Supply Chain Implementation In a Global Environment

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1 Supply Chain Implementation In a Global Environment 7th Annual Global Supply Chain Management Program Arizona State University April, 1999 A S S O C I A T E S MANAGEMENT CONSULTANTS 20 NASSAU STREET, SUITE 244 PRINCETON, NEW JERSEY 08542

2 Today s Presentation Our presentation today is planned to include.... Perspective on Supply Chain Management Background and Company Profile Supply Chain Business Models Implementing Structure and Process Change Program Organization and Structure Program Planning and Control April 00 REM Associates Page 2

3 Today s Presentation In addition, our presentation today is planned to include.... Dealing with Multi-Country Businesses Trading Service Agreements - TSAs Applying Standards in a Worldwide Environment Monitoring, Managing, and Reporting Pitfalls - What to Look For and How to Look In Summary April 00 REM Associates Page 3

4 Perspective on Supply Chain Management The logic of supply chain strategy relates directly to the flow of products, information, and costs through the business to the customer.... Manufacturing Distribution Customer Flows: Products Information Costs Revenue REM Associates

5 Perspective on Supply Chain Management There are several levels of supply chain activities between the product source and the customer.... Plant Direct Distribution Customer X X X X Large Chains Primary Distribution Secondary Distribution Tertiary Distribution X Small Independents REM Associates

6 Perspective on Supply Chain Management Supply chain management groups together a complex network of functions into a true cost and service effective business strategy.... Sourcing Purchasing Procurement Production Planning & Scheduling Inventory Planning & Management Distribution Network Design & Management Transportation Warehousing Customer Service Order Fulfillment Raw Materials Raw Materials Finished Products Finished Products Suppliers Manufacturing Facilities Distribution Centers Customers Supply Chain April 00 REM Associates Page 6

7 Perspective on Supply Chain Management The logic of supply chain planning relates directly to the functional flows of information and product through the business.... Information Flow Product Procurement Operations Forecasting Vendors Vendors and and Materials Procurement Production Scheduling Materials Requirements Planning and Facilities Planning Order Processing Consumers and Supply Supply Markets Markets Product Flow Customer Markets Inbound Transportation Material and Product Warehousing Outbound Transportation Manufacturing and Transfer Finished Goods Distribution REM Associates

8 Background and Company Profile Our presentation today uses a global consumer product company to illustrate the complexities of supply chain management across multiple cultures and business environments.... Our company is a multi-billion dollars pharmaceutical company Manufactured product groups include: Over the counter drugs Prescription drugs Nutritional products Health and beauty aids Product markets include: Primary - internal markets In-country markets International internal markets International external markets April 00 REM Associates Page 8

9 Background and Company Profile Our company business model consisted of over two dozen facility locations in over twenty countries, a sampling included.... Africa Korea Australia China Malaysia Panama Philippines Costa Rica Mexico Singapore India Indonesia Pakistan Taiwan April 00 REM Associates Page 9

10 Background and Company Profile The objective, reasoning, and logic for implementing an integrated global supply chain strategy included the need to.... Integrate a global supply chain network worldwide Standardize processes, and ways of working Improve inventory and information accuracy Update production, information, order processing, and financial systems more quickly and easily Implement common performance measures Set the stage for future change compatibility April 00 REM Associates Page 10

11 Supply Chain Business Models Consideration was given to various supply chain business operating models based on.... Type of business and products Dynamics of distribution and markets Global supply chain differences Models of company components could consist of: Production model - produce and distribute Market model - acquire and sell Country business model - country self-contained April 00 REM Associates Page 11

12 Supply Chain Business Models The company supply chain structures and functions consists of.... Integrated Supply Chain Management Forecast Demand Plan & Manage Inventory Plan Production Process Orders Move Product Policies, Key Performance Indicators April 00 REM Associates Page 12

13 Supply Chain Business Models The integrated supply chain business model included certain key functions in order to effectively support the business.... Integrated Integrated Supply Supply Chain Chain Management Management Forecast Forecast Demand Demand Plan & Manage Inventory Plan Plan Production Production Process Orders Move Move Product Product April 00 REM Associates Page 13

14 Supply Chain Business Models Alternative supply chain structures need to consider products, markets, production capability, logistics network resources, and customer service in order to effectively support the overall business strategy.... Market forecast Sales plan Customer order processing Plan and manage inventory Plan and schedule production Distribute product April 00 REM Associates Page 14

15 Supply Chain Business Models An alternative supply chain structure that places most of the responsibility on the demand side can be illustrated as follows.... Demand Supply Market forecast Sales plan Plan and manage inventory Customer order processing Plan and schedule production Distribute product April 00 REM Associates Page 15

16 Supply Chain Business Models An alternative supply chain structure that balances the responsibility on both the demand and supply side can be illustrated as follows.... Demand Supply Market forecast Sales plan Plan and manage inventory Plan and schedule production Distribute product Customer order processing April 00 REM Associates Page 16

