Supply Chain Relationships PDF

Supply Chain Relationships Aligning Supply Chains Lesson 1 (13 Aug 2024)   Understand the concept of alignment, the types of collaboration and supply chain relationships. Learning  Recognize the importance of “collaborative” supply chain relationsh...

Supply Chain Relationships Aligning Supply Chains Lesson 1 (13 Aug 2024)   Understand the concept of alignment, the types of collaboration and supply chain relationships. Learning  Recognize the importance of “collaborative” supply chain relationships Objectives  Describe a process model that will facilitate the development and implementation of successful supply chain relationships  Define what is meant by third-party logistics (3PL) and know what types of firms provide 3PL & 4PL services  Know what types of 3PL services are used by client / customer firms and what types of 3PL providers are used  Discuss the role and relevance of information technology-based services to You should be 3PLs and their clients / customers able to do the  Know the extent to which customers are satisfied with 3PL services and following: identify where improvement may be needed  Understand some of the likely future directions for outsourced logistics services  Plan Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source SCOR® is Supplier’s Customer’s founded on four Supplier Supplier Your Company Customer Customer distinct Supplier Internal or External Internal or External management processes SCOR Reference Model The four distinct management processes link together (the chain in supply-chain) seamlessly from supplier to customer “Whether from Farm to Fork or from Rock to Ring, SCOR is not limited by organizational boundaries” Source: SC Council, 2008 Supply Chain Relationships  A distinguishing characteristic of successful supply chains is the ability to achieve alignment  Alignment refers to a commonality or functionality and purpose that reinforces accomplishment of supply chain goals and objectives  Three examples of alignment in SCM:  Supply chain and organizational structures  Supply and demand  Supply chain and trading partners (Score model) Introduction  Alignment in Supply Chain Management Strategies Plans Supply chain & Functioning Organizational strategies Availability Right time Supply & Right Place Demand Supply chain & Trading Collaboration with partners stakeholders/ Score model partners © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 Supply Chain  Many firms have directed significant attention toward working more closely Relationships with supply chain partners, including not only customers and suppliers but also various types of logistics suppliers  Objective = Achieve integration and coordination among participants  This chapter focuses on two, highly related topics:  Supply chain relationships in general → emphasis on the types of relationships, the processes for developing and implementing successful relationships, and the need for firms to collaborate to achieve supply chain objectives  Third-party logistics (3PL) industry → how firms in this industry create Introduction value for their commercial clients   Vertical → traditional linkages (SC actors) between firms in the supply chain such as retailers, distributors, manufacturers, and parts and materials suppliers  Horizontal → includes those business agreements between firms that have Logistics “parallel” positions; may be thought of as a service agreement between two or Relationships more independent logistics provider firms Types of Collaboration By Integration.png: Martin Sauter derivative work: Andrew c (Integration.png) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons  Full collaboration → This is the dynamic combination of both vertical and Logistics horizontal collaboration. Full collaboration gives supply chains dramatic Relationships efficiency gains. Raw Materials Manufacturing Distribution Retail Types of Collaboration Manufacturing Retail – Example (Vertical integration) 9 Integration – Example (Vertical integration) 10 Collaborative – Examples (Horizontal integration) 11  Vertical Logistics Relationships Up/forward Side 2 Side Horizontal Types of Down/backward Collaboration  As suggested by Figure 12.1, the range of relationship types extends from that of a vendor to that of a strategic alliance Logistics Relationships Transactional (Vendor) Collaborative (Partner) Strategic (Alliance) Little or no integration or The results for all parties is More strategic and highly collaboration better than what would have relational been achieved individually long term relationship “Win-win” partnership Institutional trust Types of Relationships Source: C. John Langley Jr., Ph.D. Used with permission  