1 / 33

Supply Chain Management Managing Material Waiting Time

Supply Chain Management Managing Material Waiting Time. Outline. A key to matching supply and demand Levers for improved matching of supply and demand The bullwhip effect: Barilla The impact of aggregation. The Procurement or supply system. The Operating System. The Distribution System.

Patman
Download Presentation

Supply Chain Management Managing Material Waiting Time

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Supply Chain ManagementManaging Material Waiting Time S. Chopra/Operations/Supply Chain

  2. Outline • A key to matching supply and demand • Levers for improved matching of supply and demand • The bullwhip effect: Barilla • The impact of aggregation S. Chopra/Operations/Supply Chain

  3. The Procurement or supply system The Operating System The Distribution System Finished Goods Storage Raw Material supply points Raw Material Storage Movement/ Transport Manufacturing Movement/ Transport Movement/ Transport Movement/ Transport PLANT 1 WAREHOUSE A STORAGE PLANT 2 WAREHOUSE B STORAGE PLANT 3 WAREHOUSE C STORAGE MARKETS The Supply Chain S. Chopra/Operations/Supply Chain

  4. Key Financial Indicators of Supply Chain Performance • Return on Assets • Net Present Value • … • … These are LAGGING indicators. What must the supply chain do to achieve this? S. Chopra/Operations/Supply Chain

  5. Costs of not Matching Supply and Demand • Cost of overstocking • liquidation, obsolescence, holding • Cost of under-stocking • lost sales and resulting lost margin S. Chopra/Operations/Supply Chain

  6. Accurately Matching Demand with Supply is the Key Challenge: Inventories • ... by 1990 Wal-Mart was already winning an important technological war that other discounters did not seem to know was on. “Wal-Mart has the most advanced inventory technology in the business and they have invested billions in it”. (NYT, Nov. 95). • WSJ, Aug. 93: Dell Computer stock plunges. The company was sharply off in forecast of demand resulting in inventory writedowns. • BW 1997: S. Chopra/Operations/Supply Chain

  7. Mass Customization • Mass Production • Produce goods and services at low enough cost that nearly everyone can afford them • Mass Customization • Produce goods and services at affordable prices with enough variety and customization that nearly everyone can find exactly what they want S. Chopra/Operations/Supply Chain

  8. Implications • Markets have become increasingly heterogeneous • Demand for individual products is very unstable • Along with shorter development cycles comes shorter product life cycles • How to provide increased variety and keep costs down? S. Chopra/Operations/Supply Chain

  9. A Key to Matching Supply and Demand When would you rather place your bet? A B D C A: A month before start of Derby B: The Monday before start of Derby C: The morning of start of Derby D: The lead horse is an inch from the finish line S. Chopra/Operations/Supply Chain

  10. Procurement, Customer Order Manufacturing and Cycle Replenishment cycles PUSH PROCESSES PULL PROCESSES Customer Order Arrives Push/Pull View of Supply Chains S. Chopra/Operations/Supply Chain

  11. Role of Inventory in the Supply Chain Cost Availability Responsiveness Efficiency S. Chopra/Operations/Supply Chain

  12. Demand uncertainty and forecasting • Forecasts are usually (always?) wrong • A good forecast includes a measure of forecast error, e.g., standard deviation • The forecast horizon must at least be as large as the lead time. The longer the forecast horizon, the less accurate the forecast • Aggregate forecasts tend to be more accurate than disaggregate forecasts. S. Chopra/Operations/Supply Chain

  13. Demand uncertainty and forecasting Year Demand Forecast Error 1986 270 1987 309 1988 274 1989 268 1990 268 1991 316 S. Chopra/Operations/Supply Chain

  14. Uncertainty Uncertainty Information Uncertainty Customer Demand Uncertainty S. Chopra/Operations/Supply Chain

  15. S. Chopra/Operations/Supply Chain

  16. S. Chopra/Operations/Supply Chain

  17. S. Chopra/Operations/Supply Chain

  18. Information Uncertainty: Barilla Spa • Why are order sizes at Pedrignano so much more variable than those at Cortese? • What can Barilla do to improve coordination in its supply chain? S. Chopra/Operations/Supply Chain

  19. The Bull-Whip Effect:Causes • Rational and Optimizing Players in Supply Chain • Order Batching • Price Variations • Sales Force Incentives • Demand Signal Processing • Rationing Game S. Chopra/Operations/Supply Chain

  20. Reducing Batch Size • Wal-Mart: 3 day replenishment cycle • Seven Eleven Japan: Multiple daily replenishment • P&G: Mixed truck loads • Efforts required in: • Transportation (Cross docking) • Information • Receiving S. Chopra/Operations/Supply Chain

  21. Quantity Discounts Quantity Discounts Cost/Unit $3 $2.96 $2.92 10,000 5,000 Order Quantity S. Chopra/Operations/Supply Chain

  22. Trade Promotions • Trade Promotions S. Chopra/Operations/Supply Chain

  23. Trade promotions • Trade Promotions S. Chopra/Operations/Supply Chain

  24. The Bullwhip Effect: Countermeasures • Order Batching • Reduce setup cost, aggregation during transport, switch to volume based quantity discounts (rolling horizon) • Price Variations • Every day low pricing, sell-thru based promotions • Sales Force Incentives • Incentives based on sell-thru, rolling horizon • Demand Signal Processing • Supply chain visibility, collaborative forecasting and planning • Rationing Game • Turn and earn S. Chopra/Operations/Supply Chain

  25. S. Chopra/Operations/Supply Chain

  26. S. Chopra/Operations/Supply Chain

  27. Tackling Demand Uncertainty • The longer the forecast horizon, the less accurate the forecast • Supply Chain Goal: Quick Response • Aggregate forecasts tend to be more accurate than disaggregate forecasts • Supply Chain Goal: Accurate Response S. Chopra/Operations/Supply Chain

  28. Quick Response • Shorten supply lead time • Increase replenishment frequency • Coordinate supply chain S. Chopra/Operations/Supply Chain

  29. A Key to Accurate Response: Inventory Pooling S. Chopra/Operations/Supply Chain

  30. Accurate Response Examples • Information centralization: Wal-Mart, The Gap, mail order • Specialization: W.W. Grainger • Product substitution: Dell, Category Management S. Chopra/Operations/Supply Chain

  31. Accurate Response at Dell • Geographical aggregation: One location in the US; • three locations worldwide • SKU aggregation: Postponement and component • commonality Manufacture common components Final Assembly and delivery Customer order arrives S. Chopra/Operations/Supply Chain

  32. Hewlett Packard: Postponement DC Sale Vancouver Localization at Vancouver No Postponement (unit cost cheap) Localization at DC Postponement (unit cost expensive) S. Chopra/Operations/Supply Chain

  33. Improved Matching of Supply and Demand S. Chopra/Operations/Supply Chain

More Related