Kpmg Supply Chain.ppt

What are the Challenges FacingStrategic Supply Management&Supply Chain Integration?,All commercial and industrial organizations are facing an intense challenge to transform their business processes which bring products and services to the marketplace.The cornerstone of this challenge is strategic supply management with the internal and external integration of people,facilities,materials,transportation,information systems,and operational procedures.Several major forces are influencing the need for executive leadership in Strategic Supply management:,Market GlobalizationInformation TechnologyCustomer Service ExplosionsNew Product/Process TechnologiesReengineering Initiatives for Time CompressionCost CompetitivenessOrganizational Integration,Copyright 1995 KPMG Peat Marwick LLP.,The Supply Chain,GlobalDistribution,Agile or SynchronousManufacturing,StrategicSourcing,What is Strategic Supply Management?,Integrated Strategic Supply Management Model,Goal:Business Partners/Alliances,Goal:Strategic Supply Integration,Goal:CustomerSatisfaction,CustomerSatisfaction,What is Strategic Sourcing?,KPMG defines strategic sourcing as a process of developing a supply base capable of becoming a complementary,value added business partner.Strategic sourcing integrates the capabilities of the supply base with a comprehensive view of a customers requirements into a unified supply network with customer responsiveness as the ultimate driver of value.Strategic Sourcing is a process which translates customer requirements from product planning,product design,process planning,process control planning,manufacturing planning,and the delivery to the customer.Strategic Sourcing is supplier development,selection,qualification,communication,and continuous performance monitoring with objective feedback for improvement.,CustomerSatisfaction,STRATEGIC SOURCING ENTERPRISE MODEL,Copyright 1995 KPMG Peat Marwick LLP.,AssessmentCategories,What is your Supply Management Level or Assessment Relative to Strategic Sourcing?,Classic,World-Class,Emerging,Break-Through,Development,Supplier RelationshipSupplier TrainingDocumentationDesign InvolvementStandardization,Non-SpecificNoneInformal DocumentNoneVery Limited,PartnershipsProgrammed SupportFully on EDPFormal,All key PartsAll Parts/Components,Preferred SupplierAd Hoc InformationManual FilesInformalCasually,Certified SupplierLimit SupportPartially on EDPFormal,Some PartsSome Production Parts,Selection,Selection MethodNumber of SuppliersType of SupplierGeographic ScopeContract Length,Known from PastVast NumberPersonally KnownMainly LocalOrder Related,Continuous AssessmentFew,Key SuppliersWorld-Class SuppliersWorldwideMainly Long Term,Comparative BiddingSome ReductionWell ReputedMainly DomesticAnnual,Periodic AssignmentLimited NumberLeading CompaniesSome OffshoreSome Long Term,Qualification,Terms and ConditionsQuality ControlService Offering,Price Only100%InspectionProduct Only,Total Cost and ValueSelf-CertificationValue Added Services,Price and QualityFixed StatisticalValue Added Product,Price,Quality,ServiceSkip Lot InspectionsHigh Value Added Product,Performance Monitoring,Supplier EvaluationInventory LevelCost Reductions,NoneExcess InventoryBelow Inflation Rates,Systematic RatingsSupplier-owned StocksTotal Cost Targets,SubjectiveControlled ReserveSome Price Reductions,Some MetricsTargeted InventoryTarget Price,Communication,Business ScopeProcess IntegrationPlanning,Minimize PriceExecution LinkageShort Term Schedules,Maximized Customer ValueIntegration of ControlDrive Process&Product Technology Investments,Minimize CostsTactical LinkagesLonger Term Schedules,Minimized Total Acq.CostsMultiple LinkagesLong Term Schedules,STRATEGIC SOURCING,Company Assessment Matrix,What is Agile orSynchronous Manufacturing?,2.)An agile or synchronous organization focuses on identifying and eliminating the following seven types of waste:OverproductionCorrectionMaterial MovementOverprocessingExcess InventoryWaitingMotion,Significant effort is placed on reducing or eliminating non-value added activities.,1.)The agile or synchronous organization takes a holistic view of their business processes as a seamless flow of products and information with customer satisfaction as its ultimate goal.,Copyright 1995 KPMG Peat Marwick LLP.,What triggers Agile or Synchronous Manufacturing is the cross functionalinformational flow,Agile or Synchronous Manufacturing,Lead TimeReduction,People FocusedPractices,PlannedMaintenance,WorkplaceOrganization,QualityVerification,ErrorProofing,PullSystem,SupplierRationalization,SupplierDevelopment,Containerization,Small Lot,Quick Set Up,LevelScheduling,Transportation,MachineProcessCapability,Plant,Machine,Office Layout,Reduction of Variation,An example of an architecture to supportagile or synchronous manufacturing,ProductEngineering,Plan for Every Part,Forecast,Orders,Supplier-Carrier Information,Partner-Supplier Relationship,KanbanDeliveryInformation,Consumption Counts,Inbound,Daily