Supply Chain Management
What Is Supply Chain Management?
Supply Chain Management integrates planning and balances supply and demand across the entire supply chain. It ties suppliers and customers together in one concurrent business process that is focused on the ultimate customer. By creating a seamless process, the supply chain is able to respond quickly to market opportunities, lower costs throughout the supply chain by eliminating duplicate functions, and quickly respond to market changes and opportunities.
Supply Chain Management integrates planning and balances supply and demand across the supply chain.
The 10 steps to develop a Supply Chain Management process in your company.
1. Top Management Leadership. Anytime you are going to take on a project of this magnitude that changes the way the company operates, you need to get top management to commit to lead the change. Supply Chain Management involves building trusting relationships with your customers and suppliers and openly and honestly sharing data and information about your business. Many management teams do not want to share forecasts, production schedules, costs, shortcomings, and so on with their suppliers and customers. Supply Chain Management involves sharing benefits equally with all the partners. Often, management teams want everything to go to their bottom line and are not really concerned about how the customers and suppliers are affected by changes in the supply chain. Supply Chain Management involves developing cross-functional and cross- company teams to solve problems in the entire chain, not just at one company. Some management teams are not willing to let their people work on problems outside their company unless they can see how solving those problems will benefit their own company directly. If top management does not understand what you are trying to accomplish and gives mixed signals, suppliers will see Supply Chain Management as one more attempt to push costs down onto the supplier, and this process will quickly disappear.
2. Vision/Mission Statement. Once you have top management leadership in place, you need to develop a clear vision/mission statement of what you are trying to accomplish. This vision/mission statement should empower the entire organization to develop a Supply Chain Management strategy.
3. Communication. Communicate that vision/mission both inside and outside the organization so everyone understands what the company is trying to accomplish. If you want customers and both internal and external suppliers to agree to and align themselves with the vision, you need to clearly let them know what is expected of them.
4. Preparation. Get your own house in order first. Telling your customers and suppliers to do something you are not capable of doing will not work.
Show them how it works. Develop integrated management processes to manage your entire business. Develop a Sales and Operations Planning process that creates one set of numbers to run the business, and make that plan visible to everyone in the company. Be sure that all management processes have a clear customer focus. Clearly define each department’s roles and responsibilities in a Supply Chain Management environment, and be sure all individuals understand their individual roles. Conduct business following formalized policies and business rules. Openly share information and issues with all employees. Approve only valid plans that are achievable. Develop a silence in approval attitude among your employees so there is a commitment to meet the plan and to communicate early if the plan cannot be met. Develop an attitude where continuous improvement is the norm and the results are measured. When these are in place, you are ready to involve your customers and suppliers. If you do not openly share information and issues inside your own company, you will not share them with your supply chain partners. If your management processes do not have a clear customer focus, why would your customers want to be involved? You must get your own house in order first, and then your supply chain partners will know you are serious about integration with their planning and control systems.
5. Identification. Map out your entire supply chain. Identify who are the key suppliers and customers that need to be involved to dramatically improve the performance throughout the supply chain. Initially this would include your immediate suppliers and customers, but eventually would spread to your suppliers’ suppliers and customers’ customers.
6. Benchmarking. Benchmark yourself and your supply chain plans against the best supply chains in place today. By searching on the World Wide Web and the Internet using terms such as Supply Chain Management and benchmarking, you can easily identify what leading edge companies are doing in this area today and their future plans.
7. Teams. Develop cross-functional and cross-company teams to identify opportunities for improvement. These teams should include—at a minimum—the areas of demand management, forecasting, order entry, master production scheduling, material planning, supplier management, production management, distribution/logistics, and performance measurement.
8. Measurement. Develop the performance measurements to be used throughout the supply chain so all supply partners will know what is expected and how performance is measured.
9. Reinforcement. Constantly reinforce the need to develop trusting relationships, valid partnerships, open and honest communication, and the sharing
of benefits among all of the partners.
10. Implementation. Implement concurrent planning and execution technologies so that all of the resources of the supply chain are aligned to efficiently meet the needs of the ultimate customer quickly and profitably.
