Supply Chain Management for Manufacturing Industry
The main objective is to know about the SCM of manufacturing industry to know we have analyses several topic are: •Supply chain is a network of all firms relationships that gat a product to market, including the original acquisition of raw materials; production of the item at a manufacturing facility; distribution to a retailer; sale of he finished item to the customer, and any installation, repair, or service activities that follow the sale.• How to effectively manage the supply chain is a central issue for all levels of management, regardless of industry.•This workshop has been designed and tailored by Mr.
Ejazur Rahman amassing his over a decade experience in working and managing the Supply chain function of a reputed global manufacturing and marketing organization. To know Successful supply chain management requires decisions.
To know scm, competitive, sales and marketing strategies. Who should attend the programmed? Inventory management system of scm. How to achieve excellence in scm. Supply Chain Management for Manufacturing Industry Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies.
It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed). As a solution for successful supply chain management, sophisticated software systems with Web interfaces are competing with Web-based application service providers (ASP) who promise to provide part or all of the SCM service for companies who rent their service. Supply chain management flows can be divided into three main flows: •The product flow •The information flow The finances flow The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs.
The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedules, and consignment and title ownership arrangements. •1. Supply Chain Management – What and Why? •2. Objectives of a Supply Chain •3. Decision Phases in a Supply Chain •4. Process Views of a Supply Chain •5. Supply Chain Performance : Achieving Strategic Fit 6. Drivers of Supply Chain Performance •7. Designing the Supply Chain Network •8. Demand and Supply Planning in a Supply Chain •9. Planning and Managing Inventory •10. Designing and Planning Transportation Networks •11. Achieving Supply Chain Excellence in a manufacturing/service organization 1) Supply chain management what? Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996).
Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain). – Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies.
It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed – Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed).
As a solution for successful supply chain management, sophisticated software systems with Web interfacervice for companies who rent their service. Why supply chain management The definition, put forward by an American professional association, is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers.
In essence, Supply Chain Management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperates to provide product and service offerings has been called the Extended Enterprise.  Supply Chain Management can also refer to Supply chain management software which are tools or modules used in executing supply chain transactions, managing supplier relationships and controlling associated business processes.
Supply chain event management (abbreviated as SCEM) is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. With SCEM possible scenarios can be created and solutions can be planned. functions Supply chain management is a cross-function approach to manage the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and then the movement of finished goods out of the organization toward the end-consumer.
As organizations strive to focus on core competencies and becoming more flexible, they have reduced their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts.
The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity. Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels of activities. Strategic Strategic network optimisation, including the number, location, and size of warehousing, distribution centers, and facilities •Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics •Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management •Information Technology infrastructure, to support supply chain operations •Where-to-make and what-to-make-or-buy decisions Aligning overall organizational strategy with supply strategy Tactical •Sourcing contracts and other purchasing decisions. •Production decisions, including contracting, scheduling, and planning process definition. •Inventory decisions, including quantity, location, and quality of inventory. •Transportation strategy, including frequency, routes, and contracting. •[Benchmarking] of all operations against competitors and implementation of best practices throughout the enterprise.
•Milestone payments •Focus on customer demand. Operational Daily production and distribution planning, including all nodes in the supply chain. •Production scheduling for each manufacturing facility in the supply chain (minute by minute). •Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. •Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers. •Inbound operations, including transportation from suppliers and receiving inventory. •Production operations, including the consumption of materials and flow of finished goods. Outbound operations, including all fulfillment activities, warehousing and transportation to customers. •Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers. 2)The Objective of a Supply Chain The objective of every supply chain is to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request.
For most commercial supply chains, value will be strongly correlated with supply chain profitability, the difference between the revenue generated from the customer and the overall cost across the supply chain. For example, a customer purchasing a computer from Dell pays $2,000, which represents the revenue the supply chain receives. Dell and other stages of the supply chain incur costs to convey information, produce components, store them, transport them, transfer funds, and so on.
