Strategic Supply Chain Management (Shoshanah Cohen, Joseph Roussel)

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The book discusses concepts of viewing the supply chain as a strategic asset, developing an end-to-end process architecture, designing the organization for performance, leveraging information technology, and developing metrics to measure performance.
Case studies from Eli Lilly, Autoliv, and Avon are included to demonstrate real-world applications of the principles.
The foreword and acknowledgments pages provide introductory context about the book.
In summary, this digitally signed document serves to validate a book on strategic supply chain management concepts and case studies. The signature affirms the content is accurate as of May 21, 2005.
The book discusses the evolution and development of supply chain management as a core business discipline over time. It traces origins back to the late 1800s with examples of early integrated supply chain operations.
It then discusses how Ford pioneered efficient supply chain practices to support Model T production in the early 1900s. This created the need for materials planning and delivery directly to the manufacturing line.
In the 1950-1970 period, mass production was dominant and management focused on quality, efficiency and costs.
PRTM has been working in this field since 1976, helping early tech companies address issues of production, innovation and globalization by integrating various operational disciplines.
In the 1980s and 1990s, concepts like MRPII, JIT, TQM gained adoption and PRTM talked about an integrated set of supply chain processes.
Key studies and projects with companies like Xerox and Digital Equipment helped establish supply chain management as a core discipline, defining processes and cross-functional metrics.
The book aims to provide the current state of practice based on the authors’ extensive experience working with over 600 organizations over 15+ years.
PRTM pioneered a new approach to managing global operations using a framework of planning, sourcing, making, and delivering products. This framework emphasized integrating functions across companies and yielded benefits but required significant changes.
In 1994, PRTM helped form a Supply Chain Consortium with academic institutions to establish common definitions, performance metrics, and frameworks for supply chain management. This led to the Supply Chain Operations Reference model (SCOR) which defined key metrics and is now widely used.
PRTM also helped companies integrate their European operations using the plan-source-make-deliver framework as trade barriers in Europe were removed in 1992. An early adopter was Pitney Bowes, which used a fax solution to customize machines for the German market, reducing lead times significantly.
PRTM worked with other companies in the 1990s to define integrated supply chain architectures and processes using logical modeling techniques. This helped lay the groundwork for emerging enterprise systems and supply chain best practices.
The SCOR model developed through these efforts provided a standard for assessing new ERP systems. Its adoption by many companies led to the formation of the Supply Chain Council to advance supply chain management.

So in summary, PRTM pioneered an influential approach and helped establish standards that advanced integrated global supply chain management and drove adoption of new technologies and practices.

Collaborative partnerships within supply chains often fail to be realistic about the underlying economic assumptions. To improve collaborative relationships, companies should have all internal and external collaboration partners read Chapter 4 of the book to assess the realities of economics driving partnerships. They should then honestly assess the current state of their collaborative relationships.

Chapter 5 discusses how to choose effective supply chain metrics to drive desired business performance and meet strategic goals. It emphasizes the importance of balancing internal and external customer perspectives. Metrics should include a portfolio of financial and non-financial indicators tracking functions across the supply chain, as well as innovation and continuous improvement.

Measuring supply chain performance helps companies “lift their eyes” from daily operations to envision future opportunities. End-to-end supply chain management creates competitive advantage and shareholder value beyond logistics. It is a core business competency for any organization.

Eli Lilly suffered a major setback when a court ruled its patent on blockbuster drug Prozac would expire 3 years earlier than expected in 2001. This allowed generics to capture over half of Prozac’s sales within 6 months.
In response, Lilly ramped up R&D efforts in late 1990s to develop a strong pipeline of new drugs. It aims to launch 2-4 new products per year and double total sales revenue.
To accommodate growth, Lilly will nearly double its manufacturing sites from 20 to 40, using more contract manufacturers. Managing this increased complexity is a key supply chain challenge.
Missing pharmaceutical sales can be very costly due to high margins. Lilly prioritizes never missing a sale over minimizing inventory levels, given life-critical nature of its products.

Lilly can optimize capacity utilization across its manufacturing plants by shifting production workloads among plants based on their respective capacity levels. While plant managers may be concerned about lower production levels affecting their performance metrics, Lilly’s corporate supply chain management group helps coordinate these shifts to optimize production globally for the overall benefit of the company. The group brings together plant management monthly to review and approve capacity optimization plans.

Lilly is transitioning to managing manufacturing operations globally rather than regionally to better optimize networks of plants and products families together. A global sales and operations planning process creates long-term plans for each manufacturing network which then provide input to local site planning. The goal is to optimize capacity, inventory, and uninterrupted supply across interconnected plant networks and supply chains. Integrated IT systems will help support more coordinated global supply chain management once a global ERP rollout is complete.

Engineer to order is an operations strategy used for complex, customized products and services tailored to unique customer specifications.
Changing operations strategies, like moving from make-to-stock to configure-to-order, can improve service levels while reducing inventory for some companies.
Operations strategies should be tailored based on factors like product type, life cycle stage, number of variants, etc. A hybrid strategy may work best in some cases.
Channel strategy involves how products are delivered to buyers, like direct sales vs distributors. Choosing channels can impact profit margins and competitive advantages.
Outsourcing decisions start with analyzing core competencies and outsourcing non-core activities where others may have scale, scope or technology expertise benefits. However, differentiators and unique operations should typically not be outsourced.
Outsourcing can provide benefits of scale, scope and technology expertise but also risks so strategic implications must be carefully considered before decisions are made.

Here is a summary of the key points about adding brands in watches:

Rolex is known for manufacturing high quality watches. They not only produce the watch components themselves, but also produce machines, tools, and supplies for their watch movements and products. This extensive internal manufacturing helps ensure their high standards of quality.
Many companies outsource most or all of their production to contract manufacturers to reduce costs. However, if a company’s product or manufacturing process is a key part of their differentiation, they should avoid outsourcing that aspect.
When considering outsourcing manufacturing, companies should assess the scale of their current operations versus requirements, uniqueness of internal operations, balance of power with potential partners, and customer service strategy needs. Outsourcing may not always be the best strategic choice.
Companies choose between global, regional or country manufacturing models based on factors like business size, customer service needs, tax advantages, supplier base, import rules, and labor costs. While lower production costs are important, supply chain flexibility and total costs must also be considered.

That covers the key points about strategic considerations for brands when evaluating internal vs outsourced manufacturing and asset network configuration models. Let me know if you need any part of the summary explained further.

Here is a summary of key points about inventory levels from the passage:

The product life cycle impacts asset network decisions. Companies may use a global model early and late in the cycle to optimize costs and inventory, and a regional model in between to improve customer service.
Competing on cost requires efficient, integrated operations and a focus on keeping product and supply chain costs low. This includes metrics like asset utilization, inventory days of supply, product costs, and total supply chain costs.
Companies must align their supply chain strategy with their overall business strategy. An electronics company spent millions improving delivery but failed to align with the new strategic priority of lower prices.
Innovative companies focus on getting new products to market and scaling production quickly to gain first-mover advantage and meet demand before competitors. This requires integrating design and supply chains.

So in summary, inventory levels and strategies need to be optimized across the product life cycle and aligned with the business strategy, whether that is low cost, innovation, or another basis of competition. Efficient inventory management is important for cost-focused companies.

