The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
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Supply Chain
Supply Chain
Management
Management
LOA University
October 19, 2015
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
Who am I?
• Dr. William A Cunningham
• PhD Economics University of Arkansas
• MS Economics Oklahoma State University
• BSBA (Economics Major), Missouri Southern State
University
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
What is a ‘supply chain’?
• Network of organizations:
• Raw materials providers
• Manufacturers
• Wholesalers and distributors and
• Retailers
• Service Providers
• Connected by forward and reverse flows of goods,
information, and enabling resources
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
What Supply Chain
Management Is
Not
• It is not another name for logistics.
• It is not another name for purchasing.
• It is not another name for operations.
• It is not a combination of logistics, purchasing and
operations.
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
[The International Center for Competitive Excellence, 1994]
[The Global Supply Chain Forum, 1998]
Supply Chain Management
… is the management of
relationships
in the
network of organizations, from end customer
through original suppliers, using key
cross-functional business
processes
to create value
for customers and other stakeholders.
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
The Supply Chain
Management Processes
© Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance, p. 3.
S
up
pl
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C
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ai
n
M
a
na
g
em
en
t P
ro
ce
ss
es
Logistics
Marketing & Sales
Finance
Tier 2
Supplier
Consumer/
End user
Manufacturer
Information Flow
Purchasing
Production
Tier 1
Supplier
Customer
R&D
PRODUCT FLOW
CUSTOMER RELATIONSHIP MANAGEMENT
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
RETURNS MANAGEMENT ORDER FULFILLMENT DEMAND MANAGEMENT CUSTOMER SERVICE MANAGEMENT SUPPLIER RELATIONSHIP MANAGEMENT
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
Types of Inter-company
Business Process Links
n 2 3 1 2 1 1 n 2 1 3 n 2 1 3 1 n 2 n 1 2 n 1 C o ns um er s/ E nd -u se rs n T ie r 3 t o n s up pl ie rs In iti al S up pl ie rs
Tier 1
Customers
Tier 2
Customers
Tier 3 to
Consumers/
End-users
Tier 2
Suppliers
Tier 1
Suppliers
Tier 3 to
Initial
suppliers
n 1 n 1 nMembers of the Focal Company’s Supply Chain Focal Company
Non-members of the Focal Company’s Supply Chain Managed Process Links
Not-Managed Process Links Non-Member Process Links Monitored Process Links
T ie r 3 to n c us to m er s 1 n
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
The SCM Processes - Briefly
• The
Customer Relationship Management
process
provides the structure for how the relationship with
customers will be developed and maintained.
• The
Supplier Relationship Management
process
provides the structure for how the relationships with
suppliers will be developed and maintained.
•
Customer Service Management
is the process that
deals with the administration of the PSAs developed by
customer teams as part of the CRM process.
•
Demand Management
is the process that balances the
customers’ requirements with the capabilities of the
supply chain.
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
The SCM Processes - Briefly
• The
Order Fulfillment
process includes all activities
necessary to design a network and enable a firm to meet
customer requests while minimizing the total delivered cost.
• The
Manufacturing Flow Management
process includes all
activities necessary to obtain, implement and manage
manufacturing flexibility in the supply chain and to move
products through plants.
• The
Product Development and Commercialization
process
provides the structure for developing and bringing to market
products jointly with customers and suppliers.
•
Returns Management
is the process by which activities
associated with returns, reverse logistics, gatekeeping and
avoidance are managed within the firm and across key
members of the supply chain.
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
Processes Need to Be Standardized
to Avoid Disconnects
Logistics
Marketing & Sales
Finance
Tier 2
Supplier
Consumer/
End user
Manufacturer
Information Flow
Purchasing
Production
R&D
CUSTOMER RELATIONSHIP MANAGEMENT
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
RETURNS MANAGEMENT ORDER FULFILLMENT DEMAND MANAGEMENT
© Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance, p. 14.
CUSTOMER SERVICE MANAGEMENT SUPPLIER RELATIONSHIP MANAGEMENT
MANUFACTURING FLOW MANAGEMENT
Tier 1
Supplier
Customer
PRODUCT FLOW
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
All Functions Need
to Be Involved
Note: Process sponsorship and ownership must be established to drive the attainment of the supply chain vision and eliminate the functional barriers that artificially separate the process flows.
Finance Purchasing Production Logistics Research & Development Sales Marketing
C
U
S
T
O
M
E
R
S
S
U
P
P
L
IE
R
S
Business FunctionsInformation Architecture, Data Base Strategy, Information Visibility
© Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance, p. 15.
