CLO 3 - Contemporary (Best) Practices in SCM - Dr. Walid Smew

IET 4563: Supply Chain Strategy and Management
FACULTY: DR. WALID SMEW

CLO 3: Contemporary
(Best) Practices in SCM
2
CLO 3: Contemporary (Best) Practices in SCM
Objectives:
 To study the Contemporary (Best) Practices in Supply Chain Management (SCM).
Contemporary/Modern/Best practices used by a supply chain to become
‘best-in-class’.
 To evaluate the effectiveness of contemporary practices to improve supply chain
performance
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Want to be a "best-in-class" organization?

 Then follow the lead of highly successful companies and adopt
best practices in your own operation…
 That means adopting the philosophies, methods, and processes
that will make your organization "best in class“…
 Under pressure, to contain costs and produce results despite
challenging circumstances, you must transform rather than simply
improve your supply chain operations…
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How to build a best-
in-class supply chain
organization
https://www.youtube.com/watch?v=ylD901gv9UA
https://www.youtube.com/watch?v=sLJF9u-IoKQ
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At a glance…
 Establish a governing supply chain council
 Properly align and staff the supply chain organization
 Make technology work for you
 Establish alliances with key suppliers
 Engage in collaborative strategic sourcing
 Focus on total cost of ownership, not price
 Put contracts under the supply chain function
 Optimize company-owned inventory
 Establish appropriate levels of control and minimize risk
 Take green initiatives and social responsibility seriously
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1. Establish a governing supply chain council
 A governing council's purpose is to give direction and help align supply

chain strategy with the company's overall strategy.
 The council's membership should include:
 the leader of the supply chain organization
 corporate executives,
 business unit managers, and
 other influential company leaders.
 Ideally the council should hold regularly scheduled meetings.
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2. Properly align and staff the supply chain organization
 Some companies are best served by embedding proficient supply chain

management professionals in various business units.
 For others, a more centralized operation is most effective.
 Many of the progressive companies have adopted a hybrid approach that
combines a centralized strategy to gain consensus with decentralized
execution to improve service.
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3. Make technology work for you
 Too many companies select software they hope will make them more
efficient, and they structure their workflows and processes around that
chosen technology.
 Instead, they should first review the processes that need improvement,
and only then select the technology that best satisfies those process
needs.
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4. Establish alliances with key suppliers
 Best-in-class companies work closely with suppliers long after a deal has
been signed. In most circles today, this is called "supplier relationship
management."
 But that implies one-way communication (telling the supplier how to do it).
 Two-way communication, which requires both buyer and seller to jointly
manage the relationship, is more effective.
 A more appropriate term for this best practice might be "alliance
management," with representatives from both parties working together to
enhance the buyer/supplier relationship.
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The four primary objectives of an effective alliance management program

with key suppliers include:
 Provide a mechanism to ensure that the relationship stays healthy and

vibrant
 Create a platform for problem resolution
 Develop continuous improvement goals with the objective of achieving
value for both parties
 Ensure that performance measurement objectives are achieved
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5. Engage in collaborative strategic sourcing
 Strategic sourcing is a cornerstone of successful supply chain

management.
 But a collaborative strategic sourcing initiative produces even better

results.
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6. Focus on total cost of ownership (TCO), not price

“TCO represents taking a bigger picture look at what the product is and what its value is over time. TCO is
the purchase price of an asset plus the costs of operation. ”
 One benefit of strategic sourcing is that it shifts the focus from looking only at the purchase price
to understanding the total cost of owning or consuming a product or service.
 For significant spend areas, procurement teams at best-in-class companies are abandoning the
outmoded practice of receiving multiple bids and selecting a supplier simply on price.
 Instead, they consider many other factors that affect the total cost of ownership. This makes
good sense when you consider that acquisition costs account for only 25 to 40 percent of the
total cost for most products and services.
 The balance (and majority) of the total comprises operating, training, maintenance,
warehousing, environmental, quality, and transportation costs as well as the cost to salvage the
product's value later on.
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7. Put contracts under the supply chain function
 Purchasing and procurement teams often negotiate significant potential

savings during the sourcing process but never fully realize those savings.
 The reasons for this vary, but they often include a failure to communicate
contract terms to the affected organizations and a failure to monitor
contract compliance.
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8. Optimize company-owned inventory
 The global economic downturn means that more chief financial officers
have put inventory on their radar screens, and their financial teams are
constantly looking for new ways to improve the bottom line and reduce
working capital.
 Supply chain organizations should therefore constantly review their
inventory quantities and strive to keep them at an optimal level.
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9. Establish appropriate levels of control and minimize risk
 Supply chain management policies and procedures should follow an

appropriate sequence and structure, and it is important to review them
frequently (if not constantly) and bring them up to date.
 Keeping them realistic and easy to understand and follow will help to
ensure compliance.
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Methodologies to mitigate/ease risks:

 identifying all of the risk elements,
 determining the probability of the risk event occurring,
 assessing the dollar impact on the sourcing decision if the risk event
actually takes place, and
 prioritizing risks for monitoring and prevention.
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10. Take "green" initiatives and social responsibility seriously

 Reducing a supply chain's carbon footprint is no longer a "nice but not necessary"
practice.
 Why best-in-class companies "go green": buyers and consumers are taking
environmental impact into consideration when they choose suppliers.
 That is why organizations such as Dun & Bradstreet now produce reports that
evaluate "green" companies.
 More and more requests for proposal (RFPs) that ask suppliers and service
providers to provide information about their green initiatives are being observed
now a days.
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Questions?
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IET 4563: Supply Chain Strategy and Management

FACULTY: DR. WALID SMEW

Want to be a "best-in-class" organization?

1. Establish a governing supply chain council

 A governing council's purpose is to give direction and help align supply

 Ideally the council should hold regularly scheduled meetings.

2. Properly align and staff the supply chain organization

 Some companies are best served by embedding proficient supply chain

3. Make technology work for you

4. Establish alliances with key suppliers

The four primary objectives of an effective alliance management program

 Provide a mechanism to ensure that the relationship stays healthy and

5. Engage in collaborative strategic sourcing

 Strategic sourcing is a cornerstone of successful supply chain

 But a collaborative strategic sourcing initiative produces even better

6. Focus on total cost of ownership (TCO), not price

7. Put contracts under the supply chain function

 Purchasing and procurement teams often negotiate significant potential

8. Optimize company-owned inventory

9. Establish appropriate levels of control and minimize risk

 Supply chain management policies and procedures should follow an

Methodologies to mitigate/ease risks:

10. Take "green" initiatives and social responsibility seriously

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