Supply Chain Management
[1]
Introduction to SCM
Setijadi
setijadi@SupplyChainIndonesia.com
1
Logistics System
FLOW OF GOODS
SUPPLIER
PROCUREMENT
MANUFACTURING
PHYSICAL
DISTRIBUTION
CUSTOMER
FLOW OF INFORMATIONS
2
Definition
Logistics management is that part of
the supply chain process that plans, implements,
and controls the efficient, effective
flow and storage of
goods, services, and related information
from the point-of-origin to the point-of-consumption
in order to meet customers' requirements.
(Council of Logistics Management (CLM), 1986).
3
Flow of Logistics
SUPPLIER
CARRIER
MANUFACTURER
CARRIER
DISTRIBUTOR
CARRIER
CUSTOMER
4
Fungsi-fungsi Utama Sistem Logistik
PERSEDIAAN
SISTEM
INFORMASI
TRANSPORTASI
PERGUDANGAN
5
Supply Chain
INBOUND
Modified from Russell & Taylor (2006)
OUTBOUND / PHYSICAL DISTRIBUTION
6
Illustration of Supply Chain
PABRIK
MINYAK
GORENG
PABRIK
CPO
INBOUND “CPO”
OUTBOUND / DISTRIBUSI FISIK
“CPO”
OUTBOUND / DISTRIBUSI FISIK “MINYAK
GORENG”
INBOUND “MINYAK GORENG”
Modified from Russell & Taylor (2006)
7
Supply Chain Management
Supply Chain Management is the
integration of key business processes from end
user through original suppliers that provides products,
services, and information that add value for customers
and other stakeholders
(The Global Supply Chain Forum).
8
SUPPLY CHAIN MANAGEMENT:
INTEGRATING AND MANAGING BUSINESS PROCESSES ACROSS THE SUPPLY CHAIN
INFORMATION FLOW
TIER 2
SUPPLIER
TIER 1
SUPPLIER
MANUFACTURER
CUSTOMER
CONSUMER/
END-CUSTOMER
SUPPLY CHAIN BUSINESS PROCESSES
Logistics
Purchasing
Marketing & Sales
PRODUCTION
FLOW Finance
Production
R&D
Source: Lambert et al. (1998)
CUSTOMER RELATIONSHIP MANAGEMENT
CUSTOMER SERVICE MANAGEMENT
DEMAND MANAGEMENT
ORDER FULFILLMENT
MANUFACTURING FLOW MANAGEMENT
SUPPLIER RELATIONSHIP MANAGEMENT
PRODUCT DEVELOPMENT AND COMERCIALIZATION
RETURNS MANAGEMENT
9
Customer Relationship Management
• The customer relationship management process provides
the structure for how the relationship with the customer is
developed and maintenanced.
• Performance evaluations are undertaken to analyze the
levels of service provided to customers as well as customer
profitability.
Source: Lambert et al. (1998)
10
Customer Service Management
• The usto e se i e a age e t is the fi ’s fa e to the
customer. It becomes the key point of contact for
administering the product/service agreement.
• Customer service provides the single source of customer
information, such as product availability, shipping dates and
order status.
Source: Lambert et al. (1998)
11
Demand Management
• The demand management process needs to balance the
usto e s’ e ui e e ts ith the fi ’s supply apa ilities.
• Part of managing demand involves attempting to determine
what and when customers will purchase.
• A good demand management system uses point-of-sale and
key usto e data to edu e u e tai ty a d p o ide
efficient flows throughout the supply chain.
Source: Lambert et al. (1998)
12
Order Fulfillment
• The key to effective SCM is meeting customer need dates.
• Effe ti e o de fulfill e t e ui es i teg atio of the fi ’s
manufacturing, logistics and marketing plan.
• The design and operation of the network has a significant
influence on the cost and performance of the system.
Source: Lambert et al. (1998)
13
Manufacturing Flow Management [1]
• In traditional make-to-stock firms:
– The manufacturing process produced and supplied products to
the distribution channel based on historical forecasts.
– Products were pushed through the plant to meet a schedule.
– Often the wrong mix of products was produced.
• With SCM:
– Product is pulled through the plant based on customer needs.
– Manufacturing processes must be flexible to respond to market
changes.
– Changes in the manufacturing flow process lead to shorter
cycle times meaning improved responsiveness to customers.
Source: Lambert et al. (1998)
14
Manufacturing Flow Management [2]
• The manufacturing flow process deals with making the
products and establishing the manufacturing flexibility
needed to serve the target markets.
