the sc's strategic importance & sto - supreme energy case
TRANSCRIPT
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THE SUPPLY CHAINS STRATEGIC
IMPORTANCE & THE DEVELOPMENT OF SCMSTRATEGY, TACTICAL AND OPERATIONAL
SUPREME ENERGY CASE
WIN SUKARDI
PMBSJuly 2011
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Quote of the Day
PRO
PROAKTIF
RAJINOPENMIND
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Win Sukardi
Sr. Manager SCMSupreme Energy Group
Education:
Mechanical Engineering (Ir.), Brawijaya University Petroleum Engineering (M. Eng), Tulsa University
Management (MM), SGU-Asia University
Business Administration (MBA), Konstanz University
Business Law (M. Hum), Gadjah Mada University Certified Purchasing Manager (C.P.M.)ISM
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What we discuss?
What is SCM?
Why is it important?
Developing the SCM Strategy, Tactical &OperationalConsiderations
Supreme Energys Case
Strategy
Tactical & Operational
Enablers
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What is SCM?
Many definitions
It is an evolving field since early 1990s
Usually related to scope of activities and type ofindustries
Lets explore from APICS (operation/manufacturing),
SCOR (six sigma), ISM (process), CSCMP (functional
integration, logistics) and others
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What is SCM?
APICS
The processes from the initial raw materials to the
ultimate consumption of the finished product linking
across supplier & user companies"
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What is SCM?
SCOR
Four basic processes plan, source, make,
deliverbroadly define these efforts, which include
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"
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What is SCM?
ISM
The design and management of seamless, value-
added processes across organizational boundaries to
meet the real needs of the end customer"
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What is SCM?
CSCMP
Supply Chain Management encompasses the
planning and management of all activities involved in
sourcing and procurement, conversion, and all
logistics management activities. Importantly, it also
includes coordination and collaboration with channel
partners, including suppliers, intermediaries, third
party service providers, and customers. In essence
SCM integrates supply and demand management
within and across companies"
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What is SCM?
David Ross (Through Supply Chain Management, 1997):
"A continuously evolving management philosophy that
seeks to unify the collective productive competencies andresources of the business functions found both within theenterprise and outside the firm's allied business partnerslocated along intersecting supply channels into a highly
competitive, customer-enriching supply system focused on
developing innovative solutions and synchronizing theflow of marketplace products, services, and information
to create unique, individualized sources of customervalue."
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David Simchi-Levi, Philip Kaminsky, Edith Simchi-Levi
(Designing & Managing the Supply Chain, 2003):
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 system-wide costs
while satisfying service level requirement
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What is SCM?
In Supremes perspective, SCM has at least 3
elements:
Procurement (sourcing and operation/ tactical
buying)
Logistics (warehousing, inventory, import-export,
explosives, waste management)
Performance and Support (internal and external
performance management, general administration,
reporting, ERP, and any other IT support)
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The importance?
How deep? Is it really important?
Lets watch the video!
Some cases
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Renault and Nissan
Case cited from Elevating Supply to the Executive Agenda
by David Bonet and Phil Toy (ISM Article)
Carlos Ghosn, named as COO Renault in 1996. He set a
goal of USD 2 billion of savings over 3 years How? He has 2 questions:
How can Renault and its suppliers improve performance
drastically and permanently in terms of total costs, cycle time
and innovation? Are Renault's processes, organization, management systems
and people suited to achieve these ambitious goals?
He again adopted the same in Nissan
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Legrand
Case cited from Elevating Supply to the Executive Agenda
by David Bonet and Phil Toy (ISM Article)
French company, bought by KKR and Wendel in 2002. John
Selldrof named as CEO. He then set a goal of USD 20 Millionsavings of USD 285 Million spending
He put supply management initiatives as a high priority to
achieve the goal
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IBM
Case cited from Elevating Supply to the Executive Agenda
by David Bonet and Phil Toy (ISM Article)
First CPO, the late Gene Richter, with John Paterson, the CEO,
continued in focusing on shared processes and linkedobjectives with all the business units across the world to
have scale economies in spending (sourcing effort)
View the importance of SCM function as strategic
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DELL
Remember the popular example of what is Dell doing in
selling their computer?
