This lecture. MBI course SCM Case example 1: HEMA. Case example 2: DELL. Chapter 1 and 2 Shapiro: Lecture Ch

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1 MBI course SCM Lecture Ch IT and SCM This lecture Chapter 1 and 2 Shapiro: SCM = Optimization SCM = Integration SCM = IT Set-up and organization of this course Marjan van den Akker SCM, lecture ch SCM, lecture ch Vendor HEMA Case example 1: HEMA Plants (Non-HEMA) Distribution Center HEMA Utrecht Market HEMA shop Customer SCM, lecture ch Suppliers DC suppliers Case example 2: DELL (Net: 0.05 hours) Assembly (6 factories) 1.5 hour Production planning 30 days <1 hour Packaging at DC Transporters 4 hours Order handling & Billing Web/ Phone ordering 2 hours Transportation 3/2/ SCM, lecture ch

2 Porter s value chain (1985) A small beer game Products flow through primary activities Value is added at each step Competitive advantage: perform activities better or cheaper than competitors SCM, lecture ch SCM, lecture ch Goal of SCM Add value to products as they pass through the supply chain and transport them to geographically dispersed market in the correct quantities with the correct specifications at the correct time at a competitive cost Optimization example An airport check-in desk registers 90 passengers per hour by an average of 3 minutes per passenger. Desk is opened from 7 AM until 11 PM. Service personnel earns a salary of 250 per working day. What are the minimal cost of personnel? How can the reduce reduce its number of servants on duty? Serve passengers with corporate accounts to a separate quick-service desk Place an automatic check-in machine Implement a single line system SCM, lecture ch SCM, lecture ch

3 Case example (2) Case example: different issues HEMA wants to introduce a new ITsystem to manage their distribution. Identify functionalities that are included in distribution management Communication with truck drivers Keeping track of inventory level Daily route planning Re-ordering strategy for inventory Planning of transportation capacity Defining structure of distribution network SCM, lecture ch SCM, lecture ch Different time frames Strategic: 1-5 years Tactical: 3-12 months Operational: 1-28 days SCM is about integrative optimization through (re)design and planning SCM disciplines: Strategic management Production management Inventory management Transportation management Management accounting Demand forecasting Marketing science Operations research SCM, lecture ch SCM, lecture ch

4 SCM-systems: ERP SCM-systems: Daily route planning Transactional data on: Manufacturing Distribution Finance Sales Human Resource This is not all!! SCM, lecture ch Input data Trucks Customers Distances, Time windows Analytical tool Optimization: find route plan with minimal cost or distance Presentation tool Route plan for each truck Tables Graphics SCM, lecture ch SCM needs IT are vise versa SCM needs IT are vise versa Transactional IT: acquiring, processing and communicating raw data ERP E-commerce Transactional databases Analytical IT: supply chain planning optimization SCM, lecture ch Modeling Systems Models Data Optimization Integrated planning Supply chain decision database IT enables optimization through modeling systems IT drives integrated planning by executing models IT realizes supply chain decision database by data sourcing SCM, lecture ch

5 SCM systems (analytical IT) SCM systems (transactional IT) Strategic Supply Chain Network Optimization System Middleware Supply Chain Decision Database Tactical Optimization Modeling System Forecasting and Order- Entry System Material Requirements Planning Systems Distributions Requirements Planning Systems Enterprise Resource Planning Systems Supply Chain Decision Database Production Scheduling System Inventory Management System Distribution Scheduling System External Data Management System Middleware SCM, lecture ch SCM, lecture ch Analytical IT ~ Decision support system...supply chain management problems are not so rigid and well-defined that they can be delegated entirely to computers. In almost every case, the flexibility, intuition and wisdom the are unique characteristics of humans are essential to manage the systems effectively. However, there are many aspects of these systems that can only be analyzed and understood effectively with the aid of a computer. It is exactly this type of assistence that DSS s are designed to provide SCM, lecture ch Example Travelling salesman problem SCM, lecture ch

6 Example How to organize a store plan? Groceries Car care Merchandise Drinks Snacks News Dairy Quick service Analytical IT Descriptive models Predict characteristics in future Demand forecasting Data mining Cost calculation for a given scenario Simulation Normative models Optimize decisions on supply chain options: Linear (integer) programming: Most widely used normative models in SCM Heuristics Constraint programming SCM, lecture ch SCM, lecture ch More criteria: trade-off Analytical IT ~ Optimization Find within the collection of possible SCM planning options the one that minimizes cost or maximizes revenue What are your options/decisions? What is their cost (revenue)? What constraints have to be met? Customer service Cost SCM, lecture ch SCM, lecture ch

7 Software Example Transactional IT ERP systems (SAP, Baan, Manugistics, J.D. Edwards) Analytical IT Advanced Planning and Scheduling (APS) systems (SAP APO, i2, J.D. Edwards SCM,.): contains integer linear programming Planning systems for specific applications, e.g. SHORTREC (ORTEC), OM-partners Tailor-made planning systems (CQM) From administration to route planning Planning brings significant cost reduction SCM, lecture ch SCM, lecture ch