Supply Chain Planning

Supply chain planning (SCP) is the

component of supply chain management
(SCM) involved with predicting future
requirements to balance supply and
demand.
SCM is sometimes broken down into the
stages of planning, execution and
shipping. Supply chain planning
and supply chain execution (SCE) are
the two main categories of SCM. SCP
products may include supply chain
modeling, and design, distribution and
supply network planning.
Supply chain planning (SCP) is a
strategy for maintaining a balance
between the supply of and the demand
for goods and services. SCP is one of the
primary elements of supply chain
management, the other being supply
chain execution.
Supply Chain Modeling
There are a variety of supply chain
models, which address both the
upstream and downstream elements of
Supply Chain Management (SCM). The
SCOR (Supply-Chain Operations
Reference) model, developed by a
consortium of industry and the nonprofit Supply Chain Council (now part
of APICS) became the cross-industry de
facto standard defining the scope of
supply chain management. SCOR
measures total supply chain
performance. It is a process reference
model for supply-chain management,
spanning from the supplier's supplier to
the customer's customer. It includes
delivery and order fulfillment
performance, production flexibility,
warranty and returns processing costs,
inventory and asset turns, and other
factors in evaluating the overall
effective performance of a supply chain.

Supply Chain Operations Reference

Supply Chain Operations
Reference (SCOR) model is a
process reference model developed and
endorsed by the Supply Chain Council
as the cross-industry, standard
diagnostic tool for supply chain
management, according to the The
SCOR model describes the business
activities associated with satisfying a
customer's demand, which include plan,
source, make, deliver, and return. Use of
the model includes analyzing the current
state of a company's processes and
goals, quantifying operational
performance, and comparing company
performance to benchmark data. SCOR
has developed a set of metrics for supply
chain performance, and Supply Chain
Council members have formed industry
groups to collect best practices
information that companies can use to
elevate their supply chain models.
Supply Chain Design
Supply chains determine the ability of
the firms included in them to compete in
the marketplace. How supply chains are
designed will affect their ability to
compete. A firm that is attempting to
compete in a market where low cost
determines who gets the business will
have difficulty if it includes high cost
suppliers in its supply chain. The
characteristics of the end-market in
which a firm is competing must be
considered when designing supply
chains.
Supply Chain Design Process
Select a chain. Criteria for selection may
include: What are the largest products or
purchased items in terms of sales dollars
or spend, products/materials/services
that need improvement in cycle or
response time, problem products (any

type problem that affects customer

satisfaction and cost effectiveness),
products/items critical to company
mission or goals.
Form a design team. Include all affected
parties inside and outside your company,
especially other members of the supply
chain such as suppliers, customers, third
party service providers.
Map the chain as a team. Get a common
understanding of what you are working
to improve. The entire chain does not
need to be mapped in detail if you are
focusing only on particular parts of it
but the entire chain should be mapped
generally to assure that all members who
could be affected by changes are
identified.
Determine supply chain performance
criteria. Where or in what activities or
results must the supply chain develop
and maintain a competitive advantage.
Analyze each step of the selected supply
chain. Select best way of performing
that step. Use benchmarking and best
practice studies as references and
sources of improved business methods.
Identify specific measurement criteria
and levels to be used in determining
metrics and levels of performance that
the supply chain must achieve to
compete.
Evaluate the impact of changes from
existing practice needed to perform each
step in the supply chain as a whole.
Reiterate the preceding process until the
combination of practices that best meets
the supply chain performance criteria is
determined.
Just-in-time Delivery
Just-in-time (JIT) is
an inventory strategy companies employ

to increase efficiency and decrease

waste by receiving goods only as they
are needed in the production process,
thereby reducing inventory costs. This
method requires producers to forecast
demand accurately.
This inventory supply system represents
a shift away from the older just-in-case
strategy, in which producers
carried large inventories in case higher
demand had to be met.
A good example would be a car
manufacturer that operates with
very low inventory levels, relying on
its supply chain to deliver the parts it
needs to build cars. The parts needed to
manufacture the cars do not arrive
before or after they are needed; instead,
they arrive just as they are needed.
Just-in-time inventory control has
several advantages over traditional
models. Production runs remain short,
which means manufacturers can move
from one type of product to another very
easily. This method reduces costs by
eliminating warehouse storage needs.
Companies also spend less money
on raw materials because they buy just
enough to make the products and no
more.
Third-party logistics (abbreviated 3PL,
or sometimes TPL)
in logistics and supply chain
management is a company's use of third
party businesses to outsource elements
of the
company's distribution and fulfillment s
ervice.

