As mentioned, the SCOR� model and its engineering process counterparts provide
an excellent framework for analyzing how to improve an enterprise�s endto-
end processing. We will apply this model, in conjunction with the supply
chain maturity model and maturity matrices (to be introduced), to explain the
path to the highest appropriate level of supply chain progress, keeping in mind
that there are widely differing interpretations of these processes by companies
at different levels of supply chain sophistication. The simple silo-based planning
of a level 1 company, shared in an ad hoc way with neighboring internal
departments, for example, compares to the complex, reactive planning of a level
4 or 5 network, with collaborative, interactive comparisons of schedules up and
down key threads in the network. The na�ve �replace and scrap� policy for
returns in level 1 supply chains contrasts with the more sophisticated approaches
of higher level organizations, which are planning the cost-effective reentry of
refurbished products into the flow.
It is these different levels of application of the basic process models and the
value that can be generated that the authors have come to understand. For a firm
to generate value from the supply chain journey and become part of the processenabled
extended enterprise requires the creation of a guiding process maturity
roadmap.
is a matrix that is useful for establishing such a roadmap. The
matrix takes the top-level SCOR� processes � Plan, Source, Make, Deliver,
and Return � and sets out the attributes that can be expected for each process
as a company moves through the five levels of supply chain maturity.
The attributes are designed as a stretch for each level, and as our recent
surveys have shown, few companies have moved much beyond level 3. However,
there is merit in establishing an absolute framework against which progress
and value creation can be measured, to avoid the problems of traditional
benchmarking, where the top-level, best-in-class, attained performance may still
only be at level 3. In subsequent chapters, we will lay out the results of extensive
research in a number of case histories, to demonstrate the value that companies
have actually achieved in moving through the levels.
To support the growing process maturity, tools and technology are often
deployed. Again, we have developed a guiding matrix that indicates the types
of approach that typically support the processes in. This technology
matrix is shown in With these two matrices as our guide, we can describe the way in which
the supply chain processes and their supporting technologies develop � the
roadmap to greater supply chain value. Companies that want to follow this
roadmap are well advised to customize the matrices and the SCOR� map to fit
the actual circumstances of their industry and market conditions.
Tuesday, December 1, 2009
A GENERIC ENTERPRISE BUSINESS PROCESS MODEL:
The key question at this point becomes: How do supply chain processes create
more value as the enterprise matures and expands? With determining how to
improve business process at the forefront of management thinking,
Along the way, the firm moving toward the intelligent value network
wants to quantify the potential value of the transformation. That effort requires
the creation of a process maturity roadmap, which follows the maturity model
and leads the firm to becoming part of the best process-enabled extended
enterprise and eventually an intelligent value network.
To create such a map, we need a process model of the extended enterprise,
one that in particular illustrates the key supply chain processes that the enterprise
executes. A process model that has become a standard in many industries
over the last few years is the Supply-Chain Operations Reference (SCOR�)
model, developed by the Supply-Chain Council, an independent, not-for-profit,
global corporation with membership open to all companies and organizations
interested in applying and advancing the state-of-the-art in supply chain management
systems and practices. The SCOR� model captures the council�s consensus
view of supply chain management.
For the supply chain practitioner, SCOR� provides an excellent starting
point for developing supply chain thinking, and we have adopted it to guide our
thinking about process maturity. SCOR� covers the processes associated directly
with the supply chain � its design, planning, and execution. In the
authors� experience, the way in which a product is designed for manufacture
has a marked effect on the subsequent effectiveness of the supply chain. The
time to get a new product to market is often critical in maximizing the return
from the product, and the way in which changes are managed can make or break
a product�s long-term profitability.
We have augmented SCOR� with a set of processes that impact the Make
portion of the model and cover the engineering steps � processes that determine
the product design, how it is to be manufactured, and how the design will
be modified over time. These processes are illustrated in Figure 1.3, between
the need to manage the supply chain and the need to manage the products
manufactured. They are indicated as the linked arrows impacting the Make
phase and include (a) the design phase that is impacted by manage product
portfolio, design product, configure product (concurrently), and change product
and (b) the production engineering phase that is affected by design process and
tooling and maintain process. Getting these processes done correctly is as
important as any of the other major processes contained in the SCOR� model.
Deliver completes the traditional supply chain, getting the goods to the
customer. It encompasses many of the �order-to-cash� processes, from inquiry
and order processing through final product configuration, warehousing, order
picking, and logistics planning (load building, routing, dispatch planning) to
collecting proof of delivery or installation and invoicing. A version of Deliver
deals with the delivery of retail products to the back room of the store, onto
the shelves, and through the cash registers via the shopping cart.
