Tag Archives: SCM

Is Procurement Any Different To Supply Chain Management? (Part 3 of 3)


In the last blog, I promised my perspective on supply chain management and procurement in the light of the wisdom shared by so many “cyber friends” to illuminate personal experiences of participating in challenging projects with industry leaders of all sizes.

Procurement vsx Supply Chain Management 3

Let me begin by stating that in my opinion, the term product can be interchanged with that of service without compromise although both will obviously manifest in distinctly different supply chains.

I like definitions as I think they bring shared clarity although I recognise that depth of understanding takes time which is why the songs of Leonard Cohen invariably improve with listening. The Supply Chain Operations Reference model (SCOR) has a fine pedigree and is based on five distinct management processes: Plan, Source, Make, Deliver, and Return.

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Business Processes Part 3 – Actions Post Implementation

Once the business case has been made for the introduction of processes and relevant systems have been identified for automation, the final stage is to implement the processes themselves. Whether the processes are for a small business, or a multinational corporation, the post implementation guidelines remain roughly the same:

Business Processes

  • Let the process grow and adapt. Process outlines which remain too rigid cannot scale as business needs change. By all means formalise the process, but allow the opportunity for future organic change and enhancements.
  • Involve others in process creation and implementation creating a shared ownership and common vision for improvement. Doing this will also overcome many of the political barriers which could otherwise prevent process realisation.
  • Maintain a culture of continual improvement. There is always room for the creation of new processes or the refinement of existing ones. Incremental changes will keep processes relevant to business needs and prevent them from becoming a hindrance in future.

Any process, internal or external, can help a business increase its levels of efficiency, but attempting a one-time, big-bang implementation is unlikely to have the permanent benefits desired. Processes need to be frequently revisited to allow for the identification of smaller improvements which will keep the process relevant. Changes in business model, customer demands or supplier will all necessitate changes to business processes – inflexible and infrequent analysis of processes will preclude this.

The responsibility for implementation of processes generally lies with management, but ultimately, all staff should be encouraged to participate in a continual process improvement.

Processes can exist as part of a supply chain management system, or as an internal operating procedure.  The scope is virtually limitless. Clearly, where computerised automation is required, a suitable platform will need to be sourced which provides the necessary framework in addition to flexibility for future refinements. Why not give Celtrino a call to discuss the Smart Admin platform and how it could help with your business process implementation projects?


Securing Your Supply Chain Management System

We have talked at length here on the Celtrino blog about the importance of securing supply of raw materials for future business growth, but it is equally important to ensure your supply chain data is adequately secured again loss, damage or theft. Just as losing a warehouse could damage your company, so too could loss of critical data. Here are a few things to consider:

1. User-level securitySecuring Your Supply Chain Management System

Unfortunately the weakest point of any computer system is the people using it. A malicious staff member could steal data, or a negligent employee could delete it. Either way, your supply chain management system needs a way to restrict access to sensitive information.

2. Information access

Your business data has to be stored somewhere secure, probably spread across more than one physical location for easy access. Consequently all security protocols will need to extend across each site too. Consider using cloud hosting which places the burden of responsibility on your provider for keeping data safe and secure.

3. Selective sharing

Although we strongly recommend data sharing between supply chain partners, it is not appropriate to make everything available. Use data segregation and encryption to keep commercially sensitive information separate from that which is to be shared.

4. Resilient System Design

Just as a supply chain manager tries to eliminate the risks associated with supply and demand, similar thought should be given as to how best to keep the company data safe in case of disaster.

5. Scalable

The fortunes of your company will change over time, making a system which can expand and contract accordingly essential for business agility. A good supply chain management system therefore needs to be adjustable and configurable.

For businesses looking to hit the ground running, this list may seem quite daunting but options exist to make deployment easier. Celtrino’s Smart Admin platform interfaces with existing in-house system to facilitate easy data transfer with in-built security and resilience, leaving your supply chain manager free to consider risks external to your business instead.


Seasonal Supply Chain Disruptions

The traditional Christmas wind-down often allows time and opportunity to observe businesses which have prepared their supply chain properly to deal with the demands of their customers. One of the easiest places to see successes and failures is at your nearest restaurant.

Seasonal Supply Chain Disruptions

A recent family trip to an Italian restaurant, one of a major UK-chain, quickly became a catalogue of embarrassing failures. Our party of nine had booked a table in advance and informed the manager that we would be ordering from their highly publicised festive menu on the day.

