Description
Basic Concepts in Supply Chain
Some basic concepts and terms
The OPS Lingo!
The interface between market and manufacturing
CLASSIFICATION OF PRODUCTION SHOPS
1.0 BASED ON PRODUCT-PROCESS MATRIX
2.0 BASED ON DECOUPLING POINT
PRODUCT-PROCESS MATRIX
PRODUCT-PROCESS MATRIX
PRODUCT MIX
One off Low Vol High Vol Mass
PROCESS PATTERN Jumbled Jumbled But Dominant Line Flow Cont Flow
Bidding, Design, Del. Quality Volumes
PROJECT JOB SHOP BATCH
Scheduling Matl Hand Shifting B’Neck Worker Motivation Capital Budget Tech. Mgt Vert Integration
LINE
CONT
Price Forecast
PRODUCT-PROCESS MATRIX
Company Bama Foods Process Line Process Strength ?? High volume output ?? Consistency of product ?? Short lead time to produce one unit ?? Low cost
?? Somewhat
?
River City Biscotti Batch Process
?
Cliff Simon Job Shop
?
more flexible than line ?? Can deliver small batches quickly ?? Lower cost equipment ?? Lower setup costs ?? Able to design and deliver unique product ?? Highly flexible. ?? Very low setup times ?? Low cost capital equipment
Weakness ?? Very inflexible ?? Difficult to do short runs ?? Changeovers in products require large setups ?? Expensive from a capital (equip) perspective ?? Cannot respond quickly to rapid upward changes in demand. ?? Higher costs than line ?? Longer lead times ?? Less consistency of quality ?? Highly variable quality ?? Very dependent on skill of employees ?? Very long lead times ?? Very high costs ?? Very low total output volume
PRODUCT-PROCESS MATRIX C
Project At customer site Independent Process flow activities Slow Speed Unique events Run length Labor content Very high High Skill level Somewhat Matl reqmts predictable Uncertain, Scheduling frequent changes Estimating Challenges completion time, managing critical activities Facility size Job Shop Usually small Many patterns Batch Moderate Assy Line Often large Continuous Flow Large
Dominant patterns Slow Moderate Short Moderate Very high Varies High Mixed Hard to predict More predictable Uncertain, Varies, frequent frequent changes expediting Estimating, Balancing labor util., stages, debottlenecking responding to fast response diverse needs
Rigid pattern Inflexible Fast Long Low Low Predictable Very fast Very long Very low Varies Very predictable Fixed Inflexible, technology dictates Productivity Avoiding improvement, downtime, occasional expansions, rebalancing cost min.
SERVICE PROCESS MATRIX
The service process matrix can be classified along the dimensions of customer involvement and labor intensity. Services allow greater customization and customer involvement for the customer.
SERVICE PROCESS MATRIX
Service Factory Movie Theaters Airlines Hotels Fast Food (Taco Bell) Service Shop Hospitals Auto Repair Gourmet Restaurants
Low
Low
Customer Involvement
High
Mass Service Retail Stores (Wal-Mart) Wholesalers Schools
Professional Service Physicians Lawyers Accountants
High
MANUFACTURING AND SUPPLY CHAIN
Manufacturing is a ‘Part of the Supply Chain’
Basic Activities AND SUPPLY CHAIN MANUFACTURINGin the Value Chain
Planning and Relationship Management
Supplier Relationship Management Customer Relationship Management
Source
Make
Deliver
Product, Service, and Process Design Marketing Communications Support Activities Financial Management and Accounting Human Resource Management Information Systems Management
Flows of products, information, money, resources, and knowledge
A SUPPLY CHAIN
Design & Development Promotion & Sales
R
A W
C
U S T
M A T L S Flows of material, information, money, and knowledge Materials Supply Components Supply
Finished Goods Manufacturing Distribution Warehousing Retailing
O M E R S After-Sales Support Service Centers
DECOUPLING POINT
LEAD TIME CATEGORIES
Product design and development lead time Order lead time
Procurement lead time
Production lead time (throughput time) Delivery lead time
How long are you as a customer willing to wait for the product? How customizable is the product? Affects LEAD TIME and nature of planning/ SCM for product
Toothpaste
soap Motor cycle – unique color Custom built car? New custom built computer New machinery for new plant? Specific casting for NPD New dream house NEWS of today’s events
1 day? 1 hour?
3 days? 1 week? 1 month? 1 week? 6 months? 3 – 6 months? 1 year? 1 day? 15 days?
MTS, ATO, MTO, ETO Market Orientation and Customer Experienced Lead Time
Customer receives product Design Lead Time Order Lead Time Procurement Production Delivery Lead Time Lead Time Lead Time Fab. Assy.
