Description
the importance of solving supply chain problems, conflicting objectives of supply chain and how to solve these supply chain problems.
Supply Chain Management
Managing Obstacles
Supply Chain
Problems
What a Supply Chain Problem can do…
? Problems with the Supply Chain have caused armies to lose wars & companies to go out of business, for example…
In WW II, Germany encountered problems supplying troops in Russia, which contributed to their collapse. In 1999 ToysRUS had problems supplying to holiday shoppers & lost business.
Frequent Supply shortages
Inefficient logistics
Low order fill rates
Tier 1 Supplier
Manufacturer
Distributor
Retailer
Customer
High stockouts
Glitch-Wrong Material, Machine is Down – effect snowballs
High inventories through the chain
Ineffective promotions
High landed costs to the shelf
Supply Chain Problems
Adding value along the chain is essential for competitiveness, however problems exist especially in complex or long chains and in cases where many business partners are involved. due to • uncertainties • need to coordinate several activities, internal units, and business partners. Demand forecasts are a major source of uncertainties
• • • • • • • • Competition Prices Weather conditions Technological development Customer confidence Machine failures Road conditions Shipments
Uncertainties exist in delivery times
Quality problems may also create production delays
Conflicting Objectives in Supply Chain
1. Decentralized supply chain: each member has his own interest and act independently 2. Self-interested decision makers: every member of the supply chain optimizes his own objective.
3. These self-interested members’ decisions may not align with the optimal decisions for the overall performance of the supply chain.
4. Inefficiencies across supply chain lead to decentralization cost
5. Solution: to coordinate the members to act as if they are a centralized supply chain (i.e., one decision-maker makes decisions in behalf of the whole supply chain)
Supply Chain Uncertainty
? One goal in SCM:
?
respond to uncertainty in customer demand without creating costly excess inventory
? Factors that contribute to uncertainty
? ? ? ? ? ? ?
? Negative effects of uncertainty
? ?
lateness incomplete orders
? Inventory
?
inaccurate demand forecasting long variable lead times late deliveries incomplete shipments product changes batch ordering price fluctuations and discounts inflated orders
insurance against supply chain uncertainty
Supply Chain Vulnerability
Cranfield Five Categories of Supply Chain Risk!
Lack of Ownership
Chaos Risks
Decision Risks
J.I.T Relationship Risks
Inertia Risks
No clear identification of owner and customers of measures
(joint determination is very essential)
Fill The Gaps
Not evaluating consequences and outcomes
(Efficacy is prerequisite to customer satisfaction)
Imbalance between efficiency and effectiveness
(key processes has to be identified and owned)
Lack of Process Orientation of measurement
(Physical Orientation alone is not a suitable indicator)
Lack of Measures of relationships
(economic, physical, psychological measures are equally important)
Lack of real-time visibility
(every affected party must be informed)
Lack of Multi-firm optimization
(have to look beyond sub-optimization)
* Source: various authors
Local optimization and lack of global fit
• SCM is big:
– – – – Variety of products and services Spoiled/ demanding customers Multiple owners (procurement, production, inventory, marketing) / multiple objectives Globalization
Increasing implied uncertainty
• Instability and Randomness:
– – – Increasing product variety Shrinking life cycle Customer fragmentation
Obstacles to Achieving Strategic Fit
? ? ? ? ? ? ? ? Increasing variety of products Decreasing product life cycles Increasingly demanding customers Fragmentation of supply chain ownership Globalization Difficulty executing new strategies Demand Uncertainty Short Product Life Cycles ? ? ?
?
? ?
Frequent Promotions
Seasonality Increased Product Variety
?
? ? ? ? ? ? ? ?
Lack of SCM metrics: How do we measure responsiveness? Poor IT design Poor delivery status information Ignoring uncertainties Internal customer discrimination Poor integration Elusive inventory costs SC-insensitive product design
Growing Number of Categories Growing Number of SKU’s
?
