SBBARETAI

LMANAGEMENTUNI
T-I
V

Quest
ion1Def
inesuppl
ychai
nmanagementandact
ivi
ti
est
hatar
edeal
twi
thsuppl
ychai
n?

Ans:Suppl ychai
nmanagementcanbesi mpl
eorcomplex,butallsupplychai
nscontai
nsimil
arel
ementsandar emanagedi na
si
milarway.Asuppl ychai
nisasy st
em ofor
gani
zat
ions,people,technol
ogy,act
ivi
ti
es,i
nfor
mationandresourcesinvolv
edi n
mov i
ngapr oductorservi
cefr
om suppl
i
ertocust
omer .Ontheot herhandSupplychainsrefert
othemul t
ipl
epr ocessesthat
connectcustomersandsuppl
i
ers.

Thesuppl
ychainr epresentstheflowofmateri
als,
inf
ormat
ion,andfinancesastheymoveinapr ocessfr
om suppl
iert
o
manuf acturertowholesalertor etai
lertoconsumer.Thesupplychainlinkssupplieranduseror
ganizati
onsandincludesall
acti
vit
iesi nvol
vedint hepr oductionanddel iv
eryofgoodsandser vi
ces,includi
ngplanni
ngandf orecasti
ng,pr
ocurement,
production/oper
ati
ons,distri
buti
on, t
ransport
ati
on,
ordermanagement,andcust omerservi
ce.

Suppl
ychai
nmanagement(
SCM)

Suppl
ychai
nmanagementi sthemanagementofanetworkofint
erconnectedbusinessesi
nvol
vedintheprov
isionof
productandservi
cepackagesrequi
redbytheendcust
omersinasuppl
ychain.Supplychainmanagementspansallmov ement
andstorageofrawmateri
als,
work-i
n-pr
ocessi
nvent
ory
,andf
ini
shedgoodsfrom pointofor
igintopoi
ntofconsumpt
ion.

Ont heotherhandSuppl ychai

nmanagementast he"design,pl
anni
ng,execut
ion,contr
ol,andmoni
tori
ngofsupply
chainact
ivi
ti
eswitht heobject
iveofcreat
ingnetval
ue,bui
ldi
ngacompet i
ti
veinf
rastr
uctur
e,leveragi
ngwor
ldwidel
ogi
sti
cs,
synchr
oni
zingsupplywithdemandandmeasur i
ngperf
ormancegloball
y.
"

Suppl
ychai
nmanagementdeal
swi
tht
hef
oll
owi
ngact
ivi
ti
es

 Cust
omerr
elat
ionshi
pmanagement
 Cust
omerser
vicemanagement
 Demandmanagement
 Or
derf
ulf
il
lment
 Manuf
act
uri
ngf
lowmanagement
 Suppl
i
err
elat
ionshi
pmanagement
 Pr
oductdev
elopmentandcommer
cial
i
zat
ion
 Ret
urnsmanagement

Quest
ion2Di
scussesbr
ief
lyaboutSuppl
ychai
nper
for
mance?

Ans:Suppl ychai nmanagement( SCM)hasbeenamaj orcomponentofcompet i

ti
vest rategyt oenhanceor ganizati
onal
productivi
tyandprof i
tabil
ity.Thel i
ter atur
eonSCM t hatdeal swithstr
ategiesandt echnologiesforeffectiv
elymanagi ngasuppl y
chainisqui t
ev ast.Inrecenty ears,or ganizati
onalper f
or mancemeasur ementandmet ri
cshav ereceivedmuchat tentionf r
om
researchersandpr actit
ioners.Ther ol eoft hesemeasur esandmet ri
csint hesuccessofanor ganizati
oncannotbeov er
stated
becauset heyaf f
ectst rategic,tacticalandoper at
ionalpl anningandcont rol.Perf
ormancemeasur ementandmet ricshav ean
i
mpor tantroletopl ayi nset ti
ngobj ectiv
es,ev al
uatingper formance,anddet er
miningfuturecour sesofact i
ons.Per f
ormance
measur ementandmet ri
csper t
ainingt oSCM hav enotr eceivedadequat eat t
entionfrom r esearchersorpr act
itioners.We
developedaf ramewor ktopr omot eabet t
erunder st
andi ngoft heimportanceofSCM per formancemeasur ementandmet ri
cs.
Usingt hecurrentlit
eratureandt her esult
sofanempi ricalstudyofselectedBr it
ishcompani es,wedev elopedthef ramewor k
presentedherein,i
nhopest hati twoul dsti
mul at
emor einteresti
nthi
simpor t
antarea.

Suppl
yChai
nPer
for
manceMeasur
es
Suppl
ychai
nper
for
mancemeasur
escanbecl
assi
fi
edbr
oadl
yint
otwocat
egor
iesi
.equal
i
tat
ivemeasur
es(
suchas

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SBBARETAI
LMANAGEMENTUNI
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customersat i
sfact
ion and pr oductqualit
y)and quantit
ati
vemeasur es( such asorder-
to-
deli
veryl
ead ti
me,suppl ychai n
responset i
me,f l
exibi
li
ty,resour ceuti
l
izati
on,del
iv
er yperformance,et c.
).In ourst
udyweconsi deronlyt hequantitat
ive
perfor
mancemeasur es.Impr ovingsupplychainperformancer equi
resamul ti
-di
mensionalstr
ategythataddresseshow the
organizat
ion wi
llser v
ice diverse cust
omerneeds.Whi l
et he performance measurements may be similar,the speci
fic
perfor
mancegoal sofeachsegmentmaybequi tedi
fferent
.

St
rat
egyorcomponent
sofSCM

 Pl
anningandcont rol
 Workst ructure
 Organizationstructure
 Productf l
owf acil
itystructure
 I
nformat ionflowf aci
li
tystr uct
ure
 Managementmet hods
 Powerandl eadershipst r
uct ur
e
 Ri
skandr ewardstructure
 Cult
ureandat ti
tude

Quest
ion3:
Whatar
etheFunct
ionsofSuppl
ychai
nmanagement(
SCM)?

