SUPPLY CHAIN MANAGEMENT Contents

Introduction Lesson 1: An Introduction to Supply Chain Management Lesson 2: Developments in Supply Chain Management Lesson 3: Theories of Supply Chain Management Lesson 4: Product Life Cycle Lesson 5: Fulfilling the concept-to-customer vision Lesson 6: Limitations of current forecasting tools Lesson 7: Supply Chain Performance

SUPPLY CHAIN MANAGEMENT-INTRODUCTION

Supply chain management (SCM) Is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996). Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption (supply chain). What is supply chain management? Supply chain management (SCM) is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers. The following are five basic components of SCM. 1. PlanThis is the strategic portion of SCM. Companies need a strategy for managing all the resources that go toward meeting customer demand for their product or service. A big piece of SCM planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers. 2. SourceNext, companies must choose suppliers to deliver the goods and services they need to create their product. Therefore, supply chain managers must develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. And then, SCM managers can put together processes for managing their goods and services inventory, including receiving and verifying shipments, transferring them to the manufacturing facilities and authorizing supplier payments. 3. MakeThis is the manufacturing step. Supply chain managers schedule the activities necessary for production, testing, packaging and preparation for delivery. This is the most metric-intensive portion of the supply chainone where companies are able to measure quality levels, production output and worker productivity. 4. DeliverThis is the part that many SCM insiders refer to as logistics, where companies coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments. 5. ReturnThis can be a problematic part of the supply chain for many companies. Supply chain planners have to create a responsive and flexible network for receiving defective and excess products back from their customers and supporting customers who have problems with delivered products..

Lesson 1 An Introduction to Supply Chain Management

A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm. Below is an example of a very simple supply chain for a single product, where raw material is procured from vendors, transformed into finished goods in a single step, and then transported to distribution centers, and ultimately, customers. Realistic supply chains have multiple end products with shared components, facilities and capacities. The flow of materials is not always along an arborescent network, various modes of transportation may be considered, and the bill of materials for the end items may be both deep and large. Traditionally, marketing, distribution, planning, manufacturing, and the purchasing

organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Marketing's objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization---there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such integration can be achieved. Supply chain management is typically viewed to lie between fully vertically integrated firms, where the entire material flow is owned by a single firm and those where each channel member operates independently. Therefore coordination between the various players in the chain is key in its effective management. Cooper and Ellram [1993] compare supply chain management to a wellbalanced and well-practiced relay team. Such a team is more competitive when each player knows how to be positioned for the hand-off. The relationships are the strongest between players who directly pass the baton, but the entire team needs to make a coordinated effort to win the race.

Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed). As a solution for successful supply chain management, sophisticated software systems with Web interfaces are competing with Web-based application service providers (ASP) who promise to provide part or all of the SCM service for companies who rent their service. Supply chain management flows can be divided into three main flows:

The product flow The information flow The finances flow The product flow includes the movement of goods from a supplier to a customer, as well as

any customer returns or service needs. The information flow involves transmitting orders and updating the status of delivery. The financial flow consists of credit terms, payment schedules, and consignment and title ownership arrangements. There are two main types of SCM software: planning applications and execution applications. Planning applications use advanced algorithms to determine the best way to fill an order. Execution applications track the physical status of goods, the management of materials, and financial information involving all parties. Some SCM applications are based on open data models that support the sharing of data both inside and outside the enterprise (this is called the extended enterprise, and includes key suppliers, manufacturers, and end customers of a specific company). This shared data may reside in diverse database systems, or data warehouses, at several different sites and companies. By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a company's clients), SCM applications have the potential to improve the time-to-market of products, reduce costs, and allow all parties in the supply chain to better manage current resources and plan for future needs. Increasing numbers of companies are turning to Web sites and Web-based applications as part of the SCM solution. A number of major Web sites offer e-procurement marketplaces where manufacturers can trade and even make auction bids with suppliers.

Supply Chain Decisions We classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes {\it are} the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain. There are four major decision areas in supply chain management: 1) location, 2) production, 3) inventory, and 4) transportation (distribution), and there are both strategic and operational elements in each of these decision areas. Location Decisions The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service. These decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs, production limitations, etc. Although location decisions are primarily strategic, they also have implications on an operational level. Production Decisions The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm. These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilities--and this largely depends the degree of vertical integration within the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance.

Other considerations include workload balancing, and quality control measures at a production facility. Inventory Decisions These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw materials, semi-finished or finished goods. They can also be in-process between locations. Their primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels. Transportation Decisions The mode choice aspect of these decisions is the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service levels, and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firm's transport strategy. Supply Chain Modeling Approaches Clearly, each of the above two levels of decisions require a different perspective. The strategic decisions are, for the most part, global or "all encompassing" in that they try to integrate various aspects of the supply chain. Consequently, the models that describe these decisions are huge, and require a considerable amount of data. Often due to the enormity of data requirements, and the broad scope of decisions, these models provide approximate solutions to the decisions they describe. The operational decisions, meanwhile, address the day to day operation of the supply chain. Therefore

the models that describe them are often very specific in nature. Due to their narrow perspective, these models often consider great detail and provide very good, if not optimal, solutions to the operational decisions. To facilitate a concise review of the literature, and at the same time attempting to accommodate the above polarity in modeling, we divide the modeling approaches into three areas --Network Design, ``Rough Cut" methods, and simulation based methods. The network design methods, for the most part, provide normative models for the more strategic decisions. These models typically cover the four major decision areas described earlier, and focus more on the design aspect of the supply chain; the establishment of the network and the associated flows on them. "Rough cut" methods, on the other hand, give guiding policies for the operational decisions. These models typically assume a "single site" (i.e., ignore the network) and add supply chain characteristics to it, such as explicitly considering the site's relation to the others in the network. Simulation methods is a method by which a comprehensive supply chain model can be analyzed, considering both strategic and operational elements. However, as with all simulation models, one can only evaluate the effectiveness of a pre-specified policy rather than develop new ones. Network Design Methods As the very name suggests, these methods determine the location of production, stocking, and sourcing facilities, and paths the product(s) take through them. Such methods tend to be large scale, and used generally at the inception of the supply chain. The earliest work in this area, although the term "supply chain" was not in vogue, was by Geoffrion and Graves [1974]. They introduce a multicommodity logistics network design model for optimizing annualized finished product flows from plants to the DC's to the final customers. Geoffrion and Powers [1993] later give a review of the evolution of distribution strategies over the past twenty years, describing how the descendants of the above model can accommodate more echelons and cross commodity detail. Breitman and Lucas [1987] attempt to provide a framework for a comprehensive model of a production-distribution system, "PLANETS", that is used to decide what products to produce, where and how to produce it, which markets to pursue and what resources to use. Parts of this ambitious project were successfully implemented at General Motors. Cohen and Lee evelop a conceptual framework for manufacturing strategy analysis, where they describe a series of stochastic sub- models, that considers annualized product flows from raw material vendors via intermediate plants and distribution echelons to the final customers. They use

heuristic methods to link and optimize these sub- models. They later give an integrated and readable exposition of their models and methods in Cohen and Lee. Cohen and Lee present a normative model for resource deployment in a global manufacturing and distribution network. Global after-tax profit (profit-local taxes) is maximized through the design of facility network and control of material flows within the network. The cost structure consists of variable and fixed costs for material procurement, production, distribution and transportation. They validate the model by applying it to analyze the global manufacturing strategies of a personal computer manufacturer. Finally, Arntzen, Brown, Harrison, and Trafton provide the most comprehensive deterministic model for supply chain management. The objective function minimizes a combination of cost and time elements. Examples of cost elements include purchasing, manufacturing, pipeline inventory, transportation costs between various sites, duties, and taxes. Time elements include manufacturing lead times and transit times. Unique to this model was the explicit consideration of duty and their recovery as the product flowed through different countries. Implementation of this model at the Digital Equipment Corporation has produced spectacular results --- savings in the order of $100 million dollars. Clearly, these network-design based methods add value to the firm in that they lay down the manufacturing and distribution strategies far into the future. It is imperative that firms at one time or another make such integrated decisions, encompassing production, location, inventory, and transportation, and such models are therefore indispensable. Although the above review shows considerable potential for these models as strategic determinants in the future, they are not without their shortcomings. Their very nature forces these problems to be of a very large scale. They are often difficult to solve to optimality. Furthermore, most of the models in this category are largely deterministic and static in nature. Additionally, those that consider stochastic elements are very restrictive in nature. In sum, there does not seem to yet be a comprehensive model that is representative of the true nature of material flows in the supply chain. Rough Cut Methods These models form the bulk of the supply chain literature, and typically deal with the more operational or tactical decisions. Most of the integrative research (from a supply chain context) in the literature seem to take on an inventory management perspective. In fact, the term "Supply Chain" first appears in the literature as an inventory management approach. The thrust of the rough cut models is

the development of inventory control policies, considering several levels or echelons together. These models have come to be known as "multi-level" or "multi-echelon" inventory control models. For a review the reader is directed to Vollman et al. Multi-echelon inventory theory has been very successfully used in industry. Cohen et al. describe "OPTIMIZER", one of the most complex models to date --- to manage IBM's spare parts inventory. They develop efficient algorithms and sophisticated data structures to achieve large scale systems integration. Although current research in multi-echelon based supply chain inventory problems shows considerable promise in reducing inventories with increased customer service, the studies have several notable limitations. First, these studies largely ignore the production side of the supply chain. Their starting point in most cases is a finished goods stockpile, and policies are given to manage these effectively. Since production is a natural part of the supply chain, there seems to be a need with models that include the production component in them. Second, even on the distribution side, almost all published research assumes an arborescence structure, i. e. each site receives re-supply from only one higher level site but can distribute to several lower levels. Third, researchers have largely focused on the inventory system only. In logistics-system theory, transportation and inventory are primary components of the order fulfillment process in terms of cost and service levels. Therefore, companies must consider important interrelationships among transportation, inventory and customer service in determining their policies. Fourth, most of the models under the "inventory theoretic" paradigm are very restrictive in nature, i.e., mostly they restrict themselves to certain well known forms of demand or lead time or both, often quite contrary to what is observed. Idea The definition one American professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, thirdparty service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies. More recently, the loosely coupled, selforganizing network of businesses that cooperates to provide product and service offerings has been called the Extended Enterprise.

Supply Chain Management can also refer to Supply chain management software which are tools or modules used in executing supply chain transactions, managing supplier relationships and controlling associated business processes. Supply chain event management (abbreviated as SCEM) is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. With SCEM possible scenarios can be created and solutions can be planned. Supply Chain Management Problems Supply chain management must address the following problems:

Distribution Network Configuration: Number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers. Distribution Strategy: Including questions of operating control (centralized, decentralized or shared); delivery scheme (e.g., direct shipment, pool point shipping, Cross docking, DSD (direct store delivery), closed loop shipping); mode of transportation (e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal, including TOFC and COFC; ocean freight; airfreight); replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner-operated, private carrier, common carrier, contract carrier, or 3PL). Trade-Offs in Logistical Activities

The above activities must be coordinated well together in order to achieve the least total logistics cost. Trade-offs exist that increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs there will be an increase in inventory holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy.

Information: Integration of and other processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, and potential collaboration etc.

Inventory Management: Quantity and location of inventory including raw materials, work-inprogress (WIP) and finished goods. Cash-Flow: Arranging the payment terms and the methodologies for exchanging funds across entities within the supply chain.

