1、IS YOUR SUPPLY CHAIN COMPETITIVE? HOW DO YOU KNOW?,BLAIR R WILLIAMS Professor and Director, Polytechnic University. Brooklyn, New York 718-260-3835,OBJECTIVES AND OUTLINE,OBJECTIVE: TO HELP YOU DETERMINE IF YOUR COMPANY HAS A COMPETITIVE SUPPLY CHAIN. OUTLINE: ELEMENTS OF A SUPPLY CHAIN SCOR MODEL
2、AND METRICS BENCHMARKING IMPLICATIONS BEST PRACTICES INFORMATION SOURCES,DEFINITION OF A SUPPLY CHAIN,A SUPPLY CHAIN COVERS THE FLOW OF MATERIALS, INFORMATION AND CASH ACROSS THE ENTIRE ENTERPRISESUPPLY CHAIN MANAGEMENT IS THE INTEGRATED PROCESS OF PLANNING, SOURCING, MAKING AND DELIVERING PRODUCT,
3、FROM RAW MATERIAL TO END CUSTOMER,ELEMENTS -SUPPLY CHAIN MANAGEMENT PLAN-SOURCE-MAKE-DELIVER-MEASURE,SUPPLY CHAIN INFRASTRUCTURETRANSFER OF INFORMATION, MATERIALS AND CASH DEMAND MANAGEMENT CUSTOMER ORDER MANAGEMENT PROCESS FORECASTING CUSTOMER PARTNERSHIPS SOURCING SELECTING, QUALIFYING, PARTNERING
4、, MEASURING AND PROVIDING FEEDBACK TO KEY SUPPLIERS,ELEMENTS OF SUPPLY CHAIN MANAGEMENT PLAN-SOURCE-MAKE-DELIVER,SUPPLY OR MANUFACTURING PROCESS FACTORY SCHEDULING INVENTORY MANAGEMENT LEAD TIME REDUCTION LOGISTICAL PROCESS TRANSPORTATION, WAREHOUSING, DISTRIBUTION, DELIVERY GLOBAL PERFOMANCE MEASUR
5、EMENTS - SCOR,SUPPLY CHAIN COUNCIL (SCC),SCC IS AN INTERNATIONAL PROFESSIONAL BODY FOR SUPPLY CHAIN MANAGEMENT (SCM) SYSTEMS AND PRACTICESDEVELOPED AND ENDORSED THE SCOR (SUPPLY CHAIN OPERATIONS REFERENCE MODEL) AS A CROSS INDUSTRY STANDARD FOR SCM,SPECIAL INDUSTRY GROUPS,AEROSPACE AND DEFENCE COMPU
6、TERS & ELECTRONICS EQUIPMENT PHARMACEUTICALS & CHEMICALS UTILITIES - TELECOMMUNICATIONS RETAIL - CONSUMER PACKAGED GOODS DEFENSE AND INDUSTRIAL SEMICONDUCTORS,SCOR MODEL,BUSINESS PROCESS REENINEERING AS IS TO TO BE METRICS BENCHMARKING IMPLICATIONS BEST PRACTICE ANALYSIS PROCESS REFERENCE MODEL BASE
7、D ON BEST IN CLASS RESULTS CHARACTERIZE MANAGEMENT PRACTICES IDENTIFY SOFTWARE SOLUTIONS,LEVEL I METRICS,DELIVERY PERFORMANCE PERFECT ORDER FULFILLMENT PRODUCTION FLEXIBILITY TOTAL SUPPLY CHAIN MANAGEMENT COST MATERIAL ACQUISITION COST CASH TO CASH CYCLE TIME TOTAL INVENTORY DAYS OF SUPPLY ASSET TUR
8、NS,LEVEL I METRICS,DELIVERY PERFORMANCE - % THE PERCENTAGE OF ORDERS THAT ARE FULFILLED ON OR BEFORE THE CUSTOMERS REQUESTED DATE,LEVEL I METRICS,PERFECT ORDER FULFILLMENT - % DELIVERED COMPLETE WITH ALL ITEMS ON THE ORDER IN THE QUANTITY REQUESTED DELIVERED ON TIME TO CUSTOMERS REQUEST DATE DELIVER
9、ED IN PERFECT CONDITION WITH THE CORRECT CONFIGURATION AND COMPLETE & ACCURATE DOCUMENTATION,LEVEL I METRICS,PRODUCTION FLEXIBILITY - DAYS THE NUMBER OF DAYS REQUIRED TO ACHIEVE AN UNPLANNED, SUSTAINABLE 20% INCREASE IN PRODUCTION,LEVEL I METRICS,TOTAL SUPPLY CHAIN MANAGEMENT COST - $s SUM OF COSTS
10、OF: ORDER MANAGEMENT MATERIALS ACQUISITION INVENTORY CARRYING SUPPLY CHAIN - FINANCE, PLANNING AND MIS,LEVEL I METRICS,MATERIAL ACQUISITION COST - $s SUM OF COSTS TO MANAGE: COMMODITY MANAGEMENT & PLANNINGSUPPLIER QUALITY ENGG. INBOUND FREIGHT & DUTIES RECEIVING AND MATERIAL STORAGE INCOMING INSPECT
