Introto SCM

Introduction to Supply Chain
Management
July 9, 2007
Copyright 2005 Baios, Inc.
Agenda
The new role of supply chain in business

The Impact of Supply Chain on internal stakeholders
Developing partnerships with suppliers
Elements of an effective strategic sourcing strategy
The Integrated Supply Chain

Relationship Management
Flows of Information, Product, Services, Funds and Knowledge
SUPPLIER
NETWORK
ENTERPRISE
DISTRIBUTIVE
E
NETWORK
N
D
Engineering
C
O
Sourcing
Logistics
S
U
M
Operations
E
R
S
Resource Base (Capacity, Information, Core Competencies, Financial)
Supply Chain Management Definition
Supply chain management (SCM) is the

integration and management of order fulfillment
processes, organizations, and activities through
cooperative organizational relationships, effective
business processes, and high levels of information
sharing to create high-performing Value Systems
that provide companies, its customers and its
suppliers a sustainable competitive advantage.
Key SCM Concepts
Supply chains may be internal or external to the organization

Internal supply chain -- that portion of the supply chain
occurring within a single organization
External supply chain -- that portion of the supply chain

occurring outside of the given organization (i.e., upstream
suppliers and downstream distributors)
Stages of Supply Chain Strategy Evolution

Automotive/Electronics
Energy
I - Basic
Beginnings
Quality/cost
teams
Longer -term
contracts
Volume
leveraging
Inventory
and transport
measurement
II - Moderate
Development
Ad hoc supplier/
customer
alliances
Crossfunctional
teams
Supplier/
Customer base
optimization
Cross-location
international
teams
III - Limited
Integration
Global sourcing /
distribution
Defined alliances
Supplier
development
Total cost of
ownership
Parts/service
standardization
Pull/demand flow
inventory systems
IV- Fully Integrated

Supply Chains
Global supply
chains with
external customer
focus
Comprehensive
information
visibility
Full service
suppliers
EPI / ESI
Insourcing/
outsourcing to
maximize core
competencies of
firms throughout
the supply chain
6
We are Entering a Third Phase of Industrial Renewal
Phase 1: Optimization of individual functions

Phase 2: Optimization of cost and quality between individual
organizations
Phase 3: Management of entire supply chains with

synchronized goals and involved managers
Jeff Trimmer, National Initiative for Supply Chain Integration.
Principles of the New Model

1) The only entity that puts money into a supply chain is the end
customer
2) The only solution that is stable over the long term is where
every element of the supply chain, from raw material to end
customer, profits from the business
3) Supply chain management is about economic value added
and total content of a product/ service.
Objective: Transforming Supply Chains into

Customer-Focused Value Systems
A value system is a connected series of
organizations, resources, and knowledge streams

involved in the creation and delivery of value to
end customers.
Value systems integrate supply chain activities,
from determination of customer needs through

product/service development,
production/operations and distribution, including
(as appropriate) first, second, and third tier
suppliers.
9
Can Technology Help to Create Value Systems?
YES - but only as an ENABLER

Value systems are crated by positioning your
organization in the supply chain to achieve the
highest levels of customer satisfaction and value
while effectively exploiting information technologies
and the competencies of all organizations in the
supply chain.
Value systems compete as an integrated business

unit, not as individual businesses working together.
10
Agenda

The Impact of Supply Chain on internal stakeholders
11
Impact of Demand/Supply Management is Increasing

Five Year Cumulative
GMROI
ROA
Market Return
Circuit City
162%
4%
-33%
Best Buy
208%
8%
1025%
Kmart
109%
-2%
-62%
Wal-Mart
199%
8%
284%
Daimler Chrysler
172%
7%
-47%
Toyota Motor
228%
12%
26%
Motorola
432%
3%
-11%
Intel
2507%
22%
55%
GMROI =
Achieved Gross Margin

Avg. Inventory Investment
12
Stock Price Performance Around Announcement of a

SC Glitch
Source: Hendricks and Singhal, Journal of Operations Management, 2004.

13
Fact: Vertical & Horizontal Disconnection of SC

Organizations
Customer
Manufacturing
SC Organization
Disconnection of
External Market
Intelligence
Marketing & Sales
Disconnection of
Internal Business
Intelligence
Supplier
14
Building Partnerships
In 2006 Tom Bizzup and John McKellar were assigned to

work with plants on industrial services
A few wins:
Mill liners over $2mm purchased
Gear box at Nazareth Plant
15
Our Role
Plant perspective
Let us know when youre done.