Supply chain execution is managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional. Activities/functions Supply chain management is a cross-function approach to manage the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and then the movement of finished goods out of the organization toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they have reduced their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity. Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Management Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels of activities. Strategic

Strategic network optimization, including the number, location, and size of warehouses, distribution centers, and facilities Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics

Product lifecycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management Information Technology infrastructure, to support supply chain operations Where-to-make and what-to-make-or-buy decisions Aligning overall organizational strategy with supply strategy

Tactical

Sourcing contracts and other purchasing decisions. Production decisions, including contracting, scheduling, and planning process definition. Inventory decisions, including quantity, location, and quality of inventory. Transportation strategy, including frequency, routes, and contracting. Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. Milestone payments Focus on customer demand.

Operational

Daily production and distribution planning, including all nodes in the supply chain. Production scheduling for each manufacturing facility in the supply chain (minute by minute). Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers. Inbound operations, including transportation from suppliers and receiving inventory. Production operations, including the consumption of materials and flow of finished goods. Outbound operations, including all fulfillment activities and transportation to customers. Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.

Supply chain management Organizations increasingly find that they must rely on effective supply chains, or networks, to successfully compete in the global market and networked economy. [2] In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies. During the past decades, globalization, outsourcing and information technology have enabled many organizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott, 1993). This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure

fits neither "market" nor "hierarchy" categories (Powell, 1990). It is not clear what kind of performance impacts different supply network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms (Zhang and Dilts, 2004). Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players. Therefore, the choice of an internal management control structure is known to impact local firm performance. In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances and business partnerships, there were found to be significant success factors, following the earlier "Just-In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices.[3] Second, technological changes, particularly the dramatic fall in information communication costs, which are a significant component of transaction costs, have led to changes in coordination among the members of the supply chain network. Many researchers have recognized these kinds of supply network structures as a new organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and "Next Generation Manufacturing System".[4] In general, such a structure can be defined as "a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration". The security management system for supply chain is described in ISO/IEC 28000 and ISO/IEC 28001 and related standards published jointly by ISO and IEC.

Lesson 2 Developments in Supply Chain Management

Six major movements can be observed in the evolution of supply chain management studies: Creation, Integration, and Globalization (Lavassani et al., 2008a), Specialization Phases One and Two, and SCM 2.0. 1. Creation Era The term supply chain management was first coined by an American industry consultant in the early 1980s. However the concept of supply chain in management, was of great importance long before in the early 20th century, especially by the creation of the assembly line. The characteristics of this era of supply chain management include the need for large scale changes, reengineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management. 2. Integration Era This era of supply chain management studies was highlighted with the development of Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of internet-based collaborative systems. This era of SC evolution is characterized by both increasing value-added and cost reduction through integration. 3. Globalization Era The third movement of supply chain management development, globalization era, can be characterized by the attention towards global systems of supplier relations and the expansion of supply chain over national boundaries and into other continents. Although the use of global sources in the supply chain of organizations can be traced back to several decades ago (e.g. the oil industry), it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business. This era is characterized by the globalization of supply chain

management in organizations with the goal of increasing competitive advantage, creating more valueadded, and reducing costs through global sourcing. 4. Specialization Era -- Phase One -- Outsourced Manufacturing and Distribution In the 1990s industries began to focus on core competencies and adopted a specialization model. Companies abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This changed management requirements by extending the supply chain well beyond the four walls and distributing management across specialized supply chain partnerships. This transition also refocused the fundamental perspectives of each respective organization. OEMs became brand owners that needed deep visibility into their supply base. They had to control the entire supply chain from above instead of from within. Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI). The specialization model creates manufacturing and distribution networks composed of multiple, individual supply chains specific to products, suppliers, and customers who work together to design, manufacture, distribute, market, sell, and service a product. The set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands. 5. Specialization Era -- Phase Two -- Supply Chain Management as a Service Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, and non asset based carriers and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution and performance management. At any given moment, market forces could demand changes within suppliers, logistics providers, locations, customers and any number of these specialized participants within supply chain networks. This variability has significant effect on the supply chain infrastructure, from the foundation layers of establishing and managing the electronic communication between the trading partners to the more-complex requirements, including the configuration of the processes and work flows that are essential to the management of the network itself.

Supply chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to focus on their core competencies and assemble networks of best in class domain specific partners to contribute to the overall value chain itself thus increasing overall performance and efficiency. The ability to quickly obtain and deploy this domain specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house is the leading reason why supply chain specialization is gaining popularity. Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken root in transportation and collaboration categories most dominantly. This has progressed from the Application Service Provider (ASP) model from approximately 1998 through 2003 to the OnDemand model from approximately 2003-2006 to the Software as a Service (SaaS) model we are currently focused on today. 6. Supply Chain Management Building off of globalization and specialization, SCM 2.0 has been coined to describe both the changes within the supply chain itself as well as the evolution of the processes, methods and tools that manage it in this new "era". Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase creativity, information sharing, and collaboration among users. At its core, the common attribute that Web 2.0 brings is it helps us navigate the vast amount of information available on the web to find what we are looking for. It is the notion of a usable pathway. SCM 2.0 follows this notion into supply chain operations. It is the pathway to SCM results the combination of the processes, methodologies, tools and delivery options to guide companies to their results quickly as the complexity and speed of the supply chain increase due to the effects of global competition, rapid price flucuations, surging oil prices, short product life cycles, expanded specialization, near/far and off shoring, and talent scarcity. SCM 2.0 leverages proven solutions designed to rapidly deliver results with the agility to quickly manage future change for continuous flexibility, value and success. This is delivered through competency networks composed of best of breed supply chain domain expertise to understand which elements, both operationally and organizationally, are the critical few that deliver the results as well as the intimate understanding of how to manage these elements to achieve desired results, finally the solutions are delivered in a variety of options as no-touch via business process outsourcing, mid-

touch via managed services and software as a service (SaaS), or high touch in the traditional software deployment model. Supply chain business process integration Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become appropriate. Marketing, responding to customer demand, communicates with several distributors and retailers as it attempts to satisfy this demand. Shared information between supply chain partners can only be fully leveraged through process integration. Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flow. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert (2004) [5] are:

Customer relationship management Customer service management Demand management Order fulfillment Manufacturing flow management Supplier relationship management Product development and commercialization Returns management

Much has been written about demand management. Best in Class companies have similar characteristics. They include the following: a) Internal and external collaboration b) Lead time reduction initiatives c) Tighter feedback from customer and market demand d) Customer level forecasting

One could suggest other key critical supply business processes combining these processes stated by Lambert such as: a. Customer service management

b. Procurement c. Product development and commercialization d. Manufacturing flow management/support e. Physical distribution f. Outsourcing/partnerships g. Performance measurement a) Customer service management process Customer Relationship Management concerns the relationship between the organization and its customers. Customer service provides the source of customer information. It also provides the customer with real-time information on promising dates and product availability through interfaces with the company's production and distribution operations. Successful organizations use following steps to build customer relationships:

determine mutually satisfying goals between organization and customers establish and maintain customer rapport produce positive feelings in the organization and the customers

b) Procurement process Strategic plans are developed with suppliers to support the manufacturing flow management process and development of new products. In firms where operations extend globally, sourcing should be managed on a global basis. The desired outcome is a win-win relationship, where both parties benefit, and reduction times in the design cycle and product development are achieved. Also, the purchasing function develops rapid communication systems, such as electronic data interchange (EDI) and Internet linkages to transfer possible requirements more rapidly. Activities related to obtaining products and materials from outside suppliers requires performing resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers in scheduling, supply continuity, hedging, and research into new sources or programmes.

c) Product development and commercialization Here, customers and suppliers must be united into the product development process, thus to reduce time to market. As product life cycles shorten, the appropriate products must be developed

and successfully launched in ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must: 1. coordinate with customer relationship management to identify customer-articulated needs; 2. select materials and suppliers in conjunction with procurement, and 3. Develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination. d) Manufacturing flow management process The manufacturing process is produced and supplies products to the distribution channels based on past forecasts. Manufacturing processes must be flexible to respond to market changes, and must accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency of demand to customers. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. e) Physical distribution This concerns movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e.g. links manufacturers, wholesalers, retailers). f) Outsourcing/partnerships This is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage and everything else it will outsource. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Also, to manage and control this network of partners

and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level. g) Performance measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. By taking advantage of supplier capabilities and emphasizing a longterm supply chain perspective in customer relationships can be both correlated with firm performance. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. According to experts internal measures are generally collected and analyzed by the firm including 1. Cost 2. Customer Service 3. Productivity measures 4. Asset measurement, and 5. Quality. External performance measurement is examined through customer perception measures and "best practice" benchmarking, and includes 1) customer perception measurement, and 2) best practice benchmarking. Components of Supply Chain Management are 1. Standardization 2. Postponement 3. Customization

Lesson 3 Theories of Supply Chain Management

Currently there exists a gap in the literature available in the area of supply chain management studies, on providing theoretical support for explaining the existence and the boundaries of supply chain management. Few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al. (2008b) had tried to provide theoretical foundations for different areas related to supply chain with employing organizational theories. These theories includes:

Resource-based view (RBV) Transaction Cost Analysis (TCA) Knowledge-based view (KBV) Strategic Choice Theory (SCT) Agency theory (AT) Institutional theory (InT) Systems Theory (ST) Network Perspective (NP)

Components of Supply Chain Management Integration The management components of SCM The SCM components are the third element of the four-square circulation framework. The level of integration and management of a business process link is a function of the number and level, ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan, 1985). Consequently, adding more management components or increasing the level of each component can increase the level of integration of the business process link. The literature on business process

reengineering,[6] buyer-supplier relationships,[7] and SCM[8] suggests various possible components that must receive managerial attention when managing supply relationships. Lambert and Cooper (2000) identified the following components which are:

Planning and control Work structure Organization structure Product flow facility structure Information flow facility structure Management methods Power and leadership structure Risk and reward structure Culture and attitude

However, a more careful examination of the existing literature [9] will lead us to a more comprehensive structure of what should be the key critical supply chain components, the "branches" of the previous identified supply chain business processes, that is, what kind of relationship the components may have that are related with suppliers and customers accordingly. Bowersox and Closs states that the emphasis on cooperation represents the synergism leading to the highest level of joint achievement. A primary level channel participant is a business that is willing to participate in the inventory ownership responsibility or assume other aspects of financial risk, thus including primary level components. A secondary level participant (specialized) is a business that participates in channel relationships by performing essential services for primary participants, thus including secondary level components, which are in support of primary participants. Third level channel participants and components that will support the primary level channel participants, and which are the fundamental branches of the secondary level components, may also be included. Consequently, Lambert and Cooper's framework of supply chain components does not lead us to the conclusion about what are the primary or secondary (specialized) level supply chain components (see Bowersox and Closs, 1996, p.g. 93). That is, what supply chain components should be viewed as primary or secondary, how these components should be structured in order to have a more comprehensive supply chain structure, and to examine the supply chain as an integrative one (See above sections 2.1 and 3.1).

Reverse Supply Chain

Reverse logistics is the process of planning, implementing and controlling the efficient, effective inbound flow and storage of secondary goods and related information opposite to the traditional supply chain direction for the purpose of recovering value or proper disposal. Reverse logistics is also referred to as "Aftermarket Customer Services". In other words, anytime money is taken from a company's Warranty Reserve or Service Logistics budget, that is a Reverse Logistics operation.