The difference between the $2,000 that the customer paid and the sum of all costs incurred by the supply chain to produce and distribute the computer represents the supply chain profitability. Supply chain profitability is the total profit to be shared across all supply chain stages. The higher the supply chain profitability, the more successful the supply chain. Supply chain success should be measured in terms of supply chain profitability and not in terms of the profits at an individual stage. Having defined the success of a supply chain in terms of supply chain rofitability, the next logical step is to look for sources of revenue and cost. For any supply chain, there is only one source of revenue: the customer. At Wal-Mart, a customer purchasing detergent is the only one providing positive cash flow for the supply chain. All other cash flows are simply fund exchanges that occur within the supply chain given that different stages have different owners. When Wal-Mart pays its supplier, it is taking a portion of the funds the customer provides and passing that money on to the supplier. All flows of information, product, or funds generate costs within the supply chain.
Thus, the appropriate management of these flows is a key to supply chain success. Supply chain management involves the management of flows between and among stage sin a supply chain to maximize total supply chain profitability. 3) Decision Phases In a Supply Chain Successful supply chain management requires many decisions relating to the flow of information, product, and funds. These decisions fall into three categories or phases, depending on the frequency of each decision and the time frame over which a decision phase has an impact. 1.
Supply chain strategy or design: During this phase, a company decides how to structure the supply chain over the next several years. It decides what the chain’s configuration will be, how resources will be allocated, and what processes each stage will perform. Strategic decisions made by companies include the location and capacities of production and warehouse facilities, the products to be manufactured or stored at various locations, the modes of transportation to be made available along different shipping legs, and the type of information system to be utilized.
A firm must ensure that the supply chain configuration supports its strategic objectives during this phase. Dell’s decisions regarding the location and capacity of its manufacturing facilities, warehouses, and supply courses are all supply chain design or strategic decisions. Supply chain design decisions are typically made for the long term (a matter of years) and are very expensive to alter on short notice. Consequently, when companies make these decisions, they must take into account uncertainty in anticipated market conditions over the next few years. 2. Supply chain planning: For decisions made during his phase, the time frame considered is a quarter to a year. Therefore, the supply chain’s configuration determined in the strategic phase is fixed. The configuration establishes constraints within which planning must be done. Companies start the planning phase with a forecast for the coming year (or a comparable time frame) of demand in different markets. Planning includes decisions regarding which markets will be supplied from which locations, the subcontracting of manufacturing, the inventory policies to be followed, and the timing and size of marketing promotions.
Dell’s decisions regarding markets a given production facility will supply and target production quantities at different locations are classified as planning decisions. Planning establishes parameters within which a supply chain will function over a specified period of time. In the planning phase, companies must include uncertainty in demand, exchange rates, and competition over this time horizon in their decisions. Given a shorter time horizon and better forecasts than the design phase, companies in the planning phase try to incorporate any flexibility built into the supply chain in the design phase and exploit it to optimize performance.
As a result of the planning phase, companies define a set of operating policies that govern short-term operations. 3. Supply chain operation: The time horizon here is weekly or daily, and during this phase companies make decisions regarding individual customer orders. At the operational level, supply chain configuration is considered fixed and planning policies are already defined. The goal of supply chain operations is to handle incoming customer orders in the best possible manner.
During this phase, firms allocate inventory or production to individual orders, set a date that an order is to be filled, generate pick lists at a warehouse, allocate an order to a particular shipping mode and shipment, set delivery schedules of trucks, and place replenishment orders. Because operational decisions are being made in the short term (minutes, hours, or days), there is less uncertainty about demand information. Given the constraints established by the configuration and planning policies, the goal during the operation phase is to exploit the reduction of uncertainty and optimize performance.
The design, planning, and operation of a supply chain have a strong impact on overall profitability and success. Continuing with our example, consider Dell Computer. In the early 1990s, Dell management began to focus on improving the improved performance. Both profitability and the stock price have soared and Dell stock has had outstanding returns over this period. 4)Supply Chain Process Platform The winners in fiercely competitive markets create agile and efficient business processes, supported by flexible, reliable and cost-effective technology.
When your market position depends on your supply chain, you need processes and solutions that work together seamlessly to provide the information and automate the activities you need to operate most effectively. All of Manhattan Associates’ solutions operate on a common Service Oriented Architecture (SOA) platform, to maximize the value of your technology investment. With Manhattan Associates’ Supply Chain Process Platform, you can easily integrate any or all of our applications into your existing systems or add new solutions from our suite of products.
