SCM Strategy

7/29/2019 SCM Strategy

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What is Supply Chain Management?

Know, Develop, and Exploit Your StrengthsPeter Drucker

• The Goal: to meet customers needs better than the competition!!!

• Success depends on managing processes capable of making &

delivering the innovative, high-quality, low-cost products & servicesthat customers demand.

• Most companies cannot do this on their own. The bar is too high!!!

• Therefore, they emphasize their strengths & leverage complementarycapabilities of other supply chain members.

SCM is the theory of comparative advantage applied

at the company level.




Firm

SupplierSupplierSupplierSupplierSupplierSupplierSupplier

Supplier Supplier Supplier Supplier Supplier Supplier Supplier

Supplier SupplierSupplier

Service

Provider

Service

Provider

Customer CustomerCustomerCustom er Custom er

CustomerCustomerCustomer

“Suppliers’ suppliers to customers’ customers”

Focal

Firm

1st-Tier

2nd-Tier

1st-Tier

2nd-Tier

3rd-T

ier

P

h

y

s

ic

a

l

Go

o

d

s

I

f

o

r m

a

t

i

on




Upstream DownstreamFocal Firm1st Tier 2nd Tier 3rd Tier 4th Tier 3rd Tier 2nd Tier 1st Tier

General

Contractor

Cement

Contractor

Sand/Rock

Quarry

Framing

Contractor

Temporary

Labor

Mattress

Supplier

Lumber

ProviderMill

Food

Services

Business

Traveler

Leisure

Traveler

Hotel

Brand

Hotel

Brand

Hotel

Brand

Grocery

Distributor

Retail

GrocerConsumer

Flour

ProcessorFarmer

Corrugated

Manufacturer

Lumber

Provider

Forest

PolyethyleneBag

Manufacturer

ChemicalProcessor

OilCompany

Hotel

ManagementCompany

Cereal

Manufacturer




UpstreamSuppliers DownstreamCustomers

A Company’s Internal ValueChain Executive

Management

R&D

Marketing

Information

Technology

Finance

Supply

Management

Human

Resources

Operations

Accounting Logistics

A supply chain consists of a series of linked value chains.

Focal

FirmCustomer

Customer’s

CustomerSupplier

Supplier’s

Supplier



Supply Chain Leaders . . .

• . . . are relentlessly customer centric.

• . . . recognize inter-firm collaboration as critical.

• . . . focus on processes rather than functions.

• . . . view open communication as a must.

• . . . factor people into every decision.

• . . . invest in information technology as an enabler .

• . . . are obsessed with performance measurement.




• Supply Chain Management is the design

and management of seammless, value-

added processes across organizational

boundaries to meet the real needs of the

end customer . The development and

integration of people and technological

resources are critical to successful supply

chain integration.

Institute for Supply Management




Achieving World-class Supply Chain Alignment:

Benefits, Barriers, & Bridges

• Supply Chain Management is . . . . . . an Attitude. . . a Culture

. . . a Mindset

. . . a Philosophy that

promotes the building of a world-class SC TEAM through the selection of the

RIGHT players & the establishment of the Right relationships.

• Great TEAMS consist of outstanding players & achieve true chemistry.

Chemistry: a common vision, an understanding of individual roles, an ability to

work together, & a willingness to adjust & adapt in order to create superior

value.




The Supply Chain Council

Plan

DeliverMake

Return

Source




Deliver Source DeliverMake

Return

Suppliers’

Supplier

Supplier Your Company Customer Customers’

Customer

Source DeliverMake

Return

Source DeliverMake

Return

Source

Plan

Plan

DeliverMake

Return

Source



Maturity of Supply-Chain Practice

Time, Experience, & Integration Capability

Stage 1:Functional

Focus

•Discrete processes &data flows documented& understood.

•Resources managed atthe department level &performance measuredat functional level.

Stage 2:

InternalIntegration

•Company-wide processmodel continuouslymeasured at thecompany, process, &diagnostic levels.

•Resources managed atboth functional & cross-functional levels.

