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Supply chain management Collaboration

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This document provides an overview of supply chain management concepts including defining the supply chain and key processes involved, different supply chain strategies such as push vs pull, the benefits of supply chain collaboration, and challenges in managing inter-organizational relationships across the supply network. The document uses examples and illustrations to explain core SCM topics and discusses how firms can work to integrate suppliers, customers, and other partners to improve performance.

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Pia Bosma MSc SUPPLY CHAIN MANAGEMENT
Content Lecture Collaboration Basics of Supply Chain Management The evolving Supply Chain Analysing Relationships Questions Inter-organizational Relationships Assignments
What Is the Supply Chain? Also referred to as the logistics network Suppliers, manufacturers, warehouses, distribution centers and retail outlets facilities and the Suppliers Manufacturers Warehouses & Distribution Centers Customers Raw materials Work-in-process (WIP) inventory Finished products that flow between the facilities Transportatio Transportation n Costs Material Costs Costs Transportation Manufacturing Costs Costs Inventory Costs
The Supply Chain Another View Plan Plan Source Source Make Make Deliver Deliver Buy Buy Suppliers Manufacturers Warehouses & Customers Distribution Centers Transportation Transportation Material Costs Costs Costs Transportation Manufacturing Costs Inventory Costs Costs
Illustration of the supply chain network, using Braun Oral-B as an example
What Is Supply Chain Management (SCM)? Plan Source Make Deliver Buy A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers So that the product is produced and distributed In the right quantities To the right locations And at the right time System-wide costs are minimized and Service level requirements are satisfied
Why Is SCM Difficult? Plan Source Make Deliver Buy Uncertainty is inherent to every supply chain Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues The complexity of the problem to globally optimize a supply chain is significant Minimize internal costs Minimize uncertainty Deal with remaining uncertainty
Todays Marketplace Requires: Shared visibility for trading partners Personalized content and services for their customers Collaborative planning with design partners, distributors, and suppliers Real-time commitments for design, production, inventory, and transportation capacity Flexible logistics options to ensure timely fulfillment Order tracking & reporting across multiple vendors and carriers
Content Lecture Collaboration Basics of Supply Chain Management The evolving Supply Chain Analysing Relationships Questions Inter-organizational Relationships Assignments
Supply Chain Integration Push Strategies Classical manufacturing supply chain strategy Manufacturing forecasts are long-range Orders from retailers warehouses Longer response time to react to marketplace changes Unable to meet changing demand patterns Supply chain inventory becomes obsolete as demand for certain products disappears Inefficient use of production facilities (factories) How is demand determined? Peak? Average? How is transportation capacity determined? Examples: Auto industry, large appliances, others?
Supply Chain Integration Pull Strategies Production and distribution are demand-driven Coordinated with true customer demand None or little inventory held Only in response to specific orders Fast information flow mechanisms POS data Decreased lead times Decreased retailer inventory Decreased variability in the supply chain and especially at manufacturers Decreased manufacturer inventory More efficient use of resources More difficult to take advantage of scale opportunities Examples: Dell, Amazon
Supply Chain Integration Push/Pull Strategies Hybrid of push and pull strategies to overcome disadvantages of each Early stages of product assembly are done in a push manner Final product assembly is done based on customer demand for specific product configurations Supply chain timeline determines push-pull boundary Push- Pull Generic Product Boundary Customized Product Push Strategy Pull Strategy Raw End Materials Consumer Supply Chain Timeline
Choosing Between Push/Pull Strategies Pull High Where do the Industries where: Industries where: following industries fit Customization is High Demand is uncertain in this model: Demand is uncertain Scale economies are High Scale economies are Low Low economies of scale Automobile? Demand Uncertainty Aircraft? Computer Furniture equipment Fashion? Petroleum refining? Pharmaceuticals? Industries where: Industries where: Biotechnology? Uncertainty is low Standard processes are the Medical Devices? Low economies of scale norm Push-pull supply chain Demand is stable Scale economies are High Books, CD s Grocery, Beverages Push Low Low Economies of Scale High Pull Push
Characteristics of Push, Pull and Push/Pull Strategies PUSH PULL Objective Minimize Cost Maximize Service Level Complexity High Low Focus Resource Allocation Responsiveness Lead Time Long Short Processes Supply Chain Order Fulfillment Planning
Supply Chain Collaboration What Is It? Many different definitions depending on perspective The means by which companies within the supply chain work together towards mutual goals by sharing Ideas Information Processes Knowledge Information Risks Rewards Why collaborate? Accelerate entry into new markets Changes the relationship between cost/value/profit equation