That means dramatic reductions in complexity and faster implementation whenever you need new functionality. With shared master and transaction databases, data capture management (such as voice and RFID) and a real-time alert system that operates across all Manhattan Associates’ solutions, the Supply Chain Process Platform provides a safeguard that flags any inconsistency in your data, ensuring a safe implementation and continued smooth operation. Our Supply Chain Process Platform offers flexibility, scalability and supportability to meet the requirements of the most complex supply chains for the most demanding companies.
The Manhattan Supply Chain Process Platform: •Makes customizing your solutions to meet your business requirements easier than ever •Simplifies adding new functionalities or incorporating technical innovations •Provides a shared platform for collecting, managing, distributing and acting on information and events that flow through the supply chain •Ensures that solutions are robust, scalable, resilient and consistent across all components. Uniting the Platform Applications for Maximum Value
The Supply Chain Process Platform provides a foundation for all Manhattan platform applications: •Supply Chain Intelligence: With easy-to-read reports presenting powerful analytics, you can monitor the performance of your suppliers, carriers, customers and employees from one intuitive dashboard. •Supply Chain Visibility: See a single, consistent, real-time view of your entire global supply chain. •Supply Chain Event Management: Receive notification of all supply chain events as they occur and respond immediately across your full supply chain. 5) Supply Chain Performance : Achieving Strategic Fit Competitive strategy: defines the set of customer needs a firm seeks to satisfy through its products and services ? Product development strategy: specifies the portfolio of new products that the company will try to develop ? Marketing and sales strategy: specifies how the market will be segmented and product positioned, priced, and promoted ? Supply chain strategy: – determines the nature of material procurement, transportation of materials, manufacture of product or creation of service, distribution of product –Consistency and support between supply chain strategy, competitive strategy, and other functional strategies is important
Achieving Strategic Fit(1/2) ? How is strategic fit achieved? ? Other issues affecting strategic fit How is Strategic Fit Achieved? ? Step 1: Understanding the customer and supply chain uncertainty ? Step 2: Understanding the supply chain ? Step 3: Achieving strategic fit Step 1: Understanding the Customer and Supply Chain Uncertainty (1/3) ? Identify the needs of the customer segment being served ? Quantity of product needed in each lot ? Response time customers will tolerate ? Variety of products needed ? Service level required ? Price of the product ? Desired rate of innovation in the product Overall attribute of customer demand ? Demand uncertainty: uncertainty of customer demand for a product ? Implied demand uncertainty: resulting uncertainty for the supply chain given the portion of the demand the supply chain must handle and attributes the customer desires ? Implied demand uncertainty also related to customer needs and product attributes ? First step to strategic fit is to understand customers by mapping their demand on the implied uncertainty spectrum Step 2: Understanding the Supply Chain (1/2) ? How does the firm best meet demand? ? Dimension describing the supply chain is supply chain responsiveness Supply chain responsiveness — ability to –respond to wide ranges of quantities demanded –meet short lead times –handle a large variety of products –build highly innovative products –meet a very high service level ? There is a cost to achieving responsiveness ? Supply chain efficiency: cost of making and delivering the product to the customer ? Increasing responsiveness results in higher costs that lower efficiency ? Figure 2. 3: cost-responsiveness efficient frontier ? Figure 2. 4: supply chain responsiveness spectrum ? Second step to achieving strategic fit is to map the supply chain on the responsiveness spectrum
Step 3: Achieving Strategic Fit ? Step is to ensure that what the supply chain does well is consistent with target customer’s needs Other Issues Affecting Strategic Fit ?Multiple products and customer segments ? Product life cycle ? Competitive changes over time 6)Drivers of Supply Chain Performance Supply chains are becoming increasingly global and ever more complex, as organizations try to support strategic management practices such as entering new markets, increasing the pace of new product introductions, improving the reliability and speed of order fulfillment . . . all the while trying to lower supply chain costs.
For organizations to work closely with their suppliers, logistics providers, distributors and retailers, their supply chains must be streamlined and technology-enabled. However, organizations that want to streamline their supply chains must first understand what is working well, what is not and where the opportunities for improvement are. These companies need to have a way to measure the performance of their supply chain on an ongoing basis. Traditional approaches of measuring supply chain performance — scorecards, dashboards and reports showing supply chain metrics — suffer from three shortcomings: 1) They are not linked to strategy. ) They have a silo approach. 3) They have a flat hierarchy. Let’s examine each of these shortcomings more closely. They are not linked to strategy. It can be difficult to see how a supply chain metric affects your overall objectives. If the metric is trending in the wrong direction, which aspect of your supply chain strategy will be affected? Without a framework that links each metric to a certain element of strategy, the context behind a metric can get lost. When such context is missing, it becomes a challenge for organizations (large ones in particular) to get everyone to see the common vision.
