SESSION 1 – HERNAN VAZQUEZ

April 25th 2020

Become a Supply Chain Superstar

with SCProTM

http://cscmpcertification.org
Profesor Coordinador de Asignatura
Hernán Vázquez
[email protected]
 Supply Chain Director en Zamora
Company (Licor 43, Bodegas Ramon
Bilbao y Mar de Frades, Martin Miller’s
Gin, …)
 CSCMP Spain Education & Treasurer

 Bachelor of Business Administration

 Master of Engineering in Logistics & SCM
(MIT-ZLC International Logistics Program)

 Current: Zamora Company

Previous: Confectionary Holding, Ingenico,
Andrew, Accenture, HP and Mercedes
Benz: + 20 years.
 SCM teaching activities.
Schedule

• Schedule: Dates confirmed by EAE Coordination office

FECHA HORA_INICIO NOMBRE_PROFESOR Learning Block Confirmado Status
21/03/2020 11:00-15:00 Alberto Rodríguez Oliveira Demand Planning OK Done
28/03/2020 11:00-15:00 Iker Lopategui Manufacturing & Services OK Done
04/04/2020 11:00-15:00 Alberto Rodríguez Oliveira Warehouse Mgmt OK Done
18/04/2020 11:00-15:00 Alberto Rodríguez Oliveira Procurement & Supply OK Done
25/04/2020 11:00-15:00 Hernán Vázquez Supply Chain Concepts ok Today
09/05/2020 11:00-15:00 Iker Lopategui Inventory OK
16/05/2020 11:00-15:00 Iker Lopategui Order Fulfillment OK
23/05/2020 11:00-15:00 Iker Lopategui Transportation OK
30/05/2020 11:00-15:00 Hernán Vázquez Certification Exam OK

– Classes confirmed on Saturdays due to Program availability.

– All reading materials for each Learning Blocks will be provided through
Blackboard in advance to the SCPro Preparation classes.
Auto Test steps for each LB review
after the session:
1.Repasar los 20 temas indicados en el excel disponible en
el Blackboard:SCProLevelOneInteractiveLearningExam-StudyPlan.xls
1.Review the 20 topics in the excel file: SCProLevelOneInteractiveLearningExam-StudyPlan.xls

2.Realizar el Test de las 20 preguntas disponible en Blackboard: TestSimulation LB1.pdf

2.Answer the 20 questions available in the blackboard pdf file: Test SimulationLBX.pdf

3.Una vez realizado el test realizar la autocorrección con las respuestas disponibles
en Blackboard: Right answers for testing purposes LB1.xls.
3.Once answered the questions review them with the right answers availables at blackboard excel file:
Right answer for testing purposesLBX.xls

●IMPORTANTE: Realizar el test en forma individual luego de haber repasado los temas con la
presentación y los papers y no revisar las respuestas correctas con antelación para asegurar que el
Auto Test sea de utilidad. Revisar luego las respuestas correctas y repasar y fijar conceptos.
IMPORTANT: Execute the test indiviudally AFTER review the 20 topics with the Classroom
presentation and the lectures. Do not review right answers before in order to make the Auto Test of
help to review your understanding level. Once you finished the Autotest check the right/wrong
answers and review/focus to fix concepts.
LB-1: SUPPLY CHAIN CONCEPTS
Abstract:
• Interest in SCM, both in the private and public sectors, has grown rapidly over the
last two decades.
• Leading organizations now recognize the positive outcomes — enhanced
competitive strategy, increased market share, and greater shareholder value — that
can be achieved through effective supply chain management.
• These organizations are taking steps to achieve a competitive advantage through
supply chain management, and they need skilled individuals who can design,
execute, and manage their supply chains.
• For these individuals, skill development begins with having a solid foundation of
knowledge in supply chain management concepts and principles.
Description of LB-1
• The goal of this learning block is to assess certification
candidates’ knowledge of the essential components of a
supply chain and the fundamental concepts and principles of
supply chain management.

