Productions Management II - Lecture 6 - Supply Chain Management I Lecture Supervisor: M.Tech. Amit Garg ga@fir.rwth-aachen.de Pontdriesch 14/16 Tel.: 47705-439
Objectives of Lecture on SCM Overview on structures of Classical Supply Chains and currently predominant Supply Networks. Methods, potentials and obstacles of Supply Chain Management (SCM) Knowledge about emergence of virtual market places out of SCM needs. Differentiation between different types of virtual market places. Integration of virtual market places into SCM. Page 3
Supply Chain Management (SCM) the direct relationship for an enterprise from the perspective of value creating supply chain Enterprise Production Production Distribution Definition Supply Chain Management ist the process oriented integration of Planning & Control of the products, Information & Cash flow through the entire value chain from the customer to the supplier s supplier witht he following goals: Better fulfillment of the customer demands Synchronization & Optimization of resources to meet the demand Flexible Manufacturing to fullfill the orders Reduction of Inventory across the supply chain Kuhn, Hellingrath 2002 Page 4
Supply Chains are dependent on Competence & Capacity Management for an enterprise Multiple Capacity In-/Outsourcing Multiple In-/Outsourcing U i Multiple Sourcing U i U i Capacity Management U 1 U i U 1 P 1 P 2 P 3 P 4 P 5 Selective Capacity In-/Outsourcing U 1 U i U 1 P 1 P 2 P 3 P 4 P 5 Selective In-/Outsourcing P 1 P 2 P 3 P 4 P 5 P 1 P 2 P 3 P 4 P 5 P 1 P 2 P 3 P 4 P 5 Selective Sourcing P 1 P 2 P 3 P 4 P 5 Non-Sourcing Single-Outsourcing Single-Sourcing U 1 U i U 1 U i U i U i U 1 U 1 U 1 P 1 P 2 P 3 P 4 P 5 P 1 P 2 P 3 P 4 P 5 P 1 P 2 P 3 P 4 P 5 Competence Management Page 5
Modeling the Supply Chain using the SCOR (Supply Chain Operational Reference Model) Plan Deliver Source Make Deliver Return Return Return Source Make Deliver Source Make Deliver Return Return Return Return Source Return Intern or extern Your Manufacturing Organization Intern or extern SCOR Model Quelle: Supply Chain Council www.supply-chain.org SCOR describes any partner in the supply chain using 5 basic processes Procurement (Source), Manufacturing (Make), Delivery (Deliver), Planning (Plan) and taking back the defective products (Return). Page 6
Using the SCOR model, enterprises are modelled at different process levels Level # Description Schematic Comments 1 Top Level (Process Types) Plan Source Make Deliver Return Level 1 definiert defines the den scope Anwendungbereich and content for und the den Supply Inhalt chain des Supply Operations Chain Reference-model. Operations Reference-Modells Basis Here für basis die of Wettbewerbsstrategie competition performance targets are set. Supply Chain Operations Reference model Not in Scope 2 3 4 Configuration Level (Process Categories) Process Element Level (Decompose Processes) P3.1 Identify, Prioritize, and Aggregate Production Requirements P3.3 P3.4 Balance Production Resources with Establish Detailed P3.2 Production Requirements Production Plans Identify, Assess, and Aggregate Production Resources Implementation Level (Decompose Process Elements) Die A company s Supply Chain supply eines chain Unternehmens can be configured-to-order kann im nächstenat Level durch Level ca. 2 from 17 Standardmodule core process categories. konfiguriert werden. Die Companies Unternehmen implement implementieren their operations auf Level strategy 2 ihrethrough Operationsstrategie the configuration they durch choose einefor zugeschnittene their supply chain. Konfiguration. Level Level 3 definiert defines a die company s Möglichkeiten ability eines to compete Unternehmens successfully in in seinen its chosen gewählten markets, Märkten and consists zu wirtschaften of: und besteht aus: Definitionen der Prozesselemente Input Process und element Output von definitions Prozesselementinformationen Leistungsmessung Process element information der Prozesse inputs, and outputs Best Process Practices performance metrics Best practices, where applicable Potenziale System capabilities des Systems required zur Unterstützung to support best der practices Best Practices Systems/tools Level 3 verfeinert die Ebenen des 2. Levels Companies fine tune their Operations Strategy at Level 3. In diesem Level implementieren Unternehmen speziell zugeschnittene Companies implement Supply specific Chain Management supply chain Tools management Level practices 4 definiert at this Handlungsalternativen level. um Wettbewerbsvorteile Level 4 defines practices zu erlangen to achieve und competitive flexibel auf veränderte Marktsituationen advantage and to regieren adapt to zuchanging können business conditions. Source: SCOR Quelle: Version SCOR 7.0 Version Overview, 7.0 Overview, Supply-Chain Supply-Chain Council 2005 Council 2005 Page 7
Coordination Concept for Supply Chain Management Central coordinated Supply Chain Production-, Shipping orders Product development, Logistic coordinator -Orders Stock, Arrival of Goods Installationcompany Production-, Shipping orders Stock, Arrival of Goods Shipping orders Packer Distributor Dominated Supply Chain General Agreement, Deliver-Plans, Calls General Agreement, Deliver plans, Kanban calls General Agreement, Deliver Plans, Calls Remodel Surface- finish Final Installation OEM Stocks Production orders Stocks Production orders Stocks Production orders For example: Car Manufacturers Page 8
Planning level of the Supply Chain Management Level Description IT-System functions Supply Chain Configuration Construction of Production- and Logistic structures Product-Chain-Elements Supply Chain Planning Planning of Stocks, Planning of Assets and Capacities Master planning Product planning Transport planning Problem management planning Controlling Supply Chain Execution Inducement and Confirmation of Orders Contract Processing Transport Contract Processing Page 9
Designing, Planning, Controlling and Integration Tasks at the Overlapping Planning Level Supply Chain Management-Tasks: Configuration and Optimization of the Supply Chain Planning Information management for fast Reaction on Problems..... Planning of a Manufacturer Sales Planning, Production-Program-Planning Planning of a Distributor Sales Planning, Stock Planning Requirements Planning -Order- Processing Requirement Planning -Order- Processing Purchasing Detailed Planning Detailed Planning Shipping Planning Purchasing Stock Planning Stockreceipt Installation Package Stockreceipt Storage Transport Storage Transport Page 10
