Supply chain engineering

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The term supply chain engineering (SCE) describes a method for the conceptual design and implementation of logistic and production- oriented supply chains within a company and across company boundaries. Not only are individual elements of a supply chain considered, but all necessary processes are considered holistically. What is essential for this approach is its integrated perspective with regard to the sub-areas of strategy, technology and information technology (IT). The engineering character of this approach is not only expressed in terms of content, but also in its name.

Due to its young age, very few standard works have appeared on the concept of supply chain engineering. The following definition of terms relates primarily to the basic book "Supply Chain Engineering - Methodology of Integrated Planning in Logistics" published in July 2010 by Dr. Joachim Miebach and Dominik Bühring, which defines SCE as an independent and overarching method in the design of supply chains.

Basics and definition

The SCE method follows the classic definition of a value-adding supply chain within and between companies and markets. In doing so, SCE designs the network structures, processes and facilities along the supply chain in such a way that strategy, technology and IT are not considered separately from one another, but are given equal and integrated consideration in all planning steps. Solutions for designing supply chains with the SCE approach are therefore considered holistic and are always characterized by engineering. All measures in the context of an SCE process focus on the ideal supply chain construction, including cost optimization, the correct use of technology and IT and the training and integration of employees, both in production facilities and in purely logistical facilities.

For the German-speaking area this approach is u. a. by Dr. Miebach has been defined. The work "Supply Chain Engineering - The Methods of Integrated Planning in Logistics", published in July 2010 by Gabler-Verlag, is so far the only work that describes SCE as a holistic and firmly defined method. According to the editors, experience has shown that neither the top-down approach , which is shaped by strategy consultants , nor the bottom-up approach of most engineering firms, as singular perspectives, leads to satisfactory results in the optimal design of supply chains.

The French authors Alexandre Dolgui and Jean Marie Proth have also dealt with the term SCE in their book "Supply Chain Engineering - Useful Methods and Techniques" (Springer-Verlag London Limited, 2010). However, the authors do not understand SCE as an independent method, but subsume various individual elements of the planning and implementation of supply chains under this term. Her focus is more on production processes and less on a holistic view of supply chains.

Another driving force behind the term is the “Supply Chain Engineering” department of the Fraunhofer Institute. The Fraunhofer Institute sees SCE more as a name giver. The methodology of this department still works with the narrower terminology of supply chain management .

Differentiation from supply chain management (SCM)

The SCE approach as developed by Dr. Miebach, sees itself as an upstream instance and basis for efficient and effective supply chain management. While SCM, according to a definition of the Council of Supply Chain Management Professionals (CSCMP), sees itself more as a strategic-operational control instrument for already installed supply chains, the SCE approach starts with the fundamental, often initial design or optimization of supply chains and then integrates them supply chain management as a subsystem for supply chain control.

Common goals such as the coordination and integration of processes along a supply chain with a view to cross-functional business processes and a value-adding approach are therefore also an inherent goal component of the SCE.

SCE - top-down and bottom-up

The basic assumption of Miebach's SCE concept is based on the knowledge that neither the so-called top-down approach nor the bottom-up approach as singular methods can depict satisfactory results in the design of supply chains.

The strategic top-down approach first thinks about networks, strategies, delivery rhythms and other business variables. Based on this, a best-practice scenario emerges, which ultimately predefines basic organizational structures and processes from top to bottom, but also all facilities and technical details. This approach is particularly typical for strategy consulting firms.

With the technology-oriented bottom-up method, which is often used by engineering offices and operational planners, cost and quality problems along the supply chain are almost exclusively considered from a technical perspective. This ultimately results in proposals for installations, storage techniques and administrative organizations. In many cases, coordination with the overall strategic overview takes place afterwards or not at all.

According to the SCE approach, an optimal supply chain can only contribute to a company's business success if its structure is designed from the ground up to be holistic from both a strategic and a technical point of view. The supply chain also has the authority to define business variables such as the liquidity tied up in the company (inventory), customer satisfaction ( delivery reliability ), investments in systems and IT systems, as well as over technology and process-dependent variables, such as costs for personnel and transport or the Quality of delivery. The individual elements of a supply chain therefore influence one another and cannot be separated from one another.

