Description
The PPT explains centralization and supply chain restructuring.
Supply Chain Restructuring and Design
1
Centralization Idea
2
Centralization Idea using Simulation
? c ? ? ? ? ? ...? ?
2 1 2 2 2 n
3
Centralised Versus Decentralised Systems
• Inventory
– Safety Stock – Cycle stock
• Overhead Costs
• Customer Lead Time
• Transportation Cost
Centralized Versus Decentralized Systems: Illustration
Demand distribution at each region ( 16 regions) Daily Demand: Mean = 100 , SD = 30 Ordering cost = 256 Rs. Cost of item = 30 Rs. Inventory Carrying cost = 0.2 Rs./Rs./Year Plant Lead time: Mean = 15 Days Transportation:
Decentralized- Rs. 1 per unit Centralized case: - 10% higher
Decentralise d system –16 stock points
Centralised system –1 stock point
Cycle stock/stock point = Q*/2
800
3200
Safety Stock per stock point
232
928
Total Inv. in units for the system
(232+800) ? 16 = 16512 16512 ? 6 = 99072
928+3200 = 4128
Total Inv. carrying cost
4128 ? 6 = 24768
Incremental Transportatio n cost
300?100?1 6?0.1 =48,000
Centralization
• Physical centralization
– Amazon vs Barnes & Noble
• Decentralized inventory & centralization of information
– Johnson and Johnson new planning model
• Component Commonality • Cross Docking
Advantage of Component Commonality
450000 400000 350000 300000 250000 200000 150000 100000 50000 0 1 2 3 4 5 6 7 8 9
8
SS
No of Finished products per component
4 February 2013
Platform Strategies of Japanese and selected European car makers
1997 2007
Manufactu rer Annua Mod l els volum e 4.89m 2.74m 2.3m 1.98m 1.1m 2.7m 3.9m 45 39 26 21 18 30 33 Platfo Model rms s/ platfo rm 22 24 15 12 14 13 11 2.0 1.6 1.7 1.8 1.3 2.3 3.0
9
Source: FT World Automotive Marketing
Volume/ platform
Mod Platfo els rms
Models / platfor m 5.7 7.0 6.0 2.7 4.0 6.2 13.7
Toyota Nissan Honda Mitsubishi Mazda Fiat Volkswage n
222,272 105,385 153,333 94,285 78,571 207,692 358,503
40 35 30 19 16 31+ 55
7 5 5 7 4 5 4
4 February 2013
Centralization of Inventory via Cross Docking
Suppose gadget manufacture's CFA in Nagpur, Maharashtra directly delivers 29 inch Oxygen color TVs to the three Pantaloon retail outlets: Bazaar's in Nirmal lifestyle, Parel and Vashi. Review period at the retail outlets is 1 day and order lead time is 10 days. Lead time variation is negligible. Standard deviation of the demand per day is 5 TVs. Compute total safety stock for Pantaloon retail store. Assume K =1 for simplification
10
• SS= ?D x n x
= 5 x3 x = 49.7 Tvs
(10 ? 1)
(L ? T )
11
Safety Stock with Cross Docking
• Now the Pantaloon wants to use cross docking where a single order from Nagpur will come to Nashik and which will be then split into three small truckloads that will go into three different directions. The lead time from Nagpur to Nashik is 8 days. Lead time from Nashik to the retail outlets is 2 days ( including cross docking time). What should be the safety stock for Pantaloon stores now? 12
Safety Stock with Cross Docking
• = ?D x n x
( L1 ? L2 ? T ) n 8 ( ? 2 ? 1) 3
=5.0 x 3 x = 35.7 TVs
Decentralized Case = 49.7 TVs
13
L1=0
L1=2
L1=5
L1=8
L1=10
Ideal
n=1
166
166
166
166
166
166
n=2
332
316
292
265
245
235
n=3
497
466
415
357
312
287
n=5
829
766
661
536
433
371
n=10
1658
1517
1275
975
707
524
Implications of cross docking on inventory
14
Some Insights from the results
• Cross docking helps us in reducing the safety stock requirement. From inventory reduction perspective, it would be beneficial to do cross docking as late as possible.
Benefit of cross docking increases as the demand Is pooled over different retail outlets or warehouses
15
The HLL Supply Chain
?More than 400 SKUs (110 brands in 950 packs)
Restructuring the HLL Supply Chain
Postponement Idea
• HP printer manufacturing unit in USA • Customers in Europe
– France – Germany – Italy – Spain
• Can centralization idea reduce inventory
18
Delayed differentiation with process resequencing at Benetton
Dyed Yarns
Finished Sweaters
Dyeing
Knitting White Garments Finished Sweaters
Knitting
Dyeing
Change the push pull boundary in manufacturing
T1
T2
T3
Family Differentiation Point Product Differentiation Point
4 February 2013 20
Push pull boundary moved to slits
Slitting & Cambering HR Coil Slits Slits
Forming & Drilling
Stage 1 Steel
Mill
Stage 2
Auto
Frame Side Members Factory
4 February 2013
21
Postponement
Postponement benefits function of: • Modularity in product design • High uncertainty in demand • Higher product variety • Long transportation lead-time • Short lead-time of postponed operation • High value addition in postponed operation • Difference in tariff rates for comp. & FG
Areas of concern • Loss of economies of scale • Deterioration in quality
doc_128140111.pptx
The PPT explains centralization and supply chain restructuring.