Moving from product development to volume production requires managing processes, assets, products, and information to achieve the target level of quality.
Integrating design and supply chain ensures suppliers can meet demand, order systems support new products, and sales/service teams are prepared.
Zara’s supply chain supports rapid innovation - design is adjusted based on sales data, allowing shorter time to market, higher revenue, and fewer markdowns. This drove double-digit growth.
Companies competing on quality focus on premium products/services and consistent performance. Key supply chain aspects include manufacturing, sourcing, quality assurance, and returns. Traceability from origin is also important.
Barlean’s Organic Oils competes on freshness through its manufacturing and distribution processes.
Companies competing on service tailor offerings to customer needs and have exceptional customer service. Order fulfillment and integration with customers is key.
Shell Chemical offers an inventory management solution that simplifies purchasing for customers and cuts supply chain costs, locking in customers.
Companies must understand customer needs to identify opportunities, like how Barlean’s and Shell aligned with customers. Voice of customer ensures understanding of needs.
Tire manufacturers like Michelin prioritize the automobile makers market over the after-market segment, even though the after-market segment has higher margins. This is because being a supplier to new car manufacturers helps drive replacement tire sales and supply contracts have penalties for non-compliance.
Michelin uses the same factories for both markets to increase utilization, but has separate supply chains downstream to meet each market’s distinct needs - timeliness for automakers vs inventory holding for aftermarket.
Companies may choose to have a single multi-product supply chain or separate ones based on how different the product/customer requirements are and need for business unit control. Separate chains risk added complexity while tailored chains can optimize performance.
Epson uses separate backend supply chains for different product lines but a common frontend process to provide a unified customer experience.
Supply chain strategy should consider a company’s power and influence over customers and suppliers, as that affects what changes are realistically possible. Scale, brand strength, and customer dependence on a company can influence its power position.
Manufacturers that occupy second position on retailers’ shelves must go further to support the logistics needs of key retail accounts through things like flexible packaging and supply to accommodate retailer demands. Second-tier suppliers have less supply chain power than category leaders.
Supply chain control depends on relative power between buyers and suppliers in an industry. Collaboration is often the best approach to cut costs and boost satisfaction for both parties.
Supply chain strategies must adapt to changes in markets, business strategies, technologies and other factors both internal and external. Companies need to continually assess and refine their supply chain strategies.
Examples are given of Nokia and Cisco adapting their supply chain strategies in response to changes in market demand, growth levels, and other factors to regain competitiveness. Ongoing strategic refinement is needed given dynamic business environments.
Autoliv is the world’s largest manufacturer of automotive safety systems like airbags, seatbelts, etc. It grew rapidly capturing a third of the global airbag market.
By the late 1990s, constant price pressure from automakers and an economic slowdown stretched Autoliv’s supply chain. It faced annual price cuts and issues meeting customer demand.
Autoliv embarked on a strategic supply chain initiative in 1998 starting at its Utah operations to cut costs without affecting quality. The new Autoliv Production System (APS) significantly improved metrics.
Autoliv’s Utah plant produces millions of airbag modules annually, supplied through a 50-mile supply chain handling chemicals, textiles and components.
The technology to inflate airbags precisely in a crash comes from Morton, which developed airbag inflators using its rocket fuel expertise.
Seeing limited improvements, Autoliv partnered with Toyota in 1998. Toyota experts taught Autoliv managers about lean manufacturing practices, forming the basis for the new APS approach.
Toyota paid the salary of a Japanese expert, Harada, to help key automotive supplier Autoliv adopt Toyota’s best manufacturing practices.
At Autoliv’s Utah plant, Harada helped transform the manufacturing process from long assembly lines to smaller U-shaped cells, modeled after Toyota’s approach. This increased flexibility and visibility.
The changes included removing $15M of automation equipment and using smaller totes and tugs instead of large batches on long lines. Production switched from build to stock to build to order.
The cell approach improved defects, inventory turns, productivity and costs significantly within a few years.
Autoliv then implemented the changes at other Utah plants and won a manufacturing excellence award.
Autoliv also worked with suppliers to integrate processes and align strategies, focusing on interface costs across the entire supply chain rather than just individual parts. This further improved efficiencies.
An effective supply chain process architecture is critical to guide supply chain improvement efforts. It acts as a blueprint.
The architecture details processes, applications, information needed to support processes and their integration.
It ensures alignment between processes and supply chain infrastructure like IT systems and physical assets.
A good architecture passes four tests:
- Strategic fit - processes support company’s supply chain strategy and basis of competition
- End-to-end focus - enables end-to-end management across the supply chain
- Simplicity - processes are streamlined and minimize complexity
- Integrity - links between processes, data, IT systems are reliable and robust
Developing the architecture integrates rules about relationships between business entities and processes.
Companies with architectures aligned to goals have better performance, ease of implementation/operation, and ability to reconfigure quickly to changes.

So in summary, an effective supply chain process architecture is key to guiding improvements by mapping out the end-to-end processes, systems, and information flow in a way that strategically fits the business needs and supports an integrated, simple yet robust supply chain.

It’s important to think critically about why a company needs to operate in a certain way before deciding on supply chain practices and processes. Practices should align with and support the company’s overall supply chain strategy.
Critical supply chain practices will differ depending on a company’s primary supply chain strategy, such as innovation, cost, service, or quality leadership.
Amazon provides a good example of selecting practices that align with their supply chain strategy. As their strategy evolved, so did their processes.
Amazon focuses on constantly improving processes through benchmarking and breaking workflows into shared components across facilities.
New practices should be evaluated for their actual strategic fit and value before being implemented. Leading practices that provide only marginal benefits should be avoided.
The supply chain architecture should be reviewed regularly to ensure ongoing alignment with the company’s supply chain strategy.

Here is a summary of the key points about an end-to-end focus in supply chain architecture:

It identifies where integration of processes, systems, and organizations across the entire supply chain can create value for the company.
It requires shared goals and alignment across functions like purchasing, manufacturing, logistics, and sales to achieve overall business outcomes, not just functional objectives.
Companies need to define cross-functional, end-to-end metrics and targets to measure overall supply chain performance.
Processes need to be redesigned and information systems integrated to provide visibility and collaboration across the entire supply chain network with customers and suppliers.
Putting in place an end-to-end focus is challenging and requires companies to define shared objectives both internally and with external partners. Without shared objectives, investing in end-to-end processes does not make sense.

So in summary, an end-to-end focus looks at integrating and optimizing the entire supply chain as a network to achieve company-wide goals, rather than optimizing individual functions or segments in isolation.

The passage identifies four main drivers of complexity in supply chains: supply chain configuration, product/service proliferation, inconsistent processes and IT systems, and overautomation.
It describes how Alcatel Enterprise simplified its supply chain configuration by outsourcing non-core activities, streamlining the number of logistics providers, and standardizing fulfillment processes. This improved performance metrics.
Motorola found that too many non-standard components was driving up inventory costs, so it standardized components to reduce complexity.
Inconsistent processes and IT systems across locations increase costs, reduce flexibility and knowledge sharing, and make it harder to integrate with partners.
Overautomation, or planning tools with too many features for a company’s needs, can also increase complexity if users don’t understand how the systems work.
In summary, the passage argues that supply chain complexity is a major cause of poor returns, and simplification is needed as a first step before more advanced strategies can be effective. Companies should measure and reduce component, product, and configuration complexity to streamline operations.
Many companies have struggled with integrating their various business applications like ERP, CRM, SCM systems. These applications were often added individually over time without fully integrating underlying business processes and data.
Integration challenges still exist despite enterprise application integration tools. Software vendors were also slow to provide out-of-the-box integration between common ERP systems.
Advances like portal technologies are helping connect locations and applications, but many companies still have “application islands” where standalone apps only support part of the end-to-end process.
Lack of integration leads to manual data entry, format changes, quality checks, and reliance on individuals instead of integrated systems. This increases risks, cycle times, costs.
Accurate and available data is also important for integration. An estimated 15-20% of typical organization’s data is wrong or unusable, leading to errors and ineffectiveness.
Having a standard process architecture and definitions is important for defining required integration, measuring impacts, and communicating consistently both internally and externally. A lack of common understanding around terms like “supply chain” caused inconsistencies.
The Supply Chain Council (SCC) developed the Supply Chain Operations Reference (SCOR) model, a framework for supply chain management best practices. It defines processes, performance metrics and requirements.
The SCOR model provides a standardized terminology and framework to help organizations integrate tools like process reengineering and benchmarking. It enables effective supply chain design.
Using the SCOR model, organizations can assess their current performance, compare to others, identify improvements, and design future supply chain architecture. Over 700 companies have adopted the SCOR model.
In 1996, the SCC became independent and entrusted with the SCOR model. It has since grown internationally and continued advancing the model, adding new elements over time.
The SCOR model defines the top three levels of supply chain processes - processes, subprocesses, and activities. Level 4 defines detailed workflow tasks.
Level 1 defines the five major supply chain processes and how they align with organizational structure and strategic objectives. Level 2 refines process choices and how they align with infrastructure.

