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SupplyChainManagementAcceleratingCostEffectivenessSupplyChainManagementThesupplychainusedtobeasimpleserialprocesswithrawmaterialsslowlymovinginonedirectionthroughmanufacturingproductionandonwardviaadistributionsystemtoretailersandcustomers.Today,thetalkisof"supplynetworks","parallelchains","enhancedconcurrentactivities",and“customercentric”withnewinformationplatformsandtechnologysettocutbothinventoryandlead-timesthroughoutthedeliverypipelinefurther.TopIssuesFacingSCMProfessionalsInarecentquantitativesurvey,SCMprofessionalswereaskedaopen-endedsubjectivequestion,“Whatarethethreebiggestissuesfacingyoupersonallyindevelopingyourlogisticsstrategy?”Source:AMRResearch2000Thetopthreeresponseswere;Cost(21%),SystemsApplications(20%)andIntegration(19%)SCMBenefitsManufacturerDistributors/WholesalersCustomers
SuppliersRetailersMaterialsFlowsInformationFlowsCashFlowsUScompaniesexpecttoreap$3-400Bofsavingsthroughavarietyofbenefits(3–5%ofrevenues)Source:PRTMMoveFromPushToPullManufacturersDistributors/WholesalersCustomerSuppliersRetailersManufacturersDistributors/WholesalersCustomerSuppliersRetailersMakewhatwesell,notsellwhatwemake!MovetoCross-FunctionalBusinessProcessesPurchasingManufacturingDistributionInstall/MaintenanceSalesSourceMakeDeliverInstallSellOrderFulfillmentAvailable-to-PromiseSales&OperationsPlanningDepartmentPerformanceSupplyChainOptimizationSynchronized,SequentialPlanningForecastingDistributionPlanningManufacturingPlanningProcurementPlanningSupplyChainOptimizationSynchronized,ConcurrentPlanningDemandPlanningDistributionPlanningManufacturingPlanningProcurementPlanningPurchasingManufacturingDistributionInstall/MaintenanceSalesCross-FunctionalSupplyChainMetricsProcessPerformanceSourceMakeDeliverInstallSellPerfectOrderProcessLSLUSLLSLUSLLSLUSLLSLUSLLSLUSLSharingandCollaborationManufacturerDistributors/WholesalersSuppliersRetailersSynchronizedProductionSchedulingCollaborativeProductDevelopmentCollaborativeDemandPlanningCollaborativeLogisticsPlanningTransportationservicesDistributioncenterservicesFullValueProcurementObjectiveLowesttotalcostofownershipQualitymeetingcustomerneedsOn-timedeliveryAcceptablesupplyriskProcessefficiencyDemandreductionUnderpinnedbyprocurementinfrastructureexcellencePurchasePriceAcquisitionInstallationMaintenanceDisposalPriceisoftenjustthetipoftheiceberg!StrategicSouringTraditionalProgressiveTacticalEmphasisAcquisitionCostFocusStaffFunctionCostCenterReactiveStrategicEmphasisTotalCostFocusProfitCenterProactiveTacticalStrategicTacticalStrategicEvolvingModelofProcurementLogisticandTransportationLogisticsaccountsfor8-12%ofsales.In1998,itaccountedforover10%oftheUSGDPLogisticisoneofthegluesthatholdsthesupplychaintogether.ThetechniquesthatmostmanufacturersemploytoincreasespeedandreducingcostisoutsourcingAveragecostreductionsfromoutsourcingis32%The3PLmarkethasenjoyedexplosivegrowthoverthepast5years.Most3PLshavereportedannualgrowthrateof25-50%Source:industryweekManufacturingMaterial.....BOMPRTCustomerorderDocumentWorkcenterRoutingetc.ManufacturingmanagersviewefficiencyandflexibilityastwoobjectiveswhichmustbebalancedinordertoarrivethelowesttotalcostWorld-classcompaniesadoptstrategiesandtacticssuchaspullsystem,JITreplenishment,andcycletimereductionsthatenablesacompanytohavelowerlevelsofinventorywhilestilldrivingreductionsinproductionunitcostCompaniesfrequentlyunderestimatethecommitmentrequiredtoachieveaneffectivequalityimprovementwhichresultinoperationcostincreases.StrategicBusinessPlanningForecastingandPlanninghoursdaysweeksmonthsyear+OperationalTacticalStrategicSchedulingRollingForecastDemandPlanningManufacturingPlanningSchedulingDistributionPlanningTransportationOrderPromiseSourceMakeMoveStoreSellTopIssuesFacingSCMProfessionalse-Businessisarelativelylowpriority,cominginsixthofthetopissuesfacingSCMprofessionals.However,thisdoesnotreflecttheimpactthate-BusinesswillhaveonSupplyChainManagementSource:AMRResearch2000e-BusinesswillfundamentallychangeSCMENTERPRISEOPTIMIZATIONProcureProduceProductsManageLogisticsForecastDemandOptimizeNETWORKOPTIMIZATIONAFDGCEBCompanyCompanyCompanyCompanyCompanyCompanye-BusinessIsDrivingaFundamentalTransformationinSCMThelargerthenetworkofcompaniesthegreaterthepowerofthenetworktoreducecostforitsmembersIncreasedleveragewithsuppliersBroadermarketaccessforsuppliersExpandedcommunityandcollaborationopportunitiesGreaterintegrationacrossmarketsupplychainsNetworkEffectEconomiesofScaleThelargertheMeta-MarketthefasteritcanformandlaunchfacilitatetheoperationalexcellentBroadercommunitiestoallocateR&DcostOperationalefficienciesviabackofficesharedservicesDepthofindustryandprocurementknowledgeandresourcesavailabletodevelopsuppliercontractsCompanyTheImpactofe-BusinessonSCMe-Businessaffectsfourbroadcategoriesthatdeterminetheproductionandtransactioncostsofafirm:ThecostofexecutingasaleThecostsassociatedwithprocuringproductioninputsThecostsassociatedwithmakinganddeliveringaproductorserviceThecostassociatedwithlogisticsTheCostofe-BusinessSalesAccessibilityAne-Businesswebsiteisopen24hoursperday,7daysperweek.Abusinessnolongerhastobuildseparatephysicalestablishmentstoattractalargercustomerbase.Avirtualstorefrontalsoallowsane-businesstomanageonestoreinsteadofmultiplestores,thuseliminatingduplicateinventorycosts.TheCostofe-BusinessSalesOrderReworkAnotheraspectofe-Businessisthatitenablesmoreefficientorderconfiguration.Forexample,bothGeneralElectric(GE)andCiscoSystemsreportednearlyone-quarteroftheirpre-Web-siteordershadtobereworkedbecauseoferrors--atotalofmorethan1millionorders,inthecaseofGE.SinceadoptingaWeb-enabledcustomerinterface,Ciscoreportsanerrorrateofonly2percent.ProduceorServiceOutputCriticalCustomerRequirementDefects:ServiceunacceptabletocustomerBATheCostofe-BusinessSalesFundamentalShiftClearly,e-Businessrepresentsafundamentalshiftinhowthesalesprocessisexecutedbyacompany.Asaresult,e-Businesscompelsexistingbusinessestore-examinehowtheyinteractwithcustomers,evenasnewentrantsexploite-Businessestoreachcustomerbasespreviouslythoughtunreachable.LowHighCostofSale“Off-the-Rack”CustomisedValue-AddedofSaleDirectSalesFace-to-facesales$500/salescontactDistributors/VARs$2-300/salescontactTelephonesalesandservice$25persalescontactNohumancontact$1persalescontactResellersTele-channelElectronicChannelsSource:Dr.RowlandMoriarty,CubexCorp.TheCostsAssociatedWithProcuringProductionInputsWeb-basedprocurementofmaintenance,repair,andoperations(MRO)suppliesisexpectedtoreachmorethan$100billionworldwidebytheyear2000.MROcomprisesthosegoodsrequiredtorunacompanythatarenotrawmaterialsusedinthedirectmanufactureofaproductortheprovisionofaservice.SuppliersSuppliersConnectedtoMarketPlaceviaWeborERPBuyersBuyersconnectedtomarketplaceviaE-ProcurementAppB2BMarketPlaceProfitOtherCostsPurchases10010045504547.557.5-5%A5%reductioninpurchasecostcanresultina50%increaseinprofitmargin.+50%TheCostsAssociatedWithProcuringProductionInputsLowertransactioncostscoupledwiththeabilitytoenforcepurchasingpolicyacrosstheenterprisehavebeeninstrumentalindrivingWeb-basedMROprocurement.Twoadditionalfactorshaveacceleratedthetrend.Thefirstfactorisadefensivereactionbyfirmsthatnotethecostsavingsbeingenjoyedbyrivalsswitchingtoane-businessprocurementmode.Thesecond,andpossiblymoreimportantfactoristheinsistencebylargefirmssuchasFord,thattheirsupplierslinkintotheirWeb-basedprocurementsystemsasaconditionofdoingbusinesswiththem.Source:RBWeberCOSTPERPOPOTENTIALCOSTPERPOCURRENTCOSTPERPOTheCostofe-BusinessSupplyChainManagementEventhescopeofMROprocurementpalesbesidethepossibilitiesforreorganizingsupplychainsarounde-business.Ratherthanincreasingproductionandinventoryinadvanceofactualcustomerdemand,e-businessesarelookingtomakeboththeirownsupplychainsandthoseoftheircustomersandsuppliersrespondinrealtimetoactualsales.SupplierManufacturerDistributionRetailerConsumerInformationTheCostofe-BusinessSupplyChainManagementVisibilityoftheentiresupplychainisnecessarysoabusinesscananalysetheinterplaybetweeninteractionssuchasprocuringmaterials,components,andsubassembliesfromvarioussuppliers;shiftingproductionbetweeninstallationsorbusinesspartners;andmovinggoodstothefinalconsumer.Understandingrelationshipsbetweenallplayersinaparticularvaluechainallowsane-businesstoadjusttonewcontingenciesinrealtime.TheTransformationofLogisticse-Businesstransformslogisticsfromsimplypackagingandmovinggoodsandturnsitintoaninformationbusiness.Introducingonlineparcelorderandtrackingviaaproprietarynetworkin1983,FederalExpresstooknearly12yearstosignup50,000customers.In3years,between1995-1998,afterFedExofferedessentiallythesameserviceviatheWeb,thenumberofcustomersroseto1million.FedExestimatesnearly70percentofthe3millionpackagesitprocesseseachdaynowareinitiatedviainteractivenetworks.SupplyChainManagemente-Business
DrivingTransparencyWhenbuildingvisibilityoftheentiresupplychain,thisalsoincludescustomers.e-Businessgivesthecustomeraccesstothesuppliersproductdata,orderinganddeliveryinformation.Thisdrivestransparencywithintheorganizationandforcesthesuppliertodevelopbetterdeliveryandsupportsystems.EnterpriseConnectivityProductLifecycleManagementCustomerManagementSupplierCollaborationDesignPartnersConsumersandChannelsRecommendationsIncludee-businessaspartofyourtopthreesupplychainagendaitems.Putinefforttoarticulateavalueproposition
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