Optimizing the supply chain presents challenges… that can be overcome Next steps. Despite new and integrated methods of payment, cash Logistics strategy concept. CB industry.
Retail banking. Network optimization. Optimize distribution centres and retail locations to reduce cost of. A literature analysis of Walmart's supply chain excellence in term of integration, distribution and Supply Chain Management, Information technology, Logistics, retail industry, partnership, operations, lean Oracle Transportation Management enables companies to meet these supply chain challenges.
Operational Planning: Customers can apply their specific business rules and logic in conjunction with powerful Agro-industrial supply chain management: concepts and applications. Rome, SCM is the integrated planning, implementation, coordination and control of all. This paper provides a conceptual model that provide guidance in supply chain decision making for business expansion.
It presents a mathematical model for production-distribution of an integrated supply chain derived from current operations of SBC Tanzania Ltd which is a major supply chain that Threats: Changes in the external environmental may also present threats to the firm. Using the SWOT framework, you can start to develop a strategy that helps you distinguish your organization from your competitors so that you can compete successfully in your markets. The supply chain must then be managed to support these strategies.
As a result, he describes how the supply chain strategy is driven by the interrelation among four main elements see Figure 2. Four drivers can impact supply chain design: Demand variation: This can be a wide array of manufacturing and supply chain costs and is therefore a major driver of efficiency and ultimately cost. Product lifecycle: Advances in technology as well as consumer trends have reduced the time to bring an item to market as well as its useful life.
Affects demand variability as well as marketing and supply chain costs. Relevance of the cost of assets to total cost: Largely affects businesses requiring a high utilization rate to remain profitable for example, chemical industry. This encourages a push mentality to gain high utilization of assets but can result in higher than inventory costs and lower service levels.
Industries that have lower cost assets can focus on being more responsive. Managerial Focus To be successful, an organization must make sure that its supply chain is linked and aligned with its competitive priorities. This can only be accomplished via its decision-making process and management focus. It can be very easy for management to only focus on efficiency-oriented performance measurements at the expense of the competitive priorities set by the company. A misalignment can result with the supply chain being suboptimized by attaining local cost efficiencies at the cost of the value proposition offered to the customer.
Internal Processes Internal processes must be connected and aligned properly. It is of critical importance to determine the appropriate decoupling point that is, where a product takes on unique characteristics or specifications. This goes in to determining which parts of your internal processes are push that is, high asset utilization rate; just before the decoupling point versus pull that is, workload driven by customer demand.
Supply Chain Strategy Methodology So how might one go about actually establishing a departmental or functional supply chain strategy for your organization? Paul Dittman, in his book Supply Chain Transformation Dittman, , suggests using nine steps when developing a supply chain strategy. I have modified those slightly for purposes of clarity and results: 1.
Delivering customer value is critical to a business, as mentioned earlier. However, delivering financial value to your shareholders is also important, and is reflected in various business performance measures such as profit and market growth.
Supply chain strategy should target to deliver customer value while at the same time meet shareholder needs by enabling reliable supply and logistics service, low inventory cost, and short cash-to-cash cycle times.
Using the SCOR model processes of plan, source, make, deliver, and return can be a great way to make sure that customer and shareholder value are in alignment. Steps 2—6 that follow involve using a kind of SWOT analysis for your supply chain organization. Assess current supply chain capabilities relative to best in class. This can be accomplished through observation, interviews, data gathering, and benchmarking your organization against industry bestin-class performance.
For example, if you have a time-based strategy, speed of delivery may be important, whereas cost of delivery relatively speaking may not be as important in terms of achieving best-in-class status. Developing a gap analysis of your current versus ideal future state based on this analysis can contribute to a clear and easy-to-follow roadmap. Evaluate supply chain game changers. It is important to scan the environment on a regular basis to see what trends may impact customers and the supply chain.