The selection of process categories at the SCOR Level 3 design stage is important because it will drive the detailed operational activities that need to be defined. Different process categories like make-to-stock, make-to-order, configure-to-order, engineer-to-order require unique detailed steps.

Once the process categories are chosen, existing supply chain configurations can be mapped showing where customers, suppliers, factories, warehouses are located and what major flows exist. This gives an inventory of current processes and locations.

Opportunities for improvement in the “to be” design can then be developed and tested, though existing limitations may prevent fully optimizing the desired changes. Incremental improvements over time may be needed.

At Level 3, more operational details are added like specific practices, metrics and IT systems requirements. As-is maps show alignments of processes, locations, inventory points and lead times. Analyzing configurations can reveal ways to streamline complexity, improve demand-production linkages, eliminate duplications and reduce waits/inventories.

The Level 3 analysis informs the evaluation of “to be” options against business criteria to select designs for Level 4 implementation planning. Aligning demand information sharing and planning was key for the retailer case study to reduce inventory without hurting service.

The company’s distribution warehouses were using historical demand patterns to pull inventory from suppliers and supply retail outlets. However, demand for many products is highly variable, especially for new products, promotions, and seasonal items. This meant there would be undersupply at the beginning of promotions and oversupply at the end.

The team realized major changes were needed to the planning process, including collaborative planning with suppliers for promotions and new products. This change would significantly impact existing IT systems. A broader cross-functional team was needed to fully adopt the new process architecture.

The company launched an enterprise project involving business and IT managers to further develop the new process and system architecture using SCOR. SCOR provided a structured approach to define the supply chain processes and how they integrate. It allowed the company to understand impacts and risks before implementing changes. The project aimed to better align planning with dynamic demand patterns and involve suppliers to improve inventory availability and customer service.

The passage discusses the core process of developing an end-to-end process architecture for supply chain management.
It covers four main supply chain processes - source, make, deliver, and return.
For the source process, it recommends focusing on total cost of ownership, setting procurement strategies by category, maintaining an enterprisewide focus, measuring and managing supplier performance, and integrating sourcing with other processes.
For the make process, it suggests focusing on business priorities, aiming for speed and flexibility over just low costs, setting and monitoring quality standards, and synchronizing all manufacturing activities.
For the deliver process, the principles are balancing service and cost to serve customers, cutting costs and time through straight-through processing, choosing an optimal physical network, and integrating deliver with other processes.
It provides examples of metrics and best practices for achieving top performance within each core supply chain process. The overall focus is on developing an integrated, end-to-end process architecture across the supply chain.

Here is a summary of ion, warehousing, and transportation with a focus on total costs and delivery time:

Ionization involves changing molecules or atoms into ions through the addition or removal of charged particles like electrons. It allows for the separation of mixtures by polarizing them. However, it can increase costs due to equipment and energy needs.
Warehousing involves the storage and handling of inventory, raw materials, and finished goods. It provides buffering of supply and demand but adds infrastructure and personnel costs. Larger warehouses may be needed to gain economies of scale but located farther from customers, increasing transportation costs.
Transportation moves goods between locations via roads, rails, waterways, or air. It connects suppliers, warehouses, and customers but transportation costs can be a significant portion of total supply chain costs. Delivery time is impacted by transportation distance, capacity constraints, and reliability of carriers.

Focusing on total costs and delivery time, companies aim to optimize the tradeoffs between ionization/warehousing costs and transportation costs by locating facilities strategically, using consolidation centers, and partnering with logistics providers. Advanced analytics on demand patterns and optimal inventory levels can help minimize total costs while meeting customer expectations for delivery time.

Avon is a leading direct seller of beauty and related products with $6.2 billion annual revenue. It sells through independent sales representatives in 145 countries.
Its Europe region was growing rapidly but its existing supply chain model of decentralized factories/warehouses per country couldn’t support this growth.
Problems included a mismatch between the 3-week sales cycle and 12-week supply chain cycle, inefficient rush orders and manufacturing schedule changes, high inventory levels of unsold products, and growing language variants of packaging.
It took 18 months to build a business case and get buy-in for a major supply chain transformation, which would involve a net loss in the first two years. resources committed included removing 45 key staff full-time for 18 months.
The transformation included creating a centralized planning function, common product/inventory databases, consolidated warehouses and manufacturing, multilingual packaging, and automating workflows and decision making. The goal was to support the fast 3-week sales cycle across the growing European markets.
Avon implemented an integrated planning and scheduling system across Europe to provide end-to-end visibility of its supply chain, including sales trends, inventory levels, and more.
It formed a regional planning group empowered to make decisions on service levels, inventory, costs based on this holistic view.
Avon analyzed its supply chain processes using SCOR and consolidated some production to Poland for lower costs and expanded manufacturing capabilities in emerging markets.
It created a centralized inventory hub in Poland near the production facility to serve European branches.
Avon postponed labeling bottles until closer to sales to reduce inventory needs and increase flexibility. Suppliers were also standardized to improve efficiency.
It collaborated more closely with a reduced number of geographically close suppliers to lower total costs through better design, planning and flexibility instead of just price.
Avon now takes a more integrated, collaborative approach to product design involving various functions to optimize costs and efficiency across the entire supply chain.
Avon redesigned its supply chain processes and organization structure around four key processes - plan, source, make, deliver.
Previously it had a complex structure with many functions reporting to the head. Now there are only four direct reports for the four process heads.
A major challenge has been changing the culture and roles/responsibilities as the new structure is very different. The metrics and goals for managers changed significantly.
Avon did extensive change management including defining new roles, setting clear metrics, training programs, and emphasizing communication to manage the cultural change.
Education and skills upgrading was critical as the required competencies changed in the new supply chain organization.
While systems integration is still a challenge, Avon focused first on process redesign before overhauling systems to make the transformation manageable.
The reorganization has helped simplify management and achieve projected cost savings of $50 million annually through supply chain efficiencies. However, change management remains an ongoing effort.

Major changes to an organization’s supply chain strategy or business environment may necessitate changes to the supply chain organization structure, roles, and responsibilities to better support the new objectives. Updating metrics, strategies, competencies, or processes could render the existing structure obsolete.

The case example of Stratex Networks illustrates this. When Stratex shifted to outsourced manufacturing and a focus on order fulfillment times, it required restructuring its supply chain organization. A new order fulfillment team was created to manage the entire order process from end to end. Planning and procurement roles were revised to better support forecasting demand for the manufacturing partner. Training and new hiring helped develop the needed skills.

The restructuring evolved along with the process changes over months. It was a key enabler for Stratex to realize the benefits of its new strategy. Additionally, even relatively minor process changes may warrant some organizational adjustments to improve performance. An optimal supply chain organization structure should evolve along with an organization’s changing strategy and capabilities.

