Designing Global Supply Chains. Terry P. Harrison Penn State University

Transcription

1 Designing Global Supply Chains Terry P. Harrison Penn State University

2 A Stylized Stylized Global Supply Chain SCM is matching supply and demand

3 The Global Supply Chain When to examine supply chain design Change in network structure, improved coordination opportunities Major process modification Tax and duty structure Demand shifts Changes in competitive landscape Revised competitive strategies Examples

4 Global SCM Aspects Multiple products Customs duty and duty drawback Local content Transfer pricing Taxes and effects of tax havens Multiple transport modes

5 Global Supply Chain Design Overview Typical global design objectives: How many/where should facilities be located Facility sizing/product and processes Who should they source What is the cost of a given service level Should I postpone final processing Does this acquisition make sense How much money would be on the table Are expected operations synergies realistic

6 Global Supply Chain Design Overview Typical tactical analysis objectives: Where should I add incremental capacity Should I add/upgrade a line, or add new facility What is the impact of changing market conditions What is the impact of adding new products What is the impact of regional products What is the impact of a new national account Is this new account profitable What is the impact of different modes Should I pre-build inventory or increase capacity

7 THE ANALYSIS PROCESS Financial goals Manufacturing Raw technology material availability Corporate policies/ strategies Service goals Marketing goals Future transportation costs Plan & Launch Project Generate Baseline Optimization of existing network Alternate scenario definition Alternate scenario optimization Management Analysis analysis

8 THE ANALYSIS PROCESS Strategic analysis is not a once and done process Keys steps Coordinated data collection Establish a base line Optimize the network Perform sensitivity analysis

9 Global SCM Analysis Data Needs Costs (Fixed and variable) Purchasing Manufacturing Facility Warehousing Terminal Capacity (minimum and maximum) Vendor by part by process type Plant by process type Transport by lane and mode Warehouse / terminal throughput

10 Global SCM cont. Time Vendor lead time Plant cycle time Transit time Warehouse and terminal process time Inventory holding time Bill of material relationships Multiple period forecasts Inventory costs Freight costs

11 KEY SUPPLY CHAIN LEVERS Production technology Logistics Inventory Information and coordination

12 Factors that Degrade Supply Chain Performance Infrastructure Uncertainty Poor coordination The Triple A supply chain: Agile: short term changes supply/demand/disruptions Adaptive: changes network structure Aligned: Supply-chain wide coordinated incentives

13 Factors that Degrade Supply Chain Performance Infrastructure Uncertainty Poor coordination The Triple A supply chain: Agile: short term changes supply/demand/disruptions Best Practices:» Information flow with suppliers» Collaborative relationships» Postponement» Contingency plans

14 Factors that Degrade Supply Chain Performance Infrastructure Uncertainty Poor coordination The Triple A supply chain: Adaptive: changes network structure Best Practices:» Flexible product designs» Monitor economies around the world for trends» Evaluate ultimate consumer needs

15 Factors that Degrade Supply Chain Performance Infrastructure Uncertainty Poor coordination The Triple A supply chain: Aligned: Supply-chain wide coordinated incentives Best Practices» Exchange information freely with vendors and customers» Equitably share risks, costs, and gains

16 Types of Global Supply Chain Analyses Supply Chain Planning: Strategic in scope, determines the infrastructure (vendors, plants, DCs, physical movement options, etc.) Typically assumes no uncertainty. Examples: network optimization, inventory optimization Supply Chain Operations: Permits uncertainty; considers operational issues such as inventory deployment, assembly strategies, etc. Example: simulation, ERP

17 Typical Types of Analyses Supply Base Design How do I simultaneously perform supplier selection for all the parts in the same commodity group? How many suppliers are best and which suppliers should send which parts to which plants? Outsourcing What parts of my supply chain should I keep "in-house" and what parts to outsource? What if a third party has a higher variable cost but a lower fixed cost than in-house production?

18 Typical Types of Analyses New Product Pipeline Design What should the supply chain look like for a new product? How should I fit the new product into my current supply chain? Should I single or multiple source this product? How much do my fixed costs affect this decision? What is the cross-over point to open up a second and third source of supply? Mergers and Acquisitions Constantly redesigning the global flow

19 Supply Chain Disruptions Analyze the effects of strategic disruptions Unexpected loss/change of a supply chain partner Ways to mitigate the threat Use of one-bump analysis Key questions and issues

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26 Global Network Design Benefits Decreased costs: 5%-60%, with 10% being typical Decreased time : 25%-75% with 50% typical Helps think outside the box for the big supply chain picture. Fosters cross-functional teamwork Provides objective assessment in politically charged environment

27 Managing Uncertainty Recognize your type of supply chain Functional products Innovative products And select the correct response Functional: focus on minimizing physical costs (production, storage, distribution) Innovative: focus on having a flexible and responsive supply chain

28 Managing Uncertainty cont. Outcome of more demand variability Selling at a reduced price (possibly loss) of overstocked goods Missed sales opportunities, especially costly for high margin products---yet difficult to track

29 Managing Uncertainty cont. Remedies and Best Practices Shorten lead times throughout the supply chain Get demand commitment earlier Better forecasting Develop more flexible supply chains (ex. preposition stocks ahead of use, postponement) Risk based production sequencing; reactive versus non-reactive capacity

30 Summary Supply chain design determines a large portion of the resulting cost structure Tools exist to optimize this process, although data requirements are high Flexibility and responsiveness are key design attributes Uncertainty is a major supply chain detractor, good design can help to buffer its effects