The Parallax View New Models for Supply Chain Management Executive Summary June 2002

Transcription

1 The Parallax View New Models for Supply Chain Management Executive Summary June 2002

2 THE PARALLAX VIEW REPORT - TABLE OF CONTENTS Introduction The Accelerating Cycle of Transformation What are Supply Chains? Chains Chain Differentiation Links So what is the ChainLink Point-of-View? Supply Chain Transformation Supply Chains are Market Driven Links Strategies Determine the Winners The Strategic Value of Links Links are the Bedrock issues in your Supply Chain Beyond Benchmarking Limitations of Traditional Metrics Focusing on Inter-Enterprise Links Strategic Performance Management Active Metrics - A New Approach to Tactical Metrics Link Metrics Virtual Enterprise Scorecard Collaboration Is! Technology is needed to Support Chain Links Time for a change in Thinking The Ironies and the Opportunities: A New Technology Architecture Advocacy of advanced business models The ChainLink Inter-Enterprise Model Modes Enterprise Optimization Understanding Constraints Link and Chain Constraints Maturity Stages - How do chains evolve? Supply Chain Acquisition Stage Market Acquisition Supply Chain Effectiveness Strategic Adaptation Adaptations for the Customer (or Last Mile ) Collaborative Attributes: ChainLink Metrics: Drilling down on the links Conclusion Applying the ChainLink Model Consumer Electronics Supply Chain Example ChainLink Technology Assessment Maturity Stages impact on Technology Priorities Links and Technology Enterprise Optimization Technology Requirements Example Conclusion Glossary

3 Models for Supply Chain Management Companies no longer compete their supply chains do. Our research has concluded that the links between a company and its partners are the single biggest determinant of winners and losers. The winners will be those companies that learn how to evaluate their supply chains from this fresh perspective The Parallax 1 View. Audience for this Report Supply Chain Practitioners Senior Management Third Parties (contract manufacturers, logistics providers, etc.) Supply Chain Technology Vendors Consultants The Parallax View ChainLink s inaugural report The Parallax View describes our unique real-world framework, the ChainLink Inter-enterprise Model, a practical solution to accelerating the transformation to new supply chain business models that enable your company to build and maintain value in rapidly evolving markets. 2 The ChainLink objective is to widen the dialogue on supply chain strategy to include the CEO as well as cross-enterprise partners. Supply chain managers know they have a major impact on the enterprises success, but discussions frequently get mired in esoteric formulas. And CEOs driven by quarterly results frequently lose sight of the impact and importance of supply chain configuration and performance on customers and market share. It s not uncommon for SCM (Supply Chain Management) to be overlooked as a critical customer-success function. ChainLink s report address key topics, including: How supply chain designs can help with sales channel development and revenue growth. 1 Parallax-an apparent change in the direction of an object caused by a change in the observational position that provides a new line of sight. The American Heritage Dictionary, Third Edition 2 Rapidly evolving markets dominate today s business environment, characterized by ever accelerating waves of new innovative supply chain strategies. The impact of successfully moving (or failing to move) to a new supply chain model can have a huge impact on a firm s ability to compete or even survive. Page 1

4 How supply chains can be a key differentiator in the enterprise strategy. How firms can create effective entities, teams, organizations and facilities to support supply chain performance. How to understand realistic performance goals. How third-party logistics, contract manufacturing and solution providers enable effective supply chain management. CEO Issues for Supply Chain What are the concerns of organizational leadership? What decisions do CEOs need to make? What should they do first? What outcomes should CEOs expect? How do they create orderly, yet timely change within the constraints of money, time, and human resources? What key decisions and expectations must include executive management participation to achieve superior business performance enabled by supply chain management. If you are a supplier: How are you going to play in the new world that s coming where the customer understands all your costing data, knows how you run your manufacturing lines and is pushing you to implement change and where key large customers are pulling you in different directions. The ChainLink Point of View The ChainLink POV on Supply Chains has six tenets: 1. Supply Chains are Market Driven Ultimately market definition drives supply chain strategy, however customer-configured chains must be adapted to optimally deal with constraints inherent in the chain. 2. Link Strategies Determine the Winners Winning is largely based on the optimization of the links between the participating entities in a supply chain. Because each customer or market that an enterprise conducts business with places unique demands, the primary key to the success of these relationships is the Chain and the Link. 3. Beyond Benchmarking How-did-we-do metrics serve a purpose, but don t provide the forward-looking view required to detect and prevent extremely costly supply chain glitches or disasters. Companies must add Page 2

