Supply Chain Management:
From Vision to Implementation
Chapter 7: Supply Chain Mapping
Chapter 7: Learning Objectives
1. Discuss the concept of SC design and its
importance.
2. Explain process mapping and describe
mapping’s role in SC design.
3. Describe several popular approaches for SC
design.
4. Map out a supply chain. Describe key
insights a manager can gain from a SC map.
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Supply Chain Management
SCM is the design of seamless value added
processes across organization boundaries to meet
the real needs of the end customer. SC design
and improvement is assisted by:
1. Process Mapping - creates visibility of current
and improved processes.
2. Value Stream Mapping - depicts flow of
information and materials
3. SC Mapping - displays the dynamics that
govern how a supply chain works
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Failure to be Proactive in Design
Failure to proactively design a SC results in:
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Poor coordination of effort
Incompatible information systems
Long cycle times
Communication problems
Customer service issues
Excessive waste and environmental degradation
Relatively high inventories for the level of customer
service achieved
 Lower the optimal profit
4
Process Mapping
 A process is defined as an activity that
transforms or changes input into new output.
 A process map is a graphic representation of
the system and contains a sequence of steps
that are performed to produce some desired
output.
 The primary goal behind process mapping is
to make complex systems visible.
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Process Mapping
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Developing a Process Map
 Determine the purpose of the process map
 Establish level of detail
 Establish system boundaries
 Determine who has the required information or experience.
 Analyze the process through observation and interviews,
document each step.
 Draw the map
 Have the people who are involved in the mapping process as
well as others (including those who actually perform the
process) review the map for clarity and completeness
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Process Map – Bake a Cake
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Process Analysis
Process analysis is used to identify non-value
added or redundant activities.
1. Begin process analysis by examining the time,
cost, resources, and people involved in each
step.
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Identify the steps that consume the most time or resources.
Identify processes that take too long or vary greatly in time.
Identify points of delay.
Estimate the value added by each step and judge the value
against the cost.
 Consider the reasons for problems and how to improve
specific activities or processes.
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Process Analysis
2. Re-examine each decision symbol.
 Determine if the decision is necessary and adds value?
 Consider combining decisions or moving them to another point in the
process to create more value.
3. Check each rework loop. A rework loop involves iterative
processes, like repeatedly checking a cake until it is done
baking. Here, consider how rework can be reduced,
eliminated, or combined with another step.
4. Finally, look at each process step again. Sometimes a process
is done out of habit without verifying its value.
 Verify that the step adds more value than its cost.
 Judge if the step is redundant.
 Consider how steps could be recombined for greater efficiency.
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Initial Process Map
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Improved Process Map
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Value Stream Mapping
 Specific application of process mapping based on
lean Manufacturing principles.
 System boundaries typically defined at the macro
level.
 Generally contains more information then typical
process maps:
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Process time
Process performance characteristics
Information flows
Physical flows
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Supply Chain Design
Supply chain design is just too important to leave
to chance. Just as genetic engineering has begun
to shortcut the process of species evolution,
proactive chain design will shortcut and forever
make obsolete the slow, incremental processes of
industrial evolution.
- Charles Fine, Professor at MIT
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Supply Chain Design
1. Identify the chain’s end customer
2. Determine the Supply Chain’s value proposition
 Identify the key players at each level and the value they add
 Determine where your company is and value it adds
3. Analyze who possesses the power in the supply chain:
manufacturer, distributor, retailer, or other party
 Determine who has the best linkages with the end customer
 Establish the key technologies that drive SC success
 Assess the core competencies that drive SC success
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Supply Chain Design
4. Isolate the major processes required to support the
supply chain’s value proposition
 Determine where there is a significant amount of time
and variability
5. Establish what the ideal supply chain would look
like
 Ascertain the as-is value-added roles of the various
supply chain members
 Analyze how much control over supply chain activity
we want or need
 Clarify the should-be value-added roles of the various
supply chain members
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Traditional and SC Process Focus
Process
Traditional
Supply Chain
Inventory Management
Approach
Only company-owned
Whole chains, high turns
Cost Management Approach
Price focus
Total cost
Coordination of Sharing and
Monitoring in Chain
Limited
Long Horizon for planning
Amount of Coordination of
Multiple Levels in the Chain
Limited
Extensive
Planning in Supply Chain
None
Integrated with information
technology
Supplier Management
Arms-length and/or adversarial
Close relationships with key
suppliers
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Traditional and SC Process Focus
Process
Traditional
Supply Chain
Leadership in Supply Chain
None
Leadership roles defined
among players
Sharing of Risks and Rewards
None
Defined with key players
Speed of Operations,
Information/Inventory Flows
Slow, limited
Rapid, extensive
Information Technology
Not an issue; internal focus in
supply chain
Extensive improvements and
linkages
Team Process
None with customers or
suppliers
Joint teams with key customers
and suppliers
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Approaches to Supply Chain Design
Common Elements:
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Identification of Customer and Value Proposition
Identification of Membership
Structure of Member Relationships
Locus of Control
 Design Tools
1.
