Dr Stephen W. K. NgPresident of The Institute of Purchasing & Supply of Hong Kong,

and Vice President, IFPSM-A/P Region

March 9-10, 2006 Makati Shangri-La Hotel, Makati City, Philippine

Effective Supply Chain from a CEO Perspective

April 20, 2012

1

The Institute of Purchasing & Supply of Hong Kong

2

About the Speaker – Dr. Stephen W. K. Ng

• Dr. Ng is managing director of QuST Continuation Limited and was Associate Project Director of Poon Kam Kai Institute of Management, the University of Hong Kong. He headed up the Executive Training and Development Stream for the Institute of the University in 1999 to 2002. 

• Stephen is formerly a director at Motorola Semiconductors, Asia where he spearheaded the Change Program, 3PLs & 4PLs and Customer Focus/ Responsiveness Centers for Motorola throughout the world. Stephen also was instrumental in helping design and deliver of Leadership, Strategic Planning, Supply Chain Leadership, Logistics, Quality, Communication and Services related  programs for the Corporation and Motorola University in Asia.

• Stephen is currently President of Institute of Purchasing & Supply of Hong Kong, Director of the International Federation of Purchasing and Supply Management (IFPSM), Honorary Advisor of the Six Sigma Institute, Member of Hong Kong Logistics Development Council, SAR Hong  Kong Government, and Member, Industry Training Advisory Committee (ITAC), Education Bureau. 

• Stephen is also a visiting lecturer of the University of Hong Kong and an Adjunct Professor of The Hong Kong Polytechnic University focusing on the teaching, research, procurement development, logistics and total supply channel leadership.  He is also an Adjunct Professor of Beijing Jiaotong University.

3

Sharing for Today

1. Purchasing to Supply Chain, from Profession to Professionalism

2. The CEO’s Agenda and the New Climate Challenge 3. Transforming the Global Supply Chain, the End‐to 

End Sustainability4. What it takes to win from Purchasing to Supply 

Chain Leadership5. The Future Challenge of Supply Chain of 2030

4

60’s60’s

70’s70’s

80’s80’s

90’s90’s

00’s00’s

Mass Production大量生產

Low-cost Manufacturing低成本製造

Total Quality Drive全優質領導

Speed & Customer Relationships服務效率與關係

GSC Management全球供应链管理

Modified from Jon Anton 1996

50’s50’s

New Product新產品

Marketplace Force in Action moving towards GSCM

5

Characteristics of the 21st Century Winning Corporations

Old Characteristics

Goal‐directedPrice‐focusedProduct quality mind‐setProduct‐drivenShareholder‐focusedFinance‐orientedEfficient, stableHierarchicalMachine‐basedFunctional Rigid, committedLocal, regional, nationalVertically integrated

Emerging Characteristics

Vision‐directedValue‐focusedTotal quality mind‐setCustomer‐drivenStakeholder‐focusedSpeed‐orientedInnovative, entrepreneurialFlat, empoweredInformation‐basedCross‐functional…Flexible, learningGlobalNetworked, interdependent

SEI Center 19966

Total Supply Chain Management Overview

Accurate and timely information flow

Product Flow

Need efficient consumer response

Supplier Manufacturer (Plant)

Manufacturer (Sales & Distribution)

ConsumerRetailerWholesaler

7

Typical Supply Chain

• information is not shared• unnecessary inventory at various levels• visibility only of your own ‘link’

8

Integrated Supply Chain Management (SCM)

• information is shared across the supply chain• faster, more accurate, more efficient replenishment• drive unnecessary costs out of the supply chain• strengthen partnerships with customers and suppliers• turn inventory from a cost into an asset

9

SCM versus Channel Management (CM)

• SCM is fundamentally a philosophy of channel management which seeks the synchnonization and convergence of intraenterprise and interchannel operational and strategic capabilities into a unified compelling marketplace force.

• CM refers not to a concept but, rather, to the actual strategic objective and the structure of channel business functions, institutions, productive values and physical operations that define the way a particular channel system moves goods and services to market through the supply pipeline.

