SCM. Logistics, Service, and Operations Management

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1 SCM Logistics, Service, and Operations Management

2 Key concerns Demand/supply/lead time variability Inventory & Transportation Information technology Technological advances Level of service Product + process + system life cycle Total Risk management lean vs. resilient enterprise 2

3 Industry clock speed Innovative vs. functional products Core competencies Make vs. buy Product design Modular vs. integral Development Supply Chain Plan/Design Source Product architecture Make/buy Early supplier involvement Strategic partnerships Supplier selection Supply contracts Supply Produce Distribute Sell Copyright 2008 D. Simchi-Levi Fulfillment Supply Chain Uncertainty and variability Demand and supply Lead time Offshoring vs. onshoring Economies of scale Production and transportation 3

4 Forecast demand Pull Portion Strategy Buffer Buffer Inventory Inventory Push-Pull Boundary Push Portion Strategy 4

5 (Product variety) Low High (product life cycle) Long Short (forecast accuracy) High Low (risk of obsolescence) Low High (cost of lost sale) Low High (functional) (innovative) 5

6 Efficient SC Responsive SC Primary goal Lowest cost Quick response Product design strategy Min product cost Modularity to allow postponement Pricing strategy Lower margins Higher margins Mfg strategy High utilization Capacity flexibility Inventory strategy Minimize inventory Buffer inventory Lead time strategy Reduce but not at expense of greater cost Aggressively reduce even if costs are significant Supplier selection strategy Cost and low quality Speed, flexibility, quality Transportation strategy Greater reliance on low cost modes (functional) 6 Greater reliance on responsive (fast) modes (innovative)

7 Matching Supply Chain Strategies with Products Demand uncertainty (C.V.) Pull H I II Push IV III L Delivery cost Unit price L Pull Push H Economies of Scale 7 Copyright 2006 D. Simchi-Levi

8 Matching Supply Chain Strategies with Products Demand uncertainty (C.V.) Pull Push H L A C Pull Continuous Replenishment Inventory Positioning Push D B Short Pull Long Push Lead Time 8 Copyright 2006 D. Simchi-Levi

9 Efficient Supply Chain - Efficiency - Information integration - Auto replenishment -VMI Low (Functional Product) Demand Uncertainty High (Innovative Product) Responsive SC - Responsiveness/BTO - Flexible manufacturing - Accurate response - Postponement Supply Uncertainty Low (Stable Process) High (Evolving Process) Basic apparel, Grocery, Food, Most commodity Some power, Some food produce, Precious metals Fashion apparel, Computers, Toys, Pop music M-communications, Telecommunications, High-end servers, Semiconductor Risk-Hedging SC - Buffer inventory - Information sharing - Resource sharing - Multi-sourcing (H.L. Lee 2002) 9 Agile Supply Chain - Design collaboration - Info/Process integration - Postponement - Supplier network 9

10 Risk pooling Mass Customization( ) Postponement (delayed differentiation) Standardization 10

11 , Location pooling: Reduction in the number of stocking points Lead time pooling Consolidated distribution Delayed differentiation (HP case) Capacity pooling: Flexible manufacturing Product pooling Universal product design Component commonality 11

12 12 (David Simchi-Levi, 2006)

13 Current system: direct from supplier 8 week lead time store 1 supplier store n Proposed system: centralized inventory in a distribution center supplier 1 week lead time retail D/C store 1 8 week lead time store n 13 (Morris A. Cohen, 2007)

14 No Flexibility 1 A 2 B 3 C 4 D 5 E 6 F 7 G 8 H 9 I 10 J plant vehicle 2 Flexibility 1 A 2 B 3 C 4 D 5 E 6 F 7 G 8 H 9 I 10 J plant vehicle 14 Total Flexibility 1 A 2 B 3 C 4 D 5 E 6 F 7 G 8 H 9 I 10 J plant vehicle (Morris A. Cohen, 2007)

15 Indicator vs. Index Dynamic vs. Static Relationship among SCM KPIs (evolutionary organism) BSC KPI / SCEM System Real-time Event Rule-based optimization 15

16 Fulfillment and Development Supply Chain Efficient vs. Responsive Supply Chain Push-pull strategy Risk Pooling Postponement and Standardization Rule-based real-time KPI management 16

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