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MIM 558 Class 2

MIM 558 Class 2. Strategy Forecasting. Current Events. Thailand Egypt Mexico. Leola Milling. ISM Report on Business: Reasons for its Value. Timeliness Released on First Business Day Each Month Data From Preceding Month Accuracy Carefully Selected Sample Generalizability

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MIM 558 Class 2

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  1. MIM 558Class 2 Strategy Forecasting

  2. Current Events • Thailand • Egypt • Mexico

  3. Leola Milling

  4. ISM Report on Business: Reasons for its Value • Timeliness • Released on First Business Day Each Month • Data From Preceding Month • Accuracy • Carefully Selected Sample • Generalizability • Leading Indicator • Change Index Leads Activity Index By Quarter of a Business Cycle

  5. ISM Report on Business • Change Indices • Derivation

  6. Global Report

  7. Forecasting • Foundation of: • Operations Planning • Production Planning • Supply and Logistics Planning

  8. What Do Organizations Forecast?

  9. Types of Forecasts • Economic • Global Business Cycles • National Business Cycles • Industry Trends • Company Trends • Technological Forecasts • Product Life Cycles • Rate of Technological Change

  10. Types of Forecasts • Demand Forecasts • By Dollar Value • By Product • Supply Forecasts • Availability • Prices

  11. Why Do We Forecast?

  12. Why Do We Forecast? • To Minimize Uncertainty • To Anticipate Change

  13. What are Change Determinants? • Technology • Politics • Law • War and Threat • Strikes and Threat • Nature • Depletion • Discovery • Disaster

  14. What are Change Determinants? • Demographics • Income • Tastes/Needs • Mergers, Acquisitions & LBO’s • Global Economic Conditions • Environmental Concerns • Sustainability • Risk

  15. Three Directions of Forecasts: Demand Forecasts • General Forecasts • International, National, State and Local Conditions • Our Industry • Marketing and Sales Forecast: Our Firm, Specific Products • Production Schedule • Direct Material Inventory and Purchasing Activity • Machine Utilization • Maintenance Schedule • MRO Requirements Indirect Inventory and Purchasing Activity

  16. Three Directions of Forecasts: Supply Forecasts • Capacity • Availability • Lead Time and Changes • Supply Chains • Technology • Material Requirements/Critical Materials • Product / Component Life Cycle Issues • Prices • Labor Issues

  17. Three Directions of Forecasts:Logistics • Requirements • Availability • Lead Time • Technology (SC Visibility) • Labor Issues • Pricing

  18. Other Supply Chain Forecasts • Currency Exchange Rate Fluctuations • Oil Prices • Rate of Inflation • Labor Contract Expiration • Supplier • Dock Workers • Other Logistics

  19. Forecasting Keys • Accurate Historical Data • Understand Causes of Change • Forecast In Both Directions • Monitor Forecast vs Actual Regularly • Adjust Forecasts as Conditions Change • Examine Causes of Forecast Error

  20. Economic Concerns Industry Consolidation Privatization Unemployment Global Economic Environment Intellectual Property Rights Hacking and Computer Security

  21. Independent and Dependent Demand • Independent Demand • Generated by Customers • Use Forecasting to Determine • Dependent Demand • Demands on Suppliers • Calculate to Determine

  22. Management of Independent and Dependent Demand • Changing Order Quantities • Changing Order Timing • Forecasting and Planning • Collaborative Planning, Forecasting and Replenishment (CPFR)

  23. Game Changers:Why Tomorrow Won’t Be the Same

  24. Game Changer #1 • Global Population Changes Will Drive Shortages in Basics of Life • Water • Food • Unrest Results

  25. Global Population Forecast

  26. Global Sustainability Changes • Population • 7 Billion (October) • Over 5.5 Billion in Less Developed Countries • Africa: Growth So High Population Will Triple • 1 Bil Now, 3.6 Bil Forecast by 2100 • Yemen:25 to 100 Million • Nigeria 162 to 730 Million • U.S. Faster Than Most Developed Countries • Immigration and High Hispanic Birthrate (311M – 478M) • All of This Assumes Food & Water Available Source: UN Forecasts

  27. The Global Example • UN Forecast • World Population 2011: 7.0 Billion • World Population 2050: 9.3 Billion • Today: Half of Population in Urban Areas • 2050: 70% in Urban Areas • 2050: 27 Mega-Cities of Over 10 Million • 2050: 97% of Growth from LDCs • How Will Infrastructure Support Growing Population?

  28. The Northwest Example • Population Increase in Next 15 Years • Washington +23% • Oregon +25% • Port of Portland Forecast • Cost of Congestion Study • Trucks Between Seattle and Portland • Population 400 Million by 2043

  29. Game Changer #2 • Recent Supply Chain Strategies Shifting • Outsourcing • Single Sourcing • Lean Philosophies • Sustainability as a Source Selection Criterion • Supply Chain Risk Analysis

  30. Outsourcing • Firms Rethinking Outsourcing • Rising Wage Rates • Rising Transportation Costs • Currency Exchange Rates • Long Lead Times • Recent Survey (Global Retail Goods Firms): • 50% of firms in survey are considering moving out of China • 26% actually doing it

  31. A Look Forward: More Game Changers • China Industry Domination Strategy • BRIC Growth • Particle Deposition Technology • Quick Charge Batteries • $140/bbl Oil • Natural Disasters and SC Interruptions • Sustainability • Emma Maersk and Infrastructure

  32. Maersk Triple E Class • Size: 1312’ x 194’ • 18, 000 TEU

  33. Maersk Triple E Class

  34. Shipping and U.S. Ports • Emma and Triple E Ships All in Asia to Europe Service • None Coming to U.S. • Only 5 Ports With Capacity • Longshoremen

  35. Panama Canal • Widening and Expansion Due 2015 • New Container Ships Too Large to Fit • Large Bulk Carriers Too Large to Fit

  36. What About Mileage? • Strings may still call LA/Long Beach • On to – say- New Orleans • LA to the Canal 2939 NM • The Canal 48 NM • Canal to Head of Pass 1873 NM • HoP to New Orleans 95 NM • Total LA to NO 5296 NM • Source: Coast Pilot 2013

  37. What About Mileage? • LA to NO: 5296 NM @ 18 Knots • Plus Canal Transit Time • Plus Mississippi Transit Time • Roughly an additional 315 hours • An Additional 13 Days Transit Time

  38. What About Mileage? • Shanghai to LA 5667 NM • Shanghai to Canal 8108 NM • Difference: 2441NM • At 18 Kts = 135 Hours or 5 – 6 Days

  39. What About Mileage? • Train from LA to Chicago: 3-4 Days • Train from NO to Chicago: 2 Days • Faster and Cheaper to Discharge in California and Rail to Midwest or East.

  40. Union Pacific System

  41. BNSF System

  42. Norfolk Southern System

  43. CSX System

  44. 2012 TEU Traffic • 1. Los Angeles 7,940,511 • 2. Long Beach 6,061,091 • 3. New York/New Jersey 5,503,485 • 4. Savannah 2,944,678 • 5. Oakland 2,342,504 • 6. Seattle 2,033,535 • 7. Hampton Roads 1,918,029 • 8. Houston 1,866,450 • Source: American Assn. of Port Authorities

  45. What About Cost? • Canal Toll As of October, 2013 • $74 per TUE • ** Calculated on Total Ship TEU Capacity • Maersk Announces No Canal Use • They Will Use Suez Canal Even Though It Is Longer • Railroads Vow Not to Lose Traffic

  46. So… • To Use the Canal • Much Longer Sea Time • Much Longer Total Transit Time • Expensive Canal • Will There Be A Sea Change? • What About the Northwest Passage? • What About Nicaragua?

  47. Things to Watch • West Coast Longshore Grain Contract • Ongoing Row Over Refer Plug-ins • New Panama Canal • EU/ Airline Carbon Emissions • Carrier Capacity Constraints

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