Supply chain management-front-end anti-impurity, back-end weight reduction, intermediate treatment summary

Chapter 1: front-end clutter suppression-controlling cost by controlling complexity

The focus of this article is:

Complexity is the cost of the drive. Complex products need complex organizations and processes to support them. Three-dimensional complexity together determines the cost and speed of products and supply chains.

By comparing the complexity of Hanwang technology products with the simplicity of Apple, the advantages of simple products are illustrated. For consumers, producers and buyers, the simpler the better, the simpler the product supply chain and the easier the cost control.

There are three levels of product complexity: product line-too long, product model-flooding, too many parts-non-standard parts. The product line is getting longer and longer, the product models are getting more and more, and the unique parts are flooding, which leads to a great increase in product complexity.

Complexity is good or bad. Complexity that customers are willing to pay is good, and complexity that customers are unwilling to pay is bad. What enterprises should do is to make profits on good complexity and reduce costs on bad complexity.

The price is determined by the market, and the cost is determined by the complexity. Those companies with high complexity are doomed to be difficult to survive. For example, in Chinese restaurants in Silicon Valley, everything is cooked, with many kinds of dishes, miscellaneous materials, large quantity of dishes and low price. The final result can only be difficult to maintain, so I change my boss frequently and go back and forth.

The complexity of products leads to the complexity of organization and process, which pushes up the cost.

The complexity of the process, in addition to the complexity of the product, is the fundamental reason that the enterprise has not combed the process from the customer's point of view and handled those details well. There is a problem with using U shield to prompt digital signature in the bank, but the result is that the driver is not installed normally and needs to be reinstalled. The result is that Zhaopin's recruitment account is a trial account, and the sending time of online booking of museum tickets is wrong, but the result is that seats have been reserved, which shows that the complicated process will make customers fall into the misunderstanding of solving problems. Complex processes and complex products go hand in hand, and behind complex processes, we often see the shadow of product complexity.

Process is dead, once formed, it is difficult to change, no matter what level of managers; Organizations are active, so enterprises often make adjustments, hoping to cope with the complexity of the process. The complexity of the organization is reflected in the inconsistency of goals. For many local enterprises, in the rapid development of 20 or 30 years, the wartime goal of serving the country is the same; When it comes to persistence, it is difficult to coordinate interests. In particular, the founder retired, the growth rate of enterprises slowed down, enterprises lost their goals, the team lost its direction and centripetal force, and the complexity of the organization increased greatly. In order to reduce the complexity of the organization, KPI management is needed.

The control of complexity should be three-pronged, and products, organizations and processes should be controlled together, because the three are intertwined. Complex products need complex organizations to support them; Once the organization is complex, the process will not be simple; Once the process is complicated, the cost is not good, and the speed is not good. The main means to reduce the cost of supply chain, including negotiation price reduction, process optimization and design optimization, are actually processes to reduce complexity.

Part II: Back-end weight reduction-reducing supply chain costs by reducing assets.

The focus of this article is:

How to realize the back-end supply chain after the front-end customer demand comes in? Two ways

Heavy asset operation: self-built factory building, self-produced and self-sold. Vertical integration, do it yourself.

Light asset management: outsource and let professional suppliers produce. Depends on the market and suppliers.

Two modes of asset-oriented management: expanding production and company merger and acquisition.

Disadvantages: low return on investment. Asset-driven expansion has gained the market and lost profits; Expanded the scale and lost the cost advantage. If large companies cannot build a so-called "full supply chain" through vertical integration and form a monopoly or market dominance, it is often difficult to compete with small and medium-sized competitors in cost and speed. Asset-oriented M&A, investment and integration often leave only a pile of bad assets, whether acquired at that time or poorly managed after the merger. It is easy to convert cash into assets, but it is difficult to convert assets into cash. In this way, these non-performing assets have become the burden of the company, making the company's return on assets decline all the way.

Asset-oriented management is a feature of the industrial age and another reason for high cost. "Back-end weight reduction" is to change the vertically integrated asset-oriented operation mode and obtain resources through the market, that is, to improve the supplier management ability, select and manage suppliers, and rely on the ability of professional suppliers instead of investing and building factories by themselves. In the post-industrial era, what is more important is soft power, that is, the ability to integrate and manage supply chain resources.

