Supply Chain Management,Accelerating Cost Effectiveness,Supply Chain Management,The supply chain used to be a simple serial process with raw materials slowly moving in one direction through manufacturing production and onward via a distribution system to retailers and customers.Today, the talk is of "supply networks", "parallel chains", "enhanced concurrent activities", and “customer centric” with new information platforms and technology set to cut both inventory and lead-times throughout the delivery pipeline further.,Top Issues Facing SCM Professionals,In a recent quantitative survey, SCM professionals were asked a open-ended subjective question, “What are the three biggest issues facing you personally in developing your logistics strategy?”,Source: AMR Research 2000,The top three responses were;Cost (21%), Systems Applications (20%) and Integration (19%),SCM Benefits,Manufacturer,Distributors/Wholesalers,Customers,Suppliers,Retailers,Materials Flows Information FlowsCash Flows,US companies expect to reap $3-400B of savings through a variety of benefits (3 5% of revenues),Source: PRTM,Move From Push To Pull,Make what we sell, not sell what we make!,Move to Cross-Functional Business Processes,Purchasing,Manufacturing,Distribution,Install/Maintenance,Sales,Source,Make,Deliver,Install,Sell,Order Fulfillment,Available-to-Promise,Sales & Operations Planning,Department Performance,Supply Chain Optimization,Synchronized, Sequential Planning,Forecasting,DistributionPlanning,Manufacturing Planning,ProcurementPlanning,Supply Chain Optimization,Synchronized, Concurrent Planning,DemandPlanning,DistributionPlanning,Manufacturing Planning,ProcurementPlanning,Purchasing,Manufacturing,Distribution,Install/Maintenance,Sales,Cross-Functional Supply Chain Metrics,Process Performance,Source,Make,Deliver,Install,Sell,Perfect Order Process,Sharing and Collaboration,Manufacturer,Distributors/Wholesalers,Suppliers,Retailers,Synchronized Production SchedulingCollaborative Product Development,Collaborative Demand Planning,Collaborative Logistics Planning Transportation services Distribution center services,Full Value Procurement,Objective,Lowest total cost of ownershipQuality meeting customer needsOn-time deliveryAcceptable supply riskProcess efficiencyDemand reduction,Underpinned by procurement infrastructure excellence,PurchasePrice,Acquisition,Installation,Maintenance,Disposal,Strategic Souring,Traditional,Progressive,Tactical EmphasisAcquisition Cost FocusStaff FunctionCost CenterReactive,Strategic EmphasisTotal Cost FocusProfit CenterProactive,Tactical,Strategic,Tactical,Strategic,Evolving Model of Procurement,Logistic and Transportation,Logistics accounts for 8-12% of sales. In 1998, it accounted for over 10% of the US GDPLogistic is one of the glues that holds the supply chain together. The techniques that most manufacturers employ to increase speed and reducing cost is outsourcingAverage cost reductions from outsourcing is 32% The 3PL market has enjoyed explosive growth over the past 5 years. Most 3PLs have reported annual growth rate of 25-50%,Source: industry week,Manufacturing,Manufacturing managers view efficiency and flexibility as two objectives which must be balanced in order to arrive the lowest total costWorld-class companies adopt strategies and tactics such as pull system, JIT replenishment, and cycle time reductions that enables a company to have lower levels of inventory while still driving reductions in production unit cost Companies frequently underestimate the commitment required to achieve an effective quality improvement which result in operation cost increases.,StrategicBusinessPlanning,Forecasting and Planning,hours,days,weeks,months,year +,Operational,Tactical,Strategic,Scheduling,Rolling Forecast,Demand Planning,Manufacturing Planning,Scheduling,Distribution Planning,OrderPromise,SourceMakeMoveStoreSell,Top Issues Facing SCM Professionals,e-Business is a relatively low priority, coming in sixth of the top issues facing SCM professionals.However, this does not reflect the impact that e-Business will have on Supply Chain Management,Source: AMR Research 2000,e-Business will fundamentally change SCM,ENTERPRISE OPTIMIZATION,Procure,ProduceProducts,ManageLogistics,ForecastDemand,Optimize,NETWORK OPTIMIZATION,A,F,D,G,C,E,B,Company,Company,Company,Company,Company,Company,e-Business Is Driving a Fundamental Transformation in SCM,The larger the network of companies the greater the power of the network to reduce cost for its membersIncreased leverage with suppliersBroader market access for suppliersExpanded community and collaboration opportunitiesGreater integration across market supply chains,NetworkEffect,Economies of Scale,The larger the Meta-Market the faster it can form and launch facilitate the operational excellentBroader communities to allocate R&D cost Operational efficiencies via back office shared services Depth of industry and procurement knowledge and resources available to develop supplier contracts,Company,The Impact of e-Business on SCM,e-Business affects four broad categories that determine the production and transaction costs of a firm: The cost of executing a saleThe costs associated with procuring production inputsThe costs associated with making and delivering a product or service The cost associated with logistics,The Cost of e-Business SalesAccessibility,An e-Business web site is open 24 hours per day, 7 days per week. A business no longer has to build separate physical establishments to attract a larger customer base. A virtual storefront also allows an e-business to manage one store instead of multiple