Analyze the competition. If you plan on using your supply chain to achieve a competitive advantage, this is a must do. Survey technology. Sometimes it is better to not be on the bleeding edge when it comes to technology. When I was at Uniliver, they had spent hundreds of thousands of dollars on artificial intelligence technology to deploy finished goods inventory to their distribution centers.
It never really went anywhere at least to my knowledge , for a variety of reasons. Deal with supply chain risk. Risk management needs to be part of the strategy document. External risks, which are out of your control, can be driven by events either upstream or downstream in the supply chain. Here are the main types of external risks: Demand risks: Can be caused by unpredictable customer or endcustomer demand. Supply risks: These types of risks are caused by interruptions to the flow of product for raw material or components, within your supply chain.
For example, if you are utilizing a just-in-time JIT strategy for a critical part or component, you need to think long and hard as to what risks are involved, because you do not want to risk shutting down a production line due to a critical part that you have sole sourced suddenly becoming unavailable. Environmental risks: Come from outside the supply chain. These risks usually relate to economic, social, governmental, and climate factors, and include the threat of terrorism.
Now that you have identified what adds value to your customers while making sure it is aligned with shareholder needs, as well as identified possible current and future performance gaps in your supply chain, a road map for future success can be developed. Develop new supply chain capability requirements and create a plan to get there. Evaluate current supply chain organizational structure, people, and metrics.
There is no one-size-fits-all approach for creating an organization. Traditional supply chain organizations are functionally oriented. In the s and s, companies started to transition to structures that grouped some core supply chain functions within one department. From around onward, the philosophy of the supply chain as an end-to-end process took hold more often than not with a director or vice president of supply chain overseeing the operation.
This also requires giving that manager a set of cross-functional performance objectives and metrics and the resources they require to meet these objectives This type of organization requires an evaluation of existing capabilities and identification of any gaps between currently available skills and those needed to support this end-to-end strategy.
Develop a business case and get buy-in. Of course, any type of change typically has to be approved by management. To do this, you need to develop a business case, because whenever resources such as money or effort are utilized, they should be in support of a specific business need. Different aspects of the enterprise can now coordinate their procurement efforts and material flows to increase operating efficiency, and take advantage of their combined buying power to negotiate better prices and contract terms.
We live in volatile times. There are many external threats to our supply chain now and in the future. Organizations that do not wrap their minds around this will continue to struggle with meeting ever-increasing volatile demand, which in many cases is caused by incentives and promotions resulting in manufacturing and purchasing producing larger-than-needed lot sizes, which are pushed through the supply chain, causing inefficiencies throughout.
This is known as the bullwhip effect see Figure 2. This can be caused by a variety of things such as forecast errors, large lot sizes, long setups, panic ordering, variance in lead times, and so on.
Globalization: No area of business is more impacted by globalization than the supply chain. The benefits to globalization include access to more markets, a larger supplier pool, a greater selection of employees, and so on.
On the downside are the various risks mentioned earlier. Supply chain network design is important to managing the changes brought about by globalization and can optimize the number, location, size, and type of facilities and flow of materials throughout the network. Increased competition and price pressures: The commoditization of many products has forced businesses to find better ways to distinguish themselves. They now look to the supply chain to reduce cost and add value to the customer through both the product and service.
Radio frequency identification RFID : The wireless use of radio frequency to transfer data, to identify and track tags attached to objects. Labeling and packaging Drop shipping Collaboration Outsourcing: The supply chain and logistics functions are always a good candidate for outsourcing because they may not be a core competency for an organization. There is, of course, the tradeoff of risk and reward, which requires good supply chain network design integration with the outsourcing partner in the information chain, control mechanisms to monitor the various components of the supply chain, and information systems that connect and coordinate the entire supply chain.
Shortened and more complex product lifecycles: Today there is increasing pressure to develop and introduce new and innovative products quickly. To do this, companies have worked on improving their product lifecycle management PLM processes.
