Supply Chain Management

as
Competitive Advantage

Jakarta, Indonesia | March 2024

Business Challenges
 Market Landscape
Emerging Trends
….this will give rise to several key trends and renewed exploration into new
ways for key players to remain competitive and agile in adapting to
customers’ needs….
Key Drivers Trends

 Explore new ways to reduce overall cost platform

Deteriorating  Every activity along the value chain from cradle to grave is
Product Prices continuously evaluated to improve margins

 Time to market; time to serve

Shortening of  Need to be more agile to adapt to changing buyer needs
Product Life
 Utilize more information to make quick decisions to
Cycle
maximize the product potential
 Prefer “environmentally” friendly products and services
Environmental
 An all encompassing emphasis ranging from
Compliance &
Conservation manufacturing, logistics to sales

 A healthy balance sheet and solvent cash flow position

Increasing
is increasingly important
Shareholder
 Lowering inventory ownership exposure and reducing the
Value
fixed cost platform

Renewed  Channeling more resources toward focusing on the core

Focus on Core business and competencies of their organization
Business

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 Market Landscape
Implications on the Supply Chain
….which will have significant implications on your entire supply chain
from a value chain, service offerings, environmental and financial
treatment perspective.
Key Drivers Trends Implications

Deteriorating
 Increased need to outsource non-core activities
Product Prices  Collapsing intermediaries for a “one-stop” shop
solution, focusing on the
Shortening of  assimilation of more activities along the value
Product Life chain with core logistic services, and
Cycle
 integration of contract and service logistics
solutions for a streamline “end-to-end” supply
Environmental chain
Compliance
 Improving shareholder value through healthier
balance sheet and cash flow positions
Increasing
Shareholder  Moving towards 3PL inventory management
Value with ownership based on transactional pricing
 Deposition compliance to environmental
Renewed requirements and reduction in carbon emission
Focus on Core
Business Source: DHL Internal Analysis, Accenture Analysis

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Technology Advancement

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Hardware & Software Revolution

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What is Supply Chain
Management

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Supply Chain Management
The Supply Chain is the process that integrates, coordinates and controls the
movement of goods and materials from suppliers to the consumer (retailer) to the
final consumer

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 The Supply Chain’s Back Story
The concept of working with suppliers and customers is an old as commerce
itself, but modern idea of a “supply chain” is fairly recent ………
late 1950s to the pioneering research conducted by At some point in the early 1980s, the concepts
Jay Forrester and is colleagues at the Massachusetts of transportation, distribution, and materials
Institute of Technology (MIT) management began to merge into a single, all
•They began studying supply pipelines and encompassing term: supply chain management
channel interrelationships between suppliers
and customers
•The term apparently first appeared
•And identified a phenomenon that latter in print in1982 and is attributed to Keith
Oliver, a consultant with Booz Allen
came to be known as the bullwhip effect i.e.
inventories in the company’s pipeline (supply •In summary, a vertical strategy i.e.
chain) tend to fluctuate the further they are from the idea of compartmentalizing every
the ultimate end users department and group into unconnected
silos – was counterproductive to a company
•The idea of bullwhip effect remained largely ‘s long –term growth and health
a curiosity until the 1990s, when computer was
fast enough , powerful enough and affordable •In 2006, Porter’s in his work use is
enough that researchers could only gain an popular buzzwords of the day “unsiloing”
understanding of the bullwhip effect, but also refers to the concept of manager
design software to circumvent it. cooperating across departments and
functions, sharing resources and cross-
•Supply chain management as a discipline selling products to promote the entire
company’s bottom line
basically evolved out of Forrester’s quest to
understand and ultimately control these
increases in demand fluctuations

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Supply Chain Excellence
To achieve excellence in the supply chain organisations should:

• Develop a differentiated supply strategy that integrates short and long

term growth, liquidity and profitability
• Seek a partnership with customers and suppliers
• Maintain an ongoing investment programme including human
resources development
• Channel or product manage
• Outsource if it results in better results
• Think globally…build regionally…operate locally
• Continuously monitor their performance and address lacunas

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 Business Supply Chain
Implementation Strategy
Supply Chain is a combination of process, functions, activities, relationships,
and pathways along products, services, information and financial transaction
in and between enterprises

Inventory Strategy Transport Strategy

• Forecasting • Transport fundamentals
• Storage fundamentals Customer Service • Transport decisions
• Inventory decisions Goal
• Purchasing and supply decisions
•The product
• Storage decisions •Logistics Service
•Information System

