Supply chain process optimisation via the management of variance (2023)

Abstract

This paper presents a new optimisation approach for variance within a supply chain management process. The approach is presented by the variance cube of purchasing (VCP) that involves a lean method for variance optimisation, namely the cost and variance driver analysis. The approach focuses on the optimisation and the control of existing process variance within the supply chain. The application of the cube is presented by a case study involving a globally acting Tier 1 supplier, who produces steering systems for passenger cars and commercial vehicles. In this case, the sourcing process of this Tier 1 supplier will be analysed, evaluated and optimised regarding variance. The variance is presented in the form of the number of suppliers who are involved in the sourcing process. Unnecessary existing process variance, like an unnecessary huge number of suppliers within the sourcing process, is a type of waste. Time, money, quality and technology can be saved through a greater understanding of the optimal number of suppliers within a sourcing process. The results of the case study led to a generalised method to optimise the existing process variance, present cost improvements as well as optimising the key performance indicator to manage the number of suppliers in the sourcing process. The general approach can be used for other company departments like logistics and for different industries other than automotive. The insights of this article support the operative user and the strategic company management in order to reduce and improve unnecessary variance in different sections. The structured analysis of supply chain process variance via the VCP and the key performance indicator “optimal supplier number per sourcing process” are new to company management.

Original languageEnglish
Pages (from-to)136-153
Number of pages28
JournalJournal of Management Analytics
Volume5
Issue number2
Early online date29 Jan 2018
DOIs
Publication statusPublished - Apr 2018

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    Nabhani, F., Uhl, C., Kauf, F. (2018). Supply chain process optimisation via the management of variance. Journal of Management Analytics, 5(2), 136-153. https://doi.org/10.1080/23270012.2018.1424571

    Nabhani, Farhad ; Uhl, Christian ; Kauf, Florian ; Shokri, Alireza. / Supply chain process optimisation via the management of variance. In: Journal of Management Analytics. 2018 ; Vol. 5, No. 2. pp. 136-153.

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    abstract = "This paper presents a new optimisation approach for variance within a supply chain management process. The approach is presented by the variance cube of purchasing (VCP) that involves a lean method for variance optimisation, namely the cost and variance driver analysis. The approach focuses on the optimisation and the control of existing process variance within the supply chain. The application of the cube is presented by a case study involving a globally acting Tier 1 supplier, who produces steering systems for passenger cars and commercial vehicles. In this case, the sourcing process of this Tier 1 supplier will be analysed, evaluated and optimised regarding variance. The variance is presented in the form of the number of suppliers who are involved in the sourcing process. Unnecessary existing process variance, like an unnecessary huge number of suppliers within the sourcing process, is a type of waste. Time, money, quality and technology can be saved through a greater understanding of the optimal number of suppliers within a sourcing process. The results of the case study led to a generalised method to optimise the existing process variance, present cost improvements as well as optimising the key performance indicator to manage the number of suppliers in the sourcing process. The general approach can be used for other company departments like logistics and for different industries other than automotive. The insights of this article support the operative user and the strategic company management in order to reduce and improve unnecessary variance in different sections. The structured analysis of supply chain process variance via the VCP and the key performance indicator “optimal supplier number per sourcing process” are new to company management.",

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    (Video) Dynamics 365 Supply Chain Management - Planning Optimization Service Tech Talk

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    Nabhani, F, Uhl, C, Kauf, F 2018, 'Supply chain process optimisation via the management of variance', Journal of Management Analytics, vol. 5, no. 2, pp. 136-153. https://doi.org/10.1080/23270012.2018.1424571

    Supply chain process optimisation via the management of variance. / Nabhani, Farhad; Uhl, Christian; Kauf, Florian; Shokri, Alireza.

    In: Journal of Management Analytics, Vol. 5, No. 2, 04.2018, p. 136-153.

    Research output: Contribution to journalArticlepeer-review

    (Video) Webinar: Cell Culture Process Optimisation, Manufacturing and Security of Supply

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    (Video) Optimize Supply Chain Management & Improve Product Quality with PathWave Manufacturing Analytics

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    FAQs

    What are the 5 basic steps of supply chain management? ›

    Supply management is made up of five areas: supply planning, production planning, inventory planning, capacity planning, and distribution planning.

