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SCM CONCEPT OVERVIEW

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A survey of executives in manufacturing companies found
that 91% of them ranked supply chain management as either
"very important" or "critical" to the success of their
companies.

Yet most acknowledged that they had problems with their


chains, and only 2% regarded their chains as excellent.

When asked about their strategies to improve their chains,


59% reported that their company had no strategy at all.

Supply Chains: A Manager's Guide, David A. Taylor, Ph.D.,


2003

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ORGANIZATIONAL TRENDS
BPR

SCM

e-B

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SCM: a definition
Supply Chain Management is the integration of key business
processes from end user through original suppliers, that
provides products, services and information that add value
for customers and other stakeholders.

Supply Chain Management adalah sistem yang mengintegrasikan


proses bisnis utama yang dimulai dari konsumen hingga ke pemasok
untuk memberi nilai tambah bagi Konsumen maupun stakeholders.

A definition by GSCMF (Stanford Global SCM Forum)

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SCM: another definition
Supply chain management is a set of approaches utilized to efficiently
integrate suppliers, manufacturers, warehouses, and stores, so that
merchandise is produced and distributed at the right quantities, to the
right locations, at the right time, in order to minimize systemwide costs
while satisfying service level requirements.

Definisi lain mengenai Supply Chain Management adalah pendekatan


mengoptimumkan integrasi antara suppliers, manufacturers, warehouse
dan retail, dengan mendistribusikan produk/jasa dalam jumlah, lokasi dan
waktu yang tepat, sehingga dapat meminimumkan Cost secara sistem
keseluruhan dan meningkatkan Service Level yang diharapkan.

David Simchi-Levi, Philip Kaminsky, Edith Simchi-Levi;


Designing and Managing the Supply Chain, 2000

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CHAIN OF SUPPLY
UPSTREAM DOWNSTREAM

customers

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The New Differentiators represent the
World Class between the Traditional ones
Traditional World Class

Quality
Quality Responsiveness
Kecepatan (Speed) LEAN
dalam memenuhi Mengeliminasi
perubahan pemborosan di
permintaan dalam proses

Time Cost
Time Cost
Agility
Kegesitan
(ber- Adaptasi)
mencapai Cost
Structure yg
optimum

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SUPPLY CHAIN MANAGEMENT ….. WHY ???
SAMPLE OF VALUE STREAM: A COLA CAN
Mine
Reduction
mill
Smelter
Hot roller

Cold
Can Can
roller
ware- maker
Remelter
house

Recycle
Bottler center
Bottler Tesco
ware- Tesco
ware-
house store
house Home
Source: Lean Thinking, Womack & James

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Cola Value Stream Scorecard
Incoming Processing Finished Process Cum. Cum.
Storage Time Storage Rate Days Scrap (%)
Mine 0 20 min 2 weeks 1000 t/hr 319 0
Reduction 2 weeks 30 min 2 weeks 305 0
mill
Smelter 3 months 2 hrs 2 weeks 277 2
Hot rolling 2 weeks 1 min 4 weeks 10 ft/min 173 4
mill
Cold 2 weeks <1 min 4 weeks 2100 131 6
Rolling mill ft/min
Can maker 2 weeks 1 min 4 weeks 2000/min 89 20
Bottler 4 days 1min 5 weeks 1500/min 47 24
Retailer 0 0 3 days - 8 24
RDC
Retail store 0 0 2 days - 5 24
Home 3 days 5 min - - 3 [ 90 ]
storage

Totals 5 3 hours 6 months 319 24

months

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SAMPLE VALUE STREAM: A CAN OF COLA
 EIGHT FIRMS

 FOURTEEN STORAGE POINTS

 PICKED UP & PUT DOWN 30 TIMES

 24% OF RAW MATERIAL SCRAPPED

 319 DAYS TO DO 3 HOURS OF WORK

Source: Lean Thinking, Womack & James

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BEER GAME Time !!!