Regardless of form, relationships may differ in numerous ways … Logistics  Duration Relationships  Obligations  Expectations  Interaction / Communication  Cooperation  Planning  Goals  Performance analysis Intensity of  Benefits and burdens Involvement “Most companies feel that there is significant room for improvement in terms of the relationships they have developed with their supply chain partners” THANK YOU Chuma Lalendle [email protected] Imperative for Collaborative Relationships Lesson 2 ( 14 Aug 2024)  As suggested by Figure 12.1, the range of relationship types extends from that of a vendor to that of a strategic alliance Logistics Relationships Transactional (Vendor) Collaborative (Partner) Strategic (Alliance) Little or no integration or The results for all parties is More strategic and highly collaboration better than what would have relational been achieved individually long term relationship “Win-win” partnership Institutional trust Types of Relationships Source: C. John Langley Jr., Ph.D. Used with permission Logistics Relationships Now and in the future? Share your take aways from the video (Things that stood out )  Video 1- Takeaways (Dr Marko Bastl)  Collaboration is companies ability to work across their org boarders in a way that it results in a value greater than if companies tired to work on their own.  There is talk about it as the next great thing!  There is still a high failure rate (55% companies dissolution rate in US alone). Why do you think there is a high failure rate? Why is this a bad thing?  Most expensive to enter, maintain and exit.  Resulting in lost value and resources. → ROI not realised  Those that have succeeded have paved themselves a route to sustainable competitive advantage 5  Video Takeaways (Dr Silvia Rossi)  The route to collaborative relationships is not as uncertain as the stats may have it look. What three questions should we ask when thinking to collaborate?  Key questions to ask:  WHOM → Requires segmentation (level of intensity will dictate amount of resources)  WHY → Lesson 3 (Drivers) Compelling reasons that attract us to form a more structured relationship with the partner.  HOW → Lesson 3 (Facilitators) How will the cooperate environment support the collaboration?  More does not mean better (reserve collaborative relationship of strategic more NB partners)  Be clear from the beginning on goals, expectations, responsibilities etc. 6   Collaboration = “business practice that encourages individual organizations to share information and resources for the benefit of all.” Imperative for  Collaboration allows companies to “leverage each other on an operational basis so that together they perform better than they did separately.” Collaborative Relationships  While this approach creates a synergistic business environment in which the sum of the parts is greater than the whole, it is not one that comes naturally to most organizations, particularly those offering similar or competing products or services.  Imperative for Collaborative Relationships Elements of Successful Collaboration 1 Well-understood goals and objectives 2 Trust and commitment 3 Organizational compatibility and communication 4 Equitable sharing of gains and losses 5 Benefits greater than doing it alone 6 Dedication to continuous improvement 7 Strategic plan to provide direction to the collaboration © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8  Imperative for Collaborative Relationships Barriers and Benefits Benefits Barriers  Focus on core competencies of  Resistance to change supply chain organizations  Conflicting business objectives  Increased sharing of  Inconsistent goals and key information and knowledge performance indicators  Greater responsiveness to  Lack of trust customers’ needs  Unwillingness to share  Creation of competitive information advantage over competing  Turf protection supply chains  Lack of managerial support  More productive and satisfying relationships © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 Collaborative relationships as a SC Strategy Collaborative relationships as a SC Strategy  Video 2- Richard Markoff  The future of our SC is about collaborating with our partners (both up and downstream)  With the old way of thinking and doing business very transactional (lean reactivity can not be achieved).  Silo’s corporately and divisionally becomes a constraints; for the lack of information ends up translating into operations.  Inventory, and poor service.  Example: Collaboration approach - Glass company (GC)  Sharing with GC the results of their MRP , Point-of –Sales data, and forecasts  GC uses that data to plan their production and reserve capacity for L’Oreal There is a commitment to take certain quantity, and that results in better flexibility, shorter lead times. Creating Win-Win situation. 