Supply Chain Management;
Beyond Acquisitioning
Cobus Rossouw, 13 October 2008
Definitions of Supply Chain
Management
“Supply Chain Management is the integration of key business
processes from end user though original supplier that provides
products, services and information that adds value for customers and
other stakeholders”
The Eight Essential Supply Chain Management Processes” by Douglas M. Lambert,
“Supply Chain Management is an integrating function with primary
responsibility for linking major business functions and processes
within and across companies into a cohesive and high-performing
business model.”
Council for Supply Chain Management Professionals (CSCMP)
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 2
Supply Chain Integration
Distribution
Sales
Low
stock
High
availability of
Stock
Few
change
overs &
long run
lengths
LowestPurchase
Price
Min No
of
Vendors
Stable
plans
Beneficiation
Natural
Resources
Production
Ingredients
Conversion
Min
Distn.
cost
Conversion
(High service
levels)
Wholesale
/ Retail
Packaging
EXISTS FOR THE SOLE PURPOSE OF SATISFYING CONSUMER DEMAND
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
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CONSUMER
Materials
Asset Centric Supply Chain
Labour
Natural
Resources
Maintenance
CONVERSION
Utilities
EXISTS FOR THE SOLE PURPOSE OF MAXIMISING UTILISATION
Service Delivery Channel
Ingredients &
Packaging
Service
Interface
Conversion into Products
Supporting Service
SERVICE
BENEFICIARY
Service Delivery Supply Chains
EXISTS FOR THE SOLE PURPOSE OF SUPPORTING SERVICE DEMAND
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 4
Demand-driven Supply Networks –
AMR Research Framework
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
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Supply Chain Reference Model
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
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Business Functions & Processes
Function
Process






Outputs
Inputs
Controls
Mechanisms
Integration
Conflicting measures
Functions
Processes
Marketing
Marketing
CRM
Marketing Plan &
Resources
CSM
Prioritization of
Customers
DM
Competitor’s
initiative
OF
Role of LS in
Marketing mix
Sales
Account
Management
R&D
Technology
Capabilities
Technical
Service
Competing plan
in Cust. space
Process
Requirements
Forecasting
Knowledge of Cust.
Requirements
Environmental
Requirements
Network
Planning
Differentiation
Prospects from MC
Knowledge of Cust.
Requirements
Design for
Manufacturability
SRM
Capabilities needed
for Viable Positioning
Sales Growth
Opportunities
Material
Specifications
PDC
Product/Service
Gaps in market
Customer
Opportunities
Customer
Knowledge
Knowledge in
Marketing Programs
Logistics
Capabilities
Knowledge of
Customer Op’s
MFM
RM
Logistics
Alignment of
Logistics Activities
Prioritization
Criteria
Production
Purchasing
Finance
Manufacturing
Capabilities
Source
Capabilities
Customer
Profitability
Coordinated
Execution
Priority
Assessment
Cost to
Serve
Manufacturing
Capabilities
Made to
Order
Source
Capabilities
Material
Constraints
Tradeoff
Analysis
Distribution
Costs
Production
Planning
Integrated
Supply
Manufacturing
Costs
Inbound
Material Flow
Integrated
Planning
Supplier
Capabilities
Total Delivered
Cost
Product
Design
Logistics
Requirements
Process
Specifications
Material
Specifications
R&D
Cost
Product
Design
Reverse logistics
capabilities
Remanufacturing
Material
Specifications
Revenue
& Costs
Information Architecture, Data Base Strategy, Information Visibility
Note: Process sponsorship and ownership must be established to drive the attainment of the supply chain vision and eliminate the functional barriers that artificially separate the
flow process
Source: “Supply Chain Management: A Key to Achieving Business Excellence in the 21st Century” by Douglas M. Lambert
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 7
CUSTOMERS
Organisational unit
Specialist outputs
Common skills pool
Well-defined objectives
Career paths
Group mindset
SUPPLIERS






Functional Involvement in the Supply Chain Management Process
Supply Chain Management
Process Model
GLOBAL SUPPLY CHAIN FORUM: BUSINESS PROCESS MODEL *
Products
/ Services
Demand Management
Order Fulfillment
Returns Management
Customer
Service
Management
CUSTOMERS
Manufacturing Flow
Management
Supplier Relationship
Management
SUPPLIERS
Product Development & Commercialization
Customer Relationship Management
Cash
Information
•“The Eight Essential Supply Chain Management Processes” by Douglas M. Lambert,
•Graphical Illustration developed based on understanding of process content
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
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Operational Demand Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 9
SCM Legal Framework
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 10
Supply Chain Management Concept
SUPPLY CHAIN MANAGEMENT
INFRASTRUCTURE
(SYSTEMS)
ACQUISITION
LOGISTICS
DISPOSAL
SUPPLY CHAIN PERFORMANCE
DATABASE/S
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 11
GOVERNMENT’S
PREFERENTIAL
PROCUREMENT POLICY OBJECTIVES
DEMAND
Objectives of SCM Policy Guidelines
Governance
Efficiency
Constitution
Effectiveness
PFMA / MFMA
Cost Control
Consistent Policies
Systems
Preferential
Procurement
Performance
Measurement
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 12
Provisioning
Integrated Supply
Chain
Management
Supply Chain Management Concept
Strategy
Operations
Suppliers
Customers
Supply Chain Management
Finance
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 13
Supply Chain Management Concept
Strategy
Operations
Suppliers
Customers
Supply Chain Management
Finance
Acquisition
Management
Logistics
Management
Demand
Management
Disposal
Management
Performance Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 14
Thank you
Supply Chain Management;
Beyond Acquisitioning
Cobus Rossouw, 13 October 2008
Supply Chain Management Concept
Strategy
Suppliers
Operations
Supply Chain Management
Finance
Performance Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 16
Customers
PFMA: Performance Measurement
Retrospective Analysis
>> Proper process being used
>> Objectives being achieved
Achievement of goals
Compliance to norms and standards
Savings generated
Stores efficiency
Cost variance
Contract breach
Cost efficiency of process
Conformance to policy guidelines
Best practice
Cooperative governance
Reduction of regional disparities
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 17
Supply Chain Management Concept
Strategy
Operations
Suppliers
Customers
Supply Chain Management
Finance
Demand
Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 18
PFMA: Demand Management
Cross-Functional Process
>> Supply Chain Professional Closer to Customer
>> Achieving Maximum Value for Money
Understanding future needs
Identifying critical delivery dates
The frequency of the need
Linking the requirement to the budget
Doing expenditure analysis
Determining the specifications
Doing a commodity analysis
Doing industry analysis
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 19
Framework for Supply Chain
Management Policies
“10. A supply chain management policy must provide for an
effective system of demand management in order to
What ? ensure that the resources required to support the strategic
and operational commitments of the municipality or
Why ?
