Several methodologies about managing supply chain

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INTRODUCTION:

In the modern life, bargaining has already shifted into not as simple as buying and selling goods, but has more organized system-this is what supply chain all about. The definition of supply chain is more than three companies directly linked by upstream and downstream products (Mentzer, 2001, p. 2). In order to gain the long-term profit and keep continuing the companies alive, We have to notice that supply chain orientation and supply chain management is different: systemic, strategic implementations of activities and processes in the supply chain flow that company recognizes in managing are called supply chain orientation; the supply chain management is not only following the traditional systemic and strategic coordination but also improving the long-term performance (Mentzer, 2001, p. 2). Supply chain management can simply divide into three main flows: the product flow, the information flow, and the finance flow. The product flow includes all the processes from suppliers to customers, also service and return. The information flow is making orders and delivery status. The finical flow is involved all the credit, debit payments. In order to reach a successful supply chain project, it is very important to understand these three flows thoroughly and organize them smoothly during the supplying processes.

Methodology

The house of supply chain management (Stadtler, 2005):

The competitiveness and customer service are the roofs of the house of SCM indicate the importance of customer satisfaction and the importance to understand the strength and weakness of the competitive market. Two pillars below the roof are integration and coordination, which contain those essential elements to reach the roof, and, support by the foundations.

Benchmarking

Benchmarking is a standard for the company to measure if their own performance is enough and be able to continuous improvement. It is showed in (Bjùrn Andersen, 1999), four essence of benchmarking: measurement of own and partner's performance; comparison of performance levels, processes, and practices; learning from others ;and improvement of own company.

l Transformation process management tool (Fassoula, 2006):

It mentioned about five phases (Figure 2):

1) Identifications

The project of supply chain transformation process (SCTP) should be more specific as possible in the beginning in order to realize the present situation.

2) Supply chain processes analysis.

After collecting all the information at the first step, we are going to analysis all the data and find the opportunities to improve.

3) Re-examine the selected integrated SCTP implementation project.

A good integrated project should has modular process plan, the priorities of transformation steps, time schedule, budget, definition of project milestones, and the necessary training and communication activities.

4) Put SCTP in place.

In this step, the integrated SCTP project plan has taken place in the realization.

5) Finishing the SCTP project and final evaluation.

By using several criteria (pre-assessment criterion, in-progress evaluation criteria, final evaluation criteria), we can figure how do the project goes until this step. It is mentioned strongly that transformation process project never end. After using these criteria, the cycle will be leaded back to the first step and keep doing continuous improvement.

Supply chain models (Jinho Kim, 2007):

Before this study released, there are many types of supply chain models have been mentioned, some are categories as four, some are five. Because of the uncertainly of supply chain, (Jinho Kim, 2007) has proposed a 'Business Process Reengineering (BPR)-driven' models and added an object-oriented business model (OOBM) as a subcategory (Figure 3).

The supply chain matrix (Stadtler, 2005):

In the figure 4, it simplifies the supply chain process into four steps: procurement, production, distribution, and sales. We can clearly understand the long-term need is strategy planning, mid-term needs are master planning and planning by demands, and short-term needs show more details in every section. In this paper, we are focusing on the short-term process.

l Supply chain performance metrics framework (Jinho Kim, 2007):

There are some strategic, tactical, and operational skills that are suitable in each step of supply chain process. It is very useful and critical in planning the supply chain project. It will be blended into the project below.

Six Sigma of total quality management/continuous improvement

In a case study of Sumsung group implementing Six Sigma tool with their supply chain, instead of traditional define, measure, analyze, improve, and control (DMAIC) steps, a brand-new series of define, measure, analyze, enable, and verify (DMAEV) has formed (Hong Mo Yang, 2007).

Schedule making:

In (Ayers a. B., 2009, p. 114) shows a simple figure about schedule process (Figure 7): Once the project deliverables have been defined, the activities (tasks) can be listed. After that, tasks should be sequenced, and resources will be estimated. The duration of tasks will be set up next, and then schedule is going to be decided and controlled. If we take it with (Clements, 2006, pp. 210-212), the schedule plan would be:

1) Measuring the actual progress and find an average period.

2) Setting up the estimated schedule.

3) Tracking the schedule and updating if needed.

4) controlling the schedule.

Scope

A successful project is needed: scope, budget, and schedule. However, three of them cannot match at the same time; only two of them can be existed in the same period. The scope usually includes objective, project deliverable, project constraints (schedule and budget). It is also very helpful to have work breakdown structure (WBS), responsibility matrix, activities defining, network diagram, and Gantt charts (tasks), which form a completed project. In the scope part of this paper, there are several aspects: 1) objective, 2) deliverable, 3) process, 4) WBS, 5) budget and schedule, and 6) risk plan.

Objective

Build a successful supply chain project.

Project deliverables

Better formed supply chain procedures according to several methodologies and real-life experience of companies.

WBS

The WBS is comprehended several studies (Ayers J. B., 2006, p. 184); (Stadtler, 2005); (Hong Mo Yang, 2007) and is defined on four categories: supply chain strategy, internal alignment, short-term planning, and long-term improvement by combining with Six Sigma tool.

