Supply Chain Learning Series Part 1
“The Enterprise Supply Chain View” is the first topic of a supply chain learning series that ScottMadden is presenting along with Shared Services & Outsourcing Network (SSON). In this session, we focus on key characteristics of the enterprise supply chain. A discussion of each area (i.e., planning and forecasting, strategic sourcing, procurement, logistics, materials management, and accounts payable) will include notable characteristics of leading practice supply chains as well as key “pain points” ScottMadden has observed that keep companies from achieving an optimized supply chain.
For more in this series, please see:
How P2P Fits Within an Enterprise Supply Chain
Supply Chain Governance
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The Enterprise Supply Chain View: SSON Supply Chain Learning Series
About ScottMadden
- ScottMadden has been helping clients create greater value for their corporate services organizations for nearly 30 years. Our highly efficient, collaborative teams employ measurable, award-winning methods and deep cross-functional expertise to improve operational performance.
- Finance & Accounting
- Human Resources
- Information Technology
- Supply Chain
- ScottMadden can improve process efficiency and automation to ensure accurate and timely financial information and compliance.
- ScottMadden designs, builds, and implements HR Service Delivery models to ensure efficient and effective HR operations that meet business needs.
- ScottMadden helps organizations create measurable IT value by focusing on business engagement to improve IT decision making.
- ScottMadden can craft new supply chain strategies and deliver improvements in operations, increasing the value delivered to customers.
- Corporate and Shared Services Practice
- At ScottMadden, we assist in all aspects of the supply chain. We work with clients on all of the following:
- Supply Chain
- ScottMadden assists clients with all aspects of the enterprise supply chain.
- Corporate and Shared Services Practice
- Supply Chain Organization and Service Delivery Model Design
- Diagnostic Assessments and Planning
- Process Reengineering
- Strategic Sourcing
- Warehouse and Inventory Management
- Systems Design and Implementation
Key Components of Supply Chain
Supply Chain Definition
- Raw Materials
- Supplier
- Manufacturer
- Customer
- End-Use Consumer
- Logistics and Materials Management
Supply Chain Importance/Performance Gap
- Problem Statement Corporate leaders recognition of supply chain value continues to grow, but performance is still lagging. This disconnect is largely due to supply chain organizations inability to move beyond their transactional origins and focus on the areas in which the organization can extract the most value
- Shared Services Solution Supply chain, delivered as a shared service, facilitates cost reduction through standardization and economies of scale while ensuring alignment with the business through a customer-focused, metric-driven delivery model
- Source: Survey from CFO Research Services
Key Components of Supply Chain
- The six major supply chain functions are described below. Leading practice supply chains have evolved from a functional silo approach in the 80s to a more integrated model today which leverages standardization and process collaboration/visibility to align the appropriate skills with the degree of complexity for a particular purchase.
Planning and Forecasting
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- Planning and forecasting helps businesses more intelligently deploy resources to meet two types of demandunplanned and planned demandwithout excessive inventories or logistics costs such as expedited freight. A company can never be a top supply chain performer without doing well in this functional area.
Low High Time
- Uncertainty
- The more closely operational practices match procedures and plans, the more accurate is the derivation of planned demand
- Various mathematical models generate the forecast. Planning must incorporate the associated uncertainty
- Past demand is tracked and collected
- Present
- Unplanned demand is analyzed to understand its properties. Demand patterns are approximated with mathematical models
- Planned demand is derived from (and can be manipulated by) procedures and plans
Strategic Sourcing
- Strategic sourcing is a disciplined, proven methodology consistently applied across the organization to reduce the cost and improve the value of procured goods and services. It can best be described as a fact-based chain of analyses, strategies, and decisions.
- Current spend profile Future trends Operational strategies Cost drivers Forecast improvements Specifications analysis Aggregation potential
- Conducting supplier and market research Evaluating market forces
- Competitive bidding Direct renegotiation Auctioning
- RFP development and distribution Evaluation and selection process
- Planning Execution
- Supplier Relationship Management Scorecards Policies Procedures Governance
Strategic Sourcing (Contd)
- To effectively execute the approach shown below, key resources must have the following knowledge: Supplier base Contracting practices User requirements Technical specifications Supplier performance Market/category specifics
- A successful strategic sourcing program requires the right knowledge and a disciplined approach. Typical savings from this approach are 3-5% of total spend
Supplier Setup, PO Generation, and Quotations
- Procurement serves as the primary processing area for the acquisition of materials and services. Procurement activities are characterized by the following: Highly transactional and mostly driven by technology automation Not many variations in the process Requisition reviews for purchases consistent with established business rules Supplier qualifications and basic supply/market evaluations System-generated purchase order reviews
- Procurement
- Procurement
- Requisitions from customers
- Coordination w/customers
- Supplier setup PO generation Quotations price/delivery Order management Supplier/customer inquiries
- POs to suppliers
- Inquiries from suppliers
Order Management and Inquiries
- Effective order management allows the procurement function to meet the customers expectations. Additional activities include the following: Tracking and order status actions including customer communications Coordination with suppliers and transportation, import, and inspection providers to ensure timely and accurate order delivery Expediting deliveries for emergency needs Responses to supplier and customer questions for POs, invoices, proof-of-deliveries, additional documentation, etc.
- Procurement
- Procurement
- Requisitions from customers
- Coordination w/customers
- Supplier setup PO generation Quotations price/delivery Order management Supplier/customer inquiries
- POs to suppliers
- Inquiries from suppliers
Logistics
- Logistics connects all key points in the supply chain and is characterized by the following: Transportation mode (freight, rail, parcel, air, etc.) and carrier selection Service level analysis and carrier contract management Claims (missing or damaged product) management Returns processing and obsolete/scrap sales
Transportation
- Transportation management and optimization seeks to cost effectively deliver products on-time and undamaged. Transportation activities are characterized by the following: Transportation mode optimization (e.g., shipment planning and consolidation) Route/equipment optimization (e.g., delivery point consolidation, reducing miles, and right-sizing loads) Transportation vendor negotiation and contracting (e.g., core carriers and negotiated rates) On-time delivery, quality shipment, and cost monitoring
- Logistics
- Freight (TL or LTL) Parcel Rail Ship Air
- Same day Next day One week
- Internal (cross-dock) UPS FedEx Freight Broker
- In-transit tracking Advanced shipping notice
- Missing parts Damaged items Incorrect material
Reverse Logistics
- Reverse logistics is the process for handling returns from customers and returns to suppliers. Reverse logistics activities are characterized by the following: Surplus asset identification and appraisals Demolition and dismantlement coordination (and associated environmental and safety considerations) Surplus asset disposal Marketing and sales coordination Contract administration
- Logistics
- Returned from customer Surplus or obsolete Inoperable Damaged
- Inventory Return to supplier Third-party sale Scrap Donate
- Market evaluation Supplier coordination Marketing and sales Contracting
- Logistical coordination Payment and indemnity terms System adjustment
Materials Management
- The supply chains role as an enabler of business strategy is easy to see in materials management, which includes responsibilities like: Inventory planning and management, managing the inventory investment, etc.
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