MTS items stocked locally (Groceries) MTS items stocked centrally (Amazon.com) ATO items (Dell Computers, Burger King) MTO items from stocked matls (Custom jewelry, Wendy’s) MTO items from purchased matls., (House, custom furniture) ETO items (Space shuttle, custom home)
Firm Experienced Lead Time
Customer Experienced Order to Delivery Lead Time
Total Fulfillment Lead Time
DECOUPLING POINT-Definition
Delivery required 9 d (days)
DISTR W/H FACTORY W/H
SEMI FINISH
SUPPLIERS
FINAL ASSY
CUST
Info Flow Matl Flow
4d
2d
Decoupling Point?? 7d (9-2)
9d
DECOUPLING POINT-Classification
DISTR W/H FACTORY W/H
SEMI FINISH
SUPPLIERS
FINAL ASSY
CUST
Classification Planning strategies for supply chain
ETO
MTO
ATO
MTS
DECOUPLING POINT
? Divides the Supply Chain into Forecast and Order driven ? Also known as Order Penetration Point/ Push-Pull Boundary ? Depends on Order Lead Time versus Production Lead Time. ? Direction in which we would like to shift the Decoupling Point ?
Decoupling Point Supplier Customer
DECOUPLING POINT – aka PUSH –PULL BOUNDARY
Supply Chain Management Concept accepts the whole supply chain as a single entity and enable total transparency of demand information across all business partners Push-Pull Boundary
Push
Pull
Pull
Pull Orders received
Suppliers
Manufacturers
Warehouses
Retailers
Customers
The product is pulled by demand
DECOUPLING POINT
Communication & Cash
De Coupling Point 1
Suppliers
Manufacturer
Distributor
Retailers
Final Customer
Physical goods movement
DECOUPLING POINT
Communication & Cash
De Coupling Point 2
Suppliers
Manufacturer
Distributor
Retailers
Final Customer
Physical goods movement
DECOUPLING POINT
De Coupling Point 3 Hot Rolling
DECOUPLING POINT
Iron-making
HMDS BOF
Steel-making
SMLP Slab Casting
De Coupling Point 4 HMDS – Hot Metal De Sulphurisation BOF – Basic Oxygen Furnace SMLP – Secondary Metallurgy & Ladle Preparation
DEMAND CHAIN
DEMAND CHAIN
A series of activities dealing with not only HOW the customer makes the Purchase, but also what drives the Purchasing Transaction A Demand Chain may Start with Purchasing followed by Inventory Control and Scheduling
A term used in Offer Penetration Point: - Offer to Purchase (Traditional PO) - Offer to Inventory (VMI) - Offer to Schedule (to- line)
DEMAND CHAIN
A Normal Purchase-Supply Transaction
Supplier
Customer
DEMAND CHAIN
Transaction: Classified as per Decoupling Point
Engg
Make
Assy
Store
Customer
ETO
MTO
ATO
MTS
DEMAND CHAIN
Transaction: Classified as per Offer Penetration Point
Offer to Inventory
Supplier Increased time to Supplier
Purchase
Schedule
Buy
Store VMI
Schedule to-line
BULL WHIP
WHAT IS BULL WHIP?
