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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, 1st Tier Supplier information, processes, and money flows that occur throughout a supply chain, both upstream and downstream. 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 (cont’d) 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 CEI’s customers unhappy with late deliveries CEI identified Mare, a key supplier, as a bottleneck Mare hadn’t 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 Production Customer Blanket order control service order Capital Equipment Material suppliers Inc Sales Sales MRP Mare tech order 1 day order 10 4 days minutes Weekly scheduling 14 days Work station Work station 1 2&3 10 days 5 days 6 days 12 days 11 days 4 days Receiving Quality control Kitting Work station 6 Assembly 1 Final assembly Shipping 9 days Work station 4 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 Production Customer Blanket order control service order Capital Equipment Material suppliers Inc Sales Sales MRP Mare tech order 6 Hours order 10 1 Hour minutes Work cell 1 Quality FIFO FIFO FIFO 1 day Receiving Staging Work cell 3 Final assembly Shipping control 1 day 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, Pedro’s Peanuts, requires long lead times when you order peanuts. Pedro, who is the owner of Pedro’s 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 manager’s office is on the other side of the plant, new orders are sent over only 2 times per day—at 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 12 hour 1.25 hour average wait Raw Materials Materials wait Production Manager Receptionist fax Sam’s Peanutbutter Purchasing request Local Farmer 2 hour average wait Local 1 day Farmer 1 hour 1 hour 1 hour 2 hours 1 hour 1 day Shipping De-shell Accounting Wash Inspection peanuts 6 hours Possible Solution 1.25 hour wait Weekly Raw Materials forecasted Production Manager fax Sam’s Peanutbutter Purchasing Local need Farmer 2 hour average wait Local 1 day Farmer 1 hour 1 hour 1 hour 2 hours Continuous 1 hour 2 hours Shipping Stock pile De-shell Accounting Wash Inspection inventory peanuts 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.” APICS—The 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 37- 57. 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.
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