IE 659- Supply Chain Management
Order Fill/Service Rate=
(orders filled & delivered on time)/(number of customer per year)
regression analysis - linear
- devices the relationship between 1 independent variable X and dependent variable Y X is Time Y is the Demand
What supply chain costs are affected by network structure?
- inventories - transportation - facilities & handling - information
What elements of customer service is influenced by a network structure?
- response time - product variety - product availability - customer experience - order visibility - return-ability
ITR= 12 and ITR=4 what do these ITR numbers mean?
-ITR=12 means that on average the facility has 1 month worth of inventory -ITR=4 means the on average the part spends 3 months at the facility
Cross docking operations
-inbound flows (from suppliers) directly transferred to outbound flows (to customers) -mainly dependent on efficient trucking operations
Cross docking operations applications:
-manufacturing -distribution -transportation -retail
What qualities does the next generation of supply chains need?
-maximum delivery performance - minimized costs -maximum volume flexibility & responsiveness -minimized risked -complexity management
What is the main roles of transportation in the supply chain?
-moves the product between stages in the supply chain -impacts responsiveness & efficiency
Facilities
-places where inventory is stored, assembled, or fabricated -production & storage sites
what is a demand forecast?
-statistical or expert opinion based prediction of demand in a future period -always uncertain and should thus include both expected value of the forecast & measure of forecast error (standard deviation)
Time serious forecasting
-time ordered sequence of observations taken at regular intervals over a period of time - future values of the series can be estimated from past values
3 A's of supply chain
1. Agility 2. Adaptability 3. Alignment
6 drives of supply chain performance
1. Facilities 2. Inventory 3. Transportation 4. Information 5. Sourcing 6. Pricing
What are 2 network design problems?
1. Given a set of candidate locations, select the best location for new distribution warehouse 2. given facility locations find the best network flow strategy from plants to warehouses to markets
What are 2 network design solution approaches?
1. Heuristics - sub optimal & usually no guarantee of performance 2. Exact algorithms - optimization techniques: linear programming (LP) & integer programming (IP)
What are the 4 parts a supply chain structure?
1. Inventory 2. Transportation 3. Facilities 4. Information
3 supply chain performance metrics
1. Inventory- inventory turnover ratio 2. Service- stockouts (orders fulfillment or service rate), responsiveness (speed to change), replenishment cycle, minimum order quantity 3. Costs- unit warehouse cost, unit distribution & transportation costs, efficient- cost of the supply chain
5 main responsibilities of supply chain management so as to meet the supply chain objectives and optimize the performance metrics:
1. Procurement 2. Production 3. Warehousing 4. Distribution logistics 5. Retail Sales
4 possible outcomes for stockout
1. customer wait 2. back orders 3. lost sales 4. lost customers
How are products grouped?
1. distribution 2. product type 3. shipment size 4. transport class of merchandise *no more than 20 product groups
Forecasting Common qualitative techniques:
1. expert opinion 2. delphi technique 3. market survey
4 key transport players:
1. in-house trucking 2. 3rd party logistics 3. LTL delivery 4. Box delivery
7 Key elements in a logistics network
1. inventory 2. warehousing 3. materials handling 4. freight transport 5. information collection 6. transmission 7. processing & packaging
6 factors affecting the number of warehouses:
1. inventory costs 2. warehousing costs 3. transportation costs 4. cost of lost sales 5. maintenance of customer service levels 6. Service small quantity buyers
Data for logistics network design (9)
1. listing of all products 2. location of customers and stocking points 3. demand for each product by customer location 4. Transportation rate 5. Warehousing costs 6. Shipment sizes by product 7. Order patterns by frequency, size, season, content 8. Order processing costs 9. customer service goals
3 warehouse location analysis techniques
1. location rating factor: method for identifying & weighting important location factors 2. center of gravity: center of movement in a geographic area based on transport weight & distance 3. Load- distance: method based on the load being transported and the distance
what are 4 strategic supply chain decision?
1. locations and capacities of facilities 2. Products to be made or stored at various locations 2. Modes of transportation 4. Information systems
6 factors that influence demand & are key data in a forecasting model include:
1. past demand 2. lead time of product replenishment 3. planned advertising or marketing efforts 4. planned price discounts 5. state of the economy 6. actions that competitors have taken
2 types of cross docking applications
1. pre-distribution - customer is assigned before the shipment leaves the vendor, so it arrives to the cross- dock bagged and tagged for transfer 2. post-distribution- cross- dock allocates materials to stores
Forecasting common quantitative technique:
1. regression analysis 2. moving average 3. exponential smoothing 4. bayesian analysis 5. box-jenkins
2 challenges in moving goods
1. speed 2. efficiency from production points to consumption points
Types of variations in time series data (5)
1. trend- long term movement in data 2. seasonality- short term regular variation in data 3. cycles- wavelike variations of long-term 4. irregular variations- caused by unusual circumstances 5. random variations- caused by chance
What is a supply chain?
A network of facilities and distribution options created to fulfill a customer request.
What is supply chain management?
A total system approach to efficiently managing the entire flow of information, materials, and services from raw-materials supplies through factories and warehouses to the end customer so as to minimize cost and maximize service.
How is SCM scope determined?
By what you can control and what you need to control.
what is customer clustering?
Customers located in close proximity are aggregated using a grid network or clustering technique
How does fast transportation affect responsiveness & efficiency?
Faster transportation allows for greater responsiveness but lower efficiency
what is the supply chain cost objective?
Low Transport Costs Low Facility Costs Low Transaction Costs
what is the supply chain objective?
Low inventory High Product Variety High Service Rate
Main objective of logistics network?
Minimize the cost without compromising your service levels
Time series forecasting methods 1. moving averages (MA) 2. exponential smoothing 3. regression analysis - linear & non-linear
Notation: F(t) - forecaster demand at time t A(t)- actual demand @ time t E(t) Forecast error: E(t)= |F(t)-A(t)|
POCKETS
P=Price O=Operations C= Culture K= key item promotion/products E= expense control T=talent S=services Walmart- operations efficiency though supply chain
Pricing
Price associated with goods & services provided by a firm to the chain
If a supply chain has many SKUs what can we conclude about the companies supply chain?
The number of SKUs is an indicator of the supply chain complexity
What is supply velocity?
The speed at which goods travel between these points. Function of inventory turnover
What is the main goal of a supply chain?
To fulfill a customers request
Linear Equation Form:
Y=a+bX F(t)= a+ bt Y= dependent variable X= independent variable a= y-axis intercept b= slope of regression line
Agility
act rapid in response to dramatic changes in supply & demand
Are forecasts always right or wrong?
always wrong
what is a logistics network?
connects the different facilities that constitute the supply chain
Alignment
consistency in the interests of all participants
What does distribution directly affect?
cost & the customer experience & therefore drives profitability
Information
data and analysis regarding inventory, transportation, facilities, throughout the supply chain **biggest driver of supply chain performance**
Why are SKUs useful for a company?
date management! allows the company to systematically track its inventory.
Competitive strategy
defines the set of customer needs a firm seeks to satisfy through its products & services
Supply chain strategy
determines the nature of the materials procurement, transportation of materials, manufacture of product or creation of service, distribution of product
forecast error-
difference between forecast & actual demand. indicative of the quality of the forecasting method
Center of gravity method:
finds location of single distribution center serving several destinations XY= x,y coordinate of location n F= unit shipping cost to location n per ton-mile D= annual ship volume to location n d= distance to location n from DC steps: 1. calculate X,Y coordinate for 'center of gravity' 2. Calculate d 3. calculate shipping cost
What is demand management?
focused efforts to estimate and manage customer demand
Sourcing
functions a firm performs and functions that are outsourced
Inventory turnover ratio
inventory turnovers (ITR)= (annual cost of goods sold)/ (average daily inventory value) -provides insight on the inventory behavior in a supply chain
Name the 6 parts of a typical supply chain?
manufactures, supplies, transported, warehouses, retailers, and customers
What is the supply chain demand management role & objective?
minimize stock out and analyze knowledge about customer buying behavior
Transportation
moving inventory from point to point in a supply chain
Product replenishment time > 0 implies..
need to plan supply to meet customer demand
timer series forecasting formula
observed demand= systematic component + random component
random component-
part of forecast the deviates from systematic component
Slow transportation models can be used for customers whose priority is
price/cost
Inventory
raw materials, WIP, finished goods within a supply chain
Adaptability
reshape supply chains when necessary
Marketing and sales strategy
specifies how the market will be segmented and product positioned, priced, and promoted
Product development strategy
specifies the portfolio of the new products that the company will try and develop
What is distribution ?
steps taken to move & store a product from the supplies stage to the customer stage in the supply chain
supply demand imbalance =>
stockout or excess inventory
What is the most commonly used to forecast product demand?
time series
Stock Keeping Unit (SKU)
unique identifier for each product that moves in the supply chain
What does a supply chain begin with?
with the customer