- D. F. Ross -

10

Total Materials Management

The Relationship of Purchasing/Procurement/Supply Management Activities and Material DecisionPurchasing and Supply Management, by Donald W. Dobler et al.

11

The Evolution of Procurement to Performance

Focus on price/mfg Costs

Focus on quality,Speed, reliability,responsiveness,and total cost

Strategic Focus‐ supplier relationships

‐Forecasting‐Green

‐ cycle time‐ results

Product ‐ centred

Process ‐ centred

Relationship based

Strategic Performance 

Collaborative CommerceSourcing Activities L. T. Results

12

Scope of Professional and Professionalism

Specialist teams and individuals in Supply Management require:

– Range of roles (range of relationships)– Innovative/intelligent people– Technical/influencing skills– Internal consultant (understand key drivers)– Help define need– Understand rules– Performance spec– Innovative sourcing– Transparent decisions– Leadership– Trust, Respect and high Integrity

13

Variable %Purchasing people capabilities 25Mindset/aspirations 16Strategic influence of purchasing 16Purchasing processes 13Cross-functional collaboration 12Knowledge/information/IT 8Performance tracking/compliance 7Structure of purchasing 3Total 100

Source: McKinsey & SMI (European Business School) Global Survey, September 2006

Professionalism – The Key Success Skills

14

Challenges of SCM

• Intensified, global competition• pressure to improve operations• Accelerate time-to-market• Create value for my business partners

• What must companies do to increase productivity and lower their costs while providing greater value & better customer experience

15

Challenges of SCM

• Solutions often involve changes to multiple functions

• Many companies have not been very successful because they have taken a narrow, functionally focused approach

• Functionally focused initiatives address narrow concerns and preempt a broader examination of the issue

16

“ I am convinced that if the rate of change inside the institution is less

than the rate outside, the end is in sight “

- J. Welch

17

However, World has changed…

It’s no longer the big beats the small,

the new business game is that the fast eats the slow

企業不論大小， 速度取勝

客户滿意為先

It’s all about “Responsiveness”

18

The Real Challenge of The Value Chain – 服務價值鏈的挑戰

Quality Service服務

Source: Modified from Value Chain © 1985 Michael Porter

Firm Infrastructure 企業結構與組織

Human Resource Management 人力資源領導

Technology Development 科技之研發

Procurement Vision 採購專業之推動及願境

Inbound

Logistics

進物流

Operations

營運

Outbound

Logistics

出物流

Marketing

&

Sales

營銷

主要營運 Primary Activities

企業支援

19

TheBasics

Cross-Functional

Teams

IntegratedEnterprise

Extended ValueChain

ValueChain of

the Future

“Functional Excellence”

“Serve Our Customers”

“Drive Business

Efficiency”

“Create Market Value”

“Be a Market Leader”

Evolution in the Value Chain

Competitive Necessity Competitive Advantage

Ainsley Mann 2001

Corporate View of Strategic Procurement Planning

External Environment

PEST Analysis

External Environment

PEST Analysis

Internal Factors

SWOT Analysis

Internal Factors

SWOT Analysis

Corporate VMV, Objectives &

Strategies

Competitive Strategies

MarketingMarketing ProductionProduction

FinanceFinance Supply Process Supply Process

Functional Strategic Plans

21

• Competitive Advantage

• Profitable Growth • Innovative / Green • CSR / CER /CER• Satisfied

Customers & Suppliers

• Win-Win-Win

Results Expected

• Changes in Global /  Regional / Local Economic Conditions

• Customer Expectations / Challenges

• Operational / Political Challenges

• Supplier Challenges

• …

Potential Causes of Supply Continuity 

Issues

• Rapid Response / Speed Capability

• “Suppliers of Choice” with Customers

• “Customers of Choice” with Suppliers

• Improved Cost / Asset Management

Transform Risks into 

Opportunities

Corporate View of Strategic Procurement Planning –Ensure Total Continuity of Supply

