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Mapping supply chains
- 1. Mapping Supply Chains Paul Justensen BusM 361 Brigham Young University
- 2. Supply Chain Maps: Training Overview In depth look at supply chain mapping Business Example Mapping activity Summary
- 3. ? What is a Supply Chain Map? How will mapping supply chains help your business?
- 4. Supply Chain Maps: History and Background Has become more important with increase in outsourcing Increased competition in supply chains Barn
- 5. Supply Chain Map: Defined A visual representation of goods, 1st Tier Supplier information, processes, and money flows that occur throughout a supply chain, both upstream and downstream. Manufacturer Retailer
- 6. Characteristics of Supply Chain Maps Can focus on: *particular use or user *theme *processes, flows, facilities, organizations, geographic relationships Easy to distribute Easy to Interpret Designed to support corporate strategy
- 7. Brainstorming Exercise: What suppliers supply your company? Which of these suppliers supply the most vital products? Pick one key supplier and think about the following list of questions How good is the quality of their products? How quickly do you receive products you order?
- 8. Brainstorming Exercise: (Cont) Are there any environmental factors that could affect your supplier such as: Regulations Employee disputes Profitability issues Would that supplier be willing to team with your company in joint projects to improve operations?
- 9. Brainstorming Exercise: (Cont) Who supplies your supplier? Are there any internal or environmental factors that could affect them?
- 10. Brainstorming Exercise Recap What did you learn from this activity? How might mapping supply chains help your company?
- 11. Why do a supply chain map? Supply chains must now compete against other supply chains Supply chains are a points of strategic advantage Maps highlight inefficiencies Provide a methodology for analyzing processes
- 12. Creating a Supply Chain Map 1. Organize the customer and supplier team Meet with management and supply chain directors Purpose is to discuss current situation and decide on what core competencies are desired in supply chain 2. Draw the current-state extended value stream map Identify activities required in transaction Use boxes to represent entities and transactional documents
- 13. Creating a Supply Chain Map 2.Draw the current-state extended value stream map (cont’d) Use arrows to show flows of information and products. Label the time each step takes 3. Draw the future-state extended value stream map and implementation plan Identify areas where you can improve processes Prioritize improvement areas based potential benefits and by ease of implementation
- 14. Creating a Supply Chain Map 4. Execute the implementation plan Implement plan by starting with the most value-added changes first Track changes in improvement and cost 5. Repeat process for continuous improvement
- 15. Difficulties in collaboration Costs Savings Sensitive information Commitment Short-term focus
- 16. Business Example Capital Equipment Incorporated and Mare Technologies CEI’s customers unhappy with late deliveries CEI identified Mare, a key supplier, as a bottleneck Mare hadn’t previously considered its impact on other businesses
- 17. Business Example--Continued CEI persuades Mare to cooperate Cross-functional team organized Plan for achieving competencies developed
- 18. Business Example--Continued Mapped out current value-stream map Identified inefficiencies through observation and Material suppliers interviews Blanket order Production control Customer service Blanket order Capital Equipment Inc Sales Sales order MRP Mare tech order 1 day 10 4 days minutes Weekly scheduling 14 days Work station Work station 1 2&3 10 days 5 days 6 days 12 days 11 days 4 days Receiving Quality control Kitting Work station 6 Assembly 1 Final assembly Shipping 9 days Work station 4 Work station 5
- 19. Business Example--Continued Mapped a future value stream map with improvements Improvements prioritized based on potential benefits and ease of integration Blanket Production Customer Blanket order control service order Capital Equipment Material suppliers Inc Sales Sales order MRP Mare tech order 6 Hours 10 1 Hour minutes Work cell 1 Quality FIFO FIFO FIFO 1 day Receiving Staging Work cell 3 Final assembly Shipping control 1 day 1 day Work cell 2 Finish Goods Buffer Stock
- 20. Business Example--Continued Executed plan Focused on improvements with greatest ROI first Results Lead time reduce from 55 days to 42 days Reduced average days of WIP by 91% 9% cost reduction Strengthened commitment to work together in future
- 21. Activity: Peanut Butter Case You are the owner of Ritz Peanut Butter Co. located in Sao Paulo, Brazil, and you have been wanting to improve operations at your manufacturing plant. One concern you have had is that your main supplier, Pedro’s Peanuts, requires long lead times when you order peanuts. Pedro, who is the owner of Pedro’s Peanuts, has agreed that he would work with you in improving operations. After looking closely at how the ordering process works, you come up with the following summary of operations:
- 22. Activity: Peanut Butter Case Steps: 1. Ritz faxes order of 1000 kilos of peanuts to Maria, the receptionist 2. Maria checks the fax for orders at 8:00am, 12:00pm, and 3:00pm 3. Because the production manager’s office is on the other side of the plant, new orders are sent over only 2 times per day—at 8:30am and at 1:00pm
- 23. Activity: Peanut Butter Case 4. Production manager faxes a materials request to the purchasing director. Fax sits for 1 hour. 5. If there is enough stock on hand, purchasing notifies production manager of this. If not, it takes an average of 1 day to get stock from local farmers. 6. Peanuts then enter a batch process that takes 6 hours 7. Upon finishing, workers notify production manager, and production managers requests an invoice from accounting to be prepared.
