Newsletters Spring 2006

The Consortium Chronicle

The Official Newsletter of the UT Supply Chain Management Consortium Spring 2006









The best is still to come

Plans for SCM Center for Excellence pick up speed

tions in this field. we have been able to accomplish

From the Director We have conducted with our academic programs. As

seven Roundtables a result of the Consortium efforts,

with topics ranging we developed specializations in

Professor Douglas Morrice from “outsourcing” supply chain management in both

to “return on sup- our MBA and Ph.D. programs and

ply chain informa- in our undergraduate Engineering

tion technology Route to Business major.









I

t is with great pleasure that I projects.” The combined total at- In addition, we have devel-

introduce you to the inaugural tendance for these meeting is over oped an SCM undergraduate pro-

edition of our newsletter. Four 350 people from dozens of orga- gram from scratch which became a

years ago when representa- nizations, both private and public track in the Management major in

In this issue tives from Applied Materials, Dell, sector. September of 2004. Under the cur-

and Motorola (now Freescale) Our faculty and students have rent plan, the SCM undergraduate

• Director’s Letter came to us with a request to start also worked with Consortium com- degree will become a stand-alone

this Consortium, our activities in panies on several practicum proj- major (rather than a track in the

• Roundtable

Supply Chain Management (SCM) ects. In addition to delivering valu- Management major) effective Sep-

Wrap-up were rather minimal. able results, these projects provide tember 2006 in the Department of

Since that time we have grown great practical experience for our Information, Risk and Operations

• SCM Consortium

to 14 sponsoring companies span- students and enable them to dem- Management. Achieving the status

Spring Calendar ning at least four industries. Sev- onstrate their talents to the spon- of stand-alone major represents

eral of our faculty members have soring companies. a major milestone. It will help in

• Award Winners

established international reputa- I am particularly proud of what continued on page 5









Breathing life into supply chain management

The anatomy of supply chain planning

Consortium mission







T

ake a deep breath. Hold management sys-

Our mission is

it. Now, breathe out slow- tems involves care- Guest Column

to bring together ly. ful and thorough

executives Every part of your body project manage-

Robert Benny

worked in synchronicity to make ment. You cannot

from leading Freescale Director of Systems and

that happen, but you probably tackle the challenge Process Integration for Service and

corporations with didn’t notice. When healthy, our arbitrarily. The suc- Logistics



Texas faculty and bodies are perfect examples of cess of your supply

processes that work. Think of your chain system is dependant upon resource planning (ERP), human

students to identify,

supply chain as a finely-tuned hu- following a specific sequence in the resource planning, financial and

document, research, man body and consider what anat- building process - a step-by-step inventory tracking systems, mate-

develop and omy can teach us about designing roadmap. Each piece of anatomy rial requirements planning, sales

successful business processes, has a specific function and relies order management and distribu-

disseminate best

especially in supply chain plan- on another component’s flawless tion logistics, product line planning

practices in Supply ning. execution. (PLM) and supplier relationship

Chain Management. Implementing supply chain Step 1: Establish enterprise continued on page 6

2 The Consortium Chronicle Spring 2006





Consortium Calendar Spring 2006



Monday, May 8, 2006

4:00-8:00 PM

UT SCM Consortium

Operations and Supply Chain Management Steering Committee Meeting

Corporate Sponsors

Where: President’s Room, The University of Texas Club

Additional Info: Meeting set for 4:00-6:00 PM with dinner to follow. Applied Materials

Cardinal Health

Tuesday, May 9, 2006

8:00am-3:00 PM Chevron

Roundtable Discussion of “Supply Chain Network Design and Optimization” ConocoPhillips

Where: Red McCombs School of Business (CBA), 2100 Speedway, Room GSB 3.106. DaimlerChrysler

Additional Info: Event will include presentations by representatives of Amazon, Applied Materials, Dell Computer

Dell, Frito-Lay, the Shell Practicum Project Team and the University of Texas at Austin. Lunch will

Ford

be served in the Special Events Room on the 3rd floor at noon.

Freescale

For more information, please visit www.mccombs.utexas.edu/scm/events. If you have any questions, Semiconductor

please contact Susan Monkman at Susan.Monkman@phd.mccombs.utexas.edu or (512) 232-6945.

Frito Lay

Halliburton

Philip Morris USA

Rising fuel costs focus of Fall 2005 Supply Shell



Chain Management roundtable Temple-Inland

Texas Instruments







T Roundtable Wrap-up

hanks to everyone who 5. Fuel costs are not the only

participated, our 7th bi- factor contributing to the difficulties

annual Roundtable was companies are facing with trans-

another success. In keep- portation. Driver shortages are

ing with the topic of “The Impact of of goods through a global supply also a big problem.