Location Strategy
• Location decisions
• The network planning process

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 The Time Paradigm

Time is your biggest competitors ……

Choose time consumptions as a Time Paradigm Challenges

critical management and strategic
measure
• Quality problems, including physical and
• Use responsiveness to stay close to their intellectual rework necessitated by
customers’ dependence on them inadequate design and attention to
• Rapidly redirect their value –delivery systems to details
the most attractive customers forcing their • Structural difficulties, including
competitors toward the less attractive ones convoluted flows of product and
• Set the pace of business innovation in their information, functional handoffs, and
industries and sizes, scheduling practices and interrelated facilities located at different
authorization schedules sites
• The single greatest cause of inflexibility
and slow responsiveness, though, is
organizing for economies of scale and
control rather than for the fast throughput

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SCM Improve Shareholder Value

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Group Exercise
The phrase “Supply Chain Management” was first coined in the early 1980s to
describe the range of activities coordinated by an organization to produce and
manage supplies.

In your group identify and describe how an internal focus bounded by a single
organization and how they sourced and procured the supplies, managed their
internal inventory and moved goods onto their customers.

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Supply Chain Needs
Collaboration

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Consumer Products Logistics
Trends: Horizontal Collaboration
• Seasonality • Raw materials Consolidation • Inbound Logistics
• Flow Synchronization • Tractor/Trailer/Tanker Sharing • Empty Running
CHALLENGES • Fleet Maintenance • Combined Delivery • Multi-drop Distribution
• Reverse Logistics/Returns • New Market Development • Common Warehousing

Horizontal collaboration Customer drivers encouraging shippers to consider horizontal collaboration

Combining the supply chains Cutting transport costs
especially between production Cutting distribution costs
and retail to Enhancing customer service
• lowering costs Improving all-over efficiency Very important
Reducing empty running
• lowering carbon emissions Quite important
Improving delivery times
• Improve service level Cutting storage costs Important
• Improve visibility Cutting source costs
Somewhat
• Enter new markets Lowering carbon emissions
important
 See chart beside Being amongst industry leaders &
innovators Not important
After the Automotive industry CPG Cutting maintenance & operation costs
Sector is seen as the second Cutting reverse logistics costs
developed sector in terms of Reducing congestion
horizontal collaboration Enabling modal shift 0% 20% 40% 60% 80% 100%

BARRIERS
1. Fear of information disclosure to competitors (selected by 42% of
4. Difficulty finding appropriate partners (selected by 33% of shippers)
shippers)
5. Lack of industry case studies (selected by 28% of shippers)
2. No widespread acceptance of the idea (selected by 42% of shippers)
6. No internal knowledge on how to orchestrate this (selected by 28% of shippers)
3. Difficulty establishing relationships of trust (selected by 39% of shippers)

Source: Eye for Transport Study “European Supply Chain Horizontal Collaboration 2010”, Transport Intelligence, 2011

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Effective Collaboration

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Designing Effective Collaboration

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Consumer Products Logistics
Trends: Horizontal Collaboration
Collaboration – Example – Changes in supply in the future
As-Is Situation
As-is: 100% road transport
• Over longer-term diesel prices will rise
• Road Tax Impact increase
• CO2s taxation – Regulations
• Congestion increase (unreliable transit times)
• Trailer theft
• Short transit times
• Limited timeslots for lorry transport Urban stores

Retailer distribution center

Manufacturer A Warehouse A

Manufacturer B Warehouse B

Manufacturer C Warehouse C
Non-Urban stores
Manufacturer D Warehouse D

Manufacturer E Warehouse E

Manufacturer F Warehouse F

Manufacturer G Warehouse G

Manufacturer H warehouse H

Source: 2020 Future Supply Chain, Cap Gemini

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Consumer Products Logistics Trends:
Horizontal Collaboration
Collaboration – Example – Changes in supply in the future
To-Be Situation
To-be: Multi-modal transport sharing
• Less road KM
• Less personnel required
• 50%–80% less CO2 emissions
• Low cost, provided a critical mass
• Longer, but more reliable transit times
• Payload increase (24 tons  28tons per train)
Urban Stores

Manufacturer A

Manufacturer B Collaborative
City hub
Manufacturer C warehouse

Manufacturer D Non-Urban stores

Manufacturer E

Manufacturer F Collaborative Regional consolidation

Manufacturer G warehouse center

Manufacturer H

Source: 2020 Future Supply Chain, Cap Gemini

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Why is Supply Chain so
difficult to manage?