Rates&Kanban Codes,BOMs,12 Week Plan,Kanban Signals,Pick upDelivery,Requirement Forecast,Release Information,Special Orders,Kanban=BOM,Kanban=BOM,STRATEGICSOURCING,AGILE OR SYNCHRONOUSMANUFACTURING,DevelopmentSelectionQualificationCertificationCommunication,Material Flow AnalysisMaterial RequirementsPlanningManufacturingResource PlanningCapacity PlanningInventory AnalysisProduction SchedulingShop Floor Control,GLOBALDISTRIBUTION,WarehousingTransportationDelivery NetworksDistribution Planning,Integrated Supply Managementexpands the horizon of traditionalMRP and MRP II disciplines,KPMG believes and has demonstrated Strategic Supply Management is the next evolutionary stage of the MRP type approaches to production planning with a significantly higher level of impact.,Material Requirements Planning(MRP)-is a system used to determine the quantity and timing requirements of dependent demand materials used in a manufacturing operation.Materials can be purchased externally or produced in-house.This computer based system utilizes a master production schedule,a product bill of materials,and current inventory data to determine current new requirements and timing,Manufacturing Resource Planning(MRP II)-is an expansion of a basic MRP system that includesthe following additional capabilities:(1)a capacity planning capability;(2)a financial interface that permits planning to be done in financial and operating terminology,and(3)a simulation capabilitywhich can be used to perform“what-if”planning scenarios.,Strategic Supply Management-is an integrated managerial and organizational approach used to combine the elements of MRP,MRP 11,DRP,&JIT systems by stretching their capabilities,Activities typically involved in this integrated approach are product design,procurement,inventory management,receiving,stores&warehousing,in-plant materials handling,production planning,control&traffic,transportation,surplus&salvage,and the most important aspect.customer interfacing.,STRATEGICSOURCING,AGILE OR SYNCHRONOUSMANUFACTURING,DevelopmentSelectionQualificationCertificationCommunication,Material Flow AnalysisMaterial RequirementsPlanningManufacturingResource PlanningCapacity PlanningInventory AnalysisProduction SchedulingShop Floor Control,GLOBALDISTRIBUTION,WarehousingTransportationDelivery NetworksDistribution Planning,Customer service,minimized total material ownership costs and the strategic application of a firms assets are the major drivers of supply chain integration.,What is Supply Chain Integration?,Supply Chain Integration is the proactive linkage of all the elements within the Supply Chain.,Supply Chain Integration is the strategic acceleration of raw,work-in-process,and finished goods inventory toward the customer.,A supply chain is the physical,electronic,and communication infrastructure which allows materials to move from the point of origin,be converted,and then move on to the point of use.,Supply Chain Integration unites the traditional internal and external components of a silo-based organization into a series of customer driven,integrated cross-functional,cross-organizational business processes.,Demand Forecasting andProduction Planning,Order Processing,Warehousing,Transportation,Packaging andMaterial Handling,Inventory Managementand Control,Customer Service,Purchasing,IntegratedSupplyManagement,Marketing:Sales GoalsMarket ResearchProduct StrategiesFinancial Agreements,Functions rather than processes Does not control more then a few steps Duplicated and competing functionsFocus on function and assignment completionEmergence of functional silos,The traditional approach to materials management,Distribution:Customer ServiceOutbound LogisticsChannel Service,Traffic:Vendor decisionsSchedulingRequirementsComplianceInbound logistics,Accounting:Profit/LossInventory InvestmentsParts pricingFinancial agreements,Warehousing:Inventory LevelsRe-Order QuantitiesSafety Stock NeedsInventory Management,Production:SchedulingRaw Material RequirementsCapital NeedsQuality,Copyright 1995 KPMG Peat Marwick LLP.,The major business processes interacting with material flow which provide the foundation for Supply Chain Integration,Order FulfillmentNew Product DevelopmentManufacturing Production PlanningSchedulingEngineering/Design ChangeQuality AssuranceCustomer/Supplier InterfacesTransportation,Copyright 1995 KPMG Peat Marwick LLP.,Achieving Supply Chain Integration,Stage 1:Baseline,Stage 2:Functional Integration,Stage 3:Internal Integration,Purchasing,MaterialsControl,Production,Sales,Distribution,MaterialsManagement,ManufacturingManagement,Distribution,MaterialsManagement,ManufacturingManagement,Distribution,Marketing&Sales,Production,Distribution,Stage 4:External Integration,Achieving Supply Chain Integration,continued.,Timely,accurate,paperless information flow,Suppliers,Customers,Smooth,continual product flow matched to consumption,OrderManagement,Planning,ProductLife Cycle,R&D and NewProductDevelopment,CustomerRelationshipManagement,Sourcing,Administration,CustomerAccounting,Services&TechnicalSupport,How