March 9-10, 2006 Makati Shangri-La Hotel, Makati City, Philippine Effective Supply Chain from a CEO Perspective April 20, 2012 Dr Stephen W. K. Ng President of The Institute of Purchasing & Supply of Hong Kong, and Vice President, IFPSM-A/P Region 1
The Institute of Purchasing & Supply of Hong Kong 2
About the Speaker Dr. Stephen W. K. Ng Dr. Ng is managing director of QuST Continuation Limited and was Associate Project Director of Poon Kam Kai Institute of Management, the University of Hong Kong. He headed up the Executive Training and Development Stream for the Institute of the University in 1999 to 2002. Stephen is formerly a director at Motorola Semiconductors, Asia where he spearheaded the Change Program, 3PLs & 4PLs and Customer Focus/ Responsiveness Centers for Motorola throughout the world. Stephen also was instrumental in helping design and deliver of Leadership, Strategic Planning, Supply Chain Leadership, Logistics, Quality, Communication and Services related programs for the Corporation and Motorola University in Asia. Stephen is currently President of Institute of Purchasing & Supply of Hong Kong, Director of the International Federation of Purchasing and Supply Management (IFPSM), Honorary Advisor of the Six Sigma Institute, Member of Hong Kong Logistics Development Council, SAR Hong Kong Government, and Member, Industry Training Advisory Committee (ITAC), Education Bureau. Stephen is also a visiting lecturer of the University of Hong Kong and an Adjunct Professor of The Hong Kong Polytechnic University focusing on the teaching, research, procurement development, logistics and total supply channel leadership. He is also an Adjunct Professor of Beijing Jiaotong University. 3
Sharing for Today 1. Purchasing to Supply Chain, from Profession to Professionalism 2. The CEO s Agenda and the New Climate Challenge 3. Transforming the Global Supply Chain, the End to End Sustainability 4. What it takes to win from Purchasing to Supply Chain Leadership 5. The Future Challenge of Supply Chain of 2030 4
Marketplace Force in Action moving towards GSCM 50 s Mass Production 大量生產 60 s 70 s 80 s 90 s 00 s New Product 新產品 Low-cost Manufacturing 低成本製造 Total Quality Drive 全優質領導 Speed & Customer Relationships 服務效率與關係 GSC Management 全球供应链管理 Modified from Jon Anton 1996 5
Characteristics of the 21 st Century Winning Corporations Old Characteristics Emerging Characteristics Goal directed Price focused Product quality mind set Product driven Shareholder focused Finance oriented Efficient, stable Hierarchical Machine based Functional Rigid, committed Local, regional, national Vertically integrated Vision directed Value focused Total quality mind set Customer driven Stakeholder focused Speed oriented Innovative, entrepreneurial Flat, empowered Information based Cross functional Flexible, learning Global Networked, interdependent SEI Center 1996 6
Total Supply Chain Management Overview Accurate and timely information flow Supplier Manufacturer Manufacturer Wholesaler (Plant) (Sales & Distribution) Product Flow Retailer Consumer Need efficient consumer response 7
Typical Supply Chain information is not shared unnecessary inventory at various levels visibility only of your own link 8
Integrated Supply Chain Management (SCM) information is shared across the supply chain faster, more accurate, more efficient replenishment drive unnecessary costs out of the supply chain strengthen partnerships with customers and suppliers turn inventory from a cost into an asset 9
SCM versus Channel Management (CM) SCM is fundamentally a philosophy of channel management which seeks the synchnonization and convergence of intraenterprise and interchannel operational and strategic capabilities into a unified compelling marketplace force. CM refers not to a concept but, rather, to the actual strategic objective and the structure of channel business functions, institutions, productive values and physical operations that define the way a particular channel system moves goods and services to market through the supply pipeline. - D. F. Ross - 10
Total Materials Management The Relationship of Purchasing/Procurement/Supply Management Activities and Material Decision Purchasing and Supply Management, by Donald W. Dobler et al. 11
The Evolution of Procurement to Performance Focus on price/mfg Costs Focus on quality, Speed, reliability, responsiveness, and total cost Product centred Process centred Strategic Focus supplier relationships Forecasting Green cycle time results Collaborative Commerce Sourcing Activities Relationship based Strategic Performance L. T. Results 12
Scope of Professional and Professionalism Specialist teams and individuals in Supply Management require: Range of roles (range of relationships) Innovative/intelligent people Technical/influencing skills Internal consultant (understand key drivers) Help define need Understand rules Performance spec Innovative sourcing Transparent decisions Leadership Trust, Respect and high Integrity 13
