Advanced SCM

Advanced Supply Chain Management
Value Chain Management

Supply Chain Management
Logistics Management

Surath Pralongsil Surath Pralongsil
December 2009 December 2009
Outline of today
09:00 – 09:15 (15 min) Overview of supply chain management

09:15 – 09:45 (30 min) Strategic supply chain management
09:45 – 11:30 (1hr 45 min) Supply chain simulation (beer game) + Break
11:30 – 12:30 (60 min) Integrated supply chain planning
12:30 – 13:30 (60 min) Lunch
13:30 – 14:00 (30 min) Supply chain collaboration & efficient

consumer response (ECR)
14:00 – 15:30 (1hr 30 min) - Synchronized production/supply
15:30 – 15:45 (15 min) Break
15:45 – 16:00 (15 min) - Vendor-managed inventory (VMI)
16:00 – 16:45 (45 min) IT in supply chain management
16:45 – 17:00 (15 min) Wrap-up
Supply Chain Management / Surath Pralongsil 2
Objective of today
• To understand the concept, process and benefit of SCM in business,

and utilize SCM in his/her own work.
• To be aware of the real applications of SCM in SCCC context and
other industries.
• To be able to work from a holistic point of view (looking at big picture)
• To promote collaboration within and across organization, and
understand supply chain partners' capability

Contents of Supply Chain Management
• Overview of Supply Chain Management • Efficient Consumer Response (ECR)
• Value Management • Continuous Replenishment and
• Customer Value Synchronized Production / Supply
• Value-Based Pricing • Vendor-Managed Inventory (VMI)
• Customer Relationship Management • Strategic Sourcing and Procurement
• Strategic Supply Chain Management • Supplier Relationship Management
• Supply Chain Network Design and • Supply Chain Performance Management
Optimization • Just-in-time
• Integrated Supply Chain Planning • Lean and Six Sigma
• Sales & Operation Planning (S&OP) • Green Supply Chain
• Enabling Technology • Supply Chain Traceability and Security
• Outsourcing • The Future Supply Chain
• Inventory Management Supplementary
• Warehouse Management • Supply-Chain Operations Reference-
• Transport Management model (SCOR)
• International Logistics Management • Supply Chain/Logistics Scorecard
• Reverse Logistics • Supply Chain Simulation: Beer Game
• Supply Chain Costing / Activity-Based • Product Code Classification
Costing / Cost-To-Serve • ABC Analysis
• Supply Chain Collaboration • Best Practice
Overview of Supply Chain Management

Surath Pralongsil
December 2009
Supply Chain
Physical
PhysicalFlow
Flow
Information
InformationFlow
Flowand
andFinancial
FinancialFlow
Flow
Supplier Manufacturer Distributor/Wholesaler Retailer Consumer
Process
Processand
andPeople
People

Supply Chain
All interactions, from order entry through paid invoices, end to end from your
supplier’s supplier to customer’s customer… scope of SCM as SCC determined

Value Chain
• Michael Porter of Harvard university said that “A business is profitable

if the value it creates exceeds the cost of performing the value
activities. To gain a competitive advantage over its rivals, a company
must either perform these activities at a lower cost or perform them in
a way that leads to differentiation and a premium price (more value).”
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
M
AR
SUPPORT
GI
TECHNOLOGY DEVELOPMENT
N
ACTIVITIES
PROCUREMENT
MARKETING
M
INBOUND OPERATIONS OUTBOUND SERVICE
AR
LOGISTICS LOGISTICS & SALES
IN G
PRIMARY ACTIVITES

Value Chain
Focus on how a business creates customer value by examining contributions

of different internal activities to that value
Allow better identification of a firm’s strengths and weaknesses since the

business is viewed as a process
The activities within the value chain are split into two sections:
• Primary activities
These are activities associated with physical creation of the product,
marketing activities, activities involved with the transfer to the buyer & after-
sale support
• Support activities
These activities provide support to the organization as a whole to keep it
functioning & provide the infrastructure of the company

Holcim Value Chain
Supply Demand
Basic Materials Channels End - users Applications and
Processing Transactional Transformational Construction Fields
Cementitious Direct Sales

Materials Ready - mix General Housing
A
Concrete Contractors
p
(cement,
p
mineral Traders
Concrete l
components)
Products i
Commercial /
Self - builders c
Wholesalers Industrial
Masons a
Building
Mortars t
Aggregates
i
Retailers
o
(sand, gravel, n
stone, recycled Asphalt Civil s
Infrastructure
aggregates) Engineering
Direct Sales
10
Supply Chain Management / Surath Pralongsil
Value chain defines the scope, relating to SCCC core
businesses
Supply Demand
Basic Materials Channels Construction

Supplier Processing Transactional Transformational End - users Fields
Energy Direct Sales

Cementitious
- mix
ReadyMix Civil Infrastructure
Materials Ready
Concrete Engineering
Co- (cement, Traders
Processing mineral
Concrete
Concrete
components)
Wholesalers Product Commercial /
Industrial
General
Mineral Retailers Building
Components Mortars Contractors
Modern Trade
Asphalt
Aggregates Self - builders Housing
Direct Sales
Masons
R/M, Supply Product Channel / Distribution End-user Construction

Field
Backward Forward Vertical

Core
Integration Integration Integration
Source: adapted from Holcim Value Chain SCCC-investing business 11

SCG Value Chain
Basic Materials Channels
Supplier Processing Transactional Transformational End - users
SCT
Direct Sales CPAC
- mix Civil
Engineering
• Roof tiles,
SCI Eco Gray Cement • Ceramic floor / wall tile
SCT • Paving Concrete
block
Service White Cement • Light weight concrete
block Sekisui – SCG
• Gymsum board
Industry
Wholesalers
Mineral SCG – Sekisui
Components Tiger
Mortar Sales
Retailers
CPAC Self - builders

Aggregate Cement Thai Asphalt
Refractory Masons
Home mart
R/M, Supply Product Channel / Distribution End-user
Backward Forward
Core
Integration Integration
Source: adapted from Holcim Value Chain 12

Cement flow total market 2006
Producer
Bag 30.1 Mio t Bulk
60% 100% 40%
Transactional Retailer Whole- Agent Direct

saler Agent
sales
channel 38% 48% 20%
20% 5%
Transformational RMX
RMX Dry
channel mortar
26%
26% 1%
Selfbuilder / Contractor CPM

End user Mini-contractor Contractor CPM
65%
65% 18%
18%
17%
Construction Town
Town Single Multi
MultiHigh
HighIndust.
Simple
Simple house
house house Single house
house st.<6 rise Indust. Comm.
Comm.Inst.
Inst. Infrastructure
Infrastructure
field 28% house 20% st.<6 rise 6% 11%
28% 4%
4% 20% 4%
4% 6% 6% 6% 11% 1%1% 20%
20%
13
Value creation* for SCCC’s key stakeholders from 2010 to 2013?
Input factor (cost of all goods,

materials and services purchased)
Depreciation and amortization
Benefit to employees, government,

shareholders and creditors 32%
Benefit to employees
Employee
Benefit to government
Benefit to creditors Dividend
Benefit to shareholders
Tax
Retained in business
*Illustration 14
Value Added
• Refers to the additional value created at a particular stage of

production or through branding and marketing. In modern neo-
classical economics, especially in macroeconomics, it refers to the
contribution of the factors of production, i.e. land, labor and capital
goods, to raising the value of a product and corresponds to the
incomes received by the owners of these factors.
• The enhancement added to a product or service by a company before

the product is offered to customers.

