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2 Effective SCM
2 Effective SCM
MANAGEMENT
OUTLINE FOR DISCUSSION
Why a complete SCM methodology?
Understanding uncertainty
Modeling supply chains
Using strategic modeling tool
Case studies
Remote localization of low-cost Deskjet printers
JV with low-cost Asian manufacturer
Conclusions
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WHY A COMPLETE SCM METHODOLOGY?
Improve customer satisfaction while reducing costs
Increasing competition
Multisite manufacturing
Complex channels of independent dealers
Increasing demand for local products
Customer demand of exceptional service
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UNCERTAINTY IN SUPPLY CHAIN
Complexities in manufacturing network
Multiple suppliers
Complex processes to make subassemblies/ final product
Variety of customers
Varied transportation options
Uncertainties propagate through a manufacturing
network
Inventory protects against uncertainties
How much to hold?
Where to hold?
System optimization
Reapportion stock to reduce overall inventory 4
Approach analytically
UNCERTAINTY IN SUPPLY CHAIN
3 steps for improvement
Benchmarking current performance
Possible performance given existing operating
characteristics like order review period, forecast accuracy
Metrics: Inventory investment , Inventory turnover ratio,
order fill rate
Controlling uncertainty
Understand relative impact of different sources of
uncertainty
Planning changes
Costs/ benefits of sweeping changes to inventory network
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MODELING SUPPLY CHAINS
3 steps
Develop a simple, generic framework to describe
supply chains
Model propagation of uncertainty up & down the
chain
Create modeling approach to support strategic
decision makers
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SIMPLE GENERIC MODEL
Supply Demand
Material
transformation
Inventory control
Understand impact of uncertainty
Consider distribution function like
traditional manufacturing process
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INCLUDE UNCERTAINTY
Sources of uncertainty
Suppliers
On-time performance, average lateness, degree of
inconsistency
Manufacturing
Frequency of downtime, repair time & its variation
Probability distribution of performance & reliability
Customers
Average demand & its variability
Effective variability vs. actual variability
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ACT STRATEGICALLY
Customer service affected by uncertainties
How to reduce these?
Uncertainty cycle
Manufacturing Customer
•Process design Deliveries
•Product design
•Capacity
•Quality
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USING A STRATEGIC MODELING TOOL
3. Useful output
2 key measures of customer service
Line-item fill rate (Compare fill rate vs. weeks of supply for
alt. policies)
Order aging curve (Compare days late vs. cum. portion of
orders shipped for alt. policies)
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HP CASE 2: ADDING A MANUFACTURING
PARTNER
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