Recent additions to the SCOR� model are the Return processes � a need
driven by new legislation on recycling and packaging, along with the need to
provide ever-higher levels of after-care service to customers, at an affordable
cost. The process elements deal with authorizing the return of a product (warranty
claim, replace or refund), organizing the receipt of the product back into
the supply chain, and planning the most cost-effective way of dealing with the
defective product (whether to repair or scrap). Of course, repaired products need
to reenter the supply chain, to flow back in the customer direction, so the Return
process ultimately links back to Plan, where this additional source of product
can be taken into account.
The engineering processes that complete our enterprise model are comprised
of:
_ Manage product portfolio
_ Design product
_ Configure product
_ Design (manufacturing) process and tooling
_ Change product design
_ Maintain (manufacturing) process
The Manage product portfolio process encompasses all the activities associated
with deciding what products to provide through the supply chain. It
includes the generation and testing of research ideas, proof of concept, and the
management of linked groups of products through options and features.
The Design product process takes a chosen product idea through to a viable
product design ready for release to manufacturing. The process covers not only
a complete finished product, but also the parts and assemblies that go to make
the finished product. The process includes concept design, the development of
the design (including testing of materials, piece parts, and assemblies), through
to a production design, released to manufacturing. Product designs are first
conceived as ideas in the concept stage. The process model for concept design
must be highly flexible and nondeterministic in nature, with design ideas moving
between suppliers and team members in a free-flowing, synchronous manner.
Once the design ideas and concepts have converged, design intent then moves
to the design/redesign stage. Here, the number of unknowns has lessened to the
point where a controlled work flow model can be implemented with more
formal approval and release control.
Configure product governs the way in which products are configured to
ensure maximum value of common and standardized components and the reuse
of previous design ideas. Configuration management controls the content of the
product from design through manufacture and throughout its service life. It
includes the creation of bills of material, support for revision and version control,
support for �where used� searches, and multiple bill of material views. The
product data integrate with enterprise resource planning systems, and more
advanced companies will have support for rules-driven configurations. Product
configuration management does not stop once the product is released from
manufacture � it continues as an essential part of the management of the
product�s entire life cycle.
The Design process and tooling processes take us from a design to a set of
manufacturing instructions and the necessary tooling to support the manufacture.
Traditionally, this was a �one-hit� process or at best a two-hit! For example,
British automotive manufacturers could take up to six months to produce
a new set of tooling to iron out production problems. A the same time, Japanese
manufacturers had cut the time to six weeks, so prototyping became the accepted
way of developing the production process. Thus, for more mature companies,
this process interacts with the Design and Configure processes. Finally,
the completed product design is ready for production release, where the production
process model takes over.
Finally, we have two processes that deal with the changing product design:
Change product design and Maintain (manufacturing) process. Change management
is critical to both the longevity of the product�s profitability and the
continued effectiveness of the supply chain to deliver the product. While we
have shown the Change process starting after the product is released for manufacture,
in fact best practice dictates that change control is applied from the
beginning of the design process. Version control and change effectivity dates
are crucial to managing the evolution of the design both pre- and post-production.
In parallel with changes to the product�s design, manufacturing processes
must be kept up to date, both in terms of their own effectiveness and to keep
in line with changes to the design. Our final process � Maintain process �
deals with this requirement by establishing processes that make certain the
designs and products are still viable years into their life cycle.
more value as the enterprise matures and expands? With determining how to
improve business process at the forefront of management thinking,
Along the way, the firm moving toward the intelligent value network
wants to quantify the potential value of the transformation. That effort requires
the creation of a process maturity roadmap, which follows the maturity model
and leads the firm to becoming part of the best process-enabled extended
enterprise and eventually an intelligent value network.
To create such a map, we need a process model of the extended enterprise,
one that in particular illustrates the key supply chain processes that the enterprise
executes. A process model that has become a standard in many industries
over the last few years is the Supply-Chain Operations Reference (SCOR�)
model, developed by the Supply-Chain Council, an independent, not-for-profit,
global corporation with membership open to all companies and organizations
interested in applying and advancing the state-of-the-art in supply chain management
systems and practices. The SCOR� model captures the council�s consensus
view of supply chain management.
For the supply chain practitioner, SCOR� provides an excellent starting
point for developing supply chain thinking, and we have adopted it to guide our
thinking about process maturity. SCOR� covers the processes associated directly
with the supply chain � its design, planning, and execution. In the
authors� experience, the way in which a product is designed for manufacture
has a marked effect on the subsequent effectiveness of the supply chain. The
time to get a new product to market is often critical in maximizing the return
from the product, and the way in which changes are managed can make or break
a product�s long-term profitability.