Next-generation Supply Chain Performance Management (SCPM) systems will need to be able to show the link between any metric and the element of strategy it impacts. They have a silo approach. Current supply chain analytics solutions do a good job of showing the performance of metrics for individual departments, such as cost per unit purchased, percentage of on-time supplier shipment for the procurement department, or set-up times, capacity utilization and percentage of scrap for the plant.
However, this type of silo approach sacrifices the overall process and end goals in the interest of improving the performance of an individual department. As a result, functional silos are reinforced within the organization. The key is to measure the performance of overall business process in such a way that poor performance of a departmental metric could be overlooked in the interest of increasing the overall business process performance. To achieve this, next-generation Supply Chain Performance Management systems will need to do more than show departmental metrics – they need to have a process orientation. They have a flat hierarchy.
The metrics that help you measure the overall performance of your supply chain are not standalone — they are related to each other, sometimes in a hierarchical fashion. Such relationships help you drill down and better understand root cause more effectively. For example, if a hierarchical relationship were developed between outbound shipment cost metric and those metrics that affect shipment costs, your system will tell you that outbound shipment costs are trending up despite the carrier rates trending down due to lower fuel costs, because your express freight shipments in a certain division are up significantly month over month.
However, most current supply chain analytics have no way to define such relationships. Next-generation Supply Chain Performance Management systems of tomorrow will need to be able to define and show relationships between metrics. What supply chain performance management systems must include All these issues need to be addressed by next-generation Supply Chain Performance Management systems. Such systems should include three capabilities: an analytics framework; a process orientation; and linkages. Analytics framework.
The ideal SCPM system should allow a user to define a complete framework for supply chain analytics. This framework should include: •overall supply chain objectives; •the top-line metrics that affect the objective; •the description, targets and acceptable range for each metric; and •a list of reports where the metric can be found. 7. Designing the Supply Chain Network Overview In today’s volatile business environment, many companies are expanding, merging, contracting, or otherwise redesigning their supply chain networks.
Here learner applications of optimization models to the analysis of these network design problems. Modeling concepts are reviewed as well as practical methods for data gathering and validation, model implementation, and scenario construction. New applications will be presented including network design models to plan for new products, to manage production and inventories of products with short shelf lives, to select vendor contracts, and to control CO2 emissions. Several case studies will be presented along with discussions of network design problems faced by course attendees.
Who Should Attend This program is intended for: •Managers and analysts responsible for network design decision-making •Managers and analysts responsible for acquiring or developing, and applying data-driven modeling systems to support network design decision-making •Consultants who direct or participate in network design studies •Academics who teach supply chain subjects to students in management and engineering Participants will not need advanced analytical skills to fully absorb material presented in the program. )DEMAND AND SUPPLY PLANNING IN SCM SCM facechallenges to people at manufacturing companies who need to gauge customer demand and respond to changes in demand, even when they take place at a moment’s notice. Manufacturers’ responsiveness and agility in the areas of sales and operations planning (S;OP) and demand management—the two major parts of supply chain planning—are still hampered by cumbersome, static processes. Common problems include: ••Lack of real-time, robust, and actionable data. •Lack of integration among financial, operating, sales, and marketing plans. ••Inability of people to share information and documents. ••Poor analytical capabilities and collaborative planning environments. ••Lack of alert and monitoring capabilities. Solutions Supply Chain Demand and Supply Planning solutions from Microsoft and its partner ecosystem help manufacturers change the way they manage their supply chains to become more demand-driven, adaptive, and responsive.
By improving people’s visibility into customer demand and supplier capabilities, these solutions create an environment that enables real-time decisions about manufacturing activity, which can lower inventory while improving customer service. Demand management solutions offer real-time demand management business processes, delivered with an integrated business intelligence and collaboration framework, to empower people with collaboration and analytic capabilities.