Stage 3:External

Integration

•Strategic partners

throughout the globalsupply chain collaborateto:

•Identify joint businessobjectives & actionplans.

•Enforce common

processes & datasharing.

•Define, monitor, & reactto performance metrics.

Stage 4:Cross-Enterprise

Collaboration

•It and e-Businesssolutions enable acollaborative supply-chain strategy that:

•Aligns participatingcompanies’ business

objectives & associatedprocesses.

•Results in real-time

planning, decisionmaking, & execution ofsupply chain responsesto customerrequirements.



Maturity of Supply-Chain Practice

Stages of Operational Capability

Stage 1 Stage 2 Stage 3 Stage 4

Functional Internal External Cross-Enterprise

Focus Integration Integration Collaboration

Plan Strategy

Demand Planning

Supply Planning

Demand/Supply Balancing

Source Strategy

Commodity & Process Management

Supplier Development/Management

Organization & Infrastructure

Make Manufacturing Strategy

Production Scheduling

Material Issue, Move & Tracking

Manufacturing Process Control

Deliver Enable

Order Entry & SchedulingWarehousing, Transportation & Delivery

Invoicing & Cash Collection

Overall Supply Chain Strategy

Supply Chain Performance Mgmt

Supply Chain Processes

Supply Chain Organization

Dominant Practice Emerging Practice



•Superior SC competence doesn't require complete end-to-

end integration, but it does require a changed mindset.

Supply Chain Management In Practice

•The 4 X 100 X 400 Relay •Managing the 2nd-tier isa 1st-tier responsibility.

•The focus is onthe handoff. •There is no

coach to teach or encourage.

•The differencebetween

victory & defeat is technique.



Why Supply Chain Management Now?

• Who is really in charge?

• Can we trust other supply chain members not to take advantage of us?

• How is our role going to change in the new, integrated supply chain environment?

• Isn’t SCM going to reduce our operating flexibility?

• How am I going to develop the skills needed for success in the new “team” environment?

• What happens if we choose the wrong supply chain partners?

• How are we going to measure who adds what value?

• How are we going to share risks and rewards among the supply chain members?

• What does SCM really mean for our bottom line performance?

• Why should I be concerned about how somebody else does business?

• Where are we supposed to get the money to pay the added cost of doing things differently?

• Who are the best partners to align our competitive efforts with?

• What do we need to do to form linkages with these key “partners”?

• How many different supply chains can we work with effectively?

• How do we manage our relationships with supply chain partners who are also competitors?

• SCM creates organizational vulnerability & inertia.• Emotionally charged questions arise:



Strategy in Today’s Supply Chain World

• The Greek verb stratego means,

•

Contingency Theory: Environment Strategy Performance

• Industrial Organization Theory: 5 Forces Model

Buyer Power Supplier Power Rivalry

Substitutes Potential Entrants The Firm

• Resource-Based Theory:

. . . “to plan the destruction of one's enemies

through the effective use of resources.”



Strategic Management Concept

? How do we get there? ? ?

Where do we want to be? Where are we?

• Strategy Directs, Focuses, Guides managers as they evaluate the

firm’s competitive position in a dynamic marketplace and utilize

resources to achieve the critical objectives of customer value and

profitability.

Feedback

Environment

Resources Objectives



Strategic Management Worksheet

Environment

Resources Objectives?How do we get there?

Feedback

? ?Where do we want to be?Where are we?

• What are the 3 to 5 forces driving change in your industry?

• How do they affect decision-making now; i.e., TODAY! TOMORROW?

• Have you planned for them? (Does everybody know about them?) • What are you specific responses to each driving force?

• Who is accountable?

• What metrics are in place?

• What resources do you need? Are they in place? Have you prioritized?

• What are your firm's 3 most important customer-oriented objectives?

• What are your firm's core resources? • What are you doing to develop them?

• How well does your feedback system collect, manipulate, & disseminate information regarding. . .

• the environmental imperatives?

• performance vis-a-vis each customer oriented objective? From the customer viewpoint?

• the development and capability of each critical resource?

•Have you prioritized?

SCM Strategy

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