This document provides an overview of supply chain management concepts. It discusses internal and external supply chain management, features of SCM including considering the full production process from sourcing to delivery, and supply chain networks. It also summarizes key decisions in SCM like make-to-order vs make-to-stock and tradeoffs between cost and responsiveness. The document outlines models for determining manufacturing footprints like the demand allocation and plant location problems. It also summarizes concepts like product platforms, learning curves, inventory management including types of inventory and costs, and the economic order quantity and newsvendor models.
This document provides an overview of supply chain management concepts. It discusses internal and external supply chain management, features of SCM including considering the full production process from sourcing to delivery, and supply chain networks. It also summarizes key decisions in SCM like make-to-order vs make-to-stock and tradeoffs between cost and responsiveness. The document outlines models for determining manufacturing footprints like the demand allocation and plant location problems. It also summarizes concepts like product platforms, learning curves, inventory management including types of inventory and costs, and the economic order quantity and newsvendor models.
This document provides an overview of supply chain management concepts. It discusses internal and external supply chain management, features of SCM including considering the full production process from sourcing to delivery, and supply chain networks. It also summarizes key decisions in SCM like make-to-order vs make-to-stock and tradeoffs between cost and responsiveness. The document outlines models for determining manufacturing footprints like the demand allocation and plant location problems. It also summarizes concepts like product platforms, learning curves, inventory management including types of inventory and costs, and the economic order quantity and newsvendor models.
Session 1 : Introduction Supply chain management is all about having the right product in the right place, at the right price, at the right time and in the right condition. Blackweel (199! The supply chain perspective takes into account different internal functions and external partners. Internal Supply Chain Management (SCM) = your company (purchasing manufacturing maketing customer service) External SCM = !nternal SCM " your supplier " your customer #eatures of SCM $ Global vision of the production Starts from the very beginning of a process Cares a%out the final customer Com%ines sourcing manufacturing inventory management order handling distri%ution &egards place time price and quality of a product delivery Supply chain networks = comple' systems %etween suppliers manufacturers arehouses ! distribution centers and customers" (lmost every company must $ Source (=%uy) materials ) Ma#e (=produce) a product ) $eliver it to the customer ( SC manager has to consider the donstream (supplier " your company " customer) flo of products = physical flows (raw materials components products) %ut also the upstream flos (customer " your company " supplier) = information flows (customer orders demand forecasts product re*uirements) and financial flows (payments) SCM needs to cope with a high degree of uncertainty $ ) market uncertainty ) long time lags ) glo%ali+ation ,ne of the most fundamental decisions is to decide whether to Ma#e%to%order (e'$ -urger .ing) or to Ma#e%to%stoc# (e' Mc/onald0s). 1 conflicting goals $ improvement of customer responsiveness and cost reduction. Impact of supply chain levers on financial performance &' connaitre(: Sales 2 ,perating cost = )perating income #i'ed assets " 3orking capital = Capital employed ,perating income 4 Capital employed = *)CE #orking capital $ inventories % accounts receivable % accounts payable Session + : Manufacturing ,ootprint Strategy Choosing the location of production sites means finding a compromise %etween netor# cost and customer response time. Strategic priorities$ 3hat are the trade)offs %etween time cost and distance 5 Role in network: 3hat role should each facility play5 3hat processes are performed in each location 5 1( - he $emand .llocation Model &$.M( (production sites are fi'ed( Input / production &acilities M demand points $0 = 'nnual demand o& demand point ( 1i = )a*imum capacity o& &acility i ci0 = +roduction and transportation cost o& 1 unit produced in &acility i, shipped to demand point 0 Output -C = ,otal cost xi0 = -nits produced in &acility i and shipped to demand point 0 Minimi+e TC = su%6ect to and Solution with Excel solver (optimisation sous contrainte) linear model. +( - he Capacitated 2lant 3ocation 2roblem &C23M( &several production sites can %e opened or closed( #hat plants to open. /ow much to produce in each &acility &or each demand point. Input / M $0 1i ci0 fi = 'nnual &i*ed cost o& keeping &acility i open Output xi0 = 7nits produced in facility ! and shipped to demand point 6 yi = 1 if facility i is open and 0 if it is closed Minimi+e TC = su%6ect to and Solution with Excel solver (optimisation sous contrainte) 8o linear model (%ecause of fi'ed costs). 4( -he Center of Gravity Model &CGM( & ,ne single supply facility has to %e %uilt) Input 0ne &acility located at point (x5y) M demand points at points (a!") $0 = 'nnual 1uantity to be shipped c = 2ost o& shipping one unit &or one km &rom &acility to demand point ( &rom &acility to a demand point Minimi+e # non$linear optimi%ation pro"lem& Session 4 : 6eteen the ,los 1( 2roduct platforms ( platform where different products are made. Mi' %etween differentiation and standardi7ation $ /ifferentiation in features visi%le to the customer Standardi+ation in bac#ground architecture +( -he Experience curve 3earning curve The num%er of direct la%or hours re*uired to produce one unit of a product declines as the cumulative num%er of products produced increases Experience curve Marginal production cost declines as the cumulative num%er of products (services) produced increases 3earning curve c8 2ost o& producing the &irst unit c&x( -nit cost o& the *th unit a 3ate at which cost declines (not learning rate! 'earning rate ' The cost of unit 1' is 9 times the cost of unit ' (s the cumulative production dou%les unit cost decreases %y : 2 9 4( Inventory Management 4nventory is at the heart o& supply chain management and has a signi&icant impact on the success o& a business. The different types of inventory (and their drivers) $ (ransit stock (transportation time) )ycle stock (production lot si+e or purchase order si+e) Safety stock (demand varia%ility) Excess stock Costs in inventory management $ Storage costs Stoc#out costs ;aria%le or fi'ed ordering costs 9( Economic order quantity (focus on cycle stock) <uestion $ :o much and ho often re%order ; #inding an optimal trade)off %etween administrative order cost and inventory holding cost 8otation x 0rder 1uantity 5units6 < 7emand rate 5units per year6 - 2ycle length 5years6 / 8umber o& orders per year 596 (o minimi%e costs : derive cost function *it is given in the wording+ and optimi%e it& Session 9 : Inventory Management 1( $emand forecasts (focus on time series)%ased forecasting) (ll %usiness planning is %ased on forecasts. -he moving average method &M.( -he Exponential Smoothing Method &ES( Measuring forecast performance Should %e around = for good forecast. Mean Squared Error &MSE( *elative ,orecast Error +( Safety stoc# planning (focus on the ,ewsvendor model) 7emand - is uncertain 7istribution . o& the demand - is known )ean demand is /, standard deviation o& demand is 0 (8ormal distri%ution) ,he newsvendor "uys the newspapers at a cost o& c per unit 8ewspapers are sold to the end customer at a price o& r per unit 1nsold newspapers can be salvaged (sold after sales season) at a price o& v per unit S = 0rder 1uantity The order *uantity has to %e determined prior to the selling period ,%6ective is to determine the order *uantity that maximi7es expected profit. = >rofit function -he optimal order quantity S= ) -ecause of the characteristics of the 8ormal /istri%ution you only need values for 8(=:) to calculate the optimal *uantity for any ? and @1. ) Aou can use the ta%le of ,ormal 2istri"ution to find the 7%value. -he service level for the optimal quantity S= -he optimal expected profit Safety stock =