1. Chapter 8
Integrating the supply
chain

2. Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain

3. Integration in the supply
chain
 Key issue
How can we integrate
1 internally, externally and
electronically?

4. Integration in the supply
chain
• What is Supply Chain Integration
• the degree to which the firm can strategically
collaborate with their supply chain partners
and collaboratively manage the intra- and
inter-organization processes to achieve the
effective and efficient flows of
• Product and services
• Information
• Money
• Decisions
• With the objective of providing the maximum value to
the customer at low cost and high speed

5. Integration in the supply
chain
 Measures of integration
– Access to planning system
– Sharing production plans
– Joint EDI access / networks
– Knowledge of inventory mix / levels
– Packaging customization
– Delivery frequencies
– Common logistical equipment / containers
– Common use of third-party logistics

6. Integration in the supply
chain
 Internal integration: function to function
Purchasing Production Distribution
High productivity of Keep warehousing
Low price
machine and labor operation smooth
Unreliable delivery Post-manufacturing
High batch size
and low quality operation being resisted
Poor available Additional complexity of
distribution customizing products

7. Integration in the supply
chain
Inter-company collaboration: a manual approach
Strategic
Collaboration
Decision Flow
Products & Services Flow
Enterprise Enterprise
Information & Knowledge Flow
A B
Financial Flow
END CUSTOMERS
RAW MATERIALS
Products & Services Flow
Information & Knowledge Flow
Financial Flow
Decision Flow

8. Integration in the supply
chain
 Electronic collaboration
Transactional
The electronic execution of
transaction
Information sharing Electronic
The electronic sharing or collaboration
exchange of information
Collaboration planning
Strategic, tactical and
operational exchange

9. Integration in the supply
chain
Information
flow in apparel
supply chain

10. Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain

11. Efficient consumer
response
 Key issue
How can collaboration be
1 extended across the supply chain
to focus on meeting consumer
demand?

12. Efficient consumer
response
 Category management
Category Establish Optimize Optimize Optimize
management infrastructure introductions assortments promotions
Product Integrated Synchronized Continuous Automated
replenishment suppliers production replenishment store ordering
Reliable Cross-
operations docking
Enabling Item coding
EDI EFT and database ABC
technologies maintenance

13. Continuous replenishment
Continuous replenishment

14. Efficient consumer
response
 Enabling technologies
– Scanning data
– Data warehousing
– Data mining
 The data include
– Demand / consumption / sales information
– Cash flow
– Stocks of finished goods / work in progress
– Delivery and output status

15. Efficient consumer
response
Category Continuous Enabling
management replenishment technologies
Account Jointinventory Effective
management management information
Demand Cross-dock sharing
management operations Automated
Required Multifunctional Continuous order
capability selling teams replenishment generation
Price Bar-coding
list Effective
restructuring logistics and and the use of
Effective product flows other scanning
and
customized Quick technology

16. Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain

17. Collaborative planning,
forecasting and
replenishment
 Key issue
How can collaboration be
1 extended to strategic as to well as
operational levels?

18. Collaborative planning,
forecasting and
replenishment
 CPFR Model
CPFR Model
1. Develop front-end agreement
Planning
2. Create joint business plans
3. Create individual sales forecasts
4. Identify exceptions to sales forecasts
Forecasting 5. Resolve / collaborate on exception
items
6. Create order forecast
7. Identify exceptions to order forecast
replenishment 8. Resolve / collaborate on exception
items

20. Wal-mart ’s CPFR Seller
Process
FRONT END AGREEMENT
Collaborative
JOINT BUSINESS PLAN Planning
CREATE SALES FORECAST
Collaborative
IDENTIFY Link buyer and Seller
Goal : EXCEPTIONS Forecasting
Electronically
RESOLVE EXCEPTIONS
Collaborative
CREATE ORDER FORECAST
Replenishment
IDENTIFY EXCEPTIONS
RESOLVE EXCEPTIONS
Buyer GENERATE ORDER

21. Wal-Mart’s CPFR
Program
 CPFR has “blurred the lines between supplier
and customer”
 Suppliers buy into their program because they
have to to work with Wal-Mart, but more
importantly, because Wal-Mart’s Systems
provide increased profits for Wal-Mart and their
suppliers
 Wal-Mart “teaches” their suppliers how to
minimize shipping, inventory and other costs by
showing them their own model.

22. Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain

23. Managing supply chain relationships
 Key issue
How can broader-based
1 relationships be formed between
trading partners in the supply chain?

24. Managing supply chain
relationships
 Creating closer relationships
Arm’s length transaction Partnership
R&D Marketing R&D Marketing
Logistics Operations Logistics Operations
Information Information Information Information
system system system system
supplier customer supplier customer
Bow tie Diamond

25. Managing supply chain
relationships
 Factors in forming supply chain
relationships
– The order winner
– The method making sourcing decisions
– The nature of electronic collaboration
– The attitude to capacity planning
– Call-off requirements
– Price negotiations
– Managing product quality
– Managing research and development
– The level of pressure

26. Content
Integration in the supply chain
Efficient consumer response
Collaborative planning, forecasting and replenishment
Managing supply chain relationships
A framework for managing the supply chain

27. A framework for managing
the supply chain
 Key issue
What are the management
1 implications of integrating the
supply chain?

28. A framework for managing
the supply chain
6
Develop measurement
system for supply
chain performance
4 5
Pilot new supply Organize for supply
chain solutions chain performance
3
1 2
Develop effective
Develop a supply Gather supply chain
partnerships and
chain strategy information
alliances

29. A framework for managing
the supply chain
 Develop a supply chain strategy
– Customer service requirements
– Plant and distribution center network design
– Inventory management
– Outsourcing and third-party logistics
relationships
– Business processes
– Organizational design and training
requirements
– Performance metrics and goals

30. A framework for managing
the supply chain
 Pilot new supply chain solutions
– Successful supply chain improvement including
 Involvement of key stakeholders, suppliers,
customers and employees
 Selection of scope and environment, focusing on
avoiding risk
 Identification of the key questions that the pilot must
answer

31. A framework for managing
the supply chain
 Develop measurement systems for
supply chain performance
– On time in full, outbound
– On time in full, inbound
– Internal defect rates
– New product introduction rate
– Cost reduction
– Stock turns
– Order to delivery lead time
– Fiscal flexibility