Overview of Supply Chain Management
Supply Chain & Logistics

Surath Pralongsil
December 2009
Logistics Evolution
Journey of SCCC Logistics to
“Logistics Solution Provider”
Solution
Provider
Value
Management 3rd and 4th
Logistics
Supply Chain Value Service
Management Management Provider
Integrated Customer (LSP)
Logistics Synchronize Proposition Application
& Optimize Network Service
Outbound
Distribution
Inbound Supply Provider
Warehouse Planning (ASP)

Transportation Outbound Demand
Dispatching
Inbound Planning
Packing
Outbound Warehouse
Inbound 17
Source: Khun Nopporn Thepsithar, SCCC
Supply Chain and Logistics
• “A position of enduring superiority over competitors in terms of

customer preference may be achieved through logistics.” (Professor
Martin Christopher)
• The prizes in today’s markets go only to those companies which are

capable of providing added value in ever-shortening time scales.”
(Professor Martin Christopher)
• “Nowadays, it’s supply chains that compete with supply chains, not
companies with companies.” (Allan Waller, Price Waterhouse
Coopers)

• the design, planning, execution, control, and monitoring of supply

chain activities with the objective of creating value, building a
competitive infrastructure, leveraging logistics capability,
synchronizing supply with demand and measuring performance.
(Source: APICS)
• “The goal of supply chain management is to link the marketplace, the
distribution network, the manufacturing process and the procurement
activity in such a way that customers are serviced at higher levels but
at lower costs.” (Professor Martin Christopher)
• “the management of upstream & downstream relationships with
suppliers & customers to deliver superior customer value at less cost
to the supply chain as a whole”
• The word “Supply Chain” is not just about supply. It is about both
supply and demand, better called “Integrated Supply Chain
Management”

• Is the means whereby the needs of Customers are satisfied through

the co-ordination of the materials and information flows that extend
from the market place, through the firm and its operations and beyond
that to suppliers. (Professor Martin Christopher)
• Logistics is part of the supply chain process that plans, implements,
and controls the efficient, effective forward and reverse flow and
storage of goods, services, and related information between the point
of origin and the point of consumption in order to meet customers’
requirements. (The Council of Logistics Management)
• Logistics is all about getting the right goods to the right place at the
right time in the right quantity at the right quality at the right price.

Supply Chain Management v.s. Logistics
• Logistics management involves the strategy & operations relating to

the movement of goods within the enterprise & with its immediate
suppliers & customers. Logistics management develops a plan for the
flow of products & information through a business.
• Supply chain management involves managing the relationships

among all members in the supply chain. Supply chain management
aims at coordinating the processes of all supply chain members, both
downstream towards customers & upstream towards suppliers.
Supply chain management is linked together with cross-company
strategies and processes
• A company‘s Logistics strategy needs to be closely aligned with the

supply chain‘s overall strategy.

An Enterprise Integration
PHASES Functional Integration
Purchasing Material Control Production Sales Distribution
Phase 1
Baseline
Phase 2 Material Management Manufacturing Management Logistics

Functional
Integration

Internal
Integration
Phase 4
External Suppliers Customers
Integration Internal Supply Chain

Characteristics of Supply Chain Evolution
Fragmented Integrated Integrated Value Network /
Pyramid Enterprise Supply Chain Virtual Company
Functional Inter-enterprise
integration Cross-functional integration integration Core competency, agility, opportunity
Strategy
Driven by cost and Driven by customer satisfaction Driven by supply chain Driven by change and uncertainty
efficiency optimization
People Subject matter experts Process owners Knowledge workers Knowledge workers with smart agents
Electronic commerce enabled

Independent systems Integrated applications Electronic marketplace enabled
Technology Scaleable cross-platform
Islands of automation Process automation Plug compatible and inter-operable
portable
Functional silos Cross-functional integration Cross-company integration Dynamic, end-to-end integration

Process
Department focused Intra-enterprise focused Supply-Chain focused Opportunity and value-add-focused
Adversarial, mutual Mutual truth and full

Limited co-operation (within an
trust cooperation (extended Need-based, value-add cooperation
Culture enterprise)
I’ll do my job, you do enterprise) What true value does everyone add?
One team
yours One team
Heavy command and Empowered, self-directed Partnership / alliance Virtual / fungible

Structure control teams
Pyramid Flattened pyramid Pipeline Network / Web
We offer semi-customized
We sell products. We sell semi-customized We help our customer (s) to get the
solutions.
What products can we products. best possible solution.
Product / How can we offer best total
make? Which of our products would a What must we do to give the best total
value to a customer segment?
Service Mass-produced bunch of customers buy? solution to this individual customer?
Fully optimized semi-
products in need of a Semi-customized products in Information-rich mass-customized
customized solution in need of
market need of a market segment. solution configured for one customer
a market niche
Supply Chain Management / Surath Pralongsil Source: KPMG Transportation & Distribution 23
Supply chain framework
0. Supply chain configuration
Understand market and network dynamics and configure network with optimal cost and flexibility
3. Production management 2. Forecast and demand management

Translate market requirements into Ensure appropriate supply at low cost
production requirements, and through accurate demand forecasting
manage the resulting constraints and efficient order management
3
2
4 6 1 1. Service-level
4. Supply management
management
Understand cus-
Ensure reliable tomer requirements
supply and inte- 5 and serve them
grate with suppliers accordingly
5. Distribution management 6. Supply chain integration

Ensure reliable logistics Create integrated
and optimal material flow processes to facilitate
in the outbound network information flow supported
by a supply chain focused
organization
7. Supply chain transformation

Ensure sustainability and constant improvement in whole network
Source: McKinsey
24
Internal Supply Chain Management
& Logistics Management Source: Capgemini
Optimisation of Supply Chain Configuration

Strategic
Steering
Resources and investment planning Define Service

Multi product lines service requirements arbitration Specification
Logistics project steering

Information system requirement Quality control
Performance control
Tactical Steering
Supply Chain Justification: Trade off service / Costs

(KPI definition and
Planning
Check compliance with Service Specification result)
Proposal of logistics alternatives (Project)

Simulate Simulate
Simulate
Plan & schedule warehouse space International Cost & Budget
Trucking Plan
production and w orkload Transport Plan control
Contract establishment and follow up
Break down and
Steer, plan and
Steer, plan and consolidate logistical
schedule
Steering of
Operation
Steer, plan and schedule costs

international
schedule warehouse transport Check subcontractor
Deployment transport
operation basing on operation basing invoices
operation basing
warehousing policy on trucking SC deployment result
on transport
policy analysis
policy
Benchmarking
Track & trace
Import
(including Log Book
Execution
and Transfer
Physical
Transport Operation monitoring in line with

export Order Warehouse
KPI definition,
order operations
operational audit)
Invoice Handle
Local International Quality & 3PL Audit
products Claims
Function
Nature &
Type of
Production
Storage Transport Project Check
Sell
Supply Chain Supply Chain Execution Control
Supply Chain Management Distribution Management Import & Export
Supply Chain Management / Surath Pralongsil Logistics Management Flow Management 25

