Handout Chapter 2 - Core Discipline 2

13/02/2021
Introduction
STRATEGIC SUPPLY CHAIN MANAGEMENT
(Material in this presentation is taken from the following book)
• Supply chain architecture details the process, applications,

STRATEGIC SUPPLY and information needed to improve and evolve your supply
CHAIN MANAGEMENT chain.
The Five Disciplines for Top Performance
• It integrates rules about the process relationships between
by
SHOSHANAH COHEN business entities and ensures alignment between process and
JOSEPH ROUSSEL
supply chain infrastructure (information technology and
COURSE CODE SCM 607 physical assets, such as warehouses, factories, etc.).
C HAPT E R 2 • Companies with supply chain architectures in sync with their
Core Discipline 2 business goals have better overall business performance.
Develop an End-to-End Process Architecture Their supply chains are “fit for purpose.”
Lecture 3
SCM 607 - Lecture 3 - Chapter 2 - Dr. Shaiq 2
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If you don’t
STRATEGIC SUPPLY knowMANAGEMENT
CHAIN it !! FOUR TESTS OF SUPPLY CHAIN ARCHITECTURE
STRATEGIC SUPPLY CHAIN MANAGEMENT
• Strategy: The plans to achieve the organizational goals and • An effective supply chain process architecture satisfies four
objectives. Plan to achieve business mission or say, for tests:
example, how to increase sale by 50% in next three years 1. The test of strategic fit: (Priority should be practices
• Policy: The policy is that the product must be delivered to that truly support your basis of competition).
the customer within 24 hours from the point he or she places 2. The test of end-to-end focus: (Supply chain processes
the order. (The overall guidelines) must ensure end-to-end management)
• Process: The process is that staff will prepare the order for 3. The simplicity test: (Processes should be clear and
delivery, while managers monitor the process. (The flows of easily understood by those who use them).
activity) 4. The integrity test: (Architecture must be highly reliable,
• Procedure: The procedure gets more specific about how this ensuring coherent and robust links among processes,
process will be accomplished. data, and information systems).
SCM 607 - Lecture 3 - Chapter 2 - Dr. Shaiq 3 SCM 607 - Lecture 3 - Chapter 2 - Dr. Shaiq 4
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FOUR TESTS OF SUPPLY CHAIN ARCHITECTURE FOUR TESTS OF SUPPLY CHAIN ARCHITECTURE
STRATEGIC SUPPLY CHAIN MANAGEMENT STRATEGIC SUPPLY CHAIN MANAGEMENT
1- Strategic Fit 1- Strategic Fit
Aligning supply chain practices with the basis of competition
• It’s important before deciding how you want to operate to
think critically about why you need to operate a certain way.
• As you think of what practices and processes to make part of
your supply chain, consider to what extent they’ll drive
forward your supply chain strategy. Just as not all supply
chain strategies make sense given the overall business
strategy, not all practices are equally important given your
supply chain strategy.
• Amazon, the company, which sells millions of different
products, stocks only those items designated as top sellers,
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1- Strategic Fit (Case: Amazon strategy, given in the book) 1- Strategic Fit
• The relevance of specific supply chain practices will change • Supply chain architecture meets the test of strategic fit when
as your supply chain strategy changes. When Amazon was 1. The value of new practices is quantified before they are
founded, developing a core competency in order-fulfillment integrated into the supply chain architecture.
management was not a key element of the company’s 2. New business practices are prioritized based on their
strategy. Amazon’s original business model was to own no ability to drive forward the supply chain strategy.
inventory and simply order products directly from
3. The supply chain architecture is reviewed regularly to
manufacturers or distributors as customers placed orders.
ensure alignment with current strategic direction.
• However, the company found that this model did not provide
adequate control over the supply chain, the customer’s
experience, and the associated transactions. So, it made the
decision to build and operate its own warehouses.
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2- End –to End Focus (Case: Global manufacturer of computer 2- End –to End Focus
peripherals given in the book)
• Supply chain architecture meets the test of end-to-end when
• A supply chain architecture with an end-to-end focus
1. Processes and supporting information systems are
identifies where integration—both internal and external—
integrated within and beyond the enterprise—reaching key
can create value for the company as a whole.
suppliers and customers.
• By integration, we mean shared goals and alignment of the
2. Supply chain resources such as capacity and inventory are
processes, systems, and organizations needed to achieve
optimized across the organization and with key partners
those goals.
3. Standard metrics and quantitative objectives are shared
• Company-level cross-functional objectives are called end-to-
across the organization and with key partners.
end targets.
4. Performance visibility and management are shared across
the organization and with key suppliers and customers.
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3- Simplicity (Case: Alcatel Enterprise) 3- Simplicity a. Supply chain configuration
• Complex supply chains are hard to understand, improve, and • The decisions you make to support your channel strategy,
manage because complexity obstructs the “line of sight” operations strategy, and other components of your supply
needed to identify what is and what is not working. chain strategy can lead to complex supply chain
• If your internal processes, data, and systems are complex, configurations. And complex configurations drive process
the likelihood of supply chain being able to reach consensus complexity.
