supply chain
TRANSCRIPT
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Supply Chain
• Operations Flow
• Supply Chain Configurations
• Supply Chain Strategies
2
Customer
Retailer
Information Flows
Distributor
Producer / Suppliers
Payments: Funds Flow
Goods/Services: Value Flow
Requirements
Customer Service
Supply Chain Overview
3
D
T
R
B
P
6 Cylinder Mid-size
4 Cylinder Compact
A H F S
Flexible Flows at Health Clinic
D: Doctor (exam room)
R: Radiology (X ray)
T: Triage (assess severity)
B: Blood test
P: Pharmacy
Physical Exam
Physical Exam
Broken arm
Broken arm
Flu
Flu
Line Flows at Car Assembly Plant
A: Front-end assembly
H: Hood attachment
F: Fluid filling
S: Start-up & testing6 Cylinder Mid-size
4 Cylinder Compact
Operation Flows
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Operations Flow and Competitive Strategy
Flexible Flows
• Customization
• Low Volumes
• High Design Quality
• Long Delivery Time
• More cost
Line Flows
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•
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•
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Jumbled flows
Some dominant flows
Linear flows
Flexible flows
• Tool and die shop
• Health Center
Intermediate flows
• Branch offices
• Print shop
Line flows
• Assembly plant
• Oil refinery
Low Medium High
Volume Volume Volume
Relationship between Flows and Volume
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A Ladder-back Chair
Ladder-back subassembly
Seat subassembly Front legs Leg supports
Back legs Back slats Seat frame Seat cushion
Seat-frame boards
Bill of materials
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Master Production Schedule
MRP ExplosionInventory Records Bill of materials
Materials Requirements Plan
Materials Requirements Planning
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MRP Explosion
Materials Requirements Plan
Materials Requirements Planning
• Release new orders
• Adjust Due date
• Supplier schedules
• Capacity Requirements Plan
Manufacturing Resource Planning
• Performance Reports
Cost and Price Data
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MRP Implementation
Prerequisites
• Computing support for product and parts variety
• Accurate production schedule, inventory records, BOM
Favorable Conditions
• Number of BOM levels > 6
• Large lot sizes
• Low volatility
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Supply Chain
• Operations Flow
• Supply Chain Configurations
• Supply Chain Strategies
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Supply Chain Management: Trends
• Link manufacturers, retailers, customers & suppliers
• Streamline materials flow
• Manage demand fluctuations, global sourcing, shorter life cycles, and lower brand loyalty
• Customer service, growth, revenue enhancement
Need for information integration across the chain
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Tier 1 Suppliers
Tier 2 Suppliers
Manufacturer
Distribution Center 1
Distribution Center 2
Customer Customer Customer Customer
Supply chain for a Manufacturer
S S S S
s s s s
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The Bullwhip Effect in Supply Chains
Customers Distributors Manufacturers
Order variability increases up the chain leading to
• Insufficient / Excessive inventory
• Poor product forecasts
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Causes Behind the Bullwhip Effect
1. Forecast updating. Longer the lead time, greater the swings.
– Share demand data with upstream member
– Upstream member controls inventory (e.g., Vendor Managed Inventory)
– Bypass the distribution system (sell direct).
– Shorten lead time.
2. Order batching. Full truck load orders cause bigger fluctuations
– Share demand data with upstream member
– Use electronic ordering
– Use mixed SKU shipping
– Use a 3rd party logistics company
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3. Price fluctuations. Promotions and trade deals encourage forward buying.
– Reduce the frequency and level of discounting
– Use every day low price policy
4. Rationing. Manufacturer allocates product in short supply based on orders.
– Allocation based on past sales
– Tighten manufacturer’s return policy
– Advance orders to help increase capacity
Causes Behind the Bullwhip Effect (contd.)