We have augmented SCOR� with a set of processes that impact the Make
portion of the model and cover the engineering steps � processes that determine
the product design, how it is to be manufactured, and how the design will
be modified over time. These processes are illustrated in Figure 1.3, between
the need to manage the supply chain and the need to manage the products
manufactured. They are indicated as the linked arrows impacting the Make
phase and include (a) the design phase that is impacted by manage product
portfolio, design product, configure product (concurrently), and change product
and (b) the production engineering phase that is affected by design process and
tooling and maintain process. Getting these processes done correctly is as
important as any of the other major processes contained in the SCOR� model.
Deliver completes the traditional supply chain, getting the goods to the
customer. It encompasses many of the �order-to-cash� processes, from inquiry
and order processing through final product configuration, warehousing, order
picking, and logistics planning (load building, routing, dispatch planning) to
collecting proof of delivery or installation and invoicing. A version of Deliver
deals with the delivery of retail products to the back room of the store, onto
the shelves, and through the cash registers via the shopping cart.
Recent additions to the SCOR� model are the Return processes � a need
driven by new legislation on recycling and packaging, along with the need to
provide ever-higher levels of after-care service to customers, at an affordable
cost. The process elements deal with authorizing the return of a product (warranty
claim, replace or refund), organizing the receipt of the product back into
the supply chain, and planning the most cost-effective way of dealing with the
defective product (whether to repair or scrap). Of course, repaired products need
to reenter the supply chain, to flow back in the customer direction, so the Return
process ultimately links back to Plan, where this additional source of product
can be taken into account.
The engineering processes that complete our enterprise model are comprised
of:
_ Manage product portfolio
_ Design product
_ Configure product
_ Design (manufacturing) process and tooling
_ Change product design
_ Maintain (manufacturing) process
The Manage product portfolio process encompasses all the activities associated
with deciding what products to provide through the supply chain. It
includes the generation and testing of research ideas, proof of concept, and the
management of linked groups of products through options and features.
The Design product process takes a chosen product idea through to a viable
product design ready for release to manufacturing. The process covers not only
a complete finished product, but also the parts and assemblies that go to make
the finished product. The process includes concept design, the development of
the design (including testing of materials, piece parts, and assemblies), through
to a production design, released to manufacturing. Product designs are first
conceived as ideas in the concept stage. The process model for concept design
must be highly flexible and nondeterministic in nature, with design ideas moving
between suppliers and team members in a free-flowing, synchronous manner.
Once the design ideas and concepts have converged, design intent then moves
to the design/redesign stage. Here, the number of unknowns has lessened to the
point where a controlled work flow model can be implemented with more
formal approval and release control.
Configure product governs the way in which products are configured to
ensure maximum value of common and standardized components and the reuse
of previous design ideas. Configuration management controls the content of the
product from design through manufacture and throughout its service life. It
includes the creation of bills of material, support for revision and version control,
support for �where used� searches, and multiple bill of material views. The
product data integrate with enterprise resource planning systems, and more
advanced companies will have support for rules-driven configurations. Product
configuration management does not stop once the product is released from
manufacture � it continues as an essential part of the management of the
product�s entire life cycle.
The Design process and tooling processes take us from a design to a set of
manufacturing instructions and the necessary tooling to support the manufacture.
Traditionally, this was a �one-hit� process or at best a two-hit! For example,
British automotive manufacturers could take up to six months to produce
a new set of tooling to iron out production problems. A the same time, Japanese
manufacturers had cut the time to six weeks, so prototyping became the accepted
way of developing the production process. Thus, for more mature companies,
this process interacts with the Design and Configure processes. Finally,
the completed product design is ready for production release, where the production
process model takes over.
Finally, we have two processes that deal with the changing product design:
Change product design and Maintain (manufacturing) process. Change management
is critical to both the longevity of the product�s profitability and the
continued effectiveness of the supply chain to deliver the product. While we
have shown the Change process starting after the product is released for manufacture,
in fact best practice dictates that change control is applied from the
beginning of the design process. Version control and change effectivity dates
are crucial to managing the evolution of the design both pre- and post-production.
In parallel with changes to the product�s design, manufacturing processes
must be kept up to date, both in terms of their own effectiveness and to keep
in line with changes to the design. Our final process � Maintain process �
deals with this requirement by establishing processes that make certain the
designs and products are still viable years into their life cycle.
