MANGT 660 (A): Supply Chain Planning and Control Chapter 12 Manufacturing Focused Supply Chain Integration (2/2)

Supply Chain Integration SC excellence cannot be achieved without an integrated SC P&C system involving: 1.Information sharing across the SC Coordination of purchasing, manufacturing, and resource-planning information 2.Systems design and implementation of relevant processes Example: Supply Chain Operations Reference (SCOR) model – Provides a supply chain framework for integrating supply chain processes with related terminology, metrics, and best practices. 2

1. Information Sharing The 3 aspects of information sharing: 1)Information-sharing support technology 2)Information content 3)Information quality 3

1-1. Information-Sharing Support Technology Investment in information technology (IT) Three categories based on the length of the planning periods: 1)Supply chain execution Focuses on short-term daily activities Examples: Efficient warehouse management, transportation management, and collaborative manufacturing 4

1-1. Information-Sharing Support Technology (cont’d) 2)Supply chain planning Focuses on medium- to long-term activities 3)Supply chain execution management Supporting tools bridging “supply chain execution” and “supply chain planning” 5

1-2. Information Content Choosing the appropriate information to share Can be classified by content Manufacturer information Distribution information Retailer information Supplier information Customer information 6

1-3. Information Quality The degree to which the information shared meets the needs of the organizations The 9 aspects of information quality 1)Accuracy 2)Availability 3)Timeliness 4)Internal connectivity 5)External connectivity 6)Completeness 7)Relevance 8)Accessibility 9)Frequency of updates 7

Information Sharing and Supply Chain Practice: Example 1 Dell – Customer information Direct receipt of customer order information from website Real time price updates Customization – Manufacture information Direct sharing of order information – Supplier information backlog and inventory 8

Virtual manufacturing model – Outsourced more than 50% of production capacity Customer information – Orders through online customer interfaces Manufacture information – Electronic order sharing with component suppliers Supplier information – Suppliers are involved in Cisco’s product design process 9 Information Sharing and Supply Chain Practice: Example 2

2. SCOR Model Supply chain operations reference (SCOR) model – Integrating the business planning function with the production function (S&OP) – Includes customer interactions, physical transactions, and market interactions 10

2. SCOR Model (cont’d) Supply chain operations reference (SCOR) model – A process reference model developed by PwC and endorsed by the Supply- Chain Council (SCC) – A cross-industry de facto standard diagnostic tool for supply chain management. – A management tool, spanning from the supplier’s supplier to the customer’s customer 11

2. SCOR Model (cont’d) Supply chain operations reference (SCOR) model (cont’d) – Integrating the business planning function with the production function (S&OP) – Includes customer interactions, physical transactions, and market interactions – Enables users to address, improve, and communicate SCM practices within and between all interested parties in the extended enterprise 12

2. SCOR Model (cont’d) The Benefits – Faster cycle times, less inventory – Improved visibility of the supply chain – Access to important customer information in a timely fashion 13

2. SCOR Model (cont’d) Levels of the SCOR model 14 Level 1 (Process Types) Level 1 (Process Types) Defines the scope and content Level 2 (Process Categories) Level 2 (Process Categories) Choose the Configuration of processes Level 3 (Decompose Processes) Level 3 (Decompose Processes) Specify the best practices of each process Level 4 (Decompose Process Elements) Level 4 (Decompose Process Elements) Define practices to achieve competitive advantage

Level 1 (Process Types) Plan Source (Buyer– Supplier Relationship) Make (Transformati on Process) Deliver (Outbound Logistics) Business Plan Supply Chain 15

1) Plan (Planning) Processes intended to develop a course of action that best meets sourcing, production, and delivery requirements – Balance aggregate demand and supply to develop a course of action which best meets sourcing, production, and delivery requirements – Use historical data for demand forecast development – Information gathering and re-balance supply chains in real time 16

2) Source (Buyer–Supplier Relationship) Processes that procure goods and services to meet planned or actual demand – Connects manufacturers with suppliers Good practices – Use designated cross-functional procurement team – Establish long-term supplier–buyer relationships – Reduce the supplier base – JIT delivery from suppliers – Supplier performance evaluations and providing feedback 17

3) Make (Transformation Process) Processes that transform raw materials into finished goods to meet supply chain demand The 4 groups of practices – JIT production – Total preventive maintenance (TPM) – Total quality management (TQM) – Human resource management (HRM) 18

4) Deliver (Outbound Logistics) Processes that provide finished goods and services to meet planned or actual demand Good practices – Share real-time information with supply chain partners – JIT delivery – Using a single contact point for all order inquiries 19