Defence Technology Management

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MANAGING SUPPLY CHAINS - RECOGNISING THE
COMPLEXITIES OF SUPPLY AND THE NEED TO MANAGE
RELATIONSHIPS - FOR EFFECTIVE PERFORMANCE
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DEFINITIONS
The art of moving, lodging supplying personnel
and equipment. The supply maintenance of
materiel essential to proper operation of an
operating system. Planning co-ordination of
all activities necessary to achieve the desired
levels of delivered service and quality at least
cost. The time-related management of resources
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DEFINITIONS

• The strategic management of the integrated flow
  of resources from identification of need through
  to satisfactory receipt, use and disposal by the
  user.
• Therefore
• It includes the management of specification,
  procurement, scheduling and delivery to customers
  including the information flows necessary to
  management of the physical materials flow.

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SUPPLY CHAIN

• SIMPLE SYSTEM PERSPECTIVE OF AN ORGANISATION
• INPUT OUTPUT
• PROCESS

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SUPPLY CHAIN

• INCLUDES
• Specification
• Procurement
• Supplier Management
• Transport System
• Communications
• Quality Management
• Concept of Customer Supplier

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SUPPLY ( SUPPORT) CHAIN

• REQUIRES
• Consideration as Process
• Relationships
• Continuous Improvement
• Ability to Model
• Effective Communications
• Change of Mind Set

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SUPPLY CHAIN

• INTERNAL AND/OR EXTERNAL

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TENNIS BALL
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EFFECTIVE MANAGEMENT OF THE SUPPLY CHAIN LEADS
TO COMPETITIVE ADVANTAGE
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EFFECTIVE MANAGEMENT OF THE SUPPORT CHAIN
LEADS TO COMPETITIVE ADVANTAGE
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SUPPLY CHAIN

• TRADITIONAL - MODERN
• REACTIVE - PROACTIVE
• OPERATIONAL - STRATEGIC
• DISPARATE - INTEGRATED
• ACTIVITIES PROCESS

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SUPPLY CHAIN

• SEEKS
• Least Cost Solutions
• Maximise Quality Processes Culture
• Add Value and Eliminate Waste

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DEVELOPMENTS IN SUPPLY CHAIN MANAGEMENT

• Seamless End to End Pipeline Management
• Information Based Not Inventory Based
• Extended Enterprise Closer Relationships with
  Rationalised Supplier Base
• Focus on Time Compression through Quick
  Response Production
• Move from Supply Push to Demand Pull

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STRATEGIC DIFFERENTIATIONOF PROCUREMENTin
order to MANAGE SUPPLY CHAINS RELATIOSHIPS
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High RISK Low
Low PROFIT POTENTIAL High
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High RISK Low
Bottleneck
Critical
Routine
Leverage
Low PROFIT POTENTIAL High
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High RISK Low
Bottleneck Proprietary equipment and spare parts
Critical Gas turbines Process chemicals Compressor
s Retail packaging materials
Leverage Pipe Pumps Cable
Routine Gaskets Stud bolts Paints Stationery
Low PROFIT POTENTIAL High
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High RISK Low
Bottleneck Ensure supply continuity
Critical Form strategic partnerships
Leverage Maximise commercial advantage
Routine Simplify procurement process
Low PROFIT POTENTIAL High
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High RISK Low
Bottleneck Decrease uniqueness of suppliers
Critical Increased role of selected suppliers
Leverage Concentrate business Maintain
competition
Routine Increase role of systems Reduce buying
effort
Low PROFIT POTENTIAL High
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Bottleneck Develop new suppliers Medium term
contracts Detailed market knowledge
Critical Direct negotiations Supplier quality
management process Prepare contingency
plans Competitor analysis
High RISK Low
Routine Automate (EDI, remote requisitioning) Simp
lified ordering Stockless procurement Rationalize
supplier base Consider contracting out
Leverage Maintain flexibility Competitive
bidding Procurement coordination Standardization (
industry standards)
Low PROFIT POTENTIAL High
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RELATIONSHIPS IN THE SUPPLY CHAIN REVOLUTION
OR EVOLUTION?
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Supply relationships as the focus for management
attention
They exist between firms . . .
Or in chains . .
Or networks . . .
Or, perhaps a mess!
. . . Call it a system
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Supplier Relationships as the Focus for
Management Attentionthe supply focus
In the messy supply system, the platform for
managing the supply system is the relationship
B
A
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Managing the Supply Network The Concept of Tiers
The Japanese system of tiers had very specific
origins (which are now under threat)
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Supply base reduction is popular . . .
. . . but sometimes shows little rationale
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Supply relationships as the focus for management
attention
In the messy supply system, the platform for
managing the supply system is the relationship
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• Customers see themselves as controlling a
• network of supply lines, in which
• suppliers are managed to meet their
• requirements

• The strategies traditionally used for
• this are based upon mass production
• concepts of control

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Managing Strategic Supply Relationships

• Strategic information within the relationship?
• Performance within the relationship?
• Develop the relationship?

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Open-book Negotiation . . .Becomes two-way
transparency
Supply system
Check/Store
Check/Store
Op.1
Op.2
Supplier
Customer
Check/Store
Check/Store
Op.4
Op.5
Check/Store
Op.3
Value-adding
Non-value-adding
This requires justified, selective sharing of
sensitive data and respect for the companys
privacy
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Supplier Assessment or Relationship Assessment
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Relationship Assessment

• From the customer perspective or from
  the supplier perspective?

• A framework or model of the relationship,designed
  by the customer and supplier jointly, for
  purposes of
• supporting problem solving?

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Two traditional ways of doing supplier developmen
t
Customer Supplier Sub- Supplier
Cascade Strategy Do as I say!
Intervention Strategy Do as I do!
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Development is a two-way process and multi-lateral
Hierarchical, two-way development
Network development
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Managing the Risk A System of Relationships
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The relationship is the key management Value
focus it is a dynamic, working space
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Relationship focus may reveal new potential for
capturing value
Supply strategists must develop business projects
to realise value in the relationship.
Adapted from Cavinato (1997)
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The Supply Strategists choicebuyer/supplier
relationship or market success
On-line auction
Relationship
Supplier
C
Supply Market . . .
Portal
Value must be sought in supplier relationships
and market access
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In the supply relationship, customer and supplier
must COLLABORATE and COMPETE
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RELATIONSHIPS
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EFFECTIVE RELATIONSHIP MANAGEMENT WILL ENHANCE
DATA, INFORMATION KNOWLEDGE MANAGEMENT
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A Revolution? May Be . . . . May Be Not! An
Evolution? Certainly!

• Recognise mess and focus on what can be managed

• Supply relationships can be managed but you
  cannot
• manage them

• Supply network structures are not simple

• The customer - supplier relationship is a dynamic
• operating space in which the parties use the
  principles
• of competition in order to collaborate

• Relationship management will be the basis of
• successful supply chain management - which
• could be revolutionary !