2.
3.
4.
SCOR Model
Supply Chain Double Helix
Nature of Product or Service
Product Life-Cycle
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SCOR Model
 Supply chains are based on a series of linked,
planned-source-make-deliver-and-return processes.
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SCOR Model
 Steps in the SCOR model:
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Analyze the basis for competition: what do you need to
do well in order to succeed? How can you measure and
monitor your progress in these key areas?
Configure the supply chain as it is and as you would like
it to be. Include geographic locations and flows.
Align performance levels, practices and systems across
information and work flows.
Implement SC processes and systems, including people,
processes, technology and organization
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Supply Chain Double Helix
 Supply chains are constantly evolving and
changing as the environment which they
compete changes.
 The ability to design and redesign supply
chains proactively that creates competitive
advantage.
 As a company designs and redesigns its
supply chains must take advantage of
designed for initiatives.
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Supply Chain Double Helix
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Design for Initiatives - DFX
 Design for initiatives attempt to create an
atmosphere where designers work with other key
players internally or externally to insure critical
issues are considered and integrated into design of
products and processes.
 Design for
manufacturability
 Design for distribution
 Design for disassembly
 Design for environment
 Design for supply
 Design for the customer
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Nature of the Product or Service
 Supply chain should be structured based on
whether the product or service they deliver is
innovative or functional in nature.
 Innovative products have short life cycles
 Functional products fulfill basic needs
 Insight generated from this design strategy
can complement the SCOR, Double Helix, or
product life-cycle models.
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Innovative Product Supply Chains
 Innovative products have relatively:
 high profit margins
 unpredictable short-lived demand
 high risk of obsolescence.
 Supply chain should:
 Seek to minimize inventory
 Focus on speed and flexibility
 Ideal supply chain: Responsive
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Functional Products Supply Chains
 Functional products have relatively:
 Predictable demand
 Long life cycles
 Large number of substitutes
 Supply chain should:
 Seek to minimize cost
 Provide reliable and high service levels
 Ideal supply chain: Efficient
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Product Life-Cycle Issues
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Supply Chain Mapping
 Supply chain mapping generally begins with a
high level map to identify major linkages and
bottleneck areas.
 Supply chain maps should consider linkages
with customers and key suppliers.
 Tools like the pipeline map may identify
unnecessary complexity, thereby leading to
improvements to the current competitive state
of the supply chain.
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Pipeline Map - Example
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Pipeline Mapping Steps
1. Identify the item that you wish to map.
2. Identify all of the processes that occur on the
physical pipeline for that product, including supplier
processes.
3. Determine who performs each process in the chain.
4. Talk to each of the entities that performs a process,
determine how long the process takes; how much
inventory is present; how much inventory is in
transit and transit times for materials.
 Inventory would include raw materials, components, and
output
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Pipeline Mapping Steps
5. Draw the SC pipeline map from raw material to end
user as a series of horizontal and vertical lines.
a.
b.
c.
d.
e.
Begin by drawing a horizontal line from the commodity market to the end user.
The length of the horizontal line represents the total process and relevant
transportation time.
Starting with the earliest process, write the name of the processes in order above.
After the name of the process, indicate the time the process takes.
Draw vertical lines at the beginning and end of each process to indicate the
average amount of inventory that each party has on hand in terms of both input
and output. These represent the average inventory that any party in the supply
chain is holding. If the product is not physically transformed by the process, only
one inventory level is shown. Adding total inventory in the pipeline identifies the
amount of “non-value added” days or buffer inventory.
Alternatively, use flow modeling to , identify both the time and cost associated
with a process. Focus process improvement on the processes with the highest
value and the longest delays.
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Pipeline Mapping Steps
6.
Analyze the supply chain for opportunities.
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7.