Rising Energy Costs on Supply chain network. This makes compa- While item 1 indicates that

Chains” we had presentations that nies potentially more susceptible companies are facing more risk

gave a variety of perspectives on to increasing energy prices. from increasing energy prices,

how the challenge of rising fuel 2. To cope with rising energy items 2 and 3 indicate that compa-

costs is being met. A few common prices, companies take a total sup- nies are now in a better position to

themes arose from these presen- ply chain approach by squeezing mitigate that risk because of better

Director:

cost out of other parts of the supply chain management. Item Professor Douglas Morrice

supply chain in order to offset 4 indicates that as a result of the McCombs School of Business

energy price increases. mindset of continuous process im- 1 University Station B6500



“To cope with rising energy 3. Supply chain improvements provement in supply chain orga- Austin, Texas 78712-0212

(512) 471-7857

over the past five to ten years nizations, most companies have

prices, companies take a have provided companies with been able to adapt and cope with

morrice@mail.utexas.edu



total supply chain approach a better overall awareness of some fairly significant economic Administrator:



by squeezing cost out of how to respond more quickly to pressures. Ms. Susan Monkman

McCombs School of Business

the economic pressures asso- This Roundtable also included

other parts of the supply ciated with rising energy costs. a first for us – a presentation given

1 University Station B6500

Austin, Texas 78712-0212

chain in order to offset Ongoing continuous process remotely by Anu Goel, Director of (512) 232-6945



energy price increases.” improvements help to offset Global Parts and Supply Logis- Susan.Monkman@phd.mccombs.

utexas.edu

fuel cost increases. tics for Ford Motor Company. Anu

4. The changes made to sup- gave an excellent example of how

www.mccombs.utexas.edu/scm

tations and ensuing discussions: ply chains as a result of higher improvements in distribution logis-

1. With more off-shore sourc- energy prices have been more tics can be used not only to offset

ing, a greater proportion of the evolutionary than revolutionary in the higher fuel costs but also to im-

costs are tied up in the moving nature. continued on page 5

Spring 2006 The Consortium Chronicle 3





UT professor receives research fellowship

for study of “assemble-to-order” systems



D

uring the Fall 2005 uncertainty in the system and dis- “Another one of our finds was

Roundtable, Dr. Ste- cover how each player will respond that the ‘pull’ system, where the

phen M. Gilbert was the to optimize their own profits given assembler quotes the prices and

recipient of a research the other players’ behavior.” the suppliers hold the inventory,

fellowship awarded by the UT The study asked whether tends to be more efficient than the

Supply Chain Management Con- it was possible to coordinate a ‘push’ system, where the suppliers

sortium for his study, “Coordina- supply chain system to optimize quote the prices and the assem-

tion of Stock- quantities and maximize profits for bler holds the inventory,” said Pro-

ing Decisions all those involved. fessor Gilbert. “Ideally, you want

in an Assem- “We found that it is possible the downstream guys making the

ble-to-Order to coordinate the system to have price decisions and the upstream

Environment,” optimal quantities when the as- guys making the quantity deci-

researched sembler quotes wholesale prices sions. When the assembler’s ca-

and written in to the component manufacturers,” pacity gets tight, though, it doesn’t

conjunction said Professor Gilbert. “What’s in- really matter which system is in

with Drs. Xiao- teresting, though, is that we also place.”

hong Zhang found that all three players can Professor Gilbert presented

and Jihong make positive profits in this situa- the paper at the 2005 Manufac-

Ou of the De- tion. Typically, because of double turing and Services Operations

partment of marginalization in a system like Management Conference. It is

Decision Sci- this, the incentive for a single sup-

ences in the plier is to stock too little of a

NUS Busi- component unless the assem-

ness School bler quotes a wholesale price “In this type of research you

of the National equal to the selling price, sur-

University of rending their margin. Then the

tend to look at very focused

Singapore. supplier incentives are set up types of problems. It’s like

P r o- to maximixe combined profits shining a flashlight at part

fessor Gilbert — but all those profits have to

is an Associate Professor at the go to the supplier.

of your engine. You may

College of Business Administra- “But in this assembly not understand everything

tion at UT Austin. He teaches system, where the assembler that’s going on, but you can

courses in operations manage- has the power to allocate ca-

ment and supply chain manage- pacity here or there, they can

understand that small part

ment and serves as the coordina- quote prices that give them very well.”

tor of the operations management a positive margin and still

group. Prior to joining the UT, he incentivize their suppliers to

taught at the Weatherhead School stock the quanities that maximize currently undergoing review.

of Management at Case West- everyone’s profit. We were able “In this type of research you

ern Reserve University. He holds to get to a ‘first-best’ solution: an tend to look at very focused types

a B.S. in Industrial Engineering identified price that is purely a of problems,” he said. “It’s like

from the University of Michigan, linear function of the quantity of shining a flashlight at part of the

an M.S. in Industrial Engineering units changing hands that not only engine of your car. You may not

from Stanford and a Ph.D. in Man- maximized combined profits, but understand everything that’s go-

agement from the Sloan School of also allocated those profits to ev- ing on, but you can understand

Management at M.I.T. ery player in the system. From an that small part very well.”