THE PLAN PROCESSES IN BUSINESS PROCESS
Plan processes at their simplest, level 1, are point solutions. Plans are created
internally, with no integrated processes between different functions or plants
within the company. Basic tools � spreadsheets and simple material requirements
planning (MRP) or inventory control tools � support the process.
At level 2, the planning processes pick up and aggregate demand across the
firm. Simple MRP planning tools are augmented with finite capacity planning
capability � S&OP and later advanced planning and scheduling systems �
which allows the firm to create reliable plans that can be adapted to ensure that
more focused performance goals can be met. The planning now takes place
across functional boundaries, so the firm moves toward internal supply chain
excellence.
Between level 2 and level 3 is the wall � between my company and your
company. This wall acts as a psychological barrier to improvement, but the
more innovative firms break through, extending their processes into their suppliers
and customers. Now they can pick up advanced demand forecasts from
customers and give their suppliers early warning of changes in market conditions
and cancelation or reduction of supply rates. This condition increasingly
takes place collaboratively, with direct, electronic interchange of data between
planning systems, governed by strict rules of engagement, such as service level
agreements between collaborating partners in the extended value chain.
Level 4 planning takes in more steps in the extended chain. Some firms can
travel back four or five levels in the chains supplying key components. Dell,
for example, can reschedule its supply base for key commodities across five
levels of suppliers in 30 to 45 minutes. Now the whole process is enabled by
technology. The various players in the extended value chain are linked together,
across the Internet, with common data standards and linked process flows.
Critical events are monitored by real-time software and alerts sent to control
points in the chain if plans are not achieved.
No company or network, to the authors� knowledge, has yet fully achieved
the aspiration of level 5. The logical conclusion of the integration of Planning
across a supply network is to manage the network as though it were a single
entity, with no barriers caused by the artificial accident of share ownership.
Moving between level 4 and level 5 is similar to the internal supply chain,
moving between level 1 and level 2.
Between level 1 and level 2, performance improvements come from moving
out of functional silos to internal supply chains, where performance is measured
across the whole chain from inbound dock to dispatch. All the local functional
targets � for purchasing, manufacturing, and sales � are subservient to achieving
the best overall performance. The companies in the level 4 supply chain are
the equivalent of the functional silos at level 1. Local performance measures
are represented by local shareholder interests. To move to level 5, and realize
the major value opportunities, the linked firms must work on optimizing the
whole network, not individual shareholder funds
internally, with no integrated processes between different functions or plants
within the company. Basic tools � spreadsheets and simple material requirements
planning (MRP) or inventory control tools � support the process.
At level 2, the planning processes pick up and aggregate demand across the
firm. Simple MRP planning tools are augmented with finite capacity planning
capability � S&OP and later advanced planning and scheduling systems �
which allows the firm to create reliable plans that can be adapted to ensure that
more focused performance goals can be met. The planning now takes place
across functional boundaries, so the firm moves toward internal supply chain
excellence.
Between level 2 and level 3 is the wall � between my company and your
company. This wall acts as a psychological barrier to improvement, but the
more innovative firms break through, extending their processes into their suppliers
and customers. Now they can pick up advanced demand forecasts from
customers and give their suppliers early warning of changes in market conditions
and cancelation or reduction of supply rates. This condition increasingly
takes place collaboratively, with direct, electronic interchange of data between
planning systems, governed by strict rules of engagement, such as service level
agreements between collaborating partners in the extended value chain.
Level 4 planning takes in more steps in the extended chain. Some firms can
travel back four or five levels in the chains supplying key components. Dell,
for example, can reschedule its supply base for key commodities across five
levels of suppliers in 30 to 45 minutes. Now the whole process is enabled by
technology. The various players in the extended value chain are linked together,
across the Internet, with common data standards and linked process flows.
Critical events are monitored by real-time software and alerts sent to control
points in the chain if plans are not achieved.
No company or network, to the authors� knowledge, has yet fully achieved
the aspiration of level 5. The logical conclusion of the integration of Planning
across a supply network is to manage the network as though it were a single
entity, with no barriers caused by the artificial accident of share ownership.
Moving between level 4 and level 5 is similar to the internal supply chain,
moving between level 1 and level 2.
Between level 1 and level 2, performance improvements come from moving
out of functional silos to internal supply chains, where performance is measured
across the whole chain from inbound dock to dispatch. All the local functional
targets � for purchasing, manufacturing, and sales � are subservient to achieving
the best overall performance. The companies in the level 4 supply chain are
the equivalent of the functional silos at level 1. Local performance measures
are represented by local shareholder interests. To move to level 5, and realize
the major value opportunities, the linked firms must work on optimizing the
whole network, not individual shareholder funds
SOURCE, MAKE, DELIVER, AND RETURN
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!
