Lecture 18 19 Supply Chain Integration and Coordination

SUPPLY CHAIN INTEGRATION
Lecture 15TH & 16TH:

1st & 6th December 2021
Dr. Muhammad Moazzam

Assistant Professor Operations and Supply Chain
NUST BUSINESS SCHOOL (NBS)
National University of Sciences & Technology, Islamabad, Pakistan
» Dr. Muhammad Moazzam
House of SCM
Dr. Muhammad Moazzam 2

Governance Structure of VCs (Gereffi et al, 2005)

» Market » Modular » Relational » Captive » Hierarchy
» Integrated
» Customers Firm
End Use
Lead Firm Lead Firm

Lead
Firm
Chain
Value
Price Turn-key Relational

Suppliers Supplier
Materials
Component » Component
and Material
of Explicitand Material » Captive
» Suppliers Degree
Supplier
Coordination
Supplier Suppliers
Degree of Power Asymmetry Dr. Muhammad Moazzam 3
Content
Integration in the supply chain
Efficient consumer response
Strategic Partnership in Supply Chain
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain
Role of IT
●Key issue
How can we integrate internally,

1 externally and electronically?


What is Supply Chain Integration
• The degree to which the firm can strategically collaborate with
their supply chain partners and collaboratively manage the intra-
and inter-organization processes to achieve the effective and
efficient flows of
 Product and services
 Information
 Money
 Decisions
• With the objective of providing the maximum value to the

customer at low cost and high speed
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 3PL

● Direction of integration
● Degree of integration

Rationale for internal integration: conflicting functional objectives

Purchasing Production Distribution
Objective
High productivity of Keep fast warehousing

Low price
machine and labor throughput
Unreliable delivery Post-manufacturing

High batch size operation being resisted
and low quality
Outcome
Poor available Additional complexity of

distribution customizing products


Inter-company collaboration: A manual approach
Strategic Collaboration
Decision Flow
Products & Services Flow

Enterprise Information & Knowledge Flow Enterprise
A Financial Flow B
END CUSTOMERS
⌂ Integrated Products & Services Flow
RAW MATERIALS
processes
Information & Knowledge Flow
⌂ Synchronous
Financial Flow
production
(Heijunka) Decision Flow
e-business terminology

● Electronic collaboration
Transactional
The electronic execution of
transaction
Information sharing Electronic
The electronic sharing or collaboration
exchange of information
Collaboration planning
Strategic, tactical and operational
exchange

Content
Role of IT

What is ECR ?
● ECR is a strategy which aims to remove all useless costs along the whole
supply chain, from the producer through to the final customer.
● Any useless cost is a cost which doesn’t represent an added value for the
customer.

● Category Management
Optimize
Category Establish Optimize Optimize
Product
management infrastructure assortments promotions
introductions
Product Integrated Synchronized Continuous Automated

replenishment suppliers production replenishment store ordering
Reliable Cross-
operations docking
Enabling Item coding

EDI EFT and database ABC
technologies maintenance

Continuous replenishment in the apparel » Dr. Muhammad Moazzam
industry

●Enabling technologies
⌂ Scanning data
⌂ Data warehousing
⌂ Data mining
●The data includes
⌂ Demand / consumption / sales information
⌂ Cash flow
⌂ Stocks of finished goods / work in progress
⌂ Delivery and output status
Content
Strategic relationship in supply chain
Role of IT
Relationship Styles Continuum

Strategic partnerships in the supply chain
● Generally, strategic partnerships are cooperative

relationships that have been characterized as being
based upon (enablers):
⌂ The sharing of information;
⌂ Trust and openness;
⌂ Coordination and planning;
⌂ Mutual benefits and sharing of risks;
⌂ A recognition of mutual interdependence;
⌂ Shared goals;
⌂ Compatibility of corporate philosophies.

Advantages of partnerships
● Within partnerships, savings come in the form of

⌂ Reduced negotiations and drawing up of separate contracts,
⌂ Reduced monitoring of supplier soundness,
⌂ Including supply quality, and
⌂ Increased productivity.
●Shortened lead times and product cycles
●Longer-term investment
●Enhanced commitment and trust

Disadvantages of partnerships
● The inability to price accurately qualitative matters such as

design work;
● The need for organizations to gather substantial information
about potential partners on which to base decisions;
● The risk of exposing sensitive information to competitors;
● Potential opportunism by suppliers on the basis that they are
‘locked in’
● The costs of the customer switching suppliers are likely to be
high.
Content
Role of IT
Collaborative planning, forecasting and » Dr. Muhammad Moazzam
replenishment
CPFR Model
Planning 1. Develop front-end agreement
2. Create joint business plans
Forecasting 3. Create individual sales forecasts

4. Identify exceptions to sales forecasts
5. Resolve / collaborate on exception items
replenishment
6. Create order forecast
7. Identify exceptions to order forecast
8. Resolve / collaborate on exception items
Content
Role of IT
●Creating closer relationships
Arm’s length transaction Partnership
R&D Marketing R&D Marketing

Logistics Operations Logistics Operations
Information Information Information Information
system system system system
supplier customer supplier customer
Bow tie Diamond


Factors in forming supply chain relationships
Factors for analyzing customer–supplier relationships
 What the order winners are: for example, price, product range, technology
advantage, superior product quality.
 How sourcing decisions are made: is it, for example, competitive tender,
auctions, supplier accreditation or sole source?
 The nature of electronic collaboration: is it transactional, information sharing
or collaborative?
 The attitude to capacity planning: is this seen as the supplier’s problem, as
a problem for the buyer (tactical make/buy/additional sources) or as a
shared strategic issue?

