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Supply Chain Integration

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  • 1. SE 492: Supply Chain Systems Modeling Supply Chain Integration Dr. Mohamed Ben Daya Professor of Industrial Engineering & Operations Research
  • 2. Introduction
    • SCM revolves around efficient integration of suppliers manufacturers, warehouses, and stores.
    • Challenge: coordinate activities across the SC to improve performance:
        • Reduce cost
        • Increase service level
        • Reduce the bullwhip effect
        • Better utilization of resources
        • Effectively respond to changes in the market place
  • 3. Objective
    • Illustrate the opportunities and challenges associated with SC integration
        • SC strategies: push, pull and push-pull systems
        • Demand-driven strategies
        • Effective distribution strategies
  • 4. Push-Based SC
    • Production decisions based on forecasts
    • Manual purchase orders and invoices are employed
    • Ordering decisions based on inventory & forecasts.
  • 5. Takes longer to react the changing marketplace
    • Excess finished goods inventory
    • Inefficient production
    • Inefficient operations, high costs, low service levels
    • - Excess capacity
    • - Low utilization of resources
    • - High transportation cost
  • 6. Pull Strategies
    • Production is demand driven
        • Coordinated with true customer demand rather than forecast demand
    • Faster information flow mechanisms are used
    • Inventory levels are reduced
    • Distribution facilities are transformed from storage points to coordinators of flow.
  • 7. But …
    • Pull systems are difficult to implement when lead times are so long that it is impractical to react to demand information
    • Harder to leverage economies of scale
    • Advantages and disadvantages of push and pull systems led to push-pull SC strategy that takes advantage of the best of both
  • 8. Push-Pull SC End customer Push Strategy Pull Strategy Push-pull boundary Raw Materials Supply chain time line
  • 9. Examples
    • PC manufacturers
    Push Strategy Pull Strategy Push-pull boundary Raw Materials Assembly Components inventory Aggregate forecasts more accurate End customer
  • 10. Examples
    • Delayed differentiation in product design
    End customer Push Strategy Pull Strategy Push-pull boundary Raw Materials Prior to differentiation after differentiation
  • 11. Identifying the Appropriate SC Strategy
    • Framework for matching SC strategies with products and industries
    Economies of scale IV Books and CDs I Computer III Grocery II Furniture L L H H Pull Push Demand uncertainty
  • 12. Implementing a push pull strategy
    • Characteristics of the push and pull
    • portions of the SC
    • Pull
    • Objective Minimize cost Maximize service level
    • Complexity High Low
    • Focus Resource allocation Responsiveness
    • Lead time Long Short
    • Processes SC planning Order fulfillment
    Portion Push Pull
  • 13. Demand driven strategy
    • Processes for generating demand information:
        • Demand forecast
        • Demand shaping
    • How to increase forecast accuracy?
        • Select push-pull boundary so that demand is aggregated (aggregate forecasts are more accurate)
        • Use market analysis
        • Incorporate collaborative planning and forecasting processes
  • 14. Distribution Strategies Direct Shipment Warehousing Cross-docking