The bullwhip effect - Small changes can reverberate through a supply chain, causing huge swings of inventory and production levels. RETAILER WHOLESALER MANUFACT URER SUPPLIER
DOWNSTREAM UPSTREAM
BULL WHIP – AT EACH ECHELON
Consumer Sales
Order Quantity
Retailer's Order
200 150 100 50 0 Order Quantity
150 100 50 0 Order Quantity
Order Quantity
200
Wholesaler's Order
Order Quantity
Manufacturer's Order
Order Quantity
200 150 100 50 0 Order Quantity
200 150 100 50 0 Order Quantity
BULL WHIP – WHAT CAUSES IT
Demand Forecast Updating
Order Batching
Price Fluctuation
Rationing & Shortage Gaming
BULL WHIP – MEASURE
Measured by quotient of the coefficient of variation of demand at generated by an echelon by the coefficient of variation of demand received by the echelon
? = cout / cin
Cout = ? (Dout(t,t+T)) / ? (Dout(t,t+T))
Cin = ? (Din(t,t+T)) / ? (Din(t,t+T))
Problem of Aggregation
BULL WHIP – MEASURE
Problem of Aggregation
Consider a Supply Chain with P Products and M outlets
Aggregation Level No. of Measures
Product/Outlet
Product Outlet Echelon
PXM
P M 1
PRODUCT POSTPONEMENT
PRODUCT POSTPONEMENT THEORY
Postpone the task of final differentiation of the Product
until
the latest possible point in the Supply Chain
? Examples: Food at Home Ruff and Tuff HCL Busy Bee
PRODUCT POSTPONEMENT
Without postponement
With postponement
Raw materials components Different products
Raw materials components
Generic product Different products
PRODUCT POSTPONEMENT METHODS
? Three Basic methods to implement Postponement
? Pull Postponement ? Logistics Postponement ? Form Postponement
Various alternative classifications exist
PRODUCT POSTPONEMENT THEORY
1.0 Pull Postponement ?Refers to making the Decoupling Point earlier in the Process e.g. National Bicycle, Japan, Bennetton, USA ?Process must be sequenced so that less differentiating steps are done earlier (less fan-out in Product Structure) ?Process after DP done fast to meet delivery needs ? Accurate Order Capture
PRODUCT POSTPONEMENT THEORY
2.0 Logistics Postponement ? Calls for redesign of tasks or modules involved so that customization can be done downstream
? e.g., Localizing Printers at Distribution Centers
? Combined with Pull Postponement – color matching at local Store – low cost Chromatography. ? HCL Busy Bee: Assembly at Distributors
PRODUCT POSTPONEMENT THEORY
3.0 Form Postponement ? Use of Standardized Components or Process Steps ? e.g., HP Printer Supply Power unit, GE reduced number of parts from 60000 to 300 for its Circuit Breakers Disk Drives need testing by inserting disk specific PCBa time consuming process. Test divided into two - Standard tests and disk specific tests
PRODUCT POSTPONEMENT - BENNETTON
Dyeing
Dyeing vats for the finished knitted product.
PRODUCT POSTPONEMENT - BENNETTON
Old Sequence Purchase Yarn New Sequence Purchase Yarn Knit Garment Parts
Dye Yarn Finish Yarn
Knit Garment Parts Join Parts
Join Parts
Dye Garment Finish Garment
This process is postponed
PRODUCT POSTPONEMENT - BENNETTON
Dye yarn only after the season’s fashion preferences become more established (knit lead-time much longer than dyeing lead-time).
Example: single product; four colors
knit dye Dyeing operations postponed
dye
knit
Outcome: Reduces demand uncertainty & inventory
PRODUCT POSTPONEMENT - MODULARITY
• Modules are common across different products
1 2
Without component commonality
1 2
With component commonality
PRODUCT POSTPONEMENT - MODULARITY
integral
modular
PRODUCT POSTPONEMENT - MODULARITY
Current: Integral Designs
Proposed: Modular Design
Standardization strategy for the LaserJet by HP
Before standardization
LaserJet printer 110 volts 220 volts
After standardization
LaserJet printer Universal power supply
Differentiation by end-customer in the beginning of production
Europe
North America
HP was able to reduce the total costs of manufacturing, stocking and delivering the finished product to the customer by 5% per year
PRODUCT POSTPONEMENT - LOGISTIC
• Factory-Localization Strategy: (customization performed at the factory)
HP DC
customers
(manufacturer)
• DC-Localization Strategy: (customization performed at the DCs)
HP (manufacturer) DC customers
Postponement: Delaying the point of differentiation
PRODUCT POSTPONEMENT - POTENCY
PRODUCT FANOUT and POTENCY
Curd Milk
Vanilla Ice Cream Favorable Factors Large variety/same size Not positively correlated
Increasing Differentiation
Increasing Potency
PRODUCT POSTPONEMENT
MTS
Design
Ship TO ATO
Design Buy Design Buy
MTO
Design Buy
Buy TO ETO
Design Buy Design Buy
Purchase
Buy
Fab Assy
Fab Assy
Fab Assy
Fab Assy
Fab Assy
Fab Assy
Logistics Postpone
Pack
Dist
Pack
Dist
Pack
Dist
Pack
Dist
Pack
Dist
Pack
Dist
PRODUCT POSTPONEMENT ENABLERS
? Products and Processes must be Modular ? Allows separation of custom and standard parts ? Allows modules to be made independently ? Enablers modules that differentiate to done out ? Processes can be postponed/ resequenced ? Awareness of Design personnel on the importance in SCM ? Involves Multi Functions ? Analytical models to evaluate needed as costs may seem more, e.g. Universal Power Supply of HP printers, GE needed more Copper for Standardization of Circuit Breakers
DECOUPLING POINT VS PDP
DECOUPLING POINT VS PDP
Where should they be located with respect to each other ??