• Manufacturing flow at the operational level looks like
operations management internal to the firm.
However, certain characteristics of the process are designed
to integrate internal operations management with activities
in the supply chain.
Source: Lambert et al. (1998)
15
Supplier Relationship Management
• Supplier relationship management is the process that
defines how a company interacts with its suppliers.
• Long-term partnerships are developed with a small
core group of suppliers.
• The purchasing function develops rapid
communication mechanisms such as EDI and internet
linkages to quickly transfer requirements.
• It is important for the supplier relationships to be winwin. If both parties do not gain from the relationship,
the incentive to be in the relationship is diminished
and it will likely dissolve.
Source: Lambert et al. (1998)
16
Product Development and Comercialization
• Supply chain management includes integrating customers
and suppliers into the product development process in order
to reduce time to market.
• It is critical to have the right people from the internal
functional silos along with key customers and suppliers
involved in the product development and commercialization
process.
Source: Lambert et al. (1998)
17
Returns Management
• While many firms neglect the returns process because
management does not believe it is important, this process
can assist the firm in achieving a sustainable competitive
advantage.
• As part of this sub process, the team develops procedures
for analyzing return rates and tracing the returns back to the
root causes.
Source: Lambert et al. (1998)
18
Implementing Integrated SCM
• The implementation of SCM involves:
– identifying the supply chain members with whom it is critical to link,
– the processes to be linked with each of these key members,
– and the type/level of integration that applies to each process link.
• If the proper coordination mechanisms are not in place
across the various functions, the supply chain processes will
be neither effective nor efficient.
Source: Lambert et al. (1998)
19
Supply Chain Management Framework:
Elements and Key Decisions
What processes
should be linked with
each of these key
supply chain
members?
SUPPLY CHAIN
BUSINESS
PROCESSSES
SUPPLY CHAIN
MANAGEMENT
COMPONENTS
Who are the key
supply chain
members with whom
to link processes?
SUPPLY CHAIN
NETWORK
STRUCTURE
What level of integration and
management should be
applied for each process link?
Source: Lambert et al. (1998)
20
Source: Lambert et al. (1998)
SUPPLIERS
TYPICAL
FUNCTIONAL SILOS
BUSINESS
PROCESSES
MARKETING
R&D
LOGISTICS
PRODUCTION
PURCHASING
FINANCE
CUSTOMER
RELATIONSHIP
MANAGEMENT
Account
Management
Requirement
Definition
Requirements
Definition
Manufacturing
Strategy
Sourcing
Strategy
Customer
Profitability
CUSTOMER
SERVICE
MANAGEMENT
Account
Administration
Technical
Service
Performance
Specifications
Coordinated
Execution
Priority
Assessment
Cost to
Serve
DEMAND
MANAGEMENT
Demand
Planning
Process
Requirements
Forecasting
Capability
Planning
Sourcing
Tradeoff
Analysis
ORDER
FULFILLMENT
Special
Orders
Environmental
Requirements
Network
Planning
Plant
Direct
Selected
Supplier(s)
Distribution
Cost
Packaging
Specifications
Process
Stability
Prioritization
Criteria
Production
Planning
Integrated
Supply
Manufacturing
Cost
SUPPLIER
RELATIONSHIP
MANAGEMENT
Order
Booking
Material
Specifications
Inbound
Flow
Integrated
Planning
Supplier
Management
Materials
Cost
PRODUCT
DEVELOPMENT AND
COMERCIALIZATION
Business
Plan
Product
Design
Movement
Requirements
Process
Specifications
Material
Specification
R&D
Cost
RETURNS
MANAGEMENT
Product
Life Cycle
Product
Design
Reverse
Logistics
ReManufacturing
Material
Specification
Revenue
& Costs
MANUFACTURING
FLOW
MANAGEMENT
INFORMATION ARCHITECTURE, DATA BASE STRATEGY, INFORMATION VISIBILITY
21
CUSTOMERS
Supply Chain Management:
Implementation
EDUCATION | TRAINING | CONSULTING | RESEARCH | DEVELOPMENT
Sekretariat:
Jl. Negla 25 Setiabudi
Bandung 40154
Phone : 022 7000 1090
Mobile : 0821 1515 9595
E-mail : sekretariat@SupplyChainIndonesia.com
Website : www.SupplyChainIndonesia.com
Mailing list : SupplyChainIndonesia@googlegroups.com
LinkedIn : Supply Chain Indonesia
Facebook : Supply Chain Indonesia
22
Introduction to SCM
Setijadi
setijadi@SupplyChainIndonesia.com
1
Logistics System
FLOW OF GOODS
SUPPLIER
PROCUREMENT
MANUFACTURING
PHYSICAL
DISTRIBUTION
CUSTOMER
FLOW OF INFORMATIONS
2
Definition
Logistics management is that part of
the supply chain process that plans, implements,
and controls the efficient, effective
flow and storage of
goods, services, and related information
from the point-of-origin to the point-of-consumption
in order to meet customers' requirements.