Supply Chain Competence Framework
A. Strategy
B. Planning
C. Plant Operations
D. Distribution
E. Human Resources
A. Strategy
F. Information Technology 1. Supply Chain Strategy Development
2. Make vs Buy / Contract Manufacturing
G. Capital Management 3. Network Design / Optimization /
H. Performance Rationalization
4. Product Configuration / De-proliferation /
Management Complexity Reduction
B. Planning C. Plant Operations D. Distribution

5. Forecasting 9. Production Optimization 12.Transportation
6. Sales & Operation Planning 10.Maintenance Management i. Inbound
7. Inventory Planning 11.QA / QCc ii.Outbound
8. Supply Chain Planning 13.Warehouse Management /
Inventory Management
E. Human Resources F. Information Technology G. Capital Management H. Performance Management

14.Organization Alignment 17.Architecture 18.Fixed Capital Management 19.Integrated Strategic
15.Readiness to Change i. Capital Planning Measurement
16.Professional Development / ii.Capital Project 20.Performance Dashboard
Training / Rewards and Management 21.Continuous Improvement
Recognition
Supply Chain Management / Surath Pralongsil Source: A T Kearney 26

Top Down, Bottom Up
STRATEGIC
Structure,
Costs, Policies
STRATEGIC DIRECTION
TACTICAL
Planning,
Optimization,
Arbitration
TACTICAL PLANNING
Operational
Orders, Commitments,
Asset Tracking
ERP
EXECUTION
Identification
Standardization
Optimization
PHYSICAL

Effective and Efficient Supply Chain
Key factors:
• Understanding end customer needs
• Adopting effective supply chain strategies to meet end customer
needs
• Integration of the members of the supply chain
• Successfully tackling operational issues
• Successfully handling the impact of internationalization on the supply
chain
• Managing the information systems & technology which hold the
supply chain together
• Ensuring value for the customer provided by the supply chain

Strategic Supply Chain Management

Surath Pralongsil
December 2009
Supply Chain Philosophy
Demand Supply
Logistics: Cost and Service Trade-Off

Key Objectives of Supply Chain Management
• Delivery of value
• Responsiveness
• Reliability

Supply Chain Strategy
• a planning activity focused on the long-term decisions of the supply

chain
– The choice of products & services to offer to customers
– The structure of the logistics network & the supply chain
– The capabilities the supply chain will specialize in
– The types of relationship between supplier & customers
• Creating competitive advantage, which is sustainable over a long

period & reliant on systems of capabilities rather than a single
capability
– Opportunities in global markets
– The provision of tailored services for customers
– Rapid communication with customers & suppliers
– The need for time compression strategies in order to cope with shorter
product life cycles

Competitive Advantage in Supply Chain
Management
• Globalization
• Integration
– Internal Integration
– External Integration
– Capability Integration
– Relationships
• Time-based competition
– Responsiveness
– Reliability

Globalization
• Organizations today have the opportunity to be global companies

regarding the world as a potential market or source of supply
• Many companies are finding competitive advantage through catering

to the world market while coordinating dispersed procurement,
manufacturing & logistics activities
• Homogenous marketing concept

– Borderless geography
– No differentiation in language, look, customs, tastes, value etc.
– No time limitation

Going Global
Proactive
• Additional resources
• Taxes
• Lowered costs
• Economies of Scales
• Incentives
• Synergy
• Market extension
• Power and prestige
• Exploitation of firm-specific
advantages
• Protect home market through
offending competitor’s market
Reactive
• Trade barriers
• International customers
• International competitions
• Regulations
Integration
• Supply chain members need to be integrated in terms of their

processes, activities & systems
• Integration is vital for companies operating internationally
• Advantages of integration include improved quality, innovation

sharing, reduced costs, & improved scheduling of production &
delivery
• Levels of integration:
– Internal Integration
– External Integration
– Capability Integration
– Relationships

An Enterprise Integration
PHASES Functional Integration
Purchasing Material Control Production Sales Distribution
Phase 1
Baseline

Functional
Integration

Internal
Integration
Phase 4
External Suppliers Customers
Integration Internal Supply Chain

Internal Integration
• The company’s internal structure

has to be aligned & integrated
• Internal functions must align

along processes that lead to
specific product & service value
• Goals must align to an

overarching corporate strategy
• Communication barriers must be

reduced between activities to
enhance information flow
throughout the organization

External Integration
• External integration can only occur when internal integration &

functional strategies have been aligned
• There must be consistent competitive goals, objectives & criteria

across the supply chain, without conflicting priorities
• Cost reduction at the expense of other supply chain members simply

transfers cost to the end customer, leading to higher prices -
companies have to take into consideration all costs within the supply
chain

Capability Integration
• Under supply chain management each member of the supply chain

realizes that they cannot be the best at every activity & need to rely
on capabilities outside of the organization
• In order to add the most value on the whole supply chain,

organizations must decide which activities & capabilities to invest in &
perform

Relationships
• A key focus of supply chain

management is developing &
understanding cooperation, trust
and the management of
relationships
• Many relationships within supply

chain management are based
on the partnership idea which
involves mutually beneficial
long-term relationships

Type of Relationship in Supply Chain
• Arm’s length
• Long-term relationship
• Partnership
• Third-party / Outsourcing
• Strategic alliance
• Joint venture
• Network organization
• Vertical integration / Acquisition

Time-Based Competition
• Low cost and high quality have now become standards by which
companies can enter and compete in markets; and they are no longer
a guarantee for customer demand
• Time has become a source of competitive advantage within many

industries
• Companies have to focus their supply chain capabilities on:

– Responsiveness
– Reliability

Responsiveness
• The ability to respond to changing demands is called agility
• Agility means meeting customer demands quickly so that customers

do not turn to substitutes from competitors
• In order to provide time compression benefits to customers,

companies need to posses the following skills:
– New product development and introduction competencies
– Cross functional development team abilities
– Appropriate & timely feedback from customers
– Lead time management

Product Life Cycle
Saturation
Decline
Maturity
Growth
Sales
Introduction
Time

Reliability
• To provide reliability at times of uncertainty in demand, safety stocks

were carried by companies
• Traditionally trade-offs were perceived as existing between providing

high quality, low cost & quick delivery of products
• Successful supply chains can now deliver rapidly at low cost with high
quality. This reliability comes from reducing inventory levels as well
as reducing the need for quality detection throughout the supply chain

Different Supply Chain Characteristics in Each
Industry
Supplier R/M store Manufacturing Finished goods store Distribution Centre Customer
er
er
ord
k
r
ord
ck
r
rde
toc
rde
sto
to
oo
os
r to
oo
ble
to
t
t
ee
yt
ke
ke
ip
em
g in
bu
ma
ma
sh
ass
en

Lean v.s. Agile Supply Chain

Surath Pralongsil
December 2009
Lean Philosophy
• The lean philosophy is based on eliminating all waste from the

supply chain
• Thus, seven types of waste have been identified as detrimental for

the supply chain:
1. Overproduction
2. Waiting
3. Transporting
4. Inappropriate processing
5. Unnecessary inventory
6. Unnecessary motions
7. Defects