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BEER GAME
A SUPPLY CHAIN SIMULATION

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SCM GAME-HISTORY
The Beer Game (or beer distribution game) was
originally invented in the 1960s by Jay W. Forrester
at MIT as a result of his work on system dynamics.

The original goal of the simulation


was to research the effect of
systems structures on the
behavior of people in the supply
chain.
Industrial Dynamics (Forrester 1961)

Jay W. Forrester (MIT) Source : http://www.beergame.org

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The GOLDEN Rules
 Be disciplined, but have fun …..
> Create your Supply Chain NAME ….

 It’s a competition game, with limit on cooperation


> You work with a partner, and only ….
> You can’t talk to the rest of your team
> Do not focus on SPEED, but focus on ACCURACY

 Each move represent a week

 The Goal: achieving lowest “Supply Chain Cost”


> Each unit (pallets) of inventory: $ 0.50 per week
> Each unit (pallets) of backlog : $ 1.00 per week
> Costs are accumulated over time
> Team with the lowest total cumulative cost wins
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SCM GAME - FLOW PENGADAAN
consumption

Used
Order card
Order flow (Administrator)
Order Order Order
Placed/ Incoming Placed/ Incoming Placed/ Incoming Prod.
Outgoing Orders Outgoing Orders Outgoing Orders Request
Customer Prod
Order card Delay2
Current Current Current Current
Inventory Inventory Inventory Inventory Prod
Delay1
Ship Ship Ship Ship Ship Ship
Delay1 Delay2 Delay1 Delay2 Delay1 Delay2

RETAILER WHOLESALER DISTRIBUTOR FACTORY


Logistic flow (Operation Executor)
2 Members 2 Members 2 Members 2 Members

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ESTIMATED RETAIL CUSTOMER ORDERS (BY WEEK) SC Cost : $ 3500
TEAM: MANTAP (@ weeks)
40

35

30

O25
R
D
E
R
20
S

15

10

0
0 5 10 15 20 25 30 35 40
WEEK

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INVENTORY OR BACKLOG (BY WEEK) SC Cost: $ 3,500
TEAM: MANTAP (@ weeks)
90
I
N 70
V
E
N 50
T
O
R 30
Y

B 10
A
C
K-10
L
O
G-30

-50

-70

-90
0 5 10 15 20 25 30 35 40
WEEK

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BEER GAME : LESSONS LEARNED
DAMPAK PENYEBABNYA ? APA YANG HARUS
(DLM SUPPLY CHAIN DIPERBAIKI ?
ANDA) ?

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THE “BULL-WHIP” EFFECT
Production Manager IN SUPPLY CHAINS
The ordering patterns share a
common recurring theme:

"The variability of an upstream site


are always greater than those of the
downstream site"

“Variabilitas dalam upstream site (sisi


pemasok) akan selalu besar dibanding
downstream site (sisi konsumen)"

©Supply Chain Management and e-Business


Panos Kouvelis, 2001
Order flow from Customer
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Bullwhip Effect :
The Barilla Supply Chains
Large Swings at tip Small Perturbation
(Gangguan Kecil)
(Gelombang besar pada
bagian puncak)
Bullwhip Handle

Barilla Case (Italian Pasta Manufacturer)

Flat & Stable


Further Upstream, Variation Gets Amplified More and More Pasta Purchases Consumption

Barilla Barilla
Distributors Wholesalers Retailers
Plant Dist. Centre

Information Flow Physical Product Flow


© Supply Chain Management and e-Business
Panos Kouvelis, 2001
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WHAT ARE THE CAUSES OF
THE “BULLWHIP
PHENOMENON”?