Modified from Judy Baranowski, AlixPartners – IFPSM 200922

Rapid Response with Closed Loop Corrective 

Actions

Ensure Visibility Up/Down/Across Organization

KPIs ‐Metrics, Analytics, Predictors and Results

Cross Functional and Team Involvement

Core Processes to Minimize Potential for Supply Continuity Issues

Ensure Total Continuity of Supply – an Integrated Move

Modified from Judy Baranowski, AlixPartners – IFPSM 200923

The Emerging Logistics SCM Trends Worldwide

Business Process Integration

•JIT•QR•Integrated Logistics Management•SCM•ECR•Green•CRP / ERP•DC & RDC•Warehouse Automation•Outsourcing - 3LP•Cross Docking•VMI•CPFR•Electronic Commerce•SC Benchmarking•4th Party Logistics Provider•ERM & CRM•Crisis and Sustainability

Emerging SCM Trends

24

More radical approach• Thinking …“out‐of‐the‐box”

• Pushing Management to think:– cross functional, – boundary spanning,

– Integrated Green Logistics & global supply chain, 

– toward virtual Logistics & supply chain

– Culture change

JIT

Waste

25

The Future of Purchasing and Supply Management

• The first course on purchasing was in 1917 by the Harvard University.

• Supply Management Strategies.• Aims and Weapons of Strategic Supply

Management (SSM).• Skills needed by Supply Management

Professionals.• Evolution of Purchasing and Supply

Management Roles• Supply Management has no Boundaries.

The Future of Purchasing and Supply Management – Giovanni Atti - 2010

26

The Supply Chain and Logistics Flow

Retailer

Wholesaler

Distributor

Factory

External Demand

Delivery lead timeOrder lead time

Order lead time Delivery lead time

Delivery lead timeOrder lead time

Production lead timeBy David Simchi‐Levi

Purchasing Management

Customer Management

The Demand Chain?

27

The Future Supply Network

KeySuppliers Distribution Consumers

RetailOutletsManufacturingPrimary

Resources

Information Flow

Interactive Data Base and Exchange

ConsumerValue

Network Shared Savings Flow

Flow of Goods and ServicesBy Charles C. Poirier28

Typical Supply Chain Structure, Logistics Flow & Common Terminology

Your Company

2nd-TierSuppliers

1st-TierSuppliers

2nd-TierCustomers

1st-TierCustomers

Supply side Demand side

Purchasing & supplymanagement

Physical distributionmanagement

Logistics (transport)Materials management

Global Supply chain managementModified from Slack et al “Operations Management” 1998 p475

29

The Global 2Cs - Change and Challenge

Challenge:

30

The Three Pillars Model of Sustainable Development

持續改善环境

持續發展經濟 持續社會承擔

企業持續發展

SCR – Edmundo Werna, 2009

31

Business Continuity Plan – Macro View of Corporation BCP

Crisis Management Planning and Executive, Edward S. Devlin 2007

32

Key Performance IndicatorsInformation Systems Quality & Costs Analysis

Synchronised Demand

Integrated Supply

Synchronised Production

Synchronised Supply

Category Management

Operations & Logistics Improvements

Product and Service Management

Enablers

Short cycle planning and inventory optimisation

ClickReliableSupply

Reliable (production) Operations

Flexible (production) Operations

Continuous Replenish-

ment

Cross Docking & Distribution

Automated Store

Ordering

Total Quality & Operations Reliability

ReliableSupply

Demand Management and Communication

Supply Chain, Supply & Logistics Management Overview

33

The Foundations of Leadership Development for Supply Management

Modified from Paul R. Yost & M. M. Plunkett, 2009 - Real Time Leadership Development

KeyInfluences

34

The Value Chain –服務價值鏈的挑戰

Quality Service服務

Source: Modified from Value Chain © 1985 Michael Porter

Firm Infrastructure 企業結構與組織

Human Resource Management 人力資源領導

Technology Development 科技之研發

Procurement Vision 採購專業之推動及願境

Inbound

Logistics

進物流

Operations

營運

Outbound

Logistics

出物流

Marketing

&

Sales

營銷

主要營運 Primary Activities

企業支援

35

Supply Chain Management & Leadership for PDSP&SCM12 M2 on March 8 – May 3, 2010                            Stephen Ng, QuST, IPSHK  2010          36

The Value Chain Challenge – The Value Adding Process!