Benefits of PLM to the supply chain include processes and technology to design products that can share common operations, components, or materials with other products.
This can reduce the risk of obsolescence and reduce costs when purchasing key materials. These systems enable processes such as the following: Network and inventory optimization Logistics optimization Product lifecycle management Sales and operations planning Procurement Manufacturing optimization Warehouse operations Business intelligence I would also add the trend of companies that have started applying Lean and Six Sigma concepts to the extended supply chain.
These are both team-based continuous-improvement processes. Lean helps to identify and eliminate waste throughout an organization, and Six Sigma reduces variation in individual processes.
Because they are somewhat complementary, they have now, in many cases, been combined as Lean Six Sigma. There is also the challenge of sustainability as resources have become increasingly constrained due to the global economy and climate change, which has led to governmental regulations that attempt to minimize damage to the environment. All of these issues are covered in more detail in different sections of this book. Supply Chain Talent Pipeline The growth of the importance of the supply chain and logistics field also requires good talent that has a fundamental understanding of both supply chain and logistics concepts and the proper tools and training to analyze and improve it.
Either of those on their own can create challenges for a supply chain organization similar to a hurricane or a severe winter gale. The authors of the study mention that demand for supply chain talent is projected to continue to rise, while the talent gap will become greater as baby boomers start retiring.
That, combined with the increased need for technical skills in a more complex global economy and a possible shortage in supply chain university faculty in the coming years, may be the impetus for a perfect storm of sorts. We all know how accurate the weather forecasts have been lately, so no need to panic in my opinion.
However, it is important to think strategically to avoid potential obstacles like this. The paper also points out the need to plan ahead by focusing on the employee value proposition that is, opportunity, rewards, and so on , making sure that you hire people with the right core competencies, focusing on retention methods, investing in talent and leadership development, and helping to create a talent pipeline by working with high schools and universities to develop the talent.
Supply chain educators try to do their part by encouraging business students to consider supply chain as a major or minor , while giving them a great fundamental understanding of supply chain and logistics management practical concepts and applications and actual experience through internships and team projects. They also help them to develop the skills and abilities necessary to understand and use the various tools and technology available today to manage and improve the supply chain process in this complex global economy.
The authors of the aforementioned article emphasize the need for a tighter industry-academic collaboration to help avoid this perfect storm. It is important that supply chain organizations prepare properly in this regard and in general and take the long view to plan ahead so that they will be able to ride out this or any storm successfully.
Career Opportunities in Supply Chain and Logistics Management The supply chain talent pipeline can be employed in a variety of areas, many which might not be totally obvious to those interested in careers in this field.
When thinking about a supply chain career path, it helps to consider preferences and strengths with regard to mathematics, critical thinking, social, travel, work environment, and so on, because this may steer you down one path versus another.
Next, we examine what I refer to as the planning and scheduling processes that pertain to supply chain operations management. Figure 3. Many companies also operated under a two-number system, where sales and marketing budgeted one number which might be changed only once per quarter and manufacturing developed their own SKU stock keeping unit forecast based on more current sales.
In some cases, there was even a third number used by those responsible for finished goods deployment to distribution centers, which in many cases was based on percentage allocations of one of the two aforementioned national or global forecasts.
As technology became more readily available and more affordable in the mids to early s, many businesses were able to begin to get a better handle on the forecasting process. Using the pyramid approach to forecasting see Figure 3. These onenumber forecasts were able to drive budgeting, production, and deployment simultaneously and be updated typically on a monthly or more often basis.
Forecasting Realities You need to understand certain realities about forecasting before getting into the details of the process: All forecasts are wrong. The idea is to have an integrated, collaborative process that minimizes variance of actual versus target.
A national forecast for a family of items is likely to be more accurate than a weekly forecast for an SKU at a distribution center that handles a region of the country.
We can compensate for some of the inaccuracy through proper inventory planning, factoring in scientific safety stock inventory based on desired service levels and reduced lot sizes and cycle times included in Lean, as covered later in the book. You will get a more accurate forecast using demand history rather than sales history.
