Definitions of Dimensions

Overview

The Dimensions are:

• Supply Chain Business Objectives & Metrics
• Risk Management & Contractual Relations
• Processes & Controls
• People & Organization
• Information & Data Management
• Continuous Improvement in Supply Chain Relationships

Each of these dimensions is highly related. Concepts are grouped under the dimensions based on the logical flow from high-level business objectives down to tactical decisions.

Supply Chain Business Objectives & Metrics

The Business piece of this is what each business wants. Some might be more concerned about missing revenue opportunities due to stock outs, others about minimizing inventories to maximize ROI/ROA.

The Supply Chain side are the activities that support the business objectives and in the early progression steps are largely stand alone as are the metrics that measure them.

Objectives may change over time depending on the business cycle and should be periodically reviewed.

Related concepts:

• Balanced Scorecard
• Holistic financial objectives, i.e. supply chain-wide costs & benefits
• S.M.A.R.T Objectives = Specific, Measurable, Agreed, Realistic/Relevant, Time-related

Risk Management / Contractual Relations

This is how we define the relationship with a partner to meet each others’ objectives and manage risks to achieving the objectives.

Theoretically, risk is a function of impact multiplied by probability. However, risk also has a heavy component of perception, emotion, and trust. For example, people may perceive air travel to be more risk than road travel, while the opposite is mathematically correct.

Risks may fall into the following categories:

• Revenue
• Quality
• Inventory (excess or obsolete)
• Capacity
• Assurance of Supply
• Intelectual Property
• Timeliness (e.g the impact of a late order leading to poor service or a cancellation)
• Utilization (e.g. the risk of unused fab capacity or empty trucks)
• Information risk (the risk that information is incorrect, falsified, corrupted or lost)
• Regulatory, e.g. SOX, RoHS, WEEE

Flexibility and inventory policies are means of handling certain kinds of risk (e.g. the risk on missed revenue) that may result in another risk for a partner (e.g. excess inventory write-offs).

Risk should be managed and bourne by the party best able to manage it.

Contractual terms are the key tool used to establish the mechanisms for control of risk. However, process, systems and metrics are needed to support the management of risk.

Related Concepts:

• Flexibility, lead-time & inventory policies
• Risk sharing
• Contract templates
• Collaboration
• Financial controls
• Holding inventory where cost of capital is lowest

Remarks:

• This is where a lot of the important concepts come into play.

Processes & Controls

This is how we operationalize the above two dimensions both in delivering the objectives and managing the risks.

Collaboration is the iterative planning process towards joint agreement on action, the mutual examination of results, interpretation and correction. – this could be a better definition!

Another important concept is that of the role of the Expert and whether that role should lie with the Owner or the Provider.

Related concepts:

• Definition of accountability and roles
• Overlaps with SCOR at tactical level.
• We have processes within functions, e.g. procurement, logistics, reverse logistics
• We have key processes that are cross-functional for most organizations

People, Organization & Culture

We need a a suitable organization and well prepared people to support good processes.

Related Concepts:

• Leadership
• Organizational design & structure, e.g what happens if you make transport and trade part of purchasing?
• Definition of roles & accountability
• Training & Development
• Skills and competencies
• Collaboration skills
• Cross functional teams
• Culture both organizational and national (e.g. different approach in Japan)
• Culture of continuous improvement.

Information & Data Management

These are the tools that support the processes and people. IT must be designed based on knowledge of process and people.

Good data integrity is the foundation of good planning and collaboration.

This dimension has been divided into these categories:

• Applications (including their integration)
• Communications (e.g. EDI, XML, Rosettanet, flat-file)
• Data Management & Data integrity policies.

Continuous Improvement in Supply Chain And Relationships

This is where we strive to continually improve performance in each of the above dimensions. We explicitly create double loop learning.

Related Concepts

• At any particular time, and organization may use tools or philosophies such as six sigma or lean
• Quarterly business reviews
• Supplier reviews Not only continuous improvement but also step-change improvement
• Also continuously improve how we continuously improve.
• Examples of closed loop and double loop learning.