Supply chain Drivers and Obstacles Drivers of Supply chain performance

A framework for structuring drivers Facilities Inventory Transportation Information Sourcing Pricing Obstacles to achieving fit

Drivers of Supply chain Performance

Facilities
o o

places where inventory is stored, assembled, or fabricated production sites and storage sites raw materials, WIP, finished goods within a Supply chain inventory policies moving inventory from point to point in a Supply chain combinations of transportation modes and routes data and analysis regarding inventory, transportation, facilities throughout the Supply chain

Inventory
o o

Transportation
o o

Information
o

potentially the biggest driver of Supply chain performance functions a firm performs and functions that are outsourced Price associated with goods and services provided by a firm to Supply chain

Sourcing
o

Pricing
o

A Framework for Structuring Drivers Facilities

Role in the Supply chain

o o

the where of the Supply chain manufacturing or storage (warehouses) economies of scale (efficiency priority) larger number of smaller facilities (responsiveness priority)

Role in the competitive strategy

o o

Example 3.1: Toyota and Honda Components of facilities decisions

Components of Facilities Decisions

Location
o o

centralization (efficiency) vs. decentralization (responsiveness) other factors to consider (e.g., proximity to customers)

Capacity (flexibility versus efficiency) Manufacturing methodology (product focused versus process focused) Warehousing methodology (SKU storage, job lot storage, cross-docking) Overall trade-off: Responsiveness versus efficiency

Inventory

Role in the Supply chain Role in the competitive strategy Components of inventory decisions

Inventory: Role in the Supply chain

Inventory exists because of a mismatch between supply and demand Source of cost and influence on responsiveness Impact on
o

material flow time: time elapsed between when material enters the Supply chain to when it exits the Supply chain throughput

rate at which sales to end consumers occur I = RT (Littles Law) I = inventory; R = throughput; T = flow time Example Inventory and throughput are synonymous in a Supply chain

Inventory: Role in Competitive Strategy

If responsiveness is a strategic competitive priority, a firm can locate larger amounts of inventory closer to customers If cost is more important, inventory can be reduced to make the firm more efficient Trade-off Example 3.2 Nordstrom

Components of Inventory Decisions

Cycle inventory
o o

Average amount of inventory used to satisfy demand between shipments Depends on lot size inventory held in case demand exceeds expectations costs of carrying too much inventory versus cost of losing sales inventory built up to counter predictable variability in demand cost of carrying additional inventory versus cost of flexible production more inventory: greater responsiveness but greater cost less inventory: lower cost but lower responsiveness

Safety inventory
o o

Seasonal inventory
o o

Overall trade-off: Responsiveness versus efficiency

o o

Transportation

Role in the Supply chain Role in the competitive strategy Components of transportation decisions

Transportation: Role in the Supply chain

Moves the product between stages in the Supply chain Impact on responsiveness and efficiency Faster transportation allows greater responsiveness but lower efficiency Also affects inventory and facilities

Transportation: Role in the Competitive Strategy

If responsiveness is a strategic competitive priority, then faster transportation modes can provide greater responsiveness to customers who are willing to pay for it Can also use slower transportation modes for customers whose priority is price (cost) Can also consider both inventory and transportation to find the right balance Example 3.3: Laura Ashley

Components of Transportation Decisions

Mode of transportation:
o o

air, truck, rail, ship, pipeline, electronic transportation vary in cost, speed, size of shipment, flexibility route: path along which a product is shipped network: collection of locations and routes

Route and network selection

o o

In-house or outsource Overall trade-off: Responsiveness versus efficiency

Information

Role in the Supply chain Role in the competitive strategy Components of information decisions

Information: Role in the Supply chain

The connection between the various stages in the Supply chain allows coordination between stages Crucial to daily operation of each stage in a Supply chain e.g., production scheduling, inventory levels

Information: Role in the Competitive Strategy

Allows Supply chain to become more efficient and more responsive at the same time (reduces the need for a trade-off) Information technology What information is most valuable? Example 3.4: Andersen Windows Example 3.5: Dell

Components of Information Decisions

Push (MRP) versus pull (demand information transmitted quickly throughout the Supply chain) Coordination and information sharing Forecasting and aggregate planning Enabling technologies
o o o o

EDI Internet ERP systems Supply chain Management software

Overall trade-off: Responsiveness versus efficiency

Sourcing

Role in the Supply chain Role in the competitive strategy Components of sourcing decisions

Sourcing: Role in the Supply chain

Set of business processes required to purchase goods and services in a Supply chain Supplier selection, single vs. multiple suppliers, contract negotiation

Sourcing: Role in the Competitive Strategy

Sourcing decisions are crucial because they affect the level of efficiency and responsiveness in a Supply chain In-house vs. outsource decisions- improving efficiency and responsiveness Example 3.6: Cisco

Components of Sourcing Decisions

In-house versus outsource decisions Supplier evaluation and selection Procurement process Overall trade-off: Increase the Supply chain profits

Pricing

Role in the Supply chain Role in the competitive strategy Components of pricing decisions

Pricing: Role in the Supply chain

Pricing determines the amount to charge customers in a Supply chain Pricing strategies can be used to match demand and supply.

Sourcing: Role in the Competitive Strategy

Firms can utilize optimal pricing strategies to improve efficiency and responsiveness Low price and low product availability; vary prices by response times Example 3.7: Amazon

Components of Pricing Decisions

Pricing and economies of scale

Everyday low pricing versus high-low pricing Fixed price versus menu pricing Overall trade-off: Increase the firm profits

Considerations for Supply chain Drivers Increasing variety of products

Decreasing product life cycles Increasingly demanding customers Fragmentation of Supply chain ownership Globalization Difficulty executing new strategies

Supply Chain Performance: Achieving Strategic Fit and Scope Competitive and Supply Chain Strategies

Competitive strategy: defines the set of customer needs a firm seeks to satisfy through its products and services Product development strategy: specifies the portfolio of new products that the company will try to develop Marketing and sales strategy: specifies how the market will be segmented and product positioned, priced, and promoted

Supply Chain strategy:

o

determines the nature of material procurement, transportation of materials, manufacture of product or creation of service, distribution of product Consistency and support between Supply Chain strategy, competitive strategy, and other functional strategies is important

The Value Chain: Linking Supply Chain and Business Strategy New Product Development Marketing and Sales Operations Distribution service Finance, Accounting, Information Technology, Human Resources Business Strategy New Product Strategy Marketing Strategy Supply Chain Strategy Achieving Strategic Fit:

Consistency between customer priorities of competitive strategy and Supply Chain capabilities specified by the Supply Chain strategy Competitive and Supply Chain strategies have the same goals

A company may fail because of a lack of Strategic Fit or because its processes and resources do not provide the capabilities to execute the desired strategy

Steps in Achieving Strategic Fit Step 1: Understanding the customer and Supply Chain uncertainty

Step 2: Understanding the Supply Chain Step 3: Achieving Strategic Fit

Step 1: Understanding the Customer and Supply Chain Uncertainty Identify the needs (attributes of demand) of the customer segment being served

Quantity of product needed in each lot Response time customers will tolerate Variety of products needed

Step 1: Understanding the Customer and Supply Chain Uncertainty Service level required

Price of the product Desired rate of innovation in the product Overall attribute of customer demand Demand uncertainty: uncertainty of customer demand for a product Implied demand uncertainty: resulting uncertainty for the Supply Chain given the portion of the demand the Supply Chain must handle and attributes the customer desires. Understand customers by mapping their demand on the implied uncertainty spectrum

Achieving Strategic Fit: Understanding the Customer

o o o o o o

Lot size Response time/ Lead time Service level Product variety Price (sensitivity to) Innovation

Impact of Customer Needs on Implied Demand Uncertainty Firm now has to handle unusual surges in demand Required service level increases New products tend to have more uncertain demand Rate of innovation increases Total customer demand is now disaggregated over more channels Number of channels increases Demand per product becomes more disaggregated Variety of products required increases Less time to react to orders Lead time decreases Wider range of quantity implies greater variance in demand Range of quantity increases Causes implied demand uncertainty to increase because Customer Need Step 2: Understanding the Supply Chain

How does the firm best meet demand? Dimension describing the Supply Chain is Supply Chain responsiveness

Supply Chain responsiveness -- ability to

o o o o o

respond to wide ranges of quantities demanded meet short lead times handle a large variety of products build highly innovative products meet a very high service level

There is a cost to Achieving responsiveness Supply Chain efficiency: cost of making and delivering the product to the customer Increasing responsiveness results in higher costs that lower efficiency

Understanding the Supply Chain: Cost-Responsiveness Efficient Frontier High Low Low High Responsiveness Cost Step 3: Achieving Strategic Fit.

Step is to ensure that what the Supply Chain does well is consistent with target customers needs

Responsiveness Spectrum Integrated steel mill Dell Highly efficient Highly responsive Somewhat efficient Somewhat responsive Hanes apparel most automotive production Achieving Strategic Fit Shown on the Uncertainty/Responsiveness Map

Implied uncertainty spectrum Responsive Supply Chain Efficient Supply Chain Certain demand Uncertain demand Responsiveness spectrum Zone of Strategic Fit

Step 3: Achieving Strategic Fit All functions in the value chain must support the competitive strategy to achieve Strategic Fit

Two extremes: Efficient supply chains and responsive supply chains

Comparison of Efficient and Responsive supply Chains Greater reliance on responsive (fast) modes Greater reliance on low cost modes Transportation strategy Speed, flexibility, quality Cost and low quality Supplier selection strategy Aggressively reduce even if costs are significant Reduce but not at expense of greater cost Lead time strategy Buffer inventory Minimize inventory Inventory strategy Capacity flexibility

High utilization Mfg strategy Higher margins Lower margins Pricing strategy Modularity to allow postponement Min product cost Product design strategy Quick response Lowest cost Primary goal Responsive Efficient Other Issues Affecting Strategic Fit

Multiple products and customer segments Product life cycle Competitive changes over time

Multiple Products and Customer Segments

Firms sell different products to different customer segments (with different implied demand uncertainty) The Supply Chain has to be able to balance efficiency and responsiveness given its portfolio of products and customer segments Two approaches:
o o

Different supply chains Tailor Supply Chain to best meet the needs of each products demand

Lesson 4 Product Life Cycle

The demand characteristics of a product and the needs of a customer segment change as a product goes through its life cycle Supply Chain strategy must evolve throughout the life cycle Early: uncertain demand, high margins (time is important), product availability is most important, cost is secondary Late: predictable demand, lower margins, price is important

Product Life Cycle As the product goes through the life cycle, the Supply Chain changes from one emphasizing responsiveness to one emphasizing efficiency

Competitive Changes over Time

Competitive pressures can change over time More competitors may result in an increased emphasis on variety at a reasonable price Changes in technology can make it easier to offer a wide variety of products The Supply Chain must change to meet these changing competitive conditions

Expanding Strategic Scope

Scope of Strategic Fit

o

The functions and stages within a Supply Chain that devise an integrated strategy with a shared objective

o o

One extreme: each function at each stage develops its own strategy Other extreme: all functions in all stages devise a strategy jointly

Expanding Strategic Scope Five categories:

o o

Intracompany intraoperation scope Intracompany intrafunctional scope

o o o

Intracompany interfunctional scope Intercompany interfunctional scope Flexible interfunctional scope

Intracompany Intraoperational Scope

One operation within a functional area in a company Each operation within each stage of the Supply Chain devises a strategy independently and attempts to optimize its own performance independently Usually results in different operations having conflicting objectives does not maximize total Supply Chain profits Strategic Fit is expanded to include all operations within a function Attempt to maximize performance for the entire function All functional strategies within a company are developed to support each other and the companys competitive strategy Strategic Fit is expanded to include all functions in a firm Goal is to maximize company profit The only positive cash flow for the Supply Chain occurs when the customer pays for the product cost all other cash flows are resettling of accounts within the chain and add to total Supply Chain

Supply Chain surplus

o o

Difference between what the customer pays and total Supply Chain cost Total profit to be shared among all members of the Supply Chain

Increasing Supply Chain surplus increases the amount to be shared All stages coordinate strategy across all functions to ensure that they best meet the customers needs and maximize Supply Chain surplus Also provides more speed by managing the interfaces between Supply Chain stages Each company must evaluate its actions in the context of the entire Supply Chain

Flexible Intercompany Interfunctional Scope

Ability to achieve strategic fit when partnering with stages that change over time in the Supply Chain Customer needs and members of the Supply Chain change over time A firm may have to partner with many different firms over time

