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Screenshot 2023-02-28 at 10.13.05 AM
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NETWORK
Presented by
E.Veera Pratap
Assistant Professor
Mechanical Engineering
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 1
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 2
G L O B A L I Z AT I O N
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 3
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 4
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 5
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 6
Supply chain management:
• In commerce, supply chain management, the management of the flow of
goods and services, involves the movement and storage of raw materials, of
work-in-process inventory, and of finished goods from point of origin to
point of consumption.
• It’s the broad range of activities required to plan, control and execute a
product's flow, from acquiring raw materials and production through
distribution to the final customer, in the most streamlined and cost-effective
way possible.
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Globalization:
The process by which businesses or other organizations develop
international influence or start operating on an international
scale. It’s the free movement of goods, services and people
across the world.
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Globalization:
• With the advent of globalization, managing supply chain activities has become more
complex.
• Today a company operating in the United States may have its manufacturing facilities
in China, Mexico or Taiwan and its customers throughout the world.
• Many companies in order to manage its global operations may outsource their supply
chain activities to third-party organizations around the globe.
• Outsourcing reduces the supply chain operating cost but when not managed effectively
proves otherwise.
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Globalization:
• Globalization has dramatically changed how manufacturers operate, offering an
opportunity to reach new customers in new markets while at the same time exposing
firms to greater competition.
• Just as there are benefits and costs of globalization, there are similar pros and cons of
a global supply chain. In particular, companies need to manage the related risks.
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Benefits of a Globalized Supply Chain
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Benefits of a Globalized Supply Chain
• More room to grow:
New technologies and a shrinking globe mean that it is
easier for companies to grow generally:
to produce more,
offer more, and
sell more.
Expanding borders also means expanding businesses
and corporations. MODULE III 15
increase revenues
and
decrease costs.
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The Impact of globalization on supply chain networks
Consumer Electronics
Consumer electronics focuses on small, lightweight, high-value items that are relatively easy and
inexpensive to ship. Companies have exploited large
economies of scale by consolidating production of standardized electronics components in a
single location for use in multiple products across the globe.
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 19
Apparels
Apparel manufacture
has high labour content, and the product is relatively
lightweight and cost effective to
transport. Companies have exploited globalization by
shifting much apparel manufacturing to
low-labour-cost countries, especially China. In the first half
of 2009, about 33 percent of U.S.
apparel imports were from China.
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 20
The Impact of globalization on supply chain networks
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 21
I M PA C T O F G L O B A L I Z AT I O N O N
S U P P LY C H A I N N E T W O R K S
• Difference between success and failure often the ability to incorporate suitable
risk mitigation into supply chain design
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Risk Factors Percentage of Supply Chains Affected
Natural disasters 35
I M PA C T O F
Shortage of skilled resources 24 G L O B A L I Z AT I O N O N
Geopolitical uncertainty 20
S U P P LY C H A I N
NETWORKS
Terrorist infiltration of cargo 13
Forecasting/planning accuracy 30
Source: SCM by Chopra
Supplier planning/communication issues 27
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supply delays,
demand fluctuations,
• Critical for global supply chains to be aware of the relevant risk factors and build in suitable mitigation
strategies
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RISK MANAGEMENT IN GLOBAL
S U P P LY C H A I N S
Good network design can play a significant role in mitigating supply chain risk.
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 25
R I S K M A N A G E M E N T I N G L O B A L S U P P LY C H A I N S
For instance, having multiple suppliers mitigates the risk of disruption from any one supply source.
An excellent example is the difference in impact on Nokia and Ericsson when a plant owned by
Royal Philips Electronics, located in Albuquerque, New Mexico, caught fire in March 2000.
Nokia adjusted to the disruption quickly, using several other supply plants in its network.
In contrast, Ericsson had no backup source in its network and was unable to react. Ericsson estimated
that it lost revenues of $400 million as a result.
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 26
R I S K M A N A G E M E N T I N G L O B A L S U P P LY C H A I N S
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For Example
https://husdal.com/2008/10/18/ericsson-versus-nokia-the-now-classic-case-of-supply-chain-disruption/
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 28
R I S K M A N A G E M E N T I N G L O B A L S U P P LY C H A I N S
For example, Hino Trucks uses flexible capacity at its plants to change production levels for different products
by shifting workforce among lines.
As a result, the company keeps a constant workforce in the plant even though
the production at each line varies to best match supply and demand.
HINO is a Japanese manufacturer of commercial vehicles and diesel engines (including those for trucks, buses and other vehicles)
headquartered in Hino, Tokyo.
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R I S K M A N A G E M E N T I N G L O B A L S U P P LY C H A I N S
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R I S K M A N A G E M E N T I N G L O B A L S U P P LY C H A I N S
Table 6-3
Supply Chain Risks to Be Considered During Network Design
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R I S K M A N A G E M E N T I N G L O B A L S U P P LY C H A I N S
Table 6-3
Supply Chain Risks to Be Considered During Network Design
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R I S K M A N A G E M E N T I N G L O B A L S U P P LY C H A I N S
Every mitigation strategy comes at a price, however, and may increase other risks.
For example,
increasing inventory mitigates the risk of delays but increases the risk of obsolescence.
Acquiring multiple suppliers mitigates the risk of disruption but increases costs because
Each supplier may have difficulty achieving economies of scale.
Thus, it is important to develop tailored mitigation strategies during network design that achieve a good balance between
the amount of risk mitigated and the increase in cost.