Supply Chain Collaboration Cornerstone (= something very important that something else depends on) of effective SCM The focus of many of todays SCM initiatives Retailers Suppliers Synchronized Manufacturer Production Scheduling Collaborative Distributors/ Demand Collaborative Wholesalers Planning Product Development Collaborative Logistics Planning Transportation services Distribution center services Logistics Providers 16
Benefits of Supply Chain Collaboration CUSTOMERS MATERIAL SERVICE SUPPLIERS SUPPLIERS Reduced inventory Reduced inventory Lower freight costs Increased revenue Lower warehousing costs Faster and more reliable Lower order management Lower material acquisition delivery costs costs Lower capital costs Higher Gross Margin Fewer stockout conditions Reduced depreciation Better forecast accuracy Lower fixed costs Better allocation of promotional budgets Improved customer service More efficient use of human resources
Supply Chain Collaboration Spectrum Extensive Not Viable Synchronized Thegreen arrow Collaboration describes increasing complexity and sophistication of: Information systems Extent of Collaboration Systems infrastructure Decision support systems Coordinated Planning mechanisms Collaboration Information sharing Process understanding Higher levels of Cooperative collaboration imply the Collaboration need for both trading partners to have equivalent (or close) levels of supply chain maturity Synchronized Transactional collaboration demands Limited Collaboration Low Return joint planning, R&D and sharing of information Many Few and processing models Number of Relationships Movement to real-time customer demand information throughout the Source: Cohen & Roussel supply chain 18
Successful Supply Chain Collaboration Try to collaborate internally before you try external collaboration Help your partners to work with you Share the savings Start small (a limited number of selected partners) and stay focused on what you want to achieve in the collaboration Advance your IT capabilities only to the level that you expect your partners to manage Put a comprehensive metrics program in place that allows you to monitor your partners performance Make sure people are kept part of the equation Systems do not replace people Make sure your organization is populated with competent professionals whove done this before
Content Lecture Collaboration Basics of Supply Chain Management The evolving Supply Chain Analysing Relationships Questions Inter-organizational Relationships Assignments
1. Comparison of B2C and B2B relationships B2C Product driven Maximize the value of transaction Large target market Single step buying process, shorter sales cycle Brand identity created through repetition and imagery Merchandising and point of purchase activities Emotional buying decision based on status, desire or price
1. Comparison of B2C and B2B relationships B2B Relationship driven Maximize the value of the relationship Small, focused target group Multi-step buying process, longer sales cycle Brand identity created on personal relationship Educational and awareness building activities Relational buying decision based on business value
Relations hips in the value
2. Advantages and disadvantages of creating relationships with consumers for a manufacturer Advantages Retain consumers is more profitable in general Long-term relationships maintain a competitive advantage Disadvantages Calculate the effects on a companys profit costs (CRM program) Miss new opportunities through focusing on current consumers
3. Motorola and Hewlett- Packard Co-opetition if both elements of cooperation and competition are visible, the relationship between the competitors is named co-opetition. A firm with a strong position, but lacking resources held by the competitor must focus on a co-opetitive relationship. Within the process, firms develop mechanisms that attempt to deal with competitiveness
Five types of relationship between a firm and its competitor
4. Properly incorporating suppliers in their product development process Suppliers can do much more than deliver reasonably priced items on request. Exploiting some of the potential of a supplier requires that operations of the two companies become more closely integrated in the various facets of the relationship.
5. A manufacturer how wants to integrate end-consumers in the product development process Formal way: conjoint analysis Informal way: sales representative comes home to the HQ with some inspiration for the new product development
6. How can distance be reduced in cross-cultural buyer-seller negotiations Cultural dimensions that affect the distance: Different understanding of the national and industry culture Different understandings of the organisational culture Different personal behaviour because of the different mental programming
6. How can distance be reduced in cross-cultural buyer-seller negotiations It is possible to reduce the psychic distance by an intercultural learning process. In this learning process, the company transfers knowledge about reduction of psychic distances in different cultures Psychic: Having a special mental ability, for example so that you are able to know what will happen in the future or know what people are thinking
7. Dell entered into a relationship with IBMs Global Service Division Dell has maybe evaluated is own competences and realised that service support is not its core competence. It is better in PC-manufacturing. Therefore, it has outsourced the service support to IBM, which sees this as one of its existing and future core competences. That is a relationship of value for both partners.
