Sypply Chain Management. Dr Mariusz Maciejczak

Transcription

1 Sypply Chain Management Dr Mariusz Maciejczak

2 Basic reading Essentials of Supply Chain Management Second Edition By Michale Hugos Published by John Wiley& Sons, Inc., Hoboken, New Jersey, 2006 Chapter 6 Supply Chain Coordination

3 Is supply chain so simple? Supplier Manufacturer Distributor Retailer Customer Supplier Manufacturer Distributor Retailer Customer Supplier Manufacturer Distributor Retailer Customer Upstream Downstream

4 Supply Chain of a Typical Original Equipment Manufacturer

5 Bullwhip Effect Demand propagates from the lower levels of the supply chain (consumer end) to the upper levels (supplier end). Unfortunately, variability does the same and is amplified by each echelon of the chain. Terms for this include Information distortion Bullwhip Effect Modest movement at the whip handle (representing consumer demand fluctuations) leads to wild swings at the whip s tip (demand experienced by the supplier). Bullwhip cracks are loud because of the Doppler effect (e.g. as seen visibly in a boat s wake) which generates a small sonic boom as the whip tip breaks the sound barrier at about 800 mph. The supply chain bullwhip crack can be heard through bankruptcy filings as vulnerable suppliers and manufacturers experience deadly cash flow variability.

6 The Bullwhip Effect Because customer demand is rarely perfectly stable, businesses must forecast demand to properly position inventory and other resources. Forecasts are based on statistics, and they are rarely perfectly accurate. Because forecast errors are a given, companies often carry an inventory buffer called "safety stock". Moving up the supply chain from end-consumer to raw materials supplier, each supply chain participant has greater observed variation in demand and thus greater need for safety stock. In periods of rising demand, down-stream participants increase orders. In periods of falling demand, orders fall or stop to reduce inventory. The effect is that variations are amplified as one moves upstream in the supply chain (further from the customer). This sequence of events is well simulated by the Beer Distribution Game which was developed by the MIT Sloan School of Management in the 1960s.

7 Bullwhip Effect The magnification of of variability in in orders in in the supplychain Retailer s Orders Wholesaler s Orders Manufacturer s Orders Order Quantity Order Quantity Order Quantity Time Time Time A lot lot of of retailers each with little variability in in their orders. can lead to to greater variability for for a fewer number of of wholesalers, and can lead to to even greater variability for for a single manufacturer.

8 The Bullwhip Effect in action

9 The Bullwhip Effect

10 Causes of the Bullwhip Effect

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12 Write your suggestions Solutions?

13 The Supply Chain Management Integration Model Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.

14 The Supply Chain Management Integration Model- Cont. Identify Critical Supply Chain Trading Partners Enable sale & delivery of end products to final customers Identifying primary trading partners allows the firm to concentrate on managing these links Review & Establish Supply Chain Strategies regarding: Parts purchased & suppliers Shop layout & manufacturing processes Design of the products manufactured Mode of transportation Warranty & return services Employee training methods Types of information technologies 14 used

15 The Supply Chain Management Integration Model- Cont. Align SC Strategies with Key SC Process Objectives

16 The Supply Chain Management Integration Model- Cont. Develop Internal Performance Measures for Key Processes Performance should be continuously measured w/metrics for each process. ERP systems support internal performance measures Firm is able to track progress for each of the key processes. Assess & Improve Internal Integration of Key SC Processes. Internal integration requires: Empowered teams & cooperation across all functions Management support & resources ERP system an understanding of the internal supply chain

17 The Supply Chain Management Integration Model- Cont. Develop SC Performance Measures for Key Processes Monitor the links with trading partners in the key SCM processes. Trading partners should monitor a number of costoriented measures averaged across the member firms for each of the key supply chain processes. Assess & Improve External Process Integration & Performance Build, maintain & strengthen relationships Share information concerning: Sales, forecast information, new products, expansion plans, new processes, & new marketing campaigns process integration will enable firms to collaborate & share this information.

18 Obstacles to Process Integration Along the Supply Chain- Cont. Lack of Supply Chain Visibility In a 2002 survey, 67% of manufacturers had not yet successfully synchronized their supply chain operations with those of their trading partners And 67% said they used different supply chain management applications than their partners Anonymous, Survey Finds Manufacturers Supply Chains Come Up Short, Logistics Management 41, no. 9 (2002):

19 The Beer Game Orders Delay Delay Factory Delay Delay Distributor Retailer Delay Delay Wholesaler Delay Delay Material

20 Bullwhip effect in the beer game

21 Near Beer Game Simulation

22 Root Beer Game - Supply Chain Management Simulation