Call-off requirements:
 Does the customer alter schedules with no notice,
 Require JIT delivery against specified time windows, or
 Require synchronized deliveries of major subassemblies to the point of
use?
Price negotiations:
 Are price reductions imposed by the buyer resulting in joint continuous
improvement projects, etc.?
Managing product quality:
 Does the customer help the supplier to improve process capability?
 Are aggressive targets (i.e. 50 ppm defects) set by the customer?
 Is the supplier responsible for quality of incoming goods and warranty of the
parts in service?

Managing research and development :

 Does the customer impose new designs and have the supplier followed the
instructions?
 Does the supplier become involved in new product development?
 Is the supplier expected to design and develop the complete product for the
next model?
The level of pressure:
How far does the customer place pressure for improvement on the supplier to
avoid comfort (e.g. 30 per cent price reduction in the next two years)?

Content
Role of IT
●Key issue 1 What are the management implications of

integrating the supply chain?
6
Develop measurement
system for supply
chain performance
4 5
Pilot new supply Organize for supply
chain solutions chain performance
3
1 2
Develop effective
Develop a supply Gather supply chain
partnerships and
chain strategy information
alliances
Content
Role of IT
Role of IT in a Supply Chain
● Information provides the foundation on which supply chain

processes execute transactions and managers make decisions
● Hardware, software, and people throughout a supply chain that
gather, analyze, and execute upon information
1. Information must be accurate
2. Information must be accessible in a timely manner
3. Information must be of the right kind
4. Information must be shared


The Supply Chain Macro Processes

Supplier Relationship Management

SRM: The processes CRM: The processes that take
that take place between place between an enterprise
an enterprise and its and its customers downstream
supplier upstream in the in the supply chain
supply chain

Risk Management in IT
● Installing new systems

⌂ Revised business processes
⌂ Integration
● Problems can shut down the business
⌂ Software problems
⌂ Power outages
⌂ Viruses
● Mitigating strategies
⌂ Install new IT systems in an incremental fashion
⌂ Run duplicate systems to make sure the new system is performing well
⌂ Implement only the level of complexity that is needed

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SUPPLY CHAIN INTEGRATION

Lecture 15TH & 16TH:

Dr. Muhammad Moazzam

Dr. Muhammad Moazzam 2

Governance Structure of VCs (Gereffi et al, 2005)

Lead Firm Lead Firm

Price Turn-key Relational

Efficient consumer response

Strategic Partnership in Supply Chain

Collaborative planning, forecasting and replenishment

Managing supply chain relationships

A framework for managing the supply chain

Integration in the supply chain

How can we integrate internally,

Dr. Muhammad Moazzam 5

Integration in the supply chain

• With the objective of providing the maximum value to the

Integration in the supply chain

Dr. Muhammad Moazzam 7

Integration in the supply chain

Dr. Muhammad Moazzam 8

Integration in the supply chain

Rationale for internal integration: conflicting functional objectives

High productivity of Keep fast warehousing

Unreliable delivery Post-manufacturing

Poor available Additional complexity of

Dr. Muhammad Moazzam 9

Integration in the supply chain

Products & Services Flow

Dr. Muhammad Moazzam 11

Integration in the supply chain

Dr. Muhammad Moazzam 12

Integration in the supply chain

Efficient consumer response

Strategic Partnership in Supply Chain

Collaborative planning, forecasting and replenishment

Managing supply chain relationships

A framework for managing the supply chain

Efficient consumer response

Dr. Muhammad Moazzam 14

Efficient consumer response

Product Integrated Synchronized Continuous Automated

Enabling Item coding

Dr. Muhammad Moazzam 15

Dr. Muhammad Moazzam 16

Efficient consumer response

Efficient consumer response

Strategic relationship in supply chain

Collaborative planning, forecasting and replenishment

Managing supply chain relationships

A framework for managing the supply chain

Relationship Styles Continuum

Dr. Muhammad Moazzam 19

Strategic partnerships in the supply chain

● Generally, strategic partnerships are cooperative

Dr. Muhammad Moazzam 20

● Within partnerships, savings come in the form of

Dr. Muhammad Moazzam 21

● The inability to price accurately qualitative matters such as

Efficient consumer response

Strategic Partnership in Supply Chain

Collaborative planning, forecasting and replenishment