• The content provides insight into the key roles that supply
chain management plays in improving customer service;
reducing operating costs, and improving financial
performance for organizations small or large, national or
global.

• In addition, supply chain management processes, strategies,

tools, and technologies are introduced.
Learning Objectives:
After completing the content in this learning block, certification candidates
should be able to:

1. Describe the basic concepts of supply chain management and its essential role in
an organization

2. Identify the key elements and processes of a supply chain and how they interact

3. Identify principles and strategies for establishing efficient, effective, and

sustainable supply chains

4. Explain the critical roles of technology in supply chain planning, visibility, and
execution

5. Define the requirements and challenges of moving products across global supply
chains

6. Discuss how to assess the performance of supply chains using standard metrics
and frameworks
Lectures
The Seven Principles of SCM (article) - (H)
Supply Chain Management Review,April 2007

It’s Still a Big World - (H)

Supply Chain Europe (article),2008/archives/Global_SCM.pdf

Piecing Together the Supply Chain Concept (article) - (M)

Blueprints: The Produce Professionals Journal,November/December 2005

Supply Chain Measurement: Turning Data into Action (article) – (H)

Supply Chain Management Review,November 2007

The Triple-A Supply Chain (article) - (H)

Harvard Business Review,October 2004

Supply Chain Software Basics (article) – (L)

Modern Materials Handling,April 2009

Designing and Managing the Supply Chain (book) – (M)

Chapter 1: Introduction to Supply Chain Management,2007
(H) / (M) / (L) = High / Medium / Low importance based on teacher’s experience
Piecing together the SC Concept
• What is “Supply Chain Management”?
Supply Chain is a network of facilities and transportation linkages that performs the functions of procurement
of materials, transformation of these materials into intermediate and finished products and distribution of
these finished products to customers.

Supply Chain Management ,in turn, focuses on the collaborative coordination and control of the supply chain.

Five Interrelated
process of SCM:
SCM entails both strategy
and Key processes KPI:
Internal and external
1. Plan
metrics must focus on
2. Source
SCM must: customer service
3. Make
Establish extensive effectiveness, process
4. Deliver
relations with suppliers efficiency and final
5. Return
and customers results
Piecing together the SC Concept
• Why should my organization focus on supply chain management?
Piecing together the SC Concept
• How can my organization adopt a supply chain perspective?

5 Steps will help organizations align

the activities:

1. Develop the vision

2. Establish commitment
3. Improve the resources
(train/educate)
4. Get the ball rolling
5. Monitor the results

There is no formula for sucessfully

integrating the Supply Chain
It takes time, careful Planning and a
capacity for making the right decisions
The 7 principles of SCM

INTRO: This is one of the most popular articles of SCMR. The insights provided remain
remarkably fresh nowadays because:
• Many managers achieve profitable growth by treating supply chain management as
a strategic variable and not continue feeling the rope between satisfying customer
demands and the company’s need for growth and profitability.
• These managers recognize:
1. Think about the whole Supply Chain (E2E)
2. Pursue tangible outcomes—focused on
revenue growth, asset utilization, and cost.
The 7 principles of SCM

• Principle 1: Segment customers based on the service needs of distinct

groups and adapt the supply chain to serve these segments profitably.

Companies can profitably deliver value to customers only by understanding their

costs at the activity level and using that understanding to strengthen fiscal control

Realize opportunities to better align their investment in a particular customer

relationship with the return that customer generates.
How to do it?
• By analyzing profitability of segments, cost and benefits of alternative service
packages to ensure ROI and the most profitable allocation of resources
• Setting priorities—sequencing the rollout of tailored programs to capitalize on
existing capabilities and maximize customer impact.
The 7 principles of SCM

• Principle 2: Customize the logistics network to the service

requirements and profitability of customer segments.
Companies have traditionally taken the following approaches to logistics network design:
1. A monolithic approach organizing their inventory, warehouse, and transportation
activities to meet a single standard.
2. to meet the average service requirements of all customers
3. to satisfy the toughest requirements of a single customer segment

