SUPPLY CHAIN. DEFINITION AND TACTICAL OBJECTIVES. Jean-Marie PROTH. INTRODUCTION. Only recently has the pressure of the competitive market and new information technologies affected the structures of the production systems, calling for: Reduction of time to market.
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Only recently has the pressure of the competitive market and new information technologies affected the structures of the production systems, calling for:
Thus, the goal is not only to meet the
tolerances defined by the designer.
This part of the presentation focuses on the partial objectives to be reached in order to fulfill customers’ satisfaction.
A financial and operational evaluation are proposed as a conclusion.
A decision made by any partner of the
Supply Chain disseminates among the
whole Supply Chain. It means that such a decision requires adjustment decisions from the other partners.
As a consequence, a global information
system is necessary to allow all the partners to be informed in real time of the state of the system and the decisions made anywhere in the system.
Also, each partner should accept the rules derived from the co-operation arrangements decided at the strategic level. The goal of these rules is to make sure that each one of the partners is prepared to adjust itself to any decision that complies with these rules.
The sharing process is one of the most
The global objective of a Supply Chain is customers’ satisfaction. At the same time, individual components of the Supply Chain aim at maximizing their shareholder value by maximizing the Return on Investment (ROI) of their investors. ROI is the ratio of profit to capital employed over one year. This strategic objective can be translated into several short- and medium-term objectives at the tactical level.
The main tactical level objectives in a Supply Chain are:
This objective is much more than reducing the production cycle. It includes the time required to get raw material and components, to control their quality, to handle and, if necessary, store them until they are used. It also includes the time finished products are stored and prepared to be shipped to retailers, the transportation time, and the time they are stored again before being delivered to customers.
Minimizing the time required to convert orders into cash requires scheduling each order as soon as it arrives in the Supply Chain. This scheduling activity should cover simultaneously all the activities, that is buying, making, moving, storing and selling activities. Due to the complexity of the scheduling problems and the fact that each order is scheduled as soon as it arrives in the Supply Chain, re-scheduling of existing tasks should be avoided, baring exceptional cases.
The goal of each partner was not to decrease inventories, since inventories favor productivity, but more to move them upstream or downstream in the chain to keep the advantages of inventories while transferring the related costs to other partners or subcontractors.
This was quite common in the auto industry where auto makers used to ask subcontractors to deliver parts or subsystems "Just-In-Time", which often resulted in transferring inventories to subcontractors. It is still the case inproduction systems working on a master-slave basis: the "master" builds his success at the expense of the "slaves".
The philosophy behind the Supply Chain paradigm is totally different : the goal is to improve the efficiency of the whole system, and thus to reduce the total WIP.
A real time approach as been proposed that both minimizes the completion timeand control the W.I.P.
The evolution of the computer systems from central mainframe to local workstations has drastically changed the way information is delivered. Nowadays, information can be sent from the place it is generated to any other place in the Supply Chain in real time.
Theoretically, this allows close monitoring over product movements, inventories, market changes, logistics, etc.
Technical barriers in information systems have been virtually removed.
However, two problems remain sensitive when a new Supply Chain is designed.
The goal when improving the visibility of demand is to move the demand penetration point, that is the point of the Supply Chain where the demand is known, as downstream as possible.
Tools are available to know with a reasonable probability the customers’ demands even before it emerge in their brains.
Quality mastery involves evaluating the product or service characteristics’ fit with the specifications provided by the designers or the customers. Quality mastery implies the ability to measure quality which, in turn, allows measuring the efficiency of the activities performed to improve quality.
Two basic rules are taken into account when evaluating the costs in a Supply Chain. These are:
Two approaches are used to reduce the incremental costs of a project. These are:
Costs to take into account in the evaluation are the costs per unit (of product, or service). This cost per unit should be compared with the price paid by customers to enjoy the product or the service.
Written as the product of margin by capital turnover, the ROI is not only more understandable, it can also be easily optimized because profit and sales on one hand, and sales and required capital on the other hand, are handled by the same level of responsibility in the companies.
Three main parameters should be measured to evaluate this aspect. These parameters are:
Adequacy to customers’ expectations
The following measures should be made: