Purchasing and Supply Management
Supply Chain Management - Visibility
Introduction to SAP LO Case Study
Reminder: in the LO section of the case study, a large order is received which requires
Defining the customer (including terms of supply etc)
Defining the supplier (vendor)
Defining the precise item we wish the supplier to deliver
Before we can enter a order and manufacture the order (which involves an MRP run)
Supply Chain Management (1)
We have already defined SCM as
“The management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole”
And we have considered upstream (suppliers) and downstream (customers) and the need for collaboration. Page 3
Supply Chain Management (2)
At one level Supply Chain Management is simple.
You’ve designed and specified the product, now get it to the customer. The right product in the right quantity at the right place at the right time at the right cost.
Supply Chain Visibility (Intro)
But . . . given the nature of business today, it is important to see what is happening across the whole supply chain so that the whole supply chain can be managed efficiently and effectively.
This concept of seeing what is happening across the whole supply chain is called “supply chain visibility” or sometimes just “visibility”.
And supply chain visibility is NOT just about what is currently selling; it’s mostly about the supply side!
Supply Chain Visibility (Top Priority)
“The main supply chain transformation of the past 20 years is manufacturing outsourcing, which has made supply chain planning much more complex,” says
“With a global, multi-enterprise model, the first priority for companies is visibility, he says.
“Companies want systems that provide visibility to the information they need to make decisions, even if their manufacturing is being done 10,000 miles away.”
(SupplyChainBrain, 21 January 2013)
Inventory Management (1)
While many companies benefit from sending work to places where labour is cheap, manufacturers (and retailers) often
overrate the value of wage savings and
underestimate the inventory, obsolescence, intellectual property and currency risks of off-shoring.
Inventory Management (2)
Some also overlook the benefits of producing goods close to their markets so that customers can get them in days instead of months.
(And get the products they want! Dave)
(“When offshore manufacturing doesn’t make sense”,
McKinsey Quarterly, 2004)
Global Inventory (1)
Supply chain disruption events:
Insufficient supplier capacity (56%)
Raw materials shortages (49%)
Changes in customer demand (45%)
Shipment delayed (39%)
Fuel price increase / shortage (35%)
(Aberdeen Research Brief, October 2008)
Global Inventory (2)
“To cope with the global challenges, global enterprises need to transform their supply chains and institute a fundamentally new level of visibility and control over their supply chain processes”
“Visibility (is) essential for effectively monitoring and managing supply chain disruptions and gathering the needed data to analyse and forecast supply chain risk exposure” (Aberdeen Research Brief, October 2008)
Global Inventory (3)
At a detail level, what might a global enterprise like to have visibility of?
Visibility of What? (1)
The following (rather long) list is from an Aberdeen
Group Research Brief, October 2008
Order acknowledgment (including order acknowledgement matching purchase order)
Raw material arrival at supplier
Projected production plans
Supplier production in-progress events
Quality control passed
Visibility of What? (2)
Advance shipment notice created
Advance shipment notice matches purchase order
Carrier pick up of goods from factory
In-transit status events at shipment level (there may