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!
BUSINESS PROCESS MANAGEMENT AS THE ENABLING INGREDIENT
To transition a business into the higher levels of the supply chain evolution, and
into the realm of advanced supply chain management (ASCM), firms must
accept two necessities as they overcome the typical barriers created between
levels 2 and 3 of the maturity model. First, there is the general unwillingness
to share valuable information outside of the four walls representing the internal
organization. This unwillingness is first seen in level 1 companies, between
departments and business units, and becomes one of the first barriers to overcome.
Most companies welcome useful insights from external constituents, but
stalwartly resist sharing information they believe gives them an edge in an
industry or market. The solution here is to establish what can or cannot be
shared through collaborative efforts early in the discussion and then to demonstrate
the value of the sharing in terms of increased, documented benefits for
both parties. Typically, some form of pilot operation or sharing effort is necessary
with a particular business unit and selected external allies, to establish
those parameters.
Second, there is the need to link many legacy systems and disparate software
together in a manner that facilitates rapid exchange of the knowledge
considered pertinent to the extended enterprise processing. That means the
parties to the collaboration effort must decide exactly how to connect the
constituents into a meaningful communication network without being stopped
by difficulties with the age or type of database system holding the needed
information. In this case, the secret is to establish a simple methodology for
accessing portions or components of the different databases and extracting
information that facilitates the creation of a better network response to actual
market or customer needs. Business process management (BPM) becomes the
key to success in both areas, as it introduces the possibility of easily sharing
pertinent knowledge that helps all supply chain constituents and overcoming
the problem of dealing with many different systems. This sharing can be done
while protecting the security of the vital information, on a real-time basis
across organizations of virtually any size in any business, building future viability
in a collaborative manner.
Before we continue with our discussion of how a company and its business
allies can make the most progress with the supply chain maturity model in
conjunction with the SCOR� format, we need to establish the value of BPM
in facilitating the required reengineering of the process steps that makes viable
progress feasible. In this chapter, we consider the growing complexity of business
networks and the value opportunities presented through the ability to easily
enter into disparate information systems and extract the vital knowledge so
necessary for higher level business interactions and attainment of level 3 and
above positions. The basic concepts surrounding BPM were presented in an
earlier book, The Networked Supply Chain (Poirier et al., 2004), and we offer
that text as reference. In this book, we will summarize the important tenets and
go further to cover the new technologies that form the backbone of BPM
systems and explain how they open up opportunities for business users to take
back ownership of supply chain processing and reap the greatest benefits from
ASCM.
We will explain that the impediment to business progress in this area is not
people but technology, and the ability to continuously reengineer critical processes
in real time, without major information technology (IT) rework, gives
the users a significant advantage. These new approaches have an entry fee,
however. They require a fundamental rethinking of the role of the supporting
IT architecture and driving systems. The good news is that the changes bring
business benefits in the form of reduced costs and greater flexibility in the
delivery systems � a real win-win condition. To begin this explanation, we
must understand the complexity being faced in today�s business environment.
into the realm of advanced supply chain management (ASCM), firms must
accept two necessities as they overcome the typical barriers created between
levels 2 and 3 of the maturity model. First, there is the general unwillingness
to share valuable information outside of the four walls representing the internal
organization. This unwillingness is first seen in level 1 companies, between
departments and business units, and becomes one of the first barriers to overcome.
Most companies welcome useful insights from external constituents, but
stalwartly resist sharing information they believe gives them an edge in an
industry or market. The solution here is to establish what can or cannot be
shared through collaborative efforts early in the discussion and then to demonstrate
the value of the sharing in terms of increased, documented benefits for
both parties. Typically, some form of pilot operation or sharing effort is necessary
with a particular business unit and selected external allies, to establish
those parameters.
Second, there is the need to link many legacy systems and disparate software
together in a manner that facilitates rapid exchange of the knowledge
considered pertinent to the extended enterprise processing. That means the
parties to the collaboration effort must decide exactly how to connect the
constituents into a meaningful communication network without being stopped
by difficulties with the age or type of database system holding the needed
information. In this case, the secret is to establish a simple methodology for
accessing portions or components of the different databases and extracting
information that facilitates the creation of a better network response to actual
market or customer needs. Business process management (BPM) becomes the
key to success in both areas, as it introduces the possibility of easily sharing
pertinent knowledge that helps all supply chain constituents and overcoming
the problem of dealing with many different systems. This sharing can be done
while protecting the security of the vital information, on a real-time basis
across organizations of virtually any size in any business, building future viability
in a collaborative manner.
