings 1997 Global Electronics StudyCompleted Order Fill Rate0%25%50%75%100%LowPerformersHigherPerformers18%Cycle Time(PC and Other Companies)01Weeks 2LowPerformersHigherPe
23、rformers67%-Internal Manufacturing Metrics-Customer-Driven Manufacturing-Example:Performance Metrics 1999 Andersen Consulting11Old ParadigmEngineering problemControl$“Crisis planning”Best of Breed toolsComponent teams“Mfg will fix it”Were done at Job 1“Firefighter”New ParadigmProduct developmentHour
24、s,quality,$Common methodologyIntegrated toolsPlatform teamsConcurrent viewProcess metrics“By the book”-A Cultural Change-The introduction of a new“manufacturing”culture focused on material flow and control,quality,and a team-based approach has produced significant improvements.-Benefits-Customer-Dri
25、ven Manufacturing-Example:Manufacturing Culture Change 1999 Andersen Consulting12nPrice focusednReduced number of vendorsnEDI links to vendorsnMinimal focus on non-production purchasesnVendors viewed as resources not assets(only contact is through purchasing-negotiate price,place order)nSupplier bas
26、ed inspection and quality reviewsnTotal lifecycle cost and value focusnGrouping commodities to leverage buying powernTotal cost of ownershipnVendor integration into supply chainnFact-based negotiationnLeverage suppliers knowledge in product designnWeb-based planning and consumption nAutomated compli
27、ance to contractnJoint cost and time reduction through robust design and process capabilities Traditional Opportunities Traditionally,manufacturers have had a short term“best pricing”focus.However,leading edge manufacturers realize“our suppliers costs are in effect our costs.”Strategically Source an
28、d Produce135-20%cost reduction Fact-Based Negotiation Total cost approacheProcurements value proposition is high because it reduces operating costs for both buyers and suppliers.How can we save so much?Savings for BuyerVolume LeverageProductivityInventorySavings for SupplierSales&Order Mgt.Time to C
29、ollectInventoryStrategically Source and Produce-Example:Ariba Alliance 1999 Andersen Consulting14Profit Impact%of total spendCriticalityImportance of quality(Will unsatisfied supply lead to shut down?drop in productivity?disqualified products or services?Lost opportunities for growth?)Impact of shor
30、tageValue added provided by vendorSupply RiskNumber of vendors capable of delivering quantity&quality requiredIntensity of competition among suppliersExistence of competitive demandPrice fluctuation/Price riskLead time/Delivery riskSubstitution possibilityTo differentiate among items purchased,two d
31、imensions stand out in the Item Management Matrix.Strategically Source and Produce-Example:CAPCO Strategic Soucing 1999 Andersen Consulting15Strategically Source and Produce-Example:CAPCO Strategic SoucingWithin the Item Management Matrix,Items purchased can be further grouped into 4 quadrants.Mater
32、ials ManagementSupply ManagementPurchasing ManagementSourcing ManagementLowHighLowHighLeverageItemsStrategic ItemsNon-critical ItemsBottleneck ItemsProfit ImpactSupply RiskItem Management Matrix 1999 Andersen Consulting16Levels of SophisticationNon-critical items:Decision Level-Lower management leve
33、lDecision Authority-Delegated to end-users,and audited afterwards;PA initiated intervention,when formal contracting and vendor consolidation is justified Procurement Focus-Convenient for businessMain Tasks-Convenient transaction modes(e.g.B/O with EDI hookup);Vendor consolidation;Product standardiza
34、tion;Inventory optimization;Sources-Local suppliers with alternative ones identifiedTime horizon-up to 12 monthsLeverage items:Decision Level-Medium management levelDecision Authority-Category teamProcurement Focus-Reduce profit impactMain Tasks-Exploitation of purchasing power;Monitoring possibilit
35、y of solution substitution;Requests for more value-added services;Sources-Chiefly suppliers with local presence;alternative ones qualifiedTime horizon-1-3 yearsBottleneck items:Decision Level-Senior management levelDecision Authority-Category teamProcurement Focus-Reduce supply risksMain Tasks-Volum
36、e and quality insurance;Security of inventory;Exploration of alternatives;Sources-Mostly highly dependent on the resources necessary for de-bottleneck;alternative ones exploredTime horizon-Variable,dependent on the nature of supply risksStrategic items:Decision Level-Top management levelDecision Aut
