Supply Chain management

Lecture 1 - 2022-2023

Prof. dr. Koen Mommens (koen.mommens@vub.be)

 Practical information
Course structure
• Lectures (6 x 3h) and guest lecture
• Exercise sessions (3 x 3h)
• Wood supply chain (1 x 3h)
Three groups
• Dutch evening (HOC Monday 18h), English evening (HOC Thursday 18h) and Dutch day (HOC
Friday 15h).
Team
• Koen Mommens (course titular)
• Soukaina Bayri (assistant)
• Tom Vermeiren, Johan Devos, Heleen Buldeo Rai, André Ceron and Cathérine Cassan (lectures)
 Practical information
Course material
• Slides of the lectures
• Additional documents on Canvas (book chapters, papers, ...)
• Background reading
• Operations Management: An Integrated Approach by Reid and Sanders (7th ed.)
• Introduction to Operations and Supply Chain Management by Bozarth and Handfield (5th ed.)

Evaluation
• Written closed-book exam + formula sheet (used during WPO)
• Management have exam in April, other groups in June
• Open questions, multiple-choice questions with guess correction, exercises, ..
Practical information
Mobilise research group
mission

to accelerate the transition to a more

sustainable and socially just mobility
and logistics system
Two research teams

URBAN MOBILITY SUSTAINABLE LOGISTICS

Team goal

“to make logistics sustainable — to ensure that it

meets the needs of the present without
compromising the ability of future generations to
meet their own needs”

Needs of the Compromising

needs
Future needs
present
 Topics Present
Best practices
Comproming
Impact assessment
Future
Upscaling
& transferability
• Emission free supply chains
External costs - • Internalisation of External costs
Awareness • Air pollution on human health
• Greening the last mile

• Sharing transport capacity

Transport demand - • Short food supply chains
• Circular and reverse logistics
Avoidance • Decoupling economic growth
• Consumer movements and crowd logistics

• How to realize modal shift?

Multimodal • Robustness against uncertainties
transport - • Synchromodal transport
• Real-time simulations and decision-making
Act & shift • Vehicle routing

• Autonomous logistics (road, rail, barge)

Vehicle technology - • Electric vehicles: range, capacity
Anticipation • Which vehicle technologies to use?
• Planning, cost, service, behavioral change

Policy –
• Foster adoption of sustainable solutions
Actor involvement
 Introduction

Supply chain = network of activities to deliver finished products to customers:

• the suppliers provide raw materials and components

• the manufacturer transforms these materials into finished products

• the products are distributed to retailers via distribution centers and/or wholesalers

• the retailer sells the finished products to the end customer

 Supply chain
Supply chain management (SCM) is the business function that coordinates

• the flow of goods from suppliers to final customers

• the sharing of information

• sales forecasts, sales data, promotions, inventory levels, ...
• among all members in the supply chain
• suppliers, internal departments, transporters, third-party companies, ...
• to maximise customer value and achieve a competitive advantage

=> SCM links the operations of different partners having different

manufacturing processes
Example of Nike
Globalisation
Globalisation
Globalisation
Globalisation
Globalisation
Example Apple
 Introduction
Warehouse

• Facility where items are temporally stored

• SKU: stock keeping unit, a specific item that is stored
• Essential component of any supply chain

• Increasingly outsourced to logistic service providers

Roles of a warehouse

• Consolidation and product mixing

• Buffering (storage)

• Value-added services
 Introduction
Consolidation allows product mixing and reduces transportation costs
Introduction
 Introduction

Buffering allows different parts of the

supply chain to operate independently

Objectives:

• Increase operational flexibility (e.g.

impact of seasonal demand, batch
production, uncertainties)

• Reduce customer lead times

 Introduction
Added value logistics
 Introduction
Why is the use of warehouses beneficial to companies?
► Some examples:

• Achieving transportation economies (e.g. combined shipments)

• Achieving production economies (e.g. make-to-stock policy)
• Taking advantage of quantity discounts and forward buys
• Meeting changing market conditions and uncertainties (e.g. demand fluctuations,… )
• Overcoming time and space differences between producers and customers
• Providing temporary storage of material to be disposed or recycled (reverse logistics)
• …
Challenges: smaller orders, shorter response times and larger product variety
Introduction
 Warehouse activities

Main warehousing activities:

• Receiving

• Storage

• Order picking (retrieval)

• Preparing for shipping

Warehouse management ≠ Inventory management

 Warehouse activities
Receiving
• Goods arrive from suppliers, typically by truck (or train, ship, ...)
• Unloading at receiving docks
• Administrative actions
• The inventory record is updated
• Goods are inspected to detect quantity or quality inconsistencies
Storage
• Goods may first need to be repackaged
• Goods are transferred to their storage location
 Warehouse activities
Order picking
• Most labour-intensive activity in many warehouses
• Customer orders consist of one or more order lines (= SKU in specific quantity)
• Order picking process
• Receive set of customer orders
• Retrieve corresponding goods from their storage locations => many different strategies
Prepare for shipping
• The picked items are accumulated and sorted per customer order
• Value-added services are performed: pricing, labelling, kitting, …
• Orders are packed and stacked in the right load unit
Warehouse activities
Internal warehouse layout and equipement
Internal warehouse layout

Forward-reserve configuration

• Large reserve area (bulk stock) and

small forward area (pick stock)

• Advantage: picking efficiency through

reduced distances

• Disadvantage: need to replenish forward

area from reserve area

• All SKUs in forward area? How many

units per SKU in forward area?
Operations strategy

Decisions related to operations, but not likely to be changed frequently

Two aspects:

• Storage strategy: where to store each SKU?

• Order picking strategy: how to retrieve an SKU when ordered?

• Objective: maximize service level subject to available resources

• typical measures of service level: order delivery time, order accuracy, ...
 Storage strategy
Storage location assignment policies

• A set of rules which can be used to assign SKUs to storage locations

• Dedicated: assign SKUs to a fixed location

• Full-turnover storage: assign SKUs generating the highest sales closest to the depot

• Class-based storage: combination of turnover and random strategy (see next slide)

• Family grouping: related SKUs should be stored close to each other

 Storage strategy
Example: class-based storage

Perform Pareto analysis to divide

SKU’s into three classes (ABC
classification)

Dedicated storage areas for each

class, but random assignment
within classes

Figure: strategies to create A, B

and C areas
Order picking strategy
Order picking strategy
 Picker-to-part: zoning
Picking area divided into zones => each order picker
assigned to a single zone
• Order pickers travel smaller distances and become familiar
with locations
• But: different SKUs of the same order may be in different
zones => split orders should be consolidated before
shipping
Consolidation strategies:
• Progressive zoning
• Order is picked zone by zone: it goes to the next zone when completed in
previous zone
• Synchronized zoning
• Order is picked in parallel: it is merged after picking has been
done in all zones
 Picker-to-part: batching
In the case of small orders (few order lines), single-order picking is inefficient

 order batching reduces travel distances by picking a set of orders in a single

picking tour

Criteria to decide which orders are batched

• Timing of orders

• Proximity of orders (e.g., identical pick locations, distance between pick locations, …)

• Order due times must be respected

Sorting needs to be done either during or after picking tour

Picker-to-part: batching
 Picker-to-parts: routing
Pick list
List of SKUs (and their quantities) to be picked in a single order picking tour

• Assigned to a specific order picker

• Result of zoning and batching decisions

Routing decision
Sequencing the items on the pick list to ensure a short route through the
warehouse for the order picker

 usually solved with simple heuristics (see next slide)

Picker-to-parts: routing
Picker-to-parts
 Other order picking strategies
Parts-to-picker warehouses

• Mobile robot fulfilment systems

• Amazon: https://www.youtube.com/watch?v=Y-lBvI6u_hw
• Alibaba: https://www.youtube.com/watch?v=FBl4Y55V2Z4
• Grid-based systems
• AutoStore: https://www.youtube.com/watch?v=b3X3r5UVtEM
• AS/RS
• Fully automated warehouses
• Meijer: https://www.youtube.com/watch?v=bn5jjVKhFUs
• Vinamilk: https://www.youtube.com/watch?v=4HWppMe06WQ
RFID tags
Example: Urban distribution center
Example: Brussels Construction Consolidation Center
 Example: Brussels Construction Consolidation Center

Supply chain management

• Between production and

wholesales and construction
sites

• Different actors

• Information important
• Added value for construction
site
• Added value storage
Example: Brussels Construction Consolidation Center
Implementations

Brusselaers et al., 2022

Thank you