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A description of all supply chain processes (plan, source, make, deliver, and return) and how they relate to each other A view of the interactions between the supply chain processes and other core enterprise processes A description of the applications required to support supply chain processes, including the data and performance indicators needed for process execution and control A description of how the applications will be integrated, including specific data and frequency of communications
FOUR TESTS OF SUPPLY CHAIN ARCHITECTURE
We find that an effective supply chain process architecture satisfies four tests: 1. The test of strategic fit. Your company s overall supply chain strategy must drive the choices you make in your supply chain architecture. Although state-of-the-art practices in supply chain management may be important, your priority should be practices that truly support your basis of competition. 2. The test of end-to-end focus. Your supply chain processes must ensure end-to-end management. This requires having an architecture that provides an end-to-end vision of the supply chain and a set of shared objectives that orchestrates the work of each player in your supply chain.
CHAPTER 2 Core Discipline 2: Develop an End-to-End Process Architecture
3. The simplicity test. A good supply chain architecture is made up of simple, streamlined processes that minimize the complexity that adds cost and reduces manageability. Processes should be clear and easily understood by those who use them. 4. The integrity test. Your architecture must be highly reliable, ensuring coherent and robust links among processes, data, and information systems. Let s look at each of these tests more closely.
Strategic Fit
Some highly touted supply chain practices have been proven to support effective, efficient performance practices such as only entering customer order data once, considering the total cost of ownership when selecting suppliers, and using a cross-functional scorecard to measure supply chain performance. While these best practices may be highly correlated with superior performance, they won t necessarily deliver on your company s supply chain strategy. It s important before deciding how you want to operate to think critically about why you need to operate a certain way. Market leaders are set apart by their deep understanding of the critical supply chain practices at which they must excel those which truly support competitive and brand differentiation. Figure 2-2 shows examples of the critical supply chain practices that enable each It s important before of the primary supply chain strategies that deciding how you we identified in 1. Although any organization may adopt these practices, want to operate to their relative importance is determined by a think critically about company s specific supply chain strategy. As you think of what practices and why you need to processes to make part of your supply chain, consider to what extent they ll drive operate a certain forward your supply chain strategy. Just as way. not all supply chain strategies make sense given the overall business strategy, not all practices are equally important given your supply chain strategy. Amazon, billed as having the Earth s Biggest Selection, provides a good example of how to select business practices that align with supply chain strategy. The company, which sells millions of different products, stocks only those items designated as top sellers; the vast majority of
Strategic Supply Chain Management
F I G U R E 2 2
Aligning supply chain practices with the basis of competition.
Primary Strategy
Critical Supply Chain Practices Design chain / supply chain integration Collaborative innovation with suppliers Dedicated NPI supply chain Integrated factory planning and scheduling Raw materials and manufacturing process standardization Design for manufacturing, procurement, order management Customer collaborative planning Customer segmentation Postponement Product and lot-level traceability Life cycle tracking of sold products
Innovation
Cost
Service
Quality
products are offered through partner companies or purchased from distributors when needed to satisfy a customer order. Since this business model means that Amazon does not have direct control over the delivery schedule for most products, it is not possible to conform to the best practice of giving customers an exact delivery date when they place their orders. Providing a shipment date is easy when the product is in stock: The customer is informed that the product usually ships within 24 hours. Commitments for other products, however, are based on recent actual lead times and are quoted as usually ships in x days, where x is consistent with recent activity. Given this failure on the part of Amazon to perform in a best practice way, how does the company maintain extremely high customer satisfaction ratings For one thing, Amazon allows the customer to check order status at any time after an order has been placed and proactively notifies the customer when each product has been shipped. Amazon also provides a link to the carrier s Web site that allows the customer to track order status and the scheduled delivery date after the product has been shipped. The result Customers benefit from an unparalleled array of products, and Amazon optimizes its inventory investment and keeps supply chain costs low.
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