    What are the 3 types of supply chain strategies? ›

    The three levels of supply chain management are strategic, tactical and operational.
    • Strategic Planning. This level of supply chain management is responsible for developing long-term plans that outline the company's overall objectives and goals. ...
    • Tactical Planning. ...
    • Operational Execution.

    What are the supply chain management techniques? ›

    15 Best Practices for Supply Chain Management
    • Recruit & Develop Supply Chain Professionals. ...
    • Align the Supply Chain Team. ...
    • Establish Alliances with Suppliers. ...
    • Purchase Supplies in Volume to Reduce Costs. ...
    • Diversify Supplier Relationships to Avoid Delays. ...
    • Improve Demand Forecasting. ...
    • Optimize Inventory Management.
    29 Apr 2021

    What is supply chain management process? ›

    Supply chain management is the process of organizing and overseeing supply chain activities with the goal of achieving (or maintaining) a competitive advantage. The heart of a company's operations, supply chain management deals with every process from the acquisition of raw materials through the final product.

    What is the most important stage in supply chain management? ›

    Stage 1: Plan

    It is one of the most critical phases since it includes a wide variety of activities. Every company needs a plan or a road-map and businesses must first decide on their operations strategy and put them into action. A big decision is whether to make a product or part or purchase it from a supplier.

    What is the most important aspect of supply chain management? ›

    Key Takeaways

    The five most critical elements of SCM are developing a strategy, sourcing raw materials, production, distribution, and returns. A supply chain manager is tasked with controlling and reducing costs and avoiding supply shortages.

    What are the four 4 stages of supply chains? ›

    What are the components of your supply chain you should be focusing on right now?
    • INTEGRATION. Integration starts at your strategic planning phase and is critical throughout your communications and information sharing and data analysis and storage. ...
    • OPERATIONS. ...
    • PURCHASING. ...
    • DISTRIBUTION.

    What is the best supply chain strategy? ›

    Some strategies for an excellent supply chain are:
    • Cut inventory costs. Be it a brick and mortar store or an online business, inventory is always present and it costs money. ...
    • Integrate business processes with technology. ...
    • Use an inventory management software. ...
    • Manage inventory risk. ...
    • Take green initiatives.
    3 Sept 2021

    What are 4 types of supply chain strategies? ›

    Here are six types of supply chain models that can drive supply chain management for a business:
    • Continuous Flow. This is one of the most traditional models on the list. ...
    • Fast chain. The fast chain model is one of the new names in supply chain strategies. ...
    • Efficient Chain. ...
    • Agile. ...
    • Custom-configured. ...
    • Flexible.
    10 May 2022

    What is the importance of supply chain management in the company? ›

    Increases Cash Flow – Firms value supply chain managers because they speed up product flows to customers. For example, if a firm can make and deliver a product to a customer in 10 days rather than 70 days, it can invoice the customer 60 days sooner.

    How can supply chain skills be improved? ›

    These Are the 7 Supply Chain Leaders' Skills You'll Really Need
    1. Information Technology and Automation Knowledge. ...
    2. A Grasp of Economics and Market Dynamics. ...
    3. Understanding Cost-to-serve. ...
    4. The Skill of Flexibility. ...
    5. Project Management Skills. ...
    6. The Ability to Get the Best from People. ...
    7. The Know-How to Negotiate.
    26 Apr 2022

    What are the objectives of supply chain management? ›

    The following are the 7 most important objectives of Supply Chain Management.
    • Improving Efficiency. ...
    • Improving Quality. ...
    • Optimising Transportation and Logistics. ...
    • Reducing Costs. ...
    • Enhancing Customer Satisfaction. ...
    • Improving Distribution. ...
    • Maintaining Better Coordination.

    How do you manage the supply chain effectively and efficiently? ›

    To maintain an efficient supply chain, here are four supply chain management best practices to consider.
    1. Implement an effective inventory management process. ...
    2. Use a warehouse management system. ...
    3. Create a returns management system. ...
    4. Use real-time data for continuous improvement.
    1 Mar 2021

    What is the first step in the supply chain management process? ›

    The first step in every supply chain management process is planning. To come up with the best possible way to fulfill the end requirement is the first strategic aim of the process.

