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Global Logistics and Risk

Management

Global Supply Chain


Management

Global optimization within the supply chain

Supply contract
Strategic alliances
Flexible supply chain

International operations and supply chains are


becoming increasingly significant

The Problem

Customized products
Uncertainty and complexity
Faster technology upgrades
More product lines, shorter product life
cycles, and higher demand variability
Solutions?? Capability in

Demand shaping: NUS juice stall surprise, etc..


Supply shaping: flexible product, etc..

Flexible Product Example

Example of a flexible
Package

Process Flexibility Example

Use process
flexibility
gives us a wider
margin of error
if the Caliber doesn't
sell well, the Jeep
Compass and Patriot
could take up capacity,
and eventually a fourth
model will be built, too.

Thomas LaSorda
Chryler Group CEO

Process Flexibility Defined

A firm's ability to provide varying goods


or services, using different facilities or
resources

(Sethi & Sethi 1990, Jordan & Graves 1995)

Example:

A firm with 2 facilities to make 2 products


for the market
Compare dedicated and flexible systems to
understand the value of process flexibility

Small Systems

Extra demand for


Product 2 is lost.
Extra capacity from
Facility 1 is wasted.

Can use extra


capacity from Facility
1 to meet the extra
demand for Product 2

This gain constitutes the Value of Process Flexibility.

Insights: benefits of sparse


process structure

10 links:
No flexibility
Plant

16 links
Vehicle Plant

20 links
Vehicle

Plant

Vehicle

Plant

100 links:
Total flexibility

Vehicle

10

10

10

10

Background of
Food-From-TheHeart

On a Mission to Save Food


No. of
Collection
bakeries

115

No. of
receiving
homes

95

No. of fixed
routes (daily)

192

Quantity of
bread saved

20,000
kg/mth

(Data are from www.foodheart.org)

Target:

Send the unsold bread of bakeries to needy homes and families

Food Collection & Delivery


Process

1. A volunteer is
assigned to deliver
from one bakery to
one home

2. The volunteer
collects breads from
the bakery and
sends them to the
home.

Issues Arising From FFTH


To reduce the burden on the volunteers, the administrator
usually assigns each volunteer a fixed route and schedule
(dedicated route)
The supply from each bakery is random
The demand of each home is constant
The food-saving program
ends up throwing away food!
How to match random
supply with constant demand?
Design a flexible delivery
process

Issues Arising From FFTH

The closing times of


different bakeries are
different
It is impossible to ask
a volunteer to collect
the food at 8:30pm
and wait 2 hours for
the coordinator to
assign the delivery
allocation
How to make online
decision based on
limited information?

Process Flexibility

Process Flexibility

A type of flexibility
resulting from being
able to build
different types of
products in the same
plant or on the same
production line at
the same time.
(Jordan and Graves,
1995)

Applications of Flexibility

Process Flexibility is widely used as a powerful tool


to deal with uncertainty.
Example: Plants in the automobile industry are
becoming more flexible (Van Biesebroeck, 2004)
Other applications include: cross-trained workers,
flexible machines, etc.

Process Flexibility
Structures
1

Full Flexibility
: Random factors

Partial Flexibility

Which structure is better?

: Fixed capacities

Full Flexibility can handle the most


uncertainty, but it is also the most costly.
Partial Flexibility is cheaper, but what kind
of partial structure is most efficient?
Can we find an effective designing
strategy?

Process Flexibility

Consider a 10-product, 10-plant example.


Each plant has capacity of 100 units.
Demand for each product follows a
truncated normal distribution with mean
100 and SD 40, and minimum and
maximum of 20 and 180 units.
Product demands are independent.
Simulation is used to determine expected
capacity utilization for each product
assignment configuration.

Process Flexibility

Consider first the


cases of no
flexibility and total
flexibility.
Then, observe the
incremental
benefits of adding
one link at a time.
Adding 10 links
achieves most of
the benefits of total
flexibility

Process Flexibility

Process Flexibility

FFTH Case Study


Supply of bakeries
Bak
.

Mean

sd

Bak.