Before we continue with our discussion of how a company and its business
allies can make the most progress with the supply chain maturity model in
conjunction with the SCOR� format, we need to establish the value of BPM
in facilitating the required reengineering of the process steps that makes viable
progress feasible. In this chapter, we consider the growing complexity of business
networks and the value opportunities presented through the ability to easily
enter into disparate information systems and extract the vital knowledge so
necessary for higher level business interactions and attainment of level 3 and
above positions. The basic concepts surrounding BPM were presented in an
earlier book, The Networked Supply Chain (Poirier et al., 2004), and we offer
that text as reference. In this book, we will summarize the important tenets and
go further to cover the new technologies that form the backbone of BPM
systems and explain how they open up opportunities for business users to take
back ownership of supply chain processing and reap the greatest benefits from
ASCM.
We will explain that the impediment to business progress in this area is not
people but technology, and the ability to continuously reengineer critical processes
in real time, without major information technology (IT) rework, gives
the users a significant advantage. These new approaches have an entry fee,
however. They require a fundamental rethinking of the role of the supporting
IT architecture and driving systems. The good news is that the changes bring
business benefits in the form of reduced costs and greater flexibility in the
delivery systems � a real win-win condition. To begin this explanation, we
must understand the complexity being faced in today�s business environment.
AUGMENTED SCORE: THE ENGINEERING PROCESSES
Design and production engineering go hand in hand with supply chain improvements
efforts. Ineffective product design or design for manufacture and supply
inhibit profitability just as much as poor supply chain design and execution. In
fact, the two sets of processes are complementary, and we see the same five
levels of maturity � firms at level 1 in their supply chain thinking tend to be
level 1 in their design and production engineering thinking.
The maturity matrices for the design and production engineering processes
are shown in Tables 1.3 and 1.4. The matching technology maturity matrix is
provided in Table 1.5.
At level 1, the Manage product portfolio process is often the preserve of
just the engineering department. As maturity increases to level 2, other departments
become actively involved in the process � sharing ideas and decisions
in a way that enhances the whole enterprise. Suppliers and partners get in on
the act at level 3. By level 4, there is evidence of shared thinking about product
development up and down the extended value chain.
A level 1 company executes the Design product process in silos, just as it
runs its internal supply chain. Products are invented by marketing, designed by
engineering, and made by manufacturing. By level 2, there is integration across
the whole internal process � an organized set of interactions to ensure that a
product is designed in a way that maximizes the company�s total profitability.
In level 3, the suppliers of key components and assemblies are also becoming
involved in the design process, which extends, in levels 4 and 5, to ever-greater
collaboration, supported by Web-based tools for product data management and
computer-aided design.
The Configure product process can create great problems at level 1, as it
is, by its nature, an integrating process. With the design process fragmented,
configuration management is difficult. The problem is solved within the company
at level 2, using product data management applications to manage the
product structure, record new versions/revisions, and plan effectivity. As suppliers
become involved, at level 3, the process often causes the number of
suppliers to be reduced, as both sides invest in the growing relationships. By
level 4 and 5, the collaboration reaches a stage at which configuration is managed
across the extended chain and can be coordinated from anywhere.
At level 1, tooling and manufacturing processes are established after the
product design is complete. By level 2, the Design (manufacturing) process and
tooling process works in tandem with Design product. A level 3 company has
integrated the processing to the stage where the manufacturing process can
support more rapid changes � configure or build to order, incorporating customer
order requirements directly into the manufacturing and assembly processes.
By level 5, the network has a full mass-customization capability, with
postponement of final work right into the logistics chain.
The final two processes � Change product design and Maintain (manufacturing)
process � both follow similar paths. The level 1 company lives within
its functions. The level 5 company plays in networks, collaborating with its
partners to maximize the value they can jointly create.
These grids should all be customized to meet the needs of the individual firm
and its business network allies. They should accompany any analysis and
development plans as the firm moves to its highest level of appropriate maturity
in the SCOR� and supply chain model. They will guide our own consideration
of how a company and its trusted allies move toward supply chain management,
and use ASCM in conjunction with business process management tools, to be
described to attain a significant advantage over less capable
networks.
efforts. Ineffective product design or design for manufacture and supply
inhibit profitability just as much as poor supply chain design and execution. In
fact, the two sets of processes are complementary, and we see the same five
levels of maturity � firms at level 1 in their supply chain thinking tend to be
level 1 in their design and production engineering thinking.
