0 AutomotiveBestPracticesForumSupplyChainManagement 1 WELCOME Today smeetingwillfocusontheresultsoftheSupplyChainManagementAssessment completedby22automotivesupplierexecutivesand3vehiclemanufacturerexecutives Introduction 2 TableofContents Introduction4 13SupplyChainManagement14 21DefinitionsandStrategy22 32UnderstandingExpectations33 38SupplyChainManagement39 47PerformanceMeasurement48 55TechnologySolutions56 60SCMOpportunities61 72 PageNumber 3 IndustryForcesandIssues Introduction Theautomotivesupplychainisgoingthroughaperiodofunprecedentedchangeinordertomeetincreasingconsumerexpectationswithregardtoprice delivery andproductcustomization Themanagingofthesupplychainpipelineisthereforefacedwithanumberofkeyissuesincluding ElevatingsupplychainmanagementasacriticalsuccessfactortoachievingcompetitiveadvantageAligningtheorganizationalstructuretosupportglobalsupplychainmanagementEstablishingaprocessoriented functionallyintegratedsupplychainForecastingtheimpactofchangingglobalmarketsonsupplychaincostsandcapabilitiesDefiningkeyperformanceindicatorsandmeasuringsupplychainperformanceUnderstanding selectingandintegratingsupplychainmanagementenablingtechnologyAnticipatingandrespondingtotheimpactofsupplierconsolidationsAnticipatingandrespondingtotheimpactofOEMconsolidationsDefiningandtrackingtotalsupplychaincosts 4 Introduction DefinesupplychainmanagementanditscomponentsUnderstandtheelementsofasupplychainstrategyPositiontheroleofasupplychainexecutiveIdentifytheelementsofsupplychainmanagementUnderstandtheroleofinformationtechnologyapplicationsIdentifyhowtoutilizeperformancemeasuresinthesupplychainprocessUnderstandhowtousebestpracticesandbenchmarkinginsupportofsupplychainmanagementUnderstandroleofcustomers suppliers andthirdpartiesforcollaborativesupport Today sObjectives 5 Theintegratedsupplychainconcepthasgonethroughthreedistinctphases Source BernardLaLonde professoremeritusoflogisticsatOhioStateUniversity HistoryofSCM SCMOverview 6 ThefollowingrepresentsomeoftheotherinitiativeswhichhaveeitherhelpeddeveloporhavebeenspawnedfromtheSCMmovement SCMRelatedConcepts SCMOverview 7 Value Complexity Functional Silos VirtualExtendedChains IntegratedInternalSupplyChain IntegratedExternalSupplyChain SelectVendor CustomerCollaboration SelectedCross functionalTeaming InternallyFocusedOptimization COLLABORATION PULL PUSH SCMContinuum SupplyChainContinuum SCMOverview 8 Asurveyconductedonsupplychainessentialsresultedinamanagementresponsefrom451companiesin25countriesAlmostone third 29 ofthecompaniessurveyeddonotinvolvetheirsuppliersininventorymanagementNearlyone quarterofthecompanies 22 donotinvolvetheircustomersinplanningmanufacturingrequirementsOnly13 ratedtheirabilitytocommunicatewithcustomersonforecastingasstrong 1 Planninganddeployinginventoryeffectively2 Providingpredictabledeliveryperformance3 Creatingnewproductsandservices4 Reducingorderfulfillmentcycletime 5 Havingproductsinstock6 Decreasingmanufacturingcycletime7 Reducingtransportationcosts8 Reducingcustomerreturns9 Communicatingelectronicallywithcustomersandsuppliers TopSupplyChainEssentials Source 1997KPMG NorthwesternSupplyChainStudy CurrentStateofSCMMovement SCMOverview 9 DegreeofCompletion Themajorityofcompaniesareimplementingsupplychaininitiatives Thisfigurehasincreaseddramaticallyfrom10 reportedin1996 Question3 5 35 60 0 0 0 0 10 20 30 40 50 60 70 80 90 100 Improvementinitiativesarecomplete Plantobeginaddressinginitiativesbeyond2000 Noinitiativesoropportunitiesplanned Plantobeginaddressinginitiativesduring1999 Currentlyevaluatingimprovementopportunities Currentlyimplementinganimprovementinitiative