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CAUSES OF “BULLWHIP” EFFECT
1. Information Distortion (Distorsi
Informasi)
2. Order Batching (Order dalam skala besar)
3. Price Fluctuation (Fluktuasi Harga)
4. Rationing and Shortage Gaming
(Spekulasi)

© Supply Chain Management and e-Business


Panos Kouvelis, 2001

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1. INFORMATION DISTORTION
• Orders dianggap sebagai cerminan customer demand
(permintaan pelanggan)
• Ketergantungan pada Forecasting techniques yang sangat
tinggi dalam memahami / menganalisa customer demand
• Safety stocks yang sangat tergantung pada variasi demand
yang tidak menentu serta order lead-times yang lama
• Kendala dalam melakukan forecast

© Supply Chain Management and e-Business


Panos Kouvelis, 2001

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2. ORDER BATCHING
• Skala ekonomi dalam biaya pemesanan (ordering
cost) dan proses manufaktur skala besar (batching)
• Perencanaan dan pemesanan yang mengacu pada
sistem MRP dan sistem review berkala dalam periode
yang lama
• Skala ekonomi dalam transportasi (tarif truk penuh /
full truck-load rates)
• Sistem order yang “Push” yang mengejar keuntungan
finansial dalam jangka pendek
© Supply Chain Management and e-Business
Panos Kouvelis, 2001

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Inventory as Revenue Generator
• Anticipation – antisipasi future demand, seperti seasonality
atau promotional
• Safety Stock (buffer inventory) – buffer diperlukan terkait
issue-issue :
– Quality problems
– Lead time fluctuations
– Equipment problems
• Lot-size inventory – dengan cara menurunkan waktu setup
atau purchasing costs
• Transportation inventory
• Hedge inventory – antisipasi terhadap price changes

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ECONOMIC ORDER QUANTITY
Cost

Ordering Cost

Smaller Bigger Order Size


Order Order

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"OPTIMIZING" INVENTORIES
LT
Q
ROP

EOQ

SS
(0,0) T

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3. PRICE FLUCTUATION
• Discount program (karena order dalam jumlah besar) dan pembelian
di muka (advance purchase)
• Jumlah pembelian melebihi dari yang dikonsumsi (consumption rate)
Bullwhip Effect due to Seasonal Sales of soup
Order Quantity

Shipments from factory to distributor

Retailers’ Sales

• Gelombang demand yang besar mengakibatkan peningkatan biaya


untuk menyesuaikan kapasitas, biaya persediaan yang tinggi, serta
aktivitas transportasi yang tidak ekonomis
• Trade promotions and supply chain management = “The dumbest
marketing ploy ever!” © Supply Chain Management and e-Business
Panos Kouvelis, 2001
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4. RATIONING AND SHORTAGE GAMING
• Dimana permintaan (demand) melebihi kapasitas
(capacity rate) dan order yang sesungguhnya.
• Pelanggan membesar-besarkan kebutuhan riil mereka.
Example, 1995 DRAM chips
• drop Ketika hambatan karena kapasitas dapat diatasi,
order tiba-tiba drop.
Example, HP and Laserjet III Printers
Motorolla 1992, 1993 cellular phones
• Kendala pasokan dari supplier (membuat “safety order")
menimbulkan spekulasi dalam pengorderan.
© Supply Chain Management and e-Business
Panos Kouvelis, 2001

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CAMPBELL’S EXPERIENCE
For Retailers For Campbell

Menurunkan inventory hingga 15 % sales increase


setengahnya
Stockout diturunkan dari 1.5% 6 % reduction in
to 0.3 % transportation cost
Menurunkan administration Menurunkan 30% waktu
cost dalam order processing salesman time untuk order
entry dan negosiasi

© Supply Chain Management and e-Business


Panos Kouvelis, 2001

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HOW TO COUNTERACT THE
“BULLWHIP” EFFECT
• Information sharing (Berbagi informasi)
• Break order batches & collaborative planning (Order
dipecah dalam jumlah kecil dan perencanaan bersama-
sama)
• Stabilize prices (Menjamin kestabilan harga)
• Eliminate gaming in shortage situations (Menghindari
situasi yang dapat menyebabkan spekulasi)

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USING THE “CAUSES OF BULLWHIP PHENOMENON”
AS A CONCEPTUAL FRAMEWORK TO UNDERSTAND SUPPLY CHAIN PRACTICES