Inventory Hiding Underlying Problems
Inventory
Inventory
Restricted Quality Inadequate

Information Problems Processes
Flow

Lean v.s. Agile Supply Chain
• Lean (efficient) supply chains using JIT work when:

– Demand is relatively stable & predictable
– Product variety is low
– Price & quality are key to advantages in the market place
• Agile (responsive) supply chains :

– Are characterized by very flexible structures, production capabilities &
people within each part of the supply chain
– Focus on responsiveness over waste elimination
– Work best when customer service & responsiveness lead to
competitive advantage

Push Strategies
• Push strategies means working to long-term forecasts & estimating

the number of products being produced
– Each company throughout the supply chain has its own forecast
– Forecasts are not aligned with suppliers or customers
– Long term forecasts are difficult to predict with many variables disrupting
the forecast
– Limited forecasting ability results in build up of inventory

Pull Strategies
• Pull strategies mean that there is no production until the customer has
signaled demand by ordering a product or service
Advantages:
– No inventory costs as the product is made as soon as the order is
received
– Information flow throughout the supply chain
– Collaboration between supply chain members
Disadvantages:
– Smoothing demand is difficult
– Time taken to build final product or service might be longer as the supply
chain has to make the order

Supply Chain of PC, with Postponement

Positioning of Decoupling Point
driven by order
driven by forecast

Postponement
• Postponement or ‘push-pull‘
strategies aim at preventing the
disadvantages of both push & pull
strategies
• Under postponement, certain parts

of the supply chain are undertaking
a push strategy while other parts
perform a pull strategy:
– Upstream suppliers provide
commodity parts & components
using a push strategy as demand is
smoother & more predictable
– Downstream suppliers employ a pull
strategy & do not customize
products & services until an order
from the final customer has been
made

Determining the decoupling point in the supply
chain from PUSH to PULL - factors
PUSH & PULL
? ? ? ? ?
• Demand change & forecast reliability (“all we know about the forecast
is that it will be wrong”)
• Required product configurations & variability
• Required customer response time (balancing capacity with inventory)

Where in the supply chain and how much inventory
to keep?
? ? ? ? ?
Materials Component Assembler Storage Retailer

suppliers manufacturer
•Cost
•Flexibility
•Service level
•Response time
Postponement & its impact on reducing variety in
inventory
Materials in
Variety
Pipeline
Postponement
(delaying
customisation)
Finished goods out
A = B
Advantage of Supply Chain Management

Surath Pralongsil
December 2009
Advantage of Supply Chain Management
• Implementing supply chain management provides the

following advantages:
– Match demand and supply
– Reduced cost
– Improved quality and service
– Value

Key Performance Objectives
• Long term supply chain efficiency and success rely on performance

advantages which other supply chains will not have
• These performance objectives include:

– Cost
– Quality
– Flexibility
– Speed
– Reliability / Dependability
– etc.

Cost Reduction
• The reduction of total cost of Ownership costs include:

ownership is key to cost • Processing inventory
advantage • Repair
• Maintenance
• Total cost of ownership • Warranty
measures include both • Training
ownership & post-ownership • Operating
costs • Inventory carrying
• Contract administration
• Logistics cost advantages • Downtime cost of operating
include: equipment
– Efficient use of capacity
– Reduction in inventory levels Post-Ownership costs:
– Faster & more reliable • Disposal or environmental
information exchange consequences of product or
service

Quality and Service Level Improvements
• Quality is the most visible aspect of the supply chain
• The quality objective is the foundation for the other objectives & is
considered necessary just to compete
• Quality affects other objectives, such as:

– Cost
– Flexibility
– Speed
– Reliability / Dependability

Flexibility Enhancement
• The survival of the supply chain is dependent on its ability to meet the
changing needs of customers & to adapt to uncertain market
conditions
• Flexibility is essential in turbulent markets
• A company can focus on four possible types of flexibility:

– Product (variety) flexibility
– Mix flexibility
– Volume flexibility
– Delivery flexibility

Speed Increase
• The speed objective is similar to the time concept
• Speed of delivery involves:

– The production of goods & services as fast as possible
– The delivery to the end-customer quicker than competitors
=
12
9 3
6

Reliability
• Reliability means being able to tell customers reliably

when their product or service will be delivered
• Reliability refers to:

– Dependability of timetables
– On time deliveries
– On-Time In-Full (OTIF)

Value Advantage
• Differentiation can be achieved by more advanced or reliable

technology and/or tailored services to meet customer needs
• Customers are buying not just a product but the benefits of the
product:
– Intangible & psychological benefits
– Tangible benefits based on superior performance
• The logistics value advantage includes:

– Provision of tailored logistics service
– Responsiveness to the customer
– Reliability of the service to deliver to expectations

Supply Chain Simulation
Beer Game

Surath Pralongsil
December 2009
Beer Game
3 2
Order Order
Distributor /
Wholesaler Delivery Delivery
Consumer
Retailer
Order Delivery
4 5
Order Order
Delivery Delivery
Resources
Manufacturer Supplier
Reduce
Reduce
Reducing inventory Enhan
Enhance
ce
Cost
Cost
Matching merchandise
operating costs Reven ue
Revenue with consumer demands
• Competing among each supply chain to be the most efficient supply chain, which means the lowest
total supply chain cost.

Rule
• Inventory at the beginning = 10 unoits

• No talking
• No information sharing
• Cost
– Inventory carrying cost: 1 THB/unit/week
– Back order: 2 THB/unit/week

Bullwhip Effect (Forrester Effect)

Surath Pralongsil
December 2009
What Management Wants...
Quantity
Production
Production Demand
Demand
Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Time

What Management Gets...
Quantity
Demand
Demand
Production
Production
Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Time

Increasing Order Variability up the Supply Chain
Consump
Suppliers Manufacturers Distributors Retailers Consumers
tion

Bullwhip Effect (Forrester Effect)
Supplier Manufacturer DISTRIBUTOR RETAILER CONSUMERS
GOODS
ORDERS
ORDERS
2. Orders from
retailers to 3. Orders from
distributors distributors to 4. Orders
manufacturer from manufacturer
1. Increase of 10%
in orders from to supplier
consumers to
retailers
TIME

ITC M11:U2:02.4-2
Explaining the Forrester effect
Forrester showed how this lagged or delayed response leads to

an amplification in response magnitude, resulting in supply chain
instability and increased inventory levels.
ORDERS Lagged (delayed) response

Amplification of response
System instability
TIME
ITC M11:U2:2.4-3
Bullwhip Effect
Manufacturer Distributor Wholesaler Retailer Customer

Collaboration in Supply Chain

Collaborative Planning, Forecasting & Replenishment
Joint Business Planning
Ge st
n a
Retailer er a
te o r ec Manufacturer
f
Dr joi
n jo int
ive tf e RP
ec Common Event e
re p or ra t M
as e
len t Calendar Gen D riv
ish
me
Retailer Forecast Drivers nt Manufacturer Forecast Drivers
• In stock position • Capacity
• Fill Rate • Order Lead time
• Consumer Demand • Consumer Behaviour
• Price Changes • Product Availability
• Growth Plans Joint Forecast • Promotions
• Distribution Channels • Raw material supply