s ofRespondents SCMOverview 10 Therearemanyapproaches concepts models andideologiesdevelopedtodescribeSCM BuysfromManufacturer Wholesaler Storesinwarehouses MovesittoRetailers Storesitonshelves SellsittoCustomers Supplier W house W house Retail Retail Customer Trucks SCMApproaches SCMOverview 11 SourceThisportionofthemodelpertainstoprocurementofgoods rawmaterials semi finished orfinished andservices Partnershipbuilding strategicsourcing organizationcompatibility technologicalcapabilities andcommitmentstocontinuousimprovementareallimportantelements ProduceThissectionofthemodeladdressesthephysicalmanufacturingprocessandanycorrespondingconstraints ifapplicable Productionscheduling laborscheduling andminimizingdowntimeandsetupcostsareallkeyfactorsintheproductionprocessandsupplychainmanagement Moreimportantly thecoordinationoftheseeffortswithotherfunctionalareasofacompanymustbeevaluatedtoensurethegreatestsupplychainefficiency StoreTheStoresegmentofthemodelreferstoreceivingandshippingpractices inventorymanagement warehousemanagement andselectionofproductsfordistribution Internalvs outsourcingalternatives processflows layouts andstorage densitypracticesmustbeevaluatedintermsofcost quality andspeed Theeconomicandcompetitiveconsequencesofvariouswarehousingstrategiesmustbeanalyzedtoensureabetterreturnonassetsandlong term bottom lineimpact SupplyChainModel SCMOverview 12 PlanDisciplinedplanningisneededtomaximizethecoordinationofsupplychainfunctions Inaddition itisimportantthatanoverallstrategicplanandgoalsexistinordertoprovideacommonanduniformdirectiontothedifferentoperatingfunctions Thisinformationmustbeaccurate timely andfreelyshared Forecastingispartoftheplanningprocess inadditiontotheintegrationandcollaborationofprocessesandpractices TransportThissectioncoversthemovementofgoodsfromthesuppliertotheproductionfacilityand ordistributioncenterandfromthedistributioncentertothecustomer Regulations litigation technology relationships customerexpectations anddeliveryalternativesareallimportantcomponents Therightstrategy includingpartneringrelationships candifferdramaticallyfromonemarkettothenext SellAttracting managing andretainingcustomersisthemainfocusoftheSellingsectionofthemodel Abetterunderstandingofcustomers needs goalsandbehaviorcanimproveproductdevelopmentanddelivery Policies procedures processes andsystemsaresignificantfactorswhichmustbeexaminedinordertoimproveserviceandincreasecustomersatisfaction SupplyChainModel SCMOverview 13 Thefollowingmodelhasbeendevelopedasaguidefordiscussinganeffectivesupplychainmanagementsolution GuidingPrinciplesofSCM DefinitionandStrategies 14 FosterALeadershipDrivenSupplyChainStrategy DevelopastrategicvisionalignedwithcustomersFocusonoptimizingtheentiresupplychainIdentifygoalsanddevelopprioritizationproceduresMaintainfocuson big bang goalsbutimplementinstagesLeadfromthetop FosterALeadershipDrivenSCStrategy DefinitionandStrategies 15 WhatistheSupplyChain Thesupplychainisacompilationofactivities functions andprocedureswhichenablerawmaterialstobeconvertedintoproducts deliveredandconsumedbyendusers SupplyChainDefinition DefinitionandStrategies includingfunctionalactivities InformationTechnology Sourcing OrderProcessing ProductionScheduling Procurement CustomerService InventoryManagement Transportation Warehousing 16 WhatisSupplyChainManagement SCM Itisthecoordinationandintegrationofalltheseactivities 1 TheSupplyChainCouncil2 SupplyChainManagement Fromyoursupplier ssuppliertoyourcustomer scustomer 1 Theartofmanagingtheflowofmaterialsandproductsfromsourcetouser 2 intoaseamlessprocess SupplyChainManagementDefined