“The main thing we did in this academic perspective, that was Professor Gilbert serves as

research was to look at a theo- probably the most interesting find- an associate editor for Manufac-

retical make-to-order setting with ing in our research.” turing and Service Operations

two component suppliers and one The study also evaluated the Management and a department

assembler — a sort of simplified efficiency of the suppliers or the editor for IIE Transactions and is

version of Dell,” he said. “We used assembler holding the inventory on the editorial review boards of

mainly game theory to model the and determining price. the Journal of Service Research.

4 The Consortium Chronicle Spring 2006





SCM Consortium awards 2005 scholarships

to three McCombs students

Two undergraduates, one MBA candidate receive awards









B

rian Melinat is a gradu-

ate of the University of

Colorado, Boulder with

a BS in ME and a BA in

Economics. He graduated Suma

Cum Laude in Economics with an

overall GPA of 3.78.

Brian has worked for MCI-

WorldCom as a Product Planner

and Six88 Solutions (a software

development company) as a Busi-

ness Development, Project and

Account Manager. This past sum-

mer, he interned in Dell’s Demand/

Supply Operations department.

Brian entered the McCombs

MBA program in Fall 2004 and

plans to graduate in May 2006

with a concentration in Operations

Management. His overall GPA

is 3.8. As part of the scholarship

awards process, Brian was recog-

nized by his professors as one of

the top students in the McCombs Scholarship recipients Brian Melinat, Lauren Calhoun and Steve Black.

MBA program.



and collecting data. She is study- felt comfortable with numbers, he









L

auren Calhoun was ing Operations Engineering/Sup- was excited to discover the ERB

born in College Station. ply Chain Management in the option which afforded engineer-

She grew up in Austin ERB Program and has completed ing classes as a complement to

and is a graduate of Mc- a minor in Mathematics. Lauren business core classes. He hopes

Neil High School in Round Rock has maintained on overall GPA of his concentration in the Opera-

ISD. 3.8. tions Engineering Block will help

At UT, Lauren has been in- him acquire experience in quan-

volved in the Texas Exes Student tifying systems and scenarios to









S

Chapter Rallies Committee. She teve Black is in his gain even further insight into how

has participated in Leadership junior year in the Mc- processes and logistics come to-

Emergence and Progress (LEAP) Combs School of Busi- gether by way of more analytical

as a freshman and as a mentor ness. Born in Tucson, measures.

for the organization the following Arizona, he grew up in Baton Steve was named a College

year. She is also involved in the Rouge, LA and attended Episco- Scholar each semester and has

Air Force ROTC program and will pal High School. A “third genera- maintained an overall GPA of

be commissioned as a lieutenant tion” Longhorn, his grandparents, 3.9. He is also a member of Tech

in May in the field of Acquisitions parents and most of his uncles Connects (a community outreach/

Management. and aunts are UT graduates. volunteer organization). With op-

Lauren completed her intern- Steve transferred after his portunities for internships right

ship last spring in Interpersonal freshman year into the McCombs around the corner, he says that he

and Persuasive Communication School and shortly thereafter de- is looking forward to seeing how

Studies with a PhD student by clared Supply Chain Management classroom ideas are applied in the

performing academic research as his degree track. Having always real world.

Spring 2006 The Consortium Chronicle 5





Accomplishments and opportunities offer

glimpse of SCM Consortium’s future

continued from page 1 colloquiums and forums, offer new and Information and Supply Chain

terms of attracting students into executive education programs, Integration. This framework should

the major and administering the and develop distinguished aca- help in the longer term planning of

program. demic programs at all levels. Dr. future Roundtables, foster more

To support our burgeoning George Gau, Dean of the Red Mc- variety, and provide some guid-

academic programs, we have de- Combs School of Business, states ance to Consortium sponsors who

veloped a Consortium-sponsored in his strategic plan the willingness wish to suggest topics. Since we

scholarship program for top talent to establish two centers of excel- have not directly dealt with the is-

in our MBA and BBA programs. lence, one in SCM and the other sue of Logistics and Distribution in

(See pg. 4 for details on this year’s in Corporate Governance. In No- some time, the May 9th Roundtable

recipients.) The Consortium has vember of 2005, he addressed his will focus on this topic. In particular,

also provided support for our MBA advisory committee and committed we plan to discuss Supply Chain

students to participate in a num- up to two million dollars in match- Network Design and Optimization.

ber of MBA case challenges: the ing funds to build an endowment In closing, it is our plan to pub-

IM/OPS Case Challenge at the for each of these centers. I had the lish two issues per year following

Red McCombs School of Business opportunity to make a presentation the Roundtable meetings. I hope

(2004 and 2005), the CMU Opera- to this group about the SCM Cen- you enjoy digesting the first issue

tions Case Challenge at The Tep- ter. (If you would like to view a copy of the Consortium Chronicle as

per School of Business at Carn- of this presentation it is posted at much as we enjoyed putting it to-

egie-Melon University (2004 and the Consortium web site – www. gether!