Professionalism The Key Success Skills Variable % Purchasing people capabilities 25 Mindset/aspirations 16 Strategic influence of purchasing 16 Purchasing processes 13 Cross-functional collaboration 12 Knowledge/information/IT 8 Performance tracking/compliance 7 Structure of purchasing 3 Total 100 Source: McKinsey & SMI (European Business School) Global Survey, September 2006 14
Challenges of SCM Intensified, global competition pressure to improve operations Accelerate time-to-market Create value for my business partners What must companies do to increase productivity and lower their costs while providing greater value & better customer experience 15
Challenges of SCM Solutions often involve changes to multiple functions Functionally focused initiatives address narrow concerns and preempt a broader examination of the issue Many companies have not been very successful because they have taken a narrow, functionally focused approach 16
I am convinced that if the rate of change inside the institution is less than the rate outside, the end is in sight - J. Welch 17
However, World has changed 企業不論大小, 速度取勝 It s no longer the big beats the small, the new business game is that the fast eats the slow It s all about Responsiveness 客户滿意為先 18
The Real Challenge of The Value Chain 服務價值鏈的挑戰 企業支援 Firm Infrastructure 企業結構與組織 Human Resource Management 人力資源領導 Technology Development 科技之研發 Procurement Vision 採購專業之推動及願境 Inbound Logistics 進物流 Operations 營運 Outbound Logistics 出物流 Marketing & Sales 營銷 Quality Service 服務 主要營運 Primary Activities Source: Modified from Value Chain 1985 Michael Porter 19
Evolution in the Value Chain The Basics Cross- Functional Teams Integrated Enterprise Extended Value Chain Value Chain of the Future Functional Excellence Serve Our Customers Drive Business Efficiency Create Market Value Be a Market Leader Competitive Necessity Competitive Advantage Ainsley Mann 2001
Corporate View of Strategic Procurement Planning External Environment PEST Analysis Internal Factors SWOT Analysis Corporate VMV, Objectives & Strategies Competitive Strategies Marketing Functional Strategic Plans Production Finance Supply Process 21
Corporate View of Strategic Procurement Planning Ensure Total Continuity of Supply Potential Causes of Supply Continuity Issues Changes in Global / Regional / Local Economic Conditions Customer Expectations / Challenges Operational / Political Challenges Supplier Challenges Transform Risks into Opportunities Rapid Response / Speed Capability Suppliers of Choice with Customers Customers of Choice with Suppliers Improved Cost / Asset Management Results Expected Competitive Advantage Profitable Growth Innovative / Green CSR / CER /CER Satisfied Customers & Suppliers Win-Win-Win Modified from Judy Baranowski, AlixPartners IFPSM 2009 22
Ensure Total Continuity of Supply an Integrated Move Rapid Response with Closed Loop Corrective Actions Ensure Visibility Up/Down/Across Organization Core Processes to Minimize Potential for Supply Continuity Issues KPIs Metrics, Analytics, Predictors and Results Cross Functional and Team Involvement Modified from Judy Baranowski, AlixPartners IFPSM 2009 23
The Emerging Logistics SCM Trends Worldwide Emerging SCM Trends Business Process Integration JIT QR Integrated Logistics Management SCM ECR Green CRP / ERP DC & RDC Warehouse Automation Outsourcing - 3LP Cross Docking VMI CPFR Electronic Commerce SC Benchmarking 4th Party Logistics Provider ERM & CRM Crisis and Sustainability 24
More radical approach Pushing Management to think: cross functional, boundary spanning, Integrated Green Logistics & global supply chain, toward virtual Logistics & supply chain Culture change Thinking out of the box JIT Waste 25
The Future of Purchasing and Supply Management The first course on purchasing was in 1917 by the Harvard University. Supply Management Strategies. Aims and Weapons of Strategic Supply Management (SSM). Skills needed by Supply Management Professionals. Evolution of Purchasing and Supply Management Roles Supply Management has no Boundaries. The Future of Purchasing and Supply Management Giovanni Atti - 2010 26
The Supply Chain and Logistics Flow External Demand Retailer Order lead time Delivery lead time Purchasing Management Order lead time Wholesaler Delivery lead time Customer Management Distributor Order lead time Delivery lead time Factory The Demand Chain? By David Simchi Levi Production lead time 27
The Future Supply Network Key Suppliers Distribution Consumers Primary Resources Manufacturing Network Shared Savings Flow Retail Outlets Consumer Value Interactive Data Base and Exchange Information Flow By Charles C. Poirier Flow of Goods and Services 28
