Supply Chain Planning

Practical Frameworks for Superior Performance

Matthew J. Liberatore, Tan Miller

• Editorial: Business Expert Press
• Año: 2021
• ISBN:
  9781953349217
• Edición: 2
• Categoría: Negocios y empresa
• Categoría: Operaciones

Through this book, practitioners will obtain valuable new insights and examples of implementable frameworks and methods for managing their supply chain functions and organizations.

The critical role that supply chain planning contributes to a firm's financial well-being has never been greater. All too often, however, considerable managerial resources are directed toward planning activities with minimal results. In this book, we present proven, practical management frameworks used by the authors to support supply chain operations management and planning in private industry. These frameworks provide methodologies for managing critical activities such as supply chain strategic planning and project selection, manufacturing and distribution planning, performance measurement, supply chain risk management, and customer logistics and inventory deployment.

This book is intended for supply chain professionals, as well as for graduate and advanced undergraduate students. Practitioners will obtain valuable new insights and examples of implementable frameworks and methods for managing their supply chain functions and organizations. Students will develop an understanding of real-world approaches for supply chain planning, decision support, and many other key activities.

CHAPTER 1

Introduction

In today’s competitive global economy, a firm’s market position and bottom-line financial performance is closely linked to its supply chain (SC) performance. Sadly, the disruptive, catastrophic impact of the COVID-19 virus in 2020 only further demonstrated the critical relationship that exists between strong supply chain operations and the success of most businesses. The critical role that supply chain planning contributes to a firm’s financial well-being has never been greater. Unfortunately however, all too often, considerable managerial resources are directed toward planning activities and processes with little in the way of tangible results and outcomes. What supply chain executives require is the know-how to efficiently and effectively direct their planning activities so that the results lead to better business decisions from the long-term down to day-to-day operations. In this book, we present proven, practical management frameworks and techniques used by the authors to support supply chain operations management and planning in private industry. These frameworks provide methodologies for organizing and managing critical activities such as supply chain strategic planning and project selection, integrated manufacturing and distribution planning, performance measurement, supply chain risk management (SCRM), and customer logistics and inventory deployment, to name a few.

In this book, we illustrate how managers can and should employ planning frameworks to organize and manage all major supply chain functions and activities. While a firm clearly must have a framework to guide its overall supply chain strategic planning process, so too should the firm have a well-established planning framework for its individual supply chain functions such as transportation, manufacturing, and logistics. Further, and most critically, all these supply chain planning frameworks must support and align with the firm’s overall business goals and objectives.

Objectives of the Book

In over 20 years of private industry experience, we have implemented numerous supply chain frameworks, decision support systems, and performance measurement systems to manage supply chain functions. Our experience has taught us that firms which place strong emphasis on these approaches make themselves significantly more competitive and agile relative to firms that underinvest in these areas.

We have several objectives in writing this book. First, we wish to communicate to other supply chain practitioners and executives the importance of investing in the frameworks and systems that we describe. These methods have served us well in practice and we highly recommend these approaches. Secondly, all the methodologies and frameworks we present can readily be implemented. One objective of reviewing the numerous frameworks that follow is to raise the visibility of these approaches and methods. A related objective is to describe these frameworks in easy-to-follow illustrations. We hope in doing so we will facilitate the implementation of these frameworks and methodologies by others who wish to utilize them.

Why Are Supply Chain Frameworks Critical to a Firm’s Success?

Firms that actively employ supply chain planning frameworks as a standard business practice give themselves a true competitive advantage. As we demonstrate throughout the book, firms that embrace the methodologies and discipline fostered by a framework-based approach make themselves agile, and so are capable of effectively and rapidly responding to ever-changing business conditions. Leading-edge characteristics of these firms include the ability to link and coordinate their planning activities and actions from the long-run, strategic horizon to the medium-term tactical and short-run operational horizons. The linkages between planning levels is hierarchical, meaning that plans developed at the strategic level guide and direct the tactical level, and plans developed at the tactical level guide and direct the operational level, so that all plans and actions are in alignment with the firm’s high-level strategy. This overarching hierarchical perspective provided by well-implemented supply chain planning frameworks facilitates improved decision making, higher customer service levels, and improved operating efficiencies for firms. For example, later in this book, we review the case of a ceramic tile manufacturer that reduced its annual operating costs by approximately 10 percent and improved its customer service fill rates after implementing a hierarchical manufacturing and logistics planning framework.