Customize your logistics network probably will be more complex, involving alliances with
third-party logistics providers, and will certainly have to be more flexible than the traditional
network. Fundamental changes in the mission, number, location, and ownership structure of
warehouses are typically necessary.
Finally, the network will require more robust logistics planning enabled by “real-time”
decision support tools that can handle flow-through distribution and more time-sensitive
approaches to managing transportation
The 7 principles of SCM
• Principle 3: Listen to market signals and align demand planning
accordingly across the supply chain, ensuring consistent forecasts
and optimal resource allocation.
Companies have to change from isolated
forecast made by multiple departments to
a coordinated forecasting process like S&OP
that recognizes the needs and objectives of
each functional group but bases final
operational decisions on overall profit
potential.

In fact, S&OP transcends company

boundaries to involve every link of the
supply chain in developing forecasts
collaboratively and then maintaining the
required capacity across the operations.
Results of coordination: improving
fill rates, asset turns, and cost
metrics for all concerned.
The 7 principles of SCM

• Principle 4: Differentiate product closer to the customer and speed

conversion across the supply chain
Concepts:
• Mass Customization on the
manufacturing side.
• Postponement strategies across the
value chain at SKU level.
Impacts:
• Reduce lead times to get final products
to deliver.
• Kill backorders
• Improved asset utilization
Results:
Flexibility
Inventory
Key 1 : locate the leverage point of
the product .
Key 2: Try to push closer to demand
The 7 principles of SCM

• Principle 5: Manage sources of supply strategically to reduce the total

cost of owning materials and services
Companies should change traditional approach to supply from …
• … have as many players as possible fighting for the piece of the pie
• … forcing suppliers to provide 90 days of consigned material when 30 are enough

…. to a collaborative approach …
• …. soliciting short term competitive bids
• …. entering into long-term contracts and strategic supplier relationships,

Key concept: partners must share the goal of reducing costs across the supply
chain in order to lower prices in the marketplace and enhance margins.

Excellent supply chain management calls for creativity and flexibility.

The 7 principles of SCM
• Principle 6: Develop a supply chain-wide technology strategy that
supports multiple levels of decision making and gives a clear view of
the flow of products, services, and information.
Supply Chain Manager needs to build an IT system
that :
1. Handles day-to-day transactions and electronic
commerce across the supply chain and thus help
align supply and demand by sharing information
on orders and daily scheduling.
2. Facilitates planning and decision making,
supporting the demand and shipment planning
and master production scheduling needed to
allocate resources efficiently.
3. Enable strategic analysis by providing tools, such
as an integrated network model, “what if”
scenario planning to evaluate plants, But most of information to enhance SCM resides
outside our systems. Electronic connectivity creates
distribution centers, suppliers, and third-party opportunities to make a big impact. From handling of
service alternatives. orders to reduce inventories through VMI (Vendor
Managed Inventory)
The 7 principles of SCM

• Principle 7: Adopt channel-spanning performance measures to gauge

collective success in reaching the end-user effectively and efficiently.
How are we doing? Apart from internal KPI Supply Chain managers should take a broader
view to service and finance:
• Service: view the order from a customer perspective. Perfect order: arrives when
promised, complete, priced and billed correctly.
• Finance: determine true profitability of service by identifying the actual costs and
revenues of the activities required to serve an account. Using activity based costing and
channel performance measures brings a deep understanding of the cost of the business.
The 7 principles of SCM

• Translating Principles into Practice

Precepts to have in mind to implement the 7
principles:
1. Orchestrate Improvement efforts
2. SCM enhancement will not pay overnight
3. Recognize the difficulty of change
“Management must carefully balance long term promise vs
immediate business need.”