 Dail
yproducti
onanddi
str
ibut
ionpl
anning,i
ncludi
ngall
nodesinthesupplychain.
 Product
ionschedul
i
ngforeachmanufacturi
ngfaci
li
tyi
nthesupplychai
n(mi nutebyminut
e).
 Demandpl anni
ngandf
orecasti
ng,
coordinati
ngthedemandforecastofallcustomer
sandshari
ngt
hef
orecastwi
thal
l
suppliers.
 Sourci ngplanning, includingcur rentinventoryandf orecastdemand, i
ncol l
aborati
onwi t
hallsuppl
i
ers.
 Inboundoper ations, incl
udingt ransportati
onf rom suppl i
ersandr eceiv
inginventory.
 Product ionoper ations, i
ncludingt heconsumpt ionofmat eri
alsandf l
owoff ini
shedgoods.
 Outboundoper ati
ons, i
ncludingal lf
ulfi
ll
mentact i
vi
ties,war ehousingandt r
anspor t
ati
ontocustomers.
 Orderpr omising,account i
ngf oral lconstraintsint hesuppl ychain,incl
udingal lsuppl
i
ers,manufact
uringfaci
li
ti
es,
dist
ribut i
oncent ers, andot hercust omer s.
 From pr oductionl ev eltosuppl ylevelaccount ingalltransitdamagecases&ar rangetosettl
ementatcustomerlev
elby
maint ainingcompanyl osst hroughi nsurancecompany .

Benef
it
sofSCM

 Reduceuncer taintyalongwithchai
n
 Maintainproperi nventor
yleveli
nthechai
n
 Mini
mi zedelay
 El
iminat eunplannedact i
vit
y
 Provi
degoodcust omerservice
 Maximi zebrandname

Quest
ion3(
b)Whatar
etheObj
ect
ivesofSuppl
ychai SCM)
nmanagement( ?

 LowerI
nvent
oryI
nvest
ment
:Consol
i
dat
edv
iew ofi
nvent
oryi
ncl
udi
ngt
heneedateachpoi
ntofsal
efaci
l
itat
es
opt
imum i
nvent
oryateachpoi
ntofsal
e.Al
soensur
est
hatst
ockcanbet
ransf
err
edt
othepoi
ntofsal
eatshor
tnot
ice.

PRESI
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SBBARETAI
LMANAGEMENTUNI
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Thi
slower
sinv
est
ment&i
ncr
easest
her
etur
n

 I
ncr
easeROI
:Ident
if
ynon-
mov
ingst
ockacr
osst
hechai
n,t
ransf
ert
hem t
owher
etheyar
esel
l
ingand/
orr
etur
nthem.
Al
so,i
dent
if
yandr
etur
nnon-
mov
ingst
ockatpur
chasev
aluet
oav
oidanyl
ossonnon-
mov
ingst
ockr
etur
n.Such
ef
fect
ivest
ockt
ransf
erscoupl
edwi
thpur
chaser
etur
nsi
ncr
easet
heROI
.
 LowerPi
l
fer
age:Cont
inuousst
ockaudi
tbasedonABCcl
assi
fi
cat
ionofi
temsi
nst
eadofper
iodi
cful
lst
ockv
eri
fi
cat
ion
hel
psy
oui
dent
if
ymi
smat
chbet
weenphy
sicalst
ock&sy
stem st
ockear
ly.Suchcont
inuousst
ockaudi
thel
plower
pi
l
fer
age.
 BestPur
chase:Asy
oupooly
ourr
equi
rement
s,t
hev
olumeofpur
chasegoesup.Thi
sal
l
owsy
oubet
ternegot
iat
ing
l
ever
age.Combi
ningt
hiswi
tht
heanal
ysi
sofy
oursal
es,
pur
chaseandi
nvent
orydat
a,al
l
owsy
ousour
cepr
oduct
sfr
om
t
hecheapestandbest
.
 LowerOper
ati
ngCost:Opt
imalut
il
izat
ionofmanpower
,opt
imalut
il
izat
ionofst
orespace,ef
fect
ivei
nvent
ory
managementet
c.l
eadst
oloweroper
ati
ngcost
s
 Cent
ral
i
zedFi
nanci
alCont
rol
:Asy
ourbusi
nessmov
est
oamodelofdeposi
ti
ngt
heent
ir
erecei
pts/
col
l
ect
ionswi
th
t
heHQsuppl
ychai
nandal
lpay
ment
sar
emadef
rom HQ,
yougetbet
terf
inanci
alcont
rol
overy
ourbusi
ness.
 Fr
audPr
event
ion:Real
-t
ime/Per
iodi
cupl
oadofpoi
ntofsal
edat
atot
heHQpr
event
sanyt
amper
ingwi
thdat
aatt
he
poi
ntofsal
e.Thi
sbui
l
dsbet
terawar
enessamongpoi
ntofsal
est
affandpr
eventf
raud
 I
tem Nor
mal
i
zat
ion:Thi
shel
psi
npr
ovi
dingast
andar
dized,
compl
eteandaccur
atedat
aacr
osst
hei
tem mast
erf
il
esof
bot
hther
etai
l
erandwhol
esal
er.I
tem nor
mal
i
zat
ionhel
pst
oanal
yzet
hedat
amor
eaccur
atel
yandpr
ovi
dehi
ghqual
i
ty
r
epor
ts.

Quest
ion4Whatar
ethev
ari
ousSuppl
yChai
ndr
iverandmet
ri
cs?

