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Improving

SupplyChainManagementRelationshipsMarySimmermanVicePresident,Materiel

Acquisition&LogisticsExcellenceConference1Copyright2003NorthropGrummanCorporationImproving

SupplyChainManageAgendaIntroductionsSupplierManagement–WhatDoesItMean?TheDefenseBusiness–What’sDrivingtheTransformation?Northrop’sModel–“StrategicRelationships,StrategicAlliances”KeySuccessFactorsFutureVision–WhereDoWeGofromHere?QuestionsandAnswers2Copyright2003NorthropGrummanCorporationAgendaIntroductions2CopyrightMarySimmerman,VP,MaterielOverseeDomesticandInternationalProcurementandSubcontractManagementVP,SupplierManagementandProcurementatBoeingSpaceandCommunicationsCo-LeadSupplierMgmt.ProcessCouncilatBoeingPastLifeatNorthropinAdvancedSystemsDivisionandGrummanAerospaceSMEforMaterialOperationsofBoeingAirliftandTanker1998MalcolmBaldridgeAwardMBA,KellerGraduateSchool,BAinBusinessMgmt.,UniversityofPhoenix3Copyright2003NorthropGrummanCorporationMarySimmerman,VP,MaterielOvCost-BasedAdversarial“Vendor”“TugofWar”Non-EvaluativeShort-TermEvent-BasedCollaborationJointinvestmentSophisticatedEvaluationToolsLong-TermFocusContinuousimprovementTruePartnershipsQualityIssuesPoorCommunic.TQM6SigmaMetricsIntegratedSystemsNewTech.SCMFocusPastPresentSupplierManagement–WhatDoesitMean?4Copyright2003NorthropGrummanCorporationCost-BasedCollaborationQualityWhatDoWeMeanToday?AFormalProcessbyWhichSuppliersAreEvaluatedandCategorizedbyTheirAbilitytoAddValuetoOurBusinessViaInvestment,CollaborativePlanning&Design,Risk-SharingandProductEnhancementSupplierManagementIsEnablingRelationshipswithProvidersofGoodsandServicesto:AttainBusinessObjectivesExpandBusinessOpportunitiesReduce/TransferBusinessRisks5Copyright2003NorthropGrummanCorporationWhatDoWeMeanToday?AFormalMarketShareSignificantlyEnhancedrevenueBenefitsfromSupplierManagementNewProducts/ItemsBroaderNameRecognitionReducedCostsNewDistributionChannelsNewCustomersWhyManageSuppliers?60-70%ofWhatWeBuildIsProcured!CustomerSatisfaction6Copyright2003NorthropGrummanCorporationMarketShareSignificantlyBeneIndustryConsolidationWarTacticsCulturalIssuesEnhancedCommunicationsWeaponsTechnologyTheGenesisTheDefenseBusiness–What’sDrivingtheTransformation?“IntegratedNetwork”TruePartnerships“Systems,Services,Support”PrecisionWeapons&“Real-Time”CommunicationsGoalsCollaboration7Copyright2003NorthropGrummanCorporationTheGenesisTheDefenseBusinesTheNorthropModel–SupplierEngagementPossessTechnologyThatWouldBeBeneficialtoOurFutureBusinessAspirationsAlignwithOurFutureStrategies(e.g.NHA,JIT)HaveR&DExpendituresThatAreRelevanttoTechnologiesWeBelieveAreGapsinOurPortfolioSelectPotentialStrategicPartners(Industry/Geography)withCharacteristicsThatWouldBeCriticalDifferentiatorsforUsinFutureCompetitions(e.g.Skills,PoliticalStrengths,Technologies)8Copyright2003NorthropGrummanCorporationTheNorthropModel–SupplierTheNorthropModel–HawkeyeCaseStudyIssues:RadarApproach&TeamSolidifiedWithintheNavy(NAVAIR,OPNAV,CNO,ASN)NavyFundingProfilestoSupportRMPSD&DandPostMultiyearProductionRMPSD&DProposalSubmissioninJuneandContractAwardbyDecemberFY2004NTEProductionProposalSubmissioninNovemberandAACAwardbyDecember(3Hawkeye2000Aircraft)Strategies:PreserveFY2003BudgetforSD&DandProductionandPreservationinPOM-04ContinueHawkeye2000andAdvancedHawkeye/RMPAdvocacyCampaignsWorkwiththeCustomerforPostMYPProductionViaAffordabilityOptionsFY2004-2005(Hawkeye2000)FY2006-TBD(RMPLS/TAMD)HawkeyeIndustryTeamTactics:LeveragetheStrengthofa“Team”inUSN,OSD,CongressandtheMediaPropagate“ValueofRMP”asHighestPriorityofAdvocacyCampaignStress“ValueofHawkeye2000/CEC”toNear–termFleetOperationsDevelopAffordabilityPostureonRMPSD&DandPostMultiyearProductionTargetKeyOPNAVFlagsPromoteTeamAccomplishmentsStrategicIntent:JointMarketingoftheE-2CHawkeyeandUSNAEW&CRoadmap9Copyright2003NorthropGrummanCorporationTheNorthropModel–HawkeyeCaTheNorthropModel–F-35CaseStudyStrategicIntent:CollaborativeDesignandEngineeringwhilepursuing“BestValue”Issues:CostcontainmentiskeyfortheprogramInvestmentstructurerequiressourcingstrategyforparticipatingcountriesRFB/RFQare“model”basedDesignandproductionspecsareevolvingasthebidprocessprogressesStrategies:ExploittechnologieswhichsupportcollaborativedesignandengineeringtoaddressweightandconfigurationchallengesEmploy“ePMO”fordocumentanddatasharingforglobalteamDeploycommonengineeringstandards(CATIA)F-35GlobalTeamTactics:DevelopedJSL“VirtualPMO”forglobalprojectmanagementsupportBalance“bestvalue”andcollaborativeengineeringcapabilitiestomeetcostanddesignchallengesDevelopspecificincentivesforteamtoaddresscenterfuselageandweightchallenges.10Copyright2003NorthropGrummanCorporationTheNorthropModel–F-35CaseContinuousReviewProcessBasedonPerformanceMeasuresReflectingTotalCostofOwnershipMustBeinPlacetoProvideOngoingMonitoringoftheSupplier'sEffectiveness“PlatinumSource”CaseStudyKeySuccessFactors–SupplierRelationshipManagement11Copyright2003NorthropGrummanCorporationContinuousReviewProcessBaseKeySuccessFactors–SupplierRelationshipManagement,PlatinumSource12Copyright2003NorthropGrummanCorporationKeySuccessFactors–SupplierKeySuccessFactors–SupplierBenefits13Copyright2003NorthropGrummanCorporationKeySuccessFactors–SupplierKeySuccessFactors–SupplierRelationshipManagementSuppliers/ContractorsAreSelectedStrategically,withaLong-TermFocus,RatherThanHistoricShort-Term,Transaction-Based.OrganizationMustCommittheResourcestoDevelopMutuallyBeneficialRelationship.DemandsonSuppliersRequiringCapitalInvestmentsNecessitatestheSharingofPlansandSchedulesUtilizeSuppliersAsaKnowledgeSourceandShareBenefitsofExpandingIntoNewMarkets,AssessingValue-BasedOpportunities,DiscoveringNewCostSavings,andExtendingCurrentFunctionalities14Copyright2003NorthropGrummanCorporationKeySuccessFactors–SupplierKeySuccessFactors–SupplierRelationshipManagement(Cont)InvolveKeySuppliersinLong-TermStrategicAlliances,WhereSpecificCapabilitiesMayNeedtoBeDeveloped.MWBEsMayBeaGoodSourceforThis.AlignSuppliers,IR&DtoTechnologyMaps15Copyright2003NorthropGrummanCorporationKeySuccessFactors–SupplierBusinessPartnersWorldEnterpriseGroupSAPR/3Business

WarehouseOrderEntry,ILS,CSFinancialsHRFulfillment...E-ProcurementStrategic

Enterprise

ManagementPortal.....ExtendingScope(NewDimensions&Add-Ons)

COLLABORATIONInternetExtranetIntranetENTERPRISEKnowledgeWarehouseSupplierRelationshipMgtCollaborativePLMAPOCRMCustomerRelationshipMgmtMFG,QAProcurementBillingCompleteIESIII/IVFoFKeySuccessFactors–TechnologyBlueprint16Copyright2003NorthropGrummanCorporationBusinessPartnersWorldEnterprUser-initiated,catalog-basedrequisitioningStrategicSourcingOrderExecutionandSettlementProductLifeCycleManagementOrderPlanningandCreationEDIDirectIndirectSupplierCollaboration,Management,ImprovementSpecificationDevelopmentePLM(PDM,CAD/CAM,Proj.Mgmt,collab,etc.)ERPSupplyChainPlanningSupplyChainExecution“e-procurement”IndirectProcurementComponentSupplierManagement(CSM)EngineeringPurchasing,Mfg.Planning,SupplyChainPlant,IT,WarehouseLinkage#1Linkage#2Linkage#3KeyLinkagesSupplier/Part/CategoryMasterDataDetailedCostElementDefinition/MeasurementSupply/DemandPlansandChangesMakevsBuyAnalysisSpendingAnalysisviaBOMsLinkingas-DesignedBOMtoSourcingWorkflowDrawingSharing/Mark-UpGenericCollaborationToolsTotalCostofOwnershipContractParametersKPIsandMonitoringRules(Blanket)POFutureVision–TechnologyCapabilities17Copyright2003NorthropGrummanCorporationUser-initiated,StrategicOrderSupplierCustomerSupplierCustomerSupplyChainExtendedInformation

SystemsCustomerExtendedInformation

SystemsPurchasingProductionLogisticsOrder

ManagementSales,Marketing&ServiceCoreApplicationsandArchitectureRFxTechnologyPDM/PLMTotalSCInventoryVisibilityStrategicSourcingFutureVision–TheEventualModel–“Connectivity”18Copyright2003NorthropGrummanCorporationSupplierCustomerSupplierCustomQuestions

and

Answers19Copyright2003NorthropGrummanCorporationQuestions

and

Answers19Copyr20Copyright2003NorthropGrummanCorporation20Copyright2003NorthropGrumImproving

SupplyChainManagementRelationshipsMarySimmermanVicePresident,Materiel

Acquisition&LogisticsExcellenceConference21Copyright2003NorthropGrummanCorporationImproving

SupplyChainManageAgendaIntroductionsSupplierManagement–WhatDoesItMean?TheDefenseBusiness–What’sDrivingtheTransformation?Northrop’sModel–“StrategicRelationships,StrategicAlliances”KeySuccessFactorsFutureVision–WhereDoWeGofromHere?QuestionsandAnswers22Copyright2003NorthropGrummanCorporationAgendaIntroductions2CopyrightMarySimmerman,VP,MaterielOverseeDomesticandInternationalProcurementandSubcontractManagementVP,SupplierManagementandProcurementatBoeingSpaceandCommunicationsCo-LeadSupplierMgmt.ProcessCouncilatBoeingPastLifeatNorthropinAdvancedSystemsDivisionandGrummanAerospaceSMEforMaterialOperationsofBoeingAirliftandTanker1998MalcolmBaldridgeAwardMBA,KellerGraduateSchool,BAinBusinessMgmt.,UniversityofPhoenix23Copyright2003NorthropGrummanCorporationMarySimmerman,VP,MaterielOvCost-BasedAdversarial“Vendor”“TugofWar”Non-EvaluativeShort-TermEvent-BasedCollaborationJointinvestmentSophisticatedEvaluationToolsLong-TermFocusContinuousimprovementTruePartnershipsQualityIssuesPoorCommunic.TQM6SigmaMetricsIntegratedSystemsNewTech.SCMFocusPastPresentSupplierManagement–WhatDoesitMean?24Copyright2003NorthropGrummanCorporationCost-BasedCollaborationQualityWhatDoWeMeanToday?AFormalProcessbyWhichSuppliersAreEvaluatedandCategorizedbyTheirAbilitytoAddValuetoOurBusinessViaInvestment,CollaborativePlanning&Design,Risk-SharingandProductEnhancementSupplierManagementIsEnablingRelationshipswithProvidersofGoodsandServicesto:AttainBusinessObjectivesExpandBusinessOpportunitiesReduce/TransferBusinessRisks25Copyright2003NorthropGrummanCorporationWhatDoWeMeanToday?AFormalMarketShareSignificantlyEnhancedrevenueBenefitsfromSupplierManagementNewProducts/ItemsBroaderNameRecognitionReducedCostsNewDistributionChannelsNewCustomersWhyManageSuppliers?60-70%ofWhatWeBuildIsProcured!CustomerSatisfaction26Copyright2003NorthropGrummanCorporationMarketShareSignificantlyBeneIndustryConsolidationWarTacticsCulturalIssuesEnhancedCommunicationsWeaponsTechnologyTheGenesisTheDefenseBusiness–What’sDrivingtheTransformation?“IntegratedNetwork”TruePartnerships“Systems,Services,Support”PrecisionWeapons&“Real-Time”CommunicationsGoalsCollaboration27Copyright2003NorthropGrummanCorporationTheGenesisTheDefenseBusinesTheNorthropModel–SupplierEngagementPossessTechnologyThatWouldBeBeneficialtoOurFutureBusinessAspirationsAlignwithOurFutureStrategies(e.g.NHA,JIT)HaveR&DExpendituresThatAreRelevanttoTechnologiesWeBelieveAreGapsinOurPortfolioSelectPotentialStrategicPartners(Industry/Geography)withCharacteristicsThatWouldBeCriticalDifferentiatorsforUsinFutureCompetitions(e.g.Skills,PoliticalStrengths,Technologies)28Copyright2003NorthropGrummanCorporationTheNorthropModel–SupplierTheNorthropModel–HawkeyeCaseStudyIssues:RadarApproach&TeamSolidifiedWithintheNavy(NAVAIR,OPNAV,CNO,ASN)NavyFundingProfilestoSupportRMPSD&DandPostMultiyearProductionRMPSD&DProposalSubmissioninJuneandContractAwardbyDecemberFY2004NTEProductionProposalSubmissioninNovemberandAACAwardbyDecember(3Hawkeye2000Aircraft)Strategies:PreserveFY2003BudgetforSD&DandProductionandPreservationinPOM-04ContinueHawkeye2000andAdvancedHawkeye/RMPAdvocacyCampaignsWorkwiththeCustomerforPostMYPProductionViaAffordabilityOptionsFY2004-2005(Hawkeye2000)FY2006-TBD(RMPLS/TAMD)HawkeyeIndustryTeamTactics:LeveragetheStrengthofa“Team”inUSN,OSD,CongressandtheMediaPropagate“ValueofRMP”asHighestPriorityofAdvocacyCampaignStress“ValueofHawkeye2000/CEC”toNear–termFleetOperationsDevelopAffordabilityPostureonRMPSD&DandPostMultiyearProductionTargetKeyOPNAVFlagsPromoteTeamAccomplishmentsStrategicIntent:JointMarketingoftheE-2CHawkeyeandUSNAEW&CRoadmap29Copyright2003NorthropGrummanCorporationTheNorthropModel–HawkeyeCaTheNorthropModel–F-35CaseStudyStrategicIntent:CollaborativeDesignandEngineeringwhilepursuing“BestValue”Issues:CostcontainmentiskeyfortheprogramInvestmentstructurerequiressourcingstrategyforparticipatingcountriesRFB/RFQare“model”basedDesignandproductionspecsareevolvingasthebidprocessprogressesStrategies:ExploittechnologieswhichsupportcollaborativedesignandengineeringtoaddressweightandconfigurationchallengesEmploy“ePMO”fordocumentanddatasharingforglobalteamDeploycommonengineeringstandards(CATIA)F-35GlobalTeamTactics:DevelopedJSL“VirtualPMO”forglobalprojectmanagementsupportBalance“bestvalue”andcollaborativeengineeringcapabilitiestomeetcostanddesignchallengesDevelopspecificincentivesforteamtoaddresscenterfuselageandweightchallenges.30Copyright2003NorthropGrummanCorporationTheNorthropModel–F-35CaseContinuousReviewProcessBasedonPerformanceMeasuresReflectingTotalCostofOwnershipMustBeinPlacetoProvideOngoingMonitoringoftheSupplier'sEffectiveness“PlatinumSource”CaseStudyKeySuccessFactors–SupplierRelationshipManagement31Copyright2003NorthropGrummanCorporationContinuousReviewProcessBaseKeySuccessFactors–SupplierRelationshipManagement,PlatinumSource32Copyright2003NorthropGrummanCorporationKeySuccessFactors–SupplierKeySuccessFactors–SupplierBenefits33Copyright2003NorthropGrummanCorporationKeySuccessFactors–SupplierKeySuccessFactors–SupplierRelationshipManagementSuppliers/ContractorsAreSelectedStrategically,withaLong-TermFocus,RatherThanHistoricShort-Term,Transaction-Based.OrganizationMustCommittheResourcestoDevelopMutuallyBeneficialRelationship.DemandsonSuppliersRequiringCapitalInvestmentsNecessitatestheSharingofPlansandSchedulesUtilizeSuppliersAsaKnowledgeSourceandShareBenefitsofExpandingIntoNewMarkets,AssessingValue-BasedOpportunities,DiscoveringNewCostSavings,andExtendingCurrentFunctionalities34Copyright2003NorthropGrummanCorporationKeySuccessFactors–SupplierKeySuccessFactors–SupplierRelationshipManagement(Cont)InvolveKeySuppliersinLong-TermStrategicAlliances,WhereSpecificCapabilitiesMayNeedtoBeDeveloped.MWBEsMayBeaGoodSourceforThis.AlignSuppliers,IR&DtoTechnologyMaps35Copyright2003NorthropGrummanCorporationKeySuccessFactors–SupplierBusinessPartnersWorldEnterpriseGroupSAPR/3Business

WarehouseOrderEntry,ILS,CSFinancialsHRFulfillment...E-ProcurementStrategic

Enterprise

ManagementPortal.....ExtendingScope(NewDimensions&Add-Ons)

COLLABORATIONInternetExtranetIntranetENTERPRISEKnowledgeWarehouseSupplierRelationshipMgtCollaborativePLMAPOCRM

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