DefinitionandStrategies 17 SupplyChainManagementrefersto Managingtheentiresupplychainflowfromrawmaterialprocurement distributiontomanufacturingfacilities processingfinishedgoods distributiontowarehousesworldwideandtoendcustomer Successfulperformancebyallorganizationsandresourcesintheproductionanddeliveryofproductsandservicestocustomers Extendingcompanyboundariestosuppliernetworkthroughinformationsharingfromconcepttolifeofproduct makingsuppliersanintegralpartofthecompany Useofpro activematerial acquisitionplanningsupportedbyatailoredandbenchmarkedsupplybase Logisticsincludestheprocessesandactivitiesof Materialsmanagementsuchasforecasting sourcingandpurchasing warehousingdistributionandtransportation Movinggoodsfromsupplypointsthroughthemanufacturingprocessandtothecustomer Planning obtaining producing anddistributingmaterialandproductsinthecorrectquantities Theentireprocurementdistribution inventoryandwarehousesystem Gettingproductsorservicesfromthesuppliertoyourdoor SupplyChainManagementDefined DefinitionandStrategies Suppliershavemanydefinitionsofsupplychainmanagement Thekeyistodefineitintermsoftheactivitiesthatarecrucialtothesuccessofthesupplychainprocess Questions1 18 MyCompanyhasawelldocumentedsupplychainstrategy3 1Thesupplychainstrategyisdirectlylinkedtothecorporatestrategy3 3 SupplyChainStrategy Ingeneralmostcompanieshavehighlevelgoalsandmeasuresbutlackimplementationcontentsuchasbudgetandsystemsintegrationplans Questions4 5 14 18 27 36 36 36 36 36 41 41 45 59 64 68 68 0 10 20 30 40 50 60 70 80 90 100 FacilityNetworkEvaluationandDesign ThirdPartyRelationshipManagementPlans WarehousingManagementPlan MissionStatement ManufacturingRequirements InformationSystemsIntegration BudgetandInvestmentRequirements CompetitiveEnvironment TransportationManagementRequirements OrganizationalResponsibilities InventoryManagementRequirements CustomerRequirementsandRelationships Sourcing ProcurementRequirements PerformanceMeasures PerformanceGoalsandObjectives LevelofAgreement Where1 Disagree 2 SomewhatDisagree 3 Neutral 4 SomewhatAgree 5 Agree ofRespondents DefinitionandStrategies 19 Title DirectororVicePresidentDepartment PurchasingorSupplyChainManagementResponsibilities SupplyChainExecutiveProfile OrganizationalResponsibilities Ingeneral SupplyChainexecutivesarenotresponsibleforcustomerfacingsalesactivitiesormanufacturing butrathertraditionalpurchasingandlogisticaloperations MostCommon 1 SourcingandPurchasing 68 2 SupplyChainPlanningandNetworkDesign 64 3 InventoryManagement 50 4 WarehouseOperationsPlanning Management 50 Transportation 50 LeastCommon1 Manufacturing 14 2 LinkageswithSales PromotionsandMarketing 14 3 PackagingDesign 18 4 SalesOrderManagement 18 Questions11 12 20 ManagementoftheSupplyChain Where1 Disagree 2 SomewhatDisagree 3 Neutral 4 SomewhatAgree 5 Agree SeniorexecutivesareawareoftheimportanceofSupplyChainManagementbutlackfinancialresourcesforimplementation Question13 Seniorexecutivesareforwardthinkingandkeepupwiththelatestmanagementtechniquesforoptimizingthesupplychainandenhancingshareholdervalue Seniorexecutivesunderstandthecomplexitiesofoptimizingsupplychainperformanceandarewillingtomaketherequiredinvestments Seniorexecutivesarededicatedtotakingsupplychainmanagementfromtheorytopractice Supplychainmanagementisatopprioritywithseniorexecutives Seniorexecutivesarekeenlyawareofthecompetitiveadvantagethatcanbegainedthrougheffectivemanagementofthesupplychainprocess Supplychainmanagementhaselevatedinimportanceandvisibilityduetoincreasinggrowthandprofitabilitypressures 4 2 3 8 3 5 3 6 3 3 3 2 OrganizationalResponsibilities