Ans:Thepur poseof'Suppl
yChai ndri
veristoprov i
deopt i
mum coor dinati
onofallt
asksper f
ormedbyt hev ar
ioussupplychai
n
partners,
whi l
stconst
antl
ytakingintoaccountchangesinf r
amewor kcondi ti
ons,sothateveryli
nki nthechainisequall
yableto
beart heload.Asnothi
ngismor econstantthanchangei tself
,onemaj orchal l
engel
iesinensur i
ngt hattheabili
tyoft
hesupply
chaint ofuncti
oncorr
ectl
yismai ntai
nedataconsi st
entlyhighlevel
,regardlessofanyshif
tinci r
cumst ances.Wear ejusti
fi
abl
y
proudoft heimpactoursoluti
onshav emadei nev ery
dayuse,secur ing'SupplyChaindrivers'forgloballeadersinconsumer
goodsmanuf actur
eandregularl
ydemonst r
ati
ngtheiradaptabil
it
yundert esti
ngconditi
ons.

Dr
iver
sofSuppl
yChai
n

Themaj
ordr
iverofSuppl
ychai
nper
for
manceconsi
stsoft
hreel
ogi
sti
cal
dri
ver
s&t
hreecr
oss-
funct
ional
dri
ver
s.

Logi
sti
caldr
iver
s:

 Facil
it
ies
 I
nv ent
ory
 Transport
ati
on

Cr
oss-
funct
ionaldr
iver
s:

 I
nformati
on
 Sourci
ng
 Pri
cing

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SBBARETAI
LMANAGEMENTUNI
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Company’
ssuppl
ychai
nachi
evest
hebal
ancebet
weenr
esponsi
veness&ef
fi
ciencyt
hatbestmeet
stheneedsoft
hecompany
compet
it
ivest
rat
egy
.

Quest
ion5)a)Whatdoy
oumeanbyDemandmanagement
?Whatar
ethev
ari
oust
ypeoff
orecast
?

Def
ini
ti
on.

Focusedeffor
tst
oest
imat
eandmanagecust
omer
s'demand,wi
tht
hei
ntent
ionofusi
ngt
hisi
nfor
mat
iont
oshapeoper
ati
ng
deci
sions.

Theessenceofdemandmanagementi
stof
urthertheabi
li
tyoffi
rmsthr
oughoutthesuppl
ychain-part
icul
arl
ymanuf
act
uri
ng
thr
oughthecustomer-t
ocol
l
aborat
eonact
ivi
ti
esrel
atedt
ot hef
lowsofpr
oduct,
Servi
ces,i
nfor
mati
on,andcapit
al.

SomeConsi
der
ati
onf
orDemandManagement
.

 Gat
her
ingandanal
yzi
ngknowl
edgeaboutconsumer
s,t
hei
rpr
obl
ems,
andt
hei
runmetneeds.

 I
dent
if
yingpar
tner
stoper
for
mthef
unct
ionsneededi
nthedemandchai
n.

 Mov
ingt
hef
unct
ionst
hatneedt
obedonet
othechannel
membert
hatcanper
for
mthem mostef
fect
ivel
yandef
fi
cient
ly.

 Shar
ingwit
hothersupplychai
nmember
sknowl
edgeaboutconsumer
sandcust
omer
s,av
ail
abl
etechnol
ogy
,andl
ogi
sti
cs
chal
l
engesandopportuni
ti
es.

 Dev
elopi
ngpr
oduct
sandser
vicest
hatsol
vecust
omer
s'pr
obl
ems.

 Developi
ngandexecut
ingthebestl
ogi
sti
cs,t
ranspor
tat
ion,anddi
str
ibut
ionmet
hodst
odel
i
verpr
oduct
sandser
vicest
o
consumersi
nthedesir
edformat.

Ty
pesofFor
ecast
ing.

Long-t
ermforecast
susual
l
ycovermor
ethanthr
eey ear
sandareusedforlongrangeplanni
ngandst
rat
egici
ssues.These
natur
all
ywillbedonei
nbroadi
tems-sal
esbyproductli
neordiv
isi
on,t
hroughputcapaci
tybyt
onperperi
odordoll
arsper
peri
od,andsoon.

Midrangefor
ecast
s-intheone-tothree-
yearrange-addressbudgeti
ngissuesandsal
espl
ans.The demandf
orecast
ingwi
l
l
ver
yl i
kel
ybeindoll
arsandnow,
perhaps,atthelevel
ofproductf
amilyorproductl
i
ne.

Shor
t-t
ermf or
ecastsar
emosti mpor t
antf
ortheoper
ati
onall
ogi
sti
csplanni
ngprocess.Theypredi
ctdemandint
othesever
al
monthsaheadandar ef
ocusi
ngincreasi
ngl
yonshor
terti
meint
erv
als.Thesefor
ecastsareneededinuni
ts,
byact
uali
temst
obe
shi
pped,andforfi
nit
eperi
odsofti
me.

Quest
ion5(
b)Wr
it
eashor
tnot
eonCust
omerser
vice?

Def
ini
ti
on

1.Cust
omerSer
viceasanact
ivi
ty.

Thislevelt
reat
scustomerservi
ceasapar ti
culartaskthatafir
m mustaccompli
sht osati
sfythe customer'
sneeds.Or der
processi
ng,bi
ll
i
ngandinvoi
cing,
productr
eturns,and cl
aimshandl
ingar
eal
ltypi
calexamplesofthislev
elofcustomerservi
ce.
Customerservi
cedepart
ment,whichbasi
call
yhandlecustomerprobl
emsandcompl ai
ns,al
sorepresentthi
slevelofcust
omer
servi
ce.

PRESI
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SBBARETAI
LMANAGEMENTUNI
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2.Cust
omerser
viceasper
for
mancemeasur
es.

Thislevelemphasi
zescust
omerservicei
ntermsofspecif
icper
formancemeasur
es,suchast
heper
cent
ageoforder
sinterms
ofspecifi
cperfor
mancemeasures,suchastheper
centageoforder
sdeli
ver
edontimeandcompl
eteandthenumberoforder
s
processedwit
hinaccept
abl
eti
mel i
mi t
s.