That is to say, to take the road of light assets, light assets is professional management, which is the process of building the management ability of supply chain and suppliers. When changing from asset-oriented strategy to light asset strategy, the most important thing is to improve management ability, that is, the ability to control suppliers and supply chain, which is one of the core competitiveness of the company.

The company's core competitiveness: R&D, marketing, supply chain management and integration capabilities. Supply chain management has become a strategic function.

For example, the key to Apple's success is to have a first-class R&D team to develop first-class products; Have a first-class marketing strategy, can sell products at a good price; There is a first-class supply chain management team to ensure that the perfect order can be submitted at the right cost.

It takes a long and arduous process to establish a first-class supply chain management capability.

The ability of supplier management is a necessary condition for ignoring assets: attaching importance to assets is a dead end. If enterprises want to ignore asset management, they must obtain resources from the market. Obtaining resources from the market is inseparable from supplier management. Three basic aspects of management: organization, system and process;

(1) Does the company have a clear supplier management process, from selection to management to performance improvement?

(2) Does the company have a unified supplier management organization with clear responsibilities?

(3) Does the company have a unified supplier KPI system and information system?

In supplier management, when there are no rules to follow and the system, process and organization are not perfect, we can only rely on the experience of personnel, the predictability of management results is poor, supplier selection and performance management are not in place, which leads to frequent problems at the order level.

Countermeasures: "Five Steps of Supplier Management"

The successful implementation of the five-step process depends on a supplier management organization with clear structure and clear responsibilities.

How to build supplier management ability?

1. Have the right organizational structure and the right people to do the right things; 2. Solidify experience, wisdom and methods into the process to ensure the reliability and consistency of implementation and quality; 3. There is a suitable system to support and solidify the process, and provide performance feedback for the organization and process to form a closed-loop management, as shown below.

Three misunderstandings in supplier management:

1. Pursue small optimization of material quantity and project level at the expense of big optimization at supplier level.

2. Frequent trial and error of light selection and heavy elimination

3. Excessive reliance on market competition to manage suppliers

Learn from experience and lessons, try to avoid misunderstandings, build first-class supplier management functions, and take the road of neglecting assets. This is the way to reduce costs through back-end weight loss.

Chapter 3: Intermediate Control-Improving Plan and Reducing Inventory

The focus of this article is:

High inventory is another form of high cost. Inventory, like most problems of enterprises, seems to be a failure, but in fact it is unexpected, which stems from slow implementation and congenital deficiency of planning. Planning is the shortcoming of local enterprises, and improving management should start with improving planning, as well as controlling inventory. Planning is a bridge between (front end) demand and (back end) supply. "Intermediate chaos control" is to improve the planning level, better match demand and supply, and control inventory and its cost.

Inventory is the focus of various problems in the supply chain;

The better the operation, the lower the inventory and the higher the inventory turnover rate; Or conversely, the process from Dallas to the auditorium to solve the inventory problem of an industry is also the process from chaos to rectification. The more mature the inventory management, the more mature the supply chain management of the industry and the more mature the industry.

Type and source of inventory:

To reduce inventory, we need to start with the root causes of inventory and take countermeasures:

Turnover inventory: shorten the turnover cycle and reduce the turnover inventory. For example, shortening manufacturing time, such as lean production; Shorten transportation, installation and delivery time; Speed up the information transmission and shorten the information turnover cycle.

Safety stock: control the uncertainty, control the uncertainty caused by asymmetric information and poor implementation, such as control the on-time delivery rate, quality qualification rate and procurement lead time.

Excess inventory: improve the plan and reduce excess inventory. Such as strengthening planning function, improving decision-making ability and managing minimum order quantity.

