MIT Process Library -- Amazon
Copyright 2006 Robert J. Glushko
Pattern resources for scavenger hunt
More supply chain patterns
Patterns "in the middle"
Information supply chains
Document automation patterns
"Modes of exchange" patterns
What was the problem that Procter and Gamble wanted to solve for its customers?
The initial solution was Continuous replenishment
A better solution is Collaborative Planning, Forecasting and Replenishment
Ralph Drayer: "But the biggest benefits from [the pilot project we did with Wal-Mart] were the soft benefits. "
Dell is leading PC vendor in world, just ahead of HP
How do you continue to make money and grow market share when decreasing component costs and competitive price cuts slash your revenue?
ANSWER: Use supply chain strategy/patterns that your competitors can't completely follow
Direct Sales
Build to Order
In an indirect sales strategy a firm manufacturers products and sells them through distributors and resellers
Some products are almost always sold through indirect channels
But this may make the customers invisible to the manufacturer because they deal with the channel
But for other products there may be a choice of a direct vs indirect sales strategy
In a direct sales strategy a firm sells its product directly to the companies or consumers who buy them without any middlemen or resellers
Sometimes this "directness" is a fundamental part of the value proposition for timeliness (morning newspaper) or freshness (Farmer's Market)
The Internet has vastly increased the viability of direct sales as a strategy
Michael Dell sold direct when he was a 1-person company working out of his dormitory room. But he grew his business for several years and went public without having any resellers
A Direct sales model gives Dell competitive advantages
Most of Dell's sales go to big companies who essentially are outsourcing the procurement of their PCs
An example of Demand Chain Management
Simple in concept, but complex in execution, requiring competencies in product design, process engineering, and supply chain management
Requires more modular design to enable configurability and concurrent assembly of sub-components
What kinds of industries or products are suited for this pattern?
Often used in conjunction with "just-in-time" pattern whose goal is minimizing inventory by having suppliers deliver their raw materials or components to a manufacturing location "just in time" for them to be used
Building to order instead of forecast means a lot less inventory so the rapid obsolescence of components is less harmful
Less inventory also means that if defects are detected or processes changed there are fewer wasted parts or materials
Dell doesn't just take orders, but actively shapes them by customizing its "recommended" offerings to buyers based on inventory, opportunity for higher margin, qualification of buyer, other factors
Final assembly takes place only after customer places order
Requires very close coordination with small number of suppliers
Customer orders result in signals to suppliers to deliver components to Dell assembly plants (newest one is in Nashville)
The Internet has been a disruptive force on many traditional business model patterns, particularly in the value chain activities of supply and demand chain management
Disintermediation – cut out the middleman
{re} Intermediation – introduce new middleman
Marketplaces and Auctions
Bring together sellers (or their catalogs)
Bring together buyers (or their RFIs or RFQs)
Match buyers and sellers
Provide critical mass and infrastructure for other service providers
Glushko & McGrath's definition:
A "market maker" or "market operator"
Participating businesses
The services these businesses provide to each other
The messages and documents that are exchanged to request and perform the services
The flow of materials and goods in a supply chain is accompanied by information about it
But information about supply chain activities and processes is increasingly separated from the physical flow of materials and goods
The facilities, equipment, and inventory in a supply chain are the PHYSICAL supply chain; the information supply chain is a CONCEPTUAL model
The information supply chain has become especially important because new technologies and techniques are providing relatively greater leverage than interventions with the physical supply chain
What information is exchanged?
Which entities in the supply chain are able to exchange information?
What is the frequency of this information exchange?
As an Internet B2C retailer, you know that you make most of your money around Christmas, so you want to promise delivery by Christmas and thereby sell more online to procrastinators, who spend more than people who shop early.
You think you are better at supply chain management than your less efficient competitors, so you offer a later "you'll still get it by Christmas" date.
What aspects of your information supply chain are key to being able to promise delivery?
What are the possible outcomes after you take the customer's order?
Many business processes can be described as "moving information around"
At each step information might be added to the input document or a new document might be created that contains most of the input document's content
Clerical functions can usually be totally automated
Processes carried out by knowledge workers can not be completely automated, but partial automation useful to get "fodder" to them more efficiently
Create documents with templates or via guided assembly (aka "wizards")
Minimize manual intervention via rule-based routing, access control, exception handling
Concurrent process re-engineering
Documents are regenerated when source information changes
End-to-end perspective to maximize content reuse
Standard content components and processes
The Mode of Exchange is "the set of standard procedures, common practices, communication patterns, and norms governing routine behavior in the value chain relationship between a supplier and its customer"
This is a much broader definition of what's exchanged that simply "exchange of money" which is what many economists focus on.
The mode of exchange also governs the extent of exchange of information and know-how, the development or non-development of trust, and norms of reciprocity or fairness in the relationship
In the exit mode, problems with suppliers result in a change of suppliers
Auctions are the big "weapon" against suppliers in exit mode
The US auto industry has generally worked in exit mode, especially in lower tiers
In the voice mode, problems are resolved by collaboration, which creates opportunities to improve processes and designs
Collaborative design and inventory planning software are key technologies for voice mode relationships
The Japanese auto industry has generally worked in voice mode
Can our systems exchange information?
Do we have common logical models for the information we are trying to exchange?
Systems have to be connected... and EDI costs too much for small firms, which is why Web EDI, XML/EDI, and standard XML business vocabularies have been developed
Can our people talk to each other?
Do we have a common vocabulary or reference model (like SCOR or RosettaNet) so we can understand each other's roles in the patterns we are trying to follow?
Do we have executive sponsorship that encourages us to talk with each other about how to be more efficient and effective in our supply chain?
Do we trust each other?
Any large enterprise has already automated its supply chain to some extent or it couldn't compete
Consider how an enterprise might further evolve its supply chain and demand chain
Web-based indirect procurement is easiest automation opportunity
Firms may outsource indirect procurement by joining a "horizontal" marketplace
Setting up information (catalog, inventory, orders) exchange with a distributor
Assembly outsourcing can speed manufacturing cycles
Joining an online "vertical" marketplace to improve access to its business customers
When every enterprise takes these steps the supply chain qualitatively changes into a supply network with much less control by "chain masters"
Chapter 4 of Document Engineering [128-147]
Chapter 6 of Document Engineering
Microformats [Online]
Cover Pages -- XML Applications
OASIS Technical Committees
Universal Business Language 1.0 (Sections 1-6.4)