Mapping Supply Chains

Paul Justensen BusM 361 Brigham Young University

Supply Chain Maps: Training

Overview In depth look at supply chain mapping Business Example Mapping activity Summary

What is a Supply Chain Map?

How will mapping supply chains help your business?

Supply Chain Maps: History and Background

Has become more important with increase in outsourcing Increased competition in supply chains

Barn

Supply Chain Map: Defined

A visual representation of goods, information, processes, and money flows that occur throughout a supply chain, both upstream and downstream.
1st Tier Supplier

Manufacturer

Retailer

Characteristics of Supply Chain Maps

Can focus on: *particular use or user *theme *processes, flows, facilities, organizations, geographic relationships Easy to distribute Easy to Interpret Designed to support corporate strategy

Brainstorming Exercise:
What suppliers supply your company? Which of these suppliers supply the most vital products? Pick one key supplier and think about the following list of questions How good is the quality of their products? How quickly do you receive products you order?

Brainstorming Exercise: (Cont)

Are there any environmental factors that could affect your supplier such as:

Regulations Employee disputes Profitability issues

Would that supplier be willing to team with your company in joint projects to improve operations?

Brainstorming Exercise: (Cont)

Who supplies your supplier? Are there any internal or environmental factors that could affect them?

Brainstorming Exercise Recap

What did you learn from this activity? How might mapping supply chains help your company?

Why do a supply chain map?

Supply chains must now compete against other supply chains Supply chains are a points of strategic advantage Maps highlight inefficiencies Provide a methodology for analyzing processes

Creating a Supply Chain Map

1. Organize the customer and supplier team

Meet with management and supply chain directors Purpose is to discuss current situation and decide on what core competencies are desired in supply chain

2. Draw the current-state extended value stream map

Identify activities required in transaction Use boxes to represent entities and transactional documents

Creating a Supply Chain Map

2.Draw the current-state extended value stream map (contd)

Use arrows to show flows of information and products. Label the time each step takes

3. Draw the future-state extended value stream map and implementation plan

Identify areas where you can improve processes Prioritize improvement areas based potential benefits and by ease of implementation

Creating a Supply Chain Map

4. Execute the implementation plan

Implement plan by starting with the most value-added changes first Track changes in improvement and cost

5. Repeat process for continuous improvement

Difficulties in collaboration

Costs Savings Sensitive information Commitment Short-term focus

Business Example
Capital Equipment Incorporated and Mare Technologies

CEIs customers unhappy with late deliveries CEI identified Mare, a key supplier, as a bottleneck Mare hadnt previously considered its impact on other businesses

Business Example--Continued

CEI persuades Mare to cooperate Cross-functional team organized Plan for achieving competencies developed

Business Example--Continued

Mapped out current value-stream map

Identified inefficiencies through observation and interviews

Blanket order Production control MRP
1 day 10 minutes

Customer service Mare tech Sales order

4 days

Blanket order

Material suppliers Sales order

Capital Equipment Inc

Weekly scheduling

Work station 1

14 days

Work station 2&3

10 days

Receiving

5 days

Quality control

6 days

Kitting

Work station 6

12 days

Assembly 1

11 days

Final assembly

4 days

Shipping

Work station 4

9 days

Work station 5

Business Example--Continued

Mapped a future value stream map with improvements

Improvements prioritized based on potential benefits and ease of integration

Blanket order Production control MRP
6 Hours 10 minutes

Customer service

Blanket order

Material suppliers Sales order Mare tech Sales order

1 Hour

Capital Equipment Inc

Work cell 1

Receiving

Quality control

Staging

FIFO

FIFO 1 day

Work cell 3

FIFO

Final assembly

1 day

Shipping

1 day

Work cell 2

Finish Goods Buffer Stock

Business Example--Continued

Executed plan

Focused on improvements with greatest ROI first

Results

Lead time reduce from 55 days to 42 days Reduced average days of WIP by 91% 9% cost reduction Strengthened commitment to work together in future

Activity: Peanut Butter Case

You are the owner of Ritz Peanut Butter Co. located in Sao Paulo, Brazil, and you have been wanting to improve operations at your manufacturing plant. One concern you have had is that your main supplier, Pedros Peanuts, requires long lead times when you order peanuts. Pedro, who is the owner of Pedros Peanuts, has agreed that he would work with you in improving operations. After looking closely at how the ordering process works, you come up with the following summary of operations:

Activity: Peanut Butter Case

Steps: 1. Ritz faxes order of 1000 kilos of peanuts to Maria, the receptionist 2. Maria checks the fax for orders at 8:00am, 12:00pm, and 3:00pm 3. Because the production managers office is on the other side of the plant, new orders are sent over only 2 times per dayat 8:30am and at 1:00pm

Activity: Peanut Butter Case

4. Production manager faxes a materials request to the purchasing director. Fax sits for 1 hour. 5. If there is enough stock on hand, purchasing notifies production manager of this. If not, it takes an average of 1 day to get stock from local farmers. 6. Peanuts then enter a batch process that takes 6 hours 7. Upon finishing, workers notify production manager, and production managers requests an invoice from accounting to be prepared.

Activity: Peanut Butter Case

8. When accounting finishes invoice, they notify the production manager and send him a copy. 9. Production manager sends invoice to shipping and requests a shipment be made. Shipping gets request and loads truck (3 hours), and sends it to Ritz Peanut Butter Co. (1 day to deliver)

Map of current process

Raw Materials Purchasing Local Farmer 2 hour average wait 1 day 1 hour 1 hour 2 hours Materials request Production Manager 12 hour average wait 1.25 hour wait Receptionist fax Sams Peanutbutter

Local Farmer

1 hour

1 hour 1 day De-shell peanuts Wash Inspection Accounting

Shipping

6 hours

Possible Solution
1.25 hour wait Raw Materials Purchasing Local Farmer Weekly forecasted need 2 hour average wait 1 day 1 hour 1 hour 2 hours Sams Peanutbutter Production Manager fax

Local Farmer

1 hour Continuous

1 hour

2 hours Stock pile inventory De-shell peanuts Wash Inspection

Accounting

Shipping

6 hours

Summary--Continued
To work with suppliers, companies must: - build a business case benefiting both companies - plan how costs and savings will be shared - agree on competencies to pursue - work together in creating solutions

Summary
Supply chain mapping helps companies: 1. Improve strategic supply chain relations 2. Identify inefficiencies 3. Visualize process for communication 4. Analyze development of core competencies

References and Additional Readings

Delmonico, David & Horton, Peter. Charting a New Course: Extended value stream mapping creates innovative supply chains. APICSThe Performance Advantage. October 2004. p 43. Gardner, John T. & Cooper, Martha. Strategic Supply Chain Mapping Approaches. Journal of Business Logistics. Vol 24. No 2. 2003. pp 3757. McInerney, Mike. Supply Chain Alliances Can Help Logistics Teams Provide Value. Pulp & Paper. October 2003. pp 38-40. Anonymous, Good, Better, Best: How to Assess Your Supply Chain Performance. http://www.tompkinsinc.com/publications/ competitive_edge/articles/06-03-Good_Better_Best.asp. Nov 2005.

References and Additional Readings

Liker, Jeffrey K. & Choi, Thomas Y. Building Deep Supplier Relationships. Harvard Business Review, Dec. 2004, Vol. 82. Issue 12.