Framework CPFR (Collaborative Planning, Replenishment &


Forecasting) Benefits
A Information • Information sharing
distortion • Eliminate “black –box” ordering process
• Better controlled lead times
B Order • Reduced ordering costs
batching • Reduced importance of transportation economies of scale in ordering
• Better utilization of fixed assets through better information
C Pricing & • Volume discounts
promotional • Every Day Low price (EDLP)
distortion • Long run cost advantages
• Central stock location reduces cycle and safety stock
D Shortage • Information sharing
gaming • Capacity reservations
• Better allocation policies

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INFORMATION SHARING
EXAMPLES OF ENABLERS
Dimensions UPC EDI ERP APS INTERNET

Standardization X X

Communication X X X
Integrated systems X X

Information sharing X X
Decision Support X X
Coordination X X

Restructuring X
UPC = Utiliziation of Personal Computer
x Smaller effect EDI = Electronic data Interchange
X Big effect ERP = Entepreneur Resource Planning
APS = adalah apvance planning and schedule

1.0-1.1. SCM Overview &-Beer Game-R0 ©Copyright of PQM Consultants – www.pqm.co.id 33/57
INFORMATION REGULARY SHARED
WITH PARTNERS
60 56
Percentage 48 47
50
39 38
40
30 25 24
20
10 6
2
0
Order/Replenishment
Promotional Plans

Inventory Status

All
Business Goals

Other
POS Data
Sales Forecast

Product/Design
Information
Plans

Source: Industry Directions &


Syncra Systems

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OVERVIEW OF LESSONS LEARNED
• “Bullwhip Phenomenon” berlindung di balik kinerja Supply
Chain
• The “bullwhip” effect didorong oleh optimalisasi sektoral
tanpa melihat proses keseluruhan
• Jalan keluar dari masalah “bullwhip” membutuhkan
information sharing, collaborative planning, forecasting
and replenishment practices
© Supply Chain Management and e-Business
Panos Kouvelis, 2001

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Objectives of SCM ?
o Balancing Demand and Supply
o Maximize value & lower waste/cost
o Create and sustain competitive advantage (based on the
delivery of basic and value-added services)
o Achieve “win-win”, global optimal not local optimal
o Competition is between supply chains, not single companies

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Balancing Demand vs Supply in SCM
DEMAND Historic
Shipments
Market Analysis Statistical
Trend Models Base
Business
Marketing
Events
Major Customer
Events Shipment
Initiatives
Inventory

Line Production
Schedule

Materials
Shipment Ordering
Forecast
Long Range
Production Planning
SUPPLY

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The Goals of SCM
Effective Inventory Management

Effective Inventory Management enables a company to


meet or exceed customers’ expectations of product
availability
with
the amount of each item that will maximize net profits or
minimize inventory investment

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The Goals of SCM
Effective Inventory Management
Inventory Levels are continually increased to overcome increased
supply chain variability and sustain desired service levels
Excess Inventory
Poor Supply Delivery Production Capacity Step 1 – Eliminate Excess Inventory
Performance Constraints
High Forecasting
Poor Quality of Raw Errors
Poorly
Materials Trained Staff
High Lead Time
Unplanned
Varaibility Downtime Step 2 – Reduce Supply Chain Variability
Long
Lead
Time

• High Inventory levels are used to overcome • Identify and eliminate root cause problems
variability in the supply chain contributing to excess inventory requirements
such as high supply / demand variability or long
replenishment cycles

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Effective Inventory Management in the Supply Chain
Improve
Improve Matching
Matching of
of Supply
Supply
andand Demand
Demand

Improved Forecasting

Cost Reduce Material Flow Time Availability


Efficiency Responsiveness
Reduce Lead Time

Reduce Buffer Inventory

Supply / Demand
Economies of Scale Variability Seasonal Variability

Cycle Inventory Safety Inventory Seasonal Inventory

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How Much of Each Stocked Item Will
be Used at Each Location ?
• A demand forecast is a prediction of the quality
of a product that will be sold, transferred or
otherwise used during a specific time period

• Peramalan permintaan didasarkan pada tingkat


kualitas dari suatu produk yang akan dikirim dan
dijual pada jangka waktu yang telah ditentukan

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Common Problems with Demand
Forecasting
o The “if it’s on paper it must be true” syndrome
o Umumnya sistem peramalan yang digunakan di perusahaan
menggunakan rumus perhitungan “rata-rata (average)” dari
penggunaan periode sebelumnya . Often buyers/planners don’t
know formula !
o Umumnya menggunakan 1 rumusan peramalan yang diterapkan
untuk semua jenis produk
o Tidak ada verifikasi dan peninjauan ulang untuk menganalisis
jumlah forecast pada bulan tertentu telah benar-benar
dieksekusi (terjual) atau tidak.
o Belum ada sistem yang handal untuk mendapatkan perkiraan
permintaan customer di masa yang akan datang.

1.0-1.1. SCM Overview &-Beer Game-R0 ©Copyright of PQM Consultants – www.pqm.co.id 42/57
Accurate Demand Forecasts Are Based
on Five Elements
o Past Usage of the Products
• Suatu rumusan yang digunakan untuk menganalisis tren menurun
atau meningkatnya permintaan berdasarkan konsumsi
o External trends
• Economic or environmental factors
o Events
• Promotion, holidays, etc.
o Collaborative information from customers or salespeople
o Appropriate forecast horizon or time period

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Calculating the Forecast Error
[ Absolute Value of (Usage – Forecast) ]
Lower of Forecast or Usage

A100 Usage Forecast Calculation Error (%)

Oct 100 50 [ABS(100-50)] : 50 100


Sep 50 100 [ABS(50-100)] : 50 100
Aug 95 100 [ABS(90-100)] : 50 5.3

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The “Average” Forecast Error
o “Best Practice” companies had an error that was
approximately 1/10th of the Average forecast error in their
industry
o The Better your forecast, the less you need to stock to
maintain your desired level of Customer Service

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Different Patterns of Usage Require
Different Forecasting Methods
Item Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan De
‘11 ‘11 ‘11 ’11 ‘11 ‘11 ‘11 ‘11 ‘11 ‘11 ‘11 c
‘11
A100 100 120 80 90 110 105 88 109 98 118 112 108
B200 300 260 220 188 160 142 138 122 109 98 80 76
C300 1020 28 1030 34 990 36 1033 27 1004 39 1034 26
D400 41 85 160 241 370 398 224 129 57 36 24 20

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Different Items Have Different
Patterns of Usage ...

Trend- and Seasonality


Exponential Smoothing
Moving Average

Time Series Trend- and Seasonality-Corrected


Exponential Smoothing
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Forecast Horizon
o If the anticipated lead-time for a product is 90 days, you’re
buying in early February to satisfy demand in May
o The forecast horizon starts at today’s date plus the lead-
time
Place Order to Anticipated
Supplier Stock Receipt
Anticipated Lead Time

January February March April May

28 59 89
days days days

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PROCESS MAPPING APPROCAH

HIGH LEVEL PROCESS MAPPING


Memetakan Alur Proses Bisnis secara “Helicopter View” untuk
mendapatkan gambaran proses keseluruhan mulai dari saat
menerima order, pengadaan material, pemrosesan (produksi),
pengiriman produk dan pembayaran dari customer

LOW LEVEL PROCESS MAPPING


Memetakan Detail Aktivitas di dalam suatu Proses Bisnis
untuk mendapatkan gambaran elemen-elemen kegiatan
yang bernilai tambah maupun pemborosan

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SCM PROCESS MAPPING APPROCAH
HIGH LEVEL PROCESS MAPPING =
VALUE STREAM MAPPING (VSM)

Product/Service Flow

Purchase &
Supplier Factory Distribution Retail Customer
Supply

Order Flow

Process A Process B Process C Process D Process E

Admin & Support (IT, QA/QC, HR, Finance & Acc)

LOW LEVEL PROCESS MAPPING =


PROCESS FLOW CHART

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APA ITU VALUE STREAM?
Adalah semua aktivitas,
baik yang memberi nilai
tambah maupun tidak,
yang dibutuhkan untuk
menyelesaikan satu
produk/jasa atau famili
produk/jasa dari awal
hingga akhir.

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VALUE STREAM MAPPING
• Suatu metoda untuk melihat proses yang
memproduksikan barang/jasa Anda
• Memetakan alur produksi dan alur informasi
• Pada semua tingkat,
– Tidak hanya pada masing-masing proses, tetapi
– Juga termasuk para pelanggan dan pemasok

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Value Stream Mapping
The Process

Customer
MRP MSS
X pcs/month

Map the Current State


Std. Pack Qty.
Steel PC & L
Supplier # shifts
Weekly Build Schedule
Daily Ship
Schedule
Tues. & Fri.

# times/day

I Stamping Welding Assembly Finished Goods


Steel
Pin
I Layout
I I
# pcs Layout
# days
or shifts

TAKT = TAKT = TAKT = # Shifts =

2 Shifts # Operators Cycle Time = Overtime =

Changeover Time=4 hr Cycle Time = WIP =

Downtime Scrap/Rework DT, Scrap= 10%


Rework

2 Presses Downtime = 20% Changeover Time = Customer


Cycle Time = WIP = WIP = X pcs / month
WIP = Std Pack Qty
Steel Supplier PC & L
Uptime Scrap # Shifts
Change
Over
Level Box
Inventory Time ? days ? days ? days ? days TPc/t = ? DA1
Processing Time ? days ? days ? days Daily DA2
DA3
6 x / Day

Stamping Welding Assembly Finished Goods

Layout

3 Shifts 3 Shifts 3 Shifts # Material Handlers


TAKT Time TAKT Time TAKT Time Max Size
CT = CT = CT = 2 Shifts

Analyze the Current State and


C/O Time = C/O Time = C/O Time = 0 Overtime
DT = DT = DT =
Scrap = Scrap / Rework= Scrap / Rework =
WIP = Small Lot # Operators
WIP =

Design the Future State


WIP =

Inv.Time ? days ? days ? days ? days


TPc/t = ?
Proc.Time ? days ? days ? days

2012 2013
Activity
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
Establish TAKT & Flow in Tank Ass'y
Stamping Changeover Reduction
Reduce Stamping Buffer

Create an implementation plan and Move Ass'y to Plant 10


Establish TAKT & Flow in Sender Ass'y
Pull To Sender Ass'y

execute it ! Training

1.0-1.1. SCM Overview &-Beer Game-R0 ©Copyright of PQM Consultants – www.pqm.co.id 53/57
VALUE STREAM MAPPING
• Ikuti alur “barang” atau
“pelayanan” dari awal
hingga akhir, dan
Informasi
gambarkan setiap proses
dalam “alur material dan ALUR PROSES
informasi”.
• Kemudian, gambarkan Material
(dengan menggunakan
ikon) bagaimana alur dalam
peta masa mendatang”
1.0-1.1. SCM Overview &-Beer Game-R0 ©Copyright of PQM Consultants – www.pqm.co.id 54/57
1.0-1.1. SCM Overview &-Beer Game-R0 ©Copyright of PQM Consultants – www.pqm.co.id 55/57
VALUE STREAM MAPPING PROCESS
Value Stream
Tentukan Value Stream mana
Scope
yang perlu ditingkatkan
current state Pahami bagaimana operasi saat
drawing ini. Sebagai “Baseline”!

Rancang alur yang lean dengan


future state
menggunakan prinsip Lean.
drawing
Sebagai Visi Ke depan!

Implementation Kembangkan rencana


Plan implementasi yang rinci agar
sasaran dapat tercapai

Implementation Sasaran Value Stream Mapping!

1.0-1.1. SCM Overview &-Beer Game-R0 ©Copyright of PQM Consultants – www.pqm.co.id 56/57
FUTURE STATE MAP
CURRENT FUTURE
Condition Condition

1.0-1.1. SCM Overview &-Beer Game-R0 ©Copyright of PQM Consultants – www.pqm.co.id 57/57

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