INTERNATIONAL LOGISTICS COMPETITIVE AND SUPPLY CHAIN STRATEGIES A companys competitive strategy defines the set of customer needs that it seeks to satisfy through its products and services. For example, Wal-Mart aims to provide high availability of a variety of reasonable quality products at low prices. Most products sold at Wal-Mart are commonplace (everything from home appliances to clothing) and can be purchased elsewhere. What Wal-Mart provides is a low price and product availability. McMaster-Carr sells maintenance, repair, and operations (MRO) products. It offers more than 200,000 different products through both a catalog and a Website. Its competitive strategy is built around providing the customer convenience. McMaster- Carr does not compete based on low price. However, it guarantees product availability and delivery within a day. Customers do not come to McMaster-Carr looking for the lowest-price product; rather, they come because of the wide variety of products available and the promise of next-day delivery. Clearly, the competitive strategy at Wal-Mart is different from that at McMaster-Carr. We can also contrast Dell, with its build-to-order model, with a firm like Compaq, selling personal computers (PCs) through retailers. Dell has stressed customization and variety at a reasonable cost, with customers having to wait about a week to get their product. In contrast, a customer can walk into a computer retailer, be helped by a salesperson, and leave the same day with a Compaq computer. However, the amount of variety and customization available at the retailer is limited. In each case, the competitive strategy is based on how the customer prioritizes product cost, product delivery or response time, product variety, and product quality. A McMaster-Carr customer places greater emphasis on product variety and response time than on cost. A Wal-Mart customer, conversely, places greater emphasis on cost. A Dell customer, purchasing on-line, places great emphasis on product variety and customization. A customer purchasing a PC at a retailer is most concerned with the help in product selection and faster response time. Thus, a firms competitive strategy will be defined based on the customers priorities. Competitive strategy targets one or more customer segments and aims to provide products and services that will satisfy these customers needs. To see the relationship between competitive

strategy and supply chain strategy, we start with the value chain for any organization, as shown in. The value chain begins with new product development, which creates specifications for the product. Marketing and sales generates demand by publicizing the customer priorities that the product and services will satisfy. Marketing also brings customer input back to new product development. Using new product specifications, operations transforms inputs to outputs to create the product. Distribution either takes the product to the customer or brings the customer to the product. Service responds to customer requests during or after the sale. These are core functions that must be performed for a successful sale. Finance, accounting, information technology, and human resources support and facilitate the functioning of the value chain. To execute a companys competitive strategy, these entire functions playa role, and each must develop its own strategy. Strategy here refers to what each function will try to do particularly well. A product development strategy specifies the portfolio of new products that a company will try to develop. It also dictates whether the development effort will be made internally or out sourced. A marketing and sales strategy specifies how the market will be segmented and the product positioned, priced, and promoted. A supply chain strategy determines the nature of procurement of raw materials, transportation of materials to and from the company, manufacture of the product or operation to provide the service, and distribution of the product to the customer, along with any follow-up service. From a value chain perspective, supply chain strategy specifies what operations, distribution, and service will try to do particularly well. Additionally, in each company, strategies will be devised for finance, accounting, information technology, and human resources. As our focus here is on supply chain strategy, we define it in a little more detail. Supply chain strategy includes what many traditionally call supplier strategy, operations strategy, and logistics strategy. Decisions regarding inventory, transportation, operating facilities, and information flows in the supply chain are all part of supply chain strategy. The value chain emphasizes the close relationship between all the functional strategies within a company. Each function is crucial if a company is to profitably satisfy customer needs. Therefore, the various functional strategies cannot be formulated in isolation. They are closely intertwined and must fit and support each other if a company is to succeed. We are particularly concerned here with the link between a companys competitive and supply chain strategies. We will seek to answer this question: Given its competitive strategy, what should a companys supply chain try to do particularly well? INTERNATIONAL LOGISTICS Supply chain strategies have the same goal. It refers to consistency between the customer priorities that the competitive strategy is designed to satisfy and the supply chain capabilities that the

supply chain strategy aims to build. The issue of achieving strategic fit is a key consideration during the supply chain strategy or design phase. All functions that are part of a companys value chain contribute to its success or failure. These functions do not operate in isolation; no one function can ensure the chains success. However, failure at anyone function may lead to failure of the overall, chain. This failure can occur in coordinating strategies and achieving strategic fit or it can occur when the strategies are being executed. A companys success or failure is thus closely linked to the following keys: 1. The competitive strategy and all functional strategies must fit together to form a coordinated overall strategy. Each functional strategy must support other functional strategies and help a firm reach its competitive strategy goal. 2. The different functions in a company must appropriately structure their processes and resources to be able to execute these strategies successfully. A company may fail either because of a hick of strategic fit or because its processes and resources do not provide the capabilities to support the desired strategic fit. In thinking of the major tasks of a chief executive officer, there are few greater than the job of aligning all of the core functional strategies with the overall competitive strategy to achieve strategic fit. If this alignment is not achieved at the strategic level, conflicts between different functional goals arise. Such conflicts result in different functions targeting different customer priorities. Because processes and resources are structured to support functional goals, a conflict in functional goals leads to conflicts during execution. Consider, for example, a situation in which marketing is publicizing the companys ability to provide a large variety of products very quickly, and simultaneously, distribution is targeting the lowest-cost items of transportation. In this situation, it is very likely that distribution will delay so it can get better transportation economies by grouping several orders together. This action conflicts with marketings stated goal of providing variety quickly. How is Strategic Fit Achieved? What does a company need to do to achieve that all-important strategic fit between the supply chain and competitive strategies? A competitive strategy will specify, either explicitly or implicitly, one or more customer segments that a company hopes to satisfy. To achieve strategic fit, a company must ensure that its supply chain capabilities support its ability to satisfy the targeted customer segments. There are three basic steps to achieving this strategic fit:

1. Understanding the customer. First, a company must understand the customer needs for each targeted segment. These needs help the company define the desired cost and service requirements. 2. Understanding the supply chain. There are many types of supply chains, each of which is designed to perform different tasks well. A company must understand what its supply chain is designed to do well. 3. Achieving strategic fit. If any mismatch exists between what the supply chain does particularly well and the desired customer needs, the company will either need to restructure the supply chain to support the competitive strategy or alter its strategy. E-Business and Supply Chain Management: The web is having a significant impact on how firms interact with each other and their customers. Past stumbling blocks for supply chain integration such as high transaction costs between partners, poor information availability, and the challenges of managing complex interfaces between functional organizations are all dissolving on the web. In this paper, we examine how the web is changing supply chain management. We present a survey of emerging research on the impact of e-business on supply chain management including descriptive frameworks, analytical models, empirical analysis, and case studies. We classify the work into three major categories: e-Commerce, e-Procurement, and E-Collaboration. An early version of this paper was presented at the Supply Chain Thought Leaders Roundtable held in Como, Italy. Special thanks to the participants who shared their cases and articles with the authors. Nothing has rocked the young field of supply chain management like the emergence of the Internet. While the management of information flows have always been a key aspect of supply chain management, the rapid growth of web-based information transfer between companies, their suppliers, and their customers has decidedly increased the importance of information management in creating effective supply chains. Indeed, the Internet has emerged as a most cost-effective means of driving supply chain integration. We define e-Business as the marriage between the Internet and supply chain integration. This marriage is transforming many processes within the supply chain from procurement to customer management and product design. In this paper, we explore how e-Business is changing supply chains and examine the rapidly evolving research in this area. Following the framework of Lee and Whang, we divide the various forms of e-Business applications into three

categories e- Commerce, e-Procurement, and e-Collaboration and e-Commerce helps a network of supply chain partners to identify and respond quickly to changing customer demand captured over the Internet. E-Procurement allows companies to use the Internet for procuring direct or indirect materials, as well as handling value-added services like transportation, warehousing, customs clearing, payment, quality validation, and documentation. E-Collaboration facilitates coordination of various decisions and activities beyond transactions among the supply chain partners, both suppliers and customers, over the Internet. For example, coordination of engineering changes in the bill-of-materials for a product that is manufactured by an outsourced partner. The remainder of this paper is broken into three sections examining research in these three forms of e-Business. In our survey, we include a wide range of research, from classical model building and empirical studies to cases and frameworks. At the end of each section, we review the papers included in this special issue of POMS, relating them to the earlier work. Given the early stage of research in this area, much of the published E-Business forms and their impact on the supply chain. Research is in the form of case studies and descriptive frameworks. While we do not claim that our review is exhaustive, we do believe it provides a good snapshot of the area. We concentrate on articles that are explicitly linked to internet-based supply chain applications. Of course, there is much pre-web related research on information technology and supply chain management. We include only a few of these papers to provide continuity to past work. We categorize the papers by both the form of e-business and the research methodology. In addition, we review teaching cases focused on e-business and supply chain. The number of teaching cases focusing on this area has increased dramatically in the past few years. For the teaching cases, we limit our review to cases written in the last three years. This eliminates many of the cases focused on B2B exchanges and e-tailers that have failed. We note that a few of the cases we include in our review explicitly examine the failure of such companies. We categorize the teaching cases by e-business form and by area within supply chain management using the framework developed by Johnson and Pyke.

E-Commerce E-Commerce has had a profound impact on the supply chains of many products. Clearly, the supply chains of information goods have seen the most change Manufacturers of physical products have also turned to the Internet as a direct channel of distribution. The direct channel poses a different set of decisions and challenges from those in the existing bricks-and-mortar retail channel. These two channels differ in customer types, operations of order fulfillment, cost structure, profit contributions, priority in rationing, logistical requirement, expectations of service quality, degree

of market segmentation, access to demand/supply information, and returns policies. Much of the early work on consumer related e-Commerce focused on the changes in channels and the downward market pressure on prices. Indeed, one of the earliest such studies found that prices in the late 1990s for homogeneous products like books and CDs were 9-16% lower in e-channels than in conventional outlets. Yet, for many products, the supply chain challenges of sustained price competition became evident by 2001 with the many failed business models. Pyke, Johnson, and Desmond (2001) describe the difficulties of effectively executing e-fulfillment and develop a framework for evaluating the challenges of fulfillment for any specific product. Lee and Whang describe key lessons successful companies have used and present a framework for making e-fulfillment effective. Chen examines the interesting question about pricing and shipping methods. Using different prices an e-tailer can entice some customers to wait for their order and thus obtain some advanced demand information. Using a stochastic model, he develops an optimal pricing policy for an e-tailer. Johnson and Meller develop stochastic models of logistics systems used in e-fulfillment centers. They use their model to show why some systems were effective in reducing costs while others failed. During the late 1990s, many teaching cases were developed on (now failed) dot.com retailers such as eToys and Streamline. In this paper, we only include cases written since 2000 that have a significant supply chain component. Even so, some of the cases we include in the e-Commerce category are centered on failed businesses. Indeed, the focus of these cases is supply chain challenges that led to the firms failure. The cases reviewed in this paper, including their e-Business focus and the areas within supply chain management that are highlighted in the case. For example, the Webvan case examines the challenges of rapidly building a distribution system. Garden.com examines issues of supplier management and conflicting incentives in a virtual supply chain. In both cases, the supply chain challenges led to the failure of these firms. In contrast to these cases, Chempoint illustrates a virtual supply chain for the distribution of small volume, specialty chemicals where the supplier incentives were more closely aliened leading to a successful business model. Chempoint was able to build a nice business by both adding value to their customers through product knowledge and better order fulfillment along with carefully cultivating a set of responsive suppliers. The Papirius/Office Depot case examines the competition in Eastern Europe for the office supplies market and the role e-Commerce is playing in that evolving market. Finally the 7Dream case, based in Japan, is an interesting example of a bricks and clicks solution to the last mile problem. Customers ordering from many different vendors on the 7Dream website receive their delivery at the nearest 7-11 convenience store where they can pay in cash. Returns are also managed through the stores. Two papers in this Special Issue address two questions that arise in e-Commerce: Given

the real-time information of supply and demand over the Internet, how can one compute Available-to-Promise (ATP)? If customers are given the choice of a priority service with faster delivery at a higher price, what should be the optimal rationing policy of Inventory?. Addressing the first question, Chen, Zhao and Ball consider the configure-to-order system operating under a batch-mode ATP whereby customer requests are collected into a batch and subsequently processed together by a model that determines the ATP commitments and resource allocation. The paper studies the supply chain performance with respect to certain ATP parameters like the batching interval. The manufacturer is expected to solve a mixed-integer program per batch interval. The program captures demand profiles and supply constraints (e.g., raw material availability, production capacity, material compatibility and customer preference) and maximizes the operational profits. Its output includes final assembly plans for orders, order acceptance decisions, and delivery quantity over time. It sequentially runs the program on Maxtors data and derives some insights (regarding batch size and flexibility). The model implicitly visualizes a manufacturing system that delivers customized products in an enhanced service mode (using real-time supply chain visibility) all too realistic in the Internet age. The second question is addressed by Cattani and Souza. They consider two types (high vs. low priority) of customer demands arriving at Poisson rates. Demands are met from a common inventory that the server replenishes at a finite speed but stops when the inventory reaches a certain level. In dealing with the distinct customer demands, the manufacturer can either adopt a first-come-firstserved (FCFS) policy, or a rationing policy where the firm ships only orders for the priority customers under a certain level of inventory. The benefit of direct channel manufacturer is inventory and shipping flexibility, as some online customers are more willing to wait longer than others. The paper develops models of queuing systems or birth-death processes and derives the additional value (in terms of operational profits) of the rationing policy over the FCFS policy under three scenarios of lost sales, backlog and their combination. They offer a large number of numerical runs to derive some useful qualitative insights. This paper illustrates the additional advantages of e-Commerce over the traditional retail channels, such as delivery time flexibility or logistical configurations. Regarding the latter, note that in the design of e-Commerce distribution system, the material flow and the information flow can be decoupled the delivery process may take a different route from the order flow. One may order a book at Amazons website, but the actual delivery may come from the warehouse of its distributor Ingram Books. Thus, an online firm can construct a virtual logistical network that consists of its suppliers and retailers logistical assets as well as its own. E-Procurement

Modern manufacturing requires flexibility due to stiff competition, fast changing customer preferences, shortening product life cycle and product variety proliferation. Along with dynamic capacity allocation, efficient material procurement forms a pillar to support flexible manufacturing. The Internet again offers a natural platform to facilitate efficient procurement as numerous buyers and sellers find each other and transact according to some pre-specified protocols (governed by the marketplace or traders internal rules). While e-Procurement is the mirror image of e-Commerce, they have many different aspects. For example, e-Commerce often faces a large number of individual consumers, while e-Procurement usually involves dealings with companies. Of course, many eProcurement ideas such as dynamic markets and auction theory have been long studied areas within economics. Recent work has begun to explore how on-line exchanges impact the procurement process and the supply chains of individual companies. For example, Kaplan and Sawhney and Wise and Morrison (2000) both develop frameworks to understand what types of exchanges would appear for different types of products and examined how exchanges may evolve. Jap and Mohr explore why some firms are successful with e-procurement strategies while others are not. Lee and Whang (2002a) model how secondary on-line markets impact the supply chain. Pyke and Johnson compare many e-procurement strategies to traditional strategic alliances. In the past three years, there have been several interesting cases written on E-Procurement. Five cases summarized here examine the role of industry exchanges: SciQuest is focused on the laboratory and science research community; Instill is focused on the food services industry; eConnections and Pass Act in the electronic components industry; and eSkye is focused on the alcohol beverage industry. In each case, the companys original focus was that of an information intermediary linking buyers and sellers together without ever touching the product. While all met with some degree of success, they also found significant resistance in the supply chain as they challenged the power balance between customers, distributors, and suppliers. Today, the three survivors (Instill, eSkye, and SciQuest) have all reoriented their business model toward selling procurement software, specifically oriented to their individual industry. The Pass Act case examines the problems faced by exchanges and why many have failed. A related case, Quantum, examines the supply chain challenges of a digital storage device company and its reaction to the development of an industry consortium exchange. The I2 Trade Matrix case is focused on strategy of a supply chain software maker to leverage its expertise in supply chain planning to become a major developer of both public and private exchanges. Two other cases examine how electronic bidding and Internet auctions have changed the procurement process. The Home Depot case examines how Home Depot applies a bidding process and smart optimization algorithms to award

large transportation contracts to freight carriers. Do I Hear 5 Million Euros? details the use of reverse auctions for procurement and the impact of such procurement solutions on the supply chain of a company like Scotts. This Special Issue has three papers in e-Procurement Short-term e-Procurement Strategies vs. Long-term Contracts , Drivers of Internet Purchasing Success (Boyer and Olson 2002), and A Simple Heuristic for Dynamic Order Sizing and Supplier Selection with Time-Varying Data,. The first paper studies and compares three different procurement strategies for a manufacturer. The first strategy (called Strategic Partnership) is to develop a long-term supply relationship with a specific supplier, and the second strategy (called Online Search strategy) is to shop online for a better price. The third is to combine both sign a long-term purchase contract with a supplier up to a certain level, but if necessary, additional quantity may be purchased online. The tradeoff between Strategic Partnership and Online Search is the lower price fixed in advance vs. the random opportunity for a lower price. The combined strategy involves a minimum quantity commitment, so an irrevocable quantity commitment is traded off with the advantage of stratification. The paper offers the conditions under which one strategy is superior to others. They also study the optimal number of suppliers to contact when a fixed search cost is accrued per potential supplier contacted. The analysis underlines the fact that e-Procurement opens up the possibility of the combined strategy and derives the optimal solution in the combined strategy. It also demonstrates how the lower search cost and other factors (driven by the Internet) can affect the procurement strategy. Indeed we find various software packages that support such dynamic procurement strategies. These products (e.g., Broadvision, Manugistics, Tradec, and Instill) take real-time data (e.g., inventory levels, sales data, and market price at electronic exchanges) and provide nice presentation of the operational status and limited optimization capabilities. The second paper conducts a survey of 416 e-Procurement users (of Office Depot) and studies the success factors in procurement of indirect material. The data and its step-wise regression analysis supports that buying companies indeed realize performance benefits from e-procurement, and identifies drivers of success. Well summarized in Figure 1 of the paper, the drivers of performance success are categorized into the characteristics of the purchasing company (strategy and environment) and Internet factors (Internet-related and site specific. Combined with the work by Peleg, Lee and Hausman, this work presents a very useful future research into the status and impact of e-Procurement of direct materials. The last paper on procurement considers an optimization tool to help in dynamic supplier selection. The author considers the case of a company facing dynamic demand and multiple suppliers offering various quantity discount schemes that vary over time. The problem is formulated as a mathematical program and a fast solution heuristic is proposed and

tested. The author describes how the solution procedure was implemented as part of SAPs Advanced Planner and Optimizer (APO) software. E-Collaboration While e-Commerce and e-Procurement have captured most of the business press headlines over the past five years, the promise of e-Collaboration may be far greater. We define e-Collaboration as business-to-business interactions facilitated by the Internet. These interactions go beyond simple buy/sell transactions and may be better described as relationships. These include such activities as information sharing and integration, decision sharing, process sharing, and resource sharing. Lee and Whang provide this taxonomy of e-Collaboration and link the idea to earlier research in supply chain management. Of the three areas, information sharing has seen the most research. With widespread interest in the bullwhip effect, many researchers have worked to quantify the impact of the bullwhip and examine the benefits of sharing information. There has also been significant work to understand the benefits of IT investments within an enterprise (for example, the impact of ERP (McAfee 2002)). Process sharing like collaborative innovation and product design is also another exciting opportunity. Many researchers are wondering how the web will change innovation within and between companies. In a pair of papers, Johnson examines web-centric collaboration for product design in both the high tech and apparel industries. He develops a framework for understanding the supply chain benefits of design collaboration. There are many new cases that examine different elements of collaboration, from information sharing and integration to process and resource sharing. Several of these cases examine new web-native software companies who have developed new applications for different types of collaboration. For example, Agile looks at the role of collaboratively managing product design and engineering changes over the web; Extricity looks at software designed to aid in information integration between enterprises systems; See Commerce illustrates an application of information integration at DaimlerChrysler to facilitate supply chain metrics; Quad explores the value of supply chain visibility to each supply chain partner provided by RFID tracking of materials traveling through a supply chain; and Syncra focuses on collaborative forecasting and replenishment between a buyer and seller. Several other cases have highlighted the impact of information integration on some particular aspect of the supply chain. Some of the cases are focused on managing supply while others are more focused on the customers. For example, the Solectron case focuses on how the use of information has transformed Solectron from a simple contract manufacturer into a full service supply chain integrator. Likewise, the Third-Party Logistics Services case examines how companies like

transportation provider Flying Cargo are using information to enhance their service offerings in a near commodity business. On the other hand, cases like General Motors and Lufthansa illustrate how information can be used to increase customer loyalty and manage the prices. Hewlett- Packard examines the reverse supply chain and the information integration issues of managing returns. Finally, Marks & Spencer and Zara examine competition between two apparel companies, including the role of integrated design and manufacturing. In this special issue we have two papers related to e-Collaboration. The first paper describes a methodology for implementing product collaboration within the Greek apparel industry. The methodology, based on structured modeling and simulation, examines the potential benefits of a web-based system prior to implementation. The authors extensively describe one of several company cases that illustrate the methodology at Mass Fashion, a Greek apparel company. They include many details of the actual implementation and resulting changes to the overall product generation process. The last paper considers the incentives for firms to share demand information. The authors research follows a substantial stream of work on information and incentives in multi-echelon supply chains. The paper develops a model for a two-echelon system of a manufacturer and two ownstream retailers who are engaged in either Curnot or Bertrand competition. The authors examine the problem of information leakage in the sharing relationship and shows that the optimal price of the manufacturer does not depend on the type of downstream competition, but only on the information sharing arrangement. It is true that Internet-based software products developed by start-up companies have recently experienced a major setback. But while the Internet bubble may have burst as an opportunity to make quick money, we believe the influence of Internet on supply chain management is still alive and well. Rather than disappearing, it is expanding in breadth and depth alike. More companies are opening Internet channels, and more buyers are ordering over the Internet. Also applications are getting more sophisticated. For example, industry exchanges do not only handle transactions, but also generate data. This in turn creates a whole new stream of research and a new breed of execution software products that enable a company to take real-time data and make dynamic decisions. They complement traditional planning systems such as ERP. Indeed, SAP recently unveiled plans to enhance manufacturing applications to better interact with their planning systems and added a freight-tracking program to its transportation management system (Gilbert (2002)). At the same time, the huge amount of data coming from Internet transactions leads to information overload. This also creates an opportunity to develop solutions to aggregate, summarize and interpret them in a manager-friendly manner. Indeed software products and solution providers have emerged to address the needs in various terms like dashboard, cockpit and command center. Given the numerous

challenges in global supply chain management and the unlimited creativity in the business community, it is only a clich to say that the new powerful tool called the Internet would find its way to more and better applications for a long time. So too would research, as a corollary.