DECOUPLING POINT VS PDP
Product Differentiation Point Supplier
Decoupling Point Customer
DECOUPLING POINT VS PDP
Product Differentiation Point Supplier
Decoupling Point Customer
DECOUPLING POINT and PDP
These concepts with respect to a Dosa Vendor
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 1 The Principle of End User Focus
Long term profitability is dependent on end-user being satisfied and acting as the focus of all development and process engineering Examples/ Terms: Consumption Chain, Bull Whips
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 2 The Principle of Horizontal Boundary Definition
Different end-user needs are more competitively satisfied by logistically engineered channels within the Supply Chain
Examples: “What is the Right Supply Chain for You”- Fisher
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 3 The Principle of Vertical Boundary Definition
Boundaries of ownership and control (dividing the chain vertically) should be positioned to suit the needs of the end-user and according to the best practice and make-buy theory Examples: 3PL, 4PL, VMI
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 4 The Principle of Inventory Positioning
The positioning and levels of Inventory are best determined in a total supply chain context to suit end-user needs in line with stock and postponement theory Examples: Decoupling Point, Offer Penetration Point, Postponement
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 5 The Principle of Control over Demand Dynamics
Understanding and control over demand dynamics is best achieved by having an holistic Supply Chain perspective. The principal basis is through information control and the use of best practice relationship management Examples: Bull Whip, Information Sharing
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 6 The Principle of Cooperation and Coordination
The attainment of the above the principles requires the cooperation and coordination between supply chain participants. For this to work effectively SC participants must have self-defined and motivation objectives based on trust and common business process aspirations Examples: CPFR, ECR, QR
BUSINESS PROCESSES
1.0 FUNCTIONAL VS. PROCESS-CENTRIC ORG.
? MANUFACTURING HAS BEEN VIEWED AS A SEQUENTIAL ARRANGEMENT OF FUNCTIONS e,g. Engg to Planning to Shop to Dispatch etc. ? RECENT VIEW: TO CONSIDER IT AS A COLLECTION OF VALUE ADDING PROCESSES
2.0 EVOLUTION OF PROCESS ORIENTATION
? THE NEW I.E. - IT and Business Processes, SMR „90 ? REEINGEERING: Don?t Automate, Obliterate, HBR ?90 ? BPR WAS BORN
BUSINESS PROCESSES
CURRENT STATE ? “SUPER-EFFICIENT COMPANY”, HAMMER, HBR ?01 ? PROCESSES ACROSS ORGANIZATIONS ? CO-SUPPLIERS ? MFG. ENTERPRISE: “A network of independent companies forming a strategic alliance towards the common goal of satisfying customers faster than through other alliances or vertically integrated plants” ? Collaborative Efforts: QR, ECR, CPFR
BUSINESS PROCESSES HIERARCHY
BUSINESS PROCESS
ORGANIZATION 1
ORGANIZATION 2
ORGANIZATION 3
FUNCTION 1
FUNCTION 2
FUNCTION 3
WORK PROCESS 1
WORK PROCESS 1
INTERFACES
BUSINESS PROCESSES
TYPES OF PROCESS
? MANAGEMENT PROCESSES ? CORE PROCESSES ? SUPPORT PROCESSES EXAMPLES
? MANAGEMENT: LEADERSHIP, STRATEGY PLANG. MARKET DEV, INVESTMENT, HR CORE: ORDER FULFILLMENT, ORDER GENERATION SUPPORT: SCM, R & D, IT, SOCIAL RESP.
?
?
BUSINESS PROCESSES
CHARACTERISTICS OF A GOOD PROCESS ?PROCESS OWNER ?WELL-DEFINED BOUNDARIES ?WELL-DEFINED WORK FLOW ?PERFORMANCE MEASURES ?CONTROLLED PROCESS DEVIATIONS
APQC CLASSIFICATION ?13 CATEGORIES
BUSINESS PROCESSES
EXAMPLE OF AN APQC PROCESS
5.0 PRODUCE AND DELIVER FOR MFG. ORG.
5.1 PLAN FOR AND ACQUIRE RESOURCES 5.1.1 SELECT AND CERTIFY SUPPLIERS 5.1.2 PURCHASE CAPITAL GOODS 5.1.3 PURCHASE RAW MATERIAL 5.1.4 ACQUIRE TECHNOLOGY 5.2 CONVERT RESOURCES INPUTS INTO PRODUCTS 5.2.1 DEVELOP/ADJUST PRODN PROCESS 5.2.2 SCHEDULE PRODUCTION 5.2.3 MOVE MATERIALS 5.2.4 MAKE PRODUCTS
doc_293190697.pptx
Basic Concepts in Supply Chain
Some basic concepts and terms
The OPS Lingo!