    Which management is important for effective supply chain creation? ›

    Overall, supply chain management encompasses the design, planning, execution, control, and monitoring of supply chain activities to ensure that goods and services are delivered to your customers in a timely manner for the lowest cost.

    How do you develop a supply chain management plan? ›

    6 Steps to Write a Supply Chain Management Plan
    1. The Value behind Writing a Supply Chain Management Plan. ...
    2. 1.Assess your Current Supply Pipeline. ...
    3. 2.Define the Supply Management Outline. ...
    4. 3.Quality Assurance (QA) Overview. ...
    5. 4.Break down your Supply Needs. ...
    6. 5.Develop a Supply Timeline. ...
    7. 6.Government Laws & Regulations.
    29 Jul 2020

    What are the factors affecting supply chain management? ›

    Below are some factors that can affect supply chain management that furniture companies should keep in mind.
    • Stock control. Stock control identifies and tracks the amount of stock available. ...
    • Technology. ...
    • Outsourcing. ...
    • Quality management of materials. ...
    • Product innovation. ...
    • Logistics.
    7 Aug 2022

    How does supply chain management help a company to improve efficiency and effectiveness? ›

    Effective supply chain management enables companies to improve product flow through accurate demand and sales forecasting and also improve inventory management to arrest the bullwhip effect and avoid underproduction.

    What are the critical factors for a successful supply chain operation? ›

    These are top management commitment, development of effective SCM strategy, devoted resources for supply chain, logistics synchronization, use of modern technologies, information sharing with supply chain members, forecasting of demand based on point of sales (POS), trust development in supply chain partners, ...

    What are the 7 supply chain functions? ›

    The functions of a supply chain include product development, marketing, operations, distribution, finance, and customer service. Today, many supply chains are global in scale. Effective supply chain management results in lower costs and a faster production cycle.

    What is supply chain life cycle? ›

    There are four customary stages in a product's life cycle: the introductory phase, the growth phase, the maturity phase and the decline phase. Each phase is markedly different and often requires different value chains. Supply managers need to craft supply strategies that reflect the unique needs of each phase.

    What is a supply chain structure? ›

    A supply chain structure definition includes the suppliers of raw materials, components and services that a company needs to manufacture and distribute its products to intermediate or final customers.

    What's the most important first step for a company struggling with supply chain issues? ›

    Quantifying the financial risk of a supplier or wider supply chain failure, is the first step in successfully implementing a risk management plan. This is best done in terms of profitability impact, but revenue impact sometimes is also adequate.

    What is an example of efficient supply chain? ›

    Amazon has an incredible supply chain which ships over 10 million different products, as well as operating a Marketplace system too. Their supply chain methods utilise the lowest levels of inventory possible yet with delivering with incredible speed.

    What are the 6 components of supply chain management? ›

    CIO, the business magazine from Boston's International Data group, have identified six core components of good SCM: Planning, Sourcing, Making, Delivering, Returning, and Enabling.

    What are the 8 supply chain management processes? ›

    The Supply Chain Management Process includes the building blocks of Supply Chain Management are Strategic Planning, Demand Planning, Supply Planning, Procurement, Manufacturing, Warehousing, Order Fulfillment and Transportation business processes.

    What are the process flow of supply chain management and give its examples? ›

    There are three main flows of supply chain management: the product flow, the information flow, and the finances flow. The Product Flow – The product flow involves the movement of goods from a supplier to a customer. This supply chain management flow also concerns customer returns and service needs.

    Why is it important in supply chain management for suppliers to have visibility? ›

    Supply chain visibility is the ability to track different goods and/or products in transit, giving a clear view of the inventory and activity. It enables shippers to improve customer service and cost controls through management of inventory in motion, proactive status updates, limiting disruptions and risk mitigation.

    What is the most important technical skill required to succeed in supply chain? ›

    “Supply chain requires a high level of analytical skills coupled with an ability to build effective working relationships. Logistics and supply chain are a service business. Familiarity with supply chain software is very important for young professionals [who will be] the heavy users of the systems.”