3.Cust
omerSer
viceasaphi
l
osophy
.

Thi
sl ev
elel
evatescust
omerservi
cetoafi
rm-wi
decommi tmentt
oprov
idi
ngcustomersat
isf
act
ionthr
oughsuper
iorcust
omer
ser
vice.Thi
sview ofcust
omerser
vicei
senti
rel
yconsi
stentwithmanyfi
rms'contempor
aryemphasi
sonqualit
yandquali
ty
management.

8Rul
esForGoodCust
omerSer
vice

Goodcustomerser
viceistheli
febl
oodofanybusi
ness.Youcanofferpromot
ionsandsl
ashpri
cestobr
inginasmanynew
cust
omersasyouwant ,butunl
essyoucangetsomeofthosecust
omer stocomeback,y
ourbusi
nesswon'
tbeprof
it
abl
efor
l
ong.

Goodcust omerser vi
ceisal laboutbri
ngi
ngcust
omersback.Andaboutsendi
ngthem awayhappy-happyenoughtopass
posi
tivefeedbackabouty ourbusinessal
ongt
oother
s,whomayt hent
ryt
heproductorser
vicey
ouoff
erfort
hemselv
esandin
thei
rturnbecomer epeatcustomer s.

I
fy ou'r
eagoodsal esper
son,youcansel lanythi
ngt oany oneonce.Buti twil
lbey ourapproachtocustomerservi
cethat
determineswhet
herornotyou’
l
leverbeabletosellthatper
sonany thingel
se.Theessenceofgoodcustomerser
vicei
sforming
arelati
onshi
pwit
hcustomers–arelati
onshipthatt
hatindiv
idualcustomerfeel
sthathewouldli
ketopursue.

How doy ougoaboutf or

mi ngsuchar el
ati
onship?Byr emember i
ngt heonetruesecr
etofgoodcustomerservi
ceandact i
ng
accor
dingly
;"Youwil
lbejudgedbywhaty oudo, notwhaty ousay."
Iknowt hi
svergesontheki
ndofstatementt
hat'
softenseen
onasampl er,butpr
ovidi
nggoodcust omerserviceISasi mplething.Ify
out r
ulywanttohav
egoodcust omerserv
ice,al
lyou
havetodoisensurethatyourbusi
nessconsist
entlydoesthesethi
ngs:

1)Answeryourphone.Getcal
lfor
wardi
ng.Oranansweri
ngserv
ice.Hi
restaffi
fyouneedto.Butmakesur
ethatsomeonei
s
pi
cki
ngupthephonewhensomeonecal lsyourbusi
ness.(
Noti
ceIsay" someone"
.Peoplewhocallwanttotal
ktoaliv
e
per
son,
notafake"
recor
dedrobot
".
)Formoreonansweringt
hephone,seeHowt oAnswerthePhonePr
operl
y.

2)Don'
tmakepr
omi
sesunl
essy
ouwi
l
lkeept
hem.

Notplantokeept hem.Wi l
lkeept
hem.Reliabi
li
tyi
soneoft hekeyst
oanygoodr el
ationshi
p,andgoodcustomerser
vicei
sno
excepti
on.I
fy ousay ,“Yournew bedroom fur
nit
urewi l
lbedeli
veredonTuesday ”
,makesur eitisdeli
veredonTuesday
.
Otherwi
se,don'tsayit.Thesamer uleappli
estoclientappoi
ntments,deadl
i
nes,etc.
.Thinkbefor
eyougi v
eanypr omi
se-
becausenothi
ngannoy scustomersmor ethanabrokenone.

3)Li
stent
oyourcust
omer
s.

Isthereanythi
ngmor eexasperat
ingthantel
li
ngsomeonewhaty ouwantorwhaty ourprobl
em i
sandthendiscov
eri
ngthat
thatpersonhasn'tbeenpayingattent
ionandneedstohav ei
texplai
nedagai
n?Fr
om acust omer'
spointofv
iew,Idoubtit
.
Cant hesalespitchesandtheproductbabble.Letyourcust
omert al
kandshow himt hatyouar
eli
steni
ngbymaki ngthe
appropri
ateresponses,
suchassuggest i
nghowt osol
vetheprobl
em.

4)Deal
wit
hcompl
aint
s.

Noonel
i
keshear
ingcompl
aint
s,andmanyofushavedevelopedar
efl
exshr
ug,sayi
ng,"
Youcan'
tpl
easeal
lthepeopleal
lthe
t
ime"
.Maybenot
,buti
fyougiv
et hecompl
ainty
ourat
tent
ion,youmaybeabletopl
easethi
sonepersont
hisonetime-and

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posi
ti
ony
ourbusi
nesst
oreapt
hebenef
it
sofgoodcust
omerser
vice.

5)Behel
pful
-ev
eni
fther
e'snoi
mmedi
atepr
ofi
tini
t.

Theot herdayIpoppedint
oal ocalwatchshopbecauseIhadlostt
hesmallpiecethatcl
i
psthepi
ecesofmywatchband
together.WhenIexplai
nedtheproblem,thepropr
iet
orsai
dthathethoughthemi ghthaveonel
yi
ngaround.Hef
oundit
,
attacheditt
omywat chband–andchar gedmenothi
ng!Wheredoyouthi
nkI'
llgowhenIneedanewwatchbandorevena
newwat ch?Andhowmanypeopl edoy out hi
nkI
'
vetol
dthi
sstoryt
o?

6)Tr
ainy
ourst
aff(
ify
ouhav
eany
)tobeal
way
shel
pful
,cour
teous,
andknowl
edgeabl
e.