Let us focus on keeping production running.
Weve got suppliers who meet our needs.
16
Our Role
What we are trying to do
Buy better (lower cost)

Make good technical decisions about total cost of equipment
and services
17
Challenges
Knowing what we have
Real differences among plants
Areas of similarity are hidden by inconsistent naming,

classifications, data management
BOMs not well maintained
Timeliness of decisions
2007 capital budgets still being debated
Mill liner purchase decision not made until August 2006
Increased lead times in the market
18
Challenges (continued)
How to demonstrate savings
Comparing quotes is rarely apples to apples

Year over year is rarely relevant
Communication
Need for their involvement

Concerns about working with new suppliers
Complete/accurate information to present to suppliers
19
Case Discussion Questions

What is the current relationship between supply chain managers
and stakeholders? What do you think needs to change?
What information does the supply chain team need access to?
What are obstacles to getting it?
What do stakeholders need to do to support the SC team?
How should decision-making processes in your location change?

Who can make those changes?
Who would support those changes?
In your location what are the enablers and obstacles to effective

communication?
20
Agenda

Developing partnerships with our customers
21
Breakthrough
SupplyPeople
Management Performance
Model
Process
Collaboration
Results
and Integration
Continuous
Improvement
Power
Knowledge
Position
Supplier
Relationship
Management
+
Critical
Factors
Maturity
Score
Strategic
Sourcing
Performance
Management
Core Influence
Tactics
Consulting
Aligning
Personal
Effectiveness
Score
Enterprise
Perspective
& Team Spirit
Productive
Internal
Business
Discussions
SCM Business
Impact &
Performance
Reasoning
Supplier
Collaboration
&
Cooperation
Relationship
Capital
Trust
Process &
Performance
Enablers
Intimacy
Breadth of Network
Depth of Knowledge
22
Assessing Supply Chain Maturity
23
SRM Maturity Levels: Level 1
Sustainable, Intertwined Businesses

Ad
Ad Hoc
Hoc and
and Off
Off the
the Radar
Radar
Focus
onselected
Value
Creation
and
Innovation
Suppliers
based
Suppliers selected
based on
on local
local criteria
criteria &
& often
often without
without formal
formal
Contract
Contract terms,
terms, conditions,
conditions, &
& risks
risks vary
vary greatly.
greatly.
Established
Critical
Processes
and
Supplier
performance
rated
on
inconsistent
local
criteria.
Supplier performance rated on inconsistent local criteria.
Systems
Relationships
Relationships managed
managed through
through casual
casual &
& informal
informal contact
contact
processes.
processes.
Emerging Organizational Awareness
Ad Hoc and Off the Radar
No
No organized
organized process
process for
for review
review &
& development
development of
of relationships
relationships or
or
agreements.
agreements.
Improvement
Improvement actions
actions are
are event
event &
& occurrence
occurrence driven.
driven.
Copyright 2007 Supply Market Intelligence & Integration. All rights

reserved.
24
5
4
3
2
1
Emerging
Awareness
Sustainable,
Intertwined
Businesses
Emerging Organizational
Organizational
Awareness
Established
Established local
local pool
pool of
of potential
potential suppliers
suppliers is
is identified
identified &
&
documented.
documented.
Focus
ondriven
Value
Creation
and Innovation
RFX
established.
Locally
Locally
driven
RFX processes
processes
established.
Local
Local contracts
contracts built
built on
on standardized
standardized T&Cs
T&Cs &
& usually
usually subject
subject to
to
central
central review.
review.
Established
Critical
Processes
and
metrics
established
at
site
level.
Performance
Performance metrics established at site level.
Systems
Market
Market intelligence
intelligence limited
limited to
to local
local businesss
businesss understanding.
understanding.
Relationships
Relationships are
are managed
managed through
through regular
regular though
though often
often informal
informal
Emerging
Organizational
Awareness
contact
contact between
between suppliers
suppliers &
& local
local leadership.
leadership.
Informal
Informal reviews
reviews of
of outcomes
outcomes on
on an
an annual
annual basis.
basis.
Business
Business cases
cases for
for key
key product
product &
& process
process improvements
improvements driven
driven
Ad Hoc
and
Offcasual
the&&Radar
by
informal
by local
local needs.ugh
needs.ugh casual
informal contact
contact