Typical Supply Chain Structure, Logistics Flow & Common Terminology 2nd-Tier Suppliers 1st-Tier Suppliers 2nd-Tier Customers 1st-Tier Customers Your Company Supply side Purchasing & supply management Demand side Physical distribution management Logistics (transport) Materials management Global Supply chain management Modified from Slack et al Operations Management 1998 p475 29
The Global 2Cs - Change and Challenge Challenge: 30
The Three Pillars Model of Sustainable Development 持續改善环境 企業持續發展 持續發展經濟 持續社會承擔 SCR Edmundo Werna, 2009 31
Business Continuity Plan Macro View of Corporation BCP Crisis Management Planning and Executive, Edward S. Devlin 2007 32
Supply Chain, Supply & Logistics Management Overview Product and Service Management Demand Management and Communication Category Management Short cycle planning and inventory optimisation Integrated Supply Operations & Logistics Improvements Synchronised Production Synchronised Supply Synchronised Demand Reliable Supply Reliable (production) Operations Flexible (production) Operations Reliable Supply Continuous Replenishment Cross Docking & Distribution Automated Store Ordering Click Total Quality & Operations Reliability Information Systems Enablers Key Performance Indicators Quality & Costs Analysis 33
The Foundations of Leadership Development for Supply Management Key Influences Modified from Paul R. Yost & M. M. Plunkett, 2009 - Real Time Leadership Development 34
The Value Chain 服務價值鏈的挑戰 企業支援 Firm Infrastructure 企業結構與組織 Human Resource Management 人力資源領導 Technology Development 科技之研發 Procurement Vision 採購專業之推動及願境 Inbound Logistics 進物流 Operations 營運 Outbound Logistics 出物流 Marketing & Sales 營銷 Quality Service 服務 主要營運 Primary Activities Source: Modified from Value Chain 1985 Michael Porter 35
The Value Chain Challenge The Value Adding Process! Logistics, transport and inventory flow management Supply Chain Management & Leadership for PDSP&SCM12 M2 on March 8 May 3, 2010 Stephen Ng, QuST, IPSHK 2010 36 36
The Complexities of Global Logistics Green initiatives A growing public concern for the planet Ocean Warming Artic Ice Melt Hurricane Typhoon Intensity Siberian Permafrost Melt Pollution Waste Reduction Recycling Climate Change Government Regulation CO2 Everyone in the Supply Chain will be Impacted Global Temperature # of Floods Population Population: 1AD = 250M 1776 = 1B 1945 = 2.3B 2006 = 6.5B 2050 = 9.1B
Motorola Quality Culture Evolution 摩托罗拉品质文化的演变 1979 - Management Commitment and Understanding 管理承诺与理解 1981 - Great Quality Awakening 巨大的品质意识 10 X Improvement in 5 years 五年中的 10 倍改善 1986 - Bench Marking and Quality Surveys 水准制定的品质评述 1987 - CEO Directive and Six Sigma Change Vision 总裁指导与六西格玛理想 1989-10 X Quality Improvement 10 倍品质改善 1991-100 X Quality Improvement 10 倍品质改善 1992 - Six Sigma (Baseline 1987) 六西格玛 1993 - Six Sigma and Beyond 六西格玛及其超越 2000-10 X Quality Improvement in every 2 years 每两年 10 倍品质改善 2000-2 X 2000 in RONA 双倍回报
Total Continuity of Supply Potential Problems Quality & Compliance challenges Communication problems Operational issues Logistics /traffic problems Engineering problems Supplier s supply problems Sudden changes in customer demand Supplier financial problems Government / Policies challenges Green Supplier issues Business ethics issues Modified from Judy Baranowski, AlixPartners IFPSM 2009 39
Ensure Total Continuity of Supply Short and Long Terms REACTIVE Understand today s burning issues Fix them a quick fix Implement controls / processes to ensure the solutions stick Free up resources to work on proactive processes Respond to issues happening everyday PROACTIVE Understand the external environment Understand strategic direction for the enterprise, i.e. The Green Collaborate with the internal and external teams Define the appropriate supply chain strategies and action plans for the business Implement the plan with ongoing checkpoints, compliances and recognitions Modified from Judy Baranowski, AlixPartners IFPSM 2009 40
The 12 imperatives for outstanding supply chain performance How do we deliver distinctive value and differentiated service to local customers, while at the same time exploiting opportunities from a globalised view of supply chain? The strategic imperatives Adding value to the customer 1 st imperative: the customer value driven supply chain 2 th imperative: differentiation through the product offering Searching for structural advantage 3 th imperative: global operations restructuring 4 th imperative: strategic sourcing and co-venturing partnerships Business integration and performance drivers 5 th imperative: integrating/synchronizing the supply chain network 6 th imperative: operations beyond the productivity edge How do we align the who enterprise people, processes, operations, technology, suppliers, and other business partners around a programme of progressive strategic change? The key enablers 7 th imperative: business structure and organisation 8 th imperative: process and performance measures 9 th imperative: people and behaviours 10 th imperative: high performance partnerships 11 th imperative: leveraging information and technology How do we future proof and build agility into, our supply chain operations in response to the pace of external change and ever increasing pressures from shareholders and competitors? Managing at the pace of change 12 th imperative: agility and the ability to respond to change Source: PWC 41