with your SC partners is greatly reduced. • For example, large number of order-entry desks, warehouses,
• Following are the main 4 drivers of complexity: factories, engineering centers, and other physical locations,
too many customer and supplier relationships directly.
a. Supply chain configuration
b. Product and service proliferation • Read Alcatel Enterprise case
c. Process and information systems inconsistency
d. Over-automation
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3- Simplicity b. Product and Service Proliferation 3- Simplicity c. Process and Systems Inconsistency
• Another key driver of supply chain complexity is product • A third driver of complexity is inconsistent processes and
and service proliferation. Reasons: information systems throughout the supply chain at different
• failure to phase out or retire certain products locations or factories.
• technologies that allow organizations to “mass • When different locations have different processes and
customize” their product offerings systems, the company loses speed and efficiency and is less
• Most companies, therefore, find that they tend to carry an able to leverage knowledge across the organization.
ever-increasing number of products and services. This means • Inconsistency can result from acquisitions
more items to plan, source, make, and deliver—all of which • Finally, process and information inconsistency make it
drive supply chain costs and inventory. difficult to integrate with customers, suppliers, and other
• Read Motorola’s mobile phone division business partners.
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3- Simplicity d. Over-automation 4- Integrity
• Over automated processes are difficult to manage because • Your improvement efforts will encounter major delays and
the people who use them don’t completely understand how budget overruns if your supply chain architecture doesn’t
they work. Without this understanding, users can’t judge the have integrity in the form of integrated applications, accurate
quality of their output or improve their performance. data, and documented processes.
• Trying to build models that represent very complex • During the IT investment boom of the late 1990s, many
operating environments can itself be a cause of failure. companies added CRM and SRM to their portfolios of
• Complexity is the single greatest cause of poor investment systems without having the skills needed to create
returns in supply chain management. bulletproof integration and so failed.
Read about Hershey Company (Confectionary Leader) • Missing links between processes and information systems
result in fragile supply chains that depend on specific
individuals, manual handoffs, and work-arounds.
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4- Integrity 4- Integrity
• A typical company orchestrates hundreds of supply chain • Supply chain architecture meets the test for integrity if:
activities and decisions every day, each depending on a wide
• Required integration between applications is defined in
range of data: master data, transaction data and analytics.
the supply chain process architecture, and the impact of
• Despite the importance of accurate data, one study estimates application integration issues on business performance is
that between 15 and 20 percent of a typical organization’s measured.
data are wrong or unusable. Inaccurate or missing data lead • Processes are documented at each level of the supply
to errors and ineffective execution chain architecture, with clear descriptions of the data
• Inaccurate or unusable data also create manual work, required to execute each process.
reducing speed and efficiency and adding costs to the supply • Data quality is measured and managed, with clear
chain. ownership for data creation and maintenance.
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ARCHITECTURAL
STRATEGIC TOOLKITS
SUPPLY CHAIN MANAGEMENT ARCHITECTURAL
STRATEGIC TOOLKITS
SUPPLY CHAIN MANAGEMENT
• Supply chain architecture should describe the construct of • In the mid 90s, PRTM (Pittiglio, Rabin, Todd & McGrath)
processes and how they interact with each other same as a developed a framework, or process reference model, that
blueprint of any building describes how each element fits included descriptions of supply chain processes and key
together. performance indicators.
• It was not easy, even when just agreeing on a definition of • The process reference models, having earlier created by
what “the supply chain is,” so how difficult it would be to PACE® (Product And Cycle-time Excellence), was adopted
describe all processes and their mutual integration !! widely by companies worldwide to get better products to
• In the past, most operational process-improvement efforts market faster
had focused primarily on improving the performance of • PRTM and AMR founded the Supply-Chain Council (SCC),
internal processes. But new technologies, outsourcing, and (69 member companies). Over a year, the three organizations
the increasing customization of supply chains to meet the further developed and refined the standard called:
needs of key customers meant that supply chain development
Supply-Chain Operations Reference-model (SCOR)
increasingly looked outside the “four walls.”
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ARCHITECTURAL
STRATEGIC TOOLKITS
SUPPLY CHAIN MANAGEMENT ARCHITECTURAL
STRATEGIC TOOLKITS
SUPPLY CHAIN MANAGEMENT
• In 1996, the Supply Chain Council became an independent, • In recent history other than SCOR two more concepts got
not-for-profit professional association, and the SCOR model major acceptance and recognition:
was entrusted to it. • CPFR (Collaborative Planning, Forecasting &
• SCOR defines best practices, performance metrics, and Replenishment) mainly for Distributive and retailing sector
software functionality requirements for each core supply dealing with packaged goods and is managed by the
