Integration in the supply chain

THE CONCERN IS

How can we integrate supply

chain : internally, externally
and if possible electronically?
 Integration in the supply chain
• Supply Chain Integration means
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
• Feed Back
• With the objective of providing the maximum value to the
customer at low cost and high speed
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

Purchasing Production Distribution

High productivity of Keep warehousing

Low price
machine and labor operation smooth

Unreliable delivery Post-manufacturing

High batch size
and low quality operation being resisted

Poor available Additional complexity of

distribution customizing products
Inter- Intra Company collaboration
Strategic Collaboration

Information & Decision Flow

Products & Services Flow

Enterprise Enterprise
Information & Knowledge Flow
A B
Financial Flow

END CUSTOMERS
RAW MATERIALS

Products & Services Flow

Information & Knowledge Flow

Financial Flow

Material and Money Flow

 Integration in the supply chain
 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
 Integration in the supply chain

Information
flow in apparel
supply chain
 Efficient consumer response
 Key issue

How can collaboration be extended

1 across the supply chain to focus
on meeting consumer demand?
 Efficient consumer response
 Category management

Category Establish Optimize Optimize Optimize

management infrastructure introductions assortments promotions

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
Efficient consumer response
 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
Category Continuous Enabling
management replenishment technologies
Account Joint inventory Effective
management management information
Demand Cross-dock sharing
management operations Automated
order
Required Multifunctional Continuous
generation
selling teams replenishment
capability Bar-coding
Price list Effective
restructuring logistics and and the use of
Effective and product flows other scanning
customized Quick response
technology
promotions
 Collaborative planning, forecasting and
replenishment
 Key issue

How can collaboration be extended

1 to strategic as to well as
operational levels?
 Collaborative planning, forecasting and
replenishment
 CPFR Model
1. Develop front-end agreement
Planning 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
Forecasting
7. Identify exceptions to order forecast
8. Resolve / collaborate on exception items
9. Generate orders

replenishment
 Seller
Wal-mart’s CPFR Process
FRONT END AGREEMENT
Collaborative
JOINT BUSINESS PLAN Planning

CREATE SALES FORECAST

Collaborative
IDENTIFY buyer and Seller Forecasting
EXCEPTIONS
Goal : Link
Electronically
RESOLVE EXCEPTIONS

Collaborative
CREATE ORDER FORECAST
Replenishment
IDENTIFY EXCEPTIONS

RESOLVE EXCEPTIONS

Buyer GENERATE ORDER

Wal-Mart’s 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-Mart’s 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.
Managing supply chain relationships
 Key issue

How can broader-based

1 relationships be formed between
trading partners in the supply chain?
Managing supply chain relationships
 Creating closer relationships

Arm’s length transaction Partnership

R&D Marketing R&D Marketing

Logistics Operations Logistics Operations
Information Information InformationInformation
system system system system
supplier customer supplier customer

Bow tie Diamond

Managing supply chain relationships
 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
 A framework for managing the
supply chain
 Key issue

What are the management

1 implications of integrating the
supply chain?
 A framework for managing 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
 A framework for managing the
supply chain
 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