Making the Right Choices for Supply Chain

Management: How to Develop a Practical Strategy

to Meet Business Objectives

Jonathan A. Morell, Ph.D.

734 623-2520
jmorell@erim.org

3600 Green Court, suite 550

Ann Arbor, MI 48105
http://www.erim.org
 Scope of presentation

How to look at supply Your preferred

chain management method of
requirements analysis
Ÿ business models for
relating to suppliers Ÿ Quality Function
Deployment
Ÿ modeling information
flow to determine Ÿ Critical success
priorities for supply factors
chain management Supply Chain
Ÿ Strategic Value Management Plan
Ÿ assessing business Analysis
process capacity to
support supply chain Ÿ Concept mapping
management
Ÿ etc.
Ÿ assessing IT capacity
to support supply
chain management
Choosing a Supply Chain Management Approach

• Business models for supply chain management

• Your goals for supplier management
– map consequences of information flow
• Demands on your supply chain
– reliability of supply
– predictability of customer demand
• Business process support for supplier management
– adherence to schedules, quality control, forecasting, etc.
• IT support of information requirements
– volume
– complexity
– predictability
 tight
multi-company federation

Supplier management
vendor managed inventory
options require different
levels of coordination
with suppliers just in time, outsource warehousing

bid, negation with known supplier

order from known supplier (non-standard)

order from known supplier (standard item)

spot buy, known supplier

spot buy, open market

loose
Why Do You Want To Manage Your Supply Chain?
more complete,
faster information
accurate information

reduced lead
better fewer rejects
time for
forecasting for wrong item
purchased items

lower premium freight

faster cycle time lower inventory
increased lower transaction costs
capacity
with the less expediting
same
resources fewer unexpected
better on-time delivery
setups

better response to
unexpected demand higher up-time less scrap

Customer orientation Internal efficiency

Demands on Supply Chain
high

few suppliers,
tight relationship,
e.g. JIT, VMI

predictability limited number of Uncertainty

of critical alternate sources, requires more
supplies pre-arranged
purchase flexibility in
arrangements sources of
supply.
spot buy in
open market

low
low predictability of high
customer demand
You + Suppliers: Can Business Process Support
Supplier Management Choices?

• Supplier management options require minimum levels of

business process quality, e.g.
– accurate forecasting
– internal information transfer
– ability to negotiate
– commitment to design, few ECN’s
– accurate requirements assessment
– production quality control
– version control for business and product data
• Ex: uncertain forecasting + poor quality control + unreliable
internal communication = inability to commit to short, tight
delivery schedules.
Can IT Support A Chosen Supply Chain Management
Approach?
high
Management
Automated
challenge to
information handling
minimize this
required for success
complexity

condition
volume

Automated
Human processing
information handling
preferable desirable

low
low predictability of information high
Technology, Business Process Can Ease IT Burden

• Business process examples

– outsource EDI/EC functions
– limit suppliers to EC capable companies
– simplify via BPR, e.g. evaluated receipts settlement
– consolidate buying across divisions
• Technology
– Eforms Õ EDI interface
– EDI Õ browser
– electronic catalogs
– IT infrastructure that makes these functions incremental
changes to existing operations
Set Reasonable Requirements

• Hit anywhere
in the target
Too few Too many
requirements requirements

Cost to implement
Value to user

• Climb the curve

with incremental
improvements
Target region

# of met requirements
cost to implement
value to user