The maturity matrices for the design and production engineering processes
are shown in Tables 1.3 and 1.4. The matching technology maturity matrix is
provided in Table 1.5.
At level 1, the Manage product portfolio process is often the preserve of
just the engineering department. As maturity increases to level 2, other departments
become actively involved in the process � sharing ideas and decisions
in a way that enhances the whole enterprise. Suppliers and partners get in on
the act at level 3. By level 4, there is evidence of shared thinking about product
development up and down the extended value chain.
A level 1 company executes the Design product process in silos, just as it
runs its internal supply chain. Products are invented by marketing, designed by
engineering, and made by manufacturing. By level 2, there is integration across
the whole internal process � an organized set of interactions to ensure that a
product is designed in a way that maximizes the company�s total profitability.
In level 3, the suppliers of key components and assemblies are also becoming
involved in the design process, which extends, in levels 4 and 5, to ever-greater
collaboration, supported by Web-based tools for product data management and
computer-aided design.
The Configure product process can create great problems at level 1, as it
is, by its nature, an integrating process. With the design process fragmented,
configuration management is difficult. The problem is solved within the company
at level 2, using product data management applications to manage the
product structure, record new versions/revisions, and plan effectivity. As suppliers
become involved, at level 3, the process often causes the number of
suppliers to be reduced, as both sides invest in the growing relationships. By
level 4 and 5, the collaboration reaches a stage at which configuration is managed
across the extended chain and can be coordinated from anywhere.
At level 1, tooling and manufacturing processes are established after the
product design is complete. By level 2, the Design (manufacturing) process and
tooling process works in tandem with Design product. A level 3 company has
integrated the processing to the stage where the manufacturing process can
support more rapid changes � configure or build to order, incorporating customer
order requirements directly into the manufacturing and assembly processes.
By level 5, the network has a full mass-customization capability, with
postponement of final work right into the logistics chain.
The final two processes � Change product design and Maintain (manufacturing)
process � both follow similar paths. The level 1 company lives within
its functions. The level 5 company plays in networks, collaborating with its
partners to maximize the value they can jointly create.
These grids should all be customized to meet the needs of the individual firm
and its business network allies. They should accompany any analysis and
development plans as the firm moves to its highest level of appropriate maturity
in the SCOR� and supply chain model. They will guide our own consideration
of how a company and its trusted allies move toward supply chain management,
and use ASCM in conjunction with business process management tools, to be
described to attain a significant advantage over less capable
networks.
KNOWLEDGE TRANSFER IS EXTENDED ACROSS COMPLEX BUSINESS NETWORKS
A central theme that has begun to pervade the supply chain agenda, virtually
on a global basis and across nearly all industries and business environments,
is that ASCM efforts eventually result in a demand-driven supply network and
finally in what we term the intelligent value network. With that progression
comes some very specific needs. To satisfy the inputs from a demand-driven
business system, the linked enterprise businesses must have the ability within
their network to accept reliable demand information, from a variety of sources,
and share it quickly and accurately. Further, the resulting actions and work
flows created by analysis and response to that knowledge must be synchronized
and visible, so the parties involved have a common view of what is taking place.
The result is an accurate and effective linking of the supply responses to the
actual customer or consumer demands, without the necessity for excessive
safety stocks and inventories.
As we develop our position on how the best ASCM efforts work diligently
to create the best response system and thereby better satisfy customers and
consumers, we will describe how the processing can be developed to meet these
requirements. We must emphasize before that discussion, however, the need for
timely and accurate knowledge transfer across what is becoming a very complex
business environment. John Fontanella and others from AMR Research framed
the situation well, when they stated: �Regardless of whether demand signals are
forecasts, actual consumption data, or the result of collaborative planning between
supplier and customer, mobilizing the supply chain to respond quickly
and efficiently is the major challenge that companies face over the next five
years� (Fontanella et al., 2004, p. 1).
One central purpose of any advanced supply chain effort is to create the kind
of connectivity across the extended enterprise that results in end-to-end visibility
into what is happening. Another is to establish a system that uses the latest
technology to transfer data and ultimately valuable knowledge from the processing,
so the network can mobilize and respond better than any competing system
to the actual needs of the marketplace and key customers. A third is to be in
a position of either introducing or always being near the front of the inevitable
product or service designs and innovations that will enter the market. Satisfying
these purposes occurs when the firm and its business allies meet the opportunity
by linking together five topics of importance: ASCM, customer relationship
management, supplier relationship management, appropriate technology applications,
and customer intelligence, all factors that can be positively affected by
BPM. The last topic is our terminology for the acquisition, management, and
integration of customer knowledge in order to create a differentiating customer
value proposition. As we move forward with our considerations, we will elaborate
on the role of each factor.