can Supply Chain Integration be implemented across the traditional organization?,GENERALMANAGER,ENGINEERING,PRODUCTION,MATERIALS MANAGEMENT,QUALITYASSURANCE,Cost estimating Product engineering Value engineering,Production eng.Process eng.Incoming inspection,Purchasing Inventory control Traffic,Supplier QA,VERTICALMANAGEMENT,HORIZONTALORCROSSFUNCTIONALMANAGEMENT,Functionally driven rather than process drivenA function does not control more then a few steps Prone to duplicated and competing functionsCritical focus on function and assignment completion,task centricity,Traditional Shortcomings:,The impact of horizontal or cross functional integration onSupply Management,Function,STRATEGICSUPPLYMANAGEMENT,Supplier Quality AssuranceIncoming InspectionComponents EngineeringCost TargetingValue EngineeringPurchasingInventory ControlTraffic,Quality AssuranceManufacturingEngineeringMaterialsManagement,Department,CommodityGrouping(1),An example organizational chart forcross functional teaming,-Materials&Production Planning-Procurement Planning-Capacity Management-Customer Service-Quality Assurance-Engineering,CommodityGrouping(2),CustomerGrouping(3),Process or ProductGrouping(1),PP,MP,PP,CM,CS,MP,PP,CM,CS,MP,PP,CM,CS,MANAGER,MP,MP,CM,CS,PP,New ProductDevelopment,MP,QA,EN,PP,CM,CS,QA,EN,What are the Major Benefits for Supply Chain Integration?,Improved Customer Service Levels-as the supply chain begins to balance the execution and planning requirements,service levels will increase throughout the supply chain with an order fulfillment process that integrates all the customers needs.Detailed Cost-a clear understanding of the cost drivers and their relationships to the overall value added cost picture.Reduced Cycle Times-the ability to have the right product,at the right place,at the right time,faster is paramount in a time based competitive market.,Competitors who manage the supply relationship successfully have the opportunity to impact customer value through improved service,delivery,and product quality.,Reduced Inventory-each segment of the supply chain carries inventory(safety stock)to protect against the unknown.As information is shared back through the supply chain,such as point of sale,warehouse issues or time phased replenishment schedules,demand uncertainty is decreased,therefore reducing inventory.Faster Market Response-to shifts in demand,enabling an increase in market share and the avoidances,The impact of supply chain integration on ROI,Inventory,AccountsReceivable,Cash,Fixed Assets,SalesRevenue,Costs,+,+,+,Profit,CapitalEmployed,Customer ServiceSupply Chain EfficiencyAsset DeploymentAsset UtilizationAsset DeploymentAsset Utilization,Return onInvestment,Normative Model of Inventory Carrying Cost Methodology,InventoryCarryingCosts,Inventory Risk Costs,Storage Space Costs,Capital Costs,Inventory Service Costs,Inventory Investment,Insurance,Taxes,Plant Warehouses,Public Warehouses,Rented Warehouses,Company-ownedWarehouses,Obsolescence,Damage,Pilferage,Relocation Costs,The impact of supply chain integration on marketing,Brand ValuesCorporate ImageAvailability,Customer ServicePartnershipQuick Response,FlexibilityReduced Asset BaseLow Cost Supplier,Market ShareCustomer RetentionSuperior,CustomerFranchise,IndustryFranchise,Supply ChainEfficiency,MarketingEfficiency,x,x,=,Consider an activity analysis in procurement,Administrative and Operating activities consumed 80%of the resources or dollars,with less than 20%of the resources directed into areas with the potential forgreatest impact.,A Typical Company,100,90,80,70,60,50,40,30,20,10,5%,15%,25%,55%,40%,5%,30%,25%,Cost of Activities,Actual Long Term Business Impact,?,StrategicDevelopmentSupplier RelationsAdministrativeOperating,!,Non-Value AddedFiling$35,000Data Entry$28,000Expedite$89,000Returns$63,000Correct POs$39,000,The Integrated Supply ChainPerformance Measure Framework,METRIC TYPE,PRIMARY,SECONDARY,(9)Delivery to Commit Date(10)Warranty Costs,Returns and Allowances(11)Customer Inquiry Response Time(12)Source/Make Cycle Time(13)Supply Chain Response Time(14)Production Plan Achievement(15)Value Added Productivity(16)Forecast Accuracy(17)Inventory Obsolescence(18)Capacity Utilization,(1)Perfect Order Fulfillment(2)Customer Satisfaction(3)Product Quality(4)Order Fulfillment Lead Time(5)Total Supply Chain Costs(6)Cash to Cash Cycle(7)Inventory Days of Supply(8)Asset Performance,CustomerSatisfactionTimeCostsAssets,Symptoms which offer an opportunity forSupply Chain Integration,Customer service levels below industry averages or company requirementsMarket share losses due to product or service availabilityIncreased material costs,inventory investments and warehousing capacity not justified by salesMultiple supply streams or networks with long lead timesBuying that occurs in many places within the organization,Excessive number of suppliers or transportation,Copyright 1995 KPMG Peat Marwick LLP.,KPMG Procurement Toolkit Meth