Supply Chain Sourcing/Sourcing

Strategy

Objectives of this presentation

Be able to:

Discuss the various strategic issues

surrounding sourcing decisions and
identify some of the key factors favoring
one approach over the other.

Insourcing
The use of resources within the firm
to provide products or services

Outsourcing
The use of supply chain partners
to provide products or services

Advantages and Disadvantages of

Insourcing
Advantages

Perform a simple total cost analysis.

Explain what a sourcing strategy is, and
show how portfolio analysis can be used
to identify the appropriate sourcing
strategy for a particular good or service.
Show how multicriteria decision models
can be used to evaluate suppliers, and
interpret the results.
Discuss some of the longer-term trends
in supply management and why they are
important.

Topic to be discuss

The sourcing decision

Sourcing strategies

Supplier evaluation

Focus

Sourcing decisions
High level, often strategic decisions
regarding which products or services
will be provided internally and which
will be provided by external supplychain partners

High degree of control

Ability to control the

entire program

Economies of scale
and/or scope
Disadvantages

Required strategic flexibility

Required high investment

Loss of access to superior products and

services offered by potential suppliers

Advantages and Disadvantages of

Outsourcing
Advantages

High strategic flexibility

Low investment risk

Improved cash flow

Access to state-of-the-art products and

services
Disadvantages

Purchasing discussed in Chapter 11

The activities associated with
identifying needs, locating and selecting
suppliers, negotiating terms, and
following up to ensure supplier
performance

Possibility of choosing a bad supplier

Loss of control over the process and

core technologies

Communication and coordination

challenges

The Sourcing Decision

Hollowing out of the corporation

Total Cost Analysis

A process by which a firm seeks to
identify and quantify all of the major
costs associated with various sourcing
options .

Direct costs
Costs that are tied directly to the level of
operations or supply chain activities

Indirect costs
Costs that are not tied directly to the
level of operations or supply chain
activity

Critical Quadrant
Critical to profitability and operations
Few qualified sources of supply
Large expenditures
Design and quality critical
Complex and/or rigid specification
Strategy

Form partnerships with suppliers

Tactics

Increase role of selected suppliers

Actions

Heavy negotiation
Supplier process management
Prepare contingency plans
Analyze market/competitions
Use functional specifications

Bottleneck Quadrant

Complex specifications requiring

complex manufacturing or service
process
Few alternate productions/sources of
supply
Big impact on operations/maintenance
New technology or untested processes
Strategy

Ensure supply continuity

Tactics

Decrease uniqueness of suppliers

Manage supply

Actions

Widen specification
Increase competition
Develop new suppliers
Medium-term contracts
Attempt competitive bidding

Leverage Quadrant

High expenditures, commodity items

Large marketplace capacity, ample
inventories
Many alternate products and services
Many qualified sources of supply
Market/price sensitive
Strategy

Maximize commercial advantage

Tactics

Concentrate business
Maintain competition
Actions
Promote competitive bidding
Exploit market cycles/trends
Procurement coordination
Use industry standards
Active sourcing

Routine Quadrant
Many alternative products and services
Many sources of supply
Low value, small individual transactions
Everyday use, unspecified items
Anyone could buy it
Strategy

Simplify acquisition process

Tactics
Increase role of systems
Reduce buying effort
Actions
Rationalize supplier base
Automate requisitioning, e.g., EDI,
credit cards
Stockless procurement
Minimize administration costs
Little negotiating

Multicriteria Decision Models in Sourcing

and Purchasing

How do we evaluate alternatives when

criteria include both quantitative
measures (such as costs and on-time
delivery performance) and qualitative
factors (such as management stability
and trustworthiness)?