(Council of Logistics Management (CLM), 1986).
3
Flow of Logistics
SUPPLIER
CARRIER
MANUFACTURER
CARRIER
DISTRIBUTOR
CARRIER
CUSTOMER
4
Fungsi-fungsi Utama Sistem Logistik
PERSEDIAAN
SISTEM
INFORMASI
TRANSPORTASI
PERGUDANGAN
5
Supply Chain
INBOUND
Modified from Russell & Taylor (2006)
OUTBOUND / PHYSICAL DISTRIBUTION
6
Illustration of Supply Chain
PABRIK
MINYAK
GORENG
PABRIK
CPO
INBOUND “CPO”
OUTBOUND / DISTRIBUSI FISIK
“CPO”
OUTBOUND / DISTRIBUSI FISIK “MINYAK
GORENG”
INBOUND “MINYAK GORENG”
Modified from Russell & Taylor (2006)
7
Supply Chain Management
Supply Chain Management is the
integration of key business processes from end
user through original suppliers that provides products,
services, and information that add value for customers
and other stakeholders
(The Global Supply Chain Forum).
8
SUPPLY CHAIN MANAGEMENT:
INTEGRATING AND MANAGING BUSINESS PROCESSES ACROSS THE SUPPLY CHAIN
INFORMATION FLOW
TIER 2
SUPPLIER
TIER 1
SUPPLIER
MANUFACTURER
CUSTOMER
CONSUMER/
END-CUSTOMER
SUPPLY CHAIN BUSINESS PROCESSES
Logistics
Purchasing
Marketing & Sales
PRODUCTION
FLOW Finance
Production
R&D
Source: Lambert et al. (1998)
CUSTOMER RELATIONSHIP MANAGEMENT
CUSTOMER SERVICE MANAGEMENT
DEMAND MANAGEMENT
ORDER FULFILLMENT
MANUFACTURING FLOW MANAGEMENT
SUPPLIER RELATIONSHIP MANAGEMENT
PRODUCT DEVELOPMENT AND COMERCIALIZATION
RETURNS MANAGEMENT
9
Customer Relationship Management
• The customer relationship management process provides
the structure for how the relationship with the customer is
developed and maintenanced.
• Performance evaluations are undertaken to analyze the
levels of service provided to customers as well as customer
profitability.
Source: Lambert et al. (1998)
10
Customer Service Management
• The usto e se i e a age e t is the fi ’s fa e to the
customer. It becomes the key point of contact for
administering the product/service agreement.
• Customer service provides the single source of customer
information, such as product availability, shipping dates and
order status.
Source: Lambert et al. (1998)
11
Demand Management
• The demand management process needs to balance the
usto e s’ e ui e e ts ith the fi ’s supply apa ilities.
• Part of managing demand involves attempting to determine
what and when customers will purchase.
• A good demand management system uses point-of-sale and
key usto e data to edu e u e tai ty a d p o ide
efficient flows throughout the supply chain.
Source: Lambert et al. (1998)
12
Order Fulfillment
• The key to effective SCM is meeting customer need dates.
• Effe ti e o de fulfill e t e ui es i teg atio of the fi ’s
manufacturing, logistics and marketing plan.
• The design and operation of the network has a significant
influence on the cost and performance of the system.
Source: Lambert et al. (1998)
13
Manufacturing Flow Management [1]
• In traditional make-to-stock firms:
– The manufacturing process produced and supplied products to
the distribution channel based on historical forecasts.
– Products were pushed through the plant to meet a schedule.
– Often the wrong mix of products was produced.
• With SCM:
– Product is pulled through the plant based on customer needs.
– Manufacturing processes must be flexible to respond to market
changes.
– Changes in the manufacturing flow process lead to shorter
cycle times meaning improved responsiveness to customers.
Source: Lambert et al. (1998)
14
Manufacturing Flow Management [2]
• The manufacturing flow process deals with making the
products and establishing the manufacturing flexibility
needed to serve the target markets.
