External Supply

Chain Management
Collaboration:
Supply Side

Presented by Erlangga Arfan, MSc

Supply Chain Management Lecture
Surya University
2016
Hello!
I am Erlangga Arfan
◉  Working as Division Head of Information Technology & Supply Chain
at PT Bakrie Building Industries, Jakarta
◉  Previous working at Oracle Indonesia, Ericsson Indonesia
◉  Master Degree in Supply Chain Management from Chalmers
University of Technology, Sweden and Bachelor Degree in
Mechanical Engineering from University of Indonesia
◉  Married with one son seven years old and love to play drums
◉  You can find me at erlangga.arfan@gmail.com
 Big concept
External Supply Chain
Management?
In the past when you could do nothing else at IBM we made you a buyer,
When you couldn’t design anything
When you couldn’t build anything
When you couldn’t carry anything
When you couldn’t deliver anything
We put you into the purchasing organization

“
Agenda

◉ From Previous Lecture

◉ Area of Collaboration with External Parties
◉ Stage of External Collaboration
◉ Supply Base Strategies
◉ Lecture Plan
◉ Reference
1 From Previous Lecture
From Previous Lecture

Summary of Previous Lecture

1.  Vertical Organization VS Horizontal Organization

2.  Supply chain excellent depends on cross-functional
alignment
3.  SOP is common process applied to coordinate each
functions for managing supply with demand
4.  CEO support is mandatory required
 From Previous Lecture

Lecture Plan
1.  Introduction to Supply Chain Management
2.  Internal Collaboration
3.  External Collaboration: Supply side
4.  External Collaboration: Demand side
5.  Buyer Supplier Relationship
6.  Supply Chain Risk Management
7.  Technology in SCM
8.  Project Task
9.  Project Task
10.  Presentation
11.  Presentation
12.  Summary
2 Area of Collaboration with External Parties
Area of Collaboration with External Parties

Area of Collaboration with External Parties in SCM

•  Supply
•  Distribution
•  Production
•  Technological Development
 Area of Collaboration with External Parties
Order Point System
•  Supply
Material Requirement Planning (MRP)

Vendor Managed Inventory

Supplier of
Equipment Distributor 1 Retailer
Just in Time
Consignment
Supplier to Supplier of
Supplier Key Component Focal Company

Supplier to Supplier of
Supplier Component
Distributor 2 End Customer

Supplier of
Materials
Complementary
Producer
Area of Collaboration with External Parties
•  Supply (Order Point System)
 Area of Collaboration with External Parties
•  Supply (Material Requirement Planning)

B C

D E F

$1 $2 $4
 Area of Collaboration with External Parties
Collaborative Planning, Forecasting
•  Distribution and Replenishment (CPFR)

Available to Promise (ATP)

Supplier of
Equipment Distributor 1 Retailer Cross Docking

Supplier to Supplier of
Supplier Key Component Focal Company

Supplier to Supplier of
Supplier Component
Distributor 2 End Customer

Supplier of
Materials
Complementary
Producer
Area of Collaboration with External Parties
•  Distribution (CPFR)
 Area of Collaboration with External Parties
Lean Methodology
•  Production
Postponement

MTO, MTS, ETO

Supplier of
Equipment Distributor 1 Retailer

Mass Customization
Supplier to Supplier of
Supplier Key Component Focal Company

Supplier to Supplier of
Supplier Component
Distributor 2 End Customer

Supplier of
Materials
Complementary
Producer
 Area of Collaboration with External Parties
•  Technological Development Modularity
Global Production

Supplier of Outsourcing
Equipment Distributor 1 Retailer

R&D
Supplier to Supplier of
Supplier Key Component Focal Company

Supplier to Supplier of
Supplier Component
Distributor 2 End Customer

Supplier of
Materials
Complementary
Producer
Area of Collaboration with External Parties
•  Technological Development (Modularity)
Area of Collaboration with External Parties

Who is the main contact from a

company engaging with suppliers?
 Area of Collaboration with External Parties

Purchasing has become an important

function in the firm.
The department has the interface with the firm’s suppliers
and does the negotiations with suppliers. By forming close
relationships with suppliers the firm can get access to
these resources.
 Area of Collaboration with External Parties

In order to benefit the resources in different company units

purchasing needs to act as a link between
the suppliers and the engineering functions and has to co-
operate with internal functions – design, development and
production.
Area of Collaboration with External Parties
Actor structure

R&D Buying Firm

Logistics
Design
Procurement
•  Conflict and co-operation
•  Power and dependence
•  Trust and commitment

Sales
R&D Logistics

Selling Firm
Area of Collaboration with External Parties
Kraljic Matrix (1982)

