Michael Oldham, P.E., CPSM
ISM-Denver Pre-Dinner Seminar
1/15/2015
1

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

Strategic Role of Supply Chain Management
Supply Chain Strategies & Performance
Metrics
Supply Chain Design & Planning
The benefits of SMI (Supplier Man. Inventory)
Convincing your supplier to participate
The Supply Contract’s Role
Case studies, both high and low volume
Emerging Trends in global supply chains
Metrics and supply visibility
1/15/2015
2
1.
2.
3.
4.
5.
6.
7.
Disposition/Investment
Recovery
Distribution
Inventory Control
Logistics
Manufacturing
Supervision
Materials Management
Packaging
8.
9.
10.
11.
12.
13.
14.
Product/Service
Development
Purchasing/Procurement
Quality
Receiving
Strategic Sourcing
Transportation/Traffic/
Shipping
Warehousing
1/15/2015
33
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Key Participants
◦ Suppliers
◦ Manufacturers
◦ Warehouse, Distribution Centers & 3PL’s
◦ Customers
Processes
◦ Supplier Selection and Sourcing/Purchasing
◦ Manufacturing / Processing
◦ Transportation/Logistics/Distribution
◦ Customer Service
◦ Reverse logistics
Costs
◦ Material (purchasing & holding), Manufacturing
(including product design & development),
Transportation & Distribution
1/15/2015
4
Tier 3
Sweden
Tier 2
Germany
Tier 1
USA
Malaysia
Mexico
Germany
Canada
USA
Thailand
Components
China
China
Major
subassemblies
China
Assembly
China
East Coast
Distribution
centers
EMEA
(Germany)
USA
West Coast
Raw
materials
East Europe
Retail
West Europe
1/15/2015
5
Element
Typical Issues
Customers
Determining what customers want (Product Mix)
Forecasting
Predicting quantity and timing of demand
Design
Incorporating customer wants, mfg., and time
Processing
Controlling quality, scheduling work
Inventory
Meeting demand while managing inventory costs
Purchasing
Evaluating suppliers and supporting operations
Suppliers
Monitoring supplier quality, delivery, and relations
Location
Determining location of facilities
Logistics
Deciding how to best move and store materials
Customer Relationship
Order Fulfillment
Supplier Relationship
 Percent of orders taken
accurately
 Percent of incomplete
orders shipped
 Percent of supplier
deliveries on-time
 Time to complete the order
placement process
 Percent of orders shipped
on-time
 Supplier lead times
 Customer satisfaction with
the order placement process
 Time to fulfill the order
 Percent defects in services
and purchased materials
 Customer’s evaluation of
firm’s environmental
stewardship
 Customer retention
 Percent of botched services
or returned items
 Cost to produce the service
or item
 Customer satisfaction with
the order fulfillment process
 Inventory levels of work-inprocess and finished goods
 Amount of greenhouse
gasses emitted into the air
 Supplier flexibility
 Cost of services and
purchased materials
 Inventory levels of supplies
and purchased components
 Evaluation of supplier’s
collaboration on
streamlining and waste
conversion
 Amount of transfer of
environmental technologies
to suppliers
1/15/2015
7
Total revenue
Increase sales through
better customer service
Net income
Cost of goods sold
Improve profits
with greater
revenue and lower
costs
Reduce costs of
production, shipping
and purchasing
Operating expenses
Reduce fixed expenses
by reducing overhead
associated with supply
chain operations
Net cash flows
Improve positive cash
flows by reducing lead
times and backlogs
Return on assets
(ROA)
Working capital
Reduce working
capital by reducing
inventory investment,
lead times, and
backlogs
Fixed assets
Inventory
Increase inventory turnover
Increase ROA with
higher net income
and fewer total
assets
Reduce the number
of warehouses
through improved
supply chain design
Total assets
Achieve the same
or better
performance with
fewer assets
1/15/2015
8
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High volume parts manufactured by EMS,
ODM, OEM’s are subject to forecast volatility
Rather than build to questionable forecasts
let the supplier manage the available stock to
maintain 2 weeks DSI target to the latest best
forecast (variation of “consigment inventory”)
DSI ≡ Day Sales Inventory
Weekly effective demand packages/DSI
reports/Commits
Weekly reconciliation reports
1/15/2015
9
Supplier Group
