introduction to logistics & supply chain management - edxmitx+ctl.sc1x_1+2t2015+type@ass… ·...

MIT Center for Transportation & Logistics

CTL.SC1x -Supply Chain & Logistics Fundamentals

Introduction to Logistics & Supply Chain Management

CTL.SC1x - Supply Chain and Logistics Fundamentals Lesson: Introduction to Supply Chains 2

"Bananas". Licensed under Creative Commons Attribution-Share Alike 2.5 via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Bananas.jpg#mediaviewer/File:Bananas.jpg

"Red High Heel Pumps" by Almighty1 at en.wikipedia - Own workTransferred from en.wikipedia. Licensed under Public domain via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Red_High_Heel_Pumps.jpg#mediaviewer/File:Red_High_Heel_Pumps.jpg

“Toyota IIA opened” by Hoikka1 Licensed under Creative Commons Attribution-Share Alike 3.0 Unported via Wikimedia commons – http://commons.wikimedia.org/wiki/File:Toyota_IIA_opened_2.jpg

“Cement Bags” by StaraBlazkova Licensed under Creative Commons Attribution-Share Alike 3.0 Unported via Wikimedia commons http://commons.wikimedia.org/wiki/File:Cement_bags.jpg

CTL.SC1x - Supply Chain and Logistics Fundamentals Lesson: Introduction to Supply Chains

Five Questions

1.  What is a supply chain? 2.  What are logistics and supply chain management? 3.  How should you view SCM? 4.  What are the challenges 5.  Why should you care?

3


What is a Supply Chain?

4



Two or more parties linked by a flow of resources – typically material, information, and money – that ultimately

fulfill a customer request.

Information (order)

Money (payment)

Information (status)

5

Material (delivery)


What is a supply chain?

6



7

Bicycle

Wholesaler

Retailer

Customer

Wholesaler

Retailer

Retailer

Customer

Customer

Customer

Retailer

Hardware Supplier

Frame Supplier

Tire Supplier

Casting Plant

Gear Supplier

Paint Supplier

Pedal Supplier

Supplier

Rubber Mfg

Pigment Supplier

Chemical Mfg

Supplier

Smelter



•  The primary purpose of a SC is to satisfy customer needs. n  Only one source of revenue – the customer n  Payments between parties are just fund exchanges n  Division of intra-SC payments are a function of power, market

conditions, etc.

•  Supply Chains try to maximize the total value generated n  = [What customer pays] – [Total effort expended to fulfill]

8


Logistics versus Supply Chain Mgmt

9


What is Supply Chain Management?

“Supply Chain Management deals with the management of materials, information, and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers.“

Stanford Supply Chain Forum

“Call it distribution or logistics or supply chain management. By whatever name it is the sinuous, gritty, and cumbersome process by which companies move material, parts, and products to customers.”

Fortune (1994)

Logistics involves . . . “managing the flow of items, information, cash and ideas through the coordination of supply chain processes and through the strategic addition of place, period and pattern values.”


10


Logistics vs. SCM

According to the Council of Supply Chain Management Professionals . . .

n  Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements.

n  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, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.

11

Source: Used by permission, Council of Supply Chain Management Professionals, http://cscmp.org/.


Supply Chain Management Perspectives

12


Supply Chain Perspectives

13

Image Source: Arntzen, B. MIT Center for Transportation & Logistics, Hi-Viz Research Project (2013)


Supply Chain Perspectives

Suppliers

Manufacturers

Distributors

Customers

14


Process View of Supply Chains

•  Four Primary Cycles n  Customer Order Cycle n  Replenishment cycle n  Manufacturing Cycle n  Procurement Cycle

•  Cycles Occur Between Stages n  Interactions differ at each stage

•  Not every SC will have all 4 Cycles

Procurement Cycle

Manufacturing Cycle

Replenishment Cycle

Customer Order Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier Adapted from Chopra & Meindl “Supply Chain Management”

15


Macro Process (Software) Perspective

Supplier Relationship Management

n  Sourcing n  Negotiation n  Buying n  Design and Supply

Collaboration

Customer Relationship Management

n  Marketing n  Selling n  Call Centers n  Order Management

Internal Supply Chain Management

n  Strategic Planning n  Demand Planning n  Supply Planning n  Fulfillment

SRM “source”

ISCM “make, move, store”

CRM “sell”

Different macro processes should be aligned n  Fall under different groups (Marketing-CRM, Manufacturing-

ISCM, Purchasing-SRM) n  Forecasts, schedules, design, etc. should be coordinated

Supp

lier

Cust

omer

Firm

16


Cus

tom

ers

Supp

liers

P1 Plan Supply Chain Plan P2 Plan Source P3 Plan Make P4 Plan Deliver

Source Make Deliver

S1 Source Stocked Products M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-Order

D1 Deliver Stocked Products

D2 Deliver MTO Products

D3 Deliver ETO Products

S2 Source MTO Products

S3 Source ETO Products

Supply-Chain Operations Reference (SCOR) Model

Return Source

P5 Plan Returns

Return Deliver

Enable

Source: Supply Chain Council 17


Traditional Functional Perspective

•  Purchasing / Procurement n  What to buy from who n  Corporate vs Group

•  Inventory Control n  How much to stock where n  Trigger points n  Replenishment plan

•  Warehousing n  Storage, Mixing, Break bulk n  Pick Pack and Ship n  What to stock where in WH

•  Materials Handling n  How to move product n  Packaging, containerization n  Storage layout

•  Order Processing n  Receiving, Entry & Status n  Order Management

•  Transportation n  Inbound versus Outbound n  Domestic versus International n  Modal control (Rail, TL, LTL,

Parcel, Air, etc.) •  Customer Service

n  Geographic n  Product Line Specific

•  Planning Group n  Facility Location n  Network Design n  Demand Planning

18


Systems Perspective of Supply Chains

19


•  Take an Engineering Systems Perspective n  What is a variable and what is a constraint? n  Continuous expansion of decision variables n  Increases potential for improvement but increases both

complexity and coordination requirements

Purchasing

Warehousing

Inventory Mgm

t

Material H

andling

Order Processing

Transportation

Customer Svc

Objective: Deliver at lowest transport cost Variable:

w Select carrier to tender each load to Constraints:

w Ship everything each day w Must deliver within specified windows

20

Supply Chain as a System




Purchasing

Warehousing

Inventory Mgm

t

Material H

andling

Order Processing

Transportation

Customer Svc

Objective: Deliver at lowest transport cost Variables:

w Select carrier to tender each load to w Select time windows to deliver

Constraints: w Ship everything each day

Objective: Deliver at lowest total cost Variables:

w Select carrier to tender each load to w Select time windows to deliver w Select when to ship what from where

Constraints: w Deliver within negotiated time frame


21




Purchasing

Warehousing

Inventory Mgm

t

Material H

andling

Order Processing

Transportation

Customer Svc

Product Design

Manufacturing

Objective: w Design, build, and deliver at lowest total cost

Variables: w Select carrier to tender each load to w Select time windows to deliver w Select when to ship what from where w Select where to stock which form of product

Constraints: w Deliver within negotiated time frame


22




Purchasing

Warehousing

Inventory Mgm

t

Material H

andling

Order Processing

Transportation

Customer Svc

Product Design

Manufacturing

Objective: w Maximize on-shelf availability

Variables: w Select carrier to tender each load to w Select time windows to deliver w Select when to ship what from where w Select where to stock which form of product w Select contract relationships w Select who should control replenishment w Which channel member should perform which function

Constraints: w Total delivered cost to shelf

Retailer

Supplier


Why is this so hard to do?

23


What are the major challenges? (Why is it so hard?)

24


Why is it so difficult? 1/2

•  Metrics – How do you measure a system? n  Trade-off of Breadth vs. Validity of metrics n  Outcome Based Logistics - Perfect order, Perfect Shelf

•  Politics and Power of Players - Who wins? n  Mom & Pop Shop versus Mega-Stores n  Mega Retailers vs. Mega CPG Manufacturers

•  Visibility – Who can see what and how quickly? n  Data are stored separately n  All parties do not have equal access to data n  Massive data ≠ Shared & accessible information

25


Why is it so difficult? 2/2 •  Uncertainty - Who knows what is going to happen?

n  Variable demand of product (shorter lifecycles) n  Variable manufacturing yield n  Unreliable sourcing of raw materials n  Inconsistent transit lead times

•  Increased complexity – Why is it getting harder? n  Exploding number of Stock Keeping Units (SKUs) n  Higher and diverging customer demands n  New & merging channels (Omni-Channel)

•  Global operations – Why don’t we ever close? n  Most firms source & sell across globe n  Multiple regions, time zones, languages, & cultures

26


Why do we care?

27


Why do we care? •  Supply Chains . . .

n  Span the globe and cannot be managed as an isolated function, n  Have become critical to any organization’s operations, and n  Connect functions, divisions, and business units within a firm

as well as across firms.

Evolved into being both a Bridge and a Shock Absorber

28

By Wsvan; cropped by Beyond My Ken (talk) 01:29, 14 October 2013 (UTC) (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://commons.wikimedia.org/wiki/File:Leonard_P._Zakim_Bunker_Hill_Bridge_-_Boston,_MA.jpg

"Mini Shocks" by Avsar Aras - Own work. Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Mini_Shocks.JPG#mediaviewer/File:Mini_Shocks.JPG


Example: Variability of #2 Diesel Pricing

29

2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

4

4.2

4.4

4.6

4.8

Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 May-14 Nov-14

On

Hig

hway

Pri

ce o

f #

2 D

iese

l ($/

gallo

n)

Data Source: U.S. Energy Information Administration, http://www.eia.gov/petroleum/gasdiesel/diesel_proc-methods.cfm


Logistics Costs per GDP

30

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

1980 1985 1990 1995 2000 2005 2010 2015

Per

cent

age

of U

S G

DP

Year

US Inventory Holding Cost US Transportation Cost Total US Logistics Cost

Year GDP ($T)

Inv Cost ($B)

Trans Cost ($B)

1981 3.21 259 228 1985 4.35 227 274 1990 5.98 283 351 1995 7.66 302 441 2000 10.29 385 594 2005 13.1 410 739 2010 14.96 429 769 2013 16.8 469 862

Data Sources: Council of Supply Chain Management (2014) 25th Annual State of Logistics Report


Still, why do we care?

Key Skills Technically Narrow Coordination

Influence Local & Controllable Across entire Supply Chain

Leadership Hierarchical, Direct, ‘Hard’

Influential, Indirect, ‘Soft’

Risk Management Robust or Reactionary Planned Response & Flexibility

Measurement Single Focus Multi-faceted

Technology Approach

Isolated Optimization Visibility & Coordination

Technology Platform

Self-Hosted, On-site Cloud or SaaS

Scope / Reach Regional / National Global / Multi-National

Functional Logistics Supply Chain

Supply Chain Management is a growing and evolving discipline.

31


CTL.SC1x -Supply Chain & Logistics Fundamentals

Questions, Comments, Suggestions? Use the Discussion!

[email protected]

"Boxer (2)" by Dezidor - Own work. Licensed under Creative Commons Attribution 3.0 via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Boxer_(2).jpg#mediaviewer/File:Boxer_(2).jpg

introduction to logistics & supply chain management - edxmitx+ctl.sc1x_1+2t2015+type@ass… ·...

Documents