The interface between market and manufacturing
CLASSIFICATION OF PRODUCTION SHOPS
1.0 BASED ON PRODUCT-PROCESS MATRIX
2.0 BASED ON DECOUPLING POINT
PRODUCT-PROCESS MATRIX
PRODUCT-PROCESS MATRIX
PRODUCT MIX
One off Low Vol High Vol Mass
PROCESS PATTERN Jumbled Jumbled But Dominant Line Flow Cont Flow
Bidding, Design, Del. Quality Volumes
PROJECT JOB SHOP BATCH
Scheduling Matl Hand Shifting B’Neck Worker Motivation Capital Budget Tech. Mgt Vert Integration
LINE
CONT
Price Forecast
PRODUCT-PROCESS MATRIX
Company Bama Foods Process Line Process Strength ?? High volume output ?? Consistency of product ?? Short lead time to produce one unit ?? Low cost
?? Somewhat
?
River City Biscotti Batch Process
?
Cliff Simon Job Shop
?
more flexible than line ?? Can deliver small batches quickly ?? Lower cost equipment ?? Lower setup costs ?? Able to design and deliver unique product ?? Highly flexible. ?? Very low setup times ?? Low cost capital equipment
Weakness ?? Very inflexible ?? Difficult to do short runs ?? Changeovers in products require large setups ?? Expensive from a capital (equip) perspective ?? Cannot respond quickly to rapid upward changes in demand. ?? Higher costs than line ?? Longer lead times ?? Less consistency of quality ?? Highly variable quality ?? Very dependent on skill of employees ?? Very long lead times ?? Very high costs ?? Very low total output volume
PRODUCT-PROCESS MATRIX C
Project At customer site Independent Process flow activities Slow Speed Unique events Run length Labor content Very high High Skill level Somewhat Matl reqmts predictable Uncertain, Scheduling frequent changes Estimating Challenges completion time, managing critical activities Facility size Job Shop Usually small Many patterns Batch Moderate Assy Line Often large Continuous Flow Large
Dominant patterns Slow Moderate Short Moderate Very high Varies High Mixed Hard to predict More predictable Uncertain, Varies, frequent frequent changes expediting Estimating, Balancing labor util., stages, debottlenecking responding to fast response diverse needs
Rigid pattern Inflexible Fast Long Low Low Predictable Very fast Very long Very low Varies Very predictable Fixed Inflexible, technology dictates Productivity Avoiding improvement, downtime, occasional expansions, rebalancing cost min.
SERVICE PROCESS MATRIX
The service process matrix can be classified along the dimensions of customer involvement and labor intensity. Services allow greater customization and customer involvement for the customer.
SERVICE PROCESS MATRIX
Service Factory Movie Theaters Airlines Hotels Fast Food (Taco Bell) Service Shop Hospitals Auto Repair Gourmet Restaurants
Low
Low
Customer Involvement
High
Mass Service Retail Stores (Wal-Mart) Wholesalers Schools
Professional Service Physicians Lawyers Accountants
High
MANUFACTURING AND SUPPLY CHAIN
Manufacturing is a ‘Part of the Supply Chain’
Basic Activities AND SUPPLY CHAIN MANUFACTURINGin the Value Chain
Planning and Relationship Management
Supplier Relationship Management Customer Relationship Management
Source
Make
Deliver
Product, Service, and Process Design Marketing Communications Support Activities Financial Management and Accounting Human Resource Management Information Systems Management
Flows of products, information, money, resources, and knowledge
A SUPPLY CHAIN
Design & Development Promotion & Sales
R
A W
C
U S T
M A T L S Flows of material, information, money, and knowledge Materials Supply Components Supply
Finished Goods Manufacturing Distribution Warehousing Retailing
O M E R S After-Sales Support Service Centers
DECOUPLING POINT
LEAD TIME CATEGORIES
Product design and development lead time Order lead time
Procurement lead time
Production lead time (throughput time) Delivery lead time
How long are you as a customer willing to wait for the product? How customizable is the product? Affects LEAD TIME and nature of planning/ SCM for product
Toothpaste
soap Motor cycle – unique color Custom built car? New custom built computer New machinery for new plant? Specific casting for NPD New dream house NEWS of today’s events
1 day? 1 hour?
3 days? 1 week? 1 month? 1 week? 6 months? 3 – 6 months? 1 year? 1 day? 15 days?
MTS, ATO, MTO, ETO Market Orientation and Customer Experienced Lead Time
Customer receives product Design Lead Time Order Lead Time Procurement Production Delivery Lead Time Lead Time Lead Time Fab. Assy.