Profile of a Good Supplier
An ideal supplier profile based on 10 key criteria:
1. Delivery.
2. Quality and reliability.
3. Price.
4. Responsiveness.
5. Lead time.
6. Location.
7. Technical capabilities.
8. Research and development (R&D) investment plans.
9. Financial and business stability.
10. Supply Chain Management.
A good supplier will build quality into the product, aiming toward zero defect production. This requires a commitment to quality and a teamwork approach that entails feedback and the spirit of cooperation.
Delivery performance is a key measure of a good supplier. Desirable delivery performance not only entails hitting a schedule, but involves a willingness to make short and frequent deliveries to point-of-use areas within your facility, as well as a willingness to package items according to your specifications.
Good pricing means fair pricing; ultimately, the price may not be as low as you would like or as high as the supplier would like. But everyone wins with a fair price, because it buys you top-notch and sustained service and assures the supplier ongoing business.
A good supplier will demonstrate responsiveness to your needs by ensuring that readily accessible people are in charge of servicing your account.
Long lead times are the enemy of all businesses; a good supplier will work with you to reduce lead times as much as possible.
It is vitally important to know a supplier’s capabilities and work load at various locations. A good supplier willingly provides you with all necessary information regarding its locations.
The best suppliers create the future rather than suffer through it. Look for suppliers on the cutting edge of technology.
A cutting-edge company will reinvest some of its profits in R&D; you want a supplier who has a long-term view and is willing to spend for tomorrow.
All suppliers must meet the stringent financial stability criteria you would use to evaluate potential new customers for credit.
Good suppliers will welcome the opportunity to participate in Supply Chain Management efforts.
The Customer/Supplier Relationship
Guidelines for Effective Partnerships
1. Trust and communication has to be open and honest. This is by far the most important of all the rules. If the buying company or its suppliers have their own hidden agendas, you can be sure that the entire system will at some point fail.
2. Suppliers are part of your organization—they just happen to be outside the gate. The traditional organizational chart ensconces itself in a moat.
For supplier scheduling to work, the moat must be bridged and suppliers brought back into the fortress. Only when suppliers are viewed as critical players can a scheduling system work.
3. Shared risk means a fair price and a fair profit. The traditional “zero-sum game” must stop. You can’t always get the lowest prices and suppliers can’t always seek the maximum margins. Everyone comes out a winner when they make concessions in favor of a long-term relationship. (See next point.)
4. Long-term relationships are better than one-night stands. When a company and its suppliers take their vows, they ensure themselves of sustainable profits and benefits—predictable quality, predictable cash flow, and predictable growth and development.
5. Partnerships consist of a great deal more than signing papers or issuing some edicts. A partnership between a company and a supplier is truly a culture change, a different way of running the business. But you can’t just mandate a new culture and expect it to materialize. People must be educated about changes in the way they do their jobs. Systems must be in place. In short, management must regard itself as an agent of change, not just the authority that dictates change.
6. You can’t mass-produce partnerships. Supplier scheduling won’t work with all suppliers. You need to pick them one at a time and see which ones work and which don’t. And don’t start off with a written contract that may lock you into a relationship you may soon regret. Begin with a handshake and ease your way into a signature.
7. Performance is the main criterion for picking a supplier. Size is often irrelevant to whether a supplier can deliver the right goods to the right place at the right time. Look at performance first; everything else is a footnote.
8. Internal accountability is a key factor. When you develop a supplier scheduling system, it’s critical to establish who’s responsible for what. The system demands that everyone has an allotted role and knows what it is.
9. Sell the concept to management and get the necessary leadership and support. A supplier scheduling system will greatly reduce the number of suppliers your company deals with. This is a major change and requires top management support for it to be successful.
10. Use an existing supplier to kick off the system. Evaluate your current suppliers and pick the most likely candidate for a partnership arrangement. Sit down and negotiate the terms, conditions, and price (i.e., include everything you need to spell out in the partnership).
11. Develop the working relationship. All successful business relationships are based on ground rules. How do we communicate? How do we solve problems? These and other issues must be resolved on both sides of the partnership.