We also detail the case of a large pharmaceutical and consumer health care firm that invested heavily in hierarchical supply chain planning frameworks over many years. In particular, we examine how by utilizing its existing planning frameworks and related decision support systems, this firm responded rapidly and successfully to dramatically changing business conditions that created a significant stress on the firm’s logistics capacity. This firm was able to maintain very high fill rates and avoid potential revenue losses of $20 million during a period of rapid business change. Another supply chain planning framework that we describe is that of a multibillion dollar confectionery division of a diversified consumer products and pharmaceutical firm. A key component of this firm’s very broad hierarchical planning framework consisted of a global manufacturing planning decision support system. We review the strategic and tactical components of this system that identified over $5 million in potential annual operational savings.

The three examples just described offer a brief glimpse of the types of cases and supply chain planning frameworks that we present throughout this book. To set the stage for the remainder of this book, we now introduce two “linked” frameworks:

1. A business and supply chain planning framework

2. A supply chain function planning framework

We consider each of these frameworks separately, and then discuss the linkages and interdependencies that facilitate viewing these frameworks as one coordinated, unified firm-wide process.

A Business and Supply Chain Planning Framework

Figure 1.1 presents a simple framework depicting an integrated process where a firm’s overall business goals and objectives define its supply chain organization’s goals and objectives. Specifically, in its business strategic planning process, a company must address such key issues as overall corporate objectives, market share and profitability goals, and business and product mix targets. Strategic planning decisions relating to overall corporate objectives then drive strategic supply chain plans and decisions. For example, market share and product mix objectives will strongly influence a firm’s supply chain capacity and service strategies. Other high-level supply chain strategies are also developed at this stage to support business goals and objectives. Examples of such strategies would include setting targets for overall customer service levels and maximum inventory investment levels, and creating key customer strategic initiatives.

Figure 1.1 Integrated business and supply chain strategic planning framework

Once a firm’s supply chain planning team has established its high-level strategies, the functions within this organization must then develop and implement their individual respective strategies. As Figure 1.1 depicts, functions such as manufacturing, logistics, and transportation each must plan their own strategies to support overall supply chain goals and objectives, and ultimately those of the business. For example, the manufacturing organization’s plans must address such issues as planned production capacity levels for the next 3 years and beyond, the location and number of facilities it plans to operate, and so on. Other functions such as logistics, transportation, and procurement will face different, but similarly critical, issues and decisions. Later in the book we review in greater detail what we describe here as an integrated business and supply chain planning framework. For now, however, as illustrated in Figure 1.1, this integrated strategic planning process consists of three components:

1. Business strategic planning—which drives and guides

2. Supply chain strategic planning—which drives and guides

3. Strategic planning by individual supply chain functions

The distinction between steps 2 and 3 is as follows. In step 2, the senior leaders of the supply chain organization (i.e., the leaders of all the individual supply chain functions) collectively establish the high-level strategy for their organization. In step 3, each individual supply chain function (e.g., manufacturing) develops a strategic plan for its own organization. This individual plan naturally must support the overall supply chain plan generated in step 2.

To illustrate this integrated process, consider the following brief example. Let’s assume that the business unit strategic planning process results in a decision that production capacity should be increased by 40 percent over the next 5 years to support planned sales growth (step 1). The supply chain strategic planning team receives this input, and its planning process (step 2) then determines that the firm will generate this capacity increase through internal expansion rather than using third-party contract manufacturing. Plans developed at the overall supply chain level may be more specific—such as a general decision that capacity should be added specifically in Southeast Asia. The level of detail specified in step 2 will vary by firm. Next, in step 3 at the supply chain function level, the manufacturing group engages in its individual strategic planning process. At this level, manufacturing generates a detailed strategy addressing such issues as the specific location where it will build additional capacity, the technology planned for the facility, the targeted labor versus automation mix, and so on. Similarly, each other major supply chain function such as transportation will also conduct its strategic planning process in support of the overall supply chain strategic plan. This completes the three-step integrated business and supply chain strategy planning framework.

We next introduce a framework for individual supply chain function planning. As we will discuss, at the supply chain function level, the planning process becomes much more detailed. To accommodate the granularity required at this level, each supply chain function must utilize a hierarchical planning framework that can address all issues ranging from the long-run strategic to the very short-run operational.

A Hierarchical Supply Chain Planning Framework

The planning activities and decisions th...