Intelligent Manufacturing € October € 1996 € Vol. 2 € No. 10

Supply Chain Model Proves Successful

The Supply Chain Council, an industry consortium, has unveiled the structure of its Supply Chain Operations Reference Model, a cross-industry framework for improved supply chain management that will be launched next month. The model will provide manufacturers, suppliers, distributors and retailers with a framework to evaluate the effectiveness of their supply chains and to target and measure specific process improvements. Creating a language for communicating among intra-company functions and inter-company supply chain partners, the model defines common supply chain management processes and matches them against "best practices," benchmarking performance data, and optimal software applications.

The 69-member Supply Chain Council includes diverse industry leaders such as Dow Chemical, Compaq Computer Corp., Procter & Gamble and Federal Express. Since its founding in April, the Council has been working steadily to build a framework that can be applied to any company's role in the supply chain across industries. The Council was organized by two Boston, Mass.-based management consulting firms, Advanced Manufacturing Research (AMR) and Pittiglio Rabin Todd & McGrath (PRTM).

Spanning every supply chain-related activity from "the supplier's supplier" to the "customer's customer," the model is focused on the four key supply chain processes: plan, source, make and deliver. "A process reference-model is used to describe, characterize and evaluate a complex management process," explained PRTM director Bill Helming. "It builds on the concepts of business process reengineering, benchmarking and process measurement by integrating these techniques into an easily configurable cross-functional framework."

At the heart of the Supply Chain Council's model is a pyramid of four levels that represent the path a company takes on the road to supply chain improvement:

Level 1 provides a broad definition of the plan, source, make and deliver process types, and is the point at which a company establishes its supply chain competitive objectives.

Level 2 defines the 26 core process categories that are possible components of a supply chain (i.e., Source includes "source purchased materials," "source engineer-to-order products," and "source make-to-order products"). A company can configure both its actual and ideal supply chain by selecting from these core processes.

Level 3 provides a company with the information it needs to successfully plan and set goals for its supply chain improvements. Planning elements include process element definitions, target benchmarks, best practices and system software capabilities to enable best practices.

Level 4 focuses on implementation, when companies put specific supply chain improvements into play. Since changes at Level 4 are unique to each company, the specific elements of the level are not defined within the industry-standard model.

Two early implementations of the reference model by Council members have been developed. The first features a representative mock supply chain made up of five electronics manufacturers in areas ranging from component manufacturing to final assembly and distribution. Testing the model's structure, content and application, the development group found the model was successful as a common language for documenting and discussing supply chain practices within and among companies, as well as an easy-to-use tool for evaluating present and "could be" supply chains. The group plans to pursue further work with the model in the area of customer/supplier best practices among supply chain partners.

In addition, Rockwell Semiconductor Systems has used the framework in an internal supply chain improvement effort. According to Vinay Asgekar, manager of business process reengineering, Rockwell applied an early iteration of the framework in an assessment of the company's current supply chain practices and a configuration of its supply chain based on the Level 2 process elements. The project then drove an enterprise-wide effort to realign various functional groups and departments into a process-centric organization to enable supply chain improvement efforts.

For more information on the Supply Chain Council and the model, visit the Council's Web site at http://www.supply-chain.com or contact AMR at (617) 542-6600 or PRTM at (617) 647-2800.

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