Smith Bits, a manufacturer of drill bits for oil and gas exploration, was losing sales and experiencing long order fulfillment lead times due to a lack of product availability. Sales offices were hoarding inventory to ensure availability.
On recommendation, Smith Bits created a new supply chain organization to manage demand/supply balancing and inventory across regions. This group reported to the VP of worldwide sales.
The new organization was responsible for inventory from manufacturing to sale. It reallocated inventory between regions as needed, worked with manufacturing on production, and held weekly meetings to balance demand and supply.
The results were impressive - inventory levels dropped, improving cash flow. This allowed strategic acquisitions. Sales improved due to better availability and lead times.
The organizational change gave visibility into how actions in one region affected other regions. It improved coordination between manufacturing and sales/demand.
In summary, creating a dedicated supply chain organization improved inventory management, production planning, and customer service for Smith Bits. This delivered financial and operational benefits.
The company Agere had decentralized business units where planners would constantly change order due dates in response to changing customer needs. This caused turbulence in production scheduling.
Upon investigation, it was found that planners were “gaming the system” to get higher priority for their own orders, rather than responding to actual customer changes.
To solve this, the executive VP created a new centralized supply chain planning organization to remove influence from the business units and optimize planning at the highest level.
This reduced plan overrides from over 90% to under 50% in 6 months. It streamlined planning and improved on-time delivery and inventory performance.
The centralized structure allowed for improved coordination, data accuracy, and focus on customer needs rather than internal priorities. It optimized the end-to-end process rather than individual functions.

Here are the key points from the passage:

The company conducted a RACI (Responsible, Accountable, Consulted, Informed) analysis to identify areas with unclear accountability in its order fulfillment process. This showed that no single function or person was accountable for the overall process.
Goals of the redesign were to minimize errors, backtracking, and delays. RACI helped define roles and assign accountability for major activities. A new oversight position consolidated departments and had primary customer liaison responsibility.
Initially progress was slow as people resisted new roles, but within 10 months cycle times declined and the goal of 3 day average fulfillment was exceeded.
Core competencies are internal capabilities that confer competitive advantage or are essential to strategy. An organization should be structured to support metrics/targets and ensure clear roles/accountabilities. Outsourcing non-core activities can focus the company but thinning the core too much is risky.

So in summary, the company used RACI analysis to clarify accountability gaps, redesigned processes with new oversight roles, and improved fulfillment times, showing how defining metrics and roles supports optimizing performance.

Here are the key points about developing core competencies in supply chain management:

Core competencies are the essential skills and processes that are critical for competitive advantage, business growth, customer service, and superior product/service offerings.
To identify core competencies, review your company’s basis of competition and what is required to support it. Ask if certain activities are critical in these areas.
Functions like demand planning, supply-balancing, and supplier development are often core competencies due to their importance in meeting customer needs.
Product complexity and supply base stability influence what should be kept internal vs outsourced. More complex products/unstable supply may require keeping more in-house.
Activities near new product development like design-for-manufacturability and new product introduction coordination are often core competencies as well.
Identify any gaps between needed skills and those currently available, and determine if they should be developed internally or outsourced.
Communicate the value of supply chain management through metrics, education programs, and visible improvements to garner executive support and recognition as a strategic function.
The case discusses a senior vice president at palmOne who restructured the company’s supply chain organization over a two-year period.
He developed a three-phased plan and took on responsibility for areas like demand management, repair, and product support. His title helped cut through red tape to make changes.
The new supply chain organization was set up as a global organization with local capabilities. It had directors responsible for core processes and qualified individuals within each group.
The skills within the organization reflected strategic priorities like quick demand response and providing value in procurement.
The case also discusses AFC and how the VP of operations Jeff Rosen upgraded its supply chain organization and systems to improve processes and allow the company to scale as the market changed.
Rosen brought in experienced hires initially to improve costs and negotiate with vendors. As results improved, he was given more resources to restructure further.
Rosen replaced many transactional staff with people who could design new processes. He focused on hiring smart people to define key processes and a continuous improvement mindset.

So in summary, the case discusses how two companies successfully restructured and upgraded their supply chain organizations to better align with strategic needs through multi-year reorganization plans and focusing on the right skills and processes.

Owens Corning reorganized its supply chain structure and processes to better address increasing competition through greater cost flexibility and customer focus.
They had previously implemented an ERP system hoping it would solve business issues, but further changes were needed to truly integrate manufacturing, sales, and planning.
The goals of the reorganization were to operate as one company, improve customer service levels, and achieve $250M in cost savings over 3 years.
Functions impacting the customer experience were combined under a new Customer Supply Chain Operations department.
A Supply Chain and Technology Solutions department was created to focus on supply chain processes, technology deployment, and process innovation across the company.
Combining the technology and supply chain functions aimed to better integrate planning, manufacturing, and sales through process improvements and standardization on a common ERP platform.
The reorganization sought to shift the culture and mindset from manufacturing efficiency to supply chain flexibility and integrate customers and suppliers into end-to-end processes.

Here is a summary of the rationale and benefits for Owens Corning’s decision to reorganize and integrate its functions into one organization:

Leverage resources across the enterprise more effectively to do things faster and improve customer service.
Be more flexible and able to quickly respond to changing customer demands and market conditions.
Previously, with separate business units operating independently, costs were too high and it was difficult to grow with an inconsistent strategy.
Integrating functions allows for better coordination of planning, warehousing, transportation and manufacturing on an enterprise level rather than at the business unit level.
Improves customer service metrics like on-time delivery through better alignment of demand and supply planning processes.
Reduces costs through more integrated global operations and improved sales and operations planning.
Moving from a product focus to a customer/market focus requires having the capability to deliver customized solutions and flexible service across business demands.
Partnerships with key customers require being integrated into their supply chains to understand demands and fulfill them reliably.
Enables the company to utilize resources and processes more as an integrated “toolkit” to flexibly meet unique customer/segment needs.

In summary, the rationale was to leverage resources, improve flexibility, reduce costs and better meet evolving customer needs through integrating functions into a single, coordinated supply chain organization.

Here is a summary of the key points about customers, by eliminating as many inefficiencies as possi- in their dealings and taking the costs out of their shared supply chains:

The company is focusing on the customer and eliminating inefficiencies in how it deals with customers and manages its supply chains. This includes taking costs out of shared supply chains.
It has programs and metrics for managing vendor relationships and developing suppliers. While sourcing and supply chain teams are separate, they collaborate on initiatives like a shared vendor portal.
Cross-functional project review boards were established to better align key business processes between departments like customer service, procurement, production, R&D, IT, logistics. This helps enforce integration and assess benefits of initiatives.
The goal is to provide customers a single company experience by reinventing internal processes and organizations to be more integrated and competitive in the future. True collaboration requires information sharing, benefit sharing, and leads to quantifiable economic gains for all partners.
Collaboration exists on a continuum rather than discrete categories, so the levels of collaboration are blurred.
The diagram shows a spectrum of collaboration ranging from transactional to synchronized.
Transactional collaboration focuses on efficient transactions, while cooperative collaboration involves more information sharing.
Coordinated collaboration requires two-way information sharing and synchronized planning/processes.
Synchronized collaboration extends beyond operations to joint R&D, supplier development, IP development, and shared personnel/assets.
It’s not about picking the “right” label but examining the characteristics that differentiate partnerships.
Successful collaboration depends on choosing partners and developing relationships that maximize likely returns.
Areas to avoid are those labeled “low return” with limited collaboration and many partners, and “not viable” with deep collaboration across many partners.

So in summary, it lays out a spectrum of collaboration levels and emphasizes examining each relationship’s characteristics to determine the appropriate type and maximize returns, rather than focusing on labels.

The passage discusses the challenges of collaboration in supply chains. While fully integrated partnerships with extensive information sharing are theoretically possible, they are difficult to achieve in practice due to the challenges of aligning multiple partners.

Most supply chain collaborations today are transactional or cooperative in nature, focusing on basic activities like procurement and manufacturing. These low-investment relationships provide only modest benefits and do not advance companies’ strategic goals.

Deeper, strategic collaborations that create true value require a greater commitment from partners. However, companies still have a long way to go to reach an optimal level of multiple cooperative and coordinated partnerships.

The passage outlines some keys to successful collaboration, including first mastering internal collaboration, defining appropriate levels of collaboration for each partner, ensuring shared goals and risks/rewards, transparency of information, clear expectations, and use of technology. Internally aligning processes, incentives and systems is seen as a prerequisite to collaborating externally effectively. Balancing theoretical ideals, strategic needs and practical operations is also a challenge for companies.

In summary, the passage discusses the spectrum of collaboration in supply chains, from transactional to deeply strategic, and identifies challenges in achieving more advanced partnerships while outlining steps to build successful collaborative models.

At Logitech, decisions about product packaging design were traditionally made by the marketing department without input from the supply chain department. This led to issues like packages not fitting efficiently on pallets, increasing distribution costs.

The companies realized they needed better collaboration between marketing and supply chain to design packaging that allowed for both effective marketing of products and efficient distribution. However, changing packaging once products were already on the market was difficult.

The solution was for marketing and supply chain to work closely together earlier in the product development process. This allowed for compromise to find packaging designs that met both marketing and distribution needs. While marketing owned the overall package look, supply chain provided input on making distribution as cost-effective as possible.

Through increased collaboration between previously siloed departments, Logitech was able to achieve packaging that sold products well but also got them to customers as efficiently as possible. This benefited both marketing goals and operational costs.

Jamba Juice works closely with produce suppliers like large fruit and vegetable growers to ensure reliable availability of produce, which is critical for their business. They establish long-term contracts.
One challenge is securing enough frozen strawberries of the right size and form for their smoothies. Supermarkets prefer larger berries that are not ideal for blending.
Jamba Juice worked with their processor Cleugh’s Frozen Foods to develop a proprietary technology to break up strawberries into large chunks before freezing. This met Jamba’s volume and smoothie-making needs.
It required investment from Cleugh’s but ensured a consistent supply of fruit and solidified their long-term partnership.
The relationship shows how coordinated collaboration between a company and its suppliers can develop specialized solutions, even without advanced IT systems. It benefited both partners.

The key point is that Jamba Juice collaborates closely with produce suppliers and processors through things like long-term contracts and joint problem-solving to ensure a reliable supply of the right quality ingredients for their business. This benefits both Jamba and its partners.

Sharing strategic information like sales projections, pricing data, etc. with supply chain partners requires a high level of trust. However, violations of trust commonly occur as confidential information is sometimes shared with competitors.
Companies should set up protections when collaborating rather than avoiding it due to lack of trust. Contracts can clarify roles and responsibilities but may not provide legal recourse if violated. Comprehensive security practices and adhering to standards like ISO/IEC 17799 can help manage information security risks.
Early supply chain collaboration technologies broadly aimed to enable forecasting and planning but companies weren’t ready for the level of integration required. Today’s tools focus more on supply chain execution through event management and customer-supplier relationships.
Technology is an enabler of collaboration but not a replacement for good processes, expertise, or involvement of partners. Compromise from all sides is needed to make partnerships truly collaborative.

The key message is that while information sharing is important for collaboration, protections like contracts and security practices are needed to manage risks to trust. Technology can help but not substitute for addressing organizational readiness and involving partners. Compromise is also important for effective partnerships.

Collaboration requires partners to make fundamental changes in how they operate, and the degree of change increases along the collaboration spectrum. Only the largest companies can force changes on partners.
The goal of collaboration should be strategic or financial benefit, not just shifting costs between partners. It’s about lowering overall costs and sharing the savings, which requires willingness to compromise.
Small component suppliers may find it difficult to take on sophisticated logistics tasks required by some collaborative relationships while still remaining profitable. Their core competency is selling components, not managing supply chains.
OEMs and EMS providers sometimes develop collaboration plans that optimize their own benefits without adequately considering impacts on suppliers. Suppliers are expected to provide additional value-added services without additional compensation.
To gain supplier buy-in, collaboration plans need to fairly value any added services requested of suppliers through appropriate compensation. Partners also need technology solutions and training to prepare them.
Collaboration requires establishing metrics to regularly monitor results against the value proposition.
Future collaboration will be enabled by distributed data architectures allowing real-time responsiveness, improved security auditing, true system integration, predictive capabilities, and broader multi-tier partnerships. Focus will also shift more to front-end collaboration.

The Department of Defense is transforming its supply chain operations through an initiative called the Forward-centric Logistics Enterprise (FLE). The FLE aims to create a more agile and responsive supply chain model that draws on best practices from both the military and private sectors.

Key aspects of the FLE blueprint include total life cycle systems management, end-to-end distribution breaking down organizational “silos”, and enterprise integration of information systems. This transformation addresses the new realities of modern warfare like increased speed, flexibility and precision of military operations. It also involves greater partnerships with private industry.

Implementing this transformation presents immense challenges given the enormous scope and complexity of the DoD supply chain which is larger and more globally distributed than any private sector equivalent. Critical parts of executing the transformation include restructuring large organizations like the Defense Logistics Agency. Continuous monitoring and adjustments will likely be needed to achieve the new FLE vision.

In 2003, the Defense Logistics Agency (DLA) had $25 billion in sales and services. If it were a Fortune 500 company, it would rank 65th, just above New York Life.
The DLA operates in 48 US states and 28 foreign countries, employing 21,000 civilian and 500 military personnel. It runs the world’s largest warehouse distribution system and supplies all fuel for the US Department of Defense.
The DLA is transitioning from just storing and providing materials to understanding customer requirements and being more responsive, even during industrial base issues. It aims to see the full supply chain and be accountable over a weapon system’s lifetime.
Currently the DoD is building partnerships, protocols, and systems to achieve full end-to-end capability across the supply chain. The DLA is modernizing its legacy IT systems to better integrate with this initiative.
The DoD has struggled to identify the right metrics to measure logistics performance. It is developing a “balanced scorecard” approach with metrics chosen by the Joint Logistics Board.
Using this approach, the DLA has already reduced back orders by 22.2% and achieved its lowest ever cost recovery rate. Personnel have also been reduced.
Alan Estevez is leading the “end-to-end initiative” to integrate the supply chain and make it more customer-focused.
Estevez is revising regulations to implement accountability across the supply chain and use of performance agreements with metrics focused on the end customer like delivery times.
Pilot programs showing customers can be better served by focusing on their needs rather than the distribution network.
A balanced scorecard is being used to track performance against key metrics from the perspective of warfighters and sustainability.
Mobility force structure involving airlift, sealift, and prepositioning is key to agility. In-transit visibility technologies like RFID helped enable success in Iraq.
Commercial transportation partnerships like CRAF and VISA are critical but perspectives are changing on use of commercial options versus organic military assets.
Performance-based agreements will make the customer and their requirements the priority for determining optimal supply chain solutions.
The Marine Corps is actively engaged in logistics modernization and transformation initiatives to provide more effective support to warfighters. This includes improving internal supply chain practices and participating in joint DoD enterprise logistics initiatives like the Force-centric Logistics Enterprise (FLE).
The Marine Corps aims to replace footprint with precision and volume with information and speed, learning that setting up large logistics bases is no longer effective. They are moving toward a concept of sea-basing.
The Marine Corps has blended distribution, transportation, materiel management, and supply management under one umbrella and mapped its logistics/supply chain processes at the enterprise level for the first time using SCOR.
A key attribute is supporting Marine Air Ground Task Forces (MAGTFs), which include logistics as a 5th element. MAGTFs range from 100 to 18,000 personnel.
Metrics of success for the FLE in the Marine Corps will include reliability, responsiveness, flexibility, expense containment, asset utilization, and readiness - critical for the DoD. The Marines are implementing IT applications using the FLE enterprise integration toolkit.
Corporate metrics often focus on financial metrics like revenues, profits, costs, etc. due to reporting requirements and ease of obtaining this data.
The Sarbanes-Oxley Act of 2002 requires public companies to certify the accuracy of their financial statements and controls, enforcing good reporting practices.
While financial metrics evaluate financial health, they are historical and don’t provide forward-looking insights on operational effectiveness or non-financial metrics like customer service.
Supply chain metrics should translate financial goals into operational metrics and vice versa to connect the two. They should also drive behavior to support business strategy.
Measuring performance is important to understand improvements/issues, focus improvement efforts, and avoid problems surfacing too late. Metrics are needed for effective performance management.
A good metrics program links metrics to business strategy, uses balanced and comprehensive metrics, sets aggressive but achievable targets, ensures visibility of metrics, and uses metrics for continuous improvement.
Companies typically measure operational metrics like costs regularly, but now the entire company was asked to focus on a new “total cost” metric that captures the full expense of the supply chain.
Product managers saw for the first time the huge costs associated with expediting shipments due to forecast inaccuracies. This realization motivated a major initiative to improve forecasting accuracy, which significantly reduced reliance on expediting and lowered costs.
Measuring isolated operational metrics is often counterproductive; it’s better to identify metrics that support strategic goals by considering the full cost picture. This example illustrates how a new total cost metric revealed an opportunity to reduce expenses through forecasting improvements.

Performance versus

Use comparisons to external benchmarks to set aggressive but realistic improvement targets.

External benchmarks allow you to know what level of performance is required to be competitive. However, do not treat the external comparison data as rigid targets. Adjust benchmarks where necessary to ensure targets are both ambitious and achievable given your company’s characteristics and constraints.

Link metrics targets directly to the practices and actions needed to achieve them. This ensures accountability and anchors targets in actual process changes rather than abstract numbers. Continuously monitoring multiple metrics together provides a holistic view of progress.

Progress should be reviewed formally at least quarterly. Recalibrate targets as needed based on changing conditions to remain both motivating and grounded in reality.

CHAPTER 5

Core Discipline 5: Use Metrics to Drive Business Success 199

Consider starting with two or three key “big levers” that, once addressed, could potentially move multiple metrics. Address obstacles using a disciplined program management approach with clear owners and timelines. Recognize both quick wins and transformations that require sustained effort over years. Celebrate milestones to maintain momentum.

Metrics should inform priority areas for improvement, not dictate micromanagement tactics. Management oversight ensures an integrated, strategically aligned approach. Maintain scope for innovation beyond strict targets as new opportunities emerge.

With the right targets and program approach, quantitative measurement becomes a catalyst for major supply chain improvements rather than an end in itself. Regularly stepping back to assess strategic fit keeps efforts optimized over the long run.

Here are the key points about using metrics to drive business success:

Use a balanced set of metrics across financial, operational, customer and other relevant areas to get a holistic view of performance.
Set specific and measurable targets linked to strategies or initiatives, not just aspirational goals. Combine historical analysis, baselining and benchmarks.
Make metrics highly visible and monitor them at all levels of the organization. Use scoreboards, dashboards, etc. to track progress.
Identify “metrics champions” to actively monitor metrics and drive actions when targets aren’t being met.
Define decision-making processes and workflows that are triggered when metrics fall outside defined thresholds.
Leverage benchmarking data to continuously improve by identifying best practices and setting new targets over time. Develop implementation plans to execute initiatives that support targets.
Ensure metrics are used strategically to manage the business and supply chain, not just for reporting. Metrics should drive decisions and continuous improvement.

In summary, properly using metrics requires setting the right targets, visibility, accountability, and processes to enable strategic decision-making and performance management.

Here is a summary of the key points from Chapter 5:

Companies should choose metrics that are aligned with their overall supply chain strategy and objectives. They should validate the key priorities with senior managers and stakeholders.
Common starting metrics to consider include inventory days of supply, delivery performance, order fulfillment lead time, and cash-to-cash cycle time.
Companies should set near-term and long-term targets for the metrics, aiming for aggressive but achievable targets.
Initiatives should be identified that support achieving the objectives, and targets should be tied to specific improvement activities. Management support is important.
Implementing improvement programs may require systems support like a data warehouse or ERP system to capture and report metrics.
Companies should start with a few key metrics and get widespread use of them before adding more. Too many metrics can lead to complexity.
The right metrics will evolve over time as processes mature and depend on the company’s functional focus within supply chain. Metrics need to consider cross-functional performance.

So in summary, it focuses on selecting the right supply chain metrics that are aligned to strategy and objectives, setting targets, identifying initiatives to improve, and implementing supporting systems and processes.

RS refers to resource synchronization, which involves aligning internal resources and coordinating with external partners to ensure smooth flows across the supply chain.
Supply chain partners include suppliers, contract manufacturers, logistics providers, and customers that a company collaborates with as part of its extended supply chain. It is important to manage these external relationships and processes effectively.
Core competencies refer to the critical capabilities or knowledge that a company needs to excel at in order to provide value to customers. Core competencies are often technical or technological in nature and help differentiate the company.
Creating value involves designing products and services, as well as coordinating internal and external activities, in a way that delivers benefits to customers they are willing to pay for. The overall goal of a supply chain should be to create more value than competitors through superior coordination of resources and business processes.
Metrics are used to measure performance across key areas and ensure all functions are working together successfully to execute strategy. A balanced set of metrics is needed to assess delivery, costs, flexibility, responsiveness, and asset efficiency from both internal and external perspectives.
3Com implemented a balanced scorecard framework to monitor key performance indicators (KPIs) across different functions like sales, marketing, R&D, supply chain, and manufacturing.
Each function established objectives, actions, and metrics aligned to the company’s overall strategy. Performance was tracked across financial, customer, internal process, and learning/growth dimensions.
The supply chain organization selected metrics to measure critical aspects of performance like delivery predictability, stockout percentage, order cycle time, and supply chain costs.
Metrics were displayed on scorecards at the corporate, functional, and regional/product group levels. Drilling down allowed analyzing lower-level metrics to identify issues.
Scorecards were reviewed weekly in executive meetings to track progress on objectives and initiatives. This helped functions see how their actions impacted others.
3Com’s approach demonstrated how performance management can become integrated across the company rather than done independently in each function. This supported their end-to-end supply chain alignment with business strategy.
General Motors (GM) is the largest vehicle manufacturer, with $185.5 billion in revenue, 325,000 employees, and production facilities in 32 countries. It sold over 8.6 million vehicles globally in 2003, accounting for about 15% of the global market.
However, GM’s global market share had declined from 17.7% in the early 1990s to 15% by 2002 due to less customer satisfaction and competition from foreign imports.
In the 1970s-80s, GM had an arrogant attitude of “we’ll make it, and the customer will take it” with little input from dealers or customers on product decisions.
By the late 1990s, it was clear GM needed to change to keep up with more savvy and demanding consumers. Dealers faced high inventory levels and couldn’t get the vehicles customers wanted.
GM set a goal to satisfy customers better by shipping orders faster with less inventory and lower costs. It needed to transition from a make-and-sell to a sense-and-respond organization.
GM enhanced systems to better understand customer demands, give dealers order visibility, match production to orders, and fulfill orders faster while improving reliability and flexibility.
It reorganized into a cross-functional global team to align objectives and eliminate inefficiencies between functions like planning, supply, and logistics.
GM underwent a transformation of its Order-to-Delivery (OTD) process to improve customer satisfaction. The transformation was led by a global leadership team of three individuals who led the different subprocesses.
The new organization colocated functions that support and depend on each other, like aligning supply operations within manufacturing.
Previously GM had separate order management groups for vehicle and production orders; these were combined under the OTD process within sales and marketing.
The reorganization allowed GM to cut the size of the global OTD organization by nearly 30%, improving efficiency and reducing costs significantly.
GM realized logistics was a weak link, as outsourcing to multiple providers led to inconsistent performance. They partnered with a logistics company to centrally manage GM’s network, achieving a 17% cost reduction in three years toward a goal of 20% in five years.
GM tracked four key metrics - quality, net income, cash conservation, and market share - to guide the transformation and ensure a focus on business results.
The transformation required addressing GM’s legacy IT systems for integration and to support the process changes, though full optimization will take many years.
GM continues working to reduce cycle times and lead times, better integrate with dealers, and make the supply base more flexible through common systems.
Developing and executing a roadmap to change is important for achieving supply chain maturity and superior performance. It outlines the major initiatives over time (1-3 years) and shows how they are linked.
The roadmap is created through collaboration between supply chain, IT, and other functions like marketing, sales, finance. It ensures initiatives are defined, launched, and executed consistently with business strategy.
Developing the roadmap is a four-step process: 1) Define supply chain strategy 2) Set change priorities 3) Design solutions 4) Adapt and operate the supply chain.
Mature supply chains experience a 40% profitability advantage and average total costs just above 8% of revenue versus 10% for less mature supply chains. They also have 25% less inventory and superior customer service.
Technology is just one part of advancing performance - the five core disciplines must be enabled starting with strategy, processes, organization before fully leveraging systems integration. Positioning to excel requires being prepared across all these dimensions.
The passage discusses the need for supply chain technologies and systems to better align with how companies actually operate, rather than being narrow solutions looking for problems.
It argues the next generation of applications will be better suited to what companies want and need.
A core concept is that processes should form the foundation, with systems as “rungs on the ladder” to support improvement.
Research found that integrating best practices and technologies leads to better performance, while technology alone does not.
The next generation will emphasize transparency, flexibility and simultaneity more than efficiency. Systems are evolving to enable these characteristics.
Transparency provides visibility, flexibility handles uncertainty without buffer inventory, and simultaneity allows parallel not sequential activities.
An integrated supply chain with these qualities can improve responsiveness, lower costs and differentiate companies.

So in summary, it discusses how supply chain technologies need to better support real business needs, and defines characteristics the next generation should achieve through continued integration. Processes must come before systems to realize full benefits.

Companies are increasingly outsourcing more activities to transition fixed costs to variable costs. Effective collaboration will be critical as outsourcing becomes more widespread.
Logistics and outsourcing providers will expand their service offerings and help customers improve efficiencies and reduce labor costs.
Technologies like planning/optimization tools will continue advancing and become more integrated and modular. Information systems alone won’t provide as much competitive advantage as robust processes.
To develop a roadmap for an integrated supply chain, companies should start with their supply chain strategy to set priorities for change and drive the roadmap.
Priorities should be business-driven based on key metrics like delivery, inventory, costs tied to the company’s competitive basis.
The roadmap should consider the magnitude of change needed - from fixing basics to optimizing existing processes to new investments.
Initiatives should be evaluated as an integrated effort to understand dependencies and maximize impact of the overall efforts.

So in summary, the roadmap development process focuses on using the supply chain strategy to set priorities, understand the scope of change needed, and evaluate initiatives as an integrated portfolio to optimize impact.

The success of redesigning the planning process depends on whether underlying issues like supplier delivery performance are also addressed.
The individuals leading the changes need the right experience and skills to define and execute new processes effectively.
The new processes may rely on new system capabilities, so their design should consider dependencies and limitations of current IT systems.
A roadmap requires considering cultural and environmental factors beyond just technical solutions, like how the organization typically handles change and what the current business priorities are.
It’s important to understand the current processes, performance, metrics, pain points, roles and responsibilities to properly design new solutions.
The vision for the future state should incorporate characteristics of transparency, flexibility and simultaneity while meeting the architecture principles of strategic fit, end-to-end focus, simplicity and integrity.
Implementation requires a phased approach through design, prototyping, pilot and refinement to minimize risk and ensure success. Workstreams around program management, change management and measuring value are important.

In summary, successfully redesigning the planning process requires addressing interdependencies, having the right people, considering cultural factors, deeply understanding the current state, designing an improved future state vision and carefully implementing changes through a phased approach.

The passage focuses on how Seagate is shifting its supply chain approach to focus less on tangible physical assets and more on information and decision making to better respond to demand changes in real-time.

Seagate produces millions of complex disk drives per quarter using hundreds of complex components sourced globally. This makes it difficult to measure and manage value based on physical inventory metrics alone. Seagate’s goals are to ship to real-time changes in customer demand, not forecasts.

The passage emphasizes that Seagate is investing heavily in technology and process improvements to gain better multi-tiered visibility across its electronically linked global supply chain. This will allow it to more effectively fulfill demand in real-time as customer needs dynamically change. Agreement on specific performance metrics and value calculations upfront will be important for monitoring progress on less tangible supply chain capabilities like demand response times.

The passage indicates that n plays a critical, strategic role in Seagate’s supply chain operations. Specifically:

Integrating electronically with factories and suppliers eliminates touch points that slow things down and lead to errors, allowing Seagate to respond quickly to demand changes.
This “multitiered visibility” (ability to see up and down the supply chain) is a critical component of Seagate’s supply chain strategy. It gives Seagate and customers better capacity utilization throughout the supply chain.
Gaining visibility into subcontractors and producers further down suppliers’ supply chains helps Seagate manage risks in its extended supply chain.

So in summary, end-to-end connectivity and multitiered visibility (n) is positioned as playing a crucial strategic role in enabling Seagate to fulfill demand in real-time across its complex global supply chain operations.

Seagate proposed reducing inventory levels at customer JIT (just-in-time) hubs in exchange for being more responsive to changes in demand. This would rely on Seagate having reserve capacity.
Seagate has heavily invested in automated and flexible factory lines that can build any drive model on any line, improving responsiveness.
Some customers were skeptical, as their procurement teams weren’t incentivized to reduce inventory. But over time, even critics acknowledged Seagate’s improved service.
Suppliers were also reluctant to change at first, worrying about passing costs. But Seagate committed to transparency on consumption data, addressing suppliers’ concerns about overbooking.
Internally, Seagate changed incentives from maximizing capacity utilization to better meeting customer demand and reducing inventory.
Seagate regularly evaluates supply chain projects and strategy to ensure alignment with business needs as these evolve.
Ongoing initiatives include enterprise planning to improve data integration and the ability to assess impacts of demand changes across the company.
Seagate views its flexible and evolving supply chain as a key competitive advantage worth ongoing investment.
The Best-in-Class Company (BICC) index provides a way to sort companies into high, typical, and low performers based on a combination of supply chain metrics.
Four key SCOR Level 1 metrics were selected to calculate the BICC index: upside production flexibility, delivery performance to commit date, cash-to-cash cycle time, and inventory days of supply.
These metrics were chosen to represent both customer-facing and internal metrics and overall supply chain performance.
The values for each metric were normalized based on the industry average to remove industry bias.
The normalized values were summed to calculate the BICC index.
Companies were segmented into top 25% (best-in-class), middle 50% (median), and bottom 25% (worst-in-class) based on the BICC index.
Analysis showed best-in-class companies had more mature supply chain practices and better financial results compared to the other groups.
The appendix provides details on the methodology used to evaluate companies’ supply chain practices and performance. This includes a Supply Chain Maturity Model developed by PMG and PRTM.
The maturity model assesses companies’ practices in four supply chain processes (plan, source, make, deliver) as well as overall practices. It looks at over 270 questions across these areas.
Practices are categorized into stages of maturity from functional focus (Stage 1) to external integration (Stage 3+). A company’s overall maturity is based on which practices are dominant.
Analysis found Best-in-Class Companies (BICCs) had higher maturity, on average scoring Stage 2 or higher. Others were more transitional or Stage 1 focused.
BICCs showed better performance across key metrics like on-time delivery, inventory levels, flexibility, and costs. They had higher profits, asset turnover, and sales per assets.
The data provides evidence that more advanced supply chain practices, as measured by the maturity model, are positively correlated with better supply chain performance and overall business results.

Here is a summary of Appendix B:

The Supply Chain Maturity Model defines 4 stages of supply chain maturity: Functional Focus, Internal Integration, External Integration, and Cross-Enterprise Collaboration.
Stage 1 is defined as having individual functions focus on their own costs and performance with limited cross-functional processes.
Stage 2 involves defining company-wide processes and holding functions accountable for overall performance. Cross-functional measures are established.
Stage 3 extends integrated processes to customers and suppliers through joint agreements and scorecards. Strategic partnerships are formed.
Stage 4 involves customers/suppliers collaborating on strategy, targets, and integrating business processes through IT.
A study found most companies were between stages 2-3, with over 1/3 at advanced stage 2 and 1/3 transitioning to stage 3.
More mature companies expect to reach stage 3 on average, while the most mature aim for stage 4 collaboration. Maturity varies by industry.
Companies with more mature practices (>stage 2.3 on average) showed better performance across most supply chain metrics compared to less mature companies.

Here is a summary of the Level 1 metrics for SCOR performance attributes:

Supply Chain Delivery Performance - Key metrics include delivery performance, fill rates, and perfect order fulfillment. These measure how well the supply chain delivers the right products to the right place at the right time.
Supply Chain Responsiveness - The main metric is order fulfillment lead time, which measures how quickly the supply chain provides products to customers.
Supply Chain Flexibility - Metrics include supply chain response time and production flexibility, which measure how agile the supply chain is in responding to changes in the marketplace.
Supply Chain Costs - Cost metrics include cost of goods sold and total supply chain management costs. These measure the costs associated with operating the supply chain.
Supply Chain Asset Management Efficiency - Metrics focus on asset-related performance like cash-to-cash cycle time, inventory days of supply, and asset turns. These gauge efficiency in managing both fixed and working capital assets to support demand.

The Level 1 metrics provide high-level Key Performance Indicators (KPIs) for measuring overall supply chain performance across the main attributes. Level 2 and 3 metrics then drill down into more specific processes, capacities, lead times, etc.

This is a summary of various key metrics used to measure supplier and delivery performance in SCOR:

Downtime % of Total Production - Measures supplier reliability. Lower is better.
Supplier Performance Rating - Overall rating of supplier quality, delivery, responsiveness, etc. Higher is better.
Supplier Price Performance Percent - Metrics related to supplier adherence to agreed prices. Lower variance is better.
Value of Assets Provided by Service Provider (Cost Avoidance) - Benefits received from outsourcing arrangements. Higher savings is better.
Supplier Quality Performance Percent - Metrics related to defects, errors, reworks from the supplier. Lower is better.
Terms and Conditions - Adherence to contractual terms like payment terms, lead times, etc. Higher adherence is better.
Vehicle Maintenance Costs - Cost of maintaining delivery vehicles. Lower is better.
Time to Access Supplier/Source Data - Time taken to get supplier information for decision making. Lower is better.
Volume of Amendment Compared to Total Contracts - Stability and change in contractual agreements. Lower amendments relative to total contracts is better.
Comparison of SCOR Level 2 and 3 delivery metrics like delivery lead times, fill rates, flexibility, inventory levels, order accuracy, costs - Detailed performance metrics. Optimal targets depend on the business but in general shorter times, higher rates and lower costs are better.

Here is a summary of the key metrics in the intervention:

Number of data sources for data collection - Measures how many different systems or databases are used to collect supply chain data. More sources can increase complexity.
Compliance with multi-country government regulations - Measures ability to satisfy regulations in all countries of operation. Higher compliance reduces legal/compliance risks.
Perfect order fulfillment for the provider - Measures percentage of orders fulfilled correctly. Higher percentage means better customer satisfaction.
Cost of acquisition as percentage of distribution cost - Compares cost to obtain products to cost to distribute. Lower acquisition cost is more efficient.
Ratio of active to inactive customer data - Compares useful customer data to outdated data. Higher ratio means more relevant customer insights.
Cost of capital systems or 3rd party services - Measures expense of IT systems or outsourcing partners for supply chain activities. Lower cost is more efficient.
Rule implementation time - Time to execute new business rules or processes. Shorter time means more agility.
Rule management cost - Expense of developing and maintaining rules/algorithms that run supply chain processes. Lower cost is more efficient.
Speed of parameter updates - Time to change variables like rates, prices, etc. in response to market changes. Faster updates improve responsiveness.
Time to update customer records - Measure of data management efficiency. Shorter time keeps customer data more accurate.

The summary focuses on key supply chain metrics around data, compliance, order fulfillment, costs, processes/rules and responsiveness based on the headings provided in the prompt. Let me know if you need any part of the summary explained further.

Here is a summary of the article “69 Manufacturers Launch First Cross-Industry Framework for Improved Supply Chain Management,” November 21, 1996:

69 major manufacturers announced the formation of the Voluntary Interindustry Commerce Standards (VICS) association to develop and promote the use of common business practices and data standards across multiple industries.
The goal was to improve supply chain management through more efficient communication and data sharing between manufacturers, retailers, distributors, and suppliers.
Specific objectives included developing standardized electronic data interchange (EDI) formats, reference catalogs, and implementation guidelines to enable better planning, forecasting, ordering, inventory management, and transportation across organizations.
Founding members included Procter & Gamble, General Motors, Coca-Cola, Johnson & Johnson, PepsiCo, Wal-Mart, and Kmart. They represented industries like consumer goods, automotive, food and beverage, chemicals, electronics, and retail.
VICS aimed to build on existing EDI efforts and standards from organizations like the Uniform Code Council (UCC) and Automotive Industry Action Group (AIAG) to promote broader adoption and cross-industry use.
They hoped common standards would help reduce costs for all parties while improving service levels, order fill rates, inventory management and overall supply chain efficiency.

In summary, the article announced the formation of a new cross-industry collaborative focused on developing and promoting common Supply Chain Management standards and best practices to enable better communication, planning and data sharing across organizations.

Here is a summary of the key points about supply chain integration strategies from the passage:

Supply chain integration involves coordinating activities across organizations to improve overall supply chain performance. The degree of integration can vary from low to high.
Some defining characteristics of supply chain integration include it being coordinated across organizations, having common principles guiding activities, and using tests to evaluate the level of integration.
The core strategic vision of supply chain integration can evolve over time as capabilities change. Internal integration within an organization and external integration with other organizations are both important.
Reasons to pursue supply chain integration include reducing costs, improving customer service, gaining competitive advantage, and better managing risks and rewards across organizations.
Different levels of integration exist on a spectrum from low to high, including information sharing, coordinated decisions, jointly managed inventory, and shared rewards/risks. More integrated strategies generally involve more risks but also higher rewards.
Successful integration requires collaboration between organizations and shared goals. Internal collaboration within an organization is also important for integration. Metrics and benchmarking can help evaluate the level and effectiveness of integration.

Here is a summary of the key sections from the passage:

Order fulfillment (53-54, 115-118) - Discusses accountability principle of organization design and using RACI analysis to assign roles and responsibilities for order fulfillment processes.
Order fulfillment lead time (56) - Mentions order fulfillment lead time as a metric.
Order management (183-184, 190) - Notes order management systems and planning processes.
Order response time (225-226) - Lists order response time as a next-gen performance metric.
Order-to-delivery (OTD) organization (218–224) - Summarizes 3Com’s use of an OTD organization to improve order fulfillment.
National Automobile Dealers Association (NADA) (220) - Briefly mentions the NADA.
Partnerships (227) - Notes the importance of partnerships.
Total cost of ownership (TCO) looks at all relevant costs associated with a product or service over its full life cycle, from design to disposal. This allows organizations to optimize decisions based on the true overall expenditure.
Supply chain strategy should be aligned with an organization’s overall business strategy to maximize value. It encompasses decisions around channel structure, asset deployment, and adaptability to changes in demand or supply.
The US Department of Defense faces many challenges in managing its vast and complex global supply chain. It has initiatives to improve integration across its enterprise and implement end-to-end visibility and performance-based agreements with suppliers. Push-pull models also aim to enhance flexibility.
Supply chain metrics like total inventory days of supply, supply chain scorecards, and total cost of returns help organizations measure performance over time and identify areas for improvement.
Collaboration between organizations in the supply chain, whether transactional or strategic, can create efficiencies and optimize costs and service levels for all participants. However, trust must be established between collaborators.

#book-summary