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The Drivers of Supply Chain
Complexity

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Supply Chain Challenges

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Competitive Advantage

A firm gains competitive advantage by performing these strategically

important activities more cheaply or better than its competitors

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 Supply Chain Problems
 Two researches looked at more than 800 announcement of supply chain problems
from public companies over 8 years period i.e. 1992-1999
 These problems included things like inventory write-offs, parts shortages, shipping delays and
the likes
 The researches then tracked the price of these companies’ stock one year before and two
years after the announcement
 Companies that experienced supply chain glitches over that time period saw their average
operating income drop 107%, return on sales fall 114% , return on assets decrease by 93%
and 7% lower sales growth, 11% higher costs and 14% increase in inventories
 The supply chain disruption lowers the level of operating performance for a company,
and the firms continue to perform at that lower level for the next couple of years

As companies try to make their supply chain more efficient, they take
away slack because it is expensive. The answer though, isn’t to throw
a lot money at your supply chain problem. It’s to get smarter at
Identifying and tracking key indicators that might indicate potential
glitches early on
Source: Vinod Snigh Georgia Institute & Kevin Hendrik University of Western Ontario

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 Case Study – Planning and Forecasting
 Cisco System Inc. – as the leading manufacturer of networking routers and switches,
was one of the most influential companies driving the dot-com boom of the late 1990s
 In the 1st Quarter of 2001, Cisco was riding high as any high-tech company had ever
ridden, having reported a profit of 40 quarters growth in a row.
 With the culture that literally knew nothing but growth, naturally enough Cisco’s
planning systems – which ever considered state of the art – kept forecasting more of
the same
 Unfortunately, the inevitable bursting of the dot-com bubble happened to coincide with
a severe slump in the telecom industry, both of which had a direct impact on Cisco’s
business

Cisco’s planning systems – which were considered sate of the art –

forecasting more of the same i.e. it didn’t seem to recognize “make
less this month than we did last month” as a viable plan

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 A Bias Against Good Plan!
 Cisco planning suffered from a common malady that afflicts many companies
– bias!
 It’s pattern of behaviour within a company where different departments focus
on their own individual priorities, often disregarding the overall health of the
company in favour of propping up their fiefdoms
 A good supply chain plan will fail every time, for instance, if employees are
being given incentives to avoid stock-outs, and a result keep building up
safety stock
 The challenge comes in meeting with major players in the industry Everyone
wants to win and everyone’s planning for success, so they add 30 percent

But not everyone wins. If you add up all the players in the
industry, you might double a realistic forecast

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 Case Study – Planning and Forecasting

 Cisco System Inc. – Ultimately in the wake of the economic downturn in 2001,
Cisco ended up with far more products than it could ever sell.
How much more?
 Cisco wrote off US$2.2 billion worth of unsaleable, unusable inventory
 and reported a US$2.6 billion quarterly loss
 Although Cisco had gained the reputation of being the supply chain poster child for
the new economy, it reacted to the supply chain glitch in a typically Old Economy
fashion
 Cisco laid off 8,500 employees

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 Collaborative Planning, Forecasting and
Replenishment [CPFR]
 Traditionally we conduct forecasting at a very high level, based on history
 To get truly collaborative relationship, it must get key stakeholders involved in the
forecasting and planning i.e. with its customers, functional support & operations,
suppliers, distributors and retailers, 3PL
 CPFR requires manufacturer and retailers to share point-of-sale data over the internet
in real time
 Real-time forecasting tool capable creating daily, short-term forecasts with 52 weeks
of live data
 CPFR program essentially integrate all those different departments and processes
into a central plan, and that strategy can be applied in any company and industry i.e.
manufacturing, procurement, logistics, distribution, customer ordering, planning and
scheduling

Key Performance Indicator [KPI] need to hold people accountable as

well as measure improvements in forecast accuracy
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Group Exercise 2
Mapping Supply Chain Processes

Every product or service has a supply chain and every activity in an

organization is part of a supply chain operation. Consequently, every
organization is part of an extensive supply chain network.

Therefore, the question that needs to be asked by today’s supply chain

professional is “how can I understand, manage and improve the
performance of my organization's supply chains?”

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VIDEO –DELL COMPUTER

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SUPPLY CHAIN SOLUTION
& DESIGN

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Moving Away From One-Dimensional Solution
Define and explore the idea of multiple supply chain by considering the criteria:
Products Supply Uncertainty and Demand Production
• Functional or • Uncertainty, demand strategy has to be • Mass production i.e., push
• Innovation created by marketing or lean
• Subject to different customer behaviours, • Unpredictable demand i.e.,
which in turn change their demand and pull or agile
supply situation

Consider the supply chains that exist in your industry:

• How difficult would it be to shift towards using multiple supply
chains to serve different customer segments?
• And how effective ?
• Where would you start?

