Developing an end to end Process Architecture

Prepared by: Mike Leylekian Dina Samir

Components of SC Architecture

All supply chain processes (plan,source,make,deliver, and return). Interactions between the supply chain processes and other core enterprise processes. Applications required to support supply chain processes. How the applications will be integrated.

Tests of SC Architecture

Effective Supply Chain satisfies four tests

The test of strategic fit. The test of end-to-end focus. The simplicity test. The integrity test.

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Strategic Fit

Market leaders are set apart by their deep understanding of the critical supply chain practices at which they must excel.

Strategic Fit
Amazon provides a good example of how to select business practices that align with supply chain strategy. Amazon stocks only those items designated as top sellers Amazons process design emphasizes the importance of demand planning to predict sales and to determine the appropriate inventory levels to stock at each location. This focus has allowed the company to become highly efficient at organizing warehouses to stock items close together that tend to be purchased at the same time.

Strategic Fit

When can our Supply Chain achieve a Strategic Fit?

The value of new practices is quantified before they are integrated into the supply chain architecture. New business practices are prioritized based on their ability to drive forward the supply chain strategy. The supply chain architecture is reviewed regularly to ensure alignment with current strategic direction.

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End to End Focus

By integration, we mean shared goals and alignment of the processes, systems, and organizations needed to achieve those goals.

Case Study Company had invested in a costly, worldwide (ERP) system. Despite all this, it still had poor performance.

End to End Focus

A close look at operating practices revealed that areas such as purchasing, manufacturing, logistics, and sales were focused on achieving their functional objectives. But all this at the expense of enterprise-level outcomes. Example: Manufacturing (JIT), Production, Logistics. However, these good practices actually were hurting its delivery performance.

End to End Focus

Problem: Order management system in meeting customer delivery dates. Company put in place new supply chain processes with a focus on overall business performance. A supply chain scorecard was prepared which was based on four metrics.

End to End Focurs

On-time delivery (to commit date) Order fulfillment lead time Cash-to-cash cycle time. Total supply chain management cost.

End to End Focus

1.

When does supply chain architecture meets the test of end-to-end focus?
Processes and supporting information systems are integrated within and beyond the enterprisereaching key suppliers and customers. Supply chain resources such as capacity and inventory are optimized across the organization and with key suppliers and customers. Standard metrics and quantitative objectives are shared across the organization and with key suppliers and customers. Performance visibility and management are shared across the organization and with key suppliers and customers.

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Simplicity
The costs and risks of complexity are

highest when companies integrate their processes and systems with those of their customers and suppliers. The different drivers of complexity.
1. 2. 3. 4.

Supply chain configuration Product and service proliferation Process and information systems inconsistency. Overautomation

Simplicity

1.

Supply Chain Configuration

How has the company structured its network of physical assets and distributed activities within that network. The decisions made to support the channel strategy, operations strategy, and other components of your supply chain strategy Does the company have a large number of order-entry desks, warehouses, factories, engineering centers, and other physical locations. Is the company trying to manage too many customer and supplier relationships directly.

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Simplicity
Product and Service Proliferation Causes: 1. Failure to phase out or retire certain products as they are replaced by newly introduced alternatives. 2. Availability of technologies that allow organizations to mass customize their product offerings.

This means more items to plan, source, make, and deliverall of which drive supply chain costs and inventory.

Simplicity

Process and Information Systems Inconsistency

Different locations within the same company have different, incompatible processes. Arises because companies are simply not aware of the benefits of a standard process architectureor havent invested the resources needed to create one. Process and information inconsistency makes it difficult to integrate with customers, suppliers, and other business partners.

Simplicity

Overautomation
Overautomated processes are difficult to manage because the people who use them dont completely understand how they work. Without major changes to business practices, companies can improve performance greatly by making their operations more manageable and creating the visibility that comes with simplification. Simplifying the existing supply chain is a necessary first step toward more advanced supply chain practices, especially in supplier and customer collaboration.

Simplicity

1.

How can we know that a supply chain architecture meets the simplicity test.
Supply chain process architecture standardization rules are defined and enforced. Product and service complexity and related costs are measured and tightly managed. Standards for components and materials are defined and adhered to. The physical supply chain configuration (warehouses, order desks,factories, supplier locations, distribution centers) is reviewed regularly and simplified where possible.

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Integrity

We cant introduce new supply chain practices without a solid foundation. Many companies still have applications islands stand-alone applications that support only one piece of the end-to-end process

Integrity

Too many companies use nonintegrated applications that require manual data reentry, changes in data formats, and multiple quality checks. Data quality and availability are as important as integration between applications. Inaccurate or missing data lead to errors and ineffective execution. Inaccurate or unusable data also create manual work, reducing speed and efficiency and adding costs to the supply chain. A key driver behind this push for data quality is a growing awareness of the costs associated with poor data in transactions.

Integrity

1.

When does a supply chain architecture meet the test for integrity.

Required integration between applications is defined in the supply chain process architecture, and the impact of application integration issues on business performance is measured. 2. Processes are documented at each level of the supply chain architecture, with clear descriptions of the data required to execute each process. 3. Data quality is measured and managed, with clear ownership for data creation and maintenance.

PROCESSES FOR END-TO END SUPPLY CHAIN MANAGEMENT

Plan

Plans input is information on demand, supply, and supply chain resources. Planning excellence has five key principles:
Use timely, accurate information. Focus resources on business priorities. Aim for simplicity. Integrate all supply chain requirements. Create explicit actions and accountabilities.

PROCESSES FOR END-TO END SUPPLY CHAIN MANAGEMENT

Source

The supply chain source process procures all needed materials and services. Sourcing excellence is bulit on four key principles:
Aim for the lowest total cost of ownership (TCO). Maintain an enterprisewide focus. Set procurement strategies according to category. Measure and manage performance.

PROCESSES FOR END-TO END SUPPLY CHAIN MANAGEMENT

Make

The supply chain make process transforms the resources procured by source into goods and services according to agreed-on specifications. There are four principles for process excellence in make:
Focus on business priorities. Aim for speed and flexibility, not just low costs. Set and monitor quality standards. Synchronize all manufacturing activities.

PROCESSES FOR END-TO END SUPPLY CHAIN MANAGEMENT

Examples of processes Integration

Plan provides make with a production plan stating the amount of product to be manufactured. Source provides information on what and when materials will be received from suppliers and what inventory is available for production. Make provides source with information on materials consumption, which determines how much to order from suppliers. Make provides information on scheduled production to deliver for use in order promising.

PROCESSES FOR END-TO END SUPPLY CHAIN MANAGEMENT

Deliver

The deliver process starts with the receipt of a customer order and includes all the activities needed to complete that order. Four principles recommended for deliver process:
Balance service with the cost to serve. Cut costs and time with straight-through processing. Set up end-to-end tracking and traceability. Manage data for ongoing accuracy and timeliness.

PROCESSES FOR END-TO END SUPPLY CHAIN MANAGEMENT

Return

The return process ensures that previously sold products are supported,collected, and dispositioned according to business policies and customer agreements. For return process excellence, follow these four key principles:
Create a distinct supply chain for return. Feed back return information quickly. Base return policies on total cost of returns. Maximize revenue opportunities.