OBJECTIVES AND OUTLINE

ISYOURSUPPLYCHAINCOMPETITIVE?HOWDOYOUKNOW?,BLAIRRWILLIAMSProfessorandDirector,PolytechnicUniversity.Brooklyn,NewYorkblairrw718-260-3835,OBJECTIVESANDOUTLINE,OBJECTIVE:TOHELPYOUDETERMINEIFYOURCOMPANYHASACOMPETITIVESUPPLYCHAIN.OUTLINE:ELEMENTSOFASUPPLYCHAINSCORMODELANDMETRICSBENCHMARKINGIMPLICATIONSBESTPRACTICESINFORMATIONSOURCES,DEFINITIONOFASUPPLYCHAIN,ASUPPLYCHAINCOVERSTHEFLOWOFMATERIALS,INFORMATIONANDCASHACROSSTHEENTIREENTERPRISESUPPLYCHAINMANAGEMENTISTHEINTEGRATEDPROCESSOFPLANNING,SOURCING,MAKINGANDDELIVERINGPRODUCT,FROMRAWMATERIALTOENDCUSTOMER,ELEMENTS-SUPPLYCHAINMANAGEMENTPLAN-SOURCE-MAKE-DELIVER-MEASURE,SUPPLYCHAININFRASTRUCTURETRANSFEROFINFORMATION,MATERIALSANDCASHDEMANDMANAGEMENTCUSTOMERORDERMANAGEMENTPROCESSFORECASTINGCUSTOMERPARTNERSHIPSSOURCINGSELECTING,QUALIFYING,PARTNERING,MEASURINGANDPROVIDINGFEEDBACKTOKEYSUPPLIERS,ELEMENTSOFSUPPLYCHAINMANAGEMENTPLAN-SOURCE-MAKE-DELIVER,SUPPLYORMANUFACTURINGPROCESSFACTORYSCHEDULINGINVENTORYMANAGEMENTLEADTIMEREDUCTIONLOGISTICALPROCESSTRANSPORTATION,WAREHOUSING,DISTRIBUTION,DELIVERYGLOBALPERFOMANCEMEASUREMENTS-SCOR,SUPPLYCHAINCOUNCIL(SCC),SCCISANINTERNATIONALPROFESSIONALBODYFORSUPPLYCHAINMANAGEMENT(SCM)SYSTEMSANDPRACTICESDEVELOPEDANDENDORSEDTHESCOR(SUPPLYCHAINOPERATIONSREFERENCEMODEL)ASACROSSINDUSTRYSTANDARDFORSCM,SPECIALINDUSTRYGROUPS,AEROSPACEANDDEFENCECOMPUTERS&ELECTRONICSEQUIPMENTPHARMACEUTICALS&CHEMICALSUTILITIES-TELECOMMUNICATIONSRETAIL-CONSUMERPACKAGEDGOODSDEFENSEANDINDUSTRIALSEMICONDUCTORS,SCORMODEL,BUSINESSPROCESSREENINEERINGASISTOTOBEMETRICSBENCHMARKINGIMPLICATIONSBESTPRACTICEANALYSISPROCESSREFERENCEMODELBASEDONBESTINCLASSRESULTSCHARACTERIZEMANAGEMENTPRACTICESIDENTIFYSOFTWARESOLUTIONS,LEVELIMETRICS,DELIVERYPERFORMANCEPERFECTORDERFULFILLMENTPRODUCTIONFLEXIBILITYTOTALSUPPLYCHAINMANAGEMENTCOSTMATERIALACQUISITIONCOSTCASHTOCASHCYCLETIMETOTALINVENTORYDAYSOFSUPPLYASSETTURNS,LEVELIMETRICS,DELIVERYPERFORMANCE-%THEPERCENTAGEOFORDERSTHATAREFULFILLEDONORBEFORETHECUSTOMERSREQUESTEDDATE,LEVELIMETRICS,PERFECTORDERFULFILLMENT-%DELIVEREDCOMPLETEWITHALLITEMSONTHEORDERINTHEQUANTITYREQUESTEDDELIVEREDONTIMETOCUSTOMERSREQUESTDATEDELIVEREDINPERFECTCONDITIONWITHTHECORRECTCONFIGURATIONANDCOMPLETE&ACCURATEDOCUMENTATION,LEVELIMETRICS,PRODUCTIONFLEXIBILITY-DAYSTHENUMBEROFDAYSREQUIREDTOACHIEVEANUNPLANNED,SUSTAINABLE20%INCREASEINPRODUCTION,LEVELIMETRICS,TOTALSUPPLYCHAINMANAGEMENTCOST-$sSUMOFCOSTSOF:ORDERMANAGEMENTMATERIALSACQUISITIONINVENTORYCARRYINGSUPPLYCHAIN-FINANCE,PLANNINGANDMIS,LEVELIMETRICS,MATERIALACQUISITIONCOST-$sSUMOFCOSTSTOMANAGE:COMMODITYMANAGEMENT&PLANNINGSUPPLIERQUALITYENGG.INBOUNDFREIGHT&DUTIESRECEIVINGANDMATERIALSTORAGEINCOMINGINSPECTIONMATERIALPROCESSENGG.