5 active, or predictive metrics coupled with preventive approaches, rather than relying solely on static analysis. Additionally, ChainLink advocates the use of linking metrics with trading partners: calibrating a company s performance across the inter-enterprise processes. To this end, ChainLink is promoting a shared performance system the Virtual Enterprise Scorecard to drive over-all improvements in supply chain performance. The ChainLink Highlights Advanced supply chains are: Market driven, configured by customer or market requirements. Adapted by constraining forces. Evolving based on stages of maturity and innovation. Focused on the inter-enterprise linkages and relationships. Influenced by global political and economic forces. Managed by active performance metrics. 4. Collaboration Is! No firm is an island. Today more than ever companies are on a relentless path to virtualization driven by globalization, Wall Street demands, and enabling technologies. This is, by definition, collaboration sharing processes, exchanging value and conquering markets. 5. Technology is needed to support Chain Links Technology is an essential element of supply chain management. However, there is a huge gap between the availability of enabling technologies and the practical understanding of which specific technologies are required and how they should be deployed to create world-class supply chains. This issue is complicated by the unique link requirements that customers increasingly demand. Our report describes an innovative approach to making technology investment decisions. 6. Advocacy of Advanced Business Models ChainLink Research advocates those business models that demonstrate clear costs and benefits ultimately serving customers, market and process innovations that improve supply chain performance as well as an organization s ability to implement. The ChainLink Inter-enterprise Model The ChainLink Inter-enterprise Model for understanding and improving supply chains integrates the following concepts: 1. Modes Supply chain modes (such as build-to-forecast, build-to-order, and engineer-to-order) are production strategies driven by the economies in product build, economics, customer service requirements and unique properties of the product. Modes are also impacted by set-up Page 3

6 times, product cycle times, forecast variability and availability of components or raw materials. 2. Enterprise Optimization ChainLink recognize that a firm is in business for itself. Interenterprise processes are the means to the end serving customers and securing profits. Enterprise optimization means that the requirements of each participating firm influence the design of supply chain linkages across the multi-enterprise landscape and throughout the various phases, from bid/win to product end-of-life. ChainLink Model Concepts 1. Modes 2. Enterprise Optimization 3. Constraints 4. Maturity Stages 5. Strategic Adaptations 6. Collaborative Attributes 7. ChainLink Metrics 3. Constraints Firms need to understand not just their own constraints, but also the constraints of the whole chain. This is important because these constraints will delay delivery and increase cost. Total supply chain costs are not understood or significantly improved unless these constraints are addressed throughout the chain. 4. Maturity Stages The chain model evolves over time as the process moves from acquisition of markets and customers to establishing a steady supply chain. Over time, relationships improve and receive increasing returns from linkage maturity and innovation. Page 4

7 5. Strategic Adaptations Firms have a starting point their existing strategies, practices and infrastructure from which they build link relationships with trading partners. As they negotiate the link with their partner, they adapt and modify their own processes, practices and strategies in order to make the relationship work. Limitations or constraining forces that could limit or enhance the supply chain strategies need to be discussed decided and then deployed. We call the modifications made as a result of this process Strategic Adaptations the initial results will usually not be optimal and organizations refine them on an ongoing basis but the result does give the participating organizations a link that functions. 6. Collaborative Attributes The best firms engage in a collaborative manner creating more customized and optimized accommodations. As participants become increasingly innovative and sophisticated in cross-enterprise process, these more advanced Collaborative Attributes become an integral part of supply chain design. 7. ChainLink Metrics Local optimizations can be globally sub-optimal. A better approach is the Virtual Enterprise Scorecard a way of measuring performance across the supply chain. The scorecard is most effective when combined with active metrics metrics, which can be used to predict supply chain glitches, providing the alerts and insights needed to avert mishaps and disasters. In Conclusion Supply chains go through maturation phases as organizations enter into ongoing dialogue defining their rules of engagement and realizing the benefit of shared processes and the value derived from the relationship between them. These maturity phases have internal implications as well. ChainLink believes that supply chain operations managers know that the efforts they put into their supply chains helps differentiate their firms and supports the needs of their customers, creating and enhancing customer relationships and value. Page 5

8 About ChainLink Research ChainLink Research focuses solely on supply chain our team is a mix of supply chain practitioners with decades of hands-on, real-world experience. Our research puts us in direct contact with the managers and senior executives responsible for making supply chains work. This gives ChainLink an in-depth understanding of the problems, which we use to create practical solutions providing the catalyst to help companies solve their supply chain issues and stay ahead of the competition. ChainLink Research is a Supply Chain research organization, dedicated to helping executives improve business performance and competitiveness through an understanding of real world implications, obstacles, and results for supply chain practices, processes, and technologies. The ChainLink Inter- Enterprise Model is the basis for our research, a unique real world framework that describes the multi-dimensional aspect of links between supply chain partners. A key success factor for companies in today s rapidly evolving markets is having access to a pragmatic cycle of transformation where knowledge acquisition, learning, and transformation are an integral part of ongoing business and partnership development processes. ChainLink supplies the critical catalyst by helping companies achieve a living, pragmatic model that accelerates the speed of transformation, converting supply chains into highly competitive and effective virtual extended enterprises. Our Services ChainLink offers two levels of services to meet the needs of our members: Basic Membership and Partner Membership. In addition, ChainLink performs custom research on a per-project basis. Basic Membership Basic Members receive ChainLink s exclusive, detailed research reports. We target highly relevant topics based on impact and immediacy of value for supply chain practitioners. We conduct in-depth surveys and interviews on innovative supply chain strategies, practices, processes and technology and the results they produced. Reports include both quantitative and qualitative data and analysis. Because ChainLink has no vested interests or hidden marketing agenda, we are able to probe for the real story behind the successes and failures of supply chain initiatives, providing highly practical and candid insights: What drove decisions? What challenges were faced? Which approaches worked and which failed and why? What benefits were received and Page 6

