What is Necessary for a Successful Supply Chain

Transcription

1 What is Necessary for a Successful Supply Chain Ron Klimberg Decision & System Sciences Haub School of Business Saint Joseph s University Philadelphia, PA USA

2 Collaboration Trust

3 Beer Game Orders Delay Delay Factory Delay Delay Distributor Retailer Delay Delay Wholesaler Delay Delay Four Players on a Team Material

4 Beer Game Things to Keep in Mind Cost Inventory & Stockout Goal Minimize Costs Delays No Communication within the Team Playing the Game Two decisions each period How much to ship? How much to order?

5 Bullwhip Effect Occurs when slight demand variability is magnified as information moves back upstream 5

6 How to Reduce the Bullwhip Effect 6 Better Information Either in the form of improved communication along the supply chain or (presumably) better forecasts. Because managers realize that end-user demand is more predictable than the demand experienced by manufacturers/processors, they attempt to ignore signals being sent through the supply chain and instead focus on the end-user demand. This approach ignores day-to-day fluctuations in favor of running level.

7 How to Reduce the Bullwhip Effect Reduce or Eliminate the Delays In both real supply chains and simulations of supply chains, cutting order-to-delivery time by half can cut supply chain fluctuations by 80%. In addition to savings from reduced inventory carry costs, operating costs also decline because less capacity is needed to handle extreme demand fluctuations.

8 Supply Chain Uncertainty One goal in Supply Chain Management (SCM): respond to uncertainty in customer demand without creating costly excess inventory Negative effects of uncertainty lateness incomplete orders Inventory insurance against supply chain uncertainty

9 Supply Chain Uncertainty Factors that contribute to uncertainty inaccurate demand forecasting long variable lead times late deliveries incomplete shipments product changes batch ordering price fluctuations and discounts inflated orders

10 Supply Chain Management (SCM) Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs.

11 Supply Chain Goals Efficient supply chain management must result in tangible business improvements. It is characterized by a sharp focus on Revenue growth Better asset utilization Cost reduction.

12 Keys to Effective SCM information communication cooperation trust

13 Supply Chain Processes

14 Forecasting

15 Forecasting Good forecasts can lead to Reduced inventory costs. Lower overall personnel costs. Increased customer satisfaction. The forecasting process can be based on: Educated guess. Expert opinions. Past history of data values, known as a time series.

16 Forecasting in Practice A survey of forecasting practices at 500 U.S. corporations indicates that judgmental forecasting methods are somewhat more widely used than statistical methods. Among judgmental methods, the most popular is a jury of executive opinion. When forecasting sales, manager s opinion is a close second. Statistical forecasting methods also are fairly widely used, especially in companies with high sales. Among statistical methods, the moving-average method and linear regression are the most widely used. Both exponential smoothing and the last-value method also receive considerable use.

17 Survey of Forecasting Practices Indicated that qualitative judgment forecasting methods are somewhat more widely used than statistical methods. However respondents felt more satisfied with the results of statistical methods. the moving-average, trend line analysis and linear regression are the most widely used. Exponential smoothing also receive considerable use. Decision areas applied in: Budgeting, Operations and Financial Decisions.

18 Customer Data Where are the data sources for analysis? Transactional Data, Credit card transactions, loyalty cards, discount coupons, customer complaint calls, plus (public) lifestyle studies, Social Media.

19 Leveraging your Data Target marketing: Find clusters of model customers who share the same characteristics: interest, income level, spending habits, etc. Determine customer purchasing patterns over time: Market Basket Analysis what products sell together Cross-market analysis Associations/co-relations between product sales Prediction based on the association information.

20 Customer profiling Leveraging your Data data mining can tell you what types of customers buy what products (clustering or classification). Identifying customer requirements identifying the best products for different customers use prediction to find what factors will attract new customers Realize, your data is one of your company s most important assets Use it!!

21 Keys to Effective SCM information Technical communication cooperation trust People

22 People side Communication Collaboration Trust Internally and Externally

23 People side Agreement to mutually beneficial objectives (strategic and operational) Confidence in respective abilities to execute Openness, including a willingness to share proprietary information (i.e. "open the books") Timely and forthright communications regarding both opportunities and challenges Flexibility to respond to "outlier" situations such as rush orders. Adaptability to change, including a willingness to "go own ways" when interests diverge.

24 People side--internal Communication, Collaboration, Trust Work together One unified voice

25 People side--internal Get your act together!! Senior management support champion Long term vision and short term

26 People side--external Communication, Collaboration, Trust Must have Senior management support and involvement Long term vision and short term

27 People side--external Start small with a trusted partner Once you have success, others will follow

28 Thank You!!!