Energy Supply Chain Development Overview - Alberta, … · Council of Supply Chain Management Professionals . ... effective/faster product and service delivery systems . ... Energy

BWDumsday & Associates Ltd.

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Energy Supply Chain Development Seminar

Alberta Supply Chain Overview

Government of Alberta

Holiday Inn Express November 29th, 2012


What is a Supply Chain?

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Supply chain consists of the flow of products and services from:

Raw Material Suppliers Component and Intermediate Manufacturers End Product Manufacturers/Assemblers Wholesalers and Distributors and Retailers/End Users

Connected by transportation and storage activities

Integrated through information, planning and integration activities

Many large firms are moving away from in-house Vertically Integrated structures to Supply Chain Management


What is a Supply Chain?

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Transportation & Storage Activities

Information/Planning/Activity Integration

Raw Material

Suppliers

Intermediate Component

Manufacturers

End-Product Manufacturer (Assembler)

Wholesalers/ Distributors

End-Users (Customers)

Product & Service Flow

Recycling & Returns


Typical Alberta Supply Chain

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Typical Alberta supply chain consists of four basic players serving the Oil & Gas sector

Four supply chain participants consist of:

Industrial Distributor Product Assembler Component Manufacturer Material Supplier

Participants can be local, within North America or

Global (also applies to End-Users/Customers)


Customer and Supplier Relationships

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Supplier Relationship

Customer Relationship

End-User Demand

Industrial Distributor Assembler Component

Manufacturer Material Supplier


What is Supply Chain Management?

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The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer

Institute for Supply Management

Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels and delivery to the customer

The Supply Chain Council

The planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities…also includes coordination with channel partners, which can be suppliers, intermediaries, third-party service providers and customers

Council of Supply Chain Management Professionals



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Old Paradigm:

Firm gained synergy as a vertically integrated business encompassing ownership and coordination of several supply chain activities

Organizational cultures emphasized short-term, company focused performance



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New paradigm:

Firm in a SC focuses on area of specialization and enters into voluntary and trust-based relationships with suppliers and customers

All participants in the SC benefit

Boundaries are dynamic and extend from “the firm’s suppliers’ suppliers to its customers’ customers (i.e. 2nd tier suppliers and customers)

SCs now deal with reverse logistics to handle returned products, warranty repairs and recycling


Importance of Supply Change Management

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Businesses have discovered value-enhancing and long-term benefits

WHO BENEFITS MOST?

Businesses with:

Large inventories Large number of suppliers Complex products Customers with large purchasing budgets

BUT

ALL BUSINESSES CAN BENEFIT



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Firms using Supply Chain Management:

1. Start with key players

2. Move on to other suppliers, customers and shippers

3. Integrate second tier suppliers and customers

REMEMBER: second tier refers to the customer’s customers and the supplier’s suppliers



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Cost savings and better coordination of resources are reasons to employ SCM

Reduced Bullwhip Effect – the magnified reduction of safety stock costs based on coordinated planning and sharing of information

Collaborative planning, forecasting and replenishment activities reduce Bullwhip Effect and lead to better:

Customer service Lower inventory costs Improved quality Reduced cycle time Better production methods and Other benefits


Alberta Supply Change Management Examples

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Design and Steel Fabrication Facility (Edmonton)

Custom design and welding services

Formed a strategic alliance with a major steel supplier that initially supplied 5% of annual requirements

Using sound supply chain principles, volumes grew to 75% of annual spend of steel bar and plate purchases

During the process, reduced costs by up to 26% on selected materials

Relationship resulted in faster turnover and thus, lower inventory levels to provide higher levels of service



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Custom Metal Fabrication (Red Deer)

Service oil & gas, agriculture and mining industries

Has a secondary business to supply steel to other small manufacturers that are unable to attract interest from major suppliers

Worked with their major supplier to increase delivery cycle but this increased their responsiveness

Transportation costs increased only modestly but average inventory levels declined

Cut their lead time in half by ordering less but more frequently

Cash flow increased for all participants

Expanded customer base



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Manufacturer of Oilfield Equipment (Calgary)

Primarily focused on the oil & gas sector

Supply chain collaborative innovation program enabled them to build strong relationships with major suppliers

Relationships allowed for:

Better balancing of inventory levels Faster and more reliable supply Managed variability in time of high demand

Reduced overall operating costs

Allowed them to re-focus their Lean efforts



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Manufacturer of Valves (Edmonton)

Prime focus is on the oil & gas sector

Supply chain collaborative innovation program allowed them to establish a strong alliance with a supplier based in Ohio

New supplier:

Offered improved technology and allowed replacement of a Texas-based supplier

Allowed dramatically reduced inventory levels/improved cash flow

Facilitated transport in flow

Ultimately moved a portion of annual purchases to local foundry

Operated at 1/3 less inventory than under Texas-based supply


Supply Chain Collaborative Innovation Program

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Overview

All about building relationships with suppliers and customers to enhance performance of supply chain

“Hands-on” and practical

Based on “Best Practices” of organizations such as Cisco, Proctor & Gamble, Toyota, Honda and others

Content contains some of the secrets that these organizations have used to achieve great results in:

Reducing costs Improving on time delivery/Reducing lead time and inventories Increasing cash flow/Improving profitability Creating more innovation and a greater competitive advantage


Supply Chain Collaborative Innovation Program

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Two Phases

Phase 1: Discovery process of why participants can benefit from collaboration along their supply chain and how to begin the process

One-day working session, using simulations to demonstrate the power of Lean supply chain processes

Phase 2: Takes participants through the process of learning “Best Practices” of how to do it

Day and a half session followed by a half-day for participants to develop a 120-day Action Plan to ensure process moves forward

ALL FOUR ALBERTA SUPPLY CHAINS PARTICIPATED IN

AND BENEFITED FROM THE PROGRAM


Current Trends in Supply Chain Management

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Expanding the Supply Chain

Businesses are expanding partnerships and building facilities in foreign markets

Expansion involves:

Breadth – foreign manufacturing, office and retail sites, foreign suppliers and customers

Depth – second and third tier suppliers and customers



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Increasing Supply Chain Responsiveness

Firms increasingly need to be more flexible and responsive to customer needs

Supply chains need to benchmark industry performance/meet and improve on a continuous basis

Responsiveness improvement will come from more effective/faster product and service delivery systems



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Purchasing

Long-term supplier relationships

Supplier management – improve performance through:

Supplier evaluation (determining supplier capabilities)

Supplier certification (third-party or internal certification to assure product quality and service requirements)

Strategic partnerships – successful and trusting relationships with top-performing suppliers



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Operations

Demand management – match demand to available capacity

Linking buyers and suppliers via MRP and ERP systems

Use JIT to improve “pull” of materials to reduce inventory levels

Employ TQM to improve quality compliance among suppliers



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Logistics

Transportation Management – trade-off decisions between cost and timing of delivery/customer service via trucks, rail, water and air

Customer Relationship Management – strategies to ensure deliveries, resolve complaints, improve communications and determine service requirements

Network Design – creating distribution networks based on trade-off decisions between cost and sophistication of the distribution system



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Integration

Supply Chain Process Integration:

When supply chain participants work for common goal

Requires intra-firm functional integration Based on efforts to change attitudes and

adversarial relationships

Supply Chain Performance Measurement – crucial for firms to know if procedures are working

Documents

Energy Supply Chain Development Overview - Alberta, … · Council of Supply Chain Management Professionals . ... effective/faster product and service delivery systems . ... Energy