CHAPTER 13- SUPPLY CHAIN PROCESS CHAPTER 13- SUPPLY CHAIN PROCESS INTEGRATIONINTEGRATION

Principles of Supply Chain Management: A Balanced Approach

Prepared by Daniel A. Glaser-Segura, PhD

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 2

IntroductionIntroduction

Primary Goal of Supply Chain Management- create value for the end customers as well as the firms in the supply chain network. Firms in the supply chain network must integrate process activities internally & with other firms in the network.

– Process integration means coordinating & sharing information & resources to jointly manage a process.

– Process integration is often a difficult task & requires:• Training • Willing & competent partners• Trust• Organizational culture change

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 3

The Supply Chain Management The Supply Chain Management Integration ModelIntegration Model

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 4

The Supply Chain Management The Supply Chain Management Integration Model- Cont.Integration Model- Cont.

Identify Critical Supply Chain Trading Partners– Enable sale & delivery of end products to final customers– Identifying primary trading partners allows the firm to

concentrate on managing these linksReview & Establish Supply Chain Strategies regarding:

– Parts purchased & suppliers– Shop layout & manufacturing processes– Design of the products manufactured– Mode of transportation– Warranty & return services– Employee training methods – Types of information technologies used

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 5

The Supply Chain Management The Supply Chain Management Integration Model- Cont.Integration Model- Cont.

Align SC Strategies with Key SC Process Objectives

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 6

The Supply Chain Management The Supply Chain Management Integration Model- Cont.Integration Model- Cont.

Develop Internal Performance Measures for Key Processes– Performance should be continuously measured w/metrics for

each process.– ERP systems support internal performance measures – Firm is able to track progress for each of the key processes.

Assess & Improve Internal Integration of Key SC Processes. Internal integration requires:

– Empowered teams & cooperation across all functions– Management support & resources – ERP system – an understanding of the internal supply chain

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 7

KPI DashboardKPI Dashboard

Manhattan Associates Videos

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 8

The Supply Chain Management The Supply Chain Management Integration Model- Cont.Integration Model- Cont.

Develop SC Performance Measures for Key Processes– Monitor the links with trading partners in the key SCM processes.– Trading partners should monitor a number of cost-oriented

measures averaged across the member firms for each of the key supply chain processes.

Assess & Improve External Process Integration & Performance– Build, maintain & strengthen relationships – Share information concerning:

• Sales, forecast information, new products, expansion plans, new processes, & new marketing campaigns process integration will enable firms to collaborate & share this information.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 9

The Supply Chain Management The Supply Chain Management Integration Model- Cont.Integration Model- Cont.

Extend Process Integration to Second-Tier SC Partners– Integrate process to second-tier partners & beyond– Radio-frequency identification (RFID) tag- Microchip device

relays information on product’s whereabouts as it moves through the supply chain.

– Price of RFID tags is economical (about 5 cents each).• RFID Video

Reevaluate the Integration Model Annually– Trading partners should revisit the integration model annually to

identify changes within supply chains & to assess the impact these changes have on integration efforts.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 10

Obstacles to Process Integration Along Obstacles to Process Integration Along the Supply Chainthe Supply Chain

The Silo Mentality– “I win, you lose” – Using the cheapest suppliers.– Ignoring customers.– Assigning few resources to new

product & service design.Firm must strive to align SC goals & the

goals & incentives of the firmPerformance reviews of managers must

include their ability to integrate processes internally & externally.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 11

Obstacles to Process Integration Along Obstacles to Process Integration Along the Supply Chain- Cont.the Supply Chain- Cont.

Lack of Supply Chain Visibility– In a 2002 survey, 67% of manufacturers had not yet successfully

synchronized their supply chain operations with those of their trading partners

– And 67% said they used different supply chain management applications than their partners 1

RFID technology promises to add real-time information visibility to supply chains.

– Technology boards & user boards are being formed now to develop standards & electronic product codes (ePCs) for the RFID industry.

[1] Anonymous, “Survey Finds Manufacturers’ Supply Chains Come Up Short,” Logistics Management 41, no. 9 (2002): 19-20.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 12

Obstacles to Process Integration Along Obstacles to Process Integration Along the Supply Chain- Cont.the Supply Chain- Cont.

Lack of TrustSuccessful process integration between partners requires trust.Trust occurs over time- Partners earn trust.

Creating collaboration & trust are based on:– Start small: Pick a project likely to provide a quick return.– Look inward: establishing trust with internal constituents.– Gather ‘round: meet face-to-face.– Go for the win-win: optimize business for all SC members.– Do not give away the store: Some information should remain

proprietary– Just do it: Simple start - sharing information.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

© 2005 Thomson Business and Professional Publishing 13

Obstacles to Process Integration Along Obstacles to Process Integration Along the Supply Chain- Cont.the Supply Chain- Cont.

Lack of Knowledge– In a survey of 122 executives

practicing SCM, 43 % said lack of core SCM skills & knowledge was the greatest obstacle within their own organizations, & 54 % echoed this opinion for their trading partners.1

– Firms successfully managing their supply chains must spend significant time influencing & increasing the capabilities of themselves & their partners.

[1] Bachelor, B “Implementation Imperative Information Week (28 April 2003), 62-66