Topic 5 – Supply Chain Business Processes
Outline
1.1
Customer Service Relationship Management
1.2
Customer Service Management
1.3
Demand Management
1.4
Customer Order Fulfillment
1.5
Manufacturing Flow Management
1.6
Procurement
Topic 5 – Supply Chain Business Processes
Outline (con’t)
1.7
Product Development & Commercialization
1.8
Returns
1.9
Business Process Chains
1.10
Management Components of Supply Chain Management
1.1 Customer Relationship Management
 The customer
management.
is
the
primary
focus
in
supply
chain
 Effective customer interfaces lead to improved communication
and better predictions of customer demand, which in turn
leads to improved service to customers.
 Key steps in managing customer relationships:
a. Identify key customers or customer groups critical to the
organization
b. Develop and implement partnering programs with these
customers
1.1 Customer Relationship Management
 Key steps in managing customer relationships: (con’t)
c. Incorporate product and service agreements into these
programs
d. Tailor agreements to the needs of key individual customers
e. Identify and eliminate sources of demand variability
f. Measure performance and review service levels and
customer profitability
1.2 Customer Service Management
 Focus of customer service management is to provide a key
point of contact for administering product and service
agreements with customers
 Typically requires an on-line, real-time system that interfaces
with the organization’s production and distribution
operations
 Elements of customer service management include:
a. Providing product availability and pricing information
b. Facility for order placement and advice on promised
shipping dates
1.2 Customer Service Management
 Elements of customer service management include: (con’t)
c. Track and trace
d. After-sales service – faulty products, customer returns,
etc.
e. Providing technical support and recommendations on
product applications
1.3 Demand Management
 Inventory is either:
a. Essential - includes factory work-in-process and in-transit
pipeline products
b. Result of system variability – variances in process,
supply and demand
 Irregular customer demand is one of the largest
source of variability
 Demand management balances customer’s requirements
with the organization’s supply capabilities.
1.3 Demand Management
 Process involves:
a. Determining what customers will buy, how much and when
b. Using point-of-sale and key customer data to reduce
uncertainty
c. Synchronize customer demand and production rates
d. Considering multiple sourcing and routing options
1.4 Customer Order Fulfillment
 Objective is to meet or exceed “customer need dates” at the
lowest possible total delivered cost to customers.
 Important to achieve high order fill rates on either a lineitem or an order basis
 Requires integration of the organization’s manufacturing,
distribution and transportation plans.
 Partnerships with key supply chain members and carriers is
key to achieving a seamless process from supplier to the
organization and on to customers.
1.5 Manufacturing Flow Management
 Matching Demand and Production Capability
 In SCM, product is pulled through the plant based on
confirmed customer orders.
a. Orders are processed on a just-in-time basis in minimum
lot sizes.
b. Production priorities are driven by required delivery
dates.
1.5 Manufacturing Flow Management
 Manufacturing processes must be flexible to respond to market
changes.
a. Ability to perform rapid changeover to accommodate mass
customization
b. Keeping setup/changeover costs low.
Requires:
 Reengineering of processes
 Change in product design
 Attention to product sequencing
1.6 Procurement
 Long-term partnerships with key suppliers to support
programs like JIT
 Centralized procurement with global supply contracts to
support world-wide manufacturing operations
 Earlier supplier involvement in design cycle to “get it right
the first time” and reduce time-to-market
 Develop rapid communication mechanisms – EDI, Internet –
to reduce time and money spent on transaction portion of the
purchase
 Frees purchasers to focus time and effort on value-added
supplier development and management
1.7 Product Development & Commercialization

New products sustain an organization’s existence.

Product development is the lifeblood of an organization’s new
products.

Customers and suppliers must be integrated into the product
development process.
a. Coordination with customer relationship management
identify articulated and unarticulated customer needs
to
b. Select materials and suppliers in conjunction with procurement
c. Develop production technology in manufacturing flow to assess
manufacturability and integration into the best supply chain flow
for the product/market combination
1.8 Returns

Effective management of returns channel enables:
a. Enhancement of customer satisfaction with the total product
experience
b. Identification of productivity improvement opportunities

“Return to available” is a measure of the cycle time required to
return an asset to its useful status.
a. Important for products where customers are given immediate
replacement in case of product failure
b. Equipment destined for scrap and waste from manufacturing is
measured in terms of the time it takes for the organization to
receive cash
1.9 Business Process Chains

A process is a structure of activities designed to manage dynamic
flows of products, information, cash, knowledge and ideas, with a
focus on the end customer.