&TOOLING,LEVELIMETRICS,CASHTOCASHCYCLETIME-DAYSTHENUMBEROFDAYSBETWEENPAYINGFORRAWMATERIALSANDGETTINGPAIDFORPRODUCT,ASCALCULATEDBY:INVENTORYDAYSOFSUPPLYPLUSDAYSOFSALESOUTSTANDING(RECEIVABLES)MINUSAVERAGEPAYMENTPERIODFORMATERIAL(PAYABLES)CtoCCTIME=INVDAYS+DAYSRECDAYSPAY,LEVELIMETRICS,TOTALINVENTORYDAYSOFSUPPLY(THEAVERAGECOSTOFINVENTORYDIVIDEDBYTHECOSTOFGOODSSOLD)TIMES365TOTALINVENTORYDAYSSUPPLY=INVENTORYx365COGS,LEVELIMETRICS,ASSETTURNSNUMBERTOTALREVENUEDIVIDEDBYTOTALASSETS=TOTALREVENUETOTALASSETS,BENCHMARKINGANDBESTPRACTICES,DELIVERYPERFORMANCETOREQUEST%(8/2000)BICAverMedianPharmasandChemical98.978.491.9Computers82.856.458.8ConsumerPackagedGoods98.472.384.4DefenseandIndustrial98.069.471.7ElectronicEquipment97.467.674.2Semiconductors84.562.064.8Telecommunications94.863.472.6,DELIVERYPERFORMANCETOREQUEST%,RANGE62%TO98%(20to30%pointsperIndustryGroup)IMPLICATIONSMOSTFUNDAMENTALMEASUREMENTOFCUSTOMERSATISFACTIONINDICATESHOWWELLTHESUPPLYCHAINISCONFIGURED&INTEGRATED,DELIVERYPERFORMANCETOREQUEST%,BESTPRACTICESORDERTRACKINGSYSTEMSTOCOMPAREREQUESTEDVSACTUALDATESATLINEITEMLEVELDEMANDVISIBILITYTOSUPPLIERSCONSOLIDATION,PACKINGANDDELIVERYOUTSOURCED.DELIVERYDIRECTLYTOCUSTOMERPOINTOFUSEONLINEATPANDORDERSTATUSAVAILTOCUSTOMER,BENCHMARKINGANDBESTPRACTICES,UPSIDEPRODUCTIONFLEXIBILITY(8/2000)DAYSBICAverMedianPharmasandChemical18.4229.3120Computers9.753.438.5ConsumerPackagedGoods9.4144.860.0DefenseandIndustrial16.796.136.0ElectronicEquipment9.073.360.0Semiconductors30.0188.5175.0Telecommunications9.641.730.0,UPSIDEPRODUCTIONFLEXIBILITYDays,RANGE9to230DAYS(6to10timeswithinIndustryGroup)IMPLICATIONSMEASUREOFCOMPANYSSUPPLYFLEXIBILIYINCREASEINPRODUCTIONWITHOUTCAPITALINVESTMENT,UPSIDEPRODUCTIONFLEXIBILITYDays,BESTPRACTICESEFFECTIVESUPPLIERPARTNERSHIPSSYNCHRONIZINGOPERATIONSACROSSTHECOMPANYTOREDUCERAMPTIMEHIGHPERFORMANCEMANUFACTURINGTECHNIQUESDEMANDPULL,CELLULARMFG,MULTISKILLEDFORCEBUILD/CONFIGURETOORDERMODULARDESIGN,BENCHMARKINGANDBESTPRACTICES,TOTALSUPPLYCHAINMANAGEMENTCOSTS(8/2000)%OFREVENUEBICAverMedianPharmasandChemical5.010.311.2Computers4.39.48.4ConsumerPackageGoods4.111.39.1DefenseandIndustrial3.29.48.9ElectronicEquipment5.111.411.4SemiconductorsTelecommunications3.78.68.2,TOTALSUPPLYCHAINMANAGEMENTCOSTS%OFREVENUE,RANGE3to11%(doublewithinIndustryGroups)IMPLICATIONS1BILLIONDOLLARCOMPANYWILLSAVE$50million(5%)PERYEAR,INSUPPLYCHAINMANAGEMENTCOSTS,OVERTHEIRCOMPETITION,TOTALSUPPLYCHAINMANAGEMENTCOSTS%OFREVENUE,BESTPRACTICESSCMVIEWEDASCRITICALPROCESSANDINTEGRATEDINTOBUSINESSPLANNINGPROCESSSINGLEEXECUTIVEOVERALLRESPONSIBILITYONLINEEDIANDPURCHASINGPAYONRECEIPT(ELIMINATERECONCILIATIONOFINVOICES),BENCHMARKINGANDBESTPRACTICES,MATERIALACQUISITIONCOST1996%OFREVENUEBICAverMedianPharmasandChemical0.51.3Computers&Electronics1.01.7ConsumerPackageGoods1.11.7DefenseandIndustrial1.02.6Semiconductors0.51.3Telecommunications1.01.9Automotive1.83.5,MATERIALACQUISITIONCOST%OFREVENUE,RANGE0.4to3.5%(doubleacrossindustrygroups)IMPLICATIONA1BILLION$CO.SAVES$10MILLION(1%)PERYEARINMATERIALBUYINGCOSTSPURCHASING,QUALITYANDDEVELOPMENT,MATERIALACQUISITIONCOST%OFREVENUE,BESTPRACTICESSUPPLIERPARTNERSHIPSKEYSUPPLIERSONPRODUCTDEVELOPMENTTEAMSCERTIFIEDSUPPLIERSDELIVERATPOINTOFUSECOMMODITYTEAMSFOCUSONSTRATEGICPROCUREMENTISSUES,BENCHMARKINGANDBESTPRACTICES,CASHtoCASHCYCLETIME(8/2000)DAYSBICAverMedianPharmasandChemical31.3120.296.8Computers27.562.151.5ConsumerPackageGoods19.977.063.6DefenseandIndustrial20.870.367.1ElectronicEquipment31.6116.3103.1Semiconductors49.4110.3104.5Telecommunications19.490.585.8,CASHtoCASHCYCLETIME-DAYS,RANGE20to120days(2to4timeswithinIndustryGroups)IMPLICATIONS50%TO75%OFWORKINGCAPITALBECOMESAVAILABLETOCOMPANIESTOINVEST,CASHtoCASHCYCLETIME-DAYS,BESTPRACTICESCASH-RELEASEAGREEMENTFORBLANKETORDERSTHIRDPARTYRECONCILIATIONANDPAYMENTOFRECEIVABLESABILITYTOMAINTAINLOWERINVENTORYLEVELS,BENCHMARKINGANDBESTPRACTICES,INVENTORYDAYSOFSUPPLY(BIC&Median96,Av.98)DAYSBICAverMedianPharmasandChemical102120160Chemical375460Computers313876ConsumerPackagedGoods72DefenseandIndustrial558085ElectronicEquipment3177Semiconductors4976Telecommunications508095,INVENTORYDAYSOFSUPPLY-DAYS,RANGE20to120days(3to4timeswithinIndustryGroups)IMPLICATIONSFORA1BILLION$CO.,WITHCOGSOF500MILLION,DIFFERENCEOF50DAYSIS$100MILLION!SUPPLIERSSELECTEDONTOTALCOSTOFOWNERSHIP(TCO),NOTJUSTPURCHASEPRICE,INVENTORYDAYSOFSUPPLY-DAYS,BESTPRACTICESA