Logistics, transport and inventory flow management

36

The Complexities of Global LogisticsGreen initiatives…A growing public concern for the planet

Government

Regulation

Climate ChangeRecycling

Waste ReductionPollution

Everyone in the Supply Chainwill be Impacted

GlobalTemperature

Population

CO2

SiberianPermafrost

Melt

Artic IceMelt

# of FloodsHurricaneTyphoonIntensity

OceanWarming

Population:1AD = 250M1776 = 1B1945 = 2.3B2006 = 6.5B2050 = 9.1B

Motorola Quality Culture Evolution摩托罗拉品质文化的演变

1979 - Management Commitment and Understanding管理承诺与理解

1981 - Great Quality Awakening 巨大的品质意识10 X Improvement in 5 years 五年中的10倍改善

1986 - Bench Marking and Quality Surveys 水准制定的品质评述

1987 - CEO Directive and Six Sigma Change Vision总裁指导与六西格玛理想

1989 - 10 X Quality Improvement 10 倍品质改善

1991 - 100 X Quality Improvement 10倍品质改善

1992 - Six Sigma (Baseline 1987)六西格玛

1993 - Six Sigma and Beyond六西格玛及其超越2000 - 10 X Quality Improvement in every 2 years

每两年10倍品质改善2000 - 2 X 2000 in RONA 双倍回报

• Quality & Compliance challenges

• Communication problems

• Operational issues

• Logistics /traffic problems

• Engineering problems

• Supplier’s supply problems

• Sudden changes in customer demand

• Supplier financial problems

• Government / Policies challenges

• Green Supplier issues

• Business ethics issues

• ……

Total Continuity of Supply – Potential Problems

Modified from Judy Baranowski, AlixPartners – IFPSM 200939

REACTIVE

• Understand today’s burning issues

• Fix them – a quick fix• Implement controls / processes

to ensure the solutions stick• Free up resources to work on

proactive processes• Respond to issues happening

everyday

PROACTIVE

• Understand the external environment• Understand strategic direction for the

enterprise, i.e. The Green• Collaborate with the internal and

external teams• Define the appropriate supply chain

strategies and action plans for the business

• Implement the plan – with ongoing checkpoints, compliances and recognitions

Ensure Total Continuity of Supply – Short and Long Terms

Modified from Judy Baranowski, AlixPartners – IFPSM 200940

The 12 imperatives for outstanding supply chain performance

How do we deliver distinctive value and differentiated service to local customers,

while at the same time exploiting opportunities from a globalised view of

supply chain?

The strategic imperativesAdding value to the customer1 st imperative: the customer value driven supply chain2 th imperative: differentiation through the product offeringSearching for structural advantage3 th imperative: global operations restructuring4 th imperative: strategic sourcing and co-venturing partnershipsBusiness integration and performance drivers5 th imperative: integrating/synchronizing the supply chain network6 th imperative: operations beyond the productivity edge

How do we align the who enterprise –people, processes, operations, technology, suppliers, and other business partners –

around a programme of progressive strategic change?

The key enablers7 th imperative: business structure and organisation8 th imperative: process and performance measures9 th imperative: people and behaviours10 th imperative: high performance partnerships11 th imperative: leveraging information and technology

How do we future proof and build agility into, our supply chain operations in

response to the pace of external change and ever increasing pressures from

shareholders and competitors?

Managing at the pace of change

12 th imperative: agility and the ability to respond to change

Source: PWC41

Supply Channel Integration (E to E)

COLLECTIVE LEADERSHIP APPROACH

Enterprise

FinanceMarketing

SalesEngineering

Total LogisticsInventory Planning

Production ManagementPurchasing

Customer ServicesTransportation

WarehouseIS

Total LogisticsInventory Planning

Production ManagementPurchasing

Customer ServicesTransportation

WarehouseIS

Enterprise

FinanceMarketing

SalesEngineering

NETWORKENABLERS

RELATIONSHIP

SUPPLIER SUPPLIER

Sources: CTSCM, D.F. Ross 1998

IS A CHALLENGE TOTOTAL LOGISTICS andMaterials Management!