• Rewards

Asset utilization Price Advantages

Cost Retain Customers

Revenue
Remember that:
Excellent supply chain management calls for creativity and flexibility.
It’s still a Big World
• Mastery of the global supply chain is becoming a key competitive
weapon and those companies that achieve it are winning decisive
battles, both in their home markets and abroad.
3 Main challenges:
1. Cost: A poor
understanding of
logistics costs.
2. Time: Dealing with long
lead times also
unpredictable.
3. Risk:Increased distance,
delay in information,
increase the risk. i.e.:
European handset
maker. 3 days vs 3
weeks.
It’s still a Big World
• A solution in four parts: Success in global SCM requires excellence in
four strategic areas.
Leaders in global supply chain
management must:

• Gain insight into the supply chain

context of every market in which they
operate, local capabilities, limitations and
expectations.
• Develop structures and strategies to
deliver cost effectively in every one
of those different conditions.
• Equip themselves with the execution
capabilities to fulfil those strategies.
• Ensure that they enable themselves
to deliver supply chain excellence
with the right organizational
structure and the right IT tools.
It’s still a Big World
• Global SC leaders drive 9 levers in 4 areas to a level of Excellence
It’s still a Big World
• SC Structure and strategy improvements
It’s still a Big World
• SC execution/Capacity building improvements
It’s still a Big World
• Global SC enablers improvements
It’s still a Big World
• Global SC enablers improvements
SC measurement: Turning data into
action
• A three-step framework designed to help give your data analysis a
plan to follow.

The framework follows three steps, with

the output of each leading naturally to the
next one:

Step 1: Use themes and patterns to

understand the interdependencies in
the metrics.

Step 2: Identify the tradeoffs the

business is making and analyze the
root cause of the issues.

Step 3: Develop prioritized action

items.
SC measurement: Turning data into
action
• Step 1: Understanding Interdependencies— Using Themes and Patterns
There are some natural themes in a set of supply chain data:

Metrics are interdependent and certain metrics drive others. Understanding the interdependencies
serves to illuminate the path of root cause analysis.
 SC measurement: Turning data into
action
• Step 2: Identifying the Tradeoffs and Analyzing Root Cause
3-tiered model of Metrics

1st Tier Demand Forecast due to

its impact on performance all
the way through the Supply
Chain

2nd Tier where tradeoffs

are made

This company has chosen to keep its perfect order up This company has chosen to keep costs down at the
at the expense of cost expense of customer responsiveness.
 SC measurement: Turning data into
action
• Step 3: Developing and Prioritizing Action Items

Primary lever is to improve Focus should be on

Demand Forecast improving translation from
good Forecast all around its
Introduce S&OP network
and forecasting
disciplines

Investigate poor supplier performance and Identify any additional reasons of poor supplier
determine if it’s due to long payment terms performance and revisit agreements
Three categories of prioritization:
• Immediate Focus: These areas present the greatest opportunity and potential benefit from improvements
• Raise the Bar: These are additional areas where improvements can be realized.
• Monitor and Revisit: These areas will likely be impacted by improvements in the root cause problem areas identified
in “Immediate Focus,” and therefore do not require immediate action themselves.
Triple “A” Supply Chain
The best supply chains aren’t just fast and cost-effective. They are also
agile and adaptable, and they ensure that all their companies’ interests
stay aligned.
• Old version: Fast & Cost-Effective
– But, don´t create a sustainable advantage over our rivals…

• Today: AGILE, ADAPTABLE & ALIGNED

1. AGILE:
– React speedily to sudden changes of demand or supply
– Demand & Supply fluctuate much more than before
– Best model to cope with emergencies
– Understand examples article (HP, Intel, Nokia, Zara-H&M)
– HOW CAN WE BUILD AGILITY ? : 6 rules of THUMB
Triple A: BASICS
• Building the Triple-A Supply Chain
Triple “A”: Agility

• 6 rules of THUMB to build Agility into Supply Chain:

– Provide data on CHANGES in Supply and Demand to partners
continuously so they can respond quickly
– Develop collaborative relationships with Suppliers & Customers
(Design / Re-design prods/process + Back-Ups)
– Design products so they can share common parts and processes
initially (“postponement”)
– Keep small inventory of inexpensive components, cause of
bottlenecks
– Build a dependable logistics system that can enable your
company to regroup quickly in response to unexpected needs
– Create a team that knows how to invoke backup plans
TRIPLE “A”: Adapt