Years ago, when data storage costs were high and capacity lower, most companies only stored sales information. Today, most store order or demand information as well. Forecasting really is a blend of art and science. As we will discuss, there are both qualitative and quantitative methods of forecasting.
Today, the best practice is a combination of both, in addition to collaboration with supply chain partners, providing better visibility downstream in the demand chain. Types of Forecasts Organizations have various forecasting needs. The major ones are as follows: Marketing requires forecasts to determine which new products or services to introduce or discontinue, which markets to enter or exit, and which products to promote.
Salespeople use forecasts to make sales plans, because sales quotas are generally based on estimates of future sales. Supply chain managers use forecasts to make production, procurement, and logistical plans. Finance and accounting use forecasts to make financial plans budgeting, capital expenditures, and so on. They also use them to report to Wall Street with regard to their earnings expectations. Demand Drivers In general, demand can be driven by a number of internal and external factors, which need to be identified and understood.
Internal Demand Drivers These types of drivers of demand include sales force incentives, consumer promotions, and discounts to trade. It was only in the past 20 years that some manufacturers and retailers began to better understand the full impact of these drivers on the supply chain resulting in the bullwhip effect. Previously, supply chain and operations were at the mercy of these internal drivers and had to live through the consequences.
Of course, they will always exist to some degree. External Demand Drivers These drivers, although not controllable to any great degree, can be managed better through best practice techniques with a structured methodology in place that employs improved communications and integration with other departments within an organization and with customers. These can include events in the environment that are mostly unpredictable, such as terror attacks and stock market crashes, and others that are due to a lack of good communication and visibility, such as new distribution and larger-thananticipated orders.
Determine the use of the forecast. Varies by industry and company. In the case of manufacturing, it may be to drive production and deployment, in the case of retail it might be to determine purchasing requirements and for pure service companies might be used primarily for labor staffing.
Select the items to be forecasted. Will we be forecasting by individual item in various granulations, and at what levels and units of measure will be need to be able to aggregate forecasts and demand history?
Determine the time horizon of the forecast. Select the forecasting model s and methods. Based on a number of things we will be discussing, such as where a product is in its lifecycle, will we use qualitative, quantitative, or a blend of models? To what degree will we integrate externally supplied information for example, customer forecasts, POS data, CPFR, and so on , and what weight will we give it? Gather the data needed to make the forecas. When using forecasting software, the initial integration will consider much of this, such as using demand versus sales, as mentioned previously, eliminating data errors, and so on.
Once this integration has been created and data validated, it becomes more of a maintenance issue for things such as new and discontinued items. Generate forecasts. Typically, statistical methods are used to generate a baseline forecast, possibly at different levels of detail.
The planner will then usually audit the results and, if needed, try other statistical models. They will then factor in management overrides based on their experience and knowledge as well as promotional plans, sales estimates, and externally supplied information mentioned earlier.
Validate and implement the results. This will ultimately lead to a one-number system that was discussed earlier so that everyone is on the same page. During this time, recent forecast accuracy will be evaluated, as well, to help target improvement. Quantitative Versus Qualitative Models There are two general types of forecasting models: quantitative and qualitative. Qualitative Models The qualitative method is typically used when the situation is somewhat vague and there is little data that exists.
It is useful for creating forecast estimates for new products, services, and technology. Generally, it relies heavily upon intuition and experience. Qualitative methods include knowledge of products, market surveys, jury of executive opinion, and the Delphi method. This same method can be used with other people in the organization such as sales and marketing to gather their estimates.
For example, sale personnel may have an incentive to hit a high target to reach a bonus. It is also important to be able to share forecast and historical data in units of measure and levels of aggregation that are meaningful to others.
For example, the sales department thinks more in terms of revenue dollars, customers, and product categories. So, a good forecasting process and software system should be able to convert data back and forth to both present the data and receive feedback.