2005), and the Krannert School of mccombs.utexas.edu/scm.)

Business Case Challenge at Pur- Over the next six months, we

due University (2006). will develop a theme and vision for

this center by interviewing execu-

Roundtable

Recognizing the fact that great

scholarship is linked with outstand- tives from several top companies, Wrap-up cont.

ing academic programs, we devel- interviewing leading academics,

oped a faculty research grant pro- and conducting a benchmarking continued from page 2

gram to support study of other major academic cen- prove customer service.

top scholarship in ters. At the end of this phase, we The topic for our May 9th,

SCM. (See pg. 3 will develop and submit a proposal 2006 Roundtable (Supply Chain

“Our purposes for establish- for details on this to Dean Gau that will delineate our Network Design and Optimi-

year’s recipient.) theme, vision, activities, budget zation) was partially inspired

ing a Supply Chain Center So where do and a three-year plan to make the by this presentation. Over the

of Excellence are to foster we go from here? center a fully endowed self-sup- course of the rest of the Round-

joint research projects with In addition to the porting unit. Building a center with table we had presentations by

improvements in a multi-million dollar endowment representatives from Dell and

industry and government, our undergradu- is essential if the Red McCombs FedEx Kinko’s, plus a panel

sponsor thought leadership ate major dis- School of Business is to become discussion with representatives

colloquiums and forums, cussed above, an acknowledged leader in Supply from Chevron, Cardinal Health,

there are a num- Chain Management. Recognizing and HEB.

offer new executive educa- ber of other excit- that this type of undertaking takes We also heard from a group

tion programs, and develop ing things on the time and talent, we anticipate that of MBA students on the prog-

distinguished academic horizon. First and the proposal to Dean Gau will con- ress of their project with Chev-

foremost is an tain a recommendation to hire an ron and a discussion of how to

programs at all levels.” initiative that has executive director to lead this ini- get your company involved with

been discussed tiative. this type of exciting and reward-

for a couple of In November, the Steering ing project. A special thank-you

years but is now gaining traction: Committee developed a framework to all who presented or sat on

the establishment of a Supply for future Roundtable topics. Going the panel.

Chain Center of Excellence. Our forward, we plan to cycle through We hope you and your

purposes for establishing such a the following topics (not neces- company will be able to join us

center are to foster joint research sarily in the order listed): Sourcing in May for our next UT SCM

projects with industry and govern- and Supplier Management, Plan- Consortium Roundtable!

ment, sponsor thought leadership ning, Logistics and Distribution,

Careful planning, project management

key to healthy SCM systems

continued from page 1 (to match demand with available tional excellence in streamlining

management (SRM). supply) in order to process infor- our costs, while CRM provides the

The anatomy of managing a mation and, based on the business best commitments and superior

project in supply chain systems models being used, determine the relationships with our customers.

starts with a solid backbone. The optimal way to manage business. Remember,

components in this step provide Step 3: Focus on customer it’s all about

the information used to run a busi- relationship management (CRM) the custom-

ness and store data used to sup- and business to business (B2B) ers and “The heart of supply chain

port vital functions including plan- applications. sharehold- systems is the customer . . .

ning, scheduling, delivering and

servicing orders. Building this base

The heart of supply chain sys-

tems is the customer. CRM takes

ers — ERP,

APS and

we are in business to serve

supports efforts to globalize work the advanced information from CRM sup- our customers profitably.”

processes, manage data, provide both the ERP and APS system and port them.

a culture of service and simplify lo- communicates with the customers Clearly,

gistics. from a commitment and service there is a natural flow to project

Step 2: Implement an ad- standpoint. This communication, management in supply chain plan-

vanced planning system (APS). commitment and relationship with ning. Just as the human body dem-

The APS is considered the “brains” the customer are the heart and onstrates, when each component

of the system. It uses the informa- soul of our business. They are is in place and “healthy,” the entire

tion from the ERP, PLM and SRM what keep the customer satisfied system can run at optimal levels of

systems to maximize commitment and coming back with additional performance, which is exactly what

to customers, plan logistics and in- orders. our customers and shareholders

ventories, schedule factories, order We are in business to serve expect and deserve.

supplies and service customers. It our customers profitably. ERP and

does this by using advanced logic APS systems drive us to opera-









McCombs School of Business

1 University Station B6500

Austin, Texas 78712-0212