Sales and operations planning (S&OP) solutions, which include connected systems, process workflows, event management, and live communication, offer collaboration, analysis, integration, workflow, and monitoring functionality throughout all phases of a manufacturer’s S;OP workflow—beginning with the baseline forecast created by people in the manufacturer’s sales and marketing departments, all the way through the forecast for a specific customer, the creation of a consensus forecast, supply planning, resolution and exception processes, approval and budgeting, sales allocations, order promising, and communication with the manufacturer’s production facilities. Infor Supply Chain Management is a global solution with implementations at over 1,600 customer sites in 40 countries. Backed by domain experts who know supply chain management and the challenges you face, our supply chain planning and execution solutions comprise the following key components: Strategic Network Design —modeling and optimization tools for determining the most effective number, location, size, and capacity of facilities to meet customer service goals; time-phased tactical planning for determining where and when to make, buy, store, and move product through the network.
Demand Planning —forecasting tools, web-based collaboration interface, and sales and operations reporting and metrics that help companies predict and shape customer demand with greater accuracy. Distribution Planning —inventory analysis and time-variable stock target calculations for ensuring the optimal balance between service levels and inventory investment; synchronized replenishment plans for all network points right back to manufacturing and supplier sources for better visibility. Manufacturing Planning —constraint-based advanced planning system for engineering, assembly, and repetitive manufacturing environments; similar tools for process manufacturers. Production Scheduling —finite capacity scheduling for engineering, assembly, and repetitive environments, as well as batch-process production facilities.
Transportation and Logistics Planning —transportation planning, transportation procurement, route planning, transportation management, small parcel shipping, and international trade logistics for global, multi-modal operations. Warehouse Management System —end-to-end fulfillment and distribution including inventory, labor, and work and task management, as well as cross-docking, value-added services, yard management, multiple inventory ownership and billing/invoicing, and voice-directed distribution. RFID —comprehensive RFID-enablement framework delivering business value through process optimization for manufacturers and other companies, as well as compliance solutions for retail, pharmaceuticals, the US Department of Defense, and others.
Event Management —proactive, real-time exception management technology for detecting conditional change anywhere in the supply chain and communicating it instantly for resolution. 9)Planning and managing inventory By Curt Barry Inventory is most likely the largest balance sheet asset in your company. How well you plan, purchase, and manage your inventory largely determines your level of customer service and profits. But selling goods in multiple channels means dealing with channel-specific planning and inventory needs. Planning and inventory systems In most companies, the systems for merchandise planning and inventory control remain highly fragmented by channel.
For promotional planning, many multichannel companies need to be more diligent and use a single promotional calendar rather than channel-specific schedules on which merchandise planning is based. These should include in-store promotions, catalogs, and e-mail campaigns. Internet inventory management philosophies are slowly evolving in most companies. Traditional catalogers now average more than 50% of sales from the Internet, although much of that business is generated by receipt of the catalog. Products may be active and available longer if there is stock. What sells online is heavily influenced by placement on landing pages and organization and ranking within category product searches.
The online product assortment can be more extensive than that in a single catalog. Internet may have a total chain assortment different from any one store or region. The Website may have a clearance or liquidation aspect. These principles of planning and managing inventory are not industry established best practices, but are being hammered out in the trenches every day. From a purchasing perspective, companies are rolling multiple channel plans and forecasts together into a single purchase order management system to write Pos. When will there be true integrated systems for planning and inventory systems? For most companies, not any time soon. Retail and direct channels have different data needs and processes.
It will probably be a few years before commercial software companies that cater to retail and direct have the most basic of systems in place. MICROS Retail, Direct Tech, and Manhattan Associates all have development projects to bring channels together in terms of planning and inventory systems. Channel Inventory – a distribution view With all the complexities of planning and inventory control, how are distribution centers accommodating the channels? When multichannel marketing was in its infancy more than a decade ago, the prevalent thinking was to have a single DC that would process both direct and retail replenishment orders. There would be one pooled inventory, one staff and one facility — end of discussion. But logistics thinking is changing.
But to accomplish this, they have the additional overhead of multiple facilities and staffing, and their warehouse management and order management must be capable of managing multiple inventories and allocating and filling orders. As e-commerce in retail companies has grown substantially, logistics management has come to realize that picking, packing, and shipping of small orders is very different from full-carton replenishment to stores. With large volumes it may prove to be more efficient to have dedicated centers for direct. Another of the real drivers behind this shift is the realization that without having separate sales and stock plans, there is no accountability by business units to make their sales plans.
