R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
© 2005 Hewlett-Packard Development Company, L.P.The information contained herein is subject to change without notice
SupplyChain
Michael UramAmericas Supply Chain Solution DirectorHewlett-Packard [email protected]
ThankYouWelcome
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Dr. Sandor BoysonDr. Sandor BoysonSupply Chain Management CenterSupply Chain Management CenterRobert H. Smith School Of BusinessRobert H. Smith School Of Business
Road Map To The Global Road Map To The Global Real Time Supply ChainReal Time Supply Chain
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
The Long Road To The Real Time Supply ChainThe Long Road To The Real Time Supply Chain
• The Real Time Supply Chain enables information processing simultaneously among all partners-customers, distributors, manufacturers & suppliers.
• A single event- a customer order- triggers multiple actions at once across the entire global supply chain-compressing time & costs and resulting in orders-of-magnitude performance increases.
• The Real Time SC is the result of highly streamlined physical, informational and relationship networks. It is the Apex of intensive organizational investment over many years.
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Multi-Echelon Inventory Management
Tier 1 Core Suppliers
Pre-qualified AlternativeTier 1 Suppliers
Tier 2 Competitive Sourcing
E-Auctions
Store
Web
Phone
SRMCRM
Multi-Channel Real Time Supply Management
Multi-Channel Real Time Demand Management
Real Time Technology Systems
Flexible Third Party Logistics Relationships
Transport
Cross-Docking
Communications
The Core Challenge:Aligning Supply With Demand
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
ReRe--Engineering To A Real Time High Tech Engineering To A Real Time High Tech Electronics Supply ChainElectronics Supply Chain
Source: S.Boyson 2005
Key ResultsKey Practicesand Technologies:
Reengineering Goal:
Hewlett-PackardSC Challenge:
Rationalize over 50 separateand distinct Supply Chainsacross multiple go-to-marketmodels and channels (direct and indirect):
- retail- direct-to-consumer- public sector- SMB- large-scale enterprise
Create small set of Supply Chain categories that provide advantages economies of scale that adapt instantaneously to the unique demands of each category while adjusting to market volatility.
Rationalized Supply Chains using the SCOR model as a common yardstick andan “Adopt and Go”strategy.
Eliminated 19 SAPERP instances.
Linked SAP ERP toreal-time ODS using HP NonStop iHUB
• Inventory turns improved from 11 to 24
• 1% savings in direct materials
• 17% in procurement costs
• 50% reduction in PO cycle-time
• Automation of POs from 20% to 95+%
• $1.5B cost reduction
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
HPWorld’s Largest IT Supply Chain
($51B)• 32 manufacturing plants • 88 distribution hubs• 700 suppliers• 119 logistic partners
Broadest portfolio of IT
products/services
in the world
Broadest customer base
in the technology
industry
• Over 650 new products per year
• 200,000 SKUs• 25,000 patents
• 1 billion customers• 178 countries• Direct & indirect
2005 shipments: 50M printers, 30M PC’s, 30M Servers, 300M cartridges
Efficiency on a Massive Scale Efficiency on a Massive Scale
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reservedTime
Usa
ge
Common
Middle 60%of Companies
Stage 2Common
Stage 4Excellent
Top 5 % Companies
Leading edge practices based on new or emerging
technology or very innovative processes
Practices that are widely implemented
at leading edge companies
Practices that are widely used and
adopted
Practices that are used but may be considered
out of date
Stage 1Outdated
of CompaniesBottom 20%
AdvancedStage 3Advanced
Next 15%of Companies
Supply Chain Practices MaturitySupply Chain Practices Maturity
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Source: S.Boyson 2005
Key Business Practice :
50% of P&G sales come from events or promotions by customer store chains. Two thirds of errors in corporate forecasts are caused by these events/ promotionsCollaborate with stores and suppliers to “sense and respond” to consumer demand.
Key Technology :
Developed online capabilities to give 80% of its suppliers visibility into its manufacturing process
Reengineering Goal :
Become a consumer
- driven supply network, with 72 hour product -to-consumer cycle
Proctor & Gamble’sSC Challenge:
10 -15% average stock -out rates in retail stores
ReRe--Engineering To A Real Time Consumer Engineering To A Real Time Consumer Products Supply ChainProducts Supply Chain
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Sense & Respond Service ChainsSense & Respond Service Chains
Not for Duplication © Robert H. Smith School of Business 12/2004
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Real Time Visibility Thru A Portal To A Specific Field SensorReal Time Visibility Thru A Portal To A Specific Field Sensor
Not for Duplication © Robert H. Smith School of Business 12/2004
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
© 2005 S. Boyson & T.Corsi-All Rights Reserved
Communicationnetwork
Events
ERP and SCM Systems
Supply ChainModels
Cyc
leTi
me
Day (Wk. Mth)
Decisions
Performance
Sense & Respond Supply Chains
Supplier DistributionManufacturer Systems
Sensor dataDisturbances
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
HP Supply Chain VisibilityHP Supply Chain Visibility• Dashboard with
operational information and performance data
• Capture of supply chain events and analytic processing
• SCOR-based metricsand KPI’s
• User selectable metrics to monitor
• Drill down capability• Early warning alerts• Track and trace key
events
• Role based secure access
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Core Steps In Implementing The Real Time Supply ChainCore Steps In Implementing The Real Time Supply Chain
• Create Cross-Supply Chain Governance
• Conduct Continuous Network Optimization
• Improve Demand Forecasting
• Upgrade Warehousing Management
• Practice Multi-Echelon Inventory Management
• Capture Transportation Scale Economies
• Deploy Online Communities Of Practice For Large Customers & Suppliers
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
HP Supply Chain GovernanceHP Supply Chain Governance
Direct
Indirect
Cus
tom
er
Consumer
SMB
Public Sector
Enterprise
Demand Shaping
Design/R
&D
Configure-To-Order
No-Touch
Low-Touch
High-Value Solutions
Service
Order Fulfillm
ent
Procurem
ent
Logistics
Manufacturing
Functional Supply Chain Excellence
Design for Supply Chain
Planning
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Supply Network OptimizationSupply Network Optimization
A semi-conductor manufacturer based in Japan, but with worldwide plants and warehouses, was able to reduce its numberof plants from 9 to 6, and its warehouses from 8 to 4.
