Source processes follow a similar path to Plan. At level 1, there are few formal
processes and relationships with suppliers are ad hoc. There is little ability to
aggregate data across the firm, so sourcing decisions are suboptimal. At level
2, we find tools that allow the firm to build up a consolidated view of total
demand � the best deals can be made, but from a traditional buyer-seller
relationship. Across the wall to level 3, we see the development of well-defined
supplier partnerships, with shared goals for driving and sharing extra value.
Suppliers are integrated into the planning process and are probably involved
much earlier in the design process, for noncommodity items. By level 4, firms
will have adopted e-sourcing tools for commodity items, allowing them to
search a much wider Internet community for the best supply opportunities. More
and more of the procurement processes will be automated and linked into the
scheduling systems on both sides and to back-office reconciliation and payment
systems. The level 5 aspiration is for the whole network to co-manage sourcing
strategy to maximize the value to all the players in the chain.
The Make processes at level 1 are often as rudimentary as the planning
processes that feed them their instructions. Paper-based or simple MRP-based
tools track the manufacture of products, relying on progress chasing to maintain
due date performance. At level 2, tracking is electronic, and linked into the
scheduling system, so that the whole internal enterprise has a view of the state
of play. Customer delivery performance is greatly enhanced, and lead times and
shop floor inventories are reduced. The level 3 firm takes its pace from direct
customer information � real-time progress information can be shared with
customers, so that problems are highlighted before they become critical. Simplified
shop floor control through demand-pull, kanban-type systems is prevalent.
When level 4 is reached, the collaboration with immediate supply chain
partners is complete. By level 5, we are looking to make long-term, strategic
capacity and technology investment decisions in the best interests of the whole
value network � the activity of the whole chain is scheduled as part of a single
model.
Deliver completes the customer-focused processes. At level 1, we again see
manual planning, often with only ad hoc links to the preceding functions in the
internal supply chain. The level 2 firm uses effective warehouse and fleet
management systems to underpin good outbound logistics. By level 3, we see
the start of information flowing directly from the customer to the supplier.
Vendor-managed inventory reduces the assets on the customer�s balance sheet
and allows the supplier to use superior knowledge to reduce the total cost of
supply. Better information facilitates the choice of the best service logistics
provider. The level 4 company plays in an extended value chain, so there are
more opportunities to collaborate in multitier logistics systems, to optimize
warehousing and transportation costs. Network companies recognize that distribution
is a noncore activity and collaborate to reduce their combined logistics
bill. Aspirations of the level 5 company, in its total value network, encompass
Web-based virtual logistics operations, where the service provider can track
goods in real time using GPS technology, to maximize customer service, while
minimizing the total cost.
The last set of processes covers Return of goods, faulty or in need of
refurbishment. This is a fairly recent development. Historically, returns have
been handled in an ad hoc manner. The firm�s response depends on who takes
the call. Many level 1 firms still adopt this approach. By level 3, firms have
visibility of returning goods, so that effective response can be preplanned and
possibly handed off to a supplier. A level 5 firm would expect to have access
to full visibility of the return flow of goods in the whole network � and, of
course, the number of returns would be minimized!
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