reserved.
25
SRM Maturity
Levels: Level 3
Established Critical Processes/Systems
5
4
3
2
1
Established Critical Processes/Systems
Sustainable,
Intertwined
Businesses
centrally,
strategies.
RFX
RFX processes
processes driven
driven
centrally, usually
usually by
by category
category
strategies.
Local
Local businesses
businesses select
select suppliers
suppliers already
already approved
approved through
through category
category management
management or
or
other
central
management
processes.
other central management processes.
Centralized
Centralized contracts
contracts driven
driven by
by aa central
central function.
function.
KPIs
KPIs established
established &
& tracked
tracked at
at both
both Corporate
Corporate (Big
(Big R)
R) &
& local
local (little
(little r)
r) levels
levels
Market
intelligence
is
driven
by
buyer
category
strategy
function.
Market intelligence is driven by buyer category strategy function.
Site
Site level
level relationships
relationships (little
(little r)
r) regularly
regularly reviewed
reviewed against
against enterprise-level
enterprise-level relationship
relationship
(Big
R)
strategies
&
objectives
(Big R) strategies & objectives
Customer/Supplier
Customer/Supplier contact
contact roles
roles are
are defined,
defined, including
including primary
primary &
& secondary
secondary contacts,
contacts,
little
r
business
sponsor
&
Big
R
executive
sponsor,
with
other
functional
&
team-based
little r business sponsor & Big R executive sponsor, with other functional & team-based
roles.
roles.
Relationship
Relationship mgt
mgt responsibility
responsibility is
is spread
spread across
across the
the organization
organization &
& relationship
relationship
managers
managers can
can have
have broad
broad portfolios
portfolios of
of relationships.
relationships.
Supplier/Customer
Supplier/Customer contacts,
contacts, business
business &
& executive
executive sponsors
sponsors are
are actively
actively engaged
engaged in
in
regular
regular reviews
reviews of
of business
business outcomes
outcomes &
& KPI.
KPI.
Performance
Performance information
information &
& project
project schedules
schedules are
are openly
openly shared
shared with
with suppliers
suppliers &
&
stakeholders.
stakeholders.
Centrally
Centrally managed
managed supplier
supplier development
development resources
resources ensure
ensure supplier
supplier quality.
quality.
Business
case
for
changes
&
relationship
management
is
clearly
defined
Business case for changes & relationship management is clearly defined &
& documented
documented
at
at Big
Big R
R&
& little
little rr levels
levels
Focus on Value Creation and Innovation
Established
Critical Processes and
Systems
Emerging
Organizational Awareness

reserved.
26
SRM Maturity
Levels: Level 4
4
3
2
1

RFX
RFX process
process often
often skipped
skipped or
or mutually
mutually developed
developed &
& then
then market
market tested
tested
Contracts
Contracts treated
treated as
as flexible
flexible frameworks
frameworks with
with more
more emphasis
emphasis on
on how
how to
to reach
reach desired
desired
outcomes
outcomes than
than compliance
compliance with
with T&Cs.
T&Cs.
KPIs
KPIs &
& other
other performance
performance metrics
metrics are
are increasingly
increasingly qualitativeespecially
qualitativeespecially at
at the
the Big
Big R
R
level.
level.
Extensive,
Extensive, multifunctional
multifunctional contacts
contacts at
at local
local &
& corporate
corporate levels
levels with
with access
access to
to each
each
others
best
functional
expertise
&
resources.
others best functional expertise & resources.
Deep
Deep investments
investments in
in relationships
relationships &
& understanding
understanding each
each others
others organizational
organizational
capabilities.
capabilities.
Market
Market intelligence
intelligence developed
developed by
by pooling
pooling the
the knowledge
knowledge of
of both
both supplier
supplier &
& buyer
buyer
organizations.
organizations.
Defined
Defined process
process for
for inducting
inducting &
& educating
educating new
new team
team members.
members.
Explicit
Explicit investment
investment in
in dedicated
dedicated Relationship
Relationship management
management resources
resources who
who manage
manage
limited
number
(1-3)
suppliers
&
spend
25-30%
of
time
with
suppliers.
limited number (1-3) suppliers & spend 25-30% of time with suppliers.
Organization
Organization recognizes
recognizes the
the value
value of
of maintaining
maintaining continuity
continuity of
of relationships
relationships with
with team
team
members
&
acts
to
balance
career
progression
with
tenure
in
role.
members & acts to balance career progression with tenure in role.
Relationship
Relationship Managers
Managers have
have aa dedicated
dedicated manager
manager who
who reports
reports high
high in
in the
the organization
organization
&
follow
a
defined
management/coaching
processes.
& follow a defined management/coaching processes.
Continuous
Continuous improvement
improvement processes
processes are
are in
in place
place &
& anchored
anchored into
into the
the culture.
culture.
Mutual
Mutual investments
investments in
in process
process &
& capability
capability enhancements
enhancements that
that provide
provide differentiated
differentiated
efficiencies
or
innovation.
efficiencies or innovation.
Problems
Problems are
are fixed
fixed quickly
quickly without
without extensive
extensive approval
approval processes/documentation.
processes/documentation.
Transparency
&
Transparency of
of business
business model
model
& profit
profit drivers
drivers in
in aa climate
climate of
of verifiable
verifiable trust.
trust.
reserved.
27
Either party is willing to make short term investments without parity or short term
Focus
on Value Creation and Innovation
Established
Critical Processes and
Systems
Emerging
Sustainable,
Intertwined
Businesses
Focus
on Value
Creation
andKPIs
Innovation
organizations
for
organizations directly
directly &
& quickly
quickly influence
influence KPIs
for teams,
teams,

