Chapter 8

Integrating the supply

chain
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
Integration in the supply chain
1
How can we integrate
internally, externally and
electronically?
Key issue
WhatisSupplyChainIntegration
thedegreetowhichthefirmcanstrategically
collaboratewiththeirsupplychainpartners
andcollaborativelymanagetheintra-and
inter-organizationprocessestoachievethe
effectiveandefficientflowsof
Productandservices
Information
Money
Decisions

Withtheobjectiveofprovidingthemaximumvalueto
thecustomeratlowcostandhighspeed
Integration in the supply chain
Measures of integration
Access to planning system
Sharing production plans
Joint EDI access / networks
Knowledge of inventory mix / levels
Packaging customization
Delivery frequencies
Common logistical equipment / containers
Common use of third-party logistics
Integration in the supply chain
Internal integration: function to function
Integration in the supply chain
Purchasing Production Distribution
Low price
Unreliable delivery
and low quality
High productivity of
machine and labor
High batch size
Poor available
distribution
Keep warehousing
operation smooth
Post-manufacturing
operation being resisted
Additional complexity of
customizing products
Inter-company collaboration: a manual approach
Integration in the supply chain
StrategicCollaboration
Decision Flow
R
A
W

M
A
T
E
R
I
A
L
S

E
N
D

C
U
S
T
O
M
E
R
S

Information & Knowledge Flow
Products & Services Flow
Financial Flow
Decision Flow
Enterprise
A
Enterprise
B
Information & Knowledge Flow
Products & Services Flow
Financial Flow
Integration in the supply chain
Electronic collaboration
Transactional
The electronic execution of
transaction
Information sharing
The electronic sharing or
exchange of information
Collaboration planning
Strategic, tactical and
operational exchange
Electronic
collaboration
Integration in the supply chain
Information
flow in apparel
supply chain
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
Efficient consumer response
Key issue
1
How can collaboration be extended
across the supply chain to focus
on meeting consumer demand?
Efficient consumer response
Category management
Establish
infrastructure
Optimize
introductions
Optimize
assortments
Optimize
promotions
Integrated
suppliers
Synchronized
production
Continuous
replenishment
Automated
store ordering
Category
management
Product
replenishment
Reliable
operations
Cross-
docking
EDI
EFT
Item coding
and database
maintenance
ABC
Enabling
technologies
C
o
n
t
i
n
u
o
u
s

r
e
p
l
e
n
i
s
h
m
e
n
t

Enabling technologies
Scanning data
Data warehousing
Data mining
The data include
Demand / consumption / sales information
Cash flow
Stocks of finished goods / work in progress
Delivery and output status
Efficient consumer response
Efficient consumer response
Category
management
Continuous
replenishment
Enabling
technologies
Required
capability
Account
management
Demand
management
Multifunctional
selling teams
Price list
restructuring
Effective and
customized
promotions
Joint inventory
management
Cross-dock
operations
Continuous
replenishment
Effective
logistics and
product flows
Quick response
Effective
information
sharing
Automated
order
generation
Bar-coding
and the use of
other scanning
technology
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
Collaborative planning,
forecasting and replenishment
Key issue
1
How can collaboration be extended
to strategic as to well as
operational levels?
CPFR Model
1. Develop front-end agreement
2. Create joint business plans
3. Create individual sales forecasts
4. Identify exceptions to sales forecasts
5. Resolve / collaborate on exception items
6. Create order forecast
7. Identify exceptions to order forecast
8. Resolve / collaborate on exception items
9. Generate orders
Collaborative planning,
forecasting and replenishment
Planning
Forecasting
replenishment
Buyer
Seller
Goal : Link buyer and Seller
Electronically
Wal-marts CPFR Process
GENERATE ORDER
FRONT END AGREEMENT
JOINT BUSINESS PLAN
Collaborative
Planning







CREATE SALES FORECAST

IDENTIFY EXCEPTIONS

RESOLVE EXCEPTIONS
Collaborative
Forecasting
CREATE ORDER FORECAST

IDENTIFY EXCEPTIONS

RESOLVE EXCEPTIONS
Collaborative
Replenishment
Wal-Marts CPFR Program
CPFR has blurred the lines between supplier
and customer
Suppliers buy into their program because they
have to to work with Wal-Mart, but more
importantly, because Wal-Marts Systems
provide increased profits for Wal-Mart and their
suppliers
Wal-Mart teaches their suppliers how to
minimize shipping, inventory and other costs by
showing them their own model.
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
Managing supply chain relationships
Key issue
1
How can broader-based
relationships be formed between
trading partners in the supply chain?
Creating closer relationships
Managing supply chain relationships
Bow tie
R&D
Logistics
Information
system
Marketing
Operations
Arms length transaction
Information
system
Marketing
Operations
Information
system
Partnership
Information
system
R&D
Logistics
Diamond
supplier customer supplier customer
Factors in forming supply chain
relationships
The order winner
The method making sourcing decisions
The nature of electronic collaboration
The attitude to capacity planning
Call-off requirements
Price negotiations
Managing product quality
Managing research and development
The level of pressure
Managing supply chain relationships
Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
A framework for managing
the supply chain
Key issue
1
What are the management
implications of integrating the
supply chain?
A framework for managing
the supply chain
1
Develop a supply
chain strategy
2
Gather supply chain
information
3
Develop effective
partnerships and
alliances
4
Pilot new supply
chain solutions
5
Organize for supply
chain performance
6
Develop measurement
system for supply chain
performance
Develop a supply chain strategy
Customer service requirements
Plant and distribution center network design
Inventory management
Outsourcing and third-party logistics
relationships
Business processes
Organizational design and training
requirements
Performance metrics and goals
A framework for managing
the supply chain
Pilot new supply chain solutions
Successful supply chain improvement including
Involvement of key stakeholders, suppliers,
customers and employees
Selection of scope and environment, focusing on
avoiding risk
Identification of the key questions that the pilot must
answer
A framework for managing
the supply chain
Develop measurement systems for
supply chain performance
On time in full, outbound
On time in full, inbound
Internal defect rates
New product introduction rate
Cost reduction
Stock turns
Order to delivery lead time
Fiscal flexibility
A framework for managing
the supply chain