FACILITIES PLANNING ISE310LSESSION 5
Chapters 2_3, September 8, 2015
Geza P. Bottlik Page 1
OUTLINE• Questions? Comments?
• Quiz
• Stories or experiences with supply chains?
• Chapter 2 and 3 (Chopra)
FACILITIES PLANNING ISE310LSESSION 5
Chapters 2_3, September 8, 2015
Geza P. Bottlik Page 2
Strategic Framework for Analyzing Supply Chains
• Chapter 2 – Performance
• (Chapter 3 – Drivers and Obstacles)
FACILITIES PLANNING ISE310LSESSION 5
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Performance - Uncertainty
• Demand uncertainty – customers’ demand for a product
– What else is uncertain?
FACILITIES PLANNING ISE310LSESSION 5
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Performance - Responsiveness
• Wide ranges of quantities
• Short lead times
• Large variety
• Innovation
• Service level – what do you think this means?
• Supply uncertainty
• Responsiveness comes at a cost
FACILITIES PLANNING ISE310LSESSION 5
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Performance – Strategic fit
• Match the supply chain’s responsiveness to
the implied uncertainty of supply and demand
• Balance between responsiveness and
effectiveness (cost)
FACILITIES PLANNING ISE310LSESSION 5
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Performance – Product Life Cycle
• Demand – uncertain to relatively certain
• Margins from high to low
• Availability essential early to capture the market
• Price – unimportant to important
FACILITIES PLANNING ISE310LSESSION 5
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Performance – Inter-company Scope
• A strategic fit between companies in a supply chain is
important because competition is shifting:
– From company vs. company
– To supply chain vs. supply chain
FACILITIES PLANNING ISE310LSESSION 5
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Definitions
• Facilities – places where product is
• Stored
• Assembled
• Fabricated
• Inventory –
• Raw materials
• Work in process (WIP)
• Finished goods (FG)
• Transportation
• Spares
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Definitions - continued
• Transportation – moving inventory from point to point
– Ground
» Road
» Rail
» Pipe line
» Barge
– Air
– Ship
• Information
– Data
– Analysis
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Barge transportation
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Southeastern Arizona – Galiuro Mountains
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Southeastern Arizona – El Paso to LA Pipeline
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El Paso to LA Pipeline - Station
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Framework
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Facilities
• Role in the chain – the where of the supply chain
• Role in the competitive strategy – Location, location, location
• Components of decisions
– Location
– Capacity
– Operational methods
– Warehousing methods
– Tradeoff: Responsiveness vs. Efficiency
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Inventory
• Role in the supply chain – alleviate mismatch between supply and
demand
– Increase demand that can be satisfied
– Exploit economies of scale
– Definitions:
» Material flow (Flow time) – elapsed time between material
entering the supply chain and exiting
» Throughput – rate at which material moves through the
chain
» Little’s law: Inventory = Throughput x Flow time
» Flow time is also called cycle time
FACILITIES PLANNING ISE310LSESSION 5
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Inventory - continued
• Role in competitive strategy: responsiveness
• Components of inventory decisions:
– Cycle inventory – satisfies demand between
replenishments
– Safety Stock – protects against variations in demand
– Seasonal Inventory – built up to counter demand that
exceeds capacity
– Sources – from whom to buy (or make)
FACILITIES PLANNING ISE310LSESSION 5
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Transportation
• Role: move material
• Role in competitive strategy: match required responsiveness
• Components of decisions:
– Mode (rail, truck, air, ship, pipeline, electronic)
– Route and network selection
– Sourcing
» Who provides transportation services?
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Information
• Role: connects the members of the chain and supports daily
operations
• Role in strategy: most important underpinning
• Components of decisions:
– Push/pull
– What to share
– Forecasting and planning
– Pricing
• Enabling technologies: Software (EDI, ERP, SCM)
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Obstacles
• Increasing variety
• Shorter life cycles
• Demanding customers
• Decreasing vertical integration
• Globalization