Fast-track
Fast-track contracting
contracting for
for specific
specific opportunities.
opportunities.
Shifting
Shifting business
business priorities
priorities &
& performance
performance drivers
drivers of
of both
both
members
members &
& executive
executive sponsors.
sponsors.
Additional
Additional market
market intelligence
intelligence developed
developed through
through joint
joint investment
investment
in
in capabilities
capabilities &
& research.
research.
Business
Business strategies
strategies &
& models
models are
are adjusted
adjusted based
based on
on each
each others
others
plans
plans &
& capabilities.
capabilities.
The
The hard
hard issues
issues &
& areas
areas of
of conflict
conflict are
are addressed
addressed quickly
quickly &
&
objectively.
objectively.
Regular,
Regular, formal
formal &
& informal
informal contact
contact between
between both
both parties
parties
executives
executives in
in recognition
recognition of
of mutual
mutual dependence
dependence &
& in
in the
the spirit
spirit of
of
personal
personal &
& organizational
organizational intimacy.
intimacy.
Established Critical Processes and
Systems
Emerging

reserved.
28
In My Opinion Responses from Procurement Executives
Procurement organizations consider price the highest priority

among their decision criteria. Agree Completely or Agree to a
Great Extent:
Procurement Executives:
17%
SAMA:
45%
Procurement generally does a good job integrating and

interpreting their organizations strategic business requirements
across the various functional units they represent. Agree
Completely or Agree to a Great Extent:
Procurement Executives:
50%
SAMA:
13%
29
Agenda

Developing partnerships with our customers
30
Strategic Sourcing Process

Develop vision &
objectives +
Strategy Initiation
1. Form team &

Charter,
2. Enroll
stakeholders
3. Establish
Governance
4. Review business
needs &
strategies
5. Establish
vision ;Themes &
drivers
6. Develop high level

project plan
Understand
Scope & subcommodities
1. Define market
sector
commodity
structure
3. Define resource
requirements
Sign off sector
demand
/demand
strategy for
& supply analysis interface & segment options implementation
1. Collate spend
2. Define business
need
2. Scope category 3. Analyse supply

& sub-category
Evaluate supply
market
dynamics &
trends and TCO
1. Segment &
identify
commodities &
sourcing
options
2. Evaluate
procurement
levers & cost
drivers
3. Develop
category & subcommodity
strategies
4. Confirm
procurement
approach
5. Back to ensure
alignment with
business (where
applicable)
1. Review and
finalise project
opportunities
with planning
2. Develop highlevel strategic

implementation
plan
3. Define enablers
to accommodate
strategic plan
4. Conduct
business review,
agreement &
signoff
5. Reassess and
confirm
6. Prioritise
projects against
sourcing criteria
31
The Commodity Segmentation Model

E-Sourcing
E-Negotiate
6 Sigma
Leverage
HIGH
Large Consumption
Many alternative
Spend
Risk
Impact on
core business
initiatives
products / services
Readily Available
Important to business
Business
Impact
LOW
Strategic
Non-Standard
Common
Standard product
Many alternative
products / services
Low value items
Numerous suppliers
Readily Available
LOW
Operationally Critical
Support LOB Initiatives
Competitive Advantage
Few qualified suppliers
Unique Request
Complex Specifications
Important to business
Not Readily Available
Few alternative products /
services
Supply Market Challenge
Business
Relationship
6 Sigma
HIGH
32
Elements of a Great Strategy
How much analysis is enough?

