Professional Documents
Culture Documents
Supply Chain Management
Supply Chain Management
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What is Supply Chain Management
Schedule / Stock
Conversion Delivery
Resources Development
MATERIAL FLOWS
INFORMATION FLOWS
FINANCIAL FLOWS
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SUPPLY CHAIN MANAGEMENT IS
FACILITATED BY :
PROCESSES
STRUCTURE
TECHNOLOGY
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SUPPLY CHAIN ELEMENTS
• Supply Chain Design
Strategic • Resource Acquisition
• Long Term Planning (1 Year ++)
• Shipment Scheduling
Operational • Resource Scheduling
• Short Term Planning (Weekly,Daily)
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Supply Chain Management
Underlying Principles
Compression (Planning/Manufacturing/Supply)
Conformance (Forecasts/Plans/Distribution)
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The steps involved
Step1- Designing the supply chain
Determine the supply chain network
Identify the levels of service required
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The steps involved
Step 2 - Optimizing the supply chain
Determine pathways from suppliers to the end
customer
Customer markets to Distribution centers
Distribution centers to production plants
Raw material sources to production plants
Identify constraints at vendors, plants and distribution
centers
Get the big picture
Plan the procurement, production and distribution of
product groups rather than individual products in large
time periods- quarters or years
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The steps involved
Step 3- Material flow planning
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The steps involved
Step 4 - Transaction processing and
short term scheduling
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Developments in Supply
Chain Management
1. Creation Era
U.S. industry consultant - 1980s
assembly line
characteristics
* large-scale changes,
* re-engineering,
* downsizing driven by cost reduction programs,
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Developments in Supply
Chain Management
2. Integration Era
Electronic Data Interchange (EDI) -
introduction of Enterprise Resource
Planning (ERP) systems
characteristics
*increasing value-adding
* cost reductions through integration.
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Developments in Supply
Chain Management
3. Globalization Era
globalization era
characteristics
*supplier relationships
*the expansion of supply chains over national
boundaries and into other continents.
* increasing their competitive advantage,
* value-adding,
* reducing costs through global sourcing.
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Developments in Supply
Chain Management
4. Specialization Era
(i)Outsourced Manufacturing and Distribution
vertical integration
work -in-process visibility and vendor-managed
inventory (VMI).
creates manufacturing and distribution networks
characteristics
market, region, or channel - resulting - trading
partner environments & demands
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Developments in Supply
Chain Management
5. Specialization Era
(ii) Supply Chain Management as a Service
transportation brokerages, warehouse management
supply planning,
*collaboration, execution and performance
management.
characteristics
significant effects on the supply chain infrastructure,
from the foundation layers of establishing and
managing the electronic communication between
the trading partners to more complex requirements
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Developments in Supply
Chain Management
6. Supply Chain Management 2.0 (SCM 2.0)
Web 2.0
creativity, information sharing, and collaboration among users
a combination of the processes, methodologies, tools and
delivery options to guide companies to their results quickly as
the complexity
characteristics
increase due to the effects of global competition,
rapid price fluctuations,
short product life cycles,
expanded specialization,
near-/far- and off-shoring,
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Role of Forecasting
in a Supply Chain
The basis for all strategic and planning decisions
in a supply chain
Used for both push and pull processes
Examples:
Production: scheduling, inventory, aggregate planning
Marketing: sales force allocation, promotions, new
production introduction
Finance: plant/equipment investment, budgetary
planning
Personnel: workforce planning, hiring, layoffs
All of these decisions are interrelated
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Characteristics of Forecasts
Forecasts are always wrong. Should
include expected value and measure of
error.
Long-term forecasts are less accurate
than short-term forecasts (forecast horizon
is important)
Aggregate forecasts are more accurate
than disaggregate forecasts
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Basic Approach to
Demand Forecasting
Understand the objectives of forecasting
Integrate demand planning and forecasting
Identify major factors that influence the demand
forecast
Understand and identify customer segments
Determine the appropriate forecasting technique
Establish performance and error measures for
the forecast
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Applications for forecasting
inventory control/production planning - forecasting the
demand for a product enables us to control the stock of
raw materials and finished goods, plan the production
schedule, etc
investment policy - forecasting financial information such
as interest rates, exchange rates, share prices, the price
of gold, etc. This is an area in which no one has yet
developed a reliable (consistently accurate) forecasting
technique (or at least if they have they haven't told
anybody!)
economic policy - forecasting economic information such
as the growth in the economy, unemployment, the
inflation rate, etc is vital both to government and
business in planning for the future.
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Forecasting methods
qualitative methods
past data
no formal mathematical model
No (long-term forecasting)
• regression methods
• a number of other independent variables
• Y = a + bX
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Forecasting methods
multiple equation methods
time series methods
single variable that changes
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Aggregate planning:
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Role of Aggregate Planning
in a Supply Chain
production rate
workforce
overtime
machine capacity level
Subcontracting
inventory on hand
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The Aggregate Planning Problem
Specify the planning horizon (typically 3-
18 months)
Specify key information required to
develop an aggregate plan
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Information Needed for
an Aggregate Plan
Demand forecast in each period
Production costs
labor costs, regular time ($/hr) and overtime ($/hr)
subcontracting costs ($/hr or $/unit)
cost of changing capacity: hiring or layoff ($/worker) and cost of
adding or reducing machine capacity ($/machine)
Labor/machine hours required per unit
Inventory holding cost ($/unit/period)
Stockout or backlog cost ($/unit/period)
Constraints: limits on overtime, layoffs, capital available
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Outputs of Aggregate Plan
Production quantity from regular time, overtime, and
subcontracted time: used to determine number of
workers and supplier purchase levels
Inventory held: used to determine how much warehouse
space and working capital is needed
Backlog/stockout quantity: used to determine what
customer service levels will be
Machine capacity increase/decrease: used to determine
if new production equipment needs to be purchased
A poor aggregate plan can result in lost sales, lost
profits, excess inventory, or excess capacity
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Managing Predictable Variability
with Supply
Manage capacity
• Time flexibility from workforce (OT and
otherwise)
• Seasonal workforce, agriculture workers
• Subcontracting
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