12. Communicate constantly. In anything involving human beings, ongoing communication is crucial to success. Put every issue on the table and never make assumptions. That’s a surefire formula for success.
Performance Measurements
A good purchasing performance measurement system should cover eight different areas, including:
1. Delivery.
2. Quality.
3. Price.
4. Lead times.
5. Inventory investment.
6. Schedule completions in the plant.
7. Cost reduction/value analysis.
8. Inbound freight cost reduction.
Performance measurements are the only way to gauge your and your supplier’s effectiveness in today’s purchasing environment.
Performance measurements must be cast in terms of concrete, quantitative results and goals; subjective and generalized feedback cannot lead to improvement.
Performance measurements are not designed to be used as a means of punishment or retribution; rather they provide feedback for buyers and suppliers to use to improve their performance.
Measure performance in incremental steps against benchmarks, interim goals that will gradually move a supplier to the desired performance level at a realistic pace.
A comprehensive performance-measurement system covers delivery, quality, price, lead times, inventory investment, schedule completions in the plant, cost reduction/value analysis, and inbound freight cost reduction.
Supplier delivery performance must be gauged on need dates, not replenishment dates; otherwise, “on-time” becomes meaningless.
A 2 percent defect rate may, on the surface, seem like good performance. But 2 percent means 20,000 defective parts out of every million, which is clearly unacceptable. Strive for 100 percent.
Price should not be regarded as secondary to quality and delivery. An objective measure of price performance looks at actual performance rather than at performance against a standard cost.
Lead-time reductions should be measured pre- and post-MRP II (all lead times should be shorter once supplier scheduling is in place). They should also be rated on an overall percentage basis.
On-hand inventories of purchased parts should drop when items are delivered to true need dates.
Scheduled completion dates are ultimately reflected in customer service, which should be assessed on a regular basis.
Purchasing should develop a continuous improvement program and strive for purchasing excellence.
For more Information:
* Procurement and Purchasing Books. Strategic Proactive Procurement. Order Fulfillment. Purchasing Techniques *
What Is Supply Chain Management?
Supply Chain Management integrates planning and balances supply and demand across the entire supply chain. It ties suppliers and customers together in one concurrent business process that is focused on the ultimate customer. By creating a seamless process, the supply chain is able to respond quickly to market opportunities, lower costs throughout the supply chain by eliminating duplicate functions, and quickly respond to market changes and opportunities.
Supply Chain Management integrates planning and balances supply and demand across the supply chain.
The 10 steps to develop a Supply Chain Management process in your company.
1. Top Management Leadership. Anytime you are going to take on a project of this magnitude that changes the way the company operates, you need to get top management to commit to lead the change. Supply Chain Management involves building trusting relationships with your customers and suppliers and openly and honestly sharing data and information about your business. Many management teams do not want to share forecasts, production schedules, costs, shortcomings, and so on with their suppliers and customers. Supply Chain Management involves sharing benefits equally with all the partners. Often, management teams want everything to go to their bottom line and are not really concerned about how the customers and suppliers are affected by changes in the supply chain. Supply Chain Management involves developing cross-functional and cross- company teams to solve problems in the entire chain, not just at one company. Some management teams are not willing to let their people work on problems outside their company unless they can see how solving those problems will benefit their own company directly. If top management does not understand what you are trying to accomplish and gives mixed signals, suppliers will see Supply Chain Management as one more attempt to push costs down onto the supplier, and this process will quickly disappear.
2. Vision/Mission Statement. Once you have top management leadership in place, you need to develop a clear vision/mission statement of what you are trying to accomplish. This vision/mission statement should empower the entire organization to develop a Supply Chain Management strategy.
3. Communication. Communicate that vision/mission both inside and outside the organization so everyone understands what the company is trying to accomplish. If you want customers and both internal and external suppliers to agree to and align themselves with the vision, you need to clearly let them know what is expected of them.
4. Preparation. Get your own house in order first. Telling your customers and suppliers to do something you are not capable of doing will not work.