How do you know you have reached the point to make a
decision?
What is the appropriate level of market intelligence

gathering?
33
Supply Chain Intelligence

Companys Environment
TRADITIONAL FOCUS IS HERE
Customers Environment
Suppliers Environment
Suppliers
Supplier
Supplier
andand
Market
Market
Intelligence
Intelligence
A GUESSING GAME
Company
Customer and
Market Intelligence
Customers
Business Intelligence
Supply Chain Intelligence is the convergence of four activities (information gathering,

analysis, dissemination and response) both upstream and downstream in the supply chain.
34
SCM Enablers Data, Information, Knowledge

SCM Processes
Supply Chain Design, Supplier Rel. Mgmt, Perf. Mgmt,
Supplier Quality Mgmt, Risk Mgmt, Cont. Improvement
KNOWLEDGE
Business Intelligence/Market Intelligence

Enabling SCM Processes
INFORMATION
Gather, Analyze, & Synthesize Data & Information

Business Intelligence
Spend
Demand
Performance
Finance
Quality
Market Intelligence
Markets
Industries
Goods & Commodities
Finance
Suppliers
Competitors
Technologies
DATA
35
Business Intelligence Impact
36
Pull and Push Approaches to Intelligence Integrated into

Strategic Sourcing Process
Step 1
Conduct
Spend
Analysis
Push
MEETING &
REPORT
Spend Analysis
Pricing
Market Status
Political
Geographic
Demand
Supply
Step 2
Step 3
Customer
Needs
Assessment
Conduct
Market
Analysis
Pull
Requests for:
Specific queries
SME Interviews
Scenario plans
Supplier data
Step 4
Develop
Category
Strategy
Step 5
Negotiate and
Select
Suppliers
Push
MEETING
Updated info
Present results
Strategic thinking
Positioning
Scenario plans
Step 6
Develop
Implementation
Plan
Pull
Contracts
Terms
Indicators
Step 7
Manage
Supplier
Performance
Relationship
Manager
Push
Alerts
News Feeds
Price Trends
Statistics
Business Intelligence Manager and Team

37
Market Intelligence at British Petroleum: Four Components

Should cost and TCO
models to inform the
Sourcing process
Strategic
Cost
Modeling
Process to inform
management and
SBUs of trends
in cost and
supply
Market
Index
Planning &
Reporting
Commodit
y Price
Analysis
" CAMS
Supplie
r
Market
Analysi
s&
Reports
Identify/Communicate
trends in supply and
demand and provide
analysis
suppliers
Copyright of
2005
Baios, Inc.
Establish a market
price to compare BPs
price to identify
competitive
advantages
38
Essroc Case Study Oil and Gypsum
It seemed so straight forward

Hey we use it every day, get us the
stuff cheaper.
39
Gypsum Learning About the Situation
Began by looking at buyers needs and looked to find ways to have

suppliers bid on larger volumes and regional need
Discovered Customers
Each plant makes a different mix
Chemical requirements ultimately more important than physical

requirements
Specialized equipment requirements for synthetic gypsum meant

that only two plants could use it
Potential exposure in how POs didnt match material delivered
Determined it would be best to source based on cost of delivered

SO3 verses delivered material
40
Gypsum Learning About the Situation (continued)
Discovered Suppliers
Only three with national capabilities
International sources available for East Coast locations
Gypsum for cement represents very small percentage of

their overall business
No consistent method for handling fuel surcharges
Some sources simply not economical
Additional Research
PPI Detailed Reports
Industry & Trade Outlook

41
Gypsum Process Points
Involvement of VPs and Corporate Quality was critical

Used EZsupply
RFI
RFQ
Reverse auction
Suppliers suspicious of EZsupply
Registration process
1 supplier withdrew from the process
Hey, we dont do e-Bay!
Need for hands on follow-up and communication
Comfort level seems to be increasing
42
Oil Learning About the Situation
Oil popped out as a priority based on spend analysis

