Implementation Methodology - Supply Chain Management

Implementation Methodology - Supply Chain Management A . Vision Creation – What do we want to look like when we are complete? ... 3:14 AM

Implementation Methodology - Supply Chain Management

A. Vision Creation –

What do we want to look like when we are complete?

Ø  Create a vision of what the supply chain will look like.

Define how far the supply chain will spread from customers to suppliers. Detail the number of customer’s customer’s. Detail the number of supplier’s supplier’s.

Ø  Identify the steps and processes existing at each level of the supply chain.

Define, in as much detail possible, the steps and processes involved throughout the supply chain vision. Look for redundancies, areas of waste, time requirements and areas where over lap takes place.

ELIMINATE WASTE, EXCESSIVE TIME AND AREAS OF OVERLAP FROM THE VISION!!!

Ø  Identify potential issue areas Each organization to be included into the  supply/value chain may produce issue areas. Open discussion between interested parties while focused on implementing a true “win-win” relationship will permit minimization of many issue areas. Attention to fully discussing each potential issue in an open and frank manner is essential to the long term success of any supply/value chain. No detail should be left unresolved.

Ø  Define how the supply chain processes would work together. Based upon the vision of the supply chain, define how the supply chain would work paying attention to the seamless integration of the supply chain among the various included members. Define the method of information flow, demand exchange and data exchange.

Keep this at a relatively high level of detail. Concentrate on best world practices.

Define the logistics network that will be supported in the integrated supply chain.

When doing your plan ensure you include the following business processes:

•  Materials Management

•  Warehousing

•  Forecasting

•  Inventory Planning

•  Transportation

•  Route Management

•  Purchasing

•  Information Technology

•  Financials (AR/AP/GL)

At a minimum, the systems content should include:

Business & Planning Systems

Logistics, Sourcing & Distribution Systems

Manufacturing & Control Systems

E-commerce systems.

B. Target Selection –

Who will we work with to create this vision?

Ø  Segment customers.

Define which of the customers would be most likely to be able to join in creating an

integrated supply chain?

Pay attention to the level of technology being employed, the compentency of the planning

systems, and the expertise of their personnel.

Ø  Segment selected customers based upon service needs. Don’t necessarily segment customers by industry, market or trade channel. Segment customers by their particular needs. This will assist in developing a further definition of services, capabilities required to create and sustain an integrated supply chain. Determine to the best level possible the most likely “drivers” for their needs.

Implementation Process

•  Determine customer needs and wants

•  Ensure the business case

•  Optimize sourcing (price, quality, availability)

•  Design for operations efficiency

•  Design for basic standardizations (where possible)

•  Achieve performance standards

•  Establish suppliers of choice

•  Ensure continuity of supply

•  Implement customer focused program

Emphasis is on:

• Least cost of acquisition
• Continuity of supply
• Customer service level
• Segment suppliers

Define which of the suppliers would be most likely to be able to join in creating an integrated supply chain? Pay attention to the level of technology being employed, the competency of the planning systems, and the expertise of their personnel.

Ø  Segment selected suppliers based upon service needs. Don’t necessarily segment suppliers by industry, market or trade channel. Segment suppliers by their particular

needs. This will assist in developing a further definition of services, capabilities required to create and sustain an integrated supply chain. Determine to the best level

possible the most likely “drivers” for their needs.

Ø  Match customers and suppliers into a proposed supply chain.

Determine if there are synergies that exist between the selected customers and suppliers. This may not be an existing supply chain but may be a newly created supply chain. (Remember – sometimes revolutionary ideas do work.)

Ø  Define potential benefits.

At the highest level possible, define the potential benefits that could be achieved by creating this visionary integrated supply chain. This will be based upon an analysis of the identified “drivers”, capabilities, etc.

Ø  Make a proposed selection Outline a proposed selection of the integrated supply chain. Define which companies would be included.

C. Customize - the supply chain to the service requirements and benefits.

Ø  Tailor the logistics network for differentiation. A single monolithic approach to a logistics network  designed to a single standard is the old way of doing business. Design an integrated supply chain to meet the needs of the targeted selection. Look for superior asset utilization. Determine if the processes can be made repeatable and scaleable.

Ø  Look for flexibility. Market relationships change over time. How can the targeted supply chain be made flexible? Is there a least expensive configuration that exists or can be developed?

Ø  Define the technology and people infrastructure.

What is required to make the targeted supply chain to work in the least cost and most timely manner? Select the technology (processes, systems, hardware, and network) to make system work. Identify the people and experience base to make it work. Contrast this against core competencies by organization.

Ø  Look for issues. Based upon the issues outlined – are there issues that will come up in the future? How would you over come them?

Define the inventory policies you will use in the supply chain:

Inventory Policies:

•  Make to Stock (MTS)

•  Make to Order (MTO)

•  Purchase to Stock (PTS)

•  Purchase to Order (PTO)

•  Just-in-Time (JIT)

•  Make to Order

•  Purchase to Order

•  Purchase to Stock

D. Internal Capabilities –

     Are we internally capable of putting the targeted supply chain in place?

Ø  Perform an internal logistics audit. Review existing practices. Review existing processes. Identify potential conflicts. Review the technology base. Review potential organizational conflicts. Identify the cost drivers and define reduction plans and priorities. Eliminate waste, redundancy, and time.

Ø  Identify areas for change Align demand planning according to the supply chain. Look for cross-functional planning processes supported by demand planning software, information exchange and timely implementation. Look for new inventory deployment strategies, production methods, out-sourcing possibilities, organization changes, etc.

Ø  Identify cost/benefits Determine the ROI on the proposed changes as compared to the expected benefits.

Ø  Develop a project plan

Sample Project Plan

A sample project plan designed to upgrade the purchasing function to support “Just in Time” procurement.

·        Phase I - Commitment

–  Organizational priority

–  Allocation of personnel

·        Phase II - Preparation

–  Focus on: sourcing, pricing, developing improved relationships w/suppliers

–  Free purchasing professionals from non-value added clerical activities

–  Form JIT implementation teams

·        Phase III – Selection of items/suppliers

–  Work with manufacturing/customer

–  Evaluate high dollar/volume items

–  Select best suppliers

·        Phase IV – Formalization

–  Pilot test program

–  Establish information systems

–  Negotiate quality improvement for processes, material and information flow, price, lead

    time, and other critical values

·        Phase V – Continuous performance/improvement

–  Broad based implementation Immediate benefits from an optimal supply chain

                management program:

•  Easier data exchange

•  Faster response

•  Reduced transaction cost

•  Enhanced reliability

•  Opens new opportunities

•  Leverage purchasing power

•  High degree of collaboration

E. Propose to management Outline the changes necessary to start the transformation.

When doing your project plan, consider including the following areas:

• Strategy
• Scope
• Expectations
• Volume Estimates
• Project Plan
• Elapsed Time Estimate
• Server Architecture
• Implementation Costs
• On-going Costs
• Benefits
• Change Management Program
• Risk Management Program

When doing your internal assessment, provide volume estimates for:

•   Sales Orders

•   Purchase Orders

•   Advance ship notices

•   Shipment Receipts

•   Schedule exchanges

•   Schedule changes

•   Change orders

•   Invoices