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As market conditions and competition evolve, the supply chain needs to adapt. Today s supply chain process architectures are often incomplete
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Copyright 2004 The Performance Measurement Group, LLC
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CHAPTER 2 Core Discipline 2: Develop an End-to-End Process Architecture
and defined in terms that are not widely understood. This means that the overall impact of new strategies on existing operations is very difficult to assess. Deployment of new strategies is impaired, and potential competitive advantage is lost. In the next generation of process architecture, companies will be able to In the next rapidly translate strategies into new supply chains. These architectures will seamlessly generation of integrate business processes and information systems. And they ll include the key process architecture, performance indicators needed to ensure companies will be value creation and ongoing management. Besides providing a unified view of able to rapidly the internal supply chain, the next genera- translate strategies tion of process architecture will define the integration points among suppliers, cus- into new supply tomers, and partners. Changes will include chains. the practices described in Figure 2-14.
Strategic Supply Chain Management
F I G U R E 2 14
Next-generation practices in process architecture.
Theme Current Dominant Practice Detailed processes (plan, source, make, deliver, return) are described, but the integration between the processes, and between processes and applications, is missing or incomplete. The process architecture content focuses on execution within the organization of the subprocesses, with limited integration of analytics (performance monitoring, reporting, resolution). Manual intervention is used to resolve even routine exceptions (e.g., late supplier delivery, stockouts, etc.) and each exception typically requires days or weeks to identify and resolve. Process architecture content (activities, data, metrics, and applications) may differ by country or region, based on history or organizational control. The focus is the organization, and process architecture structure, vocabulary, and content are unique to each organization. Next-Generation Dominant Practice The process architecture integrates all supply chain process activities (plan, source, make, deliver and return), data, metrics, and applications.
Process Architecture Content
Decision Support
The processes create visibility of a de ned set of events and of actual performance versus plan, using standard metrics, in order to support proactive management, extending as required to suppliers, partners, and customers.
Process Automation
For a de ned set of critical business events, automated business rules, and problem-solving propose solutions for approval by business owners in real-time environments.
Enterprise Scope
Such content (activities, data, metrics, and applications) is standardized to support the work of geographically dispersed virtual teams and to enable the sharing and transfer of work between locations. The process architecture integrates standards such as SCOR (Supply-Chain Operations Reference-model ) and ensures the existence of common processes, data, and metrics with suppliers, partners, and customers. Standards support the management of liabilities, critical resources (inventories, capacities, etc.), and events in the extended supply chain. The process architecture is seen as an asset and is co-managed by business leaders (P&L responsibility) and IT in order to balance business requirements and the advantages of shared process and IT standards.
CrossEnterprise Scope
SCPA (Supply Chain Process Architecture) Ownership
The development and maintenance of the process architecture are led and conducted by IT; seen as an IT issue.
Avon Profile: Calling on Customers Cost-Effectively
What do you do when you have an enormous growth opportunity but can t capitalize on it with your existing supply chain If you re Avon, you embark on a radical transformation a high-risk venture with no guaranteed returns.
Avon is the world s leading direct seller of beauty and related products, with $6.2 billion in annual revenue. In addition to its cosmetics, skin care products, fragrances, and personal care products, the company offers a wide range of gift items, including jewelry, lingerie, and fashion accessories. Avon sells to customers in 145 countries through 3.9 million independent sales representatives, providing an earnings opportunity to women throughout the world. Its Europe region (spanning Europe, the Middle East, and Africa) accounts for more than $1.2 billion of Avon s sales, with operations in 32 countries and more than 1 million sales representatives. With a primary focus on marketing and sales, Avon had neglected its supply chain for a number of years, never viewing it as a strategic lever. This presented acute problems for Avon Europe because the region s strong growth threatened to overwhelm the supply chain organization. Back in the 1980s, Avon Europe had branches in only six countries, each with a separate factory and warehouse supplying the local market. These branches operated independently, with separate information systems, no overall planning, and no shared manufacturing, marketing, or distribution. On a small scale this worked quite well. Each entity could be very responsive to local needs. In the early 1990s, the company began globalizing its key brands and embarked on a strategy to modernize its image through the launch of new products, packaging, and ad campaigns a strategy aimed at more and younger consumers. Avon planned to double sales revenue from $500 million in 1996 to $1 billion in 2001 for the European region as a whole growth fueled in large part by dramatic inroads in central and eastern Europe. But the company realized that replicating its supply chain model in
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