Wood Synergy Inc. had become a mid-sized player in the fine woods supplier industry. The firm purchased stock woods from a number of producers and processed them to meet specific customer specifications. Approximately 60 percent of Wood Synergy’s sales were in the high-end furniture and cabinets sector. The firm’s annual total revenue for the last reporting period was $110 million. Wood Synergy had recently launched a number of information technology-based supply chain management initiatives and was interested in assessing the current progress. The senior management at Wood Synergy had long felt that efficiency improvements to the firm’s supply chain could be made through increased information integration. They also understood the importance of having data and information aligned with their business model; specifically, the firm was committed to delivering information to the right people at the right time so that strategic and operational decisions were made properly and quickly. Improved data sharing through the firm’s supply chain management (SCM) was meant to enable Wood Synergy to develop and execute strategies that efficiently integrated manufacturing with suppliers and distributors. A primary goal of the company was to meet order demand with the highest quality and on-time delivery: this objective became more challenging in light of the financial and economic turbulence affecting the woodcraft industry on a worldwide basis.
At a recent management meeting, Wood Synergy’s chief executive officer (CEO) asked the chief information officer (CIO) to report on current SCM and information technology (IT) initiatives. The CIO reported that he had recently looked at both the supplier and distributor-customer sides of the supply chain and found that immediate near-term gains could be realized by incorporating IT into the firm’s SCM. He went on to say that he had formed a project team and charged them with implementing a single, unified web-based interface to centralize and synchronize data access across the firm’s supplier channels. The CIO also reported that he had reviewed the following three types of mediation implementation strategies:
Classic disintermediation Removal of intermediaries in a supply chain, such as distributors or wholesalers. This removal of the middleman strategy connected the supplier directly with its customers.
Remediation Working more closely with existing middlemen partners. This strategy could be affected by high contracting risks.
Network Building alliances and partnerships with both existing and new suppliers and distributors, involving a complex set of relationships. Networks tended to reduce search costs for obtaining information, products and services.
Based on his review, the CIO reported that he had selected a remediation approach because it best fit the firm’s goal of simplifying data sharing throughout the supply chain; furthermore, the CIO noted that Wood Synergy had a long-term and positive relationship with its primary distributors, which would ameliorate the high contracting risk issue. The project team spent the first few weeks researching Internet sources in order to understand how other organizations (consumer and job sites) used web-based gateways, and to identify the different types of technology available on the market. The organizations that were examined were selected based on their ability to translate value chain performance into productivity and market share leadership. These organizations understood that supply chain leadership meant more than just low cost and efficiency; SCM leadership also required a capability to shape and respond to demand shifts with innovative products and services. This best practices process was the first step in the standard five- step implementation procedure, which also included selecting the hardware system, choosing the software system, obtaining consulting expertise and prototyping the system.
The project team learned that the best-known model for managing supply chain performance was the Supply Chain Operations Reference model (SCOR), created by the Supply Chain Council, an independent non-profit organization (see Exhibit 1). This model contained standard descriptions of the following management processes: plan, source, make, deliver and return. It also characterized the practices and standard metrics that benchmarked “best-in-class” performance. The project team used SCOR to identify and prioritize improvement opportunities because it recognized the linkages between supply chain process elements, metrics and best practices.
Due to budget and time constraints, the project team chose to build a gateway prototype without addressing problems of integrity and timeliness with the systems’ data. The project team decided to improve the data quality at a future date. Two of the key drivers included in the gateway design were data standardization and real-time interface. Three months after the Phase I system was implemented, regional distribution managers (RDMs) were given a survey to provide feedback on the gateway. The survey indicated that 90 percent of the RDMs were satisfied with the gateway, and that 85 percent had experienced productivity gains. The survey also revealed that the gateway:
boosted the efficiency of RDMs by enabling them to reduce the time required to prepare order and demand information by 15 percent,
improved the communications process by optimizing the information flowing to RDMs,
enhanced access to company information with faster access speeds and simplified navigation to information and applications
The first phase of the gateway implementation took under five months and cost approximately $400,000. Immediate results were that the RDMs became significantly more efficient, as they decreased the time and resources needed to acquire information from the firm’s wood products applications and distribution managers; furthermore, Wood Synergy recognized a cost savings of $1.5 million through a more efficient use of employee and IT resources. The CIO reported that the next step (Phase II) was to improve the integrity and timeliness of the overall reporting system and to finalize the integration of the distributors and suppliers into Wood Synergy’s supply chain. He specifically cited the following tasks and estimated times for the Phase II effort:
Develop and promulgate Phase II requirements and specifications (one month);
Continue upgrading the IT supply chain component (three months);
Provide system access and training to distributors and suppliers (two months);
Finalized selection of performance metrics (one month);
Conduct system evaluation using identified performance metrics (two months);
Prepare final report (one month).
The CIO indicated that the estimated labor costs would average $150,000per month, and that the additional system costs would be approximately $500,000. He stated that enhancing distributor and supplier integration using the new system would increase revenue and profit growth by gaining access to new process innovations and by accelerating time-to-market cycles. This, he said, was particularly important given the uncertain market conditions that tended to cloud outsourcing decisions. On the supplier side, having a seamless IT connection would assist in the exchange of bills of materials (BOMs) and component performance data. The CIO concluded his presentation by saying that organizational utilization and cost-effectiveness were two key drivers of a successful supply chain, and that he would be providing the management team with an update on these performance metrics over the coming months. Some specific metrics would include processing accuracy, upside flexibility, material value added and inventory turns. The CIO also reported that he would be working on additional IT strategic and tactical SCM initiatives during the Phase II implementation.
As the meeting concluded, the CEO asked the CIO to prepare a one-page executive summary on the results of Phase I and the challenges associated with Phase II. The CEO stated that he planned to present this information at an upcoming board meeting. He further requested more information on the SCOR model and on the rationale behind the selection of the remediation strategy. He also directed the CIO to prepare goals and performance metrics for Phase II. He stated that the analysis should take into account Wood Synergy’s current situation and the general uncertainty associated with the marketplace because of increased imports from China and Vietnam. Finally, the CEO asked the CIO to identify specific IT strategic and tactical initiatives beyond the current Phase II effort.
The Supply Chain Operations Reference model, commonly known as SCOR, is a diagnostic tool for supply chain management. SCOR identifies the various processes involved in a business and the important things that lead to customer satisfaction. The SCOR model was developed by the Supply Chain Council and is based on the following three factors:
Best practices sharing.
SCOR is used to identify and prioritize improvement opportunities. It recognizes the linkages between supply chain process elements, metrics and best practices, thereby helping companies measure the flow of information and physical goods. Demand forecast accuracy, order fulfillment efficiency, supply chain cost and cash-to-cash cycle time are four of the most critical metrics that a company can use to get a quick, balanced snapshot of its supply chain performance. The SCOR paradigm consists of three distinct yet interconnected levels: at level one, the scope and content of the supply chain including setting performance targets is specified; in level two, the supply chain strategy is configured; level three aligns available and anticipated resources to meet expected demand requirements: this is where the firm fine- tunes its operation strategy through best practices.
Written Case Report:
case study report includes:
¢ Executive Summary
¢ Issue Identification
¢ Environmental and Root Cause Analysis
¢ Alternatives or Options
¢ Recommendation(s) and Implementation
¢ Monitor and Control
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