Doity our
selforhi
resomeonet otr
aint
hem.Talktot hem aboutgoodcustomerserv
iceandwhati ti
s(andisn'
t)regular
ly.
(GoodCust omerSer
vice:
Howt oHelpaCustomerexplai
nsthebasicsofensuri
ngposi
ti
vestaff
-cust
omerint
eract
ions.)Most
i
mpor tant
ly,gi
veeverymemberofy ourstaffenoughi nf
ormationandpowert o maket hosesmallcustomer-pl
easing
deci
sions,soheneverhastosay,"
Idon'
tknow,butso-
and-sowillbebackat.
..
"

7)Taket
heext
rast
ep.

Forinstance,
ifsomeonewal ksint
oy ourst
oreandasksy outohelpt
hem fi
ndsomething,
don'tj
ustsay
,"I
t'
sinAi
sle3".Lead
thecustomert otheitem.Bet t
eryet,wai
tandseei fhehasquest
ionsabouti
t,orf
urt
herneeds.Whatev
ertheext
rastepmay
be,i
fy ouwantt oprovidegoodcust omerser
vice,
takeit
.Theymaynotsaysot oyou,
butpeoplenoti
cewhenpeoplemakean
extr
aef for
tandwi l
ltellot
herpeople.

8)Thr
owi
nsomet
hingext
ra.

Whet
herit
'sacouponforafutur
ediscount
,addit
ionali
nfor
mationonhowt ouset
heproduct
,oragenuinesmi l
e,peopl
elove
t
ogetmorethantheythoughttheyweregett
ing.Anddon’tthi
nkthatagestur
ehastobelar
get obeeffect
ive.Thelocalar
t
f
ramert
hatweuseattachesapackageofpictur
ehangerstoeverypict
urehefr
ames.Asmallt
hing,
butsoappr eci
ated.

Ifyouappl
yt heseei
ghtsi
mpl
erul
esconsi
stent
ly,
yourbusi
nesswi
l
lbecomeknownf
ori
tsgoodcust
omerser
vice.Andthebest
part?Theironyofgoodcust
omerservi
ceisthatovertimeitwi
llbr
ingi
nmorenew cust
omer
sthanpromotionsandprice
slashi
ngeverdid!

Quest
ion6)a)Wr
it
eshor
tnot
eonCol
l
abor
ati
vepl
anni
ng,
for
ecast
ingandr
epl
eni
shment
?

Ans:Thei mportanceofcommuni cati

onandcol laborati
oncannev erbestressedenoughi nasuppl ychain.Awel l
-document ed
exampl eisofVolvoandgr eencars.Inthe80's, Volvohadagr owinginventoryofgreencars.Tor educethisgrowi ngi nv
entory ,
a
promot i
onalcampaignwasi ni
ti
atedwhicht urnedoutt obeahugesuccess.Thepr oducti
ondepar tmentsawt hesal esofgr een
carspi ckupandassumi ngthatdemandhasi ncr eased,theystart
edpr oducingmoregr eencars.Thisagainresultedi nagr owing
i
nv entoryofgr eencar sandnegat i
ngt heent i
remot ivebehindt hecampai gn.Thisexampl eshowst hati fdifferententiti
es
collaborateandcommuni cateintheirf
unct i
oning,thesi tuat
ionisalway smuchbet ter.Asimil
arissueisf acedinsuppl ychains
wher el ackofcommuni cati
onr esul
tsini ncreasingdemandv ari
abili
tythroughthesupplychai npopul arl
yr ef
er r
edt oast he
"BullwhipEf f
ect"
.Thepoi ntherei sthatt hel efthandHASt oknow whatt herighthandi sdoi ng.CollaborativePl anning,
Forecast i
ngandRepl eni
shment( CPFR®)i sanat tempttoaddr essthisissue.

Col
laborat
ivePl anni
ng,Forecast
ingandRepl enishment(
CPFR®)isabusi nesspr
acti
cet hatcombinestheintel
l
igenceof
multi
pletr
adingpar t
nersinthepl
anningandfulfi
ll
mentofcust
omerdemand.TheVolunt
aryI
nteri
ndust
ryCommer ceStandar
ds
(VI
CS)Associ at
ionpubli
shedguidel
inesfori
mpl ementi
ngCPFRin1998(
updatedin2001)andithasbeeninvar
iousstagesof
i
mplement at
ionatdiffer
entcompaniessi
ncethen.

CPFRisoneofaseri
esofsupplychai
nini
ti
ati
vesli
keJI
T( Just-
In-
Time),ECR(Effi
cientCust
omerResponse)andVMI(Vendor
ManagedI
nvent
ory
)dri
venbyorgani
zat
ionstomakethei
rsupplychainsmoreresponsiveandkeepal
lthesuppl
ychai
nmember s
i
ntunewit
htheendcust
omerdemand,bothinter
msoftheproductanditsvol
umes.Byensur i
ngend-t
o-endcommunicat
ion,
the

PRESI
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occurrenceoft he" Bull

whipEf f
ect"i spreventedt husr educi
ngi nvent
orylevel
sacrosst hechain.Italsoallowspar t
nersto
vi
sualizet hebi ggerpictureintermsoft heent ir
esuppl ychainr at
herthantheirent
erpri
sealone.Aspar t
nercoll
aborati
onis
i
niti
atedr ightfrom thepl anni
ngt i
lltherepl
enishmentst age,thesupplychainasawhol eisi
nabet t
erpositi
ont orespondto
exceptionalcircumst ancesmaki ngitamor epr oactiv
eent it
yratherthanareacti
veone.Onamor eabst r
actlevel
,CPFRai msat
creat
inganenv ir
onmentoft r
ustbet weent radingpar t
nerswher et hebenefi
tsofsharinginf
ormationar eknown.Ther oleof
CPFRi nv ariousstagesofsuppl ychainactiv
ityisapt l
yrepresentedinthefi
gurebelow.