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Push-Based vs. Pull-Based Supply Chain
Manufacturer
Manufacturer
Distribution CenterDistribution Center
Retail Store
Retail Store• Forecast• Master Scheduling• Stock Distribution Center• Manual ordering
• Order point based on forecast
• Deals, promotion, forward buying
• Manual ordering
• Manage shelf inventory
• Promotions
• Manual order entry
Customer Purchase
Customer Purchase
• POS data collection
• Perpetual inventory control
• Automatic electronic ordering
• Automatic electronic ordering
• Shipping container marking
• EDI
• POS data drives scheduling• Short cycle manufacturing• Advance shipping notice• Barcode scanner
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Pull System Characteristics
Requirements Benefits
Process Redesign
New Technologies
Manufacturing capability
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Supply Chain Dynamics
External
• Volume / product mix changes from customers
• Late / under-filled shipments
Internal
• Internal shortages / breakdowns
• Engineering changes/ new products/ sales promotions
• Information errors (e.g., forecasting errors)
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Operations Measure
Aggregate inventory value
Weeks of supply
Inventory turns
Production and material costs
Percentage defects
Percentage on-time delivery
New-product development time
Supplier lead time
Financial Measure
Current assets
Working capital
Working capital
Contribution margin
Contribution margin
Revenue
Revenue
Working capital
Supply-Chain Performance Measures
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Matching Environments with Supply Chains
Factors
Demand Competitive priorities Lead Time New-product introduction Contribution margins Product variety Stockouts / Excess Stock
Efficient Chains
Predictable Low cost Consistent quality On-time delivery Long Infrequent Low Low Low
Responsive Chains
Unpredictable Development speed Fast delivery Customization Frequent High High
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Design Features for Supply ChainsFactor Efficient Chains Responsive Chains Flow strategy Line flows
High volume Standardized products
Flexible or intermediate flows
Product or service variety Capacity cushion
Low
High
Inventory investment
Low High inventory turns
As needed Fast delivery time
Lead time Shorten aggressively
Supplier selection Design Strategy
Emphasize low prices Consistent quality On-time delivery Maximize performance
Fast delivery time Customization Volume flexibility
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Supply Chain
• Operations Flow
• Supply Chain Configurations
• Supply Chain Strategies
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Competitive Advantage in the Supply Chain
Proprietary
• Supplier owns technology
• Advantage to supplier
Generic
• Technology in public domain
• No advantage possible
Custom
• Joint design, full protection
• Full advantage
Tailored
• Joint ownership, some protection
• Variable advantage
Many Customers Single Customer
Single supplier
Many suppliers
Access and control of technological capabilities
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Appropriate B2B Relationships
Total equity
Investment stake
Strategic alliance
Joint development
Performance partnership
Long term contract
Preferred suppliers
Competitive bids
Short term contracts
Spot market
Outsource
Insource
Close Relational Market collaboration Competence competition
Core
strategy
Control over capabilities
Off
strategy
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Rely on Competition
Criteria
• Over-supply in market
• Commoditization
• Rapid innovations
• Price collapse
• Testing suppliers
Strategies
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Rely on Collaboration
Criteria
• Complementary capabilities
• Access to vital assets
• Required for market access
• Enduring relationships
• Common goals
Strategies
• Long term contracting
• Share sales data
• Joint R&D
• Share cost data
• Joint marketing
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Redesign of Supply Chain
Harmonize, Rationalize
• SKU reduction
• Process Design
• Integrated platform
• Supplier reduction
• Supplier involvement
• Brand rationalization
Electronic Chain
• Intranet / Extranet / Internet
• On-line catalogs
• e-Purchasing
• EDI
• Efficient Consumer Response
• Transaction processing
Cut Low Value Work
• Outsource
• Preferred suppliers
• Certification
• Share schedule
• Supplier managed inventory
• Purchasing cards
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Current Focus Required Focus Typical Activities:
1. New product
2. Design for manufacturability
3. Strategic cost management
4. Electronic chain
5. Breakthrough projects
6. Joint training
7. Contract management
8. Requisitioning
9. Stock control
10.Low value purchases
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Change Management
Quick Win
Supplier reduction
Analysis
Cost analysis
Capability
Web procurement
Major Project
Outsource
Restructure
Strategic Alliance
Functional Change
Process Change
Strategic Change
Business Transformation
Strategic Impact
Incremental Change Short Term Migration Plan Long term
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Low External Demand for Change High
High
Internal Support
Low
Transformational Leadership
Opportunistic activity Process Initiatives
Supply Chain Realignment
Challenges of Supply Chain Redesign