Supply Chain Manager

Integrated Supply Chain Planning

Surath Pralongsil
December 2009
Purchase Order Purchase Order Purchase Order Purchase Order Procurement
C1 C2 C3 C4 C5 C6 C7 C8
Sub-Assembly Sub-Assembly Sub-Assembly Sub-Assembly MRP
Assembly Assembly
Production MPS
National DC
Regional DC Regional DC DRP
Retail Outlet Retail Outlet Retail Outlet Retail Outlet
Demand Demand Demand Demand Demand Planning
Supply Chain Management / Surath Pralongsil Note: Inventory is to be taken into account in each step. 83
Supply Chain Planning Process Framework
Customer
Customer Executional Operational Tactical Strategic
Marketing Order Management Demand Planning Business Plan

Marketing
&&Sales
Sales Inventory/
Inventory
Warehouse
Deployment Distribution
Management
Requirement
Logistics Shipment Transport Planning
Logistics
Management Planning
Detailed Master Capacity Supply Chain
Production Production Planning and Network
Production
Manufacturing Scheduling Scheduling Sourcing Design
Manufacturing Activity
Control
Material Requirement Planning
Procurement Procurement
Procurement
Immediate - Hour Day - Week Week - Month Quarter - Year
Suppliers
Suppliers

Evolution of enterprise resource management (ERM)
and manufacturing planning & control systems
ECR
Route Planning
TMS
ERP SCM/APS
WMS
MRP II / JIT DRP II
MRP I DRP I

• Sales & Operations Planning (Demand & Supply

Planning)
• Demand Planning
• Distribution Requirement Planning (DRP)
• Distribution Resource Planning
(DRP II)
• Material Requirement Planning (MRP)
• Manufacturing Resource Planning (MRP II)
• Master Production Schedule (MPS)
• Detailed Production Schedule (DPS)

Sales & Operations Planning
(S&OP)

Surath Pralongsil
December 2009
Sales & Operations Planning (S&OP)
• Sales and Operations Planning (S&OP) is core to supply chain

performance
• Collaborative S&OP is the way forward and the technologies are in
place to make it a reality
• Analysis & understanding of customers, suppliers and inventories are
essential to develop a meaningful and workable Sales & Operations
Plan
• Each step on the route to c-S&OP delivers measurable benefits
• In order to arrive at meaningful plans powerful constraint-based
planning tools are required
• Effective and appropriate supply chain planning software is essential
for effective c-S&OP

Sales & Operations Planning (S&OP)
Strategic
StrategicPlanning
Planning
Business
BusinessPlanning
Planning
VOLUME
VOLUME
Forecast
Forecast&&Demand
Sales
Sales & OperationsPlanning
& Operations Planning
CAPACITY
Sales
SalesPlan Operations
OperationsPlan
CAPACITYPLANNING
Plan Plan
MIX
DemandManagement
DEMAND MIX SUPPLIER

Master Scheduling
Master Scheduling
PLANNING
Management
Detailed
DetailedPlanning
Planning&&
Execution
ExecutionSystem:
System:MRP,
MRP,
DRP,
DRP,Plant
PlantScheduling,
Scheduling,
Supplier Scheduling
Supplier Scheduling
EXECUTION
S&OP is placed between strategic and detailed planning and
execution
Focus
Horizon
• Capital investments
• Long term alliance/commitments
• Vertical integration benefits
1-5 years
planning
Long • Budgeting/definition of targets for sales and

term production
planning
(strategic) • Strategic operational decisions regarding
S&OP product swaps, capacity outsourcing, etc.
1 - 12 month
• Mid-term demand plan

planning
Sales &
operations
• Mid-term rough cut capacity, inventory,
and material plan
planning
• Mid-term feed stock supply plan and
replenishment plan
1-4 weeks
planning
Operational Planning • Short-term capacity and material planning

(Detailed Scheduling) • Adjustment of mid-term plan as per order
portfolio and short-term disturbances
• Efficient implementation and management

Fulfillment of day-to-day business
Execution
• Order fulfillment
Supply Production Customer

logistics logistics logistics
Source: McKinsey
90
S&OP process creates a cross-functional platform for internal
collaboration on an ongoing basis
From . . . . . . to
Traditional siloed and fragmented functional planning Cross-functional integrated planning
Strategic Strategic
business planning business planning
Demand Production Supply Distribution Production Supply Distribution

manage- manage- manage- manage- Demand
manage- manage- manage-
ment ment ment ment management
ment ment ment
Detailed Order Shortage Detailed Order Shortage

scheduling fulfillment allocation scheduling fulfillment allocation
• Low responsiveness to demand changes • Better responsiveness to demand changes

• High inventory levels to account for internal inefficiencies • Lower inventory levels due to reduced internal
• Volume-based mentality inefficiencies
• Sales vs. production dispute • Value-driven decision making
• Firefighting and short-term view • Collaborative process across functions
• Lack of clear accountability and ownership • Proactive planning for business disturbances
• Data issues and lack of results • Clear accountability and ownership of decisions
• Full transparency and common set of data
High cost, low service Low cost high service, enabler for growth
Source: McKinsey
91
A typical monthly S&OP calendar follows 4 generic phases in a EXAMPLE
repetitive sequence - however details may vary between industries
Week 1 Week 2 Week 3 Week 4
Data consolidation, Adjustments,
Premeeting sales and
regular update, Monthly S&OP meetings modifications and
operations agreements
and maintenance decision implementation
Demand Planning • Demand / Supply balancing • Review KPIs • Implementation of decisions

• Creation of unconstrained taken at cross functional
forecast • Rough cut capacity planning by • Evaluate escalated meetings
• Updating current production and generation of demand / supply gaps
order portfolio capacity constrained and potential resolution • Communication of decisions
Inventory Planning consensus demand, scenarios based on and follow-up
• Regional inventory level procurement and financial and strategic
monitoring and updates replenishment plans impact and make
Production Planning resource allocation
• Evaluation of available • Identification of unresolved decisions
capacity and potential demand and supply gaps and
constraints escalation to S&OP committee
Overall
• Master data maintenance • Development of scenarios /
and changes options as an input to S&OP
decision meeting
Function specific Problem and business specific
Source: McKinsey
92
Key Performance Indicators are an essential tool to increase CLIENT EXAMPLE
the level of accountability and support the S&OP process
Concentrate Formula- Filling and Distribu-

Sales
production tion packaging tion
Service Customer service level

• Order-line Fill Rate
• Stock out
Cost Inventory level KPI performance

dialogues
conducted at 3
Scrap/Accruals levels
• Executive level
Efficiency/ Plan adherence Forecast accuracy • S&OP meetings
performance • Vs. annual supply budget (as of 2008) • Vs. changes • Site / Pre-
• Vs. 3 month frozen period • Vs. actual sales meetings
Lead time, e.g.