chain process, subprocess, and activity. Collaborative Commerce Standards Institute. Purpose is to
improve the partnership between retailers and vendor
• The SCOR model provides a framework and standardized merchants through shared information.
terminology to help organizations integrate a number of • RosettaNet, mainly for companies in the electronics and
management tools, such as business process reengineering, telecommunications industries and is managed by the
benchmarking, and best-practice analysis. Uniform Code Council, a leading commerce standards
• The SCOR toolbox enables organizations to develop and organization. It develops Internet-based business standards
manage effective supply chain architectures. to align processes through standard data definitions called
partner-interface processes (PIPs).
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ASSIGNMENT # 1
STRATEGIC SUPPLY CHAIN MANAGEMENT FIVE PROCESSES
STRATEGIC SUPPLYFOR END-TO-END
CHAIN SCM
MANAGEMENT
Each group should write an informative and analytical essay
on SCOR model mentioning the following: • Different levels of SCOR will be covered in your assignment
Introduction, Process and Categories. Levels of Analysis, Advantages here we will discuss here the five (5) processes which need
and Strengths, Shortfalls and weaknesses and Metrics to be integrated while architecting supply chain, not only
Loads of tons of information is available on net. Get benefit with the other supply chain processes but also with other
from that but don’t copy. enterprise processes such as technology, product and service
development, marketing and sales, customer support, and
I will check plagiarism and marks will be deducted on high
finance. The five processes are:
similarity.
• Plan
Length of essay can be whatever you feel appropriate. • Source
Should be written on MSWord, Font 12 TNR • Make
• Deliver
File name should be like: “Group1_SCOR_yyymmdd”
• Return
Standard Format please
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FIVE PROCESSES
CHAIN SCM
MANAGEMENT FIVE PROCESSES
CHAIN SCM
MANAGEMENT
Plan: Plan’s input is information on demand, supply, and Source: Using the plan generated, the supply chain source
supply chain resources. This information enables better process procures all needed materials and services,
decision making and guides all supply chain activities related performing the operational activities of purchasing,
to the execution processes. scheduling, receiving, inspecting, and authorizing supplier
• Planning excellence has five key principles: payment.
• Use timely, accurate information • Process excellence in source is built on four key principles
• Focus resources on business priorities • Aim for the lowest total cost of ownership (TCO).
• Aim for simplicity • Set procurement strategies according to category.
• Integrate all supply chain requirements • Maintain an enterprise-wide focus (different locations)
• Create explicit actions and accountabilities • Measure and manage performance
• To achieve company’s business objectives, be sure to • For the supply chain to operate effectively, integrate source
integrate planning with other enterprise business processes. with the plan, deliver, make, and return processes both
within the organization and with suppliers
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FIVE PROCESSES
CHAIN SCM
MANAGEMENT FIVE PROCESSES
CHAIN SCM
MANAGEMENT
Make: The supply chain make process transforms the Deliver: The deliver process starts with the receipt of a
resources procured by source into goods and services customer order and includes all the activities needed to
according to agreed-on specifications. complete that order, from providing a price quote to collecting
• There are four principles for process excellence in make: payment from the customer.
• Focus on business priorities • Here are four principles for deliver process excellence:
• Aim for speed and flexibility, not just low costs. • Balance service with the cost to serve
• Set and monitor quality standards • Cut costs and time with straight-through processing
• Synchronize all manufacturing activities • Set up end-to-end tracking and traceability
• For the supply chain to operate effectively, make must be • Manage data for ongoing accuracy and timeliness
integrated with the plan, source, deliver, and return • You won’t be able to follow all these principles without
processes. integrating delivery with other core business processes.
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FIVE PROCESSES
CHAIN SCM
MANAGEMENT NEXT GENERATION
STRATEGIC SUPPLY CHAINPROCESSES
MANAGEMENT
Return: The return process ensures that previously sold • As market conditions and competition evolve, the supply
products are supported, collected, and dispositioned according chain needs to adapt.
to business policies and customer agreements and covers all • In the next generation of process architecture, companies
activities from return authorization to financial settlement. will be able to rapidly translate strategies into new supply
• Return or reverse supply chain has four key principles: chains.
• Create a distinct supply chain for return • Next generation processes will include the key performance
• Feed back return information quickly indicators needed to ensure value creation and ongoing
• Base return policies on total cost of returns management.
• Maximize revenue opportunities • The next generation of process architecture will define the
• An effective return process also requires integration with integration points among suppliers, customers, and partners.
other core business processes
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NEXT GENERATION
MANAGEMENT NEXT GENERATION
MANAGEMENT
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13/02/2021

• Supply chain architecture details the process, applications,

SCM 607 - Lecture 3 - Chapter 2 - Dr. Shaiq 2

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