MTS items stocked locally (Groceries) MTS items stocked centrally (Amazon.com) ATO items (Dell Computers, Burger King) MTO items from stocked matls (Custom jewelry, Wendy’s) MTO items from purchased matls., (House, custom furniture) ETO items (Space shuttle, custom home)
Firm Experienced Lead Time
Customer Experienced Order to Delivery Lead Time
Total Fulfillment Lead Time
DECOUPLING POINT-Definition
Delivery required 9 d (days)
DISTR W/H FACTORY W/H
SEMI FINISH
SUPPLIERS
FINAL ASSY
CUST
Info Flow Matl Flow
4d
2d
Decoupling Point?? 7d (9-2)
9d
DECOUPLING POINT-Classification
DISTR W/H FACTORY W/H
SEMI FINISH
SUPPLIERS
FINAL ASSY
CUST
Classification Planning strategies for supply chain
ETO
MTO
ATO
MTS
DECOUPLING POINT
? Divides the Supply Chain into Forecast and Order driven ? Also known as Order Penetration Point/ Push-Pull Boundary ? Depends on Order Lead Time versus Production Lead Time. ? Direction in which we would like to shift the Decoupling Point ?
Decoupling Point Supplier Customer
DECOUPLING POINT – aka PUSH –PULL BOUNDARY
Supply Chain Management Concept accepts the whole supply chain as a single entity and enable total transparency of demand information across all business partners Push-Pull Boundary
Push
Pull
Pull
Pull Orders received
Suppliers
Manufacturers
Warehouses
Retailers
Customers
The product is pulled by demand
DECOUPLING POINT
Communication & Cash
De Coupling Point 1
Suppliers
Manufacturer
Distributor
Retailers
Final Customer
Physical goods movement
DECOUPLING POINT
Communication & Cash
De Coupling Point 2
Suppliers
Manufacturer
Distributor
Retailers
Final Customer
Physical goods movement
DECOUPLING POINT
De Coupling Point 3 Hot Rolling
DECOUPLING POINT
Iron-making
HMDS BOF
Steel-making
SMLP Slab Casting
De Coupling Point 4 HMDS – Hot Metal De Sulphurisation BOF – Basic Oxygen Furnace SMLP – Secondary Metallurgy & Ladle Preparation
DEMAND CHAIN
DEMAND CHAIN
A series of activities dealing with not only HOW the customer makes the Purchase, but also what drives the Purchasing Transaction A Demand Chain may Start with Purchasing followed by Inventory Control and Scheduling
A term used in Offer Penetration Point: - Offer to Purchase (Traditional PO) - Offer to Inventory (VMI) - Offer to Schedule (to- line)
DEMAND CHAIN
A Normal Purchase-Supply Transaction
Supplier
Customer
DEMAND CHAIN
Transaction: Classified as per Decoupling Point
Engg
Make
Assy
Store
Customer
ETO
MTO
ATO
MTS
DEMAND CHAIN
Transaction: Classified as per Offer Penetration Point
Offer to Inventory
Supplier Increased time to Supplier
Purchase
Schedule
Buy
Store VMI
Schedule to-line
BULL WHIP
WHAT IS BULL WHIP?