Upon our arrival however the waiting staff informed us that the Festive Menu had been cancelled. Permanently. Worse still the ingredients required for the advertised dishes were unavailable and we would therefore have to order from the a la carte menu instead. The issue was really brought to a head when the waitress admitted that the dessert chosen by half our group was also out of stock.

Apart from immediately creating nine dissatisfied customers, the restaurant demonstrated a definite supply chain management failure by not having the ingredients required for their most popular recipes as advertised. Although Christmas closures at suppliers can cause severe knock-on effects, careful supply chain management and stock level forecasting can easily prevent such problems, particularly when customer orders are placed in advance. The restaurant had 9 orders on their books before the Christmas shutdown, making an ingredient shortage inexcusable. The fact that Christmas comes around on the 25th of December every year should also make long term planning all the easier.

Whether the issues at this particular restaurant were caused by human error or a computer system failure is unclear but the underlying supply chain failures are totally transparent. We would hope that the restaurant described learns their lesson in time for this coming December. This tale of woe should also serve as a cautionary tale for other businesses, in all sectors, next Christmas.

Masters of Supply Chain Management – Jay Wright Forrester

Although many people are claimed to be the ‘Father of Supply Chain Management’, Jay Wright Forrester’s research into Systems Dynamics lends weight to the argument for his claim to the moniker.

Forrester grew up on his family cattle ranch in Nebraska where he first demonstrated a gifting for electrical engineering when he developed a wind-driven system to provide the ranch with its first-ever electrical feed. Realising that he preferred engineering to raising cattle, Forester went on to study electrical engineering at the local university.

Masters of Supply Chain Management – Jay Wright Forrester

Forrester went on to further study at the Massachusetts Institute of Technology under the tutelage of Gordon Brown (no, not that one!) where he was put to work developing various devices for military deployment during World War II. Forrester continued work with the military developing a number of computerised systems after the end of the War, but eventually left engineering in favour of management.

Whilst lecturing at the MIT School of Management, Forrester began research into the interactions between objects in dynamics systems, leading to the modern concept of supply chain management. The work undertaken by Forrester and his team in the late 1950s have formed the foundations for all major supply chain management systems.

Systems Dynamics seeks to analyse and understand the behaviour of a complex system, particularly each of the internal processes which have the potential to affect the entire system. Systems Dynamics concentrate on trying to explain how simple systems are able to behave in previously unpredicted ways, using feedback loops and stocks and flows.

Put into the context of a business, Systems Dynamics help to explain how the delayed availability of a small component can cause major problems further down the construction process. By seeking to understand such effects, Systems Dynamics help to prevent these same problems.

Systems Dynamics are directly related to Supply Chain Management, and Forrester led the field in understanding them. Forrester’s claim to paternity is therefore substantial.

How Boeing Changed an Industry

How Supply Chain Management at Boeing Changed an IndustryAs we have stated previously on the Celtrino blog, the lessons learned by Boeing in the construction of their revolutionary new airliner are also lessons which can be learned by others. The Dreamliner is an incredible feat of aeronautical engineering, but the supply chain management infrastructure behind it is equally impressive. In fact, both the technical and supply chain aspects have revolutionised the aircraft construction industry.

The Dreamliner has been designed for maximum fuel efficiency and passenger comfort using revolutionary materials and fabrication methods. Perhaps of greater interest to businesses outside the aeronautical industry is the outsourcing of Boeing’s core operations and the infrastructure required to support this paradigm shift.

As we have said in previous posts, Boeing’s new supply chain required tighter integration with contractors coupled with a new software platform underpinning the chain to facilitate efficient data interchange. Boeing shifted the entire focus of their business outward, taking note of their customers’ customers needs, assisting suppliers with inventory and manufacture problems and generally keeping the supply chain moving. Boeing moved away from pure aeroplane construction and took a more management-focused role, bringing a number of disparate contractors and production processes together in the creation of a new airliner.

The new outward-looking perspective did not turn Boeing into a service company, nor was it a negative action. By monitoring, reporting and assisting suppliers, Boeing was able to build exactly what they wanted, how they wanted. The Dreamliner arrived in several large parts which required final construction on site at Boeing, a process which takes just three days.

Despite encountering a number of processes during the project, Boeing proved not only that this change in business focus could work, but also that their supply chain management system was capable of disseminating information in a timely manner to all interested parties. In doing this, Boeing also fundamentally changed the way that their competitors regard the aircraft assembly process and underlying management systems.