8. Describe the interactions between buyer and seller in the diamond model In the diamond model, the boundaries between buying and selling firms become more transparent. Interactive, cross functional teams openly exchange ideas for improving efficiency and effectiveness. The goal is to create new value together.
Organisation of buyerseller relationship
Content Lecture Collaboration Basics of Supply Chain Management Efficient consumer response Analysing Relationships Questions Inter-organizational Relationships Assignments
Summary Inter- organizational relationships The network perspective on supply chains requires a holistic approach. (dealing with of treating with the whole of something) It recognizes the interdependence not only of immediate partners but also among the entire network of relationships
Summary Inter- organizational relationships The movement of organizations toward network relationships places new challenges on management to define the core and establish the boundaries of the firm to create the most effective governance mechanism to develop the most appropriate relationships with partners
Summary Inter- organizational relationships Trust relationships are a necessary condition in supply chain management. Without it, partners wont share information or commit to specific high-risk investments. It is time consuming and is based on building positive experience
Summary Inter- organizational relationships The essential characteristics of the supply chain is its inter-organizational relationships. The ability to develop and manage the supply chain becomes a core competency, along with product technology, knowledge, and market access these relationships govern future actions of the corporation.
Content Lecture Collaboration Basics of Supply Chain Management Efficient consumer response Analysing Relationships Questions Inter-organizational Relationships Assignments
Assignments: Innovation and entrepreneurship Working assignments 1 and 2 Page 9 Question: Are large firms better innovators than small firms Page 10 Questions: Skype: innovators and entrepreneurs Page 13 Article: Innovation Management in Supply Chains Summary
Benettons Supply networks Assignment Combine several subjects in a professional report. The size of the report must not exceed 5 A4, excluding the cover, contents and appendixes. Then there will be at the end a talk of around 30 minutes about the report

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Supply chain management Collaboration

  • 1. Pia Bosma MSc SUPPLY CHAIN MANAGEMENT
  • 2. Content Lecture Collaboration Basics of Supply Chain Management The evolving Supply Chain Analysing Relationships Questions Inter-organizational Relationships Assignments
  • 3. What Is the Supply Chain? Also referred to as the logistics network Suppliers, manufacturers, warehouses, distribution centers and retail outlets facilities and the Suppliers Manufacturers Warehouses & Distribution Centers Customers Raw materials Work-in-process (WIP) inventory Finished products that flow between the facilities Transportatio Transportation n Costs Material Costs Costs Transportation Manufacturing Costs Costs Inventory Costs
  • 4. The Supply Chain Another View Plan Plan Source Source Make Make Deliver Deliver Buy Buy Suppliers Manufacturers Warehouses & Customers Distribution Centers Transportation Transportation Material Costs Costs Costs Transportation Manufacturing Costs Inventory Costs Costs
  • 5. Illustration of the supply chain network, using Braun Oral-B as an example
  • 6. What Is Supply Chain Management (SCM)? Plan Source Make Deliver Buy A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers So that the product is produced and distributed In the right quantities To the right locations And at the right time System-wide costs are minimized and Service level requirements are satisfied
  • 7. Why Is SCM Difficult? Plan Source Make Deliver Buy Uncertainty is inherent to every supply chain Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues The complexity of the problem to globally optimize a supply chain is significant Minimize internal costs Minimize uncertainty Deal with remaining uncertainty
  • 8. Todays Marketplace Requires: Shared visibility for trading partners Personalized content and services for their customers Collaborative planning with design partners, distributors, and suppliers Real-time commitments for design, production, inventory, and transportation capacity Flexible logistics options to ensure timely fulfillment Order tracking & reporting across multiple vendors and carriers
  • 9. Content Lecture Collaboration Basics of Supply Chain Management The evolving Supply Chain Analysing Relationships Questions Inter-organizational Relationships Assignments
  • 10. Supply Chain Integration Push Strategies Classical manufacturing supply chain strategy Manufacturing forecasts are long-range Orders from retailers warehouses Longer response time to react to marketplace changes Unable to meet changing demand patterns Supply chain inventory becomes obsolete as demand for certain products disappears Inefficient use of production facilities (factories) How is demand determined? Peak? Average? How is transportation capacity determined? Examples: Auto industry, large appliances, others?