• Critical to ADAPT overtime, as market structures & strategies evolve (i.e:

Seven Eleven Japan)
• Companies keep adapting their SC so they can adjust to changing needs..
Can be tough, but it's critical in developing a SC that delivers sustainable
advantage
• Example of Lucent –page 5-
• Unless they adapt their SC, they won´t stay competitive for very long
• Best SC identify structural shifts, sometimes before they occur, by
capturing the latest data, filtering out noise, and tracking key patterns
• Could be defensive or proactive … even for innovations
• Examples: HP inkjet printers; Microsoft; Cisco; Gap; Toyota (Page 6)
Triple A: ADAPT: 2 key components

Ability to spot trends

• To identify future patterns; follow these guidelines
– Track economic changes; especially in developing countries
– Decipher the needs of your ultimate consumers

Capability to change supply networks

• Must retain the option to alter supply chains
– They must develop new suppliers that complement existing
ones
– Must ensure that product design teams are aware of the SC
implications of their designs
Triple A: ALIGNMENT

• Align interests of all the firms in their SC with their own

(Cisco’s contract manufacturers disregard demand= Raw materials’
scrap).
• It´s critical… because each firm try to maximize only it´s own
interest
• Misaligned interest cause problems; even in same company (HP
examples)
• Final example: SEVEN ELEVEN JAPAN Three Aces doing great !

Do you know in your company examples of misalignment??

Do you think the Triple-A supply chain requires more technology &
investments?
Who can make the Triple-A supply Chain happen??
Introduction To Supply Chain
Management
• SCM & Development Chain
SCM is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so
that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time,
in order to minimize system wide costs while satisfying service level requirements

They Intersect at Production point.

It’s clear that characteristics and The Development Chain is the set of activities and processes associated
decisions taken in any of them will with new product introduction (NPI). It includes the product design
have an impact on the other phase, associated capabilities and knowledge that need to be developed
internally, sourcing decisions and production plans.
Introduction To Supply Chain
Management
• Managing uncertainty and Risk
Global optimization is made even more difficult because supply chains need to be designed for, and
operated in, uncertain environments, thus creating sometimes enormous risks to the organization.
A variety of factors that contribute to this:

1. Matching supply and demand is a major

Challenge. Months before demand is realized,
manufacturers have to commit to specific
production levels
2. Inventory and back-order levels fluctuate across
the supply chain. In example: Distributor orders
to factory fluctuates far more than Retail orders to
distributor.
3. Forecasting doesn’t solve the problem. First
principle of forecasting is that “forecast are always
wrong”
4. Demand is not the only source of uncertainty.
Delivery lead times, transportation times,
component availability also can impact.
5. Recent trends such as lean manufacturing,
outsourcing, and offshoring that focus on cost
reduction increase risks significantly
Introduction To Supply Chain
Management
• Key issues in SCM
3 Different level of decisions
1. Strategic Level: Decisions that have a
long-lasting effect on the firm.
Key issues, questions and Trade-offs
• Product Design
• Make or Outsource
• Distribution network configuration
• Supplier selection
• Inventory Control
• Number of warehouses, etc
• Production Sourcing
• Supply Contracts
2. Tactical Level: Decisions tipically updated
• Distribution Strategies
during the year.
• Supply Chain integration and Strategic
• Purchasing and production decisions
Partnering
• Inventory policies
• Outsourcing and Offshoring strategies
• Transportation strategies, etc
• Product Design
• Information Technology and Decision-
3. Operational level: Day to day decisions.
Support Systems
• Scheduling
• Customer value
• Lead time quotations
• Smart pricing
• Routing
• Truck loading, etc
Supply Chain Software Basics
• Key software applications are enabling E2E Supply Chain Management

The aim of these systems is to capture that real-time information and make it visible to decision makers
across the supply Chain
Three different categories:
• Enterprise-level applications reside at the
corporate level and serve as the information
backbone, or the systems of record, of the
supply chain.