TheVICSAssociati
onprovidesi
nfor
mationaboutthestruct
ureofCPFR acti
vi
ti
esandguidel
inesforimpl
ement
ingt
hem.
Accor
dingtothem,CPFRcompr i
sesoff ourmaincol
laborat
ionact
ivi
ti
es:1)St
rat
egyandPlanning2)DemandandSuppl
y
Management3)Execut
ionand4)Anal
ysi
s.

Implementat
ionofal
lfouract
ivi
ti
esi
snotnecessar
yfori
mpl
ement
ingCPFRandasubsetoft
heseact
ivi
ti
escanal
sobe
i
mplemented.

1)St
rat
egyandPl
anni
ng:

Thi
sactiv
ityest
abli
shest
hegroundrul
esf
ort
hecol
l
abor
ati
ver
elat
ionshi
p.I
tdet
ermi
nest
hepr
oductmi
xandpl
acementand
dev
elopseventpl
ansfort
heper
iod.

2)DemandandSuppl
yManagement
:

Thi
sact
ivi
tyest
imat
esconsumerdemandandor
derandshi
pmentr
equi
rement
sov
ert
hepl
anni
nghor
izon.

3)Execut
ion:

I
nthi
sacti
vi
ty,or
der
sareplaced,shi
pment
sar
epl
acedanddel
i
ver
ed,pr
oduct
sar
erecei
vedandst
ocked,sal
est
ransact
ionar
e
r
ecor
dedandpaymentsar
emade.

4)Anal
ysi
s:

Int
hisacti
vit
y,planningandexecut
ionaremonit
oredforexcept
ions,r
esult
sareaggr
egatedandkeyperf
ormancemet
ri
csar
e
cal
cul
ated.Theinsightther
eofi
ssharedbet
weenthepart
nersandplansareadj
ust
edfori
mprovingr
esul
ts.

I
mpl
ement
ati
on:

 Toder
ivemaxi
mum benef
it
sfr
om CPFR,
itneedst
obei
mpl
ement
edi
nawel
l
-def
inedst
ruct
ure.Ast
ep-
wisei
mpl
ement
ati
on

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SBBARETAI
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ofCPFRi
sout
li
nedi
nthef
oll
owi
ngmanner
.

 For
mall
yestabli
shanagreementwi
thy
ourt
radi
ngpar
tner
sandi
dent
if
ykeyper
for
mancei
ndi
cat
orsconsi
stentwi
tht
he
pur
poseofcol
labor
ati
on.

 For
mal
i
zet
her
olesandr
esponsi
bil
i
tiesofeachpar
tneri
ntheCPFRpr
ocess.

 Dev
elopacol
l
abor
ati
vebusi
nesspl
ant
hati
sconsi
stentwi
tht
hegoal
sofi
ndi
vi
dual
par
tner
sandt
hesuppl
ychai
nal
i
ke.

 Developasalesf
orecastf
ort
hecol
l
abor
ati
vei
nit
iat
iveandi
dent
if
ykeyexcept
ionsal
ongwi
thmet
hodst
oaddr
esst
hose
excepti
ons.

 Execut
ethecol
l
abor
ati
vepl
anandaddr
essanyexcept
ionst
hatar
isei
namannerdeci
dedbef
orehandVal
uePr
oposi
ti
on

 Thegr eat
estvalueofCPFRi sderiv
edfrom thereductionininventorylevelsandeli
minati
ngout-of
-st
ocksituati
ons.Moreover,
repl
enishmentcy cl
esgetsmallerassupplychainsgetmor eresponsivet oendcustomerdemandmaki ngitmorecompetit
ive.
Asout -of
-st
ocksi tuat
ionsareel i
minat
ed,salesi ncreaseespeci all
yint heret
ailgoodsindustr
y.Asi nventor
ylevel
sar e
reduced,warehousingcostsarealsoreducedwhi chcanr esultinsignif
icantsavi
ngs.Insummar y,t
hesupplychainbecomes
mor ecustomer-dri
venthanbeforeandreali
zessignifi
cantadv antagesfrom suchcoll
aborat
iveacti
vit
ies.

 Thepurposebehi
ndCPFRoranyothercol
l
abor at
iveact
ivi
tyinasupplychainistolev
eragethecompetenci
esofeachtradi
ng
par
tnerinamannerwher
etheenti
resupplychainbenefi
ts.Eveniftr
adingpartner
sdonotimplementCPFRi nt
hestructur
ed
mannerdefi
nedbyVI
CS,anenvi
ronmentoftrustandacollaborat
ivei
nteract
ioncangreat
lybenef
iteachoneoft
hem.

Quest
ion6(
b)Wr
it
eshor
tnot
eonOr
derFul
fi
ll
ment

Ans:Or derFulf
ill
mentcanbedef inedastheacti
vit
iesthatt
akeplacef
rom themomentabuyer/
customerplacesanorderunti
l
thator
derhasbeendel iv
eredinfull
.Howwel ly
ourorderful
fi
ll
mentprocessfunct
ionsi
sacri
ti
caldeter
minantofhowwel ly
ou
sati
sfy
,andt herefor
er et
ain,y
ourcustomers.Sotheorderful
fi
ll
mentprocessplay
sacruci
alr
oleinsupplychainmanagement,
andmanyconsi deritthemosti mport
antbusi
nessprocess.

eBuil
der’
sOr derFulfi
ll
mentCl oudProcessenablesyout oautomateandcont r
olt heorderf ulfi
l
lmentf l
ow fr
om end-t
o-end,
i
ntegrati
ngal ltheparti
cipati
ngbusinesspartner
s(theValueNetwork)
,executi
ngthebusi nesslogicateachst epint
hef l
ow,and
provi
dingv i
sibil
ityoftheent i
reprocess.TheCloudProcessmonitorsboththeservicelevelagr eement syouhaveagreedupon
withparti
cipant sinthepr ocessandt heKPIsyouhav edefinedi
ny ourorderful
fil
l
mentpr ocess.I tensur
estheyaremetand
takesactionwhent heyar enotmet .Personnelcanf ocusonhandl i
ng exceptionsbecauset heyar efr
eed f
rom routi
ne
administ
rationoft hefl
ow.