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Lesson 5: Fulfilling the concept-to-customer vision

Operating a chaos-tolerant supply chain in a world of increasing uncertainty is an impossible mission unless you have business-specific SCM software that helps you manage complexity and increase your profitability, competitiveness, and growth. Infor SCM (Supply Chain Management) meets the challenge with specialized functionality that takes into account the different supply chain perspectives and unique business challenges of manufacturers, retailers, and transportation and logistics service providers. By partnering with Infor, you're assured of having comprehensive SCM solutions delivered by a single vendor, with best practices and low total cost of ownership built in, that match all of your business priorities from network design/order inception to delivery-from concept to customer. Infor's supply chain logistics and inventory management software solutions help companies like yours:

Reduce supply chain operational costs for increased profitability Improve customer service to enhance competitiveness Manage growth and expansion to improve revenues and market share Become supply chain leaders

Infor Supply Chain Management is a global solution with implementations at over 1,600 customer sites in 40 countries. Backed by domain experts who know supply chain management and the challenges you face, our supply chain planning and execution solutions comprise the following key components: Strategic Network Design modeling and optimization tools for determining the most effective number, location, size, and capacity of facilities to meet customer service goals; time-phased tactical planning for determining where and when to make, buy, store, and move product through the network. Supply chain masters know the secret to supply chain successand it starts with the very design of their network. Superior performance is determined by the location and capacity of manufacturing, distribution, and transportation assets. To meet the challenges of expansion, competitiveness, and risk, companies need the ability to continually evaluate and strategically align these assets.

Infor SCM Strategic Network Design fine-tunes your supply chain, helping you determine the optimal number, location, and size of facilities necessary to meet your customer service goals. As new opportunities arise, youll have the essential tools to reconfigure your network to changes in demand, supply, labor, transportation, and outsourcing initiatives to sustain a strong, highly competitive supply chain. A strategic decision-support toolset for analyzing and designing supply chain networks, Strategic Network Design offers extensive modeling and optimization features to help planners design more efficient supply chain networks. You can determine facility location and capacity requirements, evaluate different transportation and inventory strategies, select vendors, mitigate risks, and perform profitability and cost analysis. Plus, interactive map-based graphics and pointand-click functionality simplify the complexities of strategic supply chain planning. When combined with Tactical Planner , a time-phased strategic planning application that tells you when to buy, when and where to manufacture, and where to hold inventory, you can align demand with your supply planning processes to deliver the most complete, capacity constrained and cost-effectivesupply chain plan. Demand Planning forecasting tools, web-based collaboration interface, and sales and operations reporting and metrics that helps companies predict and shape customer demand with greater accuracy. Companies excelling in customer service know the importance of effective supply chain planning. Customer-focused businesses need an accurate picture of demand to drive production, inventory, distribution, and buying plans across their operations. These challenges are intensified by the effects of seasonality, promotions, and product proliferation, not to mention growth through mergers and acquisitions. Infor SCM Demand Planning enables you to predict and shape customer demand more efficiently. Advanced statistical capabilities combined with market knowledge gained from internal and external collaboration bring pinpoint accuracy to your demand plans. The result: a single, global view of the truth that both provides the foundation for your sales and operations plan and helps you achieve measurable service improvements. Infors demand planning solutions help companies like yours:

Improve forecast accuracy 20-40% Increase on-time delivery performance up to 20% Slash inventory investments and increase turns by 15-30%

Reduce obsolescence by 15% Lower production costs by as much as 20%

Demand Planning can be implemented at a single site or centrally with web-based access to manage a global demand plan with multiple channels to market. It enables you to improve forecast accuracy, which, in turn, drives more responsive customer service with lower inventories and reduced obsolescence. Components include: Demand Forecaster flexible, powerful self-learning statistical engine, unique slow-moving stock algorithms, promotional management, and scenarios ensure a more accurate, single view of customer demand. Collaborate web-based access securely incorporates input from internal and external parties, including customers and suppliers and provides a platform for vendor managed inventory (VMI) and collaborative planning, forecasting, and replenishment (CPFR). Sales and Operations Reporting comprehensive web-based, time-phased reporting and metrics support the sales and operations planning (S&OP) decision process in forecasting, inventory, and supply planning, as well as allow you to track, analyze, and improve supply chain performance.

Distribution Planning inventory analysis and time-variable stock target calculations for ensuring the optimal balance between service levels and inventory investment; synchronized replenishment plans for all network points right back to manufacturing and supplier sources for better visibility. The impact of globalization on supply chain management affects us all. As manufacturing supply consolidates and offshore operations become commonplace, the demands on a companys distribution capabilities skyrocket. Expanding enterprises must contend with more products, inventory, distribution points, and complexity. Visibility also becomes an issue as supply chains merge, cross geographical boundaries, and encounter an abundance of systems. Infor SCM Distribution Planning provides a single, enterprise-wide inventory management software solution plan for your network. Inventory is planned for every stock location. And distribution points are replenished to meet demand, delivering a global sourcing plan for

manufacturers and suppliers. The result: complete visibility of supply and demand, synchronized to ensure greater fulfillment at lower costs. Infors distribution planning solutions helps companies like yours:

Increase customer order fulfillment, while reducing your inventory investment Improve visibility across multiple systems and borders Respond faster to changes in demand and supply Introduce vendor managed inventory (VMI) programs for leaner supply chain

networks Infors distribution planning solutions enable you to plan and gain visibility of the movement of inventory through a complex distribution network. You can establish service-level inventory targets for every product at every location. Replenishment plans automatically take into account lead times, supply chain planning policies, and sourcing alternatives to ensure better service at a lower cost by getting the right product to the right place at the right time. Inventory Planner inventory analysis and time-variable stock target calculations ensure the optimal balance between service levels and inventory investment. Replenishment Planner synchronized replenishment plans for all points in the network, right back to manufacturing and supplier sources, as well as rich, secure, browser-based access enable up-to-the-minute replenishment plans for better visibility. Manufacturing Planning constraint-based advanced planning system for engineering, assembly, and repetitive manufacturing environments; similar tools for process manufacturers. Nowhere are the complexities of supply chain management more extreme than in manufacturing. Manufacturers must meet demand by maximizing their most valuable assetsequipment, people, materials, and capital. But the greatest challenges lie at the heart of their production processes. Infor SCM Manufacturing Planning delivers advanced capabilities that go beyond those of traditional ERP-based planning to help you make the best use of your production resources, improve efficiencies, increase throughput, and lower costs. Because one size doesnt fit all, each solution is business specific with industry experience built in, providing laser-focused applications that recognize and solve the essential challenges in your business. Infors manufacturing planning solutions help companies like yours:

Boost manufacturing productivity by as much as 15% Reduce raw materials costs up to 20% Minimize finished goods inventory by as much as 40% Realize procurement reductions of up to 15%

Dedicated to the industry it serves, Manufacturing Planning combines advanced capabilities with industry-specific functionality to solve challenges conventional systems cant. Each planning component features multiple constraint-based planning engines that deliver achievable, fully synchronized plans you can adapt to accommodate the realities of capacity, people, and material constraints. The memory-resident planning engines assess millions of combinations in minutes, making them among the fastest available. They are ideal for what-if analysis in response to unexpected changes in your plan such as new orders, machine downtime, or late deliveries. An order promiser module enables you to provide accurate, achievable customer promise dates to new inquiries. Components include: Planner this constraint-based advanced planning system (APS) for engineering, assembly, and repetitive manufacturing environments ensures realistic and perfectly synchronized manufacturing plans for optimal throughput. Advanced Planner this constraint and optimization-based planning system delivers supply chain and manufacturing plans from all possible combinations, considering capacityand costto determine the least-cost supply chain plan. Production scheduling finite capacity scheduling for engineering, assembly, and repetitive environments, as well as batch-process production facilities. Squeezing the last ounce of productivity from critical production resources demands detailed schedulingdown to the minute. Plans that look good at the daily level can fail to recognize capacity and material limitations or dependencies of sequenced changeovers, lengthening run times and threatening the time slots of customer deliveries. Infor SCM Production Scheduling provides finite capacity scheduling (FCS) capabilities with deep levels of detail to help you meet customer order delivery times and maximize the productivity of your production assets. Its powerful scheduling engines synchronize your products on all lines, checking interdependencies and optimally sequencing to shorten make-time. Infors production scheduling solutions help companies like yours:

Improve on-time delivery performance by up to 5% Reduce lost time due to changeovers by as much as 30% Decrease cycle times of over 20% Cut production costs up to 10% Increase capacity utilization and throughput between 10-40%

Infors production scheduling solutions, which can be implemented with any ERP software system, use finite capacity scheduling and optimization principles to address your essential scheduling challenges. These applications are business specific with industry experience built in and like Infors manufacturing planning solutions, their design-for-use heritage ensures fast implementation, with minimal effort, so they start to deliver ROI within weeks. They schedule your capacity, labor, materials, and any enabling resources across all lines. Drag-and-drop scheduling boards make it easy to visualize and change schedules, and browser-based screens make changes instantly visible. Components include: Scheduler finite capacity scheduling for engineering, assembly, and repetitive production environments characterized by bills of material and routings synchronizes all operations to deliver higher throughput and faster cycle times. Advanced Scheduler finite capacity scheduling for batch-process production facilities characterized by recipes, by- and co-products, and tank scheduling for liquids optimizes productivity, minimizes changeover times, and improves on-time delivery performance. Transportation and Logistics Planning transportation planning, transportation procurement, route planning, transportation management, small parcel shipping, and international trade logistics for global, multi-modal operations. Winning new business and driving sales means serving more customers over greater geographic areas across more suppliers. Yet globalization entails more cash tied up in inventory across more nodes and modes, longer lead times, more service variability, and compliance with new governmental regulations. Infors Transportation and Logistics solution helps mobilize your global inventory so you can get the right goods to the right customer and place at the right time in the right condition for the right price, even as you comply with trade regulations. As a result, youre more likely to get the sale and deliver on your commitment, while reducing costs, boosting service, and avoiding customs delays and fines. Infors supply chain logistics management solution helps companies like yours:

Lower logistics and transportation costs 8-15% Increase asset turnover Reduce inventory carrying costs Decrease customs fines and penalties through better trade compliance Strengthen customer service

Our transportation logistics management software is a comprehensive, global multi-modal transportation and logistics solution that manages orders from inception to delivery. It provides the essentials to help companies gain global visibility into inbound and outbound supply chain movementreducing costs, while improving customer service. This proven transportation logistics management solution includes the following capabilities: Transportation Planning improve plan optimization and consolidation by optimizing transportation plans across multi-period transportation and daily plans and schedules. Transportation Procurement enhance carrier selection and reduce costs through constraintbased bid optimization, analysis, and awarding. Optimal bids and carriers are selected based on combinations of lane bundles, price, and service. Route Planning determines the best routes through sophisticated optimization, analysis, and scheduling tools to improve routing, driver, and asset utilization. Transportation Management improves shipment lifecycle planning, execution, and settlement with web-hosted planning and optimization, execution, resolution, reporting, and analysis. Small Parcel Shipping (SPS) simplify the fulfillment of parcel manifesting requirements; expand to meet increases in order volume; benefit from rating, labeling, and electronic reporting features for managing small parcel shipments more efficiently. International Trade Logistics boost visibility and improve compliance with product classification tools, up-to-date trade compliance content, total landed cost calculation, and event management capabilities Warehouse Management System end-to-end fulfillment and distribution including inventory, labor, and work and task management, as well as cross-docking, value-added services, yard management, multiple inventory ownership and billing/invoicing, and voice-directed distribution. Experts estimate that 20% of all orders are filled imperfectly. Thus, the ability to meet customer

demand by getting the right products to the right place, at the right time, and in the right condition is an essential competency with bottom-line implications. Infor SCMs Warehouse Management system solution enables you to see what inventory is or will be available, organize work and align resources and labor to satisfy customer requirements, and optimize fulfillment and distribution processes to ensure that products are delivered on time and in full, each and every time. The result: improved supply chain management with end-to-end fulfillment from order inception to delivery.