The Dreamliner project was neither smooth nor easy, but Boeing clearly demonstrate that looking after your suppliers is of equal value to looking after your own business’ needs.


SCM at Boeing and the Dawn of a New Age in Aircraft Manufacture

Although the Dreamliner promises to change the aviation industry thanks to its increased fuel efficiencies and revolutionary materials, Boeing nevertheless underwent a number of nightmare problems which threatened the future of the aircraft. Originally promised for delivery to customers in May 2008, a series of catastrophes delayed shipment until October 2011. As consecutive delivery dates came and went, industry analysts and competitors seized on Boeing’s problems as evidence that the company had completely lost the plot when it came to building planes.

Dreamliner, Boeing

Source: Wikipedia

A shortage of parts, inability of contractors to meet their obligations and even an onboard fire during a test flight all played their part in delaying shipment of Dreamliners which in turn cost Boeing dear. Additional investment in large-scale composite manufacturing technology further added to the construction costs. Factor in payments to customers for non-delivery of the aircraft and it is tempting to write the Dreamliner off as a horribly expensive experiment in outsourced construction.

Yet despite the problems and associated costs, the Dreamliner and its construction process are set to reap major returns for Boeing in the future. As with any new process, the implementation will always involve the resolution of a number of teething problems, but if done correctly, the lessons learned will only serve to improve the supply chain for future operations.

Although many of Boeing’s competitors laughed at the misfortune and the massive costs involved in initial construction, the potential profits from the Dreamliner over the next decade may well mean they end up laughing on the other side of their faces. The Dreamliner has been specifically designed for fuel efficiency – a hot topic as environmental concerns and rising fuel costs become uppermost in airline business models; by addressing these concerns, Boeing have stolen a march on their competitors.

The technology behind the Dreamliner has been made possible by the enhanced supply chain management systems utilised by Boeing. Using the lessons learned, Boeing have set out the stall for construction of their future aircraft models, and the potential for even greater profit margins.

Masters of Supply Chain Management – Norman Joseph Woodland

Woodland’s journey to Master of Supply Chain Management status initially started as something of an accident. Thanks to a conversation overheard by his friend Bernard Silver, Woodland began a personal quest to create a system which automatically read product information at the checkout in a store. The overall goal was to reduce processing time, reduce operator error and thereby reduce processing costs. The solution developed by Woodland? The barcode.

Norman Joseph WoodlandUsing Morse code as his inspiration, Woodland recognised that using simple dots and dashes information could be encoded simply and sent electronically. Legend has it that during a visit to the beach, Woodland drew a series of dots and dashes in the sand, which he then dragged to form lines; dots produced thin vertical lines whilst dashes were much thicker. The two-dimensional barcode was created as a direct variant of Morse code.

Woodland and his business partner Bernard Silver adapted an existing system used for optical soundtracks in movies to provide the automated aspect of the new coding system. An ultra bright light bulb was shone through the printed barcode onto a movie projectors photomultiplier (a clever piece of technology which accurately detects light levels and variants therein). After proving the concept worked, Woodland and Silver were granted a patent for their “Classifying Apparatus and Method” in 1952. Unlike modern barcodes, the patent used “bulls eye” circular codes which were easier to scan and decode from any angle.

The barcode concept developed by Woodland was pushed around by various technology companies for the next twenty years with in-store tests only beginning in earnest in 1972. Almost immediately a problem with Woodland and Silver’s original concept was discovered, because the codes produced were frequently corrupted whilst being printed, rendering them unreadable. Fortunately Woodland had secured a position at IBM and had developed an alternative system which was less prone to the printing problem, based on the straight line systems we know today. The new system was released in 1973.

BarcodeJust one year later, in a supermarket in Ohio, USA, the first ever commercial transaction using Woodland’s new barcoding system took place. So momentous was the occasion that the receipt generated by the transaction is still on display today at the Smithsonian Institute.

As more stores across the US began to implement barcode scanners at the checkout, researchers noted several findings. Firstly within 5 weeks of the scanners being installed, sales permanently increased by 10-12%. It was also found that operation costs were reduced by between 1% and 2% thanks to new efficiencies at the till. The finding which sealed the place of the barcode in history however was the discovery that the system generated a 41.5% return on investment. And in addition to the financial savings, businesses were also able to use the scan data for improved customer relationship management.

Barcodes are now present on virtually every item in every store in every country. Woodland’s conversion of Morse code into a machine readable format changed supply chain management and the wider world forever.