Market Surveys Market surveys involve the process of gathering information from actual or potential customers. When I was an employee at Burger King Corporation at their headquarters in Miami, Florida, we would be asked on occasion to visit the test kitchen upstairs. Usually we were asked to compare items that might have subtle differences, like different brands of ketchup.
Another example are focus groups where people are asked about their perceptions, opinions, beliefs, and attitudes toward a product, service, concept, advertisement, idea, or packaging.
Questions are sometimes asked in a group setting, and participants can talk with other group members. Jury of Executive Opinion In the jury of executive opinion forecasting method, managers within the organization get together to discuss their opinions on what sales will be in the future.
These discussion sessions usually resolve around experienced guesses. The resulting forecast is a blend of informed opinions, with some use of statistical methods. Delphi Method In the Delphi method, which is a bit more formal than the jury of executive opinion method, the results of questionnaires are sent to a panel of experts.
Through an iterative process, multiple rounds of questionnaires are sent out, and the anonymous responses are aggregated and shared with the group at the end of each round. The experts are allowed to modify their answers for each round. The Delphi method seeks to reach the correct response through consensus. Both the Delphi and jury of executive opinion forecasting methods are usually a bit more strategic in nature and used more in developing higherlevel longer-terms forecasts.
Quantitative Models As opposed to qualitative methods, quantitative methods are typically used when the situation is fairly stable and historical data exist. Time Series Models Time series forecasting uses a set of evenly spaced numeric data that is obtained by observing response variable at regular time periods.
The forecasts are based on past values and assume that factors influencing past, present, and future will continue. Relatively simple and inexpensive methods such as moving averages and weighted moving averages are used to predict the future. Associative Models Associative often called causal models forecast based on the assumption that the variable to be forecast that is, dependent has a cause-and-effect relationship with one or more other that is, independent variables.
Projections are then based on these associations. Models such as linear and multiple regression are used in this case. Note that the product lifecycle also has an impact on the supply side, as covered in the next chapter. The phases in the lifecycle of a product or service are introduction, growth, maturity, and decline see Figure 3. Growth As a product gains momentum through expanded marketing and distribution, some of the simpler time series methods may be used as minimal demand history becomes available.
A general rule of thumb in forecasting is that to generate a decent statistical forecast, you need at least 12 months of history. So, during this growth phase, forecasting is truly a blend of art and science, as both quantitative and qualitative methods are both used to create a blended forecast. During the growth phase, it can be very easy to over- or underestimate forecasts, which can have dramatic effects on cost and service.
So, great care must be taken, and all lines of communication must be established and open both internally and externally, to avoid surprises where possible which in some cases, such as new distribution, may be hard to avoid.
Maturity When a product reaches maturity, forecast accuracy tends to improve. However, once a product reaches maturity, there are opportunities for brand extensions, which is what happened with baking soda. This went on to baking soda toothpaste, baking soda deodorant, and so on in the years that followed. Paul A. Myerson teaches you all you'll need to start or move forward in your own supply chain career. Writing in plain English, he covers all the planning and management tasks needed to transform resources into finished products and services, and deliver them efficiently to customers.
Using practical examples, Myerson reviews the integration, collaboration, and technology issues that are essential to success in today's complex supply chains.
You'll learn how to measure your supply chain's performance, make it more agile and sustainable, and focus it on what matters most: adding customer value. Myerson, Paul. Verlag: Pearson FT Press , Myerson, , Pearson, , Hardcover Die Inhaltsangabe kann sich auf eine andere Ausgabe dieses Titels beziehen. Add To My Wish List. More Information. Overview Pearson Education, Inc. Collection and Use of Information To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including: Questions and Inquiries For inquiries and questions, we collect the inquiry or question, together with name, contact details email address, phone number and mailing address and any other additional information voluntarily submitted to us through a Contact Us form or an email.
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