W13 - Redesign Supply Chain Processes

Source/Reference:

SUPPLY CHAIN RE-ENGINEERING: A CASE STUDY David Newlands, Catholic University of Lille, 2003

http://www.littoralis.info/iom/assets/200302_18.pdf

Subject:

Review : Redesign Supply Chain Processes and case study

Introduction

        In this lecture, redesign supply chain processes is taught. Supply chain is the flow of materials, information, money, and services from raw material suppliers through factories and warehouses to the end customers. Supply chain processes include more than one company, so it is different from normal business process. There are five steps of redesign. They are:

1.Scoping the supply chain process

2.Identifying the e-business PIPs

3.Designing the To-Be PIPs

4.Estimating expected impacts      

5.Agreeing on & disseminating the specification:

After searching extra material through internet, I found a case study of supply chain re-engineering. Here I would briefly introduce the case study, and what message is sent through the article.

The case study

        Alpha Co. is an assembler attempting to set up and optimize a new supply chain in UK. The principle sub-contractor is a molding company called Plastic Parts Ltd (PPL). PPL is a British subsidiary of Nordic Plastic Parts(NPP). NPP would have been a superior supplier due to proximity to the final assembly plant.

PPL and its supply chain were analyzed. Three sub-contact companies added values to components in PPL supply chain. The components flows are shown as the following:

 

        In the process, PPL sold molded parts to the painter. Then the painter sold on the remainder either back to PPL(material W,Y&Z) or on to Special Paint(material X). Special Paints would add their value then sell the parts on to Liquid Gaskets. It was a “purchase – add value – sell” type supplier networks. Also, it was expected that the suppliers would order the volumes required by the next company in the chain.

        Clearly, there are many flaws in this process. The complexity of the process created a lack of production synchronization. There are four independent companies which cause the lack of co-ordination between the independent companies. All of them would not accept the cost of inspecting. The material X in the process holding up the whole production in the process

        There is one intermediate solution shown as following:

        In this solution, PPL takes the responsibility of inspecting after each company complete the value-adding operations. However, This situation lead to restricted production volumes. To avoid this, a simplified supply chain is developed, the percentage of the value-added of Nordic Plastic is increased. This strategy aimed to simplify batch tracking and clearly assign accountability.

Message of this case study

        The most important message of the case is that never do the “purchase – add value – sell” type supplier networks. Supply chain should be started and finished by the supplier as they can make a profit from their initial sales to their supply chain customer. “Purchase - add value- sell”¦ supplier networks focus on transactions rather than on flow of goods through the whole supply chain. Profit can ensure quality, tracking batches and reducing costs.Minimising the number of suppliers involved increases purchasing function’s concentration on those important relationships.