The bullwhip effect - Small changes can reverberate through a supply chain, causing huge swings of inventory and production levels. RETAILER WHOLESALER MANUFACT URER SUPPLIER
DOWNSTREAM UPSTREAM
BULL WHIP – AT EACH ECHELON
Consumer Sales
Order Quantity
Retailer's Order
200 150 100 50 0 Order Quantity
150 100 50 0 Order Quantity
Order Quantity
200
Wholesaler's Order
Order Quantity
Manufacturer's Order
Order Quantity
200 150 100 50 0 Order Quantity
200 150 100 50 0 Order Quantity
BULL WHIP – WHAT CAUSES IT
Demand Forecast Updating
Order Batching
Price Fluctuation
Rationing & Shortage Gaming
BULL WHIP – MEASURE
Measured by quotient of the coefficient of variation of demand at generated by an echelon by the coefficient of variation of demand received by the echelon
? = cout / cin
Cout = ? (Dout(t,t+T)) / ? (Dout(t,t+T))
Cin = ? (Din(t,t+T)) / ? (Din(t,t+T))
Problem of Aggregation
BULL WHIP – MEASURE
Problem of Aggregation
Consider a Supply Chain with P Products and M outlets
Aggregation Level No. of Measures
Product/Outlet
Product Outlet Echelon
PXM
P M 1
PRODUCT POSTPONEMENT
PRODUCT POSTPONEMENT THEORY
Postpone the task of final differentiation of the Product
until
the latest possible point in the Supply Chain
? Examples: Food at Home Ruff and Tuff HCL Busy Bee
PRODUCT POSTPONEMENT
Without postponement
With postponement
Raw materials components Different products
Raw materials components
Generic product Different products
PRODUCT POSTPONEMENT METHODS
? Three Basic methods to implement Postponement
? Pull Postponement ? Logistics Postponement ? Form Postponement
Various alternative classifications exist
PRODUCT POSTPONEMENT THEORY
1.0 Pull Postponement ?Refers to making the Decoupling Point earlier in the Process e.g. National Bicycle, Japan, Bennetton, USA ?Process must be sequenced so that less differentiating steps are done earlier (less fan-out in Product Structure) ?Process after DP done fast to meet delivery needs ? Accurate Order Capture
PRODUCT POSTPONEMENT THEORY
2.0 Logistics Postponement ? Calls for redesign of tasks or modules involved so that customization can be done downstream
? e.g., Localizing Printers at Distribution Centers
? Combined with Pull Postponement – color matching at local Store – low cost Chromatography. ? HCL Busy Bee: Assembly at Distributors
PRODUCT POSTPONEMENT THEORY
3.0 Form Postponement ? Use of Standardized Components or Process Steps ? e.g., HP Printer Supply Power unit, GE reduced number of parts from 60000 to 300 for its Circuit Breakers Disk Drives need testing by inserting disk specific PCBa time consuming process. Test divided into two - Standard tests and disk specific tests
PRODUCT POSTPONEMENT - BENNETTON
Dyeing
Dyeing vats for the finished knitted product.
PRODUCT POSTPONEMENT - BENNETTON
Old Sequence Purchase Yarn New Sequence Purchase Yarn Knit Garment Parts
Dye Yarn Finish Yarn
Knit Garment Parts Join Parts
Join Parts
Dye Garment Finish Garment
This process is postponed
PRODUCT POSTPONEMENT - BENNETTON
Dye yarn only after the season’s fashion preferences become more established (knit lead-time much longer than dyeing lead-time).
Example: single product; four colors
knit dye Dyeing operations postponed
dye
knit
Outcome: Reduces demand uncertainty & inventory
PRODUCT POSTPONEMENT - MODULARITY
• Modules are common across different products
1 2
Without component commonality
1 2
With component commonality
PRODUCT POSTPONEMENT - MODULARITY
integral
modular
PRODUCT POSTPONEMENT - MODULARITY
Current: Integral Designs
Proposed: Modular Design
Standardization strategy for the LaserJet by HP
Before standardization
LaserJet printer 110 volts 220 volts
After standardization
LaserJet printer Universal power supply
Differentiation by end-customer in the beginning of production
Europe
North America
HP was able to reduce the total costs of manufacturing, stocking and delivering the finished product to the customer by 5% per year
PRODUCT POSTPONEMENT - LOGISTIC
• Factory-Localization Strategy: (customization performed at the factory)
HP DC
customers
(manufacturer)
• DC-Localization Strategy: (customization performed at the DCs)
HP (manufacturer) DC customers
Postponement: Delaying the point of differentiation
PRODUCT POSTPONEMENT - POTENCY
PRODUCT FANOUT and POTENCY
Curd Milk
Vanilla Ice Cream Favorable Factors Large variety/same size Not positively correlated
Increasing Differentiation
Increasing Potency
PRODUCT POSTPONEMENT
MTS
Design
Ship TO ATO
Design Buy Design Buy
MTO
Design Buy
Buy TO ETO
Design Buy Design Buy
Purchase
Buy
Fab Assy
Fab Assy
Fab Assy
Fab Assy
Fab Assy
Fab Assy
Logistics Postpone
Pack
Dist
Pack
Dist
Pack
Dist
Pack
Dist
Pack
Dist
Pack
Dist
PRODUCT POSTPONEMENT ENABLERS
? Products and Processes must be Modular ? Allows separation of custom and standard parts ? Allows modules to be made independently ? Enablers modules that differentiate to done out ? Processes can be postponed/ resequenced ? Awareness of Design personnel on the importance in SCM ? Involves Multi Functions ? Analytical models to evaluate needed as costs may seem more, e.g. Universal Power Supply of HP printers, GE needed more Copper for Standardization of Circuit Breakers
DECOUPLING POINT VS PDP
DECOUPLING POINT VS PDP
Where should they be located with respect to each other ??