  • 11. Supply Chain Integration Pull Strategies Production and distribution are demand-driven Coordinated with true customer demand None or little inventory held Only in response to specific orders Fast information flow mechanisms POS data Decreased lead times Decreased retailer inventory Decreased variability in the supply chain and especially at manufacturers Decreased manufacturer inventory More efficient use of resources More difficult to take advantage of scale opportunities Examples: Dell, Amazon
  • 12. Supply Chain Integration Push/Pull Strategies Hybrid of push and pull strategies to overcome disadvantages of each Early stages of product assembly are done in a push manner Final product assembly is done based on customer demand for specific product configurations Supply chain timeline determines push-pull boundary Push- Pull Generic Product Boundary Customized Product Push Strategy Pull Strategy Raw End Materials Consumer Supply Chain Timeline
  • 13. Choosing Between Push/Pull Strategies Pull High Where do the Industries where: Industries where: following industries fit Customization is High Demand is uncertain in this model: Demand is uncertain Scale economies are High Scale economies are Low Low economies of scale Automobile? Demand Uncertainty Aircraft? Computer Furniture equipment Fashion? Petroleum refining? Pharmaceuticals? Industries where: Industries where: Biotechnology? Uncertainty is low Standard processes are the Medical Devices? Low economies of scale norm Push-pull supply chain Demand is stable Scale economies are High Books, CD s Grocery, Beverages Push Low Low Economies of Scale High Pull Push
  • 14. Characteristics of Push, Pull and Push/Pull Strategies PUSH PULL Objective Minimize Cost Maximize Service Level Complexity High Low Focus Resource Allocation Responsiveness Lead Time Long Short Processes Supply Chain Order Fulfillment Planning
  • 15. Supply Chain Collaboration What Is It? Many different definitions depending on perspective The means by which companies within the supply chain work together towards mutual goals by sharing Ideas Information Processes Knowledge Information Risks Rewards Why collaborate? Accelerate entry into new markets Changes the relationship between cost/value/profit equation
  • 16. Supply Chain Collaboration Cornerstone (= something very important that something else depends on) of effective SCM The focus of many of todays SCM initiatives Retailers Suppliers Synchronized Manufacturer Production Scheduling Collaborative Distributors/ Demand Collaborative Wholesalers Planning Product Development Collaborative Logistics Planning Transportation services Distribution center services Logistics Providers 16
  • 17. Benefits of Supply Chain Collaboration CUSTOMERS MATERIAL SERVICE SUPPLIERS SUPPLIERS Reduced inventory Reduced inventory Lower freight costs Increased revenue Lower warehousing costs Faster and more reliable Lower order management Lower material acquisition delivery costs costs Lower capital costs Higher Gross Margin Fewer stockout conditions Reduced depreciation Better forecast accuracy Lower fixed costs Better allocation of promotional budgets Improved customer service More efficient use of human resources
  • 18. Supply Chain Collaboration Spectrum Extensive Not Viable Synchronized Thegreen arrow Collaboration describes increasing complexity and sophistication of: Information systems Extent of Collaboration Systems infrastructure Decision support systems Coordinated Planning mechanisms Collaboration Information sharing Process understanding Higher levels of Cooperative collaboration imply the Collaboration need for both trading partners to have equivalent (or close) levels of supply chain maturity Synchronized Transactional collaboration demands Limited Collaboration Low Return joint planning, R&D and sharing of information Many Few and processing models Number of Relationships Movement to real-time customer demand information throughout the Source: Cohen & Roussel supply chain 18
  • 19. Successful Supply Chain Collaboration Try to collaborate internally before you try external collaboration Help your partners to work with you Share the savings Start small (a limited number of selected partners) and stay focused on what you want to achieve in the collaboration Advance your IT capabilities only to the level that you expect your partners to manage Put a comprehensive metrics program in place that allows you to monitor your partners performance Make sure people are kept part of the equation Systems do not replace people Make sure your organization is populated with competent professionals whove done this before
  • 20. Content Lecture Collaboration Basics of Supply Chain Management The evolving Supply Chain Analysing Relationships Questions Inter-organizational Relationships Assignments
  • 21. 1. Comparison of B2C and B2B relationships B2C Product driven Maximize the value of transaction Large target market Single step buying process, shorter sales cycle Brand identity created through repetition and imagery Merchandising and point of purchase activities Emotional buying decision based on status, desire or price