• Product release lead time at internal sites
• Product lead time at external mfg site
93
Typical frequency of S&OP by industry Quarterly or less
S&OP frequency by industry in percent Monthly
Weekly
Daily
Pharma
Paper/lumber/timber
Mining/oil/gas
Industrial equipment
Food/beverage
CPG
Consumer electronics
Consumer durable goods
Chemicals
Automotive
Source: Aberdeen Group, July 2006
94
S&OP is traditionally done outside MRP II

SCO System make Collaborative S&OP happening in
reality

S&OP Process Map

Sales & Operations Planning Processes (S&OP)
Key to Effective Supply Chain Optimization
Sales and Operations Planning, S&OP, supports the notion that making good
decisions all of the time is preferable to making outstanding decisions some of
the time. Tom Wallace (MRP II: Making it happen) defines S&OP as follows:
– Sales & Operations Planning (S&OP) is a business process that helps companies
keep demand and supply in balance.
– S&OP is cross functional… including the executive in charge of the business unit
– Used properly S&OP enables the company’s managers to view the business
holistically and gives them a window into the future.
The processes involved in S&OP lead to one common plan for the business that
is achievable as it takes into account demand, available capacity and business
constraints:
– Input: customer demands, forecasts, draft Master Schedule, replenishment plan,
projected inventory plan & supply constraints
– Output: agreed Master Schedule, replenishment plans, shipping plans
In order for this to happen there needs to be an agreement on priorities and

objectives for the whole business. One plan is developed on-line, collaboratively,
including key suppliers and customers, and signed off in a formal S&OP meeting
attended by representatives of all internal stakeholders, i.e. Sales, Marketing,
Logistics, Manufacturing, Purchasing, Finance, Management.

Integrated S&OP Process

Demand Planning

Surath Pralongsil
December 2009
Acronym
• Demand management
• Demand planning
• Demand plan
• Real demand
• Enriched demand plan
• Sales forecast
• Sales target
• Sales plan
• Budget
• Financial plan
• Operational plan

Why do we need Demand Plan / Forecast?
P-Time = Process Lead Time
Supply of Raw Manufacturing

Warehouse &
& Packaging Packaging & Retailer
Distribution
Materials Release
Make-to-order
Assembly / Packaging-to-order
Demand Plan is used to prepare stock Make-to-stock
Delivery Lead Time (to react to demand)

Demand
• Dependent Demand vs Independent Demand

• Only demand plan of independent demand is required.
• Total number of table X 4 legs = Total number of legs
Remark:
• Performance measurement: Demand Plan Accuracy and Bias
• Consistent positive or negative bias demonstrates error pattern
Forecast helps to identify gap against Budget
01808 xxxx
Gap
Budget vs Act/For
90,000
80,000
Budget
70,000
Act. & For
60,000
50,000
CASES
40,000
30,000
20,000
10,000
-
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

How to Complete the Forecasting Horizon...
The 3-Component Model: Baseline, Impactors, Uplifts
Large, Planned Large,
Historical Exceptional Exceptional
Demand Events Events
Planned
Past Events Events Uplifts
Uplifts
Volume
Projected
Baseline
?
Baseline

Months 105
Forecast Techniques
• Qualitative
– Based on intuition and expert opinion
– In many cases, bottom up.
• Quantitative
– Statistical forecasting
Remark:
• Forecast is always wrong
• More detail, higher inaccuracy
• Further timeline, higher inaccuracy

Demand Pattern
1 Trends:
a) b) c)
PAST FUTURE PAST FUTURE PAST FUTURE
2. Seasonality 3. Random Variation
PAST FUTURE PAST FUTURE
4. Cyclical Variation
To Counter Forecasting Error
• Customer Relationship Management (CRM)

• Supply chain visibility
• Vendor-Managed Inventory (VMI)
• Variety reduction
• Re-design supply network e.g. cross-docking operation
• Postponement (Push-Pull)

Distribution Requirement Planning (DRP)

Distribution Resource Planning (DRP II)

Surath Pralongsil
December 2009
Multi-Level Distribution
National
NationalDC
DC
Regional
RegionalDC
DC Regional
RegionalDC
DC
Local
LocalW/H
W/H Local
LocalW/H
W/H Local
LocalW/H
W/H Local
LocalW/H
W/H
Dealer
Dealer Dealer
Dealer Dealer
Dealer Dealer
Dealer Dealer
Dealer Dealer
Dealer Dealer
Dealer Dealer
Dealer

Impact of Multi-Echelons

DRP is aimed at improving the management of finished product

inventory & controlling the transport of goods in multi-level distribution
supply chains
• DRP is a simulation system that models all expected activities

involved in shipping goods through distribution networks over a
defined planning time horizon
• DRP is driven by a demand forecast for each product

Time-bucket matrix display
Lead Time: 1 week Delivery

Order Quantity: 500 cancelled
Time Horizon: 8 Weeks
Past Week
Min. Safety Stock: 250
Max. Stock Limit: 600 Due
1 2 3 4 5 6 7 8
Forecast Demand 200 210 220 200 180 200 210 160
Shipments on Order (in transit) 500 500 500 500 500
Planned Shipment Quantity 500 500 500 500
Received Shipment Quantity 500 500 500 500

ALERT
Projected Stock on Hand 195 495 285 565 365 185 485 775 615
Delayed Over
receipt limit
ITC M11:U2:2.5-25
Inventory Deployment
National
NationalDC
DC
Regional
RegionalDC
DC Regional
RegionalDC
DC E
S A G
S
Local
LocalW/H
W/H E Local W/H
Local W/H Local
LocalW/H
W/H RT Local
LocalW/H
W/H
E XC HO
S
Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet
Forecast > Actual Demand Forecast < Actual Demand
• How do we deploy the inventory along the distribution network?

• What if actual demand does not follow the forecast?

Re-Deployment
National
NationalDC
DC
Regional
RegionalDC
DC Regional
RegionalDC
DC
Local
LocalW/H
W/H Local
LocalW/H
W/H Local
LocalW/H
W/H Local
LocalW/H
W/H
Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet Outlet
Outlet
EXCESS SHORTAGE
• Need to concern about the distribution cost of re-deployment

• Cross-docking is one way to avoid this situation, but lead-time will be
stretched
Cross-Docking
• …is a distribution system in which merchandise received at the warehouse or

distribution centre is not put away, but immediately turned around for
shipment to retail stores
Store
A
Store
B
Store
Z
Shipping
Cross-Docking Full
Platform Pallets
Single
Product
Plant Plant Plant

1 2 N Receiving

Distribution Resource Planning (DRP II)
The extension of distribution requirements

planning into the planning of the key resources
contained in a distribution system: warehouse
space, workforce, money, trucks, freight cars, etc.
APICS Dictionary, 9th ed., 1998.