37、hority-Category team consists of senior managementProcurement Focus-Make conscious decisions to balance profit impact and supply risksMain Tasks-Formulation of supply management strategies explicitly linked to the corporate strategy;Partnering with suppliers to identify joint-cost reduction opportun
38、ities;Active exploration of opportunities of alliance with members in the value chain or even with complementor in other industries(e.g.purchasing group)Sources-Global suppliersTime horizon-Over 3 yearsDifferent quadrants imply different procurement management approaches.Strategically Source and Pro
39、duce-Example:CAPCO Strategic Soucing 1999 Andersen Consulting17All purchase items are put into 4 quadrants and different soucing strategies and purchasing processes are defined to optimize procurement cost.HighLowHighSupply RiskLowProfit ImpactPXHACSmall-Scale ProjectLarge-Scale ProjectSpecialtyChem
40、icalsGasTankageTransportationGeneralServiceGeneralInsuranceUtilityCommonSpare PartsCapital Equipment&Specialized Spare PartsItem Management MatrixStrategically Source and Produce-Example:CAPCO Strategic SoucingExpected to release benefits at least US$10 Million annually.1999 Andersen Consulting18Cus
41、tomize the logistics network to the service requirements and profitability of customer segments.nLogistics network designed to meet a single standardnTypically either:nAverage or Toughestservice requirementsnCross-dockingnLogistics independent of manufacturingnCompany owned warehousing and dedicated
42、 fleetsnMulti-level logistics network to provide segment-specific servicesnRobust logistics planning enabled by“real-time”decision support toolsnOutsource some or all elements of the supply chainnInclusion of value added logistics provider or Fourth Party Logistics providernIntegrate the manufacturi
43、ng and logistics processesnConfigure the network to reduce cost and replenishment lead time Traditional Opportunities.of course,customer needs and preferences do not tell the whole story,the service packages must turn a profit.Customize the Logistics Network 1999 Andersen Consulting191,2001,00080060
44、04002000$8,470$7,700$10,010$8,000BaselineOption 1Option 3Option 2Customer FreightInterfacility FreightTotal Network Cost($000)10,20010,10010,0009,0008,0007,000Total Network Cost($000)5060708090100Option 1Option 4Option 2Option 6Option 3Option 5Percentage of Volume within Target Lead TimeTotal Logist
45、ics CostCost Service Trade-off CurveWarehousingInventory CarryingEfficient distribution strategies may require analysis of alternative network scenarios which balance cost and service requirements.Customize the Logistics Network-Example:Cost Service Trade-off Curve 1999 Andersen Consulting20By movin
46、g from a myopic view of individual optimization to a channel-wide view,estimates in the food industry suggest 42%reduction in per case logistics cost and 73%reduction in total days in the systemValue-addedDistributorFoodRetailerDistributionCentresSupplierDistributionCentresIndividual OptimizationCha
47、nnel-wide OptimizationTransition to Channel-Wide OptimizationAverage cost/case=$2.36#of days to the store=73Average cost/case=$1.37#of days to the store=24Customize the Logistics Network-Example:Channel-wide Optimization 1999 Andersen Consulting21nEDInShop floor controlnFunctionally based systems ac
48、quisitionsnSeparate or disparate systemsnPoor customer to operations linksnIndependent financial systems(no true purchase-to-pay or order-to-receive model)nLeverage web capabilities to span the entire supply chainnGlobalization of corporate systemsnInformation clearing housesnSupply chain optimizati
49、on using decision support toolsnBusiness simulation trainingnElectronic links to customer demandnAutomated order generation for POs with trackingnCustomer connectivity(analysis and response to promotions and marketing impact Traditional Opportunities Mass production manufacturing efficiencies no lon
50、ger provide competitive advantage.The ability to design flexibility into products and production processes will allow companies to give their customers exactly what they want faster and with less cost.Supply Chain-wide Technology Strategy 1999 Andersen Consulting22Supply Chain-wide Technology Strate