Network orientated Supply Chain Management Planned and Coordinated Connection- and Power relationship balanced one.-sided E-Community E-Marktplatz Classical network OEM Market Supply Chain Network SC Network A SC Network B Network OEM Market Market Market instable Tier-2 Tier-1 stable Time of Company-Communication Page 11
Problems with the SC Whipshaw - Effect Market Volatility ± 10 % Local Stocks Regional Stock Central Stock Safety Lags (Transfer) Installation Factories Efficiency- Differences ± 30-50 % Source: Boutellier Page 12
Problems within the SC Bull Whip - Effect Material flow ± 70% ± 3% Stocks / Order size Stocks / Order size Stocks / Order size Stocks / Order size t t t t Stocks Order size Producer 1 2 Information flow Page 13
Potentials of Supply Chain Management Classical Material Organization and PPS Targets of each area involved: throw it over the wall - Mentality Assets are planned with a high security option right from the beginning Organization of interfaces Asset changes are running through the complete supply chain and influence all partners involved Local planning for single processes without regarding influences on other partners Supply Chain Management Takes all partners from the first supplier to the customer into account Delivery to the customer is the main target for all partners involved Assets are only the last chance to react on order changes Active integration of different functions and systems within the supply chain Planning for the complied supply chain taking influences on different partner and their resources into account Targets of SCM Reduction of assets Reduction of supply time Reduction of costs through an increased resource planning and higher planning efficiency Page 14
Potentials of Supply Chain Management Financial flow Physical Physical Physical Process Producer Process Commerce Process Information flow Potentials Available to promise Finding bottle necks Planning SCM Potentials Planning security Higher flexibility Order tracking Higher cost transparency Reduction of delivery time Active asset management Faster business processes Proactive Stock management Baumgarten, TU Berlin 2001 Page 15
Target system of Supply Chain Management Supply Chains are regarded as one Unit Potentials of Supply Chain Management The supply of the end-customer is the strategic goal for all chain links Stocks are uncoupled Adjustment of variations and interferences All functions and systems of the supply chain are integrated active Planning and control of the supply chain takes place under consideration of effects on all ressources satisfaction Product availability Short delivery times Delivery reliability Product quality Extended benefits Demand variation Product changes and Product launches Products with short lifecycle Expansion on new markets Transfer of Production Alliances and Fusions High flexibility SCM- Target system Cost reduction Low costs for Handling / Transportation Low warehousing costs Low Obsolescence costs through minimizing of shortfalls Source: Alicke, K.: Supply Chain Management, 2005 Page 16
Market Place as Connection between Seller and Real Market Place Virtual Market Place A B A B F C F Virtual Marketplace C E D E D Combination of traditional market places Integration of electronic market places Page 17
Problems with Electronic Market Places Reaching critical mass Income mainly based on number of transactions Variable costs Costs Fixed costs Critical mass Number of transactions Fixed costs: Rent Personal costs Marketing costs Organization Variable costs: care Administration of database Transaction specific costs Page 18
Purchase Processes Internet based purchase platform Internet based B2B Market Internet based purchase platform Marktet place n:1-relation z.b. www.vwgroupsupply.com n:1:m-relation z.b. www.mro.com 1:m-Relation z.b. www.dell.com Page 19
E-Business Market Place bidding driven Sell Side System neutral request driven Buy Side System Bilateral Market Place Organized by: Selling Company Sell Side Market place Organized by: Neutral Organizer Organized by: Buying Company Buy Side Market place Organized by: Selling company, Consortium Seller Buyer Organized by: Buying company, Consortium Page 20
Integration of Virtual Market Places in SCM Vertical electronic market place, additional to SCM Supply Chain 1 C1 C2 C3 C4 Supply Chain 2 C1 C2 C3 C4 Supply Chain 3 C1 C2 C3 C4 Legend: C = Company horizontal electronic Marketplace, additional to SCM Vertical electronic market place, additional to SCM Page 21
Example for a Market Place within the Supply Chain wtransnet is internet based logistic trading platform (horizontal Marketplace) Better usage of trucks Reduction of waiting time Higher transparency 116.077 requests counted in March 2003 Page 22
Example for a Market Place within the Supply Chain PolyOne is a market place designed for the chemical industry One of the largest vertical, electronic market places. Page 23
Future of Virtual Market Places Customization My Marketplace Commerce Transaction specific information Transactions Integrated services Content Information archive Databases News service Analyses and comments Community Possibility for discussions Expert-Chat Career-Center Controlling systems My Products My Service Customization Integrated product development Integrated projects Connectivity Open communication with third parties in different marketplaces Standard Higher customer loyalty Page 24
Outlook CRM System e-marketplace ERP System Supply Chain Management System E-Procurement System Cross linking becomes more important in the future. Market Places have to integrate existing systems as good as possible Company.com web site Page 25
Integrated orders management with myopenfactory Page 26
Objectives of Lecture on SCM Overview on structures of Classical Supply Chains and currently predominant Supply Networks. Methods, potentials and obstacles of Supply Chain Management (SCM) Knowledge about emergence of virtual market places out of SCM needs. Differentiation between different types of virtual market places. Integration of virtual market places into SCM. Page 27