Every company is involved in supply chain relationships.
a. When two companies establish a relationship, for example a
manufacturer and its distributor, some of their internal activities
will be linked and managed between them.
b. These two companies would have established relationships with
other members of their supply chain. Therefore, a supply chain
network is formed.
c. Structure of activities within and between companies is critical for
creating unique and superior supply chain performance.
1.9 Business Process Chains

There is a lack of consistency in how each company within a supply
chain structures its own activities.
a. Companies in the same supply chain may have different activity
structures.
b. Examples:
 Functional structure
combination of both
versus
process
structure
 Different number of processes consisting
activities and links between activities
of
versus
different
 Different names for similar processes, and similar names for
different processes
c. Lack of inter-company consistency
inefficiencies in the supply chain.
causes
friction
and
1.9 Business Process Chains
 Leadership and coordination is a pre-requisite for successful
supply chain management.
a. Identify key business processes and manage them using
cross-functional teams.
b. Where appropriate, extend internal business processes to
external organizations such as suppliers and customers.
c. Synchronize structures, processes and activities across
supply chain members.
d. Leadership role means an organization’s internal
business processes can become the supply chain
business processes.
1.10 Management Components of SCM

Certain management components are common across all business
processes and members of the supply chain

Primary components are:
a. Planning & control methods
b. Work flow/activity structure
c. Organization structure
d. Communication and information flow facility structure
e. Product flow facility structure
f. Management methods
g. Power & leadership structure
h. Risk & reward structure
i. Culture & attitude
1.10 Management Components of SCM
 Can be categorized into two groups:
a. Physical & technical management components - visible,
tangible, measurable and easy to change components
 Planning & control methods
 Work flow/activity structure
 Organization structure
 Communications & information flow facility structure
Product flow facility structure
1.10 Management Components of SCM
b. Managerial & behavioural management components – less
tangible and visible, difficult to assess and alter
 Management methods
 Power & leadership structure
 Risk & reward structure
 Culture & attitude
These components define the organizational behaviour
and influence how the physical and technical
management components can be implemented.
1.10 Management Components of SCM
c. Organizations must focus on both groups.
d. If one or more physical and technical management
components are changed, management components in
the managerial and behavioual group likewise may have
to be adjusted.
1.10 Management Components of SCM
 Planning & Control Methods
a. Planning is key to moving an organization or supply
chain in a desired direction to achieve desired objectives
b. Control should be operationalized into measurable
performance metrics for appraising supply chain
effectiveness
1.10 Management Components of SCM
 Work Flow/Activity Structure
a. Work flow/activity structure dictates how an organization
performs its tasks and activities.
b. Level of integration of processes is a measure of work
flow/activity structure.
1.10 Management Components of SCM
 Organizational Structure
a. Use of cross-functional teams indicates a process
approach.
b. Supply chain integration occurs when such teams cross
organizational boundaries.
Example : in-plant supplier personnel
1.10 Management Components of SCM
 Communication & Information Flow Facility Structure
a. Usually the first component integrated across a supply
chain
b. Type of information shared and timeliness affects supply
chain efficiency
1.10 Management Components of SCM

Product Flow Facility Structure
a. Network structure for sourcing, manufacturing and distribution
across the supply chain
b. Issues and dependencies:
i. Inventory reduction pressures
ii. Postponement strategies
iii. New product launch
iv. Complexity of product design
v. Promotions
vi. Seasonality of demand
1.10 Management Components of SCM

Management Methods
a. Include corporate philosophy and management techniques
b. Level of management involvement in daily operations can
differ across supply chain members.
c. Integration of different management structures among supply
chain members can be difficult.
Example : Top-down organization structure versus bottom-up
structure
1.10 Management Components of SCM
 Power & Leadership Structure
a. Affects supply chain form
b. Usually one or two strong leaders exist within a supply
chain.
 Strong leaders will drive direction of supply chain
c. Exercise or lack of power affects level of commitment of
other supply chain members.
 Given the opportunity, forced
encourage exit behaviour.
participation
will
1.10 Management Components of SCM
 Risk & Reward Structure
a. Anticipation of sharing of risks and rewards across
supply chain affects members’ long-term commitment.
1.10 Management Components of SCM
 Culture & Attitude
a. Corporate culture and its compatibility across supply
chain members cannot be ignored.
b. Meshing cultures and individuals’ attitudes is timeconsuming but necessary for supply chain to perform as
a coordinated network.
Topic 5
Summary
and
Conclusion
1. Successful supply chain management requires a
change from managing individual functions to
integrating activities within these functions into key
supply chain processes.
2. Focusing effort on the key supply chain processes
provides the foundation for an effective supply chain
management philosophy.
3. The goals and outcomes of these processes are to:
a. Develop customer-focused teams that provide
mutually beneficial product and service
agreements to strategically important customers
b. Provide a point of contact that efficiently handles
all customer enquiries
1. The goals and outcomes of these processes are to:
(con’t)
c. Continuously gather, compile and update
customer demand to match requirements with
supply
d. Develop flexible manufacturing systems that
respond quickly to changing market conditions