Infors warehouse management system helps companies like yours:

Reduce inventory 5 to 20% Increase labor productivity 15 to 40% Improve shipping accuracy 2 to 5% Increase inventory accuracy 99+% at location level Boost perfect order rates Reduce direct operating costs and increase overall revenue

Warehouse Management is a proven, advanced WMS software solution for manufacturing, distribution, and retail enterprises and third-party logistics providers (3PLs) that can be used by enterprising organizations of all sizes. It helps companies maximize product placement strategies, prioritize tasks, implement fair productivity standards, and increase logistics efficiency. Capabilities include: Inventory Management multiple units of measure, lot control, and catch weights improve inventory accuracy and visibility to offset margin squeeze. Work and Task Management deep functionality for work order/location grouping into batches and waves optimizes productivity. Labor Management forecasting, time and attendance, assignment scheduling and monitoring, and enforcement of standards optimize labor and reduce costs. Cross-Docking flow-thru, trans-shipment, and opportunistic process capabilities increase inventory speed and throughput.

Slotting and Optimization the ability to arrange SKUs advantageously within a range of pick faces/slots accommodates variable demand. Value-Added Services deferred manufacturing, preparation of store-ready pallets, light assembly, and kitting enable customization of products closer to the point of sale. Yard Management coordination of yard movement with receiving and order fulfillment improves visibility, productivity, and security. Multiple Inventory Ownership, Billing, and Invoicing the ability to track multiple inventories, employ multiple business rules, and manage billing for multiple customers improves 3PL and distributor efficiency. Voice-Directed Distribution voice-enabling order selection, replenishments, put-aways, transfers, and receiving enhances productivity and accuracy. RFID comprehensive RFID-enablement framework delivering business value through process optimization for manufacturers and other companies, as well as compliance solutions for retail, pharmaceuticals, the US Department of Defense, and others. The need for keen inventory visibility and track and trace proficiency across the supply chain, as well as regulatory pressures and compliance mandates from retail giants and government agencies, are causing more and more companies to embrace Radio Frequency Identification (RFID)-enabled distribution to automate fulfillment and distribution processes. Infors RFID solution connects suppliers, manufacturers, distributors, and retailers and allows them to exchange product and trading partner data, as well as generate EPC-compliant RFID/barcode labels. It delivers real business value, not only in compliance, but also in operational and processing efficiency improvements. Infors RFID solution helps companies like yours:

Satisfy industry and government compliance mandates Improve track and trace through process, location, and inventory visibility Achieve operational efficiencies by reducing barcode scanning Automate inbound and outbound processing Increase inventory visibility at the pallet, case, tray, and item level

Infors comprehensive RFID-enablement framework drives business value by providing industry-focused solutions. It delivers industry compliance solutions for retail, pharmaceutical, US Department of Defense, and other organizations. It enables business process optimization solutions for manufacturers and companies overseeing supply chain and asset management operations. Included are extensive edge device management, business process management and workflow, packaged business services, event management, as well as business intelligence and integration services. Infors global presence and infrastructure make our RFID offering much more than a best-of-breed solution. Event Management proactive, real-time exception management technology for detecting conditional change anywhere in the supply chain and communicating it instantly for resolution. Adaptive global supply chain management is essential in todays competitive, non-stop business environment. When exceptions are encountered, companies must be able to sense, respond, and act appropriately to ensure their customers get the products they want in the right amount, at the right time, place, and price. Event Management provides proactive, real-time exception management technology that enables you to detect conditional change anywhere in your supply chain and communicate it instantly to thoseboth inside and outside your organizationwho need to take action. Problem resolution can take place on the spot following your business rules. Event Management helps companies like yours:

Supply up-to-date order status information Improve delivery performance Resolve problems before they escalate Reduce the cost of goods sold Decrease expense overruns Eliminate excess inventory and avoid stock outs

Ideal for manufacturers, retailers, distributors, and logistics providers, Event Management helps companies improve visibility and be more proactive in both upstream and downstream directions. You can manage resolution processes collaboratively with internal and external contacts using one unified system. Using intelligent, real-time alerting and exception management, tracking, and reporting capabilities, view the status of orders and inbound and outbound inventory shipments and their relationship to purchase and sales orders, manufacturing, quality control, and

financial processes. Exceptions such as delayed shipments, timeouts, carrier-rejected shipments, ASN mismatches, damaged goods held in customs, and others can be managed expeditiously across multiple business systems. Demand Planning Demand Planning is the process in which companies are able to forecast into the future to determine what future demands may be. This is important to businesses due to the fact that it enables them to be sufficiently prepared and ready, in terms of inventory, for their customers.

Lesson 6 Limitations of current forecasting tools

Current forecasting tools are designed for products with a fixed BOM (or SKU) with a limited set of configurations; each SKU is considered a unique entity. When the number of SKUs is small, this forecasting method works. However, as the number of configurations grows, forecasting accuracy drops dramatically. This is because core assumptions made by these forecasting tools are violated. The no demand migration between SKUs assumption as the number of configurations grows; customers pick and choose among them based on the features that match their needs. Now a fixed BOM product is acting like a configurable product. Demand migrates between SKUs based on feature sets; the old assumption that a single SKU has captive demand is not true any more. Under this assumption, forecasting tools cant forecast demand for new SKUs or for customer migration between SKUs with similar feature sets. The result is high-error forecasting. One lighting manufacturer that offers thousands of SKUs gave up forecasting because each year new SKUs made up at least 40% of the total product offering. The companys forecasting tools didnt work in this situation. The phantom configuration assumption Since current forecasting tools were designed for fixed BOM products, a common workaround for configurable products is to create phantom configurations that mimic a fixed BOM product. For example, a truck manufacturer may choose 15 or 20 phantom configurations for planning and forecasting, but this tactic is doomed manmade assumptions cant closely approximate the millions of configurations that are typically ordered and built. The rate of forecasting error is very high, and suppliers and other business partners who rely on planning results to manage inventory pay a very heavy price in added costs and reduced efficiency. The feature choice independence assumption Current forecasting tools also assume that customers select one feature at a time and that selections are unrelated to previous decisions. This overly simplified calculation assumes that if 10% of customers bought a DVD player with a particular car model, a 10% adjustment in DVD players based on total production volume should be forecast for the coming year. However, feature selection is not independent. Customers select groups of features together based on their needs and price point. This creates dependencies between features that should be leveraged to improve the product offering and forecasting. Feature dependencies are dynamic, changing as the product changes as new features are introduced and as prices fluctuate. Straightline forecasting systems fail to account for these patterns. The result: a poor product mix and erroneous forecasts. Complexity increases as customization and the number of configurations

increase. How well does your forecasting tool fit your products? Emcien offers a forecasting solution for configurable products. By filling the gaps listed above, companies can dramatically improve material planning, and product availability for configurable products.

INFORMATION DRIVEN ENTERPRISE 1 Businesses in virtually all industry sectors are working to make their supply chains more efficient. They understand the value of shrinking their inventories, streamlining logistics, improving forecasts, and eliminating costs. As customers demand products faster and look for value-added services that require great flexibility, supply chain leaders have responded by making quicker and better decisions. They execute rapidly, basing their actions on detailed plans that are drawn from the rich and interactive information that flows up and down their supply chains. These leaders know that inflexible forecasting and planning tools are of little use when the supply chain is a living organism when customers, suppliers, production plants, and even entire business models are in flux. They also know the best plans in the world are useless if theyre not followed by efficient execution. Effective supply chain management demands comprehensive information systems that allow you to synchronize plans with your customers and suppliers, collaborate in real time both inside and outside your enterprise, execute plans, adapt to a dynamic environment, and measure performance to objectives. Leaders evaluate business processes firstthen consider technology and software. They make deep process improvements to cut manual steps, redundant data entry, and multiple interfaces. They focus on competitive advantage and customer service. And they bring these business processes online in real time. How Supply Chain Leadership Works We offer a range of internet-enabled software that facilitates all stages of supply chain management, from planning through execution. JD Edwards Enterprise One Supply Chain Management (SCM) helps streamline everything from the earliest sales forecasts to customers acknowledgements of orders received. It can also model complex supply chain scenarios, factoring in all relevant costs and all potential supply and demand constraints. The SCM software easily extends supply chain business processes beyond a companys four walls, making it possible to adjust to unforeseen events in real time.

To showcase the advantages of a well-integrated supply chain, we use a fictional account of a process manufacturer that faces a tough competitive challenge. Rylander Food Products Co., a fictitious $450 million-a-year food-coloring processor, uses JD Edwards Enterprise One SCM software to model its available options and to add significant value for its premier customer. The JD Edwards Enterprise One Supply Chain Management Story The news that Colorico is opening a new plant in the United States isnt news to Jim Leggett. The French firmhis toughest rivalhas been making noise all year about shortening its supply lines to key U.S. customers. Its the location of the new facility that worries Leggett. Its within 50 miles of candy maker Sendia Inc. As vice president of Sales for Rylander Food Products Co., the countrys largest maker of food colorings, Leggett is especially protective of Sendia. Its his largest customer, and Rylander has had more than 45 percent of Sendias business for years. Leggett takes a deep breath before phoning CEO Hal Thurman. Responding to the Competitors Challenge Thurman wastes no time. Two days later, he opens the emergency executive staff meeting with a bang. Its not a pretty meeting. But after two hours, the brainstorming list has narrowed to three big ideas: Aim to own at least 55 percent of Sendias business inside a yearand help it challenge Mynah Confections Inc. for the market lead. Hold collective market share across the top three customers but boost margins by eight percent over the next 12 months. Accelerate the launch of the new Orange 22 food coloring product by six months. The best option will be nailed down in the next staff meeting. The CEO is barely in his office when the call comes. Its Peter Blanco, Rylanders production chief, wanting 30 minutes of Thurmans time. We can give Sendia and ourselves a leg up, Hal, he says. And weve got a shot at launching Orange 22 early. Thurman knows Blanco gets results. Youre in my Palm for 7 a.m. tomorrow, he says.

JD Edwards Enterprise One Supply Chain Management Blanco apologizes for taking the boss through the supply chain basicsespecially because Rylander has been piloting a new supply chain management program for seven months, using JD Edwards EnterpriseOne software to improve its demand forecasting and smooth some bad production bumps. He describes the significance of the classic Plan-Source-Make-Deliver continuum. The supply chain management pilot has been Blancos pet project; he sees Thurmans mandate as the opportunity to accelerate the program, and hes pitching hard for it. Blanco shows how far the company has come already. Just seven months ago, Rylanders planning meetings relied on disconnected desktop spreadsheets, but already the SCM software has three of the firms five regional sales managers reporting their forecast updates electronically. As Blanco describes a vendor-managed inventory (VMI) program for Sendia, Thurman senses strategic advantage: a way to strengthen relations with one of the candy industrys most promising players. Blanco explains how the VMI program will tighten Sendias cash cycle, giving the confectioner room to trim prices and push for more market share. So youll spearhead the project? asks Thurman. At the next staff meeting, Thurman takes the team through the three options. The marketing vice president has sized the 2005 market for U.S. candy sales, mapping competitorsin particular, Coloricoslikely moves. Displayed in clear charts and graphs with the JD Edwards EnterpriseOne Strategic Network Optimization software, the impact of the accelerated supply chain management program is easy to grasp. Sales chief Leggett shows how, by itself, an early launch for Orange 22 could help Sendia reach market leadership in two years. Supply Chain and Sourcing: Enabling a Globally Agile Enterprise Emerging global markets, shortening product lifecycles, channel consolidation, changing compliance requirements and outsourced operations are all adding complexity to the supply chain. Yet perhaps the greatest pressure on your supply chain today comes from heightened customer demand. Organizations need to mitigate risk and effectively anticipate customer desires, while at the same time keeping pace with competitive pressures to reduce costs and get the greatest value from sources.

