Basics of Supply

Chain Management

ASQ Customer Supplier Division

2007 Symposium
Presented by: Herb Shields
President, HCS Consulting

Instructor Bio

• As President of HCS Consulting since 2000, Herb has delivered improved results for clients in their
purchasing and inventory management activities. Working with client personnel, Herb has reduced the cost of
purchased materials and services, improved inventory turns and customer service, and enhanced peoples’
capabilities with customized training programs. Satisfied clients include manufacturers and distributors in
industrial products, rail equipment maintenance, dyes and pigments, personal care and household products,
pharmaceuticals, and food products.

• In the field of education, Herb’s clients include the City Colleges of Chicago, the Chicago Public Schools,
Northern Illinois University, the State of Illinois, Moraine Valley Community College, and the Warehousing
Education and Research Council. His work includes curriculum development and teacher training as well as
customized lectures and written materials, all related to logistics and supply chain management.

• Herb has delivered numerous presentations and workshops to industry and professional associations. He
has been designated as a Certified Management Consultant by the Institute of Management Consultants and
serves on the Chicago chapter Board. Herb serves on the Board of the Midwest Society of Professional
Consultants. Herb is an Associate Member of Vistage, an international organization of CEO’s. Herb serves
on the Board of the Greater West Town Training Partnership, a not-for-profit organization providing industrial
training to inner city people. Herb teaches Purchasing at the Illinois Institute of Technology and has lectured
at IIT’s Graduate School of Business on the subject of inventory management. Herb publishes his own e-
newsletter and has been a contributing writer for many other publications.
• Herb has 30+ years of experience as an operations executive in capital equipment, automotive, electrical
machinery, and consumer products companies. As VP of Materials Management at Helene Curtis, Herb led
the supply chain organization which helped the corporation win Vendor of the Year awards from Wal-Mart,
Target, etc. Herb has led global sourcing teams in a variety of commodity areas. He has traveled extensively
in Europe and Asia for companies including Unilever and Danly Machine.
• Herb has a BS in Electrical Engineering from Clarkson University and did graduate work in business at
Bowling Green State University.
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 When you hear

“Supply Chain Basics”

What comes to mind?

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Your Supply Chain

Your
Suppliers Customers
Company

Products

Information

Funds
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End to End Process

• Right product

• Right quality

• Right cost

• Right time
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New Definition

Supply Chain

Is

People
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What Determines Effectiveness?

Collaboration

The ability of people

to work together

across departmental

and company boundaries

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What You Can Take Away

• How do I ensure ideas

get implemented?

• How do I bring other

people with me?

• How do I make my
supply chain process
more effective?
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 Your 2007 Challenges
• Implementation of lean manufacturing
with key suppliers
• Monitoring and ensuring suppliers meet
quality and delivery requirements
• Ensuring quality when dealing with off-
shore suppliers
• Finding the right suppliers

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Finding the Right Suppliers

• Company strategy

• Supply chain
strategy

• Commodity plans

• Sourcing teams
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Company Strategy

• Customers and markets

• New products

• Core competencies

• Organization structure

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Supply Chain Strategy

• Customer service

• Manufacturing /
outsourcing

• Strategic sourcing

• Transportation, distribution, and

logistics
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 Strategic Sourcing

Alignment of

Supply Chain Strategy

with Company Strategy

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Risk/Value Matrix
High Bottleneck Strategic (critical)

RISK
Routine Leverage

Low
Low VALUE High
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 Risk/Value Matrix
Material Classification
High Bottleneck Strategic (critical)
• Low spend • Significant P&L impact
• No customer impact • Key customer benefit
• Unique specs • Limited supply base

RISK
Routine Leverage
• Industry standard spec • High COGS
• Many producers • Does not differentiate
• Low cost to switch • Many producers
Low
Low VALUE High
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Risk/Value Matrix
Specific Actions
High Bottleneck Strategic (critical)
• Contingency Plans • Process improvement
• Develop competition • Sr. mgmt. involved
• Increase technical • Increase market
understanding knowledge
RISK
Routine Leverage
• Minimize admin cost • Active negotiation and
• Re-engineer out sourcing
• Explore new • Watch market changes
Low methods
Low VALUE High
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 Risk/Value Matrix Strategic
Approaches
High
Bottleneck Strategic (critical)
• Ensure supply • Develop partnerships
availability • Joint development
• Develop alternates programs
RISK
Routine Leverage
• Simplify acquisition • Maximize buying
process power

Low
Low VALUE High
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Commodity Plans

• Short term – 1 to 2 years

• Focused on
–How many/which suppliers
–Total cost
–Material availability
–Supplier quality

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Sourcing Teams

• Commodity focused

• Cross functional

• Empowered

• Global

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How to Work Effectively with

Suppliers

Build Share
Trust Information

Develop
Measure
Joint
Results
Programs

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 Building Trust

• Share strategies

• Open books

• Share resources

• Joint problem solving

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Traditional
Supplier Seller-Buyer Customer
Relationship
R&

Ma ng
R&

ti
D

rk
e ti r ke
Man ng Ma g
ufa a c turin
ctu
ring Ma nuf
Accountin g
g Accountin
Sales Purchasing
Finance Finance
ry Re g
g ulato ulat
Re ory
y Qu
ualit en
t Ma alit
Q m na y
a ge ge
n m
Ma en
t
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Partnering Relationship
R&
D D
R& g Ma
e tin rke
Supplier Ma
rk tin Customer
g
c tu ring Man
ufac
ufa
Man ting
tur
Accoun ing
A c c o un ting
Sales Purchasing
Financ e
e Financ
Re g ry
ulat g u lato
ory Re
Qu ty
M
ali
ty uali ent
an Q
ag g em
em a
en an
M
t
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Partnerships

• What is a partner?

• Do we need partners?

• How many supplier partners

can we have?

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Supply Chain Measures

• Total cost
• Customer satisfaction
• Inventory velocity
• Quality of
product/service

• “Greenness”

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Optimizing Your
Supply Chain

• Most companies
provide the resources

• Most companies
have good people

• Most
software systems work

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Differentiators

• Group/team functionality

• Relationship building skills

• Communication skills

• Training/development

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Thank You

For more information, visit:

www.HShieldsConsulting.com

- or -

e-mail Herb Shields at

hcsconsnb@aol.com

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