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
SMI_AAA
Supplier ID
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
12345678
Part Name
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
ABCD1234
Part Description
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
STN V1
SAP Plant
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
COMEM1
Due Date
Effective Demand
01-05-15
01-12-15
01-19-15
01-26-15
02-02-15
02-09-15
02-16-15
02-23-15
03-02-15
03-09-15
03-16-15
03-23-15
03-30-15
04-06-15
04-13-15
04-20-15
04-27-15
05-04-15
05-11-15
05-18-15
05-25-15
06-01-15
06-08-15
06-15-15
41
0
0
29
203
203
203
201
183
183
184
183
188
190
189
190
187
183
183
183
183
246
247
246
1/15/2015
DSI Target
109
0
0
336
397
389
382
374
368
371
374
376
378
376
373
370
368
391
417
442
468
536
595
655
10
Part Part Description
Part Site
12345
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
700507151
X1211 COF1
Effective Demand
E129 SIP DESKPHONE
COF1
On Hand - AOI
E129 SIP DESKPHONE
COF1
On Hand - SOI
E129 SIP DESKPHONE
COF1
In Transit
E129 SIP DESKPHONE
COF1
Future Commits
E129 SIP DESKPHONE
COF1
Other Commited Supply
E129 SIP DESKPHONE
COF1
Net Inv Position (EFF DMD)
E129 SIP DESKPHONE
COF1
DSI Target (Units)
E129 SIP DESKPHONE
COF1
DSI Actual/Projection
E129 SIP DESKPHONE
I131
Effective Demand
E129 SIP DESKPHONE
I131
On Hand - AOI
E129 SIP DESKPHONE
I131
On Hand - SOI
E129 SIP DESKPHONE
I131
In Transit
E129 SIP DESKPHONE
I131
Future Commits
E129 SIP DESKPHONE
I131
Other Commited Supply
E129 SIP DESKPHONE
I131
Net Inv Position (EFF DMD)
E129 SIP DESKPHONE
I131
DSI Target (Units)
E129 SIP DESKPHONE
I131
DSI Actual/Projection
E129 SIP DESKPHONE
I316
Effective Demand
E129 SIP DESKPHONE
I316
On Hand - AOI
E129 SIP DESKPHONE
I316
On Hand - SOI
E129 SIP DESKPHONE
I316
In Transit
E129 SIP DESKPHONE
I316
Future Commits
E129 SIP DESKPHONE
I316
Other Commited Supply
E129 SIP DESKPHONE
I316
Net Inv Position (EFF DMD)
E129 SIP DESKPHONE
I316
DSI Target (Units)
E129 SIP DESKPHONE
I316
DSI Actual/Projection
Past
0
13,286
0
0
1,408
0
14,694
0
0.0
68
0
3,006
0
1,664
0
4,602
0
0.0
1,228
11
0
0
0
0
-1,217
0
0.0
Date
Week
01-05-15 01-12-15 01-19-15 01-26-15 02-02-15 02-09-15 02-16-15 02-23-15 03-02-15 03-09-15 03-16-15 03-23-15 03-30-15 04-06-15 04-13-15 04-20-15 04-27-15
1,359
0
0
0
0
0
13,335
2,806
47.5
222
0
0
0
0
0
4,380
590
74.2
1,500
0
0
5,376
0
0
2,659
1,850
14.4
1,359
0
0
0
0
0
11,976
2,882
41.5
289
0
0
0
0
0
4,091
614
66.6
170
0
0
0
0
0
2,489
872
28.5
1,359
0
0
0
0
0
10,617
2,959
35.9
290
0
0
0
0
0
3,801
631
60.2
1,440
0
0
0
0
0
1,049
918
11.4
1,387
0
0
0
0
0
9,230
3,027
30.5
295
0
0
0
0
0
3,506
646
54.3
0
0
0
0
0
0
1,049
455
23.1
1,550
0
0
0
0
0
7,680
3,033
25.3
331
0
0
0
0
0
3,175
647
49.1
286
0
0
2,176
0
0
2,939
558
52.7
1,551
0
0
0
0
0
6,129
2,973
20.6
331
0
0
0
0
0
2,844
634
44.9
285
0
0
0
0
0
2,654
547
48.5
1,551
0
0
0
0
0
4,578
2,913
15.7
331
0
0
0
0
0
2,513
621
40.5
285
0
0
0
0
0
2,369
536
44.2
1,529
0
0
0
0
0
3,049
2,853
10.7
326
0
0
0
0
0
2,187
608
35.9
281
0
0
0
5,376
0
7,464
525
142.2
1,401
0
0
0
0
0
1,648
2,908
5.7
298
0
0
0
0
0
1,889
620
30.5
258
0
0
0
0
0
7,206
535
134.6
1,400
0
0
0
0
0
248
3,056
0.8
299
0
0
0
0
0
1,590
652
24.4
258
0
0
0
0
0
6,948
562
123.5
1,401
0
0
0
0
0
-1,153
3,206
-3.6
299
0
0
0
0
0
1,291
684
18.9
257
0
0
0
0
0
6,691
590
113.5
1,401
0
0
0
0
0
-2,554
3,354
-7.6
299
0
0
0
0
0
992
716
13.9
258
0
0
0
0
0
6,433
617
104.2
1,666
0
0
0
0
0
-4,220
3,493
-12.1
355
0
0
0
0
0
637
745
8.5
307
0
0
0
0
0
6,126
643
95.3
1/15/2015
1,773
0
0
0
0
0
-5,993
3,513
-17.1
378
0
0
0
0
0
259
750
3.5
326
0
0
0
0
0
5,800
646
89.7
1,773
0
0
0
0
0
-7,766
3,490
-22.2
379
0
0
0
0
0
-120
745
-1.6
326
0
0
0
0
0
5,474
642
85.3
1,773
1,748
0
0
0
0
0
0
0
0
0
0
-9,539 -11,287
3,467
3,444
-27.5
-32.8
378
373
0
0
0
0
0
0
0
0
0
0
-498
-871
740
735
-6.7
-11.9
326
322
0
0
0
0
0
0
0
0
0
0
5,148
4,826
638
634
80.7
76.1
11
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
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2-4 weeks of stock
Each week: 17 week commit
Dwell period - supplier ownership Company
Taxes, insurance, importation duties
Transportation costs, warehouse costs
FiFo considerations / EDI is required
3PL contracts - Required
Quality and inspection costs
1/15/2015
12
1.