Show them how it works. Develop integrated management processes to manage your entire business. Develop a Sales and Operations Planning process that creates one set of numbers to run the business, and make that plan visible to everyone in the company. Be sure that all management processes have a clear customer focus. Clearly define each department’s roles and responsibilities in a Supply Chain Management environment, and be sure all individuals understand their individual roles. Conduct business following formalized policies and business rules. Openly share information and issues with all employees. Approve only valid plans that are achievable. Develop a silence in approval attitude among your employees so there is a commitment to meet the plan and to communicate early if the plan cannot be met. Develop an attitude where continuous improvement is the norm and the results are measured. When these are in place, you are ready to involve your customers and suppliers. If you do not openly share information and issues inside your own company, you will not share them with your supply chain partners. If your management processes do not have a clear customer focus, why would your customers want to be involved? You must get your own house in order first, and then your supply chain partners will know you are serious about integration with their planning and control systems.
5. Identification. Map out your entire supply chain. Identify who are the key suppliers and customers that need to be involved to dramatically improve the performance throughout the supply chain. Initially this would include your immediate suppliers and customers, but eventually would spread to your suppliers’ suppliers and customers’ customers.
6. Benchmarking. Benchmark yourself and your supply chain plans against the best supply chains in place today. By searching on the World Wide Web and the Internet using terms such as Supply Chain Management and benchmarking, you can easily identify what leading edge companies are doing in this area today and their future plans.
7. Teams. Develop cross-functional and cross-company teams to identify opportunities for improvement. These teams should include—at a minimum—the areas of demand management, forecasting, order entry, master production scheduling, material planning, supplier management, production management, distribution/logistics, and performance measurement.
8. Measurement. Develop the performance measurements to be used throughout the supply chain so all supply partners will know what is expected and how performance is measured.
9. Reinforcement. Constantly reinforce the need to develop trusting relationships, valid partnerships, open and honest communication, and the sharing
of benefits among all of the partners.
10. Implementation. Implement concurrent planning and execution technologies so that all of the resources of the supply chain are aligned to efficiently meet the needs of the ultimate customer quickly and profitably.
Profile of a Good Supplier
An ideal supplier profile based on 10 key criteria:
1. Delivery.
2. Quality and reliability.
3. Price.
4. Responsiveness.
5. Lead time.
6. Location.
7. Technical capabilities.
8. Research and development (R&D) investment plans.
9. Financial and business stability.
10. Supply Chain Management.
A good supplier will build quality into the product, aiming toward zero defect production. This requires a commitment to quality and a teamwork approach that entails feedback and the spirit of cooperation.
Delivery performance is a key measure of a good supplier. Desirable delivery performance not only entails hitting a schedule, but involves a willingness to make short and frequent deliveries to point-of-use areas within your facility, as well as a willingness to package items according to your specifications.
Good pricing means fair pricing; ultimately, the price may not be as low as you would like or as high as the supplier would like. But everyone wins with a fair price, because it buys you top-notch and sustained service and assures the supplier ongoing business.
A good supplier will demonstrate responsiveness to your needs by ensuring that readily accessible people are in charge of servicing your account.
Long lead times are the enemy of all businesses; a good supplier will work with you to reduce lead times as much as possible.
It is vitally important to know a supplier’s capabilities and work load at various locations. A good supplier willingly provides you with all necessary information regarding its locations.
The best suppliers create the future rather than suffer through it. Look for suppliers on the cutting edge of technology.
A cutting-edge company will reinvest some of its profits in R&D; you want a supplier who has a long-term view and is willing to spend for tomorrow.
All suppliers must meet the stringent financial stability criteria you would use to evaluate potential new customers for credit.
Good suppliers will welcome the opportunity to participate in Supply Chain Management efforts.
The Customer/Supplier Relationship
Guidelines for Effective Partnerships
1. Trust and communication has to be open and honest. This is by far the most important of all the rules. If the buying company or its suppliers have their own hidden agendas, you can be sure that the entire system will at some point fail.
2. Suppliers are part of your organization—they just happen to be outside the gate. The traditional organizational chart ensconces itself in a moat.
