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Strategic Supply Chain Management
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favorites that were purchased every day in predictable volumes. The team closely examined how demand was calculated at each level of the supply chain, starting with the retail store, moving back to the warehouse, and finally moving on to the supplier. Using plan source process elements (see Figure 2-7), the team realized that information on actual sell-through at the store was not used in planning requirements for suppliers and that each store placed orders on the warehouses based on its best view of demand. Using the P 2.1 process element identify, prioritize, and aggregate product requirements the team saw that distribution warehouses that supplied the retail outlets were pulling inventory from suppliers based on historical demand patterns for all products which was fine as long as demand was consistent with historical levels. In actuality, of course, demand patterns for many products were highly variable, particularly in the cases of new products, store-level promotions, and the periodic introduction of seasonal merchandise. These events distorted demand patterns, creating a baseline demand that was appropriate only for a specific time period. This meant undersupply at the
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Using plan source for better performance.
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P2 Plan Source Establish and communicate supply chain plans Production plans Delivery plans P 2.1 Identify, prioritize, and aggregate product requirements P 2.2 Identify, assess, and aggregate product resources Planning data Item master, bill of materials, product routings Reserve resources and determine delivery date Planning decision policies P 2.3 Balance product resources with product requirements P 2.4 Establish sourcing plans
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Sourcing plans Product availability Inventory availability Sourced production on order Planning data
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CHAPTER 2 Core Discipline 2: Develop an End-to-End Process Architecture
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beginning of a promotion and oversupply at the end. The team realized that major changes would be required to planning, including the introduction of collaborative planning with suppliers during promotions and new product introductions. Making the change to the plan process would have a major impact on existing information systems. And gaining full acceptance of the new process architecture would require involvement of a broader team. Following its initial work using SCOR level 3, the company initiated an enterprise project involving both business managers and information systems managers to further develop the new process and information systems architecture. As can be seen by these examples, SCOR provides a structured approach to developing a supply chain architecture. SCOR s top-down approach, which moves progressively into more detail, allows you to see the big picture before moving into greater levels of detail. And the model s hierarchical structure, which breaks down processes into subprocesses and activities, means that companies can see how changes will affect the existing supply chain operations. This helps to clarify risks, needed resources, and implementation timelines. For typical benefits of using SCOR, see Figure 2-8.
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Benefits of using each level of SCOR.
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Supply Chain Strategy Typical Benefits Cross-business unit synergies Agreement on performance priorities Shared vision for supply chain process internally and with customers and suppliers Supply chain simplification Processes with best practices Process-information systems alignment Measurable operational objectives
Supply Chain Scope
SCOR Level 1 Align process architecture with business structure and set priorities SCOR Level 2 Align process architecture with strategy and infrastructure SCOR Level 3 Define detailed process and applications architecture
Roadmap for Change and Implementation
Strategic Supply Chain Management
FIVE PROCESSES FOR END-TO-END SUPPLY CHAIN MANAGEMENT
As you develop your own supply chain process architecture, you will need to ensure that each process is integrated not only with the other supply chain processes but also with other enterprise processes such as technology, product and service development, marketing and sales, customer support, and finance. We ll be discussing a number of principles specific to each process design that will help you to drive best-in-class performance.
Plan
Every supply chain process has inputs and outputs. Plan s input is information on demand, supply, and supply chain resources. This information enables better decision making and guides all supply chain activities related to the execution processes source, make, deliver, and return. Each of the execution processes has a planning element. For example, plan source and plan make outline the raw materials needed, the source of those materials, and the quantities of inventory to be produced. Plan deliver provides the information needed to commit to customer orders. And plan return provides the information needed to schedule returns and replacement orders. Planning-process excellence contributes to superior business performance by ensuring that decisions are timely and well prepared and that their implications are understood, agreed on, and feasible. Planning excellence has five key principles:
Use timely, accurate information. From a demand standpoint, this means information on real-time customer and market demand based on such factors as end-user consumption, downstream inventory levels, economic conditions, and market intelligence. Use data from key customers when possible. From a supply standpoint, it means understanding the critical internal and external resources needed to satisfy demand, such as labor, inventory, manufacturing capacity, suppliers, and warehouses. To develop a full view of needed resources, it is necessary to get information from each of the execution processes source, make, deliver, and return. Since both demand and supply are dynamic, what s accurate today probably won t be tomorrow. This is why timely information is so critical.
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