How design thinking can turn SCM strategy into reality

Challenge:

Since the introduction of the term supply chain management (SCM) in 1973. it has received ever- growing interest both in the literature as well as from industrial practice. A reason for this might be  that it has so many facets and that the tasks of accomplishing the aims of SCM are so demanding  that it is more an ongoing endeavor than a single short-term project. This broad scope of SCM  incurs the difficulty of finding a suitable definition and description of the term.

we are concerned with the future of advance planning system which may give rise to future  research. Three areas for improvements are proposed: Improvements which are possible within  the modules of today’s advance planning system, issues which challenge the premises of today’s  advance planning system, and last but not least two business functions are identified which should  be better integrated with advance planning system.

Selection:

The network of organizations that are involved, through upstream and downstream linkages in the  different processes and activities that produce value in the form of products and services in the  hand of the ultimate consumer.’ This definition stresses that all the activities along a SC should be  designed according to the needs of the customers to be served. Consequently, the (ultimate)  consumer is at best an integral part of a SC. The main focus is on the order fulfilment process and  corresponding material, financial and information flows.

Application:

Competitiveness and customer service The roof of the house of SCM depicts the ultimate aim of  SCM, namely improving competitiveness of a SC as a whole. This is achieved by directing the SC in a  sustainable, strategic position compared to its competitors. An important means to achieve this aim  is customer satisfaction. Excellent examples of how to focus SC processes on customers are given by  two case studies (Berry et al., 1999; Childerhouse et al., 2002), which––based on the work of  Skinner (1974) show how to analyses the strengths and weaknesses of a SC in a competitive  market. Concentrating on order qualifiers and order winners, a methodology is proposed for  market segmentation followed by the re-engineering of a specific order fulfilment process for each  market segment.

Insight:

An issue of the ‘correct’ input data for decision models. Although technically possible, there is no  direct link between an APS and a company’s cost accounting system. The reason is that costs  calculated in accounting systems serve several purposes, like an ex post evaluation of the  profitability of a specific customer order or the total cost of a machine hour, but usually not to  become an input to decision models. Recently, there has been a renewed discussion about the  ‘correct’ inventory holding costs in purchasing models. The usual approach is to specify the  inventory holding cost per item per period as the interest to be paid on the value of that item.

Approach:

This approach is challenged in case there are different sources of supply for an item at different  costs per unit. Since it is not clear which items are withdrawn first e.g. the cheapest or the most  expensive ones the ‘value’ of the remaining inventory is no longer clear. One way to overcome this  problem is to convert the objective function into minimizing the net present value of cash flows.  However, assuming that compound interest is negligible, it shown that cost accounting figures may  still result in correct decisions, if holding costs are not attributed to inventory levels but to the  material flows. This example highlights the need for further research efforts for making use of  accounting data within APS.


How design thinking can turn SCM strategy into reality Challenge : Since the introduction of the term supply chain management ( SCM ) in 1973 . it has received ever- growing interest both in the literature as well as from industrial practice . A reason for this might be that it has so many facets and that the tasks of accomplishing the aims of SCM are so demanding that it is more an ongoing endeavor than a single short - term project . This broad scope of SCM incurs the difficulty of finding a suitable definition and description of the term . we are concerned with the future of advance planning system which may give rise to future research . Three areas for improvements are proposed : Improvements which are possible within the modules of today ’s advance planning system , issues which challenge the premises of today ’s advance planning system , and last but not least two business functions are identified which should be better integrated with advance planning system . Selection : The network of organizations that are involved , through upstream and downstream linkages in the different processes and activities that produce value in the form of products and services in the hand of the ultimate consumer . ’ This definition stresses that all the activities along a SC should be designed according to the needs of the customers to be served . Consequently , the ( ultimate ) consumer is at best an integral part of a SC . The main focus is on the order fulfilment process and corresponding material , financial and information flows . Application : Competitiveness and customer service The roof of the house of SCM depicts the ultimate aim of SCM , namely improving competitiveness of a SC as a whole . This is achieved by directing the SC in a sustainable , strategic position compared to its competitors . An important means to achieve this aim is customer satisfaction . Excellent examples of how to focus SC processes on customers are given by two case studies ( Berry et al . , 1999 ; Childerhouse et al . , 2002 ) , which––based on the work of Skinner ( 1974 ) show how to analyses the strengths and weaknesses of a SC in a competitive market . Concentrating on order qualifiers and order winners , a methodology is proposed for market segmentation followed by the re - engineering of a specific order fulfilment process for each market segment . Insight : An issue of the ‘ correct ’ input data for decision models . Although technically possible , there is no direct link between an APS and a company ’s cost accounting system . The reason is that costs calculated in accounting systems serve several purposes , like an ex post evaluation of the profitability of a specific customer order or the total cost of a machine hour , but usually not to become an input to decision models . Recently , there has been a renewed discussion about the ‘ correct ’ inventory holding costs in purchasing models . The usual approach is to specify the inventory holding cost per item per period as the interest to be paid on the value of that item . Approach : This approach is challenged in case there are different sources of supply for an item at different costs per unit . Since it is not clear which items are withdrawn first e.g. the cheapest or the most expensive ones the ‘ value ’ of the remaining inventory is no longer clear . One way to overcome this problem is to convert the objective function into minimizing the net present value of cash flows . However , assuming that compound interest is negligible , it shown that cost accounting figures may still result in correct decisions , if holding costs are not attributed to inventory levels but to the material flows . This example highlights the need for further research efforts for making use of accounting data within APS .