Supplier Relationship Management

Supply chain Tiers

Non-linear flows can be enabled by the Internet technology

Linear Flows

Transactions in a Supply-Chain

Future Supply Chain

Demand-supply chain: order penetration point

Demand-supply chain: value offering point

Demand-supply chain: text book

Process Misalignments• Information content and format

– Information items may be buyer and/or vendor specific– Purchasing constraints of buyers may differ– Product change notification not up-to-date– Reduced information transparency and bullwhip effect

• Lot size mismatch between buyer and seller• Unsynchronized production and promotion schedules • Process reengineering by partners (e.g. re-sequencing for

delayed differentiation) (Benetton)• Unnecessary hand offs

– Procuring lots of assembly parts or procuring the product assembled by suppliers in a sequence (Li and Fung)

– Parts assembled in transit vs. parts assembled by the manufacturer (Dell)

Modes of Collaboration

• Information Sharing

• Coordinated planning

• Conflict Resolution

• Real time execution

Information Exchange

• Catalogs, terms of transactions, customer preferences, promotions

• Data conversion to standard format– Bilateral standards (m x n)– Information hub (m + n)

• Specification of message to be exchanged– Purchase order schema, content

• Specification of transport and receiving points• Specification of Security

– Signature, authentication– Specification of exchange behavior among parties– Operation sequence, timing constraint

Shared information categories

• Inventory status– Fritz who manages Apple’s warehouse provides

visibility of its inventory pipeline to Apple.

• Sales– Sharing point-of-sales (POS) data by retail stores

(P&G, IBM, HP)

• Order status for tracking– UPS’s Host Access System for order tracking

• Demand/sales forecast– Sun, HP, and TI share their forecasts with suppliers

• Production/delivery schedule– Component manufacturers share production schedules

with Motorola

• Information transfer– Transfer information to a partner who maintains the

database for decisions• VMI requires the retailer to send the sales and inventory

information to the vendor • MicroAge transfers its orders to UPS who plans and executes

deliveries

• Third-party model– The third party is to collects information and maintains

it in a database for the supply chain• Fritz plays the third party role in the Apple VMI• Digital Market sells aggregated information on vendors

• Information hub– An information hub plays the role of a third party

• Information exchange hub for the transportation industry -

Models of Information Sharing

Information Hub

Logistics ProvidersSuppliers

Financial Institutions

DistributorsCustomers

Contract Manufacturers

                

 

Information Hub

http://www.dtrac.com/etrac.html

Coordinated Planning• Information Visibility

– Adaptec based in California (data transfer products) and TSMC based in Taiwan (fabricated microchips)

– Adaptec’ six-month forecasts are made visible to TSMC and SMC’s WIP data are made visible to Adaptec

– TSMC’s shipments to ASAT (a supplier of Adaptec) are also made visible to Adaptec

• Rules of conflict resolution– Customer orders not synchronized with supplier’s

production plan

– Front end agreement

– Early identification of conflicts• Cisco’s intelligent planning software

Customer

Adaptec

TSMC ASAT

Manufacturer

Assembler

OrderReceiving

Shipping

Warehouse

Sales

WarehouseOrderPlacement

Shipping

Assembly

Component Warehouse

Order Receiving

Finished Produtct Warehouse

OrderPlacement

Supplier

Assembler

Customer

  

                          

Collaborative Execution

Collaborative Ordering• Without collaboration

– Assembler’s order of Q units may be partially filled, who must then look for other suppliers

• With collaboration– Prior to ordering, assembler checks supplier’s

warehouse and orders only what the supplier can supply = Q1, (Q1< Q)

– Assembler may desire visibility of supplier’s warehouse

– Supplier may desire visibility of assembler’s production plan, to synchronize its component manufacturing

• Sharing of inventory information less sensitive than sharing production plans

Process Sharing• Event based triggers

– On receiving an order assembler triggers two processes

• ship to customer• assemble the next unit

– Assembly process triggers component delivery from the supplier

– Supplier triggers shipment to assembler and manufacture of a replacement part

• Run partner’s business processes (a set of applications) for information extraction

• Public/Private Processes

Publisher 1

AmazonBilling Co.

Customer

Publisher 2 Publisher 3

Shipping Co.

Mail order processing

Mail order processes

• Customer orders three books (three publishers)• Amazon places orders, one from each publisher• Publisher’s ok

– Must satisfy customer’s conditions (delivery deadlines etc.)• Amazon finds a shipper• Shipper coordinates shipments

– Books arrive separately– Batch them in one or more shipment

• Billing by Amazon once shipment is confirmed– Single or batched

• Order cancellation/alteration by customer• Shipper does not deliver on time

Workflow

• Follows partners’ business rules to transfer information to them

• Users select tasks for execution from a list of tasks outstanding

• Identifies and Assigns resources to tasks

• Places tasks in queue if resources unavailable

• Activates appropriate procedures for task execution and updates data and status

• Tracks task performance

RequestPO

Change

 Decide

Next Steps

 

ProcessPO

Change

 

 

 

Supplier

 Customer

 Rejected

 

Get Customer

Information

 

Look up items to be

changed

 

Post updated PO to ERP

 

Call ERP Session

 

Continue

  Original PO found OK

 

Items not found

 

Original PO not found

 

Items found OK

 

Customer found OK

 

END Update lastPO change date

Customer

Reject

Public Processes

PrivateProcesses

Item Not Found Item Not Found

Change Accepted

                

  

 Public / Private Processes

Project Management• Project tasks

– Sequencing of tasks that share critical resources– Transfer of resources between partners– Progress monitoring– Accounting of resource sharing– Course of task execution

• Coordinating multiple suppliers who supply different components of the same product to a customer

• The components may differ in delivery schedules, specifications, and order quantities

• Coordinate multiple suppliers working on different aspects of a common component

CPFR

http://www.cpfr.org/

• Customer shares demand forecasts with the vendor

• Customer and vendor agree on ordering policy (periodic review, base-stock etc.)

• Vendor is responsible for replenishing customer’s warehouse inventory

• Customer pays for the inventory only when it uses the item

Vendor Managed Inventory

Trading Network

• Partners business processes may differ – orders placement, logistics, payment

• Split orders and allocate to partners• Information on returns, new products, and

inventory must be routed to appropriate partners• Distributed entities must be synchronized to work

off the same information• Select partners based on capability and availability• Negotiate commitments and remuneration• Coordinate service delivery• Resolve execution problems