Inventory is the adhesive between demand and supply, and planning is the bridge between demand and supply. Supply chain planning begins with demand planning, which is equivalent to the first driving force of supply chain. After the demand plan is made, how much to produce and how much to purchase can be judged according to the inventory. The latter is based on the former, and the four plans are interlocking to form a supply chain planning system, which drives the operation of the whole supply chain:

Demand planning is the driving force of supply chain, and its importance is self-evident, but it does not mean that demand planning has been paid enough attention and resources have been obtained. On the contrary, in many enterprises, more resources are invested in production planning and procurement planning, while demand planning is often ignored. "The plan can't keep up with the changes, so we should change with the constant", and simply ignoring it is actually a misunderstanding. The purpose of demand planning is not to pursue invariability-change is absolute, but to formulate corresponding solutions for possible changes.

Another reason why demand planning is neglected is that after the rapid growth of enterprises, organizations, systems and processes can't keep up, and marketing and supply can't be effectively connected, and reasonable demand planning can't be carried out.

How to make a demand plan? -Start with data and judge the end, and predict future demand according to historical data.

Historical data is the quantitative factor of demand forecast, and the judgment of sales and customers is the qualitative factor. The combination of the two can produce the best demand plan.

Who will make the demand plan? -Demand Planning Manager

Demand planning manager is the focus of cross-functional collaboration, and needs to be a full-time position, responsible for analyzing historical demand data, coordinating sales, market, customers, products, brands, supply chain, finance and other functions and executives, and making demand plans.

Which function should demand planning belong to? -Depending on the maturity of demand planning process, it belongs to sales or market when it is immature, and to supply chain when it is mature.

What is the demand planning process? -trilogy: 1. Data start, 2. The verdict is over, 3. Gain cross-functional knowledge. Here is a simplified process:

In this way, the final result of realizing * * * knowledge is "the same set of numbers", which drives marketing and the whole supply chain.

For companies and supply chains, planning is far more important than expediting, and it is the engine of supply chain:

Planning-driven procurement, operation and logistics are the most important functions in supply chain management. Although planning is important, we can't rely on perfect planning and forecasting. Various factors make it impossible to achieve 100% accuracy in planning and forecasting. However, although all the predictions are wrong, there is still a big difference between more mistakes and less mistakes. We can't give up the plan just because it can't keep up with the changes. In the plan, something is far better than nothing.

Planning is the core of management. A good plan increases the certainty of enterprise operation and is the key to control the operating cost and inventory of enterprises, especially large and medium-sized enterprises. Common enterprise management mode: strategy-tactics-execution.

On the strategic level, the boss sets strategic goals; On the tactical level, professional managers turn strategic objectives into plans, feed back the feasibility of strategies to the strategic level for strategic adjustment, and then decompose them layer by layer to guide grass-roots implementation; At the executive level, the grass-roots staff put the plan into practice and feedback the enforceability of the plan to the tactical level for adjustment.

Supply chain planning needs an index system to support it. There are three operational indicators of supply chain: customer service level (such as on-time delivery rate), asset utilization rate (such as inventory turnover rate) and operating costs (such as labor, logistics and warehousing costs).

All kinds of problems in supply chain will be more or less reflected in inventory, which is mainly a planning index and the focus of all kinds of problems in supply chain. Reducing inventory and controlling costs by improving planning is a process of intervening chaos.

Summary:

The control of "front-end anti-impurity" is complicated, "back-end weight reduction" deals with heavy assets, and "intermediate chaos control" solves the inventory problem. Only by taking a three-pronged approach can the cost be better controlled. Supply chain plays a key role in front-end anti-impurity, back-end weight reduction and intermediate chaos control;

Finally, the story of Apple's supply chain management concludes that Apple's success is ostensibly a product success, but also a supply chain success. It clearly presents the three development stages of the supply chain: from working (execution) without looking at the road (planning), to not only working (execution) but also thinking (planning), and then to not only doing rough work (execution) but also calculating detailed accounts (analysis). Simply put, it is three meetings: work, planning and accounting.

The success of Apple's supply chain once again proves that a company, especially a technology company, can only develop first-class products and survive if it has first-class engineers, but it is not enough to have good products. If we can't improve the quality and reduce the cost, even the best products can't compete in the market. Good products and a good supply chain can make an enterprise from excellent to excellent: supply chain has become a strategic function of an enterprise.