Levelofagreementwithregardstosupplychainmanagement 21 Developbusinessunitstrategiestosupportachievementofcompanyobjectives Appointasupplychainexecutivetoserveasanaturalfacilitatorandintegratorbetweenthedivergentneedsofsalesandmanufacturing qualityandprice costandservice andfinancialandqualitativemeasures Clearlydefinesupplychainfunctions processes andactivitiesandarticulatethroughouttheorganization Translatebusinessunitstrategiesintosupplychainstrategieswithquantifiablegoalsandobjectives Identifycriticalprocessesessentialtotheachievementofthebusinessstrategyandgoals Establishactionplansdetailingthestepsrequiredtoachievethegoalsandobjectives BestPractices DefinitionsandStrategies 22 Automotivesuppliersdefinesupplychainmanagementdifferently Theactivitiescomprisingautomotivesuppliers supplychainsalsodifferdramatically Themajorityofrespondentswereunsurewhethersupplychainstrategiesarealignedwithbusinessunitandcorporatestrategies Companieswithsupplychainstrategiesplaceemphasisonperformancemeasurementandsupplierandcustomerfacingissues butlittleemphasisondefiningactionplans budgets investmentrequirements andresourcesrequiredtoimplementthoseplans Companiesassessedthattheywerebestpreparedtorespondtoglobalsupplychainissues butlesscapableofcapturingsupplychaincosts measuringperformance andselectingandintegratingsoftwaresolutions KeyFindings DefinitionsandStrategies 23 Supplierssupplychainexecutivesrolesandresponsibilitiesvary asdoesthelevelanddepartmentwithintheorganization Suppliersfeelthatseniorexecutivesmayonlypartiallyunderstandthecomplexitiesofoptimizingsupplychainperformanceandarewillingtomaketherequiredinvestmentsnecessarytoachieveoptimalperformance KeyFindings OrganizationalResponsibilities 24 UnderstandcustomersandsegmentbaseduponneedsandpreferencesAnalyzecostofservicebycustomerDevelopachannelstrategytotargetandservedifferentsegments AssessCustomerNeeds Segments AssessCustomerNeeds Segments UnderstandingExpectations 25 Company sExpectationsofSelf UnderstandingExpectations Question7 Suppliers OEMs 100 on timedeliveryCostimprovementsDefine Track andReduceSupplyChaincostsReducepurchasedproduct suppliercostsReducepartscosteverymodelyearReduceInventoryandobsolescenceReducepremiumfreightanddistributioncostsQualityImprovementsIntegrate leveragesuppliercapabilitiesandtechnologiesforcompetitiveadvantageImprovePPMperformanceTechnologyImplement upgradeEDI ERP WMScapabilities Expectations XXXXXXXXXXXX 26 UnderstandingExpectations Questions8 9 TierOneSupplier OEMCustomer Supplier ExpectationsofCustomers ExpectationsofSuppliers ExpectationsofSuppliers UnderstandingExpectations ExpectationsofOEM 27 ExpectationsofCustomers Questions8 9 Toberewardedforsuperiorperformance tobedealtwithasapartner tobepaidontimeStableorders subjective communicationofkeyissuesaffectingsuppliersReducednumberofdesignalterationsduringdesigndevelopment improvedforecaststabilityandaccuracy risksharingofrawmaterialscostexposure UnderstandingExpectations TierOneSupplier OEMCustomer Supplier Supplier ExpectationsofCustomers ExpectationsofCustomers Schedulestability recognizeourfullvalue sharetechnologyexpectationsSharingprogramorcycleplansinformation fairnessincustomersupplierrelations providingbusinessopportunitiestosupportLargerorders limitedcustomization qualityforecasts EDIordering ExpectationsofOEM Supplier Tomeetorimproveallqualitytargets tomeetorimproveallcosttargets tomeetorimprovealldeliverytargets Stableproductionscheduling optimalcapacityplanning integratesupplychainintoourbusinessConsistent accuratecommunications sharebenefitsofcontinuousimprovements respectsuppliertechnology ExpectationsofOEM