($8-$9mm/yr)
Discovered Customers
Fuel needs different at each plant
Different tank sizes means different fittings means

different delivery methods
Deal with UPS didnt work well for several locations
All buying from local distributors
43
Oil Learning About the Situation (continued)
Discovered Supplier
Huge mix of suppliers
Many apparently national suppliers work through local

distributors and so did not want to participate
Industry challenges
High price volatility
Challenge of setting prices for contracts
Settled on OPUS index plus fixed margin for suppliers
44
Oil Process Points
Established a team up front to look at needs
Plant purchasing
Quary managers
Production managers
Used EZsupply
RFI to limit the field
45
Case Study Themes
Hidden complexity
High level commodity overviews dont reveal key details
Local plants typically unaware of variation between them
Calculating value requires new thinking/education
Buying by ton of delivered chemical
Standardization of fuel surcharges
Determining how to set price/establish value
Engaging stakeholders is typically challenging

It was the nuance that enabled us to add value.
46
A Great Strategy Should Help You Understand Risk
47
Risk Escalation Process

CODE BLUE
Engage senior management in bi-weekly
review meeting or ASAP if required,
establish strategic action plans to lower
risk score if possible.
HIGH REV IMPACT,

HIGH P(RISK)
LOW REV IMPACT,

HIGH P(RISK)
HIGH REV IMPACT,

LOW P(RISK)
LOW REV IMPACT, LOW P(RISK)
CONTINGENCY PLAN REQUIRED

Buyer-Planner team
visits supplier, validates risk level, and
discusses contingency plan with
Supplier and Manager, and escalates to
next level
if required
LOW RISK
Annual or quarterly
update using Risk
Survey Tool
48
Supply Chain Risk Management Process

3a. Make
Resources
Available
2. Identify Risk
3b. Supplier
Reduction
Relationship
Mechanisms for Collaboration &
High-Risk
Joint Planning
Suppliers
1. Measure the Risk

of Critical Suppliers
GOAL:
Resilient
Supply Chain
With On-going
Knowledge and
Risk Mitigation
3c. Invest in
Visibility
systems
49
Supply Chain Organizational Structures

Developing the right organizational structure will become more chaotic
because of the convergence of many factors...
Commodity sourcing experts will

increasingly be dispersed around the
globe at business unit or geographic
buying locations (with coordination)
Sourcing personnel will increasingly

have dual reporting relationships
Greater use of global commodity teams

adds to organizational complexity
Increased global sourcing requires the

coordination of worldwide purchasing
activities
50
What is Supplier Management?

Definition
Supplier Management is the targeted development of strategically prioritized suppliers containing:
Organization
Processes
Techniques
Tools
Knowledge
Systems
Manages external functions to meet Essrocs business objectives

Delivers maximum value to Essroc
Engages talent and skills of suppliers personnel in achieving Essrocs business goals
Integrates external organizations into Essrocs cross functional teams
Ensures relationship is mutually beneficial
Extends Essrocs quality and delivery expectations to tier-2 and tier-3 suppliers
51
Best in Class Supplier Relationship Management: Dell Interview

It takes a team of IEs, of product engineers, or supplier quality engineers,
procurement and logistics people that will wrap around a supplier relationship
from Dell and an equivalent number of specialists and planning people from
the suppliers management team, to dive into the process.
People from the supplier (field application engineers) live in our Dell facilities,
and they are the feedback mechanisms to back to their company to deal with
supplier quality processes and failure analysis.
Lots of real-time internet data systems between us and the supplier

collaborative and reciprocal information databases that share what is going
on, when material gets here, quality, and yield of material that we are using.
Daily, weekly, and quarterly performance reviews with the supplier and not
just about the product, but with people who are providing service technicians,
HR services, etc.
52
Why Do We Need SRM?

Successful supplier management targets several areas for improvement across all
the major supply chain processes: Plan, Source, Make, Deliver, and Return
Areas
Areas of
of Improvement
Improvement
Expected
Expected Outcome
Outcome
Supplier Qualification
Improved Part Quality
Supplier Development
Reduced Shortages
Product Development Process
Improved on-time Delivery
On-going Production Process
Lead Time Reduction
Quality Management
Reduced Inventory Levels
Planning and Scheduling
Reduced Invoice Discrepancies

Reduced Time to Connect a
Systems Alignment / Technology

Integration
New Supplier
Supplier Collaboration
Reduced Transportation Costs

Plan
Source
Make
Deliver
Return
53
The Single Point of Contact Fallacy

Guess Whos Getting in the Way?
Sr.Sr.
management
management
Staff Business
Sr. management
Line of Business
Staff
Business
Leaders
Leaders
Line Business
Leaders
Line
Business
End Users
Leaders
End Users
SCM/
Procurement
Account
Owner
Specialists
R&D
Account Services
Geographic Sales
FACILITATE INTEGRATION!
The
The Customer
Customer
Organization
Organization
The
The Supplier
Supplier
Organization
Organization
54
Deep Listening and Multi-Level Dialogue