Material Requirement Planning (MRP)

Surath Pralongsil
December 2009
Material Requirement Planning
• Are calculated based on the Bill-of-Materials (BOM)

• Is driven by MPS to make the end items and drive to Shop-floor
control and Purchasing
Objectives:
• To determine the materials required
• What is required
• How much is required Table 100
• When it is required
• To establish and maintain priorities
Base 200 Top 025
Leg Bolts
Legs 206 Frame 280
216
Supply Chain Management / Surath Pralongsil Source: APICS 119

Materials requirements planning - closing the
loop
Master
Production
Schedule
Operational capacity
constraints (e.g., machine,
Inventory labour & lead-times)
records
Materials
requirements
Bill of plan
materials
Purchase Materials Production

orders movements orders
ITC M11:U2:2.5-6
Bill of Materials (BOM)
PRODUCT PRODUCT
02 03
1 Off 1 Off 2 Off 1 Off 2 Off

SUB-ASSEMBLY SUB-ASSEMBLY
12 13
4 Off 3 Off 3 Off 3 Off 2 Off 2 Off

PART PART PART PART PART PART PART PART PART
20 29 28 22 20 21 22 27 29
EXAMPLE - CALCULATION OF
REQUIREMENT FOR PART 022

ITC M11:U2:2.5-11
MRP the need for accurate inventory records
• BOM must be very close to 100% accurate

Inventory item master file - source for BOM
• Stock records better than 95% accurate

Inventory transaction file - receipts and issues
Inventory location file - storage locations of raw
materials, finished goods, WIP and workshop floor holding
areas

Supply Chain Collaboration
Efficient Consumer Response (ECR)

Surath Pralongsil
December 2009
Background of ECR
Spain
P LV S V LTR A
United
Sweden Kingdom (UK)
Adoption of ECR initiative

Korea
throughout America, Europe Greece Hong Kong
and more recently Asia

Canada France Singapore
Denmark Portugal Philippines China
Germany Switzerland Thailand Malaysia
European
USA Italy Union (EU) Australia Finland Taiwan Japan
1992/1993 1993 1994 1995 1996 1997 1998/1999

ECR Overview
"WORKING
TOGETHER TO
FULFIL CONSUMER
WISHES BETTER,
FASTER AND AT
LESS COST"

Scope The ECR Thailand project focuses on the Fast Moving Consumers Goods
(FMCG) that are sold through modern retail stores (the Modern Trade
Channel), although future ECR initiatives will include the Traditional Trade
Channel.
Product Groups Study Areas

Dry Grocery Demand Management Enabling Technologies
Food Consumer Optimize Electronic Data Electronic Funds
Value Creation Assortments Interchange(EDI) Transfer (EFT)
Soft Drinks
General Merchandise Optimize Optimize Item Coding and Activity Based
Promotions Introductions Database Mgmt Costing (ABC)
Retail Formats
Supermarkets Supply Management Integrators
Convenience Stores Synchronized Synchronized Collaborative Planning
Supply Production Forecasting and Replenishment
Department Stores Continuous Automated
Replenishment Store Ordering
E-Business
Specialist Stores Reliable Cross E-Procurement, E-Supply Chain
Operations Docking

ECR Improvement Concepts
Demand Management
Establish Strategy Optimise Product Optimise Optimise
and Capabilities Introductions Assortments Promotions
Supply Management
Integrated Synchronised Continuous Automated Store
Suppliers Production Replenishment Ordering
Reliable
Cross Docking
Operations
Enabling Technologies
Electronic Commerce
Item Bar Coding
Electronic Data Electronic Funds Activity Based
and Database
Interchange (EDI) Transfer (EFT) Costing
Maintenance
Human Factors
Strategy and
Culture Skills Relationships
Structure

Benefits
Through the adoption of ECR in Thailand for all channels, it is expected to reduce
consumer price by 7.7%, which is equivalent to Baht 38 billion saving across the Industry
Supplier Manufacturer Retailer Consumer
Plant D.C. Store
Modern Operating
Channel* costs = 2.3%
Consumer
price
reduction
=
7.7%
Inventory
Traditional costs = 5.4%
Channel**
Total Supply Chain
*Modern Trade: Supermarket chains, hypermarket chains, convenience stores,

**Traditional: Mom & Pop Store, independent Supermarket

Interesting Web Sites

Surath Pralongsil
December 2009
www.gci-net.org

www.globalscorecard.net

GCI Benchmarking Tool: Maturity Assessment
Nothing done Nothing done but Early Further Fully
Maturity Measure Criteria Who
No plans plans developed implementation implementation implemented
Criteria Definition * 0 1 2 3 4
Replenishment The extent to which M Changes in stock Agreement established Prototype CRP being CRP being rolled out to CRP fully installed for
Method and stocks at all stages in W replenishment between trading tested using CRP cover at least half of all targeted products
Application the supply chain are R quantities and timings partners to match orders or VMI (where long term target and volume and fully
replenished in are driven primarily by replenishments more appropriate) to volume integrated into order
response to an estimate price / quantity deals, closely to consumer generate the demand processing systems
of consumer demand rather than consumer demand signal CRP or VMI orders
(demand signal) demand integrated into order
CRP or VMI orders not management systems
Replenishment may be integrated into order via industry standard
via continuous management system: electronic commerce:
replenishment process proprietary electronic used by manufacturer
(CRP) orders commerce standards to plan loads
calculated by the still used
retailer, or via vendor Retailer gets
managed inventory information of
(VMI), where shipments via EDI
appropriate
Replenishment driven Agreement to get A fully implemented

by inventory and visibility. demand management
offtake. Need system (DMS)
visibility for that at all integrated with ERP.
levels.
* Manufacturers (M) , Wholesalers (W) , Retailers (R)

www.supply-chain.org

www.ecrnet.org

cscmp.org

www.cscmpthailand.org

www.supplychainasia.com

www.gs1.org

www.epcglobalinc.org

Continuous Replenishment
Synchronized Production/Supply
Vendor-Managed Inventory

Surath Pralongsil
December 2009
Enabling Technology
in Supply Chain Management

Surath Pralongsil
December 2009
Business Process
Order – To – Cash (O2C) Process

Purchase – To – Pay (P2P) Process

Surath Pralongsil
December 2009
Order – To – Cash (O2C) Process
Order entry Customer Order
• Cust. No.
• Address
Credit limit • Product Code
• Quantity
Stock • Requested
Available-To-Promise (ATP) Delivery Date
Soft allocation
Processed orders with the

same requested date
Route allocation
Load configuration
Picking Slip
Invoice & DO • Product Code
• XXX Picking as per load • Quantity
• XXX • Loading bay
• XXX Picking confirmation, stock
• XXX updated, AR generated, Invoicing
Collection & payment

Enabling Technology
in Supply Chain Management
IT Systems

Surath Pralongsil
December 2009
What are Legacy System?
• Legacy IT systems were developed prior to 1990 and have a

functional focus
• Legacy systems are used for simple operations like order entry &
processing, managing inventory, customer & product databases
• Each activity within the organization has its own proprietary system
and there is little integration or communication between the systems
Human Finance & Sales & HQ &

Engineering Logistics Operations
Resources Accounting Marketing Branches
Function Function Function Function Function Function Function

Server & Server & Server & Server & Server & Server & Server &
Database Database Database Database Database Database Database

What are ERP System?
• ERP stands for Enterprise Resource Planning & ERP systems are used to
integrate business systems & processes. ERP systems allow all areas &
functions of an organization to combine & analyze data.
Engineering Operations
Human Sales &

Resources Marketing
Supplier Central
CentralDatabase
Database Customer
Relationship and Servers Relationship
Management Management
Finance &
Accounting Logistics
Headquarters
and Branches

What ERP Covers?
• A sales order is made and recorded (Sales)
• Parts are reserved or purchased & delivered (Purchasing & Supply)
• Labour is scheduled & charged (Human Resources)
• The cost of parts is taken from general ledger inventory accounts, &
the revenue is booked & billed when the order is completed (Finance)
• The required goods are manufactured or assembled (Production)
• The completed order is shipped to the customer (Logistics)

Module in SAP R/3
FI - Financial Accounting CO – Controlling

• FI-GL General Ledger Accounting • CO-OM Overhead Costing (Cost
Centers, Activity Based Costing,
• FI-LC Consolidation
Internal Order Costing)
• FI-AP Accounts Payable • CO-PA Profitability Analysis
• FI-AR Accounts Receivable • CO-PC Product Cost Controlling
• FI-BL Bank Accounting AM- Asset Management
• FI-AA Asset Accounting PS – Project System
• FI-SL Special Purpose Ledger FS – Insurance
• FI-FM Funds Management • FS-CD Collections and
disbursements
• FS-CM Claims management
• FS-CS Commissions management
• FS-PM Policy management
• FS-RI Reinsurance management
• FS-PE Payment Engine (Banking
Payments Solution still in
development)
Module in SAP R/3
IS – Industry Solution • IS-PS Public Sector

• IS-A Automotive • IS-R Retail
• IS-ADEC Aerospace and Defense • IS-REA Recycling Admin
• IS-AFS Apparel and Footwear • IS-SP Service Provider
• IS-B Banking
• IS-T Telecommunications
• IS-BEV Beverage
• IS-U Utilities
• IS-CWM Catch Weight
Management (Variable Weight HR – Human resources
Items such as Meats and Cheeses) • HR-PA
• IS-DFS Defense and Security • Personnel Administration
• IS-H Hospital • HR-PD
• IS-HER Higher Education • Personnel Development
• IS-HSS Hospitality Management
• HR-RC
• IS-HT High tech
• Recruitment
• IS-M Media
• IS-MIN Mining
• IS-MP Milling (or IS-MILL)
• IS-OIL Oil
Module in SAP R/3
PM - Plant Maintenance SCM - Supply Chain Management

MM - Materials Management SEM - Strategic Enterprise
QM - Quality Management Management
PP - Production Planning WM - Warehouse Management
SD - Sales and Distribution HUM - Handling Unit Management
• Helps to optimize all the tasks and AF&R - Advanced Forecasting &
activities carried out in sales, Replenishment
delivery and billing. Key elements
are: pre-sales support, inquiry
processing, quotation processing,
sales order processing, delivery
processing, billing and sales
information system.

Advance Planning & Scheduling (APS) System:
Architecture of Advanced Planner & Optimizer (APO)
APO
Internet / EDI / XML / RosettaNet

Partner
Customer
Source: SAP

SCM Application
• Supply Chain Collaboration (Linkage among trading partners in

supply chain)
– Collaborative Planning
– Network Planning
• Supply Chain Planning
– Material Requirement Planning
– Advanced Planning and Scheduling
– Demand and Supply Planning
• Supply Chain Execution
– Procurement
– Warehouse Management System
– Transport Management System
– Sales Order Processing System
– Manufacturing System
Supply Chain Management / Surath Pralongsil Source: Tokuii Corporation 152

Value Chain Management


Surath Pralongsil Surath Pralongsil
December 2009 December 2009
Wrap-Up: Advanced SCM
• Value chain • Advantage of robust SCM
• Value creation – Match demand and supply
• Supply chain – Reduced cost
– Improved quality and service
• Logistics
– Higher value
• Enterprise integration
• Demand variability: beer game Æ bullwhip
• Strategic, Tactical, Operational SCM: effect
Balance demand and supply
• Integrated supply chain planning
• SCM objectives – Sales & Operations Planning (Demand &
– Delivery of value Supply Planning)
– Responsiveness – Demand Planning
– Reliability – Distribution Requirement Planning (DRP)
• Competitive advantage in SCM – Distribution Resource Planning (DRP II)
– Globalization – Material Requirement Planning (MRP)
– Integration – Manufacturing Resource Planning (MRP II)
– Time-based competition – Master Production Schedule (MPS)
• Supply chain characteristics – Detailed Production Schedule (DPS)
– Ship to stock • Efficient Consumer Response (ECR)
– Make to stock • Synchronized Production/Supply
– Assemble to order • Vendor-Managed Inventory
– Make to order
– Buy to order
• O2C, P2P
– Engineer to order • ERP: Enterprise Resource Planning
• Lean v.s. Agile supply chain • APS: Advanced Planning & Scheduling
• Push and pull • EPC: Electronic Product Code
• Postponement (mass customization): • RFID: Radio Frequency Identification
decoupling point

Advanced SCM

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Value Chain Management

Advanced Supply Chain Management

09:00 – 09:15 (15 min) Overview of supply chain management

12:30 – 13:30 (60 min) Lunch

13:30 – 14:00 (30 min) Supply chain collaboration & efficient

• To understand the concept, process and benefit of SCM in business,

Supply Chain Management / Surath Pralongsil 3

Advanced Supply Chain Management

Supplier Manufacturer Distributor/Wholesaler Retailer Consumer

Supply Chain Management / Surath Pralongsil 6

Supply Chain Management / Surath Pralongsil 7

• Michael Porter of Harvard university said that “A business is profitable

HUMAN RESOURCE MANAGEMENT

Supply Chain Management / Surath Pralongsil 8

Focus on how a business creates customer value by examining contributions

Allow better identification of a firm’s strengths and weaknesses since the

Supply Chain Management / Surath Pralongsil 9

Cementitious Direct Sales

Basic Materials Channels Construction

Energy Direct Sales

R/M, Supply Product Channel / Distribution End-user Construction

Backward Forward Vertical

Source: adapted from Holcim Value Chain SCCC-investing business 11

CPAC Self - builders

R/M, Supply Product Channel / Distribution End-user

Source: adapted from Holcim Value Chain 12

Transactional Retailer Whole- Agent Direct

Selfbuilder / Contractor CPM

Input factor (cost of all goods,

Benefit to employees, government,

• Refers to the additional value created at a particular stage of

• The enhancement added to a product or service by a company before

Supply Chain Management / Surath Pralongsil 15

Supply Chain & Logistics

Advanced Supply Chain Management

Warehouse Planning (ASP)

• “A position of enduring superiority over competitors in terms of

• The prizes in today’s markets go only to those companies which are

Supply Chain Management / Surath Pralongsil 18

• the design, planning, execution, control, and monitoring of supply

Supply Chain Management / Surath Pralongsil 19

• Is the means whereby the needs of Customers are satisfied through

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• Logistics management involves the strategy & operations relating to

• Supply chain management involves managing the relationships

• A company‘s Logistics strategy needs to be closely aligned with the

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Phase 2 Material Management Manufacturing Management Logistics

Phase 3 Material Management Manufacturing Management Logistics

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Electronic commerce enabled

Functional silos Cross-functional integration Cross-company integration Dynamic, end-to-end integration

Adversarial, mutual Mutual truth and full

Heavy command and Empowered, self-directed Partnership / alliance Virtual / fungible

3. Production management 2. Forecast and demand management

5. Distribution management 6. Supply chain integration

7. Supply chain transformation

Optimisation of Supply Chain Configuration

Resources and investment planning Define Service

Logistics project steering

Supply Chain Justification: Trade off service / Costs