Global Sourcing Cycle Time Pressure Regulatory Frameworks
doc_647899553.pptx
the importance of solving supply chain problems, conflicting objectives of supply chain and how to solve these supply chain problems.
Supply Chain Management
Managing Obstacles
Supply Chain
Problems
What a Supply Chain Problem can do…
? Problems with the Supply Chain have caused armies to lose wars & companies to go out of business, for example…
In WW II, Germany encountered problems supplying troops in Russia, which contributed to their collapse. In 1999 ToysRUS had problems supplying to holiday shoppers & lost business.
Frequent Supply shortages
Inefficient logistics
Low order fill rates
Tier 1 Supplier
Manufacturer
Distributor
Retailer
Customer
High stockouts
Glitch-Wrong Material, Machine is Down – effect snowballs
High inventories through the chain
Ineffective promotions
High landed costs to the shelf
Supply Chain Problems
Adding value along the chain is essential for competitiveness, however problems exist especially in complex or long chains and in cases where many business partners are involved. due to • uncertainties • need to coordinate several activities, internal units, and business partners. Demand forecasts are a major source of uncertainties
• • • • • • • • Competition Prices Weather conditions Technological development Customer confidence Machine failures Road conditions Shipments
Uncertainties exist in delivery times
Quality problems may also create production delays
Conflicting Objectives in Supply Chain
1. Decentralized supply chain: each member has his own interest and act independently 2. Self-interested decision makers: every member of the supply chain optimizes his own objective.
3. These self-interested members’ decisions may not align with the optimal decisions for the overall performance of the supply chain.
4. Inefficiencies across supply chain lead to decentralization cost
5. Solution: to coordinate the members to act as if they are a centralized supply chain (i.e., one decision-maker makes decisions in behalf of the whole supply chain)
Supply Chain Uncertainty
? One goal in SCM:
?
respond to uncertainty in customer demand without creating costly excess inventory
? Factors that contribute to uncertainty
? ? ? ? ? ? ?
? Negative effects of uncertainty
? ?
lateness incomplete orders
? Inventory
?
inaccurate demand forecasting long variable lead times late deliveries incomplete shipments product changes batch ordering price fluctuations and discounts inflated orders
insurance against supply chain uncertainty
Supply Chain Vulnerability
Cranfield Five Categories of Supply Chain Risk!
Lack of Ownership
Chaos Risks
Decision Risks
J.I.T Relationship Risks
Inertia Risks
No clear identification of owner and customers of measures
(joint determination is very essential)
Fill The Gaps
Not evaluating consequences and outcomes
(Efficacy is prerequisite to customer satisfaction)
Imbalance between efficiency and effectiveness
(key processes has to be identified and owned)
Lack of Process Orientation of measurement
(Physical Orientation alone is not a suitable indicator)
Lack of Measures of relationships
(economic, physical, psychological measures are equally important)
Lack of real-time visibility
(every affected party must be informed)
Lack of Multi-firm optimization
(have to look beyond sub-optimization)
* Source: various authors
Local optimization and lack of global fit
• SCM is big:
– – – – Variety of products and services Spoiled/ demanding customers Multiple owners (procurement, production, inventory, marketing) / multiple objectives Globalization
Increasing implied uncertainty
• Instability and Randomness:
– – – Increasing product variety Shrinking life cycle Customer fragmentation
Obstacles to Achieving Strategic Fit
? ? ? ? ? ? ? ? Increasing variety of products Decreasing product life cycles Increasingly demanding customers Fragmentation of supply chain ownership Globalization Difficulty executing new strategies Demand Uncertainty Short Product Life Cycles ? ? ?
?
? ?
Frequent Promotions
Seasonality Increased Product Variety
?
? ? ? ? ? ? ? ?
Lack of SCM metrics: How do we measure responsiveness? Poor IT design Poor delivery status information Ignoring uncertainties Internal customer discrimination Poor integration Elusive inventory costs SC-insensitive product design
Growing Number of Categories Growing Number of SKU’s
?
Global Sourcing Cycle Time Pressure Regulatory Frameworks
doc_647899553.pptx