Introduction to Logistics & Supply Chain Management

Transcription

1 CTL.SC1x -Supply Chain & Logistics Fundamentals Introduction to Logistics & Supply Chain Management MIT Center for Transportation & Logistics

2 "Bananas". Licensed under Creative Commons Attribution-Share Alike 2.5 via Wikimedia Commons "Red High Heel Pumps" by Almighty1 at en.wikipedia - Own worktransferred from en.wikipedia. Licensed under Public domain via Wikimedia Commons Toyota IIA opened by Hoikka1 Licensed under Creative Commons Attribution-Share Alike 3.0 Unported via Wikimedia commons Cement Bags by StaraBlazkova Licensed under Creative Commons Attribution-Share Alike 3.0 Unported via Wikimedia commons CTL.SC1x - Supply Chain and Logistics Fundamentals 2

3 Five Questions 1. What is a supply chain? 2. What are logistics and supply chain management? 3. How should you view SCM? 4. What are the challenges 5. Why should you care? 3

4 What is a Supply Chain? 4

5 What is a Supply Chain? Two or more parties linked by a flow of resources typically material, information, and money that ultimately fulfill a customer request. Information (order) Information (status) Material (delivery) Money (payment) 5

6 What is a supply chain? 6

7 What is a Supply Chain? Customer Rubber Mfg Supplier Tire Supplier Gear Supplier Hardware Supplier Wholesaler Retailer Supplier Pedal Supplier Bicycle Retailer Customer Smelter Casting Plant Wholesaler Customer Frame Supplier Retailer Pigment Supplier Paint Supplier Retailer Customer Chemical Mfg 7

8 What is a Supply Chain? The primary purpose of a SC is to satisfy customer needs. Only one source of revenue the customer Payments between parties are just fund exchanges Division of intra-sc payments are a function of power, market conditions, etc. Supply Chains try to maximize the total value generated = [What customer pays] [Total effort expended to fulfill] 8

9 Logistics versus Supply Chain Mgmt 9

10 What is Supply Chain Management? Logistics involves... managing the flow of items, information, cash and ideas through the coordination of supply chain processes and through the strategic addition of place, period and pattern values. MIT Center for Transportation & Logistics Supply Chain Management deals with the management of materials, information, and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers. Stanford Supply Chain Forum Call it distribution or logistics or supply chain management. By whatever name it is the sinuous, gritty, and cumbersome process by which companies move material, parts, and products to customers. Fortune (1994) 10

11 Logistics vs. SCM According to the Council of Supply Chain Management Professionals... Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements. Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. Source: Used by permission, Council of Supply Chain Management Professionals, 11

12 Supply Chain Management Perspectives 12

13 Supply Chain Perspectives Image Source: Arntzen, B. MIT Center for Transportation & Logistics, Hi-Viz Research Project (2013) 13

14 Supply Chain Perspectives Manufacturers Customers Suppliers Distributors 14

15 Process View of Supply Chains Four Primary Cycles Customer Order Cycle Replenishment cycle Manufacturing Cycle Procurement Cycle Cycles Occur Between Stages Interactions differ at each stage Not every SC will have all 4 Cycles Customer Customer Order Cycle Retailer Replenishment Cycle Distributor Manufacturing Cycle Manufacturer Procurement Cycle Adapted from Chopra & Meindl Supply Chain Management Supplier 15

16 Macro Process (Software) Perspective Supplier SRM source Firm ISCM make, move, store CRM sell Customer Supplier Relationship Management Sourcing Negotiation Buying Design and Supply Collaboration Internal Supply Chain Management Strategic Planning Demand Planning Supply Planning Fulfillment Customer Relationship Management Marketing Selling Call Centers Order Management Different macro processes should be aligned Fall under different groups (Marketing-CRM, Manufacturing- ISCM, Purchasing-SRM) Forecasts, schedules, design, etc. should be coordinated 16

17 Supply-Chain Operations Reference (SCOR) Model Plan P1 Plan Supply Chain P2 Plan Source P3 Plan Make P4 Plan Deliver P5 Plan Returns Suppliers Source Make Deliver S1 Source Stocked Products M1 Make-to-Stock D1 Deliver Stocked Products S2 Source MTO Products M2 Make-to-Order D2 Deliver MTO Products S3 Source ETO Products M3 Engineer-to-Order D3 Deliver ETO Products Customers Return Source Return Deliver Enable Source: Supply Chain Council 17

18 Traditional Functional Perspective Purchasing / Procurement What to buy from who Corporate vs Group Inventory Control How much to stock where Trigger points Replenishment plan Warehousing Storage, Mixing, Break bulk Pick Pack and Ship What to stock where in WH Materials Handling How to move product Packaging, containerization Storage layout Order Processing Receiving, Entry & Status Order Management Transportation Inbound versus Outbound Domestic versus International Modal control (Rail, TL, LTL, Parcel, Air, etc.) Customer Service Geographic Product Line Specific Planning Group Facility Location Network Design Demand Planning 18

19 Systems Perspective of Supply Chains 19

20 Supply Chain as a System Take an Engineering Systems Perspective What is a variable and what is a constraint? Continuous expansion of decision variables Increases potential for improvement but increases both complexity and coordination requirements Customer Svc Transportation Order Processing Material Handling Inventory Mgmt Warehousing Purchasing Objective: Deliver at lowest transport cost Variable: w Select carrier to tender each load to Constraints: w Ship everything each day w Must deliver within specified windows 20

21 Supply Chain as a System Take an Engineering Systems Perspective What is a variable and what is a constraint? Continuous expansion of decision variables Increases potential for improvement but increases both complexity and coordination requirements Purchasing Warehousing Inventory Mgmt Material Handling Objective: Deliver at lowest total cost Variables: w Select carrier to tender each load to w Select time windows to deliver w Select when to ship what from where Constraints: w Deliver within negotiated time frame Order Processing Transportation Customer Svc Objective: Deliver at lowest transport cost Variables: w Select carrier to tender each load to w Select time windows to deliver Constraints: w Ship everything each day 21

22 Supply Chain as a System Take an Engineering Systems Perspective What is a variable and what is a constraint? Continuous expansion of decision variables Increases potential for improvement but increases both complexity and coordination requirements Product Design Manufacturing Purchasing Warehousing Inventory Mgmt Material Handling Order Processing Transportation Customer Svc Objective: w Design, build, and deliver at lowest total cost Variables: w Select carrier to tender each load to w Select time windows to deliver w Select when to ship what from where w Select where to stock which form of product Constraints: w Deliver within negotiated time frame 22

23 Supply Chain as a System Take an Engineering Systems Perspective What is a variable and what is a constraint? Continuous expansion of decision variables Increases potential for improvement but increases both complexity and coordination requirements Transportation Order Processing Material Handling Inventory Mgmt Warehousing Purchasing Manufacturing Product Design Supplier Why is this so hard to do? Customer Svc Retailer Objective: w Maximize on-shelf availability Variables: w Select carrier to tender each load to w Select time windows to deliver w Select when to ship what from where w Select where to stock which form of product w Select contract relationships w Select who should control replenishment w Which channel member should perform which function Constraints: w Total delivered cost to shelf 23

24 What are the major challenges? (Why is it so hard?) 24

25 Why is it so difficult? 1/2 Metrics How do you measure a system? Trade-off of Breadth vs. Validity of metrics Outcome Based Logistics - Perfect order, Perfect Shelf Politics and Power of Players - Who wins? Mom & Pop Shop versus Mega-Stores Mega Retailers vs. Mega CPG Manufacturers Visibility Who can see what and how quickly? Data are stored separately All parties do not have equal access to data Massive data Shared & accessible information 25

26 Why is it so difficult? 2/2 Uncertainty - Who knows what is going to happen? Variable demand of product (shorter lifecycles) Variable manufacturing yield Unreliable sourcing of raw materials Inconsistent transit lead times Increased complexity Why is it getting harder? Exploding number of Stock Keeping Units (SKUs) Higher and diverging customer demands New & merging channels (Omni-Channel) Global operations Why don t we ever close? Most firms source & sell across globe Multiple regions, time zones, languages, & cultures 26

27 Why do we care? 27

28 Why do we care? Supply Chains... Span the globe and cannot be managed as an isolated function, Have become critical to any organization s operations, and Connect functions, divisions, and business units within a firm as well as across firms. Evolved into being both a Bridge and a Shock Absorber By Wsvan; cropped by Beyond My Ken (talk) 01:29, 14 October 2013 (UTC) (Own work) [GFDL ( or CC-BY-SA-3.0 ( "Mini Shocks" by Avsar Aras - Own work. Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons - CTL.SC1x File:Mini_Shocks.JPG#mediaviewer/File:Mini_Shocks.JPG - Supply Chain and Logistics Fundamentals 28

29 Example: Variability of #2 Diesel Pricing On Highway Price of #2 Diesel ($/gallon) Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 May-14 Nov-14 Data Source: U.S. Energy Information Administration, 29

30 Logistics Costs per GDP 16.0% 14.0% GDP Inv Cost Trans Cost Year ($T) ($B) ($B) Percentage of US GDP 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Year US Inventory Holding Cost US Transportation Cost Total US Logistics Cost Data Sources: Council of Supply Chain Management (2014) 25th Annual State of Logistics Report 30

31 Still, why do we care? Functional Logistics Supply Chain Key Skills Technically Narrow Coordination Influence Local & Controllable Across entire Supply Chain Leadership Hierarchical, Direct, Hard Influential, Indirect, Soft Risk Management Robust or Reactionary Planned Response & Flexibility Measurement Single Focus Multi-faceted Technology Approach Technology Platform Isolated Optimization Self-Hosted, On-site Visibility & Coordination Cloud or SaaS Scope / Reach Regional / National Global / Multi-National Supply Chain Management is a growing and evolving discipline. 31

32 CTL.SC1x -Supply Chain & Logistics Fundamentals Questions, Comments, Suggestions? Use the Discussion! MIT Center for Transportation & Logistics "Boxer (2)" by Dezidor - Own work. Licensed under Creative Commons Attribution 3.0 via Wikimedia Commons - File:Boxer_(2).jpg#mediaviewer/File:Boxer_(2).jpg