Each requiring distinctly different supply chains, i.e. “ the root cause of the problems
plaguing many supply chains is a mismatch between situation and type of supply chain
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 Aligning Supply Chain Strategies with
Product Uncertainties
Demand predictable e.g. Respond opportunistically
(from historic off-take), but and manage yield. Focus
loose relationship does not on providing creative
necessitates an extreme Loose
Fully Flexible solutions to premium price
service level.
Focus on efficiency
Lean
With Customer
Relationship

Continuous
Replenishment Agile

Tight
Predictable demand, easily
Unplanned or unforeseen
managed through tight High Predictable of Low demand and sometimes
collaboration with customers
Focus on retention of customer
Demand loose relationship with
customers – almost always
relationship
demands an agile response
at higher cost-to-serve. Focus
“The four generic supply chain types” on speed and capacity

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Supply Chain Management
Case Study

2
Affordable Automobile 1908
"Any customer can have a car painted any colour that he wants, so long as it
is black.“ Henry Ford

Because black paint at the time was the least expensive

and dried the fastest, black paint allowed Ford to
produce a car in about 90 minutes – and satisfy the
nation's hunger for personal transportation at a
relatively inexpensive price.

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Toyota Supply Chain Management 4VL
Velocity, Visibility, Variability, Variety + Learning

The 4Vl principles of learning are homogenous throughout the Toyota

supply chain management processes to create a sort of "balance.
These principles consist of: variety, velocity, variability and visibility.
Variety allows a balance between market demands and operational
efficiency. Velocity of supply chain flows is the next key and it works
through all facets of the supply chain demonstrating the efficiency and
speed at which processes in the chain are achieved. Variability affects
individual processes and allows the supply chains to flow with low
levels of inventory which vice versa (high levels of inventory) can mask
waste. Finally Visibility can be considered the dock to which the other
principles are tied to, without visibility no measurement of success and
compliance can be determined or rewarded.

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Fully Flexible Supply Chain
Postponement is a business strategy that maximizes possible benefit
and minimizes Risk by delaying further investment into a product or
service until the last possible moment.

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Agile Supply Chain
Agile refers to the ability to react and adapt to the changes in demand
and supply situations in a supply chain.

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Supply Chain is a Business Process
Plan Source
• Two season Spring/Summer and Falls/Winter • 40 percent of the fabric from another of its subsidiary
• Commits 6 months in advance to only 15-25 percent • Almost half of these fabric un-dyed to allow faster
of season’s line and only lock in 50-60 of its line at the response to mid season
start of the season
• Work closely with dyestuff producer partly owned and
• If demand surge during mid season, Zara react get purchase 20 percent from it
them to stores while trend is still peaking
• The rest of the fabric comes from a range of 260 other
• All design are produce in-house a staff of 300 people, suppliers, none of which account more than 4 percent
design 40,000 a year of which 10,000 are selected for of Zara’s total production to minimize dependency and
production encourage maximum responsiveness

Deliver Make
• Own distribution center in Arteixo
• Zara manufactures approximately 50 percent of its
• Satellite centers in Argentina, Mexico and Brazil products on its own network of 22 Spanish factories
• Franchise system, Company owned store & JV • Uses subcontractors for all sewing operations
• Reduce cycle time for quick response system. • The other half of the products is produced by 400
outside suppliers, 70 percent of which in Europe and
• Shipped more often in smaller batches, new style can
the rest in Asia
hit stores twice per week
• Actually Zara source basic product in Asia
• Minimize unsold inventory to get rid off
• With it relatively large and stable orders, Zara is
• Double up production hit and raise price in its stores
preferred buyer

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Continuous Supply Chain

Continuous replenishment programs provide an opportunity for suppliers

and customers to work together to establish logistics processes that
create value for both parties.

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Another Example of Fashion Retailers
Approach

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Case Study – The three different
supply chain at Coca-Cola

Customer ‘Mom & Pop store’ ‘Supermarket” ‘Vendor refill machines’

Segments

Collaborative Lean Agile

Service
Stable, long-term
priorities Consistency Short lead-time
relationship
Highly reliable Flexibility
High levels of support
Regular deliveries Responsive service
Merchandising
Predictable Telemetry*
Help with billing

Regular representation On-call representation

Segment- Multi-level relationships Automatic order receipt Low stock vehicles with
Focused Proactive order Time definite deliveries on-road flexibility
activities Cost efficiency Quick response

Shared logistics •Distribution

Coordination Manufacturing
Infrastructure
Warehousing Marketing
(capable of multi
Inventory management Finance and administration
Response)
*Telemetry is the in situ collection of measurements or other data at remote points and
their automatic transmission to receiving equipment for monitoring.

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THANK YOU FOR
YOUR ATTENTION

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