Methodical approaches of the SCE

The methodology of the SCE is divided into five different sub-areas of a planning cycle:

  • Key performance indicators (KPI) as target values
  • Network strategy
  • Process planning
  • Technology and operation
  • Optimization of the overall system

In principle, an evaluation of the current status of a supply chain is necessary, as is the development of various scenarios using quantified calculation models . No rough benchmark tables are used as the basis for a conception according to this method , but data tailored to the respective situation and location.

The SCE approach assumes that there is no computational model that automatically generates the ideal solution for a case based on all conceivable network strategies, processes and techniques, because the effort would be too great.

Ultimately, unfavorable solutions are gradually ruled out along the planning cycles, but others are further specified and the targeted optimization is then continuously questioned in a quantified manner.

Important tools of the SCE are knowledge management databases, simulations and emulations , EDP tools for detailed calculations, implementation experience in program and project management and, last but not least, the motivation and experience of the experts employed.

The planning cycle

I. Key performance indicators as target values

For the design of logistics networks from the point of view of the SCE, the following applies: What cannot be measured cannot be designed. Therefore, all requirements for a supply chain must be quantified in the form of so-called key performance indicators as business key figures. Looking back at the integration of top-down and bottom-up approaches, the company strategy with purchasing, production and distribution strategies flow into the system “from above”, while performance and cost data are specified “from below”. These relate, for example, to the throughput times to be achieved or the return quantities.

The limiting determination of individual types of costs is not yet carried out at this point, as necessary changes may result, for example, due to the shift in storage and transport costs.

II. Network strategy

This part of the SCE planning cycle deals with locations, production networks , cooperations and suppliers as well as the question of the degree of centralization and specialization and other influences on the structure of a network.

Here new approaches are formed from several location options and the alternative strategies are quantified and compared with the defined target KPIs. This is done, for example, by simulating the flow of goods.

III. Process planning

Within this step, processes that run on the company level are first considered. These processes are mapped in the enterprise resource planning system ( ERP system ). Specifically, this includes requirements and resource planning, lot size formation and utilization planning, the strategy of replenishment along the storage levels in the push or pull process, inventory planning and the general software architecture.

At this level, too, it is necessary to quantify the individual processes in order to arrive at the ideal solution. The use of simulations for decision-making is also an adequate tool in process planning.

IV. Techniques and Operations

In the next step of the planning cycle, processes and systems are considered on the operational level. These include conveyor and storage systems, systems for order picking and packaging, loading aids, warehouse management systems, route planning, personnel deployment planning and security issues.

Since manufacturers mostly only offer data for their own solutions, the SCE methodology also requires further quantification of possible alternatives at this point. Usually, as many comparison projects as possible are used, which are best prepared in the form of databases. It must be possible to query empirical values ​​that have already been collected. Performance data such as playing times, picking performance, error rates or transport performance must also be available.

V. Optimization of the overall system

The fifth and last step of the SCE planning cycle is the optimization of the overall system. The overall system developed over the previous three stages is compared here with the KPI system from step 1 of the planning cycle. The system asks whether the planned system meets the requirements, possibly even exceeds them, or whether the alternative found needs to be revised again before the planned supply chain system can be implemented.

Reasons for running through the planning cycle again can be surprising deviations, risk factors, quantifications that are not yet sufficiently reliable, or deviations from benchmarks or tolerances that could only be discovered during the first run.

Furthermore, in this step the robustness of the selected alternative is questioned and its efficiency is checked against changing factors in the product or in the market.

However, this methodology can ultimately also result in the set targets possibly being too ambitious.

literature

  • RG Poluha: The quintessence of supply chain management: What you really need to know about your processes in procurement, production, storage and logistics. Springer Verlag, Berlin and Heidelberg 2009, ISBN 978-3-642-01584-7 .
  • Prof. Alexander Dolgui, Jean-Marie Protz: Supply Chain Engineering - Useful Methods and Techniques. Springer-Verlag, London 2010, ISBN 978-1-8499-6016-8 .
  • Dr. Joachim Miebach, Dominik Bühring (Eds.): Supply Chain Engineering - The Method of Integrated Planning in Logistics. Gabler-Verlag, Wiesbaden 2010, ISBN 978-3-8349-2142-0 .
  • Marc Goetschalckx: Supply chain engineering. Springer-Verlag, New York 2011, ISBN 978-1-4419-6512-7 .

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