    What are 3 hard skills that a good supply chain professional need? ›

    Hard Skills of a Supply Chain Functional Consultant
    • Enterprise Resource Management. ...
    • Business Intelligence Solutions. ...
    • An Understanding of Market Dynamics. ...
    • Risk Management. ...
    • Supply Chain Strategy and Analytics. ...
    • Project Management.
    3 Mar 2022

    What is supply chain in simple words? ›

    A supply chain is the network of all the individuals, organizations, resources, activities and technology involved in the creation and sale of a product. A supply chain encompasses everything from the delivery of source materials from the supplier to the manufacturer through to its eventual delivery to the end user.

    What are the 5 main goals of supply chain management? ›

    The primary purpose of the supply chain is to fulfill demand, drive customer value, improve responsiveness, facilitate financial success and build a good network. Most primary goals of efficient supply chain management should be – faster delivery, Higher efficiency, and an accelerated cash flow.

    What are the characteristics of supply chain management? ›

    the three characteristics of an effective supply chain are consistency of leadership, technology implementations, effective supply chain planning and network design. An effective supply chain is an important factor for any business in order for the company to build itself up.

    What is supply chain management how does it optimize operations of a company? ›

    Supply chain optimization is the process of refining your supply chain to operate at its best. This means finding ways to better align your operations, inventory, purchasing, and distribution. If done well, optimizing your supply chain can create a competitive advantage for your business.

    How can supply chain management improve organizational performance? ›

    Recommendations: The managers are recommended to improve the performance of organization by developing the relationship with supplier. The managers are also recommended to build a clear way of communication and collaboration among supplier and customer to be successful.

    How can supply chain management increase efficiency and customer satisfaction? ›

    Use technology to enhance visibility and track inventory

    And, increasing visibility across your supply chain is key to customer satisfaction. Without a big picture view of your supply chain, it becomes nearly impossible to implement customer-focused strategies like just-in-time inventory replenishment.

    › blog › core-elements-suppl... ›

    From integration and operations to purchasing and distribution - we discuss the four main elements of supply chain management. Learn more here.
    It is very important for businesses to ensure two things for their supply chain to be effective, one is the supply chain should be cost effective and second it ...
    Supply chain management is the handling of the entire production flow of a good or service — starting from the raw components all the way to delivering the fina...

    What are the 5 types of supply chain? ›

    Here are six types of supply chain models that can drive supply chain management for a business:
    • Continuous Flow. This is one of the most traditional models on the list. ...
    • Fast chain. The fast chain model is one of the new names in supply chain strategies. ...
    • Efficient Chain. ...
    • Agile. ...
    • Custom-configured. ...
    • Flexible.
    10 May 2022

    What are the four 4 stages of supply chains? ›

    What are the components of your supply chain you should be focusing on right now?
    • INTEGRATION. Integration starts at your strategic planning phase and is critical throughout your communications and information sharing and data analysis and storage. ...
    • OPERATIONS. ...
    • PURCHASING. ...
    • DISTRIBUTION.

    What are the 6 components of supply chain management? ›

    CIO, the business magazine from Boston's International Data group, have identified six core components of good SCM: Planning, Sourcing, Making, Delivering, Returning, and Enabling.

    What is the first step of supply chain management? ›

    Plan. The initial stage of the supply chain process is the planning stage. We need to develop a plan or strategy in order to address how the products and services will satisfy the demands and necessities of the customers. In this stage, the planning should mainly focus on designing a strategy that yields maximum profit ...

    What are the 4 elements of supply chain management? ›

    Integration, operations, purchasing and distribution are the four elements of the supply chain that work together to establish a path to competition that is both cost-effective and competitive.

    What are the 7 supply chain functions? ›

    The functions of a supply chain include product development, marketing, operations, distribution, finance, and customer service. Today, many supply chains are global in scale. Effective supply chain management results in lower costs and a faster production cycle.

    What is the main importance of supply chain management? ›

    Increases Cash Flow – Firms value supply chain managers because they speed up product flows to customers. For example, if a firm can make and deliver a product to a customer in 10 days rather than 70 days, it can invoice the customer 60 days sooner.

    What is supply chain life cycle? ›

    There are four customary stages in a product's life cycle: the introductory phase, the growth phase, the maturity phase and the decline phase. Each phase is markedly different and often requires different value chains. Supply managers need to craft supply strategies that reflect the unique needs of each phase.

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