12  Traditional Supply Chain Collaboration in action Orders Physical Flow Supplier Customer Each organization manages their own position  Collaborative Supply Chain Collaboration in action Physical Flow Supplier Customer Manage as a whole Information used to determine shipment: ❑ End user demand ❑ Customer stock levels ❑ Goods in Transit (GIT) inventory THANK YOU Chuma Lalendle [email protected] Model for Developing & Implementing Successful Relationships Lesson 3 (16 Aug 2024) Supply chain relationships 6-step process development  Step 1: Perform strategic assessment  Step 2: Decision to form relationship  Step 3: Evaluate alternatives Model for  Step 4: Select partners Developing and  Step 5: Structure operating model Implementing  Step 6: Implementation and Continuous Improvement (CI) Successful Supply Chain Relationships Model for Developing and Implementing Successful Supply Chain Relationships Potential Partner Capabilities 1 2 4 6 Perform 3 5 Decision Structure Strategic Evaluate Select Implementation to Form Operating Assessment Alternatives Partners & Continuous Relation- Model Improvement ship Company Needs and Priorities Source: Figure 12-2 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3  Model for Successful Supply Chain Relationships Step 1: Perform Step 3: Evaluate Strategic Assessment  Alternatives Overall business goals and objectives, including those from a corporate, divisional, or logistics perspective  Needs assessment to include requirements of customers, suppliers, and key logistics providers  Involves the conducting  Identification and analysis of strategic environmental a logistics audit, which factors and industry trends provides a perspective  Profile current logistics network and the firm’s on the firm’s logistics and supply chain needs positioning in respective supply chains as well as a wide range  Benchmark / target values for logistics costs and key of useful information. performance measurements  Identifying “gaps” between current and desired measures of logistics performance (qualitative and quantitative) © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4  Model for Successful Supply Chain Relationships Step 2: Decision to Core competency assessment Step 3:inEvaluate is key relationship decision that involves Form Relationship an external provider of logistics services. Alternatives Skills Good use of needed resources  Decision involving Expertise Strategic channel partners focuses Fit on type of relationship that works best.  Decision involves whether or not to have a relationship with external an service Ability to Invest provider (core Is the ROI attractive? competency assessment) Source: Figure 12-3 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5  Model for Successful Supply Chain Relationships Step 2: Decision to Form Relationship (continued) “Drivers” and “facilitators” are identified in relationship decision that involves channel partners. Drivers: Compelling reasons to partner  Neither drivers nor Asset/cost efficiency; customer service; facilitators present: marketing advantage; profit stability/growth More transactional, or “arm’s length” Facilitators: Supportive corporate  Common drivers with environmental factors that enhance facilitating factors: partnership growth & development More structured, formal relationship Corporate compatibility; management philosophy; mutuality of commitment; symmetry on key factors (e.g. finances) Source: Figure 12-3 and pg. 483 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6  Model for Successful Supply Chain Relationships Step 3: Evaluate Alternatives Step 3: Evaluate Alternatives  “Measure” apparent levels of drivers and facilitators  If neither the drivers nor the facilitators seem to be  Thorough assessment of present → more transactional or “arm’s length” the company’s needs and priorities in relationship recommended comparison with the  Assess firm’s needs and priorities in comparison to the capabilities of each potential partner. capabilities of each potential partner → consider critical  A broad representation measurements and conducting interviews and involvement of  Cross functional process is important people throughout the company © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7  Model for Successful Supply Chain Relationships (continued) Step 5: Structure Step 4: Select Partner(s) Operating Model  Selecting a logistics or  The activities, processes, and supply chain partner priorities that will be used to  This should happen only build and sustain the after very close consideration relationship. Examples of of the credentials of the most components are: likely candidates have been  Planning performed.  