Logistics
Capabilities ManufacturingCapabilities SourcingCapabilities CustomerProfitability Account
Management Technological Capabilities Marketing Plan & Resources Business Processes Customer Relationship Management
Forecasting Manufacturing Capabilities Sourcing Capabilities Competitors’ Initiatives Alignment of Logistics Activities Coordinated Execution Prioritization of Customers Knowledge of Customer Operations Production Planning Integrated Supply Network Design
Made-to-Order Material Constraints DistributionCost Role of Logistics Service in Marketing Mix Process Specifications Material
Specifications R & D Cost Product
Design
Logistics Requirements
Priority
Assessment Cost-to-Serve Tradeoff Analysis Process Requirements Environmental Requirements Differentiation Opportunities from Manufacturing Capabilities Prioritization Criteria Integrated
Planning SupplierCapabilities Total DeliveredCost Material Specifications Capabilities Required for Competitive Positioning Inbound Material Flow Manufacturing Cost Knowledge of Marketing Programs Product Design Reverse Logistics Capabilities
Re-manufacturing Material Specifications Revenue & Costs Technical Service Customer Knowledge Customer Opportunities Product/Service Gaps in Market Sales Growth Opportunities Design for Manufacturability Knowledge of Customer Requirements Knowledge of Customer Requirements Competing Programs in Customer Space Demand Management Customer Service Management Manufacturing Flow Management Order Fulfillment Product Development & Commercialization Supplier Relationship Management Returns Management
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
The Critical Supply Chain
Management Linkages
Supply Chain Performance = Increase in Profit for A, B, C, and D
Manufacturer
C
Retailer/
End User
A
Wholesaler/
Distributor
B
P&L for
C as supplier
P&L for
B as supplier
Revenue
-
Cost
Profit
Revenue
-
Cost
Profit
Supplier
D
P&L for
A as customer
Revenue
-
Cost
Profit
P&L for
B as customer
Revenue
-
Cost
Profit
P&L for
C as customer
Revenue
-
Cost
Profit
Total Cost Report
for D as supplier
Cost =
Profit
CRM
SRM
SRM
SRM
CRM
CRM
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
It Is Critical to Measure
the Financial Impact
• The development of customer profitability reports
enables the CRM process teams to track
performance over time.
• More profitable customers will be allocated more
resources.
• Similarly, wholesalers and retailers should use
profitability reports to evaluate suppliers, but
manufacturers should use total cost reports to
evaluate suppliers.
• The performance of each process should be
measured in terms of its impact on EVA
®.
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
How CRM Affects EVA
®
ECONOMIC VALUE ADDED NET PROFIT MARGIN NET PROFIT NET SALES TOTAL EXPENSES GROSS MARGIN CGS COST OF CAPITAL INVENTORY TOTAL ASSETS CURRENT ASSETS FIXED ASSETS OTHER CURRENT ASSETS
–
–
+
+
SALES =
–
CAPITAL CHARGE%
© Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance, p. 18.
Strengthen relationships with profitable customers
Improve ”share of customer”
Improve plant productivity
Improve demand planning
Reduce safety stock
Improve investment planning and deployment
Targeted marketing
Improve trade spending
Eliminate or reduce services provided to low-profit
customers
Optimize physical network/facilities
Leverage new or alternative distribution channels
Reduce overhead / management / admin. costs
Reduce HR costs / improve effectiveness
Improve mix ( e.g. align services and costs to serve)
Sell higher margin products
Make to order, mass customization of inventories
Improve product development and asset investment
Improve asset utilization and rationalization
Reduce accounts receivable
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
Building High-Performance
Supply Chain Relationships
• Supply chain management is all about
relationship
management.
• Partnerships require significant investment, so
the goal is to fit the type of relationship to the
business situation.
• Management Tools:
• The partnership model assists with determining the
right level of partnership between two organizations.
• The collaboration framework assists with structuring
of relationships when symmetry and/or working
history are lacking between organizations.
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
Supply Chain Management:
Elements and Key Decisions
2) What processes should be
linked with each of these
key supply chain members?
1) Who are the key supply
chain members with whom
to link processes?
3) What level of integration and
management should be applied
for each process link?
Supply Chain
Management
Processes
Supply Chain
Network
Structure
Supply Chain
Management
Components
The AFIT of Today is the Air Force of Tomorrow.
Air University: The Intellectual and Leadership Center of the Air Force Aim High…Fly - Fight - Win
Conclusions
• Supply chain management is
not
just another
name for logistics, nor a combination of
logistics, purchasing and operations.
• It is a way of doing business that is:
• Process-oriented
• Cross-functional
• Cross-firm
• The partnership model helps firms manage
the most important business relationships
with customers and suppliers.