eBuil
der’
sOr derFulf
il
lmentmanagesordersf
rom recei
ptthroughvali
dati
onandsourci
ng.I
tmonitor
sandcont
rol
sthepicki
ng,
processi
ng,andpacki ngofeachorder;aswellasitsdi
spatchandt ranspor
t.Fi
nal
l
y,youwil
lknow whent
heorderhasbeen
recei
ved,andy oucanmonitort
heservi
ceprov
ider’
sprogressininst
all
i
ngi t
.

eBui
lder
'sOrderFul
fi
ll
mentmakesi tpossibl
etoi
mpl
ementaCont
rolTowersol
uti
ont
hatgi
vescent
ral
i
zed,end-
to-
endv
isi
bil
i
ty
andcontrol
oftheenti
ref
ulf
il
lmentprocess.

eBuil
der'
sOrderFulf
il
lmentCloudProcessisbuil
ton10y ear
sofexperi
enceinimplement
ingorderful
fi
ll
mentsuppl ychain
sol
utionsforcust
omer saroundthewor l
d.Thepr ocessspansacrosstheenti
reful
fi
ll
mentprocessfrom orderrecei
ptt o
ful
fi
ll
mentbasedonor deragreement
s.Thi sser
vice,avai
l
ableovertheInt
ernet
,isamaj orstepbeyondtradit
ionalorder
ful
fi
ll
mentsoft
wareorordermanagementsy st
em.

Thef
ulf
il
lmentpr
ocesscanbeusedf
orbot
hinbound(
buy
ing)andout
bound(
sel
l
ing)f
ulf
il
lment
.

Atthest
rat
egi
clevel
,eBui
l
derOr derFul
fil
l
ment '
sBusi
nessInt
ell
i
gencePort
alenabl
esyout
omanageglobalnet
wor
kKPIs,f
oll
ow
tr
ends,andanal
yzeandi dent
if
ybot tl
enecks.TheeBuil
derBIPortali
sast rat
egi
cmanagementservi
cewithanonli
ne´t
ool

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desi
gnedt
oconsoli
dat
eaveryl
argeamountofdatacol
l
ect
edf r
om t
housandsofact
orsandsy
stemsar
oundt
hewor
ldandt
urn
i
tint
osimpl
e,i
ntui
ti
ve,
andpower
fuldeci
sion-
maki
ngmater
ial
.

Att hetact
icallevel,theProcessMonit
orgi
vestheuserreal
-t
imevi
sibi
l
ityacrossthecompl eteorderful
fi
ll
mentprocess.
Excepti
onsar eidenti
fi
edast heyoccur(
SLAt
imeorcondi
ti
onbased)andaredisplay
edinani nter
acti
vedashboar
d.Theuser
candril
ldownt oamor edet
ail
edvi
ewonaspecif
icact
orty
pe(e.g.
,ahuborservicecent
er)
,andf ur
therdowntoanindiv
idual
ordertovi
ewi tsdetail
sandcontent
.

Attheoperationallevel
,theOrderManagermanagest heorderfl
ow,ordercont
ent,andinf
ormati
onv al
i
dations;aswellasthe
standar
dor derfulf
ill
mententit
ieswit
ht heirprocess,event
s,andstates.TheOrderManagerwebi nt
erf
acesconsi st
soforder
dashboardsthat,amongot hert
hings,
providetheabili
tytocross-
ref
erenceandsearchbasedonvar
iouscrit
eria.

Alsoattheoper
ati
onallev el
,theTranspor
tManagertakescar eofautomatedpr
ocessingofor dersint
oshi
pmentsbasedon
confi
gur
edrouti
ng,carr
ier,andrules.I
tcreat
estherequir
edshi ppi
ngdocumentsforintegr
atedcar r
ier
sandsendsel
ectr
oni
c
booki
ngstothecar
ri
er.Statusretr
ieval
andint
egr
ati
ontoor derstat
usandeventhi
stor
yarealsoincluded.

The operati
onallevel i
sf urt
hersupported bythe Network Opti
mi zat
ion Manager, a stat
e-of-
the-artnetwor
k process
opti
mizati
onf unct
iont
hati
ndexesprocessactors(
suchaswar ehouses,carri
ers,
suppl
ier
s,et
c.)andopt i
mi zest
hepaththrough
theprocessbasedonsetbusinessr
ules.I
tworksinreal
timeforeachtransacti
on,prov
idi
ngoptimizat
ionfrom endtoend.

Questi
on6 (
c)Whati sOr
derManagement
?
Ans:Theter
m OrderManagementref
erst
othesetofact
ionst
hatamer
chantneedst
oper
for
mtodel
i
vert
hegoodst
hata
cust
omerhasor
dered.

I
ntheecommer cecontext
,OrderManagementdescr
ibesev
ery
thi
ngt
hatt
hemer
chantdoesaf
teracust
omerhaspl
acedan
or
deronherwebstor
e.Thetypi
calst
epsinv
olv
edare-

1. Pi
cki
nvent
oryf
rom herwar
ehouseandshi
pitt
othecust
omer

2. Sendanemai
lnot
if
icat
iont
othecust
omert
hatt
heor
deri
soni
tsway

Howev
er,
thi
ngsar
eal
way
snott
hatsi
mpl
eformostor
der
s.Her
eiswhy-

Themerchantmaybeoutofst
ockonsomeoft heitemsthatthecust
omerhasor dered.I
nthatcase,
themerchantmayshi
pout
onl
ypar
toft heor
derwit
hthei
temsthatar
einstock.Andwillshi
ptherestoutatalatert
ime.Andthati
stheideabehi
ndPart
ial
Shi
pments.Theit
emsthatwer
enotshi
ppedarereferr
edt
oasbeenBackOr dered.