SUPPLIER MANAGED INVENTORY.
Company, at its sole discretion, will direct Supplier to maintain Supplier Managed Inventory for specified Products
at an Company designated logistics facility under the terms and conditions outlined herein. Supplier Managed
Inventory (“SMI”) is defined as Products for which Supplier maintains title of ownership and that are stored by
Supplier at an Company designated location (“SMI Storage Site”).
A. When Company identifies Products to be managed as SMI and states reasonable quantities and reasonable
delivery dates for shipment of Products to one or more SMI Storage Sites, Supplier will deliver such
Product as SMI to an Company designated SMI Storage Site. Such Product will be known as "SMI
Product."
B. Upon receipt of each shipment of SMI Product, Supplier will contract with an Company Designated Third
Party Logistics (“3PL”) provider and cause the SMI Product to be placed in segregated storage ("SMI
Product Storage") at the Company designated SMI Storage Site in unbroken lots partitioned or marked in
such a way that the SMI Product may be readily distinguished from other inventory by physical inspection.
Supplier shall have the right to inspect the SMI Storage Site facility on an as required basis no more than
six (6) times per year and upon two (2) weeks advanced written notice.
C. Supplier’s Shipment from SMI Product Storage. Company may withdraw or cause to be withdrawn SMI
Product from SMI Product Storage at any time and from time to time by issuing a written action (interwarehouse pull transaction) to 3PL. Supplier will keep or cause to be kept records based upon the
reconciliation reports received from Company and the 3PL. Supplier has responsibility for cycle count
accuracy with 3PL in management of the SMI Product in the SMI Storage Site.
1/15/2015
13
Start
Canada
Customer
Company
Collects
from 3PL
and ships
to
customer
to close
SO
Company
Receives
Customer
PO and
creates SO
Supplier
receives
PO from
Company
Company
Collects
from 3PL
and ships
to
customer
to close
SO
NOTES/REQUIREMENTS
1. Supplier will have to manage many high volume low
value customer specific Company PO’s
2. Supplier must agree to EDI implementation
3. Supplier must agree on similar model for EMEA & AP
Modified Supplier Managed
Inventory Process Flow
Supplier
sells
Product to
Company
without A
suffix
Company
Sells
Inventory
to Supplier
SMI Supply
Company
Receives
back to
back PO
from
Supplier
EMS
maintains
SMI based
upon
Company
forecast
1/15/2015
EMS
receives
PO/pull
from
Supplier &
moves
inventory
to
Company
14
1/15/2015
15
The supply management component is either part of the individual’s
personal job responsibilities and/or supervisory responsibilities or the
responsibility of someone else in the supply management organization.
98%
Components Survey Results
83%
ur
ch
as
i
P
83%
81%
81%
79%
75%
74%
71%
69%
63%
63%
34%
Q
In
ua
ve
lit
nt
y
M
or
at
y
Tr
er
C
ia
an
on
ls
sp
tro
M
o
an
l
rta
D
is
a
t
i
g
po
on
em
si
/T
tio
en
ra
n/
ffi
t
In
c/
S
ve
hi
st
pp
m
in
en
g
tR
ec
ov
er
W
y
ar
eh
ou
si
ng
D
is
tr i
bu
t io
n
R
ec
P
ro
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du
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ng
ct
P
/S
a
er
ck
vi
ag
c
M
e
in
an
D
g
e
uf
ve
ac
lo
tu
pm
rin
en
g
S
t
up
er
vi
si
on
99%
ng
/P
ro
cu
S
re
tr a
m
te
en
gi
t
c
S
ou
rc
in
g
Lo
gi
st
ic
s
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1/15/2015
16
Mike has a master’s degree in Mechanical
Engineering from the University of Colorado,
Boulder. Mike has worked for McDonnell Douglas,
IBM and Rockwell International before joining
AT&T/Lucent Technologies in Colorado. For the past
11 years Mike has been employed by Avaya Inc. with
the title of Sourcing Manager.
Acknowledgements:
1. Sanjay L. Ahire, Ph.D. & John B. Jensen, Ph.D.,
University of South Carolina, Columbia
2. Institute for Supply Management
1/15/2015
17