Supply Chain Management I

Supply Chain Processes

Eight Key Processes

Well, we have talked about generic processes and particularly those involved in supply chain
management. I want to outline here the actual processes that are required to make a supply chain work.
In the MSU environment, we characterize eight processes as being necessary to operationalize a whole
supply chain, and this lists them and on the right-hand side provides descriptions of each of them. I'm
going to just provide an overview of what the major processes are. And this is a change from how others
perhaps have viewed supply chain which is more of a functional orientation looking at transportation,
looking at inventory, looking at production. Here, we want to emphasize the fact that the process is
really what has achieved the activity.

Demand Planning Responsiveness

So we’ll start off with the demand planning responsiveness process which are the activities that balance
demand and demand management in terms of forecasting to figure out what we need to sell, and
planning and purchasing, figuring out what we have to buy to support what we want to sell. So in that
sense, it’s demand planning or demand and supply balancing. And this is a major effort within supply
chain organizations to balance the input and output of a process, to make sure we have the raw
materials and the production capacity to manufacture finished goods and then be able to deliver it to
the consumer.

Customer Relationship Collaboration

The second process is customer relationship collaboration. This process is a relationship with the
customers involving marketing and sales and supply chain. So we have to work together to make sure
that when marketing has a strategy they want to put into place such as a promotion or a product
change, that they define what that strategy is, what the impact is likely to be on sales, and sales works
with the customer to determine what the delivery requirements are going to be, then also works with

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the supply chain organization within the firm to make sure that we’ve produced and have available that
product.

So that customer relationship collaboration is critical for understanding what the demand is going to be,
what the timing is going to be, what products are necessary, and then be able to communicate that to
the rest of the supply chain organization.

Order Fulfillment/Service Delivery

The third step is order fulfillment/service delivery. This one’s looking at what I do with the product and
actually delivering it. Now I've established that there’s demand for it, I've established that we need to
make it; now I'm actually going to deliver it. And that means going out, seeking warehousing capacity or
transportation capacity or both, and being able to support delivery of that product to the consumer.

Product/Service Development Launch

In some cases, I also want to deal with a product service development launch. Well, one may ask, what’s
the difference between this and the previous one?

Many activities, in fact, in some organizations, 25 to 50 percent of their activities are involved in
introducing new products. We have old products we deal with on an ongoing basis, and those are fairly
standardized; we understand how to do those. The new products are ones that have unique
requirements, maybe have quicker delivery requirements or maybe have some custom capacity
constraints I have to have or custom raw materials.

So we separate out the order fulfillment process, which is characteristic of more the efficient supply
chain and the new product development supply chain, which is characteristic of the innovative supply
chain. Although they in many cases involve similar activities, the timing and the capacity constraints are
often different.

Manufacturing Customization

The fifth item is– the fifth process is manufacturing customization. This is the manufacturing process,
the plant and production where we have the equipment that takes the raw materials, changes the form,
customizes the product, perhaps, and then packages it for delivery to the customer. This is what

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typically occurs in manufacturing plants although it could occur in retail stores through customization of
paint colors or of printing on cakes, as we provided examples of.

Supplier Relationship Collaboration

The sixth one is the supplier relationship collaboration. In this particular case, we’re looking at the
relationship with suppliers, and a critical requirement for supply chain is working with suppliers to make
sure they have a good visibility for the capacity, or the volumes that you would require, and also for the
innovation that the suppliers might provide for the supply chain. So this is working hand-to-hand with
the suppliers, not trying to keep them in the dark, if you will, but actually keep them as much in the loop
as possible to understand the future forecast, the future production plans, and the future changes in the
product line.

So those six are what we would see as the processes for most supply chains. The last two are unique but
by no means are they not common.

Life Cycle Support

The life cycle support is critical for, particularly, durable-type items such as automobiles, agricultural
equipment, military equipment. In this case, I want to make sure that the products I have in the field
have the repair items that are needed to keep those products moving, whether it’s in the military
situation where I have tires for Hummers, I have to make the decision of how many tires do I have in the
field to support the Hummers. In the automotive situation, I want to make sure I have enough
transmissions in place so that when an individual comes in and says, I need a transmission for my car,
that it’s there or at least relatively easily accessible. So life cycle support is increasingly important in
making sure the extended life of a product.

Reverse Logistics

And the last one is returns logistics, which is dealing with recycling. Increasingly, we’re being asked, in
some reasons driven by the government, to recycle more and more products. Whether it’s beverage
containers for us in Michigan, whether it’s car components or electronic components, or furniture. All
those are examples of products that we move out, we use for a number of years, and historically what
we’ve done is thrown them in a landfill when they’re not useable. Well, we’re being asked, requested,

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and in some cases, required to deal with recycling those products to make sure we don’t waste products
or put in a landfill what could be easily reused in a supply chain.

So the key requirement of that, a key challenge in that particular process, is to deal with reverse
logistics, to be able to take those products from the field, whether it’s the office, whether it’s the
university, whether it’s the farm, and being able to take those materials back, break them down, and
then put the components back in the recycling process.

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