So if the first unit to allocate inventory gets the stock, then there may not be inventory for later drops of a catalog, e-mail campaigns, initial stocks to open stores, etc. Other companies use a “virtual inventory” concept, not in the sense of drop-shipping, but of the inventory system being able to keep planned sales by product and SKU by channel, and being able to reserve inventory for the channel business unit. Importing’s effect Where we source product is also changing how we can plan and manage it. Much of the multichannel world relies on imported product. Even if you buy from a domestic distributor, chances are that merchandise is imported.
Additionally, companies may not be looking at a fully loaded product cost including agent’s/broker’s fees, demurrage, duty rate, product development costs, and buyer’s travel. Couple that with warehouse storage space requirements for container size receipts and the inventory carrying costs. All of this leads to higher inventory and carrying costs and slower turnover. What to do about it? •Use mixed container loading, where appropriate. •Weigh the increase in per unit cost to take smaller quantities. •Move the entire merchandise and creative planning calendar for promotions back and do each season earlier (no easy task). •Challenge merchants to look Stateside to try to get the product with smaller quantities, or to develop product in the U. S. and later roll it out off-shore if it sells. •Tackle the issue of ccounting for all the product costs to be sure you have an accurate, fully loaded cost and sufficient initial markup without being overstocked. Liquidating overstocks Inventory that doesn’t sell and liquidation are two dreaded aspects to merchandising. Because you have to take in larger imported orders and distribute to more channels, you need a cost effective strategy for in-season liquidation and clearance. In a cost-based system it’s hard to determine how much gross margin is lost in marking down retail prices. Our experience is that it may represent 2% to 4% of net sales at least. What to do about it? •Develop a liquidation strategy. Options include clearance catalogs, Web specials, bind-in or package inserts, sales pages, and telephone offers. Develop a report showing candidates for liquidation based on rate of sale. •Develop an age of inventory report that will age products in time brackets (30 days, etc. ) to stay on top of inventory. transportation, importing, retail versus direct packaging, technology used in the supply chain and DCs, etc. All this necessitates setting standards with vendors so that you aren’t working on an exception basis with every one. Vendor compliance and supply chain In most multichannel businesses the size of the product assortment and vendor base have grown dramatically. Supply chains have become increasingly complex with modes of vendor compliance is at the heart of efficient supply chain management.
Routing inbound shipments to reduce costs and scheduling inbound appointments can help speed product flow through the DC, significantly helping in turn to reduce inventory levels. Automating the supply chain through advanced shipping notifications (ASNs), RFID, and cross-docking to stores can go a long way toward reducing costs, but these cannot be implemented without a comprehensive vendor compliance policy. Start small by communicating your company vision, the need for on-time delivery, routing guides, inbound dock standards like carton labeling, product specifications, accounting and paperwork requirements, contact list, and the costs of back orders. Begin a charge-back policy and implement it with your largest vendors.
Later, you can add other items that are typically included, such as service level standards, packaging, labeling, case labeling, valued and value-added services, logistical requirements, scheduling appointments, cross-docking and direct-to-store requirements, charge back for non-compliance, etc. The trend is to push compliance back up the supply chain. This means as many value-added services as possible — packaging, marking, quality inspections — performed by vendors or merchant reps in factories. Catching errors at the source and using source-based services speeds inventory flow, and any such issues are cheaper to deal with in the vendor’s environment. 10)ACHIEVING SCM EXCELLENCE A new survey reveals what separates manufacturing industry leaders from laggards IT HAS BEEN several years since a comprehensive and independent survey of the state of supply chain management (SCM) in the paper manufacturing industry has been carried out.
A lot has happened both in the industry and in the field of SCM during this time. Moderator Consulting carried out an extensive survey during July-October 2005 to see where we stand today. Altogether 11 European paper companies participated in the survey, which covered issues such as SCM strategy, process and management models, reporting systems, managing customer relationships, efficient operations, people and supporting systems and future plans. The respondents covered all the main product groups in nine European countries. The results of individual companies were obviously kept strictly confidential. Common terminology and definitions were used in the survey to ensure common understanding of the questions and issues.
The results provide a good cross-section of the industry performance and challenges. Besides being a major cost and working capital factor, SCM can also be considered a source of significant competitive edge. Some of the findings are listed below. 1. Nearly half the respondents still need to develop more robust SCM strategies. While all companies said they have an SCM strategy, the content, communication and integration into overall business strategy in many cases leaves much to be desired. For instance, some companies had no logistics provider strategy or did not include development of cost factors. 2. The industry has clearly been moving toward a more integrated management structure.
Most SCM-related decisions, such as strategy, demand planning and vendor and location management are nowadays made at corporate / business area levels, with sales companies and mills mostly in an execution role (Figure 1). However, even though management structures are more integrated, several companies have yet to adopt more of a process approach, with the processes and their ownerships defined. Systems for monitoring key performance indicators (KPIs) seem nowadays to be at a reasonably good level in nearly all the respondent companies. 3. The outsourcing process appears to be complete. The dominant logistics management mode is nowadays clearly “preferred partnerships” – on average 60%, and covering the whole infrastructure.
Interestingly although “preferred partnerships” was stated as the dominant transport mode, respondents still had between 50 and 100 regular haulage “partners” in use on average. This may indicate room for some further consolidation. IT systems management is the exception to the outsourcing rule: very few companies have outsourced this aspect of their operations. 4. Many companies still need to segment their customers and define corresponding service levels for each customer or customer group. This may mean that these companies are offering the same service, such as dedicated stocks or a 24 hr/ single pallet delivery – with corresponding costs – to all or most of their customers.
This can hardly be optimal from a cost-to-serve viewpoint, unless price supplements are enforced. However, customers rarely accept such surcharges nowadays. 5. Surprisingly few customers participate in the demand planning processes (only five to 10 on average). Participation in this context means active involvement and, considering the industry’s forecasting challenges this may offer an improvement in some industry segments. Transaction automation with customers and logistics providers also offers big potential: only 10-20% and 50% respectively said they currently transact electronically. More standardization is needed. 6. Most companies seem quite satisfied with their IT systems.
On a scale of one (very dissatisfied) to five (very satisfied), a clear majority of the companies gave a mark of four for most of their systems, such as mill execution, sales and distribution and data warehousing. The substantial investments in IT systems over recent years appear to have paid off in a number of cases. 7. Most companies were satisfied with both the number and caliber of their SCM personnel. Main training requirements were focused on customer relations issues. 8. Future development needs to be carefully planned. As generic future goals, most respondents stated that their main focuses are on cost and inventory reductions, as well as on improving customer service. Improved internal integration and process management was also listed as a priority generic target.
However, these may be conflicting targets, unless planned carefully. More specifically, the respondents were asked to prioritize a list of 14 specific SCM initiatives provided, based on their planned implementation in the next three years initiatives included issues such as RFID, vendor managed inventory (VMI), activity based costing, harmonization of IT infrastructure, e-commmerce with logistics providers and offering outsourcing capabilities to customers. The clear “winners” were VMI, e-commerce projects and collaborative planning, forecasting and replenishment (CPFR) following close behind. These are huge undertakings with significant risks, resource and planning requirements.
However, the companies that successfully implement them would take their supply chain to an entirely new level of sophistication, responsiveness, efficiency and transparency. Finally,The industry has been moving toward a more integrated and customer-centric management approach. Industry and customer consolidation are the most likely reasons for this. IT systems and performance monitoring finally appear to be in good shape in most companies. This is a good basis for future development, even though many companies revealed some worrying weaknesses in a number of critical areas and are clearly lagging behind the leaders. The leading companies – based on this survey – can best be characterized as having a clear, comprehensive and well-communicated SCM strategy.
They also have an integrated management structure and KPI monitoring in place; processes are defined in detail; service/cost tradeoffs are optimized; logistics partners are managed efficiently; they have implemented wellfunctioning IT systems; and have competent and well trained people, all of which are reflected also in their costs and performance. Is this just good, basic management? Easy to say, much more difficult to accomplish in real life! Furthermore, the leaders have ambitious plans for the future – especially in areas involving their customers. These companies are clearly outperforming their peers and they are well positioned to increase their competitive edge by efficiently and intelligently serving their customers.