  • 22. 1. Comparison of B2C and B2B relationships B2B Relationship driven Maximize the value of the relationship Small, focused target group Multi-step buying process, longer sales cycle Brand identity created on personal relationship Educational and awareness building activities Relational buying decision based on business value
  • 23. Relations hips in the value
  • 24. 2. Advantages and disadvantages of creating relationships with consumers for a manufacturer Advantages Retain consumers is more profitable in general Long-term relationships maintain a competitive advantage Disadvantages Calculate the effects on a companys profit costs (CRM program) Miss new opportunities through focusing on current consumers
  • 25. 3. Motorola and Hewlett- Packard Co-opetition if both elements of cooperation and competition are visible, the relationship between the competitors is named co-opetition. A firm with a strong position, but lacking resources held by the competitor must focus on a co-opetitive relationship. Within the process, firms develop mechanisms that attempt to deal with competitiveness
  • 26. Five types of relationship between a firm and its competitor
  • 27. 4. Properly incorporating suppliers in their product development process Suppliers can do much more than deliver reasonably priced items on request. Exploiting some of the potential of a supplier requires that operations of the two companies become more closely integrated in the various facets of the relationship.
  • 28. 5. A manufacturer how wants to integrate end-consumers in the product development process Formal way: conjoint analysis Informal way: sales representative comes home to the HQ with some inspiration for the new product development
  • 29. 6. How can distance be reduced in cross-cultural buyer-seller negotiations Cultural dimensions that affect the distance: Different understanding of the national and industry culture Different understandings of the organisational culture Different personal behaviour because of the different mental programming
  • 30. 6. How can distance be reduced in cross-cultural buyer-seller negotiations It is possible to reduce the psychic distance by an intercultural learning process. In this learning process, the company transfers knowledge about reduction of psychic distances in different cultures Psychic: Having a special mental ability, for example so that you are able to know what will happen in the future or know what people are thinking
  • 31. 7. Dell entered into a relationship with IBMs Global Service Division Dell has maybe evaluated is own competences and realised that service support is not its core competence. It is better in PC-manufacturing. Therefore, it has outsourced the service support to IBM, which sees this as one of its existing and future core competences. That is a relationship of value for both partners.
  • 32. 8. Describe the interactions between buyer and seller in the diamond model In the diamond model, the boundaries between buying and selling firms become more transparent. Interactive, cross functional teams openly exchange ideas for improving efficiency and effectiveness. The goal is to create new value together.
  • 34. Content Lecture Collaboration Basics of Supply Chain Management Efficient consumer response Analysing Relationships Questions Inter-organizational Relationships Assignments
  • 35. Summary Inter- organizational relationships The network perspective on supply chains requires a holistic approach. (dealing with of treating with the whole of something) It recognizes the interdependence not only of immediate partners but also among the entire network of relationships
  • 36. Summary Inter- organizational relationships The movement of organizations toward network relationships places new challenges on management to define the core and establish the boundaries of the firm to create the most effective governance mechanism to develop the most appropriate relationships with partners
  • 37. Summary Inter- organizational relationships Trust relationships are a necessary condition in supply chain management. Without it, partners wont share information or commit to specific high-risk investments. It is time consuming and is based on building positive experience
  • 38. Summary Inter- organizational relationships The essential characteristics of the supply chain is its inter-organizational relationships. The ability to develop and manage the supply chain becomes a core competency, along with product technology, knowledge, and market access these relationships govern future actions of the corporation.
  • 39. Content Lecture Collaboration Basics of Supply Chain Management Efficient consumer response Analysing Relationships Questions Inter-organizational Relationships Assignments
  • 40. Assignments: Innovation and entrepreneurship Working assignments 1 and 2 Page 9 Question: Are large firms better innovators than small firms Page 10 Questions: Skype: innovators and entrepreneurs Page 13 Article: Innovation Management in Supply Chains Summary
  • 41. Benettons Supply networks Assignment Combine several subjects in a professional report. The size of the report must not exceed 5 A4, excluding the cover, contents and appendixes. Then there will be at the end a talk of around 30 minutes about the report