42

The Competition and the Next Competition (Co-operation + Competition)

Copetition

43

Volatility in the Electronics & Semiconductors Supply Chain

‐60.00

‐40.00

‐20.00

0.00

20.00

40.00

60.00

80.00

100.00

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001

Year

% C

hang

e, Y

ear-

to-Y

ear

Worldwide Semiconductor Manufacturing Equipment SalesWorldwide Semiconductor Shipments

Electronics, Computing and Communications Equipment OutputGDP World GDP USA

44

All Conclusions are Temporary

Clockspeeds are increasing almost everywhereValue Chains are changing rapidly

Assessment of value chain dynamics

Build Strategiesand Roadmaps

Changes of what we Think?

From Prof. Charles Fine, 200945

Source: Fortune Global 500, 1990, 1999, 2008

By Mr. Soeren Vammen IFPSM 2008

Chapter 11

46

Data Data

Banks

Suppliers

Data

Data

Data

Data

YOUR COMPANY

DataData

Transporters

Customers

A New Way of Doing Business

• Trust building• Information sharing &

Management

The Technologies!!!

47

Globalization of Electronic Product Code (EPC Global)

The Challenge to Supply Chain and Logistics Management, The Drive for Ultimate Technologies… 

48

Supply Chain Continuum

True Stockless Inventory

Product Standardization

Just-In-Time Delivery

Comprehensive Inventory Management

Prime Supplier Programs w/Scheduled Deliveries

Prime Supplier Programs w/EDI

Inventory Management Programs In Selected Departments

Consolidation/Reduction of Suppliers

Committed Group Purchasing

Materials Management w/Information Systems & Software

Materials Management Orientation

Traditional Purchasing Department

Supplier Management

Potential

For Cost

Reduction

High

LowHigh

Low Speed of Response

Evolving and Adapting Operations of the Future – Influences

By John Gattorna in Dynamic Supply Chain Alignment, 2009

50

Supplier market Economy general &

accounting

Business process management

Cooperation

Influence & communication

Flexibility

Analysing skills

Creativity

Leadership

Project management

LanguagesIS/IT- general

Company environment/

contextCompany end

customer market

Company positioning and development

Company business processes and IS/IT

General skills

Professional skills

Business skills

Developing competency through a non-stop learning culture…

Supply Chain

KnowledgeSupply Management

WarehousingNegotiation Outbound

logistics/ Distribution

Reverse logistics

Logistics toolbox/KPIs

51

The Operations in Supply Side Alignment of 2030

By John Gattorna in Dynamic Supply Chain Alignment, 2009

52

Summary Notes

• Implementing World Class Supply Management and World Class Supply Chain Management is as much about leadershipand management as it is about supply management concepts and practices with results

• That is all about people and the soft skills and our behavior towards these basics, but useful skills

• Based on it’s integrative, relationship, and boundary spanning nature, there is no question in our minds:

“World class supply managers have the essential skill sets to become Chief Supply Chain Officers, Chief Procurement Officers and Chief Executive Officers!”

53

Readings & References ..…

1.  “World Class Supply Management, the key to supply chain management”, by David N. Burt, Donald W. Dobler, Stephen L., Starling, 2004  

2.   “Purchasing & Supply Chain Management”, by Arjan J. Van Weele, 2005

3. “Outsourcing and Offshoring of Professional Services” by Amar Gupta 2008 

4.   “Purchasing and Supply Management, Test and Cases” by Donald W. Dobler and David N. Burt, 1996

5.   “Supply Chain Logistics Management” by Donald J. Bowersox et al., 2010

6.   “Operations & Supply Management” by F. Robert Jacobs et al., 2009 7.   “Management, Leading & Collaborating in the Competitive 

World” by Thomas S. Bateman & Scott A. Snell, 2009

8.   “Supply Management” by David Burt, S. Petcavage, and R. Pinkerton, 2010 

9. “Global Supply Chain Management and International Logistics” by Alan E. Branch, 2009 

54

55