17 Implementing Structure and Process Change Once the structure is decided on, the tasks turn to implementation and process change and must consider.... Understanding ways of working, reasoning, and logic Uniqueness of country operating characteristics Identifying process and productive operations change Standardization of ways of working versus unique country needs - financial, marketing, etc. April 00 REM Associates Page 17

18 Program Organization and Structure Effective program organization must blend the proper mix of resources, matching skills with specific functional requirements.... Resource Teams Corporate resources Above country resources External resources Process owners Local resources Technical resources Internal resources April 00 REM Associates Page 18

19 Program Planning and Controlling Planning, monitoring, and control are the essential ingredients to successful program implementation.... A well organized and documented plan is the first step Effective communications at all levels is the second step Up front ownership and buy in are keys to success Establishment of clearly defined roles, responsibilities, and accountabilities are essential Monitoring, progress reporting, and plan management make sure timing and progress are kept on track April 00 REM Associates Page 19

20 Dealing with Multi-Country Businesses Multi-country environments create significant challenges to program implementation.... Up front agreement and buy in are key to multi country program success Ways of working, considering functions, tasks, and activities, can be very different and demand unique processes Cultural differences must be considered and dealt with in an effective manner Sequence and timing are critical to maintaining program momentum Responsibility and discipline are necessary for program management Respect for country style and culture must be considered in all phases of program implementation REM rule: One third country; one third culture; one third business April 00 REM Associates Page 20

21 Trading Service Agreements - TSAs Trading service agreements are used to make firm both demand and supply requirements and negotiate key points of difference.... Demand must initiate marketplace requirements in terms of: Products Quantities Time Supply must define production and distribution capacities in terms of: Products and production capacity EOQs Inventories and locations Distribution and delivery timing April 00 REM Associates Page 21

22 Trading Service Agreements - TSAs Trading service agreements must consider, negotiate, and agree on certain key elements.... Initial consideration given to: Uniqueness of products, markets, country, etc. Product life cycle and volatility Product sourcing Key agreement components: Product quantities Timing Firm versus planned orders Negotiation process When and how to change TSA agreement must be a process - not a product April 00 REM Associates Page 22

23 Applying Standards in a Worldwide Environment Once agreements are in place and the process is working effectively, there is a need to develop standards and measures.... Benchmarks need to measure progress over time Measures need to benchmark and compare Internal measures Functional elements Industry benchmarks World class benchmarks They must recognize operational differences They must compare apples to apples April 00 REM Associates Page 23

24 Applying Standards in a Worldwide Environment The performance measurement framework model demonstrates the use of evaluation, measurement, and reporting in applying standards.... Performance Measurement Framework Performance Measurement (PM) Process Model What is PM? A management process that translates business strategies into action steps: Business Decisions Information Requirements Organizational Accountabilities Resource Allocation & Prioritization April 00 REM Associates Page 24

25 Monitoring, Managing, and Reporting Measures and standards provide the ability to manage the supply chain to effectively support the business.... Monitoring supply chain operations must consider: Key elements and functions Exception reporting Timing is a key to effective management Daily activities Weekly trends Monthly summaries Yearly planning Tolerance ranges can be effective tools for management Focus on key functions and elements Signal problem areas based on data outside ranges Ranges can set degree and priority of management attention April 00 REM Associates Page 25

26 Monitoring, Managing, and Reporting Continuous Improvement Stateof-the-Art Strategies/ Automation Benchmarking Proactive in Business Decisions Quality Performance Measurement Standards High Level of Productivity/ Efficient Use of Resources Effective Internal Controls Excellent Reputation in Industry Team Work April 00 REM Associates Page 26

27 Pitfalls - What to Look For and How to Look Pitfalls to watch out for and be aware of include.... Insufficient planning and organization Incorrect deployment of internal and external resources Insufficient time to deal with cultural differences In-depth knowledge of country and local uniquenesses Lack of effective and timely communications from beginning to end Unanticipated issues - e.g. inventory and data accuracy April 00 REM Associates Page 27

28 In Summary In summary, a successful global integrated supply chain program implementation must consider.... Worldwide markets, products, and businesses The reality of a global economy Multidimensional operating environments Need for up front planning and resource commitment Effective and timely communications Need for coordination and cooperation The assumption that one thing that is constant is Change April 00 REM Associates Page 28

29 A S S O C I A T E S MANAGEMENT CONSULTANTS 20 NASSAU STREET, Suite 244 PO Box 7345 PRINCETON, NEW JERSEY Phone: Fax: WWW:

REM Associates A Profile of our Consulting Network Princeton, NJ December 2007 A S S O C I A T E S MANAGEMENT CONSULTANTS 20 NASSAU STREET, SUITE 244 PRINCETON, NEW JERSEY 08542 Profile of REM Associates

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