11、ION MATERIAL PROCESS ENGG. & TOOLING,LEVEL I METRICS,CASH TO CASH CYCLE TIME - DAYS THE NUMBER OF DAYS BETWEEN PAYING FOR RAW MATERIALS AND GETTING PAID FOR PRODUCT, AS CALCULATED BY: INVENTORY DAYS OF SUPPLY PLUS DAYS OF SALES OUTSTANDING (RECEIVABLES) MINUS AVERAGE PAYMENT PERIOD FOR MATERIAL (PAY
12、ABLES)C to CC TIME = INV DAYS + DAYS REC DAYS PAY,LEVEL I METRICS,TOTAL INVENTORY DAYS OF SUPPLY(THE AVERAGE COST OF INVENTORY DIVIDED BY THE COST OF GOODS SOLD) TIMES 365TOTAL INVENTORY DAYS SUPPLY= INVENTORY x 365COGS,LEVEL I METRICS,ASSET TURNS NUMBERTOTAL REVENUE DIVIDED BY TOTAL ASSETS = TOTAL
13、REVENUETOTAL ASSETS,BENCHMARKING AND BEST PRACTICES,DELIVERY PERFORMANCE TO REQUEST % (8/2000)BIC Aver Median Pharmas and Chemical 98.9 78.4 91.9 Computers 82.8 56.4 58.8 Consumer Packaged Goods 98.4 72.3 84.4 Defense and Industrial 98.0 69.4 71.7 Electronic Equipment 97.4 67.6 74.2 Semiconductors 8
14、4.5 62.0 64.8 Telecommunications 94.8 63.4 72.6,DELIVERY PERFORMANCE TO REQUEST %,RANGE 62% TO 98% ( 20 to 30 % points per Industry Group)IMPLICATIONS MOST FUNDAMENTAL MEASUREMENT OF CUSTOMER SATISFACTION INDICATES HOW WELL THE SUPPLY CHAIN IS CONFIGURED & INTEGRATED,DELIVERY PERFORMANCE TO REQUEST
15、%,BEST PRACTICES ORDER TRACKING SYSTEMS TO COMPARE REQUESTED VS ACTUAL DATES AT LINE ITEM LEVEL DEMAND VISIBILITY TO SUPPLIERS CONSOLIDATION, PACKING AND DELIVERY OUTSOURCED. DELIVERY DIRECTLY TO CUSTOMER POINT OF USE ON LINE ATP AND ORDER STATUS AVAIL TO CUSTOMER,BENCHMARKING AND BEST PRACTICES,UPS
16、IDE PRODUCTION FLEXIBILITY (8/2000)DAYSBIC Aver Median Pharmas and Chemical 18.4 229.3 120 Computers 9.7 53.4 38.5 Consumer Packaged Goods 9.4 144.8 60.0 Defense and Industrial 16.7 96.1 36.0 Electronic Equipment 9.0 73.3 60.0 Semiconductors 30.0 188.5 175.0 Telecommunications 9.6 41.7 30.0,UPSIDE P
17、RODUCTION FLEXIBILITY Days,RANGE 9 to 230 DAYS (6 to 10 times within Industry Group)IMPLICATIONS MEASURE OF COMPANYS SUPPLY FLEXIBILIY INCREASE IN PRODUCTION WITHOUT CAPITAL INVESTMENT,UPSIDE PRODUCTION FLEXIBILITY Days,BEST PRACTICES EFFECTIVE SUPPLIER PARTNERSHIPS SYNCHRONIZING OPERATIONS ACROSS T
18、HE COMPANY TO REDUCE RAMP TIME HIGH PERFORMANCE MANUFACTURING TECHNIQUES DEMAND PULL, CELLULAR MFG, MULTI SKILLED FORCE BUILD/CONFIGURE TO ORDER MODULAR DESIGN,BENCHMARKING AND BEST PRACTICES,TOTAL SUPPLY CHAIN MANAGEMENT COSTS (8/2000)% OF REVENUEBIC Aver Median Pharmas and Chemical 5.0 10.3 11.2 C
19、omputers 4.3 9.4 8.4 Consumer Package Goods 4.1 11.3 9.1 Defense and Industrial 3.2 9.4 8.9 Electronic Equipment 5.1 11.4 11.4 Semiconductors Telecommunications 3.7 8.6 8.2,TOTAL SUPPLY CHAIN MANAGEMENT COSTS % OF REVENUE,RANGE 3 to 11% ( double within Industry Groups)IMPLICATIONS 1 BILLION DOLLAR C
20、OMPANY WILL SAVE $50 million (5%) PER YEAR, IN SUPPLY CHAIN MANAGEMENT COSTS, OVER THEIR COMPETITION,TOTAL SUPPLY CHAIN MANAGEMENT COSTS % OF REVENUE,BEST PRACTICES SCM VIEWED AS CRITICAL PROCESS AND INTEGRATED INTO BUSINESS PLANNING PROCESS SINGLE EXECUTIVE OVERALL RESPONSIBILITY ON LINE EDI AND PU