Supply Chain Restructuring and Design
1
Centralization Idea
2
Centralization Idea using Simulation
? c ? ? ? ? ? ...? ?
2 1 2 2 2 n
3
Centralised Versus Decentralised Systems
• Inventory
– Safety Stock – Cycle stock
• Overhead Costs
• Customer Lead Time
• Transportation Cost
Centralized Versus Decentralized Systems: Illustration
Demand distribution at each region ( 16 regions) Daily Demand: Mean = 100 , SD = 30 Ordering cost = 256 Rs. Cost of item = 30 Rs. Inventory Carrying cost = 0.2 Rs./Rs./Year Plant Lead time: Mean = 15 Days Transportation:
Decentralized- Rs. 1 per unit Centralized case: - 10% higher
Decentralise d system –16 stock points
Centralised system –1 stock point
Cycle stock/stock point = Q*/2
800
3200
Safety Stock per stock point
232
928
Total Inv. in units for the system
(232+800) ? 16 = 16512 16512 ? 6 = 99072
928+3200 = 4128
Total Inv. carrying cost
4128 ? 6 = 24768
Incremental Transportatio n cost
300?100?1 6?0.1 =48,000
Centralization
• Physical centralization
– Amazon vs Barnes & Noble
• Decentralized inventory & centralization of information
– Johnson and Johnson new planning model
• Component Commonality • Cross Docking
Advantage of Component Commonality
450000 400000 350000 300000 250000 200000 150000 100000 50000 0 1 2 3 4 5 6 7 8 9
8
SS
No of Finished products per component
4 February 2013
Platform Strategies of Japanese and selected European car makers
1997 2007
Manufactu rer Annua Mod l els volum e 4.89m 2.74m 2.3m 1.98m 1.1m 2.7m 3.9m 45 39 26 21 18 30 33 Platfo Model rms s/ platfo rm 22 24 15 12 14 13 11 2.0 1.6 1.7 1.8 1.3 2.3 3.0
9
Source: FT World Automotive Marketing
Volume/ platform
Mod Platfo els rms
Models / platfor m 5.7 7.0 6.0 2.7 4.0 6.2 13.7
Toyota Nissan Honda Mitsubishi Mazda Fiat Volkswage n
222,272 105,385 153,333 94,285 78,571 207,692 358,503
40 35 30 19 16 31+ 55
7 5 5 7 4 5 4
4 February 2013
Centralization of Inventory via Cross Docking
Suppose gadget manufacture's CFA in Nagpur, Maharashtra directly delivers 29 inch Oxygen color TVs to the three Pantaloon retail outlets: Bazaar's in Nirmal lifestyle, Parel and Vashi. Review period at the retail outlets is 1 day and order lead time is 10 days. Lead time variation is negligible. Standard deviation of the demand per day is 5 TVs. Compute total safety stock for Pantaloon retail store. Assume K =1 for simplification
10
• SS= ?D x n x
= 5 x3 x = 49.7 Tvs
(10 ? 1)
(L ? T )
11
Safety Stock with Cross Docking
• Now the Pantaloon wants to use cross docking where a single order from Nagpur will come to Nashik and which will be then split into three small truckloads that will go into three different directions. The lead time from Nagpur to Nashik is 8 days. Lead time from Nashik to the retail outlets is 2 days ( including cross docking time). What should be the safety stock for Pantaloon stores now? 12
Safety Stock with Cross Docking
• = ?D x n x
( L1 ? L2 ? T ) n 8 ( ? 2 ? 1) 3
=5.0 x 3 x = 35.7 TVs
Decentralized Case = 49.7 TVs
13
L1=0
L1=2
L1=5
L1=8
L1=10
Ideal
n=1
166
166
166
166
166
166
n=2
332
316
292
265
245
235
n=3
497
466
415
357
312
287
n=5
829
766
661
536
433
371
n=10
1658
1517
1275
975
707
524
Implications of cross docking on inventory
14
Some Insights from the results
• Cross docking helps us in reducing the safety stock requirement. From inventory reduction perspective, it would be beneficial to do cross docking as late as possible.
Benefit of cross docking increases as the demand Is pooled over different retail outlets or warehouses
15
The HLL Supply Chain
?More than 400 SKUs (110 brands in 950 packs)
Restructuring the HLL Supply Chain
Postponement Idea
• HP printer manufacturing unit in USA • Customers in Europe
– France – Germany – Italy – Spain
• Can centralization idea reduce inventory
18
Delayed differentiation with process resequencing at Benetton
Dyed Yarns
Finished Sweaters
Dyeing
Knitting White Garments Finished Sweaters
Knitting
Dyeing
Change the push pull boundary in manufacturing
T1
T2
T3
Family Differentiation Point Product Differentiation Point
4 February 2013 20
Push pull boundary moved to slits
Slitting & Cambering HR Coil Slits Slits
Forming & Drilling
Stage 1 Steel
Mill
Stage 2
Auto
Frame Side Members Factory
4 February 2013
21
Postponement
Postponement benefits function of: • Modularity in product design • High uncertainty in demand • Higher product variety • Long transportation lead-time • Short lead-time of postponed operation • High value addition in postponed operation • Difference in tariff rates for comp. & FG
Areas of concern • Loss of economies of scale • Deterioration in quality
doc_128140111.pptx