• Manufacturing flow at the operational level looks like
operations management internal to the firm.
However, certain characteristics of the process are designed
to integrate internal operations management with activities
in the supply chain.
Source: Lambert et al. (1998)
15
Supplier Relationship Management
• Supplier relationship management is the process that
defines how a company interacts with its suppliers.
• Long-term partnerships are developed with a small
core group of suppliers.
• The purchasing function develops rapid
communication mechanisms such as EDI and internet
linkages to quickly transfer requirements.
• It is important for the supplier relationships to be winwin. If both parties do not gain from the relationship,
the incentive to be in the relationship is diminished
and it will likely dissolve.
Source: Lambert et al. (1998)
16
Product Development and Comercialization
• Supply chain management includes integrating customers
and suppliers into the product development process in order
to reduce time to market.
• It is critical to have the right people from the internal
functional silos along with key customers and suppliers
involved in the product development and commercialization
process.
Source: Lambert et al. (1998)
17
Returns Management
• While many firms neglect the returns process because
management does not believe it is important, this process
can assist the firm in achieving a sustainable competitive
advantage.
• As part of this sub process, the team develops procedures
for analyzing return rates and tracing the returns back to the
root causes.
Source: Lambert et al. (1998)
18
Implementing Integrated SCM
• The implementation of SCM involves:
– identifying the supply chain members with whom it is critical to link,
– the processes to be linked with each of these key members,
– and the type/level of integration that applies to each process link.
• If the proper coordination mechanisms are not in place
across the various functions, the supply chain processes will
be neither effective nor efficient.
Source: Lambert et al. (1998)
19
Supply Chain Management Framework:
Elements and Key Decisions
What processes
should be linked with
each of these key
supply chain
members?
SUPPLY CHAIN
BUSINESS
PROCESSSES
SUPPLY CHAIN
MANAGEMENT
COMPONENTS
Who are the key
supply chain
members with whom
to link processes?
SUPPLY CHAIN
NETWORK
STRUCTURE
What level of integration and
management should be
applied for each process link?
Source: Lambert et al. (1998)
20
Source: Lambert et al. (1998)
SUPPLIERS
TYPICAL
FUNCTIONAL SILOS
BUSINESS
PROCESSES
MARKETING
R&D
LOGISTICS
PRODUCTION
PURCHASING
FINANCE
CUSTOMER
RELATIONSHIP
MANAGEMENT
Account
Management
Requirement
Definition
Requirements
Definition
Manufacturing
Strategy
Sourcing
Strategy
Customer
Profitability
CUSTOMER
SERVICE
MANAGEMENT
Account
Administration
Technical
Service
Performance
Specifications
Coordinated
Execution
Priority
Assessment
Cost to
Serve
DEMAND
MANAGEMENT
Demand
Planning
Process
Requirements
Forecasting
Capability
Planning
Sourcing
Tradeoff
Analysis
ORDER
FULFILLMENT
Special
Orders
Environmental
Requirements
Network
Planning
Plant
Direct
Selected
Supplier(s)
Distribution
Cost
Packaging
Specifications
Process
Stability
Prioritization
Criteria
Production
Planning
Integrated
Supply
Manufacturing
Cost
SUPPLIER
RELATIONSHIP
MANAGEMENT
Order
Booking
Material
Specifications
Inbound
Flow
Integrated
Planning
Supplier
Management
Materials
Cost
PRODUCT
DEVELOPMENT AND
COMERCIALIZATION
Business
Plan
Product
Design
Movement
Requirements
Process
Specifications
Material
Specification
R&D
Cost
RETURNS
MANAGEMENT
Product
Life Cycle
Product
Design
Reverse
Logistics
ReManufacturing
Material
Specification
Revenue
& Costs
MANUFACTURING
FLOW
MANAGEMENT
INFORMATION ARCHITECTURE, DATA BASE STRATEGY, INFORMATION VISIBILITY
21
CUSTOMERS
Supply Chain Management:
Implementation
EDUCATION | TRAINING | CONSULTING | RESEARCH | DEVELOPMENT
Sekretariat:
Jl. Negla 25 Setiabudi
Bandung 40154
Phone : 022 7000 1090
Mobile : 0821 1515 9595
E-mail : sekretariat@SupplyChainIndonesia.com
Website : www.SupplyChainIndonesia.com
Mailing list : SupplyChainIndonesia@googlegroups.com
LinkedIn : Supply Chain Indonesia
Facebook : Supply Chain Indonesia
22