The reduction of facilities significantly reduced all operating costs, with the exception of transportation:
Total supply chain costs dropped 14 percent-from $191 million to $165 million.
Profits improved 53% as better location of shipping facilities led to improved customer response and increased sales revenues.
Across projects, designing and implementing optimized worldwide supply chains cut costs from 7 per cent to 31 per cent with an average cost reduction of 17%.Bender, Paul “How To Design An Optimum World Wide Supply Chain”, Supply Chain Management Review, Spring, 1997, Vol. 1 No. 1
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Army Network ModelingArmy Network ModelingVarious Reports in the HIMARS Launcher models tell the method and cost of the deployments.
–19 Launchers went from Fort Hood to Djibouti via Sea through SPOE Beaumont to SPOD Djibouti
$68,941
310 Hours
–19 Launchers went from Fort Bragg to Tashkent via Air through APOE Pope AFB to APOD Tashkent
$213,998
32 Hours
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Network Optimization Network Optimization -- Issues Check ListIssues Check List
Do you have a network map that pinpoints the geographic clustering of your customers, the locations of your core suppliers (especially your suppliers of high volume items), your warehousing assets and core transport lanes?
In your mapping, have you segmented your demand signals by online, call center or in-store channels to hone in on variances in demand patterns across channels?
Have you done any baseline costing/optimization analysis of this map? How frequently do you update this analysis?
What software do you use to perform this analysis? Is the software web-based for remote user inputs?
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Demand Forecasting MethodsDemand Forecasting Methods
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Demand Forecasting Issues Check ListDemand Forecasting Issues Check List• Do you have a logical model of key customer behaviors? Do you know
what are the key economic or industry-level drivers that compel key customer behaviors?
• Given the volatility of demand signals, what is the best methodology to use for forecasting? In high tech industries with extreme spikes in demand, companies are moving to forecasting methods that incorporate real time data and are constantly re-forecasting every fifteen minutes.
• How are current forecasts validated for accuracy? Do you continuously track the variance between actual demand versus projected demand to refine forecasts?
• What procedures are in place to refine forecasts and manage riskthrough Collaborative Planning, Forecasting & Replenishment with core suppliers to reduce bullwhip effects?
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
MultiMulti--EchelonEchelon Inventory ManagementInventory Management
• Real-Time Visibility of fixed and in-transit inventory positions:-store stocking points-distribution centers-production staging areas-supplier warehouses
• Enables the enterprise to route inventory to emerging points of demand.
• Inventory Optimization Software can help manage these inventory routings.
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
MultiMulti--Echelon Inventory VisibilityEchelon Inventory Visibility
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
MultiMulti--Echelon Inventory Management Issues Check ListEchelon Inventory Management Issues Check List
• Do you have a logical model of inventory behaviors based on analysis of :– Point Of Sale data for finished goods; – Product lifecycle behaviors/prognostics;– Spare parts stocking policies; – Inventory in the pipeline.
• Which items and in what quantities should you hold in your own or suppliers’ warehouses -who should own title to inventory and when? – In high tech electronics, components depreciate 100% within
3 months.
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
TransportationTransportation
• Best practice companies regulate, measure and control multi-year partnerships with carriers, including master contracts with 3PLs.
• Identify current methods to aggregate inbound and outbound shipment volumes
• Explore current processes to assign transportation liabilities for freight
• Push the extent and frequency of freight bill auditing, particularly for f.o.b. destination where the supplier bundles the shipping costs into the total price and transport can be a profit center for suppliers.
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Supply Chain Communities Of Practice (COP)Supply Chain Communities Of Practice (COP)
• COPs are secure Portal environments that provide target customersegments with specialized SC content, collaboration tools and automated workflows.
• COPs allow differentiated service levels based on the specific characteristics of the segment:– E-catalogues aimed at government high volume buyers working
under GSA requirements; – Real time views into available inventory for Fortune 1000 clients &
automated business rules to assign inventory on a priority basis to them; messaging aimed at discounts/special pricing on surplus inventory items.
– Shared applications for supply chain planning with customers/ distributors/ suppliers
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
ConclusionsConclusions
• Implementing a real time supply chain is not just about deploying an integrated enterprise architecture; web-enabled transactions & planning applications; and a shared corporate database - although these are crucial for the transition.
• Implementing a real time supply chain is all about corporate strategic intent- climbing the ladder of transformation over time.
• Network optimization, improved demand planning & inventory management, better warehouses, transport scale economies and more robust online channels to key customers & suppliers - these are the many rungs of the ladder to be climbed to reach the real time supply chain.
R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
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QuestionsQuestions
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R.H. Smith School of Business/Supply Chain Management Center -Sandor Boyson March 2006 All rights reserved
Michael UramAmericas Supply Chain Solutions Dir
[email protected]: 630-579-4052
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