Supply Channel Integration (E to E) COLLECTIVE LEADERSHIP APPROACH NETWORK ENABLERS IS A CHALLENGE TO TOTAL LOGISTICS and Materials Management! Enterprise Enterprise Finance Marketing Sales Engineering Total Logistics Inventory Planning Production Management Purchasing Customer Services Transportation Warehouse IS Total Logistics Inventory Planning Production Management Purchasing Customer Services Transportation Warehouse IS Finance Marketing Sales Engineering SUPPLIER RELATIONSHIP SUPPLIER Sources: CTSCM, D.F. Ross 1998 42
The Competition and the Next Competition (Co-operation + Competition) Copetition 43
Volatility in the Electronics & Semiconductors Supply Chain 100.00 80.00 % Change, Year-to-Year 60.00 40.00 20.00 0.00 20.00 40.00 60.00 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 Year Worldwide Semiconductor Manufacturing Equipment Sales Worldwide Semiconductor Shipments Electronics, Computing and Communications Equipment Output GDP World GDP USA 44
All Conclusions are Temporary Clockspeeds are increasing almost everywhere Value Chains are changing rapidly Assessment of value chain dynamics Changes of what we Think? Build Strategies and Roadmaps From Prof. Charles Fine, 2009 45
Chapter 11 By Mr. Soeren Vammen IFPSM 2008 Source: Fortune Global 500, 1990, 1999, 2008 46
A New Way of Doing Business Trust building Information sharing & Management Banks Data Data Data Suppliers Data YOUR COMPANY Data Data Customers The Technologies!!! Data Data Transporters 47
Globalization of Electronic Product Code (EPC Global) The Challenge to Supply Chain and Logistics Management, The Drive for Ultimate Technologies 48
Supply Chain Continuum High Supplier Management True Stockless Inventory Product Standardization Potential For Cost Reduction Just-In-Time Delivery Comprehensive Inventory Management Prime Supplier Programs w/scheduled Deliveries Prime Supplier Programs w/edi Inventory Management Programs In Selected Departments Consolidation/Reduction of Suppliers Committed Group Purchasing Materials Management w/information Systems & Software Materials Management Orientation Low Low Traditional Purchasing Department Speed of Response High
Evolving and Adapting Operations of the Future Influences By John Gattorna in Dynamic Supply Chain Alignment, 2009 50
Developing competency through a non-stop learning culture Business skills Company positioning and development Company business processes and IS/IT Supplier market Economy general & accounting Company environment/ context Company end customer market IS/IT- general Languages Project management Leadership General skills Creativity Analysing skills Business process management Flexibility Supply Chain Supply Management Knowledge Warehousing Negotiation Professional skills Reverse logistics Outbound logistics/ Distribution Influence & communication Cooperation Logistics toolbox/kpis 51
The Operations in Supply Side Alignment of 2030 By John Gattorna in Dynamic Supply Chain Alignment, 2009 52
Summary Notes Implementing World Class Supply Management and World Class Supply Chain Management is as much about leadership and management as it is about supply management concepts and practices with results That is all about people and the soft skills and our behavior towards these basics, but useful skills Based on it s integrative, relationship, and boundary spanning nature, there is no question in our minds: World class supply managers have the essential skill sets to become Chief Supply Chain Officers, Chief Procurement Officers and Chief Executive Officers! 53
Readings & References.. 1. World Class Supply Management, the key to supply chain management, by David N. Burt, Donald W. Dobler, Stephen L., Starling, 2004 2. Purchasing & Supply Chain Management, by Arjan J. Van Weele, 2005 3. Outsourcing and Offshoring of Professional Services by Amar Gupta 2008 4. Purchasing and Supply Management, Test and Cases by Donald W. Dobler and David N. Burt, 1996 5. Supply Chain Logistics Management by Donald J. Bowersox et al., 2010 6. Operations & Supply Management by F. Robert Jacobs et al., 2009 7. Management, Leading & Collaborating in the Competitive World by Thomas S. Bateman & Scott A. Snell, 2009 8. Supply Management by David Burt, S. Petcavage, and R. Pinkerton, 2010 9. Global Supply Chain Management and International Logistics by Alan E. Branch, 2009 54
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