9 most importantly, what specific key factors were required to achieve those benefits? The following are examples of upcoming reports: Slaying the Delivery Dragon: Innovations in Out-bound Delivery to Demanding Retailers and OEMs How leading manufacturers have stepped up to meet ever-more-challenging out-bound logistics demands from mega-retailers, such as Wal- Mart and Home Depot, and major OEMs in High Tech and Auto. The Future of VMI: Revelations and Implications of VMI Success and Failures Current and emerging practices: When is VMI working, when is it not working, and why? Limitations and obstacles, impact on each partner, structure of trading partner agreements, how to determine optimum VMI strategies. Dynamic Replenishment: Achieving Real-time Responsiveness to Unpredictable Demand Advanced practices of OEMs, manufacturers, retailers and third parties to achieve real-time responsiveness. Changes made to production, order processing, sourcing, planning and forecasting, warehouse strategies, and logistics. Rehumanization of the blanket P.O. leveraging and connecting intelligence throughout the chain. Super Thin Manufacturing: The Emerging Next Generation of Ultra-efficient Manufacturers What leading manufacturers are doing to become Super Thin. The role of contract manufacturers, 3PL s, international trade enablers, trace and track, strategic supplier collaboration, inbound replenishment, and key practices such as postponement from both the supplier and manufacturers perspective. Who Can Benefit from Membership Basic Membership is valuable to anyone who cares about supply chains: Supply Chain Practitioners ChainLink s unique framework enables supply chain practitioners to analyze their own firm's unique situation and to define and implement optimum supply chain strategies and inter-enterprise processes. Senior executives Executives can use the model to evaluate and make the tough tradeoff decisions about the best supply chain strategies for their firm. Page 7

10 Chain Link Dialogue Relationship Management Goal Process and Alignment Role of 3rd Parties Service Levels Modes Linkage Maturity and Evaluation Technology vendors ChainLink s own experience and deep user-focused research enables supply chain vendors to deeply understand the issues faced by their customers. Vendors are then able to align their product offerings and messaging with those buying community segments that receive the most value from the vendor s technology. Consultants Consultants will find the model invaluable in advising and shaping the supply chain initiatives and strategies of their clients. Partner Membership ChainLink s Partner Members have access to everything offered to Basic Members. In addition, Partner Members are able to participate in one or more of ChainLink s Partner Rings. Partner Rings are private 5, confidential, interactive groups. These groups meet in ChainLink-hosted and facilitated forums: Online discussions forums Members can ask questions of other members and invited experts as well as ChainLink s seasoned team. Members of a ring strictly control who participates and the visibility of these discussions. Round-table web-based conference calls Presentation of case studies and general discussions facilitated by ChainLink experts. Face-to-face meetings Hosted by members and facilitated by ChainLink. There are three types of facilitated rings: Peer Rings A set of peers, for example VP s of Supply Chain, from various companies, learning from the collective experiences about actual problems faced, what works and what doesn t work. 5 These are not open, public forums. Members of the Partner Ring decide which other firms may join and participate in the ring. Page 8

11 Enterprise Rings Cross-functional or cross-divisional members of a firm in a facilitated forum to bridge the stove-pipe gap that occurs within large enterprises. Virtual Enterprise Rings Constituent members from different firms in a confidential supply chain ring for example, an OEM, a distributor, a contract manufacturer and a third party logistics provider hashing out specific supply chain issues and developing strategies with the guidance of ChainLink as a knowledgeable and objective third party. To swiftly converge on optimum decisions and relationships between members of a ring, ChainLink provides: Deep supply chain expertise in planning, logistics, distribution, strategic sourcing and collaborative design 6. Rules of engagement designed to ensure a constructive, highly confidential dialog that leads quickly to addressing the core issues and identifying optimal solutions. Collaborative environment supplying the basic tools and environment for the dialog: Partner Rings provide a highly effective solution for firms struggling to rapidly transform themselves and their supply chains helping them to attain and maintain world-class performance. Custom Research Upon request, on a per-project basis, ChainLink will also provide custom research and analysis specifically tailored to an organization's unique situation and issues. To learn more about ChainLink Research and our membership services, please contact us: Phone: ext. 2 info@clresearch.com Web: 6 ChainLink experts are available on a scheduled basis for online forums and to facilitate the interactive discussions. Partner Membership does not include one-to-one phone time with ChainLink personnel. Page 9

12 CHAINLINK RESEARCH, INC. HARVARD SQUARE CENTER 124 MOUNT AUBURN STREET, SUITE 200 NORTH CAMBRIDGE, MA TEL: (617) FAX: (617)