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The simple one..
Up Sustainable and growProfit
Up Sustainable and growRevenue
Down Meeting the quality standards, acceptable to
marketCost
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Strategic Importance Supremes Perspective
Who and what is Supreme Energy doing?
To understand more and to have check & balances on the
strategic importance, we shall transform it the Strategy,
Tactical, and Operational
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Strategic Importance Supremes Perspective
Who and what is Supreme Energy?
To understand more and to have check & balances on the
strategic importance, we shall transform it the Strategy,
Tactical, and Operational
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Supreme Energy
Jakarta HQ, geothermal business focus. Joint venture of
National + France + Japan
3 WKPs in Sumatera (each WKP is 220 MW capacity); three
project companies; total of 660 MW Each WKP has a 35-year contract from exploration to
operation & maintenance (5 years exploration + 30 years
O&M)
Total cost exposure: app. USD 660 Millions each for the allstages (USD 2 Billions in total)
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Supreme Energy
Stages: preliminary survey, exploration, development &
construction, and O&M
Major works (Civil Construction, Drilling, EPC, and O&M) of 3
projects (2 consecutive projects and another 1 project will bein parallel)
Involving 3 remote areas
Considered low and sensitive margin (IRR Project 16%)
Project financed (limited to the low interest of source of fund)
100% equity on the pre-exploration and exploration works
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The strategic importance
The integration and management of all flows (flow of
information, flow of product-goods/services, and flow of
funds)
Driving force to reduce cost (TCO in some types) and deliverthe goods/services at the required time with satisfactory
performance in all project phases
Driving force to maintain good relationships with key
suppliers Add value to the targeted COD (Commercial Operation
Date) and maintain production at the service level during the
concession contract period
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Strategic Importance Supremes Perspective
Who and what is Supreme Energy?
To understand more and to have check & balances on the
strategic importance, we shall transform it the Strategy,
Tactical, and Operational
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Development of the STO
Merriam-Webster:
Strategy: is defined as a long term plan of action designed
to achieve a particular goal
Tactical: is defined as involving or pertaining to actions, ends,or means that are immediate or short-term in duration,
and/or lesser in importance or magnitude, than those of a
strategy or a larger purpose.
Operational: is defined as of or relating to operation or toan operation
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Considerations
Nature of Company Company/Project Risks
Common Practice Stakeholder Value Business Relationships Laws & Regulations
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Nature of Company
Public sectororganizations
Privateenterprises
Non-profitorganizations
Type of Institution
Size of InstitutionPhase of project
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Company/Project Risks
Exploration risk (upstream and downstream)
Development risk (upstream and downstream)
Operational risk (upstream and downstream)
Financial risk
Market risk
Business risk
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Common Practice (OG & GEO)
1. Exploration
2. Drilling
3. Production & Maintenance
Phase of the project
Internal Chain OG & GEO
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RECEIVING
CUSTOMS WAREHOUSE &INVENTORY CONTROL
USAGESURPLUS
WRITE OFF
REORDERROCUREMENT
Suppliers
Common Practice (OG & GEO)
http://../i-appi/bidang-1/logistic/tim%20receiving.ppthttp://../i-appi/bidang-1/logistic/tim%20customs.ppthttp://../i-appi/bidang-1/logistic/tim%20warehousing%20inventory.ppthttp://../i-appi/bidang-1/logistic/tim%20warehousing%20inventory.ppthttp://../i-appi/bidang-1/logistic/usage.ppthttp://../i-appi/bidang-1/logistic/tim%20surplus.ppthttp://../i-appi/bidang-1/logistic/penghapusan.ppthttp://../i-appi/bidang-1/logistic/tim%20procurement.ppthttp://../i-appi/bidang-1/logistic/tim%20procurement.ppthttp://../i-appi/bidang-1/logistic/penghapusan.ppthttp://../i-appi/bidang-1/logistic/tim%20surplus.ppthttp://../i-appi/bidang-1/logistic/usage.ppthttp://../i-appi/bidang-1/logistic/tim%20warehousing%20inventory.ppthttp://../i-appi/bidang-1/logistic/tim%20customs.ppthttp://../i-appi/bidang-1/logistic/tim%20receiving.ppt -
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Stakeholder Value
Profitable
Growth
CostMinimization
TaxMinimization
Working CapitalEfficiency
E
V
A
Time
$ Market Cap
Fixed-CapitalEfficiency
Source: Cap Gemini E&Y Research
For OG, GEO Energy
Five Key Drivers of Stakeholder Value
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Business Relationships
PROJECT
COMPANY
LOCALGOV.