- 24. Activity: Peanut Butter Case 8. When accounting finishes invoice, they notify the production manager and send him a copy. 9. Production manager sends invoice to shipping and requests a shipment be made. Shipping gets request and loads truck (3 hours), and sends it to Ritz Peanut Butter Co. (1 day to deliver)
- 25. Map of current process 12 hour 1.25 hour average wait Raw Materials Materials wait Production Manager Receptionist fax Sam’s Peanutbutter Purchasing request Local Farmer 2 hour average wait Local 1 day Farmer 1 hour 1 hour 1 hour 2 hours 1 hour 1 day Shipping De-shell Accounting Wash Inspection peanuts 6 hours
- 26. Possible Solution 1.25 hour wait Weekly Raw Materials forecasted Production Manager fax Sam’s Peanutbutter Purchasing Local need Farmer 2 hour average wait 1 day Local Farmer 1 hour 1 hour 1 hour 2 hours Continuous 1 hour 2 hours Shipping Stock pile De-shell Accounting Wash Inspection inventory peanuts 6 hours
- 27. Summary--Continued To work with suppliers, companies must: - build a business case benefiting both companies - plan how costs and savings will be shared - agree on competencies to pursue - work together in creating solutions
- 28. Summary Supply chain mapping helps companies: 1. Improve strategic supply chain relations 2. Identify inefficiencies 3. Visualize process for communication 4. Analyze development of core competencies
- 29. References and Additional Readings Delmonico, David & Horton, Peter. “Charting a New Course: Extended value stream mapping creates innovative supply chains.” APICS—The Performance Advantage. October 2004. p 43. Gardner, John T. & Cooper, Martha. “Strategic Supply Chain Mapping Approaches.” Journal of Business Logistics. Vol 24. No 2. 2003. pp 37-57. McInerney, Mike. “Supply Chain Alliances Can Help Logistics Teams Provide Value.” Pulp & Paper. October 2003. pp 38-40. Anonymous, “Good, Better, Best: How to Assess Your Supply Chain Performance.” http://www.tompkinsinc.com/publications/ competitive_edge/articles/06-03-Good_Better_Best.asp. Nov 2005.
- 30. References and Additional Readings Liker, Jeffrey K. & Choi, Thomas Y. “Building Deep Supplier Relationships.” Harvard Business Review, Dec. 2004, Vol. 82. Issue 12.
Notas del editor
- This slide is helpful to show trainees what they will do in the training session.
- This slide is meant to help trainees give their first impressions about what supply chain mapping is and why it can be useful. The questions will help focus the trainees’ minds to look for answers to these questions as they participate in the training session.
- Currently, (as of Nov. 2005) there are no standardized methods or symbols for developing a supply chain map. But with the rise of firms that outsource much of their operations, such as Dell and Cisco, mapping supply chains has become a critical strategic component of business. Also, as competition has increasingly focused on which supply chain can out-perform another, making supply chain maps is more important. Gardner, John T. and Cooper, Martha C. “Strategic Supply Chain Mapping Approaches.” Journal of Business Logistics. Vol 24. No. 2. 2003.
- Supply chain maps: are visual representations of the flows of information, processes, and money between companies both upstream and downstream in the supply chain. “ Upstream” refers to those companies that supply your organization with goods, and “downstream” refers to the organizational or individual buyers of your products. Gardner, John T. and Cooper, Martha C. “Strategic Supply Chain Mapping Approaches.” Journal of Business Logistics. Vol 24. No. 2. 2003.
- There is no set thing that a supply chain map must focus on. The focus should be determined by the organization’s strategic goals. Organizations may find that they will make several supply chain maps, each focusing on a different element. Particular use or user: if it is going to be made to show money, product, or information flows; maybe there is a different supply chain map for rush season such as the holidays Theme: such as type of value added, generic; for example, an computer manufacturer might map the supply chain for its microprocessors, since they are a considerable value-added item. When creating a supply chain map, the organization should consider how it will distribute the maps (e.g. through Internet, fax, or memo), and create the map for easy distribution. All symbols should be uniform across maps, and maps need to be simple enough to interpret quickly. Supply chain maps are designed to help businesses determine and execute their strategic objectives. Therefore, these maps must be done in coordination with management as a part of developing the strategy. Gardner, John T. and Cooper, Martha C. “Strategic Supply Chain Mapping Approaches.” Journal of Business Logistics. Vol 24. No. 2. 2003.