To begin, if a firm looks holistically at the five, usually disparate, factors
mentioned and determines how a leading position can be gained through supply
chain excellence, it can develop integrated strategies and solutions for delivering
products and services to key customers better than any competitors. When
the effort is extended through BPM techniques, to include willing and trusted
business allies, working across an extended enterprise for the same purposes,
the advantages are unmatched. In theory at least, the collaboration that will
occur across such a holistic effort will move the linked business network toward
conditions of total enterprise optimization. In such an environment, the involved
firms will be making the greatest use of assets, will be at or near lowest cost
position, and will be generating the most new revenues by virtue of greater
overall satisfaction to the intended customer or consumer groups at the end of
the intelligent value network. In other words, they will have created a competitive
advantage.
Any discussion on the possibilities of achieving such advanced supply chain
management conditions and something like total enterprise optimization must
begin with an understanding of just how complex an extended enterprise has
become and why there is such a strong need for cross-organizational communication.
The original supply chain efforts were directed toward achieving
optimum operating conditions across a linear set of tightly linked, internal
process steps � from beginning raw materials to final delivery of products and
services
on a global basis and across nearly all industries and business environments,
is that ASCM efforts eventually result in a demand-driven supply network and
finally in what we term the intelligent value network. With that progression
comes some very specific needs. To satisfy the inputs from a demand-driven
business system, the linked enterprise businesses must have the ability within
their network to accept reliable demand information, from a variety of sources,
and share it quickly and accurately. Further, the resulting actions and work
flows created by analysis and response to that knowledge must be synchronized
and visible, so the parties involved have a common view of what is taking place.
The result is an accurate and effective linking of the supply responses to the
actual customer or consumer demands, without the necessity for excessive
safety stocks and inventories.
As we develop our position on how the best ASCM efforts work diligently
to create the best response system and thereby better satisfy customers and
consumers, we will describe how the processing can be developed to meet these
requirements. We must emphasize before that discussion, however, the need for
timely and accurate knowledge transfer across what is becoming a very complex
business environment. John Fontanella and others from AMR Research framed
the situation well, when they stated: �Regardless of whether demand signals are
forecasts, actual consumption data, or the result of collaborative planning between
supplier and customer, mobilizing the supply chain to respond quickly
and efficiently is the major challenge that companies face over the next five
years� (Fontanella et al., 2004, p. 1).
One central purpose of any advanced supply chain effort is to create the kind
of connectivity across the extended enterprise that results in end-to-end visibility
into what is happening. Another is to establish a system that uses the latest
technology to transfer data and ultimately valuable knowledge from the processing,
so the network can mobilize and respond better than any competing system
to the actual needs of the marketplace and key customers. A third is to be in
a position of either introducing or always being near the front of the inevitable
product or service designs and innovations that will enter the market. Satisfying
these purposes occurs when the firm and its business allies meet the opportunity
by linking together five topics of importance: ASCM, customer relationship
management, supplier relationship management, appropriate technology applications,
and customer intelligence, all factors that can be positively affected by
BPM. The last topic is our terminology for the acquisition, management, and
integration of customer knowledge in order to create a differentiating customer
value proposition. As we move forward with our considerations, we will elaborate
on the role of each factor.
To begin, if a firm looks holistically at the five, usually disparate, factors
mentioned and determines how a leading position can be gained through supply
chain excellence, it can develop integrated strategies and solutions for delivering
products and services to key customers better than any competitors. When
the effort is extended through BPM techniques, to include willing and trusted
business allies, working across an extended enterprise for the same purposes,
the advantages are unmatched. In theory at least, the collaboration that will
occur across such a holistic effort will move the linked business network toward
conditions of total enterprise optimization. In such an environment, the involved
firms will be making the greatest use of assets, will be at or near lowest cost
position, and will be generating the most new revenues by virtue of greater
overall satisfaction to the intended customer or consumer groups at the end of
the intelligent value network. In other words, they will have created a competitive
advantage.
Any discussion on the possibilities of achieving such advanced supply chain
management conditions and something like total enterprise optimization must
begin with an understanding of just how complex an extended enterprise has
become and why there is such a strong need for cross-organizational communication.
The original supply chain efforts were directed toward achieving
optimum operating conditions across a linear set of tightly linked, internal
process steps � from beginning raw materials to final delivery of products and
services
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