stores, thus eliminating duplicate inventory costs.,The Cost of e-Business SalesOrder Rework,Another aspect of e-Business is that it enables more efficient order configuration. For example, both General Electric (GE) and Cisco Systems reported nearly one-quarter of their pre-Web-site orders had to be reworked because of errors-a total of more than 1 million orders, in the case of GE. Since adopting a Web-enabled customer interface, Cisco reports an error rate of only 2 percent.,The Cost of e-Business SalesFundamental Shift,Clearly, e-Business represents a fundamental shift in how the sales process is executed by a company. As a result, e-Business compels existing businesses to re-examine how they interact with customers, even as new entrants exploit e-Businesses to reach customer bases previously thought unreachable.,Low,High,Cost of Sale,“Off-the-Rack”,Customised,Value-Addedof Sale,DirectSales,Face-to-face sales$500/sales contact,Distributors/VARs$2-300/sales contact,Telephone sales and service$25 per sales contact,No human contact$1 per sales contact,Resellers,Tele-channel,ElectronicChannels,Source: Dr. Rowland Moriarty, Cubex Corp.,The Costs Associated With Procuring Production Inputs,Web-based procurement of maintenance, repair, and operations (MRO) supplies is expected to reach more than $100 billion worldwide by the year 2000. MRO comprises those goods required to run a company that are not raw materials used in the direct manufacture of a product or the provision of a service.,Profit,OtherCosts,Purchases,100,100,45,50,45,47.5,5,7.5,-5%,A 5% reduction in purchase cost can result in a 50% increase in profit margin.,+50%,The Costs Associated With Procuring Production Inputs,Lower transaction costs coupled with the ability to enforce purchasing policy across the enterprise have been instrumental in driving Web-based MRO procurement. Two additional factors have accelerated the trend. The first factor is a defensive reaction by firms that note the cost savings being enjoyed by rivals switching to an e-business procurement mode. The second, and possibly more important factor is the insistence by large firms such as Ford, that their suppliers link into their Web-based procurement systems as a condition of doing business with them.,Source: RB Weber,COST PER PO,POTENTIAL COST PER PO,CURRENTCOST PER PO,The Cost of e-Business Supply Chain Management,Even the scope of MRO procurement pales beside the possibilities for reorganizing supply chains around e-business. Rather than increasing production and inventory in advance of actual customer demand, e-businesses are looking to make both their own supply chains and those of their customers and suppliers respond in real time to actual sales.,Supplier,Manufacturer,Distribution,Retailer,Consumer,Information,The Cost of e-Business Supply Chain Management,Visibility of the entire supply chain is necessary so a business can analyse the interplay between interactions such as procuring materials, components, and subassemblies from various suppliers; shifting production between installations or business partners; and moving goods to the final consumer. Understanding relationships between all players in a particular value chain allows an e-business to adjust to new contingencies in real time.,The Transformation of Logistics,e-Business transforms logistics from simply packaging and moving goods and turns it into an information business. Introducing online parcel order and tracking via a proprietary network in 1983, Federal Express took nearly 12 years to sign up 50,000 customers. In 3 years, between 1995-1998, after FedEx offered essentially the same service via the Web, the number of customers rose to 1 million. FedEx estimates nearly 70 percent of the 3 million packages it processes each day now are initiated via interactive networks.,Supply Chain Management,e-BusinessDriving Transparency,When building visibility of the entire supply chain, this also includes customers. e-Business gives the customer access to the suppliers product data, ordering and delivery information. This drives transparency within the organization and forces the supplier to develop better delivery and support systems.,Enterprise,Connectivity,Product Lifecycle Management,CustomerManagement,Design Partners,Consumers and Channels,Recommendations,Include e-business as part of your top three supply chain agenda items. Put in effort to articulate a value proposition for e-business within your company, and the impact it will have on your supply chain. Seek and gain cross-functional and key trading partner alignment on your strategy.Look for additional learning opportunities. Look at the early adopter or e-business-oriented companies, e-business consultants, system integrators, and colleagues in supply chain management. Lessons can be learned in both the Business-to-Consumer (B2C), as well as Business-to-Business (B2B) domains. Broaden your perspectives on e-business beyond customer interaction and supply chain cost savings. Consider the broader implications of supplier and trading partner visibility, Business Community Integration (BCI), and partner collaboration. A broadened perspective can yield greater opportunities for leveraging e-business processes within the supply chain.Consider some form of electronic marketplace adoption as part of your supply chain strategy. Evaluate the long-term presence of trading exchanges according to the value-added services they can provide that are over and above procurement transactional cost savings. Evaluate your strategies to impact both the sell-side and the buy-side processes.,