6.12

4.18

10

5.23

5.20

15.1
7

4.13

11

17.87

6.09

0.57

0.30

12

12.73

3.89

2.67

1.51

13

15.47

10.08

3.33

1.87

14

3.38

2.96

5.00

4.81

15

3.35

2.46

8.06

4.70

16

3.53

2.70

21.5
8

13.0
5

17

8.39

5.38

Mean

Demand of homes

sd

9
8.57
5.95
Home
1
2

18
10.42
3
4
5

4.52
6
7

Deman
d

22

3.5

50

33

20

16

Performance

Avg=1.235

Online Delivery
Process
Priority of homes (decreasing)
Demand of homes (increasing)

1. A volunteer
is assigned to
one bakery
and a series of
homes
(ordered)

2. The Volunteer
collects breads
from the bakery
and send them
to Home A

3. If Home A has
enough demand, leave
all breads to home A
and call it a day,
otherwise send the
leftovers to home B.

4. Send all left


breads to the last
home, the
oversupply will be
recorded as the
wastage of the
system.

Performance

Performance

Average =
1.235

Extensions - When System is


Large

How good (or bad) is chaining when system becomes very


large?

System Size

Expected Maximum Flow

Chaining Efficiency

Dedicated

Chaining

Full Flexibility

10

864.47

949.36

955.14

93.62%

15

1297.51

1434.44

1447.00

91.59%

20

1728.52

1915.78

1938.93

89.00%

25

2179.81

2401.94

2441.73

84.81%

30

2601.84

2871.06

2929.84

82.08%

35

3044.48

3352.66

3430.70

79.79%

40

3469.06

3807.16

3905.48

77.47%

What do you think?

How close are the two values?

Extensions - Performance of
the Chaining Strategy

We prove an interesting connection between


asymptotic chaining efficiency and some
properties of a generalized random walk model

Identical and balanced case - equal number of


plants and products, with (fixed) supply and (mean)
demand of each.
demand is symmetrically distributed around its
mean and has support [0, 2],

Leads to an efficient method for computing the


value of chaining efficiency for general
demand distributions.

Extensions - Performance of
the Chaining Strategy

with CV of at most 0.33, the ratio of the


expected sales from chaining to the fully
flexible system is

89% for uniform distribution


96% for normal distribution

The proposed method works even for the


unbalanced (i.e. capacity not equal to mean
demand) and asymmetric (i.e. demand not
symmetrical around its mean) case.

Extensions When Number of


Plants is Different from Number
of
Products
Expansion Ratio Heuristics

Postponement + Flexibility

International Supply
Chain:
Product differences
Wal-Mart in South America

Are there global products?


Is this a trend?
What is the balance between local
tastes, global products?

Dealing with established


competition, aggressive competitors
Developing market knowledge

Wal-Mart in South America

Lack of critical mass


Different infrastructure/ business
environment

distribution problems
different equipment standards cultural
differences
postdated checks

Issues with foreign governments


Deep pockets for success

Increasing Globalization

International distribution systems

International suppliers

Raw materials and components are furnished by foreign


suppliers
Final assembly is performed domestically.
In some cases, the final product is then shipped to foreign
markets.

Offshore manufacturing

Manufacturing still occurs domestically, but distribution and


typically some marketing take place overseas.

Product is typically sourced and manufactured in a single


foreign location
Shipped back to domestic warehouses for sale and distribution

Fully integrated global supply chain

Products are supplied, manufactured, and distributed from


various facilities located throughout the world.

Forces Driving
Globalization

Global Market Forces


Technological Forces
Global Cost Forces
Political and Economic Forces

Challenges and Opportunities in


the Current Supply Chain
Environment
Key Difference in the Current Supply Chain Environment

Big Data Era


E-business
Payment (e.g. COD)
Example: Bumbox, Yamato, SingPost
Environmental Concerns
Remanufacturing Supply Chain
Higher Service Standard
Higher Expectation on Supply Chain Transparency

Example: Benetton fails on worker safety in


Bangladesh
http://www.cleanclothes.org/news/pressreleases/2014/03/18/benetton-fails-on-workersafety-in-bangladesh