• Supply chain planning (SCP) applications also

reside at the corporate level, but may also be
used by plants and warehouses. These look at
the information about orders collected by
systems of record and create plans to get the
work done.

• Supply chain execution (SCE) applications are

assigned the job of executing the plans created
by planning systems.
Supply Chain Software Basics
• Enterprise resource planning (ERP): foundation of the enterprise.
Enterprise resource planning (ERP):
It is a packaged business software system that allows a company to:
• Automate and integrate the majority of the business processes,
• Share common data and practices across the entire enterprise, and
• Produce and access information in a real-time environment.
Typically, the core business processes managed by the ERP involve the manufacturing, distribution and
financial needs of a company, including cost accounting, inventory, purchasing, customer orders, invoicing,
vendor invoices and payments, customer receipt processing, general ledger and shop floor control
features. Data created by those processes is maintained in a common file and in a common language
understood by all the other systems in an enterprise

Focus moved from To Information about

Physical movement the movement of
of goods…. same goods
Supply Chain Software Basics
• Supply chain planning (SCP) software enables decision support,
optimization and cross-functional decision making
Supply chain planning (SCP):

While there are many planning components, most attack a problem from one of three angles:

• Strategic planning looks at capital asset allocation as well as market and sourcing decisions,
like where to locate a warehouse or DC to serve a particular market.
• Tactical planning asks the questions: Given my customers' demand and my resources, what
can I make that will produce the most profit for my company?
• Operational planning takes the supply chain plan developed by the strategic and tactical
planning programs and develops an operational path to execute those plans. First, it may
develop weekly production and stocking schedules. Then, it might break the weekly plans into
smaller units of time, right down to the day, hour, minute and even second.

Examples:
 Multi-echelon planning
 SC Optimization and network design
 SC event management and visibility
 SC Collaboration
Supply Chain Software Basics
• Supply chain execution (SCE) applications are assigned the job of
executing the plans created by planning systems.
Supply chain execution (SCE): Main Examples
 Warehouse Management System (WMS): supports the everyday functions that are central to warehousing: receiving,
directed putaway, order fulfillment planning, picking and packing, and shipping theorder. A more advanced WMS
system may also support other important warehouse activities,like: Replenishment, Cycle counting, Productivity.

 Manufacturing execution System (MES): manages the process on a shop floor much like a
WMS executes orders in the warehouse. At least three characteristics are unique to an MES
system:
• Tracks products and orders on the plant floor, managing the workload and collecting
transactions for reporting to ERP systems.
• Electronically dispatches the orders or product requirements to shop floor personnel, allowing the schedule
to change quickly in response to unexpected demand or to recover from equipment or material problems.
• Uses its tracking capabilities to provide other data services to the shop floor such
as quality tracking, electronic work instructions and lot traceability, among others.

Other SW Examples:
 Transportation Mgmt System (TMS): Manage transport options to meet delivery promises
 Warehouse Control (WCS): synchronizes the activities of automated storage, picking and
transportation solutions
 Labor Management: Manage performance level of warehouse personnel.
Questions for Auto Test LB1
• Pasos para el Auto Test LB1:

1. Repasar los 20 temas indicados en el excel disponible en el

Blackboard: SCProLevelOneInteractiveLearningExam-StudyPlan.xls
2. Realizar el Test de las 20 preguntas disponible en Blackboard: Test
Simulation LB1.pdf
3. Una vez realizado el test realizar la autocorrección con las respuestas
disponibles en Blackboard: Right answers for testing purposes
LB1.xls.

IMPORTANTE: Realizar el test en forma individual luego de haber

repasado los temas con la presentación y los papers y no revisar las
respuestas correctas con antelación para asegurar que el Auto Test sea de
utilidad. Revisar luego las respuestas correctas y repasar conceptos.
More info