The healthy relationship model as the outcome of Strategy
Sr. Management
Staff Business
SCM/
Procurement
Leaders
Line Business
Leaders
End Users
Sr. Management
Line of Business
Specialists
R&D
Account Services
Geographic Sales
The
The Customer
Customer
Organization
Organization
Account
Owner
The
The Supplier
Supplier
Organization
Organization
55
Supply Chain Maturity

Competency Continuum
Ad Hoc
Defined
Managed/Linked
Leveraged/Integrated
Optimized/Extended
Traditional Competencies
Integrity and ethical behavior
Cost-reduction focus
Sense of urgency and results orientation
Business process analysis
More people have problems succeeding due to lacking social

competence than technical competence. Giunipero and Handfield
56
Supply Chain Maturity

Competency Continuum
Ad Hoc
Defined
Managed/Linked
Traditional Competencies
Integrity and ethical behavior
Cost-reduction focus
Sense of urgency and results orientation
Business process analysis
Leveraged/Integrated
Optimized/Extended
Breakthrough Competencies
Enterprise-wide perspective and
customer-focused decision making
Business acumen and innovative thinking
Operational improvement through
collaboration and team leadership
Communications, influencing, and
facilitating change
More people have problems succeeding due to lacking social

competence than technical competence. Giunipero and Handfield
57
Final Thought
If you insist on beginning only with
certainties
you shall end in doubts;
but if you will be content to begin with
doubts
you shall end in certainties.
(Francis Bacon)
58

Introto SCM

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Introduction to Supply Chain

Copyright 2005 Baios, Inc.

The new role of supply chain in business

Copyright 2005 Baios, Inc.

The Integrated Supply Chain

Resource Base (Capacity, Information, Core Competencies, Financial)

Supply Chain Management Definition

Supply chain management (SCM) is the

Key SCM Concepts

Supply chains may be internal or external to the organization

External supply chain -- that portion of the supply chain

Stages of Supply Chain Strategy Evolution

IV- Fully Integrated

We are Entering a Third Phase of Industrial Renewal

Phase 1: Optimization of individual functions

Phase 3: Management of entire supply chains with

Jeff Trimmer, National Initiative for Supply Chain Integration.

Principles of the New Model

Objective: Transforming Supply Chains into

A value system is a connected series of

organizations, resources, and knowledge streams

Value systems integrate supply chain activities,

from determination of customer needs through

Can Technology Help to Create Value Systems?

YES - but only as an ENABLER

Value systems compete as an integrated business

The new role of supply chain in business

Copyright 2005 Baios, Inc.

Impact of Demand/Supply Management is Increasing

Achieved Gross Margin

Stock Price Performance Around Announcement of a

Source: Hendricks and Singhal, Journal of Operations Management, 2004.

Fact: Vertical & Horizontal Disconnection of SC

In 2006 Tom Bizzup and John McKellar were assigned to

Mill liners over $2mm purchased

Gear box at Nazareth Plant

Copyright 2005 Baios, Inc.

Let us know when youre done.

Copyright 2005 Baios, Inc.

Buy better (lower cost)

Copyright 2005 Baios, Inc.

Areas of similarity are hidden by inconsistent naming,

Comparing quotes is rarely apples to apples

Need for their involvement

Copyright 2005 Baios, Inc.

Case Discussion Questions

How should decision-making processes in your location change?

In your location what are the enablers and obstacles to effective

The new role of supply chain in business

Copyright 2005 Baios, Inc.

Assessing Supply Chain Maturity

Copyright 2005 Baios, Inc.

SRM Maturity Levels: Level 1

Sustainable, Intertwined Businesses

Emerging Organizational Awareness

Ad Hoc and Off the Radar

Copyright 2007 Supply Market Intelligence & Integration. All rights

SRM Maturity Levels: Level 2

Copyright 2007 Supply Market Intelligence & Integration. All rights

Established Critical Processes/Systems

Focus on Value Creation and Innovation

Ad Hoc and Off the Radar

Copyright 2007 Supply Market Intelligence & Integration. All rights