For supplier scheduling to work, the moat must be bridged and suppliers brought back into the fortress. Only when suppliers are viewed as critical players can a scheduling system work.
3. Shared risk means a fair price and a fair profit. The traditional “zero-sum game” must stop. You can’t always get the lowest prices and suppliers can’t always seek the maximum margins. Everyone comes out a winner when they make concessions in favor of a long-term relationship. (See next point.)
4. Long-term relationships are better than one-night stands. When a company and its suppliers take their vows, they ensure themselves of sustainable profits and benefits—predictable quality, predictable cash flow, and predictable growth and development.
5. Partnerships consist of a great deal more than signing papers or issuing some edicts. A partnership between a company and a supplier is truly a culture change, a different way of running the business. But you can’t just mandate a new culture and expect it to materialize. People must be educated about changes in the way they do their jobs. Systems must be in place. In short, management must regard itself as an agent of change, not just the authority that dictates change.
6. You can’t mass-produce partnerships. Supplier scheduling won’t work with all suppliers. You need to pick them one at a time and see which ones work and which don’t. And don’t start off with a written contract that may lock you into a relationship you may soon regret. Begin with a handshake and ease your way into a signature.
7. Performance is the main criterion for picking a supplier. Size is often irrelevant to whether a supplier can deliver the right goods to the right place at the right time. Look at performance first; everything else is a footnote.
8. Internal accountability is a key factor. When you develop a supplier scheduling system, it’s critical to establish who’s responsible for what. The system demands that everyone has an allotted role and knows what it is.
9. Sell the concept to management and get the necessary leadership and support. A supplier scheduling system will greatly reduce the number of suppliers your company deals with. This is a major change and requires top management support for it to be successful.
10. Use an existing supplier to kick off the system. Evaluate your current suppliers and pick the most likely candidate for a partnership arrangement. Sit down and negotiate the terms, conditions, and price (i.e., include everything you need to spell out in the partnership).
11. Develop the working relationship. All successful business relationships are based on ground rules. How do we communicate? How do we solve problems? These and other issues must be resolved on both sides of the partnership.
12. Communicate constantly. In anything involving human beings, ongoing communication is crucial to success. Put every issue on the table and never make assumptions. That’s a surefire formula for success.
Performance Measurements
A good purchasing performance measurement system should cover eight different areas, including:
1. Delivery.
2. Quality.
3. Price.
4. Lead times.
5. Inventory investment.
6. Schedule completions in the plant.
7. Cost reduction/value analysis.
8. Inbound freight cost reduction.
Performance measurements are the only way to gauge your and your supplier’s effectiveness in today’s purchasing environment.
Performance measurements must be cast in terms of concrete, quantitative results and goals; subjective and generalized feedback cannot lead to improvement.
Performance measurements are not designed to be used as a means of punishment or retribution; rather they provide feedback for buyers and suppliers to use to improve their performance.
Measure performance in incremental steps against benchmarks, interim goals that will gradually move a supplier to the desired performance level at a realistic pace.
A comprehensive performance-measurement system covers delivery, quality, price, lead times, inventory investment, schedule completions in the plant, cost reduction/value analysis, and inbound freight cost reduction.
Supplier delivery performance must be gauged on need dates, not replenishment dates; otherwise, “on-time” becomes meaningless.
A 2 percent defect rate may, on the surface, seem like good performance. But 2 percent means 20,000 defective parts out of every million, which is clearly unacceptable. Strive for 100 percent.
Price should not be regarded as secondary to quality and delivery. An objective measure of price performance looks at actual performance rather than at performance against a standard cost.
Lead-time reductions should be measured pre- and post-MRP II (all lead times should be shorter once supplier scheduling is in place). They should also be rated on an overall percentage basis.
On-hand inventories of purchased parts should drop when items are delivered to true need dates.
Scheduled completion dates are ultimately reflected in customer service, which should be assessed on a regular basis.
Purchasing should develop a continuous improvement program and strive for purchasing excellence.
For more Information:
* Procurement and Purchasing Books. Strategic Proactive Procurement. Order Fulfillment. Purchasing Techniques *
0 comments:
Post a Comment
Place Your Comments Here