municipal entity, are delivered at the correct time, at the
right price and at the right location, and that the quantity
and quality satisfy the needs of municipality or entity.”
How much ?
Where ?
How ?
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 20
When ?
Supply Chain Management Concept
Strategy
Operations
Suppliers
Customers
Supply Chain Management
Finance
Acquisition
Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 21
PFMA: Acquisition Management
Operational Procedures
>> Governance of Supplier Interaction
>> Achieving Lowest Total Cost of Ownership
Preferential Policy Objectives
Strategy on Approaching the Market
Total Cost of Ownership Principles
Bid Document, including detailed requirements
Bid Evaluation Criteria
Bid Evaluation and Recommendations
Contract documents and agreements
Contract administration
Kick-start Logistics Management Process
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 22
Framework for Supply Chain
Management Policies
“11. A supply chain management policy must provide for an
effective system of acquisition management in order to ensure
that:
What ?
Goods and services are procured in accordance with authorised
processes only
That Expenditure is incurred in terms of approved budgets
Threshold values for different processes are complied with
How ?
Bid documentation, adjudication and evaluation criteria and
general conditions of the contract is in accordance with
applicable legislation
Treasury guidelines are properly taken into account
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 23
How much ?
“Standard” Procurement Process
Demand Management
Define sourcing needs
1
Scope
the
Need
2
Specify
required
outcomes
3
Choose & define
the
Sourcing
Strategy
4
Specify
Evaluation
Criteria
5
Predetermine
Potential
Suppliers
Obtain Suitable Supply
6
Fulfill Group
Collaboration
7
Engage
& screen
Supplier
8
Obtain
Quotations
9
Evaluate&
Choose best
Option
10
Negotiate
Contractual terms
& SLA
11
Finalise
Contract
Logistics Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 24
S
T
R
A
T
E
G
I
C
Supply Chain Management Concept
Strategy
Operations
Suppliers
Supply Chain Management
Finance
Logistics
Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 25
Customers
PFMA: Logistics Management
Control of Assets
>> Working Capital: Stock / Inventory
>> Fixed Assets: Projects & Immovable Property
Coding of Items
Setting of Inventory Levels
Placing of Orders
Receiving and Distribution of Material
Stores / Warehouse Management
Expediting Orders
Transportation Management
Vendor Performance Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 26
Logistics Management
CSCMP Definitions
Logistics Management
“Logistics Management is that part of Supply Chain Management that plans,
implements, and controls the efficient, effective flow forward and reverse
flow and storage of goods, services and related information between the
point of origin and the point of consumption in order to meet customers’
requirements.”
Boundaries & Relationships
“Logistics Management activities typically include inbound and outbound
transportation management, fleet management, warehousing, materials
handling, order fulfillment, logistics network design, inventory management,
supply/demand planning, and management of third-party logistics service
providers. To varying degrees, the logistics function also includes sourcing
and procurement, production planning and scheduling, packaging and
assembly, and customer service. It is involved in all levels of planning and
execution – strategic, operational and tactical. Logistics Management is an
integrating function, which coordinates and optimizes all logistics activities,
as well as integrates logistics activities with other functions, including
marketing, sales, manufacturing, finance and information technology.”
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 27
“Standard” Procurement Process
Acquisition Management
Demand Management
Execute Operational Procurement Process
12
Operational
User
Requisition
13
Initiate
Order
14
Perform receipt
Of goods
Stock, Warehousing &
Transportation Management
Execute Operational Payment Process
15
Collate
Invoices
16
Execute
Payment
Logistics
Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 28
17
Evaluate
Contract & Supplier
Performance
Disposal Management
O
P
E
R
A
T
I
O
N
A
L
Inventory Targets
This is only true
if the right inventory
is carried.
Service level
Total inventory cost
Cost
Percentage
Inventory
carrying cost
Order cost
Inventory Units
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 29
Supply Chain Management Concept
Strategy
Operations
Suppliers
Customers
Supply Chain Management
Finance
Disposal
Management
SCM; Beyond Acquisitioning - GSCPS Midrand
Cobus Rossouw, 13 Oct 2008
Page 30
PFMA: Disposal Management
End of Life-cycle Stage
>> Working Capital: Stock / Inventory
>> Fixed Assets: Depreciation & Replacement
Obsolescence Planning
Database of Redundant Material
Inspection for Potential Re-use
Strategy for Disposal Execution
Physical Disposal
Replacement Planning
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Page 31