- Ask these questions about your company to those in the training meeting. These questions will help them to see the benefits of mapping supply chains. Purpose of questions: What suppliers supply your company? Helps trainees identify the number of suppliers and think of them individually. Which of these suppliers supply the most vital products? This question will help trainees focus their thoughts around suppliers who hold significant power and importance to the success of the organization. How good is the quality of their products? This question will help trainees learn to evaluate suppliers by the quality of their supplies, especially if those supplies are vital to the organization. It also forces them to look at any suppliers who may not provide the best quality and assess why we are still buying from that supplier. Part of the mapping process is to help us see why we are using certain suppliers, and assess whether or not that is a good thing. How quickly do you receive products you order? This question is to help trainees analyze the service aspect of their suppliers and evaluate whether or not that service is adequate for the business. The question might also help you identify any potential problems your supplier might be having due to internal or external factors affecting it—such as inefficient business processes or difficult logistics situations.
- Are there any environmental factors that could affect your supplier such as: This question focuses trainees’ attention on any important environmental issues that may affect the supplier’s ability to meet future demands. It forces us to look beyond the organization and recognize other factors.
- Who supplies your supplier? This question is to help trainees think about supply chain members further upstream. Are there any internal or environmental factors that could affect them? This follow-up question helps trainees to realize that problems can occur all throughout the supply chain, and that a company needs to be aware of problems that could possibly affect the availability of their most vital supplies.
- This recap slide is to help the instructor review lessons learned through doing this exercise. What did you learn from this activity? Possible answers include: Our organization is part of a larger organization Our organization may be dependent on other companies and we might want to reduce our risks of their failures. Suppliers of our company’s most vital parts should be assessed based on quality and service. Our organization’s success depends on the success of its suppliers. Therefore, it is in our best interest to see those supplier succeed. How might mapping supply chains help your company? Possible answers include: Maps help us visualize what is really going on? The process of creating maps forces us to think about other issues such as why business processes are the way they are, where are there inefficiencies, and how dependent is our organization on the success of other organizations A visual diagram can highlight possible areas of improvement A visual diagram can help organization in forming strategic supply chain alliances
- This slide helps instructor point out why the map making process can be useful. Maps are also a good idea because: 1. They help simplify complex relationships into visual models 2. They help communicate complex data quickly 3. The process of making maps forces organizations to rethink why things are done the way they are
- Additional commentary on each of these steps: 1. Organize the customer and supplier team: It is important to meet with key decision makers in both organizations ( i.e.; the supplier and the buyer) and gain consensus on what competencies they want to achieve. Then they must agree to work together in coming up with solutions. 2. Draw the current-state extended value stream map: This is a crucial step! You cannot simply come out with a solution. Time must be taken to understand what is going on currently within and between the organizations so that appropriate actions can be taken to improve those processes. Drawing a map of current process forces organizations to understand their operations and see why things are the way they are.
- Commentary continued. 2. Draw the current-state extended value map: Use basic flow-charting shapes to map out processes. 3. Draw the future-state extended value stream map and implementation plan: This step helps you create a vision for both organizations to work with. It will also help later as the organizations try to assess how well they are meeting the goals they have outlined. To measure these goals, they can simply compare what is currently happening against what they wanted to happen in this diagram.
- Commentary continued. 4. Execute the implementation plan: During this phase, organizations must prioritize their efforts by doing those things which add the most value and the least cost first. Also, any change needs to be documented with regards to the savings it generates for the organization. This documentation is necessary in assessing the financial success of the project. 5. Repeat process: Organizations should be continuously improving, and improving the supply chain is an important part of that goal. Companies that are complacent will find it difficult to compete in an increasingly competitive environment.
- When you try to create a strategic supply chain plan, it is important that both the buyer and the supplier are willing to collaborate. There are many issues that can undermine this willingness to cooperate. These include: Disagreements on how to share costs Disagreements on how to distribute savings Unwillingness to share sensitive information Fear of weakening their negotiating power Fear that of long-term commitments will limit flexibility Companies have short-term financial focus http://www.tompkinsinc.com/publications/competitive_edge/articles/06-03-Good_Better_Best.asp
- The following example comes from: Delmonico, David & Horton, Peter. “Charting a New Course: Extended value stream mapping creates innovative supply chains.” APICS—The Performance Advantage. Oct 2004: p. 43. Capital Equipment Incorporated (CEI) launched a new product line, but it wasn’t as successful as previously anticipated. Inability to meet volume and time requirements identified as key cause of poor reception. CEI quickly recognized that Mare, an important supplier of an essential part, was a bottleneck in the supply chain.