21、RCHASING PAY ON RECEIPT (ELIMINATE RECONCILIATION OF INVOICES),BENCHMARKING AND BEST PRACTICES,MATERIAL ACQUISITION COST 1996% OF REVENUEBIC Aver Median Pharmas and Chemical 0.5 1.3 Computers & Electronics 1.0 1.7 Consumer Package Goods 1.1 1.7 Defense and Industrial 1.0 2.6 Semiconductors 0.5 1.3 T
22、elecommunications 1.0 1.9 Automotive 1.8 3.5,MATERIAL ACQUISITION COST % OF REVENUE,RANGE 0.4 to 3.5% (double across industry groups)IMPLICATION A 1 BILLION $ CO. SAVES $10 MILLION (1%) PER YEAR IN MATERIAL BUYING COSTS PURCHASING, QUALITY AND DEVELOPMENT,MATERIAL ACQUISITION COST % OF REVENUE,BEST
23、PRACTICES SUPPLIER PARTNERSHIPS KEY SUPPLIERS ON PRODUCT DEVELOPMENT TEAMS CERTIFIED SUPPLIERS DELIVER AT POINT OF USE COMMODITY TEAMS FOCUS ON STRATEGIC PROCUREMENT ISSUES,BENCHMARKING AND BEST PRACTICES,CASHtoCASH CYCLE TIME (8/2000)DAYS BIC Aver Median Pharmas and Chemical 31.3 120.2 96.8 Compute
24、rs 27.5 62.1 51.5 Consumer Package Goods 19.9 77.0 63.6 Defense and Industrial 20.8 70.3 67.1 Electronic Equipment 31.6 116.3 103.1 Semiconductors 49.4 110.3 104.5 Telecommunications 19.4 90.5 85.8,CASHtoCASH CYCLE TIME - DAYS,RANGE 20 to 120 days ( 2 to 4 times within Industry Groups)IMPLICATIONS 5
25、0% TO 75% OF WORKING CAPITAL BECOMES AVAILABLE TO COMPANIES TO INVEST,CASHtoCASH CYCLE TIME - DAYS,BEST PRACTICES CASH-RELEASE AGREEMENT FOR BLANKET ORDERS THIRD PARTY RECONCILIATION AND PAYMENT OF RECEIVABLES ABILITY TO MAINTAIN LOWER INVENTORY LEVELS,BENCHMARKING AND BEST PRACTICES,INVENTORY DAYS
26、OF SUPPLY (BIC&Median96, Av.98) DAYSBIC Aver Median Pharmas and Chemical 102 120 160 Chemical 37 54 60 Computers 31 38 76 Consumer Packaged Goods 72 Defense and Industrial 55 80 85 Electronic Equipment 31 77 Semiconductors 49 76 Telecommunications 50 80 95,INVENTORY DAYS OF SUPPLY - DAYS,RANGE 20 to
27、 120 days (3 to 4 times within Industry Groups)IMPLICATIONS FOR A 1 BILLION $ CO., WITH COGS OF 500 MILLION, DIFFERENCE OF 50 DAYS IS $100 MILLION! SUPPLIERS SELECTED ON TOTAL COST OF OWNERSHIP (TCO), NOT JUST PURCHASE PRICE,INVENTORY DAYS OF SUPPLY - DAYS,BEST PRACTICES AUTO REPLENISHMENT Ex. VMI V
28、ISIBILITY OF DEMAND TO ALL KEY PARTICIPANTS IN SUPPLY CHAIN CAPACITY AND SUPPLY CONSTRAINTS IDENTIFIED AND MANAGEDPRODUCT DESIGN INCLUDES PART STANDARDIZATION, CONFIGURABILITY, END OF LIFE MANAGEMENT,SOURCES OF INFORMATION,PRTN Insight MagazineSupply Chain Council and SCOR - PublicationsArthur Ander
29、sen Knowledge SpacePerformance Measurement Group Dimensions News,SUMMARY OF WHAT WE COVERED,IDENTIFIED SCOR METRICS DEFINED HOW THE METRICS WERE CALCULATED BENCHMARKED THE METRICS BY INDUSTRY GROUPING BY BIC, MEDIAN, AVERAGE, WIC LOOKED AT THE IMPLICATIONS OF THE DIFFERENCES COVERED SOME BEST PRACTICES,NEXT STEPS,CLASSIFY YOUR COMPANY IN AN INDUSTRY GROUP (CHECK SCC ON WEB) CALCULATE YOUR COMPANYS PERFORMANCE IN THE LEVEL I METRICS PLOT WHERE YOUR COMPANY IS ARE YOU COMPETITIVE?NOW YOU KNOW!,INFORMATION,THANK YOUMORE INFORMATION email BLAIR WILLIAMS ,