Leverage Strategic
Products Products
Purchasing’s
impact on
financial result
Routine Bottleneck
Products Products

Supply Risk
3 Stage of External Collaboration
Stage of External Collaboration

Stage 1

-  Both parties recognize the potential power of

collaboration
-  Senior executive support
Stage of External Collaboration
Stage 1 Example

activity
Transportation
end product

Crating/Pallet
Stage of External Collaboration

Stage 2

-  Having a supply chain strategy with

collaboration as one of the core elements
-  Sharing data and strategies
-  Having a mutual plan to sustain the efforts
 Stage of External Collaboration
Stage 2 Example - Vendor Managed Inventory (VMI)
Stage of External Collaboration

Stage 3

-  The parties mutually develop key performance

indicators and jointly measure success as a
common group
-  Agree to have equitably share the saving from
their join improvement efforts
-  Have better fill rates, lower inventories, lower
costs
 Stage of External Collaboration
Stage 3 Example – Just In Time (JIT)
 Stage of External Collaboration
Stage 3 Example – Just In Time (JIT)
Stage of External Collaboration

VIDEO
Stage of External Collaboration

Suppliers

Supplier 1

Lear Volvo Cars

Supplier 2

Supplier 3
Volvo Logistics

Legend

Flow of material
Stage of External Collaboration

Suppliers

Supplier 1
Lear Volvo Cars
Supplier 2

Supplier 3

Volvo Logistics

Legend
Information exchange
Monetary flow
4 Supply Base Strategies
 Supply Base Strategies

•  Supplier rationalization
•  Outsourcing
•  Supplier collaboration
 Supply Base Strategies

Supplier Rationalization

1.  It is not possible to have close relationships with too many

suppliers
2.  Standardized the requirements of components
3.  Create a long term contract with suppliers with re-openers for
pricing issues
 Supply Base Strategies
It is not possible to have close relationships with too many suppliers

Supplier of
Supplier of Component
Component

Supplier to Supplier of Supplier of

Supplier of
Focal Company Component Main Component Focal Company
Supplier Component

Supplier to Supplier of
Supplier Component Supplier of
Component

Supplier of
Component
 Supply Base Strategies
It is not possible to have close relationships with too many suppliers

Changes in number of suppliers

Company 1985 1995

Xerox 5,000 500

Motorola 10,000 3,000

General Motors 10,000 5,500

Ford Motor 1,800 1,000

Allied-Signal Aerospace 7,500 6,000

 Supply Base Strategies
Standardized the requirements of components
 Supply Base Strategies

Outsourcing

1.  We couldn’t be expert in everything

2.  Begin buying more from outside suppliers thus outsourcing
more
 Supply Base Strategies
We couldn’t be expert in everything
 Supply Base Strategies

Supplier Collaboration

1.  Source with suppliers who are going to be tomorrow’s

technology leaders
2.  Source with suppliers having multiple component capacities up
to finished product level
3.  Having a brainstorming session with suppliers to communicate
its future technical needs and listen to what the suppliers has
to say about those requirements
Supply Base Strategies

Source with suppliers

who are going to be
tomorrow’s
technology leaders
5 Lecture Plan
 Lecture Plan

Summary of Today Lecture

1.  Purchasing Organization has an important role in developing a relationship

with suppliers
2.  There are three stages in developing collaboration with external parties. More
open the relationship is closer the relationship
3.  Supply strategy can be done by reducing the number of supplier, generalizing
the components and maintain collaboration closely
 Lecture Plan

1.  Introduction to Supply Chain Management

2.  Internal Collaboration
3.  External Collaboration: Supply side
4.  External Collaboration: Demand side
5.  Buyer Supplier Relationship
6.  Supply Chain Risk Management
7.  Technology in SCM
8.  Project Task
9.  Project Task
10.  Presentation
11.  Presentation
12.  Summary
 Lecture Plan

1.  Group?
2.  ?
3.  ?
4.  ?
5.  ?
6.  ?
7.  ?
8.  ?
6 Reference
 Reference

•  Dubois, A, (2004), Lecture of SCDM1, Chalmers University of Technology,

Gotheburg, Sweden
•  Gadde, L-E. and Håkansson, H. (2001), “Supply Network Strategies”, John
Wiley & Sons, Chichester
•  Gadde, L-E. (2004), Lecture of SCDM 2, Chalmers University of Technology,
Gotheburg, Sweden
•  Slone, Reuben E., Dittmann, J. Paul, and Mentzer, John T. (2010), “The New
Supply Chain Agenda”, Harvard Business Press, Boston, Massachusetts
Thanks!
Any questions ?