Supply chain management 091116162848 Phpapp01

Supply Chain Dynamics and Coordination DSC 335 Zhibin Yang, Assistant Professor Decision Sciences

Supply Chain for a Florist Flowers-on-Demand florist Home customers Commercial customers Packaging Flowers: Local/International Arrangement materials FedEx delivery service Local delivery service Internet service Maintenance services

A Global Manufacturing Supply Chain East Coast West Coast East Europe West Europe Retail USA Ireland Distribution centers Manufacturer Ireland Assembly Germany Mexico USA Tier 1 Major subassemblies Germany Mexico USA China Tier 2 Components Poland USA Canada Australia Malaysia Tier 3 Raw materials

Structure of Supply Chain ,[object Object],[object Object]

A Definition of Supply Chain (text pp 324) ,[object Object],External Suppliers External Consumers Support Processes Supplier relationship process New service/ product development process Order fulfillment process Customer relationship process Service/Product Provider Support Processes Supplier relationship process New service/ product development process Order fulfillment process Customer relationship process First-Tier Supplier

Outline ,[object Object],[object Object],[object Object],[object Object],[object Object]

Supply Chain Dynamics – Bullwhip Effect ,[object Object],[object Object],[object Object],[object Object],Hau L. Lee Thoma Professor of Operations, Information, and Technology, Stanford Graduate School of Business Director of the Stanford Global Supply Chain Management Forum Director of the Strategies and Leadership in Supply Chains Executive Program

Bullwhip Effect in a Diaper Supply Chain Babies’ daily demand for diapers Retailers’ daily orders to distribution center DC’s weekly orders to Manufacturer Manufacturer’s weekly production quantity 9,000 7,000 5,000 3,000 0 Order quantity Day 1 Day 30 Day 1 Day 30 Day 1 Day 30 Day 1 Day 30

What Causes the Bullwhip Effect? ,[object Object],[object Object],[object Object],[object Object]

Bullwhip Effect due to Demand Forecast ,[object Object],[object Object],[object Object],Wholesaler Retailer 100 units 100 units 100 units 100 units 100 units

(cont’d) Demand Forecasting ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Bullwhip Effect due to Order Batching ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Bullwhip Effect due to Price Variations ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Bullwhip Effect due to Rationing Game ,[object Object],[object Object],[object Object],[object Object],[object Object]

(cont’d) When Is Rationing Game Most Likely? ,[object Object],[object Object],[object Object],[object Object],[object Object]

Solutions for Battling Bullwhip Effect ,[object Object],[object Object],[object Object],[object Object]

Vendor Managed Inventory (VMI) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

VMI Success at Wal-Mart ,[object Object],[object Object],[object Object]

VMI Failure at Spartan Stores ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Quick Response ,[object Object],[object Object]

Quick Response vs. VMI ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

More on Battling the Bullwhip Effect ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Outline ,[object Object],[object Object],[object Object],[object Object]

Conflicting Objectives in Supply Chain ,[object Object],[object Object],[object Object],[object Object],[object Object]

Conflicting Objectives – Prisoner’s Dilemma ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Prisoner B denies Prisoner B confesses Prisoner A denies A & B: 6 months in jail A: 10 years in jail B: set free Prisoner A confesses A: set free B: 10 years in jail A & B: 5 years in jail

Supply Chain Coordination ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Coordination Issues in Operations ,[object Object],[object Object],[object Object],[object Object],[object Object]

Example: Coordinating S.C. Inventory ,[object Object],[object Object],Buyer Supplier Customers

(cont’d) ,[object Object],[object Object],[object Object],[object Object]

(cont’d) ,[object Object],[object Object],[object Object]

(cont’d) A Cost-sharing Contract ,[object Object],[object Object],[object Object],[object Object],[object Object]

Factors that Affect Coordination of SC ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What Is the Right Supply Chain for Your Product ? Outsourcing? VMI? Quick Response? Make to order? …… .

Rule of Supply Chain Design ,[object Object]

Product Life-Cycle: Soup 1969 1999 1989 1979 2009

Product Life-Cycle: Fashion Fall Winter Spring

Margins? Retail Price: $139.50 Retail Price: $1.39

Variety? New Design? Differed in color, size, style, etc., 95% new Unchanged over years, only 5%

Forecasting Error? High forecast error, 40-100% error Highly predictable, service level of 98%

Markdowns? Deep discount in the end of the season Rare

Two Types of Products Functional Products ( Soup ) Innovative Products ( Fashion clothing ) Demand Uncertainty Low (forecast error) High (forecast error) Life Cycle Long Short Risk of Obsolescence Low High Profit Margin Low High Variety Low High Demand volume High Low

Tow Main Functions of Supply Chains ,[object Object],[object Object],[object Object],[object Object]

Two Types of Supply Chains Factor Efficient Supply Chains Responsive Supply Chains Operation strategy Make-to-stock or standardized services or products; emphasize high volumes Make-to-order, or customized service or products; emphasize variety Capacity cushion Low High Inventory investment Low; enable high inventory turns If needed to enable fast delivery time Lead time Shorten, but do not increase costs Shorten aggressively Supplier selection Emphasize low prices, consistent quality, on-time delivery Emphasize fast delivery time, customization, variety, volume flexibility, top quality

Choose Supply Chain for Your Product ,[object Object],mismatch match mismatch match Source: “What is the Right Supply Chain for Your Product?”, by Marshall Fisher, HBR March-April 1997 Functional products Innovative products Responsive SC Efficient SC

Some Lessons of SC Design ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Supply chain management 091116162848 Phpapp01

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