Supply Chain: Key Management Processes

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world class contracting. The Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Supply Chain Key Management Processes adding some additional support as well.

Supply Chain: Key Management Processes

The Basic Supply Chain Model alludes to linked companies making the supply chain discipline seem well defined and organized. More accurately, the supply chain model is viewed as linked processes.  These processes convert or transform materials into finished goods or services for distribution to customers. Functional areas within the company execute the processes and constitute the supply chain.  Considering the supply chain as a set of processes vide a succession of companies, the supply chain becomes difficult to identify and manage. 

APICS utilizes one of the more widely known process-oriented models is the Supply Chain Operations Reference Model (SCOR) developed and maintained by the Supply Chain Council (SCC). The model is also applied to service supply chains as well as manufacturing chains. 

Conflicts and Confusion

As with most industries, there are competitive views, defintions, and models. For example, some researchers and authors consider supply chain to be only the suppliers.  The remaining elements are viewed as distribution. APICS views the supply chain to include all three components; suppliers, producers, and customers in relationship. Wholesalers and distributors are also included in the APICS models.  

There is also confusion regarding 'value chains' versus 'supply chains'.  Supply Chains can be value chains if well managed just as they are distinctly different per others thinking.  APICS defines value chains as functions within a company that add value to the goods and services sold to customers in exchange for payments. Value chains integrate supply chain activities during the product or service lifecycle based on customer needs.  Value chains attempt to increase value of the product passing through the system achieving the highest level of customer satisfaction. In short, value exploits the supply chain competencies of all actors in the chain. However, not all value chain activities are in the supply chain. 

Closely related concepts are 'value stream' and 'value stream mapping'. Value streams are the activities that increase value of a product or service from concept to the end user. The value stream map aides in process improvement.  

Definitions, in the many discussions, result in unclear separation between processes and entities.  Stream implies flow while chain implies entities and both are crucial to management of the supply chain. Therefore, both should be included. 

APICS and Supply Chain Management

APICS states that supply chain management is the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, competitive infrastructures, leveraging  global logistics, synchronizing supply with demand, and measuring performance globally.  A few points to note immediately are that supply chains are about creating value, reducing costs, and leaning the chain. 

Supply chains tend to be managed by a dominant or strong firm in the chain. However, project managers may have to take control of the supply chain in order to facilitate innovation in complex  global mega-projects.  Managing supply chains requires a balancing act among competing interests. 

Supply Chain Operations Reference (SCOR) Model

This model is a cross industry standard diagnostic tool for supply chain management developed over years of field based practices that links together business process, metrics, best practices, and technology in a unified structure, Figure 1. 

Figure 1: SCOR Supply Chain Operations Reference Model

The SCC intends the models use for improving the supply chain performance and understanding and carefully defines the boundaries of the model as model does not apply to all business processes. The model only extends two tiers in both directions from the core producer or provider. SCOR's applicability is widespread and includes process descriptions, relationships and describes, measures, and improves supply chain performance. The model's current version about to be released is 11.0 as of May 2013 and has some limitations that follow:

SCOR applies to all these activities:

• Customer interactions from order entry to payment 
• Product transactions 
• Market transactions from aggregate demand to order fulfillment 

SCOR does not apply to these activities:

• Sales and marketing or demand generation 
• Research and technology development 
• Product development 
• Some elements of post delivery customer support (does include returns) 

SCOR does not address but assumes the following exists:

• Training 
• Quality 
• Information Technology 
• Administration 

The principle focus of the model is processes associated with plan, source, make, deliver, and return. These processes exist within the member firms in the chain and executed by the central triad; suppliers, producers, and customers. SCOR Version 10 added a 'People' standard for describing the skills for the tasks performed with the following competences. 

• Novice: untrained 
• Beginner: limited situational perception 
• Competent: understands the work and sets the priorities 
• Proficient: oversees all aspects of work 
• Expert: intuitive understanding applying experience patterns to new situations.

SCOR processes defined include matters such as product engineering, warehousing, product inventories, and returns.  The high level processes are:

• Plan: Demand/supply and management
• Source: Make-to-order, Engineered-to-order, and stocked product
• Make:  Make-to-stock, Make-to-order, and Engineered-to-order production execution
• Deliver: Order, Warehouse, transportation, and installation management for stocked, make to order, and engineered to order product
• Return: Return of raw materials and receipts of return of finished goods

The SCOR model is not static as it is versioned with regular updates improving the model. The most important take away is the focus on process. Once an organization begins to focus on the process vice functional silos then everything improves. Supplier aided design is a desirable practice as this cross functional or process driven communication strengthens the product.

References:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.