Somet i
mes,themer chantmaynotst ockalltheitemsi nherwarehouse.Forexampl e,amer chantwhosell
stoy sonline,may
decidetonotstocktheheavydol l
-housesinherwar ehouse.Anyt
imeacustomeror dersadoll-
houseonherwebsit e,
shewi llask
thedoll-
housemanuf actur
er(vendor )toshi
pi toutdi r
ectl
yfrom t
hemanuf actur
er’s(vendor’s)war
ehousetot hecust omer ’
s
address.Thi
spr ocessofshippingdi r
ectl
yfrom thev endortothecustomerwithoutgoingthr oughther
etai
ler
’swar ehousei s
cal
ledDropShipping.

Somemer chantsuseOutsourcedFul
fil
l
mentWar ehousestoavoidcarryi
nganyinvent
ory
.Insimplewords,t
hemerchantusesa
thi
rdpart
ywarehousetostoreherinv
entoryf
orher.Whenanor derisplacedonherwebsit
e,sheforwar
dsthator
derinf
ormati
on
tothethi
rdpart
ywarehouse,whothenshipsthegoodsdirect
lyt
ot hecustomer
.

Thoughor dermanagementprocessisgeneral
l
yconsider
edt obecompl eteoncet heent
ir
eorderhasbeenshippedout(
eit
herin
multi
pleParti
alShi
pments,orvi
aDr opShipmentsasdescri
bedabov e),
themer chantusual
lyf
oll
owsupwi t
ht hecust
omerafew
dayslatertoensur
ethatthecustomerishappywithenti
retransact
ion.Theref
ore,theordermanagementprocessmustbetied
cl
oselytotheCustomerRelat
ionshi
pManagementpr ocessthatthemer chantf
ollows.

Whatthemerchantsel
ls(whatt
hecustomer
sorder
)alsodet
ermineswhati
temssheneedst
ostockandhowmuchsheneeds
t
ostockinherwarehouse.Ther
efor
e,t
heOrderManagementpr
ocessisal
soclosel
yti
edtot
heI
nvent
oryManagementpr
ocess

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t
hatt
hemer
chantneedst
oper
for
m.

Asasmal
lbusi
nessowner
,under
standi
ngther
elati
onshi
pbetweenallt
hesepr
ocesses,
andmanagi
ngt
hem ef
fect
ivel
ywi
l
lhel
p
youi
mpr
oveyourcust
omersat
isf
acti
onandhel
py ougrowyourbusi
ness.

Toomanypl
ayer
s,t
oomanysy
stems

I
nthepr
ocesst
hatIhav
eexpl
ainedabov
e,t
her
ear
emanypar
ti
cipant
s.

Mer
chant(
sel
l
sthepr
oduct
)

Cust
omer(
buy
sthepr
oduct
)

Shi
ppi
ngSer
vice(
transpor
tst
heshi
pment
)

Manuf
act
urer(
Vendor
)(dr
opshi
pst
hepr
oduct
)

Out
sour
cedFul
fi
ll
mentWar
ehouse(
car
ri
esi
nvent
oryf
ort
hepr
oduct
)

Manysmal lbusinessesr esor

ttoemai lcommunicati
onandbet weenallthepartici
pant
slist
edabov e.Forexampl e,whent he
customerplacesanor deront hemer chant
’swebsi
te,thewebsitesendsanemai ltothemer chantwiththeorderinformat
ion.
Merchantssendsashi pmentnotif
icati
onemailtothecust omeroncetheorderi
sshipped.Fordropshippi
ngandf oroutsour
ced
ful
fi
llment
,themer chantsendsemailstothemanufacturer(v
endor)ort
heoutsourcedful
fi
ll
mentwar ehouserespect
ively
.

Ther
ear
eal
somanycomput
ersy
stemsi
nvol
vedi
ntheor
dermanagementpr
ocess.

Mer
chant
’swebsi
te(
webst
ore)

Mer
chant
’semai
lsy
stem

Shi
pmentcompany
’swebsi
te(
tocr
eat
eshi
ppi
ngl
abel
s)

Manuf
act
urer
’swebsi
te(
tocr
eat
edr
opshi
prequest
s)

Out
sour
cedf
ulf
il
lmentwar
ehouse’
swebsi
te(
tocr
eat
eshi
pmentr
equest
s)

Manysmal lbusinessesr esorttomanualcopy i

ngandpasti
ngofdatabetweenthesesystemst ocomplet
etheirorderful
fi
ll
ment
steps.Forexampl e,oncet hewebsitesendsanemai lt
othemerchant
,shecopiesthecustomer’
saddress(theShipToaddr ess)
fr
om t heemai l
,pastest hatintoaf ormintheshipper’
swebsi
te,andgener
atesashippinglabel
.Shealsoforwardstheemai lto
hermanuf acturer(vendor )ortotheoutsourcedful
fi
ll
mentwar
ehouserequesti
ngthem toshiptheri
ghtgoodstot hecustomer’s
address.

1)Shor
tnot
eonExpect
edcostofst
ock-
out

Economicconsequencesofnotbei
ngabletomeetanint
ernalorext
ernal
demandfr
om thecur
renti
nvent
ory
.Suchcost
sconsi
st
ofint
ernal
costs(delay
s,l
aborti
mewastage,l
ostpr
oducti
on,etc.
)andexter
nal
cost
s(l
ossofprofi
tfr
om l
ostsal
es,
andlossof
fut
ureprof
itduetolossofgoodwil
l
).Al
socall
edshort
agescosts.

Fourpossi
bleout
comesf
rom ast
ockout

Cust
omer
swai
t

PRESI
DENCYCOLLEGEPage10
SBBARETAI
LMANAGEMENTUNI
T-I
V

Backor
der
s

Lostsal
es

Lostcust
omer
s

PRESI
DENCYCOLLEGEPage11