ESDM
(EBT-KE)
PT. PLN(PERSERO)
PPALICENSE
PRIVATE COMPANY
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Laws and Regulations
Indonesian laws and regulations
International laws (especially affecting France and Japanese
companies)
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StrategySupreme Energy
Gain the Top management support
Fit-for-purpose (relevant) organization
Different focus in each stage, based on companys objectives
SCM as a center of coordination, prime-mover and as afinancial commitment gate-keeper
Simple and accountable process, minimize approvals but
having a sound control mechanism
Limited financial authority (going bigger as approaching thedevelopment and O&M, part of risk management)
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Tactical & OperationalSupreme Energy
To be part of management team, controls from
Procurement Committee, BOD Contract Review
Three sections in all project stages, functional scope:
Procurement (sourcing, tactical), Logistics (warehousing,inventory, importation, re-exportation, transportation), and
Performance & Support
Speed and flexible on exploration stage
Lead and drive the process, appropriately Simple procedures, less bureaucracy but two-signatures
principle (control)
Use standard forms as much as possible
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Tactical & OperationalSupreme Energy
No ERP, simple database and process tracking system (prior
to exploration only)
Less paper, use of IT, email, scan, use of standard forms but
modifiable Direct import if possible, narrow down the supplier base,
use of the relationship type of procurement and selected
arms-length (transactional) type
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Enablers
Top Management Support
People
(Relevant) Organization
Information Technology
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Top Management Support
View SCM as part of management team
Obtain continuous trust and appropriate authority
Potential improvement: promote the Head of SCM to be
an equal level to Engineering, Project, or Operations (VPlevel).
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People
Best and fit-for-purpose people
Can-do attitude, good interpersonal skills, strategic
thinking, value oriented, and relationship management
skills Technical and project management skills
Multi background and experience. Work with less
supervision and less or nil of staff
Avoid under paid: You pay cheap, you will get monkey!.Seek a balance between buy and make/develop
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(Relevant) Organization
To be effective, relevant (fit-fur-purpose), viewed as VALUE,and as part of Management Team
Set up Procurement Committee (members are VP level)
Small to grow larger (budget constraint)exploration risks Speed, experienced task-force, multi-tasking to a mixed
type towards the O&M stage
Keep the three sections: One manager, 3 staffs (4, prior to exploration)
One manager, 3 heads, 3 fields, 4 staffs (11, exploration &development)
One manager, 3 heads, 3 fields, 8 staffs (15, O&M)
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(Relevant) Organization
Set up performance objectives for each section, develop
KPI and measure and improve. The fact: less number of
people, can do this later
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Information Technology
Depends on the project stage, fit-for-purpose, less cost if
possible, satisfying the basic needs
Moving to the O&M stage, use of the latest proven
technology; use of a full scale of e-proc, suitable ERP
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Closing remarks
Dont we think that SCM is strategically important?
If yes, it is then up to you, as the SCM professional and
Manager or VP, to bring and drive it to maximize value
to the success of your company!
You, us, as the key enabler, keep learning and improve!
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Thank You, Wish You All The Best!
Email: [email protected]