What is Supply Chain Management?

Know, Develop, and Exploit Your Strengths Peter 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 & services that customers demand. Most companies cannot do this on their own. The bar is too high!!! Therefore, they emphasize their strengths & leverage complementary capabilities of other supply chain members.

SCM is the theory of comparative advantage applied at the company level.

What is Supply Chain Management?

Suppliers suppliers to customers customers
Customer Customer Customer Customer Customer

Customer

Customer

Customer

Service Provider

Firm

Service Provider

Supplier

Supplier

Supplier

Supplier

Supplier

Supplier

Supplier

Supplier

Supplier

Supplier

I f o r m a t i o n

2nd-Tier 1st-Tier

Focal Firm

P h y s i c a l
G o o d s

1st-Tier

2nd-Tier

Supplier

Supplier

Supplier

Supplier

Supplier

Supplier

Supplier

3rd-Tier

What is Supply Chain Management?

Upstream
4th Tier 3rd Tier 2nd Tier 1st Tier
Sand/Rock Quarry Mill Lumber Provider Cement Contractor Framing Contractor Temporary Labor General Contractor Hotel Management Company

Focal Firm
Hotel Brand Hotel Brand Hotel Brand

Downstream
1st Tier 2nd Tier
Business Traveler Leisure Traveler

3rd Tier

Mattress Supplier
Food Services Polyethylene Bag Manufacturer Flour Processor Corrugated Manufacturer Cereal Manufacturer

Oil Company

Chemical Processor

Farmer

Grocery Distributor

Retail Grocer

Consumer

Forest

Lumber Provider

What is Supply Chain Management?

A Companys Internal Value Chain Executive
Information Technology Finance Management R&D

Upstream Suppliers

Marketing

Supply Management Accounting Operations Logistics

Human Resources

Downstream Customers

Suppliers Supplier

Supplier

Focal Firm

Customer

Customers Customer

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

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.

What is Supply Chain Management?

Supply Chain Management is the design and management of seammless, valueadded 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

What is Supply Chain Management?

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.
Achieving World-class Supply Chain Alignment: Benefits, Barriers, & Bridges

What is Supply Chain Management?

Plan
Source Make Deliver Return
The Supply Chain Council

What is Supply Chain Management?

Plan

Source

Make

Deliver

Plan

Return

Deliver

Source

Make

Deliver Return

Source

Make

Deliver Return

Source

Make

Deliver Return

Source

Suppliers Supplier

Supplier

Your Company

Customer

Customers Customer

Maturity of Supply-Chain Practice

Stage 4: Cross-Enterprise Collaboration
It and e-Business solutions enable a collaborative supplychain strategy that: Aligns participating companies business objectives & associated processes. Results in real-time planning, decision making, & execution of supply chain responses to customer requirements.

Stage 3: External Integration Stage 2: Internal Integration

Company-wide process model continuously measured at the company, process, & diagnostic levels. Resources managed at both functional & crossfunctional levels. Strategic partners throughout the global supply chain collaborate to: Identify joint business objectives & action plans. Enforce common processes & data sharing. Define, monitor, & react to performance metrics.

Stage 1: Functional Focus

Discrete processes & data flows documented & understood. Resources managed at the department level & performance measured at functional level.

Time, Experience, & Integration Capability

Maturity of Supply-Chain Practice

Stages of Operational Capability
Stage 1 Functional Focus Stage 2 Internal Integration Stage 3 Stage 4 External Cross-Enterprise 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 & Scheduling Warehousing, Transportation & Delivery

Invoicing & Cash Collection

Overall

Supply Chain Strategy Supply Chain Performance Mgmt Supply Chain Processes Supply Chain Organization

Dominant Practice

Emerging Practice

Supply Chain Management In Practice

Superior SC competence doesn't require complete end-toend integration, but it does require a changed mindset.

The 4 X 100 X 400 Relay

The focus is on the handoff.

There is no coach to teach or encourage.

The difference between victory & defeat is technique.

Managing the 2nd-tier is a 1st-tier responsibility.

Why Supply Chain Management Now?

SCM creates organizational vulnerability & inertia.

Emotionally charged questions arise:

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? Isnt 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?

Strategy in Todays Supply Chain World

The Greek verb stratego means,

. . . to plan the destruction of one's enemies through the effective use of resources.
Performance
5 Forces Model
Rivalry
The Firm Buyer Power Substitutes

Contingency Theory: Environment Strategy Industrial Organization Theory:

Supplier Power

Resource-Based Theory:

Potential Entrants

Strategic Management Concept

Environment

? ?
Where are we? How do we get there?

?
Where do we want to be?

Resources

Feedback

Objectives

Strategy Directs, Focuses, Guides managers as they evaluate the firms competitive position in a dynamic marketplace and utilize resources to achieve the critical objectives of customer value and profitability.

Strategic Management Worksheet

Environment Resources

?
How do we get there? Feedback

Objectives

?
Where are we?

?
Have you prioritized? we want to be? Where do

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?