Communication  Ensure that everyone  Risk/reward sharing involved has a consistent  Contract style understanding of the  Financial investment decision made. © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8  Model for Successful Supply Chain Relationships (continued) Future success of relationship is a direct function of the ability Step Step 4: Select Partner(s) 6: Implementation & of involved organizations to achieve both continuous & Continuous Improvement breakthrough improvement. 1. Customer Value Research 6. Supply Chain 2. Process  Depending on the Transformation Mapping complexity of the new Supply relationship, the overall Chain implementation process may be relatively short, or Value it may be extended over a 5. Benchmarking 3. Data Analytics longer period of time. and Intelligence 4. Cost Analysis Source: Figure 12-4 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 Model for Developing and Implementing Successful Supply Chain Relationships Potential Partner Capabilities 1 2 4 6 Perform 3 5 Implementa- Decision Structure Strategic to Form Evaluate Select tion Assessment Alternatives Partners Operating & Relation- Model ship Continuous Improvement Company Needs and Priorities Source: Figure 12-2 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10 THANK YOU Chuma Lalendle [email protected] Third- Party Logistics (3PLs) Lesson 4 (20 Aug 2024)   A third-party-logistics (3PL) firm may be defined as an external supplier that performs all or part of a company’s logistics functions  While some industry executives take care to distinguish among terms such as Definition of these, each of these terms refers to the use of external suppliers of logistics Third-Party services Logistics (3PL)  Depending on the firm and its positioning in the industry, the terms contract logistics and outsourcing (or logistics service providers) are sometimes used in place of third-party logistics (3PL)  Distinguishing service providers © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3  Third-Party Logistics: Industry Overview “Depending on the firm and its positioning in the industry, the terms contract logistics and outsourcing (or logistics service providers) are sometimes used in place of third-party logistics (3PL)” Participants who are involved in the buying and selling of outsourced logistics services range from 1PL’s to 5PL’s:  1PL – Any organisation that needs to move product from point A to point B.  2PL – Asset-based logistics providers that physically move product through the supply chain (transport carriers of various modes).  3PL – Firms that manage and/or provide logistics services on behalf of their clients and customers. Most of these organizations offer order fulfillment services as well as integrated and customized services.  4PL – Non asset-based supply chain integrator takes full responsibility for the management of end-to-end supply chain on behalf of a client.  5PL – Companies that aggregate demands of 3PLs into bulk volumes to negotiate better rates with logistics service providers. Images courtesy of Supply Chain 24/7 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4  LOGISTICS SERVICE PROVIDERS 1-5 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 Difference between 3PL & 4PL © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6  Basic 3PL scenerio © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7  A Identify B which step in B critically needs to be applied in A? Identify which type of model the following businesses use? Suppliers of Logistics related Services in South Africa  Third-Party Logistics Evolution of Logistics Outsourcing Spin-Off Elements of 4PL Supply Chain  Manage Multiple 3PLs Advanced Services  Take on More 3PL Risk than 3PLs Lead Logistics  Transportation  Provide and 4PL Single Source Management Advanced IT Services 3PL Contract  Domestic vs. Services Logistics International  Provide  Assests Strategic Individual or  Value-Added Consultancy Multiple Logistics Warehousing  “Control Tower” Activities and Distribution Services  Management of Insourcing Other Logistics Services  Software Source: Figure 12-6 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11  Third-Party Logistics Types of 3PL Providers Transportation-based 3PL providers founded as a subsidiary or major division of a large transportation firm. Examples: FedEx Supply Chain Services, UPS Supply Chain Solutions, DHL, Ryder Supply Chain Solutions, Schneider logistics, and Penske Logistics. Contract Logistics -based Generally referring to services relating to warehousing and distribution. Examples: CEVA Logistics, DSC Logistics, Exel/DHL, Geodis, Penske