Supply chain process (Figure 8)

According to (Bjùrn Andersen, 1999), the best practice process is:

After receiving the customer request, the project team is formed. Once they get the customer order, the company has to decide to make or buy the components. If they are going to manufacture, the manufacturing components will be produced and be placed to make an inventory. If they buy from suppliers, comparing of existing and new suppliers is needed. After the components are gathered, the inventory is produced, and payment will be made afterwards.

Budget

Budget is estimated by labor, materials, subcontractors, equipments, and contingencies. After setting up the budget, we can see the total budgeted cost (TBC), cumulative budgeted cost (CBC), cumulative actual cost (CAC), and cumulative earned value (CEV). To track the budget expense, we can use a formula cost performance index (CPI) and use other formulas to forecast cost. The last step of holding the budget is cost control. We have to track the expense regularly and analyze it often in order to take action on the cost variance (CV) and inefficiencies. If there was a negative CV, we can correct: 1) activities will be taken place in the near future or 2) activities had large estimate cost. It is also important to keep a regular cash flow for fear of cash shortage.

Schedule

In supply chain, there are many details going on. We only briefly do the time-estimated for each category in the short-term planning:

1) Requirement: 1 month.

The requirement includes the customer order and acceptance, make-or-buy decisions (manufactures/suppliers), and purchasing is placed.

2) Production planning and scheduling: 7 days.

It includes between producing procedures and order placed.

3) Distribution planning and transport planning: 7-10 days.

It is calculated as standard shipping during the transportation.

4) Demand planning and fulfillment: 7 days

Customers tend to have a period to regret/satisfy buying goods, as a result, they may return/exchange or place the next order.

Risk plan

In order to reduce risk, (Clements, 2006) makes the four steps for managing risks: identification, assessment, response planning, and monitoring.

There are several types of risk in supply chain:

Types

Probabilities

Impact

Level

Risk response

Performance

Wrong inventory production

2

51%

H

Re-check before put it all together

Delivery late to customer

3

51%

H

Monitor the delivery process

Delivery wrong product to customer

1

51%

M

Delivery control

Budget

Over budget

3

49%

H

Track expense regularly and correct in time.

Wrong budget estimate

1

51%

M

Check actual activities take place

Schedule

Delayed production

2

20%

M

Monitor the production process

Delayed component delivery

2

20%

M

Track delivery and make supplier performance list

Lack component delivery

1

51%

M

Re-order and make supplier performance list

Equipment broken

1

51%

M

Maintain regularly

*H: high, M: moderate, L: low.

Analysis

In order to understand the performance and control the supply chain project, companies can use some tools to make them analyze the outcome, moreover, finding the opportunities and challenges.

(Beamon, 1998) has collected many kind of analyzing tools: qualitative performance measures and quantitative performance measures. In qualitative performance measures, customer services always stand in the first place. The pre-transaction satisfaction, transaction satisfaction, and post-transaction satisfaction performance have to be traced carefully. Second, the flexibility the company has can affect the product delivery. Third, information and material flow level determine the functions of supply chain. Fourth, effective risk management influence all the relationships within the supply chain. Fifth, the supplier performance has a strong effect of raw materials quality and consistency. In the quantitative performance measurement, cost and customer responsiveness are the two major concerns. The successful project tends to boost return on investment, the sales and profit maximization and minimize the inventory investment. Considering customer response, reducing product lateness, place order time, manufacturing time, and function duplication but increase fill rate of orders, are the key elements.

Conclusions/Recommendations

Supply chain management is a very complicated project to deal with. In a supply chain, it is not managing one company only but several companies are correlated. The difficulties of managing a successful supply chain is those companies are in the same standing, not in a hierarchy system. It is more likely keeping a good partnership between each company, no matter supplier or wholesalers/customers. The best way to manage a successful supply chain is having a good strategy, monitoring the process at the same period of time, and having a risk plan.

REFERENCES:

Ayers, a. B. (2009). Supply Chain Project Management. Second Edition: A Structured Collaborative and Measureable Approach. Auerbach Publications.

Ayers, J. B. (2006). Handbook of supply chain management. Auerbach Publications.

Beamon, B. M. (1998). Supply Chain Design and Analysis: Models and Methods. International Journal of Production Economics , pp. 281-294.

Bjùrn Andersen, T. F. (1999). Benchmarking supply chain management: finding best management: finding best. JOURNAL OF BUSINESS & INDUSTRIAL MARKETING , pp. 378-389.

Clements, J. G. (2006). Successful Project Management. Cengage Learning.

Fassoula, E. D. (2006). Transforming the supply chain. Journal of Manufacturing Technology Management , pp. 848-860.

Hong Mo Yang, B. S. (2007). Supply chain management six sigma: a management innovation methodology at the Samsung Group. Supply Chain Management: An International Journal , pp. 88-95.

Jinho Kim, K. J. (2007, August). Building a Strategic Business Framework for Proactive Decision-Making in the Supply Chain Industry. PICMET , pp. 2315-2324.

Mentzer, J. T. (2001). Supply chain management. London: Sage Publications, Inc.

Stadtler, H. (2005). Supply chain management and advanced planning-basics, overview and challenges. European Journal of Operational Research , pp. 575-588.

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