Start by anticipating customer demand Emerging global markets, shortening product lifecycles, channel consolidation, changing compliance requirements and outsourced operations are all adding complexity to the supply chain. Yet perhaps the greatest pressure on your supply chain today comes from heightened customer demand. Organizations need to mitigate risk and effectively anticipate customer desires, while at the same time keeping pace with competitive pressures to reduce costs and get the greatest value from sources. To meet customers expectations for price and availability, organizations need insight that begins with the customers mindset and extends back to the point of origin for creating new products. The supply chain must be viewed as a much more extensive, highly networked value chain, driven by customer demand. Align Value Chain to Drive Growth Bearing Points Supply Chain and Sourcing Solution can help your organization:

Support Revenue Growth and Accelerate New Product Launch our solution can help you better anticipate and satisfy customer demand; build out an integrated value chain; and improve product and service quality. This can help you drive sales in new and existing products.

Reduce Supply Chain Risk and Vulnerability Using a proactive risk mitigation strategy, we can help you improve supply chain security and regulatory compliance.

Increase Responsiveness and Flexibility We can help you develop increased visibility into the network partners and sources in your supply chain, and measure and improve supply network performance.

Improve Throughput, Profitability and Reduce Operating Costs we can work with you to improve throughput, reduce cycle times, process variability, excess inventory, rework, facility requirements, overtime and other drains on your bottom line.

Streamline Sourcing Operations for Greater Flexibility. At Bearing Point, we focus on the strategies, processes and technologies required to drive growth and heighten profitability across that entire value chainunderstood in its most comprehensive sense. Our Supply Chain and Sourcing Solutions can help you:

Initiate advanced analysis and strategies that link customer demand, partner capabilities and sourcing opportunities Deliver dynamic order fulfillment, contract management and inventory planning strategies Comply with regulatory requirements and enable environmentally responsible operations Manage your value chain aggressively from product launch through customer delivery

Sourcing and Procurement In spite of growing IT investments in sourcing and procurement, enterprises face issues such as proliferation of suppliers and supplier contracts, inability to identify and exploit sourcing leverage, and inability to measure and monitor supplier performance. Infosys can help you manage your supplier relationships both at the strategic and operational levels with sourcing and procurement services. Targeting a wide supplier base and automating the entire procure-to-pay cycle are two important components for pursuing process improvement and cost reduction strategies. Our experienced sourcing and procurement team enables you to implement innovative solutions and exceed your cost reduction goals. Infosys' sourcing and procurement services maximize the effectiveness of your strategic sourcing, supplier management, and purchase-to-pay processes while improving efficiency. With proven capability and experience in managing and delivering complex supplier relationship management solutions, Infosys' SCM sourcing and procurement practice leverages functionality of leading spend management and SRM packages such as SAP SRM, Ariba, and Oracle i-Procurement to deliver enhanced strategic and operational procurement capabilities.

Issues and Concerns in Spend Management

Our business process and technology know-how and experience in sourcing and procurement allow us to provide comprehensive supply chain solutions and services. Consulting/Business Solutions 1. 2. Strategic IT consulting services focused on improving the current procurement processes Business transformation services

3.

Enablement services

Implementation / Roll out 1. 2. 3. Implementation and roll out services for a wide range of packages Version upgrades and enhancement services Integration with ERP and DSS

Maintenance, support and development services 1. Sustenance services, and enhancements and development services focused on maintaining current application portfolio Enterprises can experience transformational benefits by utilizing our services across major business processes offered in collaboration with our alliance partners:

Improved supplier management by helping the organization to locate suppliers with the best prices and location Cost reduction and procurement savings by increasing productivity and lowering the cost of purchasing staff Improved documentation as all transactions are electronically tracked and the reports help the organization to move ahead Increased speed by streamlining and automating the business process

Lesson 7 Supply & Demand Planning

Supply and demand planning processes enable consumer goods companies to create a profitable match of supply and demand. Responsiveness to demand changes and flexibility in planning are essential. Demand planning (forecasting) is a key requirement in the fast moving consumer goods industry. Analysis of historic sales data is the foundation for creating sales forecasts, and ready access to enable adjustments to this forecast by Product Managers, Account Managers, Sales Managers and Sales Representatives leads to a more accurate, consultative sales forecast. Wide participation by staff and external partners improves effectiveness, but requires ready access to collaborative ECM tools to manage the interchange of information in a wide range of formats. Analyzing historic sales data is the foundation for creating sales forecasts; however, demand planning has evolved into a mix of numbers and art the numbers alone no longer paint a sufficient picture of future demand. Consumer goods companies are increasingly relying on sharing information up and down the supply chain with customers, retailers, distributors and manufacturers to create their demand forecasts. ECM solutions provide the collaborative tools required for easy, quick, and secure information exchange and collaboration among supply chain stakeholders. Using ECM solutions in the supply and demand planning process helps Consumer Goods companies to create more accurate sales forecasts, better serving their customers and maximizing productivity. SUPPLY CHAIN PLANNING: SYNCHRONIZING SUPPLY AND DEMAND Your Road to a Demand-Driven Supply Chain Network and Increased Customer Satisfaction Todays fast-paced and rapidly changing business environment is placing increasing pressure on companies to execute consistently and reliably. You are working in an environment where the

balance of a push and a pull requires an adaptive supply chain one that is driven by real-time customer demand and supply signals monitored on a 24/7 basis. Your supply chain must be able to meet the highest levels of demand accuracy and order fulfillment satisfaction, fully supporting order, product, and execution tracking and logistics. Transportation and fulfillment operations need to be smoothly synchronized. Your supply chain must also provide robust planning capabilities that allow you to maximize your return on assets and ensure a profitable match of supply and demand. MySAP SCM and Supply Chain Planning The mySAP Supply Chain Management (mySAP SCM) solution supports an adaptive supply chain network that facilitates interaction among customers, suppliers, and partners. Business practices are linked to industry processes with real-time information, enabling the dynamic synchronization of demand-driven planning, logistics, and supply network execution. Through integration, automation, and comprehensive functionality, mySAP SCM helps you successfully deal with the supply chain challenges that you face on a daily basis. The mySAP Supply Chain Management solution helps you transform your existing supply chain to an adaptive network that can respond to todays tumultuous business environment. You can set goals and forecast, optimize, and schedule time, materials, and other resources. With the solutions supply chain planning capabilities, you can synchronize supply and demand, allowing your company to maximize its return on assets and boost profitability. SAP Solution Brief MySAP Supply Chain Management MySAP SCM is the only complete supply chain management solution that allows you to adapt your supply chain processes to an ever-changing competitive environment. The mySAP SCM solution transforms traditional supply chains from linear, sequential processes into an adaptive supply chain network in which communities of customer-centric, demand-driven companies share knowledge, intelligently adapt to changing market conditions, and proactively respond to shorter, less predictable product life cycles. You can use network wide visibility across the extended supply chain to perform strategic as well as day-to-day planning. You can monitor and analyze the performance of the extended supply chain using predefined and configurable key performance indicators.

Supply Chain Planning: Synchronizing Supply and Demand SAPs supply chain planning and collaboration solution helps enhance your existing supply chain by delivering full planning capabilities strategic, tactical, and operational. The solution is integrated for supply network collaboration among customers, suppliers, manufacturing, and product management. It has the flexibility to support demand-, forecast-, calendar-, event-, or order-driven supply chain process models. The resulting match of supply and demand leads to reduced inventory levels and increased demand accuracy, in-stock positions, inventory turns, profitability, and productivity. Planning capabilities help you model your existing supply chain, set goals, and forecast, optimize, and schedule time, materials, and other resources. You can maximize return on assets and ensure a profitable match of supply and demand. MySAP SCM enables the complete synchronization of logistics, transportation, and fulfillment operations with front-end demand and back-end supply gateways to support demand driven manufacturing and fulfillment processes. The solution supports dynamic planning processes that effectively balance push- and pull-based requirements. The result is a dynamic replenishment process driven by actual demand and a leaner, more efficient supply chain that reduces your inventory carrying costs. You will also be able to fulfill orders in a timelier manner, enhancing customer satisfaction. Overall, by synchronizing supply and demand, you will experience increased productivity, profitability, and customer loyalty. Specific Capabilities Key supply chain planning functions provided by mySAP SCM include demand and supply planning and service parts planning. Demand and Supply Planning Decision makers can perform strategic, tactical, and operational planning. Demand planning and forecasting You can use state-of-the- art forecasting algorithms to anticipate demand for products or product characteristics. You can also model and plan new product introductions, trade promotions, or causal events that will significantly impact demand. Safety stock planning

You can assign optimal safety stock stock kept on hand to satisfy unexpected demand and target stock levels across the entire supply network. This means you can meet your target customer service levels while maintaining a minimum amount of safety stock. Supply network planning By integrating purchasing, manufacturing, distribution, and transportation plans into an overall supply picture, you can simulate and implement comprehensive tactical planning and sourcing decisions based on a single, globally consistent model. This can involve heuristics-based material and capacity planning, constraint-based optimization, and multilevel supply and demand matching. Distribution planning You can plan the best short-term strategy to allocate available supply to meet demand and replenish stocking locations by determining which demands can be fulfilled by existing supply elements. Supply network collaboration Using collaboration capabilities that improve visibility into supply and demand, you can work with partners to reduce inventory buffers, increase the velocity of raw materials and finished goods through the pipeline, improve customer service, and increase revenues. Service Parts Planning You can perform demand planning, inventory planning, supply planning, and distribution planning, and monitoring of service parts supplies. Parts demand planning You can improve the accuracy of forecasts through better modeling of demand quantities, events, and their respective deviations. You can select sophisticated forecast models and optimize model parameters to improve forecasting for slow-moving parts or for parts with irregular demand patterns. Through aggregated forecast-parameter profile maintenance, you make data maintenance more efficient. Parts inventory planning

You can reduce inventory levels and improve retail service levels by providing more precise demand modeling. You can distribute inventory optimally within the multi-echelon supply chain to ensure high service levels while keeping inventory levels at a minimum. Parts supply planning You can reduce inventory in the supply chain by improving supplier alignment, increasing automation, and developing accurate supply plans. You can also reduce operational cost through efficient purchasing practices. Parts distribution planning To reduce stock-out situations and operational costs, you can set up stock transfers for parts within a service parts network. Parts monitoring You can work with suppliers and customers to exchange information and handle alerts collaboratively. Optimized Supply Chain planning with mySAP SCM By implementing mySAP SCM planning capabilities, your supply chain is paced to actual, realtime demand. The result is improved fulfillment, increased customer satisfaction, and a more competitive position in the marketplace. You improve demand accuracy and, at the same time, reduce inventory levels and increase inventory turns. Your company maximizes its return on assets and enjoys a profitable balance of supply and demand. MySAP SCM supports an adaptive supply chain network that facilitates interaction between your customers, suppliers, and partners. Your business practices are linked to industry processes with real-time information, enabling the dynamic synchronization of demand-driven planning, logistics, and supply network execution. Through integration, automation, and comprehensive functionality, mySAP SCM helps you meet the challenges posed by an increasingly competitive, fast-paced, and unpredictable marketplace. Powered by SAP Net Weaver MySAP SCM is powered by the SAP Net Weaver platform, the open integration and application platform that enable change. SAP Net Weaver helps companies align IT with their business. It allows companies to obtain more business value from existing IT investments and to deploy a service-oriented architecture. SAP Net Weaver reduces total cost of ownership and complexity across the entire IT landscape. SAP Net Weaver powers mySAP Business Suite solutions, SAP xApps packaged composite applications, and partner solutions.

It provides the best way to integrate all systems running SAP or non-SAP software. SAP Net Weaver unifies integration technologies into a single platform and is preintegrated with business applications, reducing the need for custom integration. For informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP Group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty.