Slide 1Change in ParadigmExample: Automotive RelationshipsSupplier CollaborationMajor Business TransformationsRecipe for Competitive AdvantageSlide 7Barriers to Supply Chain IntegrationHorizontal OrganizationsGetting startedKPI’s in the Supply ChainPurpose of BenchmarkingChange PerspectiveSlide 14Benchmarking: A strategic processDefine Scope and ObjectivesChoosing performance metrics and driversSlide 18“What If?” ScenariosImplementation IssuesBA331-Supply Chain ManagementChapters 11 & 12Shay Scott, Ph.D.Department of Marketing and SCMManaging Director, Global Supply Chain InstituteUniversity of [email protected] Chain ManagementShay Scott2Change in ParadigmTraditional View of CompetitionIndividual businesses compete as stand alone entities. New Paradigm of CompetitionSupply chains compete with one another.Requirements for success1. Collective strategy development2. Win-win thinking3. Open communicationExample: Automotive RelationshipsSource: http://www.autolinedetroit.tv/journal-wp-content/uploads/2009/05/2009-wri-news-release-09-25-092.pdfSupplier CollaborationSource: http://www.autolinedetroit.tv/journal-wp-content/uploads/2009/05/2009-wri-news-release-09-25-092.pdfWhy collaborate with suppliers?What are the consequences?Major Business TransformationsRecipe for Competitive Advantage•Concept-based continual learning in addition to experience•Internal and external relationships •Information visibility to maximize communication and effectiveness.•Integrate demand and supply as tightly as possible.Goal: Quickly respond to market changes effectively and efficiently - producing what your customers want when they want it6Conventional Organization Structure also called traditional, functional, vertical, silo Barriers to Supply Chain ImprovementCore organizational objective: Generate orders and fulfill those orders without regard to costThe cost of an order moving through the pipeline is not visible!Barriers to Supply Chain IntegrationPeople are interested in protecting and growing their own function.Horizontal OrganizationsCore organizational objective: Link demand and supply through Demand Supply Integration (DSI).Distinguishing characteristics of horizontal, market-facing organizations:• Organized around processes• Flat and de-layered• Built upon multi-functional teams• Guided by market-based performance metricsExample: UT CBA–Key Performance Indicators–BenchmarkingGetting startedOBJECTIVE PROCESS/ DRIVER MEASURE (KPI) Better Cost Customer retentionFaster Relationships End-to-end pipeline timeCheaper Service Quality Total Cost-to-serveCloser Time Perfect Order Achievement What gets measured, gets managed…KPI’s in the Supply Chain•To answer the question, “Are we competitive?”•To establish the ground for creative breakthroughs and move away from tradition•To provide externally-oriented performance input that is forward looking as opposed to financially-oriented historical input•Three types: Internal, Competitive, Best in Class/ProcessPurpose of BenchmarkingCategory Number of Times Reporting Highest Perceived PerformanceDo Not Benchmark 15Limited Benchmarking 15Extensive Benchmarking 2Change Perspective Satisfied Neutral Aware Concern CriticalCrisis1 2 3 4 5 6Defensive Curious DecisiveDis covery Diagnose DesignSource: ModusLink adaptation of PRIME Resource GroupLowProbability of ChangeHighProbability of Change“Life is great!” “I’m comfortable” “It could happen” “It is happening” “It’s costing $$$” “I must change!”•Strong feelings of success•See no need to change•No satisfaction or pain•Not exploring problems/change•Discomfort. Problem exist but not directly •Consider future change•See symptoms, problems potentially harmful•Ready to define and explore change•Clear picture of problem•Quantify financial impact•Unacceptable problem cost•No longer avoid change. Ready to decideNegative PresentChange Positive PresentSustainPositive FutureAttainNegative FutureAvoidBenchmarking helps identify current pain and motivate positive change PresentNegativeFuturePositiveConventional ChangeDesired ThoughtBenchmarkingConventional change processes present solutions for a better future without thoroughly diagnosing the present problem. As a result, personnel recognize the risk of change instead of the risk of not changingSource: 2004 Prime Resource Group* Understand process “As-Is” *Map flows –VPM*Determine key drivers & metrics•*Identify targets•*Map target “should-be”* Model supply chain structure* Quantify current requirements as baseline*Design alternatives solutions*Understand cost trade-offs *Quantify total cost/benefit of alternatives* Develop implementation plan to best alternative Implement* Measure process improvements by key metrics *Quantify results against baseline *Review process for continual improvement Continuous Improvement Conduct Business Systems Analysis Conduct Benchmarking Analysis Conduct Scenario “What If” Analysis Implement Plan Evaluate Change Define Scope and Objectives* Identify trouble areas *Determine scope and objectives for improvement Enterprise-wide focus Intensive fact-finding, data driven process Analysis of total cost of ownership Quantify, quantify, quantify Enterprise-wide focus Intensive fact-finding, data driven process Analysis of total cost of ownership Quantify, quantify, quantifyBenchmarking: A strategic processDefine Scope and ObjectivesHow do I increase the competitiveness of my supply chain?Strategic Operational• How should the structure of our supply chain be designed? • How are our business practices and policies affecting our performance and bottom line?• How do we build a networked supply chain and manage our business partners?• How can we extend or further concentrate our areas of business expertise?• Which customers and product mix shall we focus on?• What is the performance of our existing production facilities, warehouses, distribution, etc?• What are the optimal inventory levels given variable customer demand and reduced cycle times?•How can we reduce total cost while simultaneously improving customer service?• How do we assess and measure the performance of our operations and that of our partners?• What is our profitability by customer, market or product/service
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