DECOUPLING POINT VS PDP
Product Differentiation Point Supplier
Decoupling Point Customer
DECOUPLING POINT VS PDP
Product Differentiation Point Supplier
Decoupling Point Customer
DECOUPLING POINT and PDP
These concepts with respect to a Dosa Vendor
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 1 The Principle of End User Focus
Long term profitability is dependent on end-user being satisfied and acting as the focus of all development and process engineering Examples/ Terms: Consumption Chain, Bull Whips
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 2 The Principle of Horizontal Boundary Definition
Different end-user needs are more competitively satisfied by logistically engineered channels within the Supply Chain
Examples: “What is the Right Supply Chain for You”- Fisher
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 3 The Principle of Vertical Boundary Definition
Boundaries of ownership and control (dividing the chain vertically) should be positioned to suit the needs of the end-user and according to the best practice and make-buy theory Examples: 3PL, 4PL, VMI
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 4 The Principle of Inventory Positioning
The positioning and levels of Inventory are best determined in a total supply chain context to suit end-user needs in line with stock and postponement theory Examples: Decoupling Point, Offer Penetration Point, Postponement
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 5 The Principle of Control over Demand Dynamics
Understanding and control over demand dynamics is best achieved by having an holistic Supply Chain perspective. The principal basis is through information control and the use of best practice relationship management Examples: Bull Whip, Information Sharing
TIME COMPRESSION IN SUPPLY CHAINS PRINCIPLES
Principle No. 6 The Principle of Cooperation and Coordination
The attainment of the above the principles requires the cooperation and coordination between supply chain participants. For this to work effectively SC participants must have self-defined and motivation objectives based on trust and common business process aspirations Examples: CPFR, ECR, QR
BUSINESS PROCESSES
1.0 FUNCTIONAL VS. PROCESS-CENTRIC ORG.
? MANUFACTURING HAS BEEN VIEWED AS A SEQUENTIAL ARRANGEMENT OF FUNCTIONS e,g. Engg to Planning to Shop to Dispatch etc. ? RECENT VIEW: TO CONSIDER IT AS A COLLECTION OF VALUE ADDING PROCESSES
2.0 EVOLUTION OF PROCESS ORIENTATION
? THE NEW I.E. - IT and Business Processes, SMR „90 ? REEINGEERING: Don?t Automate, Obliterate, HBR ?90 ? BPR WAS BORN
BUSINESS PROCESSES
CURRENT STATE ? “SUPER-EFFICIENT COMPANY”, HAMMER, HBR ?01 ? PROCESSES ACROSS ORGANIZATIONS ? CO-SUPPLIERS ? MFG. ENTERPRISE: “A network of independent companies forming a strategic alliance towards the common goal of satisfying customers faster than through other alliances or vertically integrated plants” ? Collaborative Efforts: QR, ECR, CPFR
BUSINESS PROCESSES HIERARCHY
BUSINESS PROCESS
ORGANIZATION 1
ORGANIZATION 2
ORGANIZATION 3
FUNCTION 1
FUNCTION 2
FUNCTION 3
WORK PROCESS 1
WORK PROCESS 1
INTERFACES
BUSINESS PROCESSES
TYPES OF PROCESS
? MANAGEMENT PROCESSES ? CORE PROCESSES ? SUPPORT PROCESSES EXAMPLES
? MANAGEMENT: LEADERSHIP, STRATEGY PLANG. MARKET DEV, INVESTMENT, HR CORE: ORDER FULFILLMENT, ORDER GENERATION SUPPORT: SCM, R & D, IT, SOCIAL RESP.
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BUSINESS PROCESSES
CHARACTERISTICS OF A GOOD PROCESS ?PROCESS OWNER ?WELL-DEFINED BOUNDARIES ?WELL-DEFINED WORK FLOW ?PERFORMANCE MEASURES ?CONTROLLED PROCESS DEVIATIONS
APQC CLASSIFICATION ?13 CATEGORIES
BUSINESS PROCESSES
EXAMPLE OF AN APQC PROCESS
5.0 PRODUCE AND DELIVER FOR MFG. ORG.
5.1 PLAN FOR AND ACQUIRE RESOURCES 5.1.1 SELECT AND CERTIFY SUPPLIERS 5.1.2 PURCHASE CAPITAL GOODS 5.1.3 PURCHASE RAW MATERIAL 5.1.4 ACQUIRE TECHNOLOGY 5.2 CONVERT RESOURCES INPUTS INTO PRODUCTS 5.2.1 DEVELOP/ADJUST PRODN PROCESS 5.2.2 SCHEDULE PRODUCTION 5.2.3 MOVE MATERIALS 5.2.4 MAKE PRODUCTS
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