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RISK MANAGEMENT
Table 6-4 Tailored Risk Mitigation
I N G L O B A L S U P P LY
Strategies During Network Design
CHAINS
Get redundant suppliers More redundant supply for high-volume products, less redundancy for
low-volume products. Centralize redundancy for low-volume products
in a few flexible suppliers.
Increase responsiveness Favor cost over responsiveness for commodity products. Favor
responsiveness over cost for short–life cycle products.
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RISK MANAGEMENT
I N G L O B A L S U P P LY TableTable
6-4 Tailored Risk Mitigation
6-4 [Continued]
CHAINS Strategies During Network Design
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F L E X I B I L I T Y, C H A I N I N G , A N D
C O N TA I N M E N T
• Flexibility plays an important role in mitigating different risks and uncertainties faced by a
global supply chain.
Mix flexibility
● Ability to produce a variety of products within a short period of time
Volume flexibility
● Ability to operate profitably at different levels of output
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F L E X I B I L I T Y, C H A I N I N G , A N D C O N TA I N M E N T
Product Plant
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Firm that sells four different products
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F L E X I B I L I T Y, C H A I N I N G , A N D C O N TA I N M E N T
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F L E X I B I L I T Y, C H A I N I N G , A N D C O N TA I N M E N T
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DEMAND FORECASTING
I N A S U P P LY C H A I N
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Outline
• Introduction
• Characteristics of forecasts
• Components of forecasts and forecasting methods
• Basic approach to demand forecasting
• Time series forecasting methods
• Measures of forecast error
• Forecasting demand at Tahoe Salt
• Forecasting in practice
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Introduction
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Aim of Forecasting
The aim of forecasting is to reduce the risk or uncertainty that the firm faces
In its short-term operational decision making and in planning for its long term
growth.
R O L E O F F O R E C A S T I N G I N A S U P P LY C H A I N
• consider two car dealers, the sourcing policies for each dealer should be
very different, given the difference in forecast accuracy. Thus, the forecast
error (or demand uncertainty) is a key input into most supply chain
decisions. Unfortunately, most firms do not maintain any estimates of
forecast error.
CHARACTERISTICS OF FORECASTS
• However, it is much more difficult to forecast yearly revenue for a company with less than a 2% error, and it is
even harder to forecast revenue for a given product with the same degree of accuracy.
• The key difference among the three forecasts is the degree of aggregation.
• The GDP is an aggregation across many companies, and the earnings of a company are an aggregation across
several product lines.
CHARACTERISTICS OF FORECASTS
In general, the farther up the supply chain a company is (or the farther it is from the
consumer), the greater the distortion of information it receives.
One classic example of this phenomenon is the bullwhip effect, in which order variation is amplified as orders
move farther from the end customer.
Collaborative forecasting based on sales to the end customer helps upstream enterprises reduce forecast error.
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 52
COMPONENTS OF A FORECAST AND
FORECASTING METHODS
• Companies must identify the factors that influence future demand and then
ascertain the relationship between these factors and future demand
Past demand
Lead time of product replenishment
Planned advertising or marketing efforts
Planned price discounts
State of the economy
Actions that competitors have taken
Forecasting Methods
1. Qualitative
– Primarily subjective and rely on human judgment
1. Time Series
Use historical demand only and
Best with stable demand
Components of a forecast and forecasting Methods
Forecasting Methods
1. Causal
Relationship between demand and some other factor
• For example,
• product pricing is strongly correlated with demand
1. Simulation
Imitate consumer choices that give rise to demand
• Airlines simulate customer buying behaviour to forecast demand for higher-fare seats when no
seats are available at lower fares.
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 56
BASIC APPROACH TO DEMAND FORECASTING
The following five points are important for an organization to forecast effectively.
1. Understand the objective of forecasting.
2. Integrate demand planning and forecasting throughout the supply chain.
3. Identify the major factors that influence the demand forecast.
4. Forecast at the appropriate level of aggregation.
5. Establish performance and error measures for the forecast.
Every forecast supports decisions that are based on it, so an important first step is to identify
these decisions clearly.
Examples of such decisions include
how much of a particular product to make,
how much to inventory, and
how much to order.
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 58
BASIC APPROACH TO DEMAND FORECASTING
A company should link its forecast to all planning activities throughout the supply chain.
These include
capacity planning,
production planning,
promotion planning, and
purchasing, among others.
I M PA C T O F U N C E RTA I N T Y I N N E T W O R K 59
A firm must identify demand, supply, and product-related phenomena that influence the
demand forecast.
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BASIC APPROACH TO DEMAND FORECASTING
Given that aggregate forecasts are more accurate than disaggregate forecasts, it is important to
forecast at a level of aggregation that is appropriate, given the supply chain decision that is driven
by the forecast.
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M e a s u re s o f F o re c a s t E r ro r
• Forecast errors contain valuable information and must be
analyzed for two reasons:
T H E R O L E O F I T ( S O F T WA R E T O O L S )
IN FORECASTING
• Software is important
Large amounts of data
Frequency of forecasts
Importance of high-quality results
• Can forecast demand by products and markets
• Real time updates help firms respond quickly to changes in
marketplace
• Facilitates demand planning
The Role of IT (software tools) in
Forecasting
Text Book: Supply Chain Management: Strategy, Planning, and
Operation, seventh edition, Sunil Chopra
Thank you
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