OEM TierOneSupplier ExpectationsofOEM 28 ExpectationsofSuppliers Questions8 9 TobeEDIcapable staycurrent tomanagetheirsupplierstoourrequirements toimplementleanacrosstheirsupplybaseSmalllotdelivery on timedelivery lowppmCostreduction improvedperformance technologicalsupport Managethesupplychaintotheirbenefit investintechnologytotheirbenefit reduceourtotalacquisitioncost100 on timedelivery costcompetitive shortlead timesOngoingpricereductionsat3 5 peryearrate flawlessdeliveryandqualityperformanceCompetitivequoting blackboxengineeringdesignwork supplychainagreements ExpectationsofSuppliers ExpectationsofSuppliers Supplier ExpectationsofSuppliers OEM Improvingnewproductdevelopmenttiming tocontinueproductivityimprovementactivities toexpandregressivereplicationofsupplychainoptimizationphilosophy Bemoreintegratedinourbusinessprocess leanproductionpractices reduceleadtimes fasttomarket inventorymanagementBeawareofpositioninsupplychainandcommunicate managesupplychain notjustsupplier continuouslyimprovequality cost cycletime humanresourceefficiency UnderstandingExpectations TierOneSupplier OEMCustomer Supplier TierOneSupplier ExpectationsofSuppliers OEMCustomer ExpectationsofSuppliers 29 Ensurethatthemanagementcontrolstructurefacilitatescross functionalsupportandcommunicationwithintheorganization Activelysolicitinputfrominternalstakeholdersattactical operational andstrategiclevelswithintheorganization Establishmechanismsorforumsforexchangingsupplychaininformationwithsuppliersandcustomers Refinemanagementstyletoensurestrongtrustandcommunicationwithsupplychainpartners BestPractices UnderstandingExpectations 30 KeyPracticesSuppliersCustomersWillingnesstoshareknowledge3 13 3Inter enterpriseknowledgeandskillsarevalued3 13 1Committedtopursuinghigherlevelsofperformance3 13 8End consumerfocused2 94 1Inter consumerfocused2 73 0Willingnesstosharerisk2 72 6Embraceelectroniccommerce2 73 8Transactionsystemssupportcollaborativeprocesses2 53 1Collaborativeuseofdecisionsupporttools2 32 6 IntegrationofKeyPracticesintoSupplierandCustomersSupplyChains SupplyChainManagement Where1 NotIntegrated 2 SlightlyIntegrated 3 FairlyIntegrated 4 HighlyIntegrated 5 ExtensivelyIntegrated OEMsaredrivingintegrationonthecustomersidewithTier1Suppliers however therelationshipsbetweentieredsuppliershavelimitedintegrationsuccess Question20 31 CustomizeyoursupplychainstructuretofocusontargetedcustomersegmentsIdentifyconstraintsusingcross functionalteamsQuantifyleveragepointsinsourcing manufacturinganddistributionUtilizevendor customeralliancesacrossthechain DevelopSupplyChainStructure DevelopSupplyChainStructure SupplyChainManagement 32 ActivitiesinSupplyChain SupplyChainManagement Thereisconsensusamongallregardingactivitiesinthesupplychainandevidencethatimprovementopportunitiesareplentiful Performance 1 None 2 Poor 3 Fair 4 Good 5 Excellent Suppliers OEMs Question2 0 10 20 30 40 50 60 70 80 90 100 CapacityPlanning SourcingandPurchasing InventoryManagement Transportation Forecasting DemandPlanning CustomerService ProductionScheduling MaterialsPlanning WarehouseManagement SupplyChainPlanning NetworkDesign 0 10 20 30 40 50 60 70 80 90 100 IncludedinSCM ofRespondents ScopeofSupplyChainActivities 33 OrganizationalResponsibilities Manufacturing Sales PromotionsandMarketing PackagingDesign SalesOrderManagement CustomerService FleetManagement CapacityPlanning ReverseLogisticsandReturns ProductionScheduling InformationTechnologySolutions Forecasting DemandPlanning Distribution MaterialsPlanning InventoryManagement Transportation WarehouseOperationsPlanning Mgt SupplyChainPlanningandNetwo