8.
9.
Consider means to reduce the pipeline length.
Map relevant SC processes. Look for unnecessary processes and delays. Identify
potential improvement opportunities.
Consider means to reduce the level of buffer inventory. This represents assets that
SC members have tied up increasing cost and risk while lowering the agility of
the chain. Analyze where inventories are too high by focusing on areas with the
highest levels and longest delays.
Prioritize your ideas from step 6. Work with the team, suppliers, customers
and other affected parties to implement, manage, and monitor changes. Don’t
limit yourself to the first tier suppliers or customers, as the supplier’s
suppliers and customer’s customers may also provide excellent ideas or
opportunities for SC improvement.
Analyze the new supply chain, revisiting step 6 until satisfied with the
improvement results or they are no longer cost-beneficial.
Repeat the procedure with other supply chains.
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A Return to the Opening Story
Based on what you have now read and discussed:
1. Does “drawing a picture” of Olympus’ core process seem like
a good way to seem like a good way to identify improvement
opportunities? Why or why not?
2. Does extending the idea of process mapping to the supply
chain make sense? In what ways would you expect SC
mapping to differ from process mapping?
3. Where would you begin in drawing the SC map? Who should
be involved?
4. SC mapping answers the questions, “How do we fit?” and
“How should we fit?” Why begin with a map of your current
process before drawing a map of how you would like things to
be?
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Supply Chain Management:
From Vision to Implementation
Supplement G: Project Management
Project Management
 Project and process management are closely related
practices.
 Project management requires a good understanding
of interdependencies among activities, time and
resources necessary to complete these activities.
 Three best-known project management tools: critical
path method (CPM), Gantt charts, and the program
evaluation review technique (PERT)
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Critical Path Method (CPM)
 Developed by DuPont and Remington Rand
during the 1950s
 Projects are broken into various activities
 Precedence between activities determine
sequence for completion
 Activities with no slack, amount of time an
activity can slip without impacting overall
completion time, are said to be along the
“critical path”
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CPM Steps
Step
Number
Step Name
1
List required activities
2
Construct precedence diagram
3
Estimate time necessary for each activity
4
Calculate earliest start and finish times
5
Calculate latest start and finish times
6
Calculate slack of each activity
7
Identify critical path
8
Use critical path information to better manage project
9
If necessary, calculate the cost and benefits of crashing the critical
path
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CPM Example Data
Activity
A
B
C
D
E
F
G
H
I
Time (days)
5
2
4
4
3
7
3
2
4
Preceding Activities
none
none
A
A
B
B
D, E
F
C, G, H
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Project Precedence Diagram
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Organization of CPM Information
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CPM with Task Times
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CPM - Calculations
Earliest Finish Time  Earliest Start Time  Activity Time
Latest Start Time  Latest Finish Time - Activity Time
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CPM Forward Pass
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CPM Backward Pass
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Identification of Critical Path
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Project Crashing
 In some instances a company may wish to
reduce the amount of time for project
completion- “Crashing the Project”
 Accomplished by scheduling overtime, hiring
more employees, or adding an extra shift.
 Decisions on crashing are made by comparing
the marginal cost of crashing activities along
the critical path.
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Project Crashing
Normal
Crash
Activity
Time (weeks)
Cost
Time (weeks)
Cost
A
4
$
2,000
2
$
4,000
B
3
$
1,500
2
$
1,750
C
2
$
5,000
1
$
6,000
Activity
Normal
Time (weeks)
Crash
Cost
Time (weeks)
Cost
A
4
$
2,000
2
$2,000/2 = $1,000
B
3
$
1,500
2
$250/1 = $250
C
2
$
5,000
1
$500/1 = $500
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Gantt Charts
 A Gantt chart is a graphical trail of a project’s
activities over time.
 Disadvantage of Gantt charts is that they do
not show precedence relationships between
various project activities.
 Gantt charts should be used with CPM to help
overcome this disadvantage.
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CPM Example Gantt Chart
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PERT
 PERT was developed by the U.S. Navy and
Booz Allen Hamilton for use of the Polaris
missile project.
 Major difference between CPM and PERT is
the use of multiple time estimates to allow for
variation in task completion.
 Time estimates include: optimistic best case
(A), pessimistic worst case (B), and most
likely (C) activity times.
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PERT – Time Estimate
A  4C  B
Time Estimate (mean) 
6
Variance  

B - A

2
2
36
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