Logistics, Saddle Creek Corporation. Freight Forwarding-based Organizations performing services for the daily flow of global commerce, purchasing shipping capacity from asset-based providers, then re-selling to supply chain customers. Examples: C.H. Robinson, DHL, Expeditors, Hub Group, and UTi Worldwide. Images courtesy of cls3pl, vwmin.org, Atlanta Customs Brokers & International Freight Forwarder © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12  Third-Party Logistics Types of 3PL Providers (continued) Financial-based Firms providing services such as freight payment and auditing, cost accounting and control, tools for managing shipment visibility, information, and tracking, and consulting and advisory services. Examples: Tranzact Technologies, CTSI, and Cass Information Systems. Information -based A newer, innovative type of third-party provider emerged as a result of growth and development of Internet-based, business-to-business, electronic markets for transportation and logistics services. Example: Transplace, Inc. Corporate Subsidiaries-based 3PL organizations that initially were divisions or subsidiaries of manufacturing or distributor organizations. Examples: Neovia, Inc. (formerly Caterpillar Logistics), IBM Global Business Services Images courtesy of holykaw.alltop.com, Lynden, Biz Journal © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13  Third-Party Logistics Management and Relationship Issues Customers’ Expectations of 3PL Providers’ Expectations of 3PL Providers Customers Superior service and execution Mutually beneficial, long term (proven results and performance) relationship with company Trust, openness, and information Trust, openness, and information sharing sharing Solution innovation and relationship Dedicating the right resources at the right reinvention levels, including executives Capable information technologies to Access to useful data to design solutions support the relationship and provide desired services to customers Ongoing executive level support Clearly defined service level agreements Service offering aligned with customer Fiduciary responsibility and overall strategy and deep industry knowledge fairness relative to pricing Source: Table 12-3 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14  Third-Party Logistics Logistics Outsourcing Activities % Respondents by Logistics Services that Use a 3PL (Global Results) Domestic transportation 80% Warehousing 66% International transportation 60% Freight forwarding 48% Customs brokerage 45% Reverse logistics 34% Cross-docking 33% Freight bill auditing and payment 31% Transportation planning and management 28% Inventory management 25% Product labeling, packaging, assembly,… 22% Order management and fulfillment 20% Service parts logistics 12% Fleet management 12% Information technology (IT) services 11% Services within Other Supply chain consultancy services 11% ranged from 6% - 7% Other (e.g.customer service, LLP/4PL) 7% Source: Figure 12-8 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16  Third-Party Logistics: Global 3PL Market Global 3PL Revenues Exhibit Modest Growth for 2013-2014 2013 Global 2014 Global Percent Percent Percent 3PL 3PL Change Change Change CAGR Region Revenues Revenues 2013 to 2012 to 2011 to 2006-2014 (US$Billions) (US$Billions) 2014 2013 2012 North $ 177.3 $ 187.6 + 5.8% + 2.9% + 6.7% + 4.3% America Europe 158.1 174.4 + 10.3% +.01% - 2.6% + 0.7% Asia-Pacific 255.6 269.6 + 5.5% + 5.3% + 23.6% + 10.2% South 44.9 41.9 - 6.7% + 3.0% + 12.4% + 8.1% America Others 69.0 77.2 + 11.9% -.01% + 6.4% Total $ 704.9 $ 750.7 + 6.5% + 2.7% + 9.9% Source: Table 12-1 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17  Third-Party Logistics U.S. 3PL Market 2000-2018E (US$ Billions) Source: Figure 12-7 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18  Third-Party Logistics: Future 3PL Industry Trends 1 Continued expansion, acquisition 6 IT capabilities to become an even and consolidation of 3PL industry greater differentiator 2 Expansion of global markets and 7 Increased efforts to update, enhance, needed services and improve 3PL provider-user relationships 3 Continued broadening of service offerings across supply chain, and 8 Increased adoption of shared service broad-based business process networks and sometimes outsourcing collaborative initiatives with traditional competitors Two-tiered relationship models 4 (strategic and tactical) 9 Emphasis on relationship reinvention, mechanisms for Growing range of “strategic” continual improvement, and solution 5 services offered by 3PLs and 4PLs innovation Images courtesy of Edutopia © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 THANK YOU Chuma Lalendle [email protected]