Integration in the supply chain

THE CONCERN IS
How can we integrate supply chain : internally, externally and if possible electronically?

Integration in the supply chain

Supply Chain Integration means
The degree to which the firm can strategically collaborate with their supply chain partners and collaboratively manage the intra- and inter-organization processes to achieve the effective and efficient flows of

Product and services Information Money Feed Back

With the objective of providing the maximum value to the

customer at low cost and high speed

Integration in the supply chain

Measures of integration Access to planning system Sharing production plans Joint EDI access / networks Knowledge of inventory mix / levels Packaging customization Delivery frequencies Common logistical equipment / containers Common use of third-party logistics

Integration in the supply chain

Internal integration: function to function
Purchasing
Low price

Production
High productivity of machine and labor

Distribution
Keep warehousing operation smooth

Unreliable delivery and low quality

High batch size

Post-manufacturing operation being resisted

Additional complexity of customizing products

Poor available distribution

Inter- Intra Company collaboration

Strategic Collaboration
Information & Decision Flow Products & Services Flow Enterprise A Financial Flow
END CUSTOMERS RAW MATERIALS

Information & Knowledge Flow

Enterprise B

Products & Services Flow Information & Knowledge Flow Financial Flow Material and Money Flow

Integration in the supply chain

Electronic collaboration
Transactional The electronic execution of transaction Information sharing The electronic sharing or exchange of information Collaboration planning Strategic, tactical and operational exchange

Electronic collaboration

Integration in the supply chain

Information flow in apparel supply chain

Efficient consumer response

Key issue
How can collaboration be extended across the supply chain to focus on meeting consumer demand?

Efficient consumer response

Category management
Category Establish management infrastructure Optimize introductions Optimize assortments Optimize promotions

Product replenishment

Integrated suppliers

Synchronized production

Continuous replenishment

Automated store ordering

Reliable operations

Crossdocking Item coding and database maintenance

Enabling technologies

EDI

EFT

ABC

Efficient consumer response

Enabling technologies Scanning data Data warehousing Data mining The data include Demand / consumption / sales information Cash flow Stocks of finished goods / work in progress Delivery and output status

Efficient consumer response

Category management Continuous replenishment
Joint

Enabling technologies
Effective

management Demand management Required Multifunctional selling teams capability Price list restructuring Effective and customized promotions

Account

inventory management Cross-dock operations Continuous replenishment Effective logistics and product flows Quick response

information sharing Automated order generation Bar-coding and the use of other scanning technology

Collaborative planning, forecasting and replenishment

Key issue
How can collaboration be extended to strategic as to well as operational levels?

Collaborative planning, forecasting and replenishment

Planning
1. 2. 3.

CPFR Model
Develop front-end agreement Create joint business plans Create individual sales forecasts Identify exceptions to sales forecasts Resolve / collaborate on exception items Create order forecast Identify exceptions to order forecast Resolve / collaborate on exception items Generate orders

4.
5.

Forecasting

6. 7. 8. 9.

replenishment

Wal-marts CPFR Process

FRONT END AGREEMENT JOINT BUSINESS PLAN

Seller

Collaborative Planning

CREATE SALES FORECAST

Collaborative IDENTIFY Link buyer and Seller Goal : EXCEPTIONS Forecasting Electronically RESOLVE EXCEPTIONS
CREATE ORDER FORECAST IDENTIFY EXCEPTIONS RESOLVE EXCEPTIONS

Collaborative Replenishment

Buyer

GENERATE ORDER

Wal-Marts CPFR Program

CPFR has blurred the lines between supplier and

customer Suppliers buy into their program because they have to to work with Wal-Mart, but more importantly, because Wal-Marts Systems provide increased profits for WalMart and their suppliers Wal-Mart teaches their suppliers how to minimize shipping, inventory and other costs by showing them their own model.

Managing supply chain relationships

Key issue
How can broader-based relationships be formed between trading partners in the supply chain?

Managing supply chain relationships

Creating closer relationships
Arms length transaction R&D Marketing R&D

Partnership

Marketing

Logistics
Information system

Operations
Information system

Logistics Operations
InformationInformation system system

supplier

customer

supplier

customer

Bow tie

Diamond

Managing supply chain relationships

Factors in forming supply chain relationships The order winner The method making sourcing decisions The nature of electronic collaboration The attitude to capacity planning Call-off requirements Price negotiations Managing product quality Managing research and development The level of pressure

A framework for managing the supply chain

Key issue

What are the management implications of integrating the supply chain?

A framework for managing the supply chain

Develop measurement system for supply chain performance Pilot new supply chain solutions

Organize for supply chain performance

Develop a supply chain strategy

Gather supply chain information

Develop effective partnerships and alliances

A framework for managing the supply chain

Develop a supply chain strategy Customer service requirements Plant and distribution center network design Inventory management Outsourcing and third-party logistics relationships Business processes Organizational design and training requirements Performance metrics and goals

A framework for managing the supply chain

Pilot new supply chain solutions Successful supply chain improvement including

Involvement of key stakeholders, suppliers, customers and employees Selection of scope and environment, focusing on avoiding risk Identification of the key questions that the pilot must answer

A framework for managing the supply chain

Develop measurement systems for supply chain

performance
On time in full, outbound On time in full, inbound

Internal defect rates

New product introduction rate Cost reduction Stock turns Order to delivery lead time Fiscal flexibility