- CEI persuaded Mare to partner in improving supply chain by citing the complaints of customers. With executives at both companies recognizing the need for improvement, a cross-functional team was organized to develop a plan to achieve certain core competencies in the supply chain.
- As they mapped out the current process, they discovered a lot of time was being wasted by observing processes and interviewing employees. Some things they noted were these: 1. Order processing was being delayed by incompatible PO reference numbers between the two companies (this caused a 10 minute job to take 4 days!) 2. Procedures to measure utilization caused unnecessary complexity 3. Overly large quantities of work-in-process (WIP) inventory caused confusion about which orders should be done first.
- The team came up with 15 areas where the process could be improved. With those 15 items, the team prioritized them according to their potential business benefits and their ease of integration into the current system. Specifically, this team focused on three things: 1. Clean up the customer master file 2. Reduce the number of scheduling queues 3. Improve product flow
- For both companies, this exercise turned out to be extremely beneficial. In Mare’s case, it helped the company become more competitive by reducing cost and increasing speed. CEI was helped by being able to better satisfy customers’ demands. The success of this project increased commitment in both companies to work together in achieving business objectives.
- This case will help people internalize supply chain mapping by having them make one. The most effective method of doing this is to give each member a copy of the written case and a copy of the current map. Instructor’s note: This case can be done either individually or as teams. Our recommendation, however, is that the exercise be done as teams because that will allow trainees the opportunity to collaborate in coming up with unique ideas to solve the problems posed in the case. Such collaboration is what would normally occur within organizations that do this kind of exercise with their suppliers.
- Instructor’s note: You might make a hard copy of both the steps and the process map that go with this exercise to hand out to your trainees.
- Instructor’s note: You might make a hard copy of both the steps and the process map that go with this exercise to hand out to your trainees.
- Instructor’s note: You might make a hard copy of both the steps and the process map that go with this exercise to hand out to your trainees.
- Total time for process and delivery is about 74.5 hours or a little over 3 days. Company would normally require a 5 business day lead time for orders. This is a map of what is currently going on. To help trainees, please make a hard copy and give to each individual or team to work on.
- In this solution, I did a number of things to increase the speed of each transaction. Specifically, note the following items: - I got rid of the secretary’s role in receiving the order. The secretary did little to add value because she simply passed the order on to the production manager -To eliminate the waiting times on receiving product from suppliers who are inconsistent in their delivery times, I’ve created an inventory stock pile that is continuously being added to. The amount of materials we order is based on a weekly forecast determined by the production manager. -With this approach, we eliminate the significant bottle necks and our total process and delivery time is about 40.25 hours, or just over 1.5 days. That is a 54% reduction in time from previous process. This approach will allow for shorter lead times, maybe of just 3 business days, and it will reduce costs by eliminating the work of the secretary.
- Working with other members of the supply chain is not an easy thing. This slide helps trainees be aware of potential problems that may arise when companies try to work together. Commentary on slide points: To work with suppliers, companies must: -build a business case benefiting both companies: Any strategic supply chain alliance must be in the best interest of both supplier and buyer. A company wanting to work with another must be able to build a case that benefits both parties. -plan how costs and savings will be shared: Sharing costs is important. Sometimes the major modifications in processes affect one supplier more than the other. Therefore, they must come up with specific ways they can share those costs. -agree on competencies to pursue: If supply chains are to work together, they must agree on what they want to achieve. Obtaining consensus is not always easy, however, because each organization has its own objectives. -work together in creating solutions: Working together is important so that both companies buy into the recommended changes. A major part of this mapping process is creating a future map that shows the vision of what can be done. Since this vision incorporates different members of the supply chain, it must include those members in its creation.
- This slide is to help you recap the material, and help trainees remember what they’ve learned. You might also have trainees do a self-assessment of what they have learned by asking them what insights they gained during the training session. Commentary on summary: Supply chain mapping helps companies: 1. Improve strategic supply chain relations: Supply chain maps should be done with suppliers. This collaboration will help strengthen relationships between the two organizations as both organizations benefit from the efforts. 2. Identify inefficiencies: Supply chain maps help model processes and force managers to look at why things are done in certain ways. This process of mapping clarifies where inefficiencies occur and can help managers in their business process improvement goals 3. Visualize process for communication: Maps help make complex information easy to see and understand. Communicating problems with upper management and with others within the organization is easier when maps are used. 4. Analyze development of core competencies: Maps help organizations look at their processes in a strategic way to see if they are supporting the core competencies that the organizations are trying to achieve.