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Scm study final

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Scm study final

  1. 1. June 19, 2013 Supply Chain Management - Team 05 - 1
  2. 2. 0. Outline 1. 2. 3. 4. 5. 6. Overview of results Option Choices Forecasting Production Planning Supplier Choice Buy Information 2
  3. 3. 1. Overview of result 1st year Margin 2nd year 43,252 29,715 3rd year 30,269 Model A Revenue 125,560 Model A Costs 114,750 120,000 140,000 120,000 Model A Margin 100,000 92,699 81,700 40,000 80,000 60,000 52,717 35,330 28,983 32,861 152,679 Model B Revenue Model B Costs 106,645 Model B Margin 61,151 60,000 49,443 100,000 88,080 79,420 80,000 Total Model B – huge mistakes in 2nd and 3rd year Model A – Totally nice margin! 140,000 4th year 75,888 73,131 55,619 35,374 34,989 40,000 46,202 40,794 33,514 26,929 20,269 20,000 20,000 385 0 5,408 0 1st year 3 2nd year 3rd year 4th year 1st year 2nd year 3rd year 4th year
  4. 4. 1. Overview of result Unit profit * Actual demand is the maximum margin under perfect prediction 1st year Perfect Model A prediction Model B 2nd year 4th year Total 30,732 41,026 36,225 27,675 135,658 29,204 11,253 14,250 59,090 113,797 Model A – Totally nice again! 45,000 3rd year Model A Margin 40,000 Model A Perfect est. 35,000 Model B – huge loss also in 4th year 70,000 Model A Loss 60,000 Model B Margin Model B Perfect est. Model B Loss 50,000 30,000 25,000 40,000 20,000 30,000 15,000 20,000 10,000 10,000 5,000 0 0 1st year 4 2nd year 3rd year 4th year 1st year 2nd year 3rd year 4th year
  5. 5. 1. Overview of result The important things are… Accurate demand prediction 5 Flexibility of production to cover miss-prediction
  6. 6. 2. Option Choices  Option Choices  3 criteria for deciding options to reduce uncertainity. The estimation of demand increase Comprehensive Judgment Changes of profit 6 The variance of demand estimation
  7. 7. 2. Option Choices 1st Year 2nd Year 3rd Year Infrared & Extra Battery Profit per unit 4th Year Anti Theft & Speakers demand How can we stabilize this? 7 Speakers & Super Slim Total profit
  8. 8. 3. Forecasting  Forecasting  Flexibility is more important than forecasting  Forecasting is not worth believing 8
  9. 9. But...In reality we had to use assumption 1data Year Year 2 We tried to use “Consensus Data” rather than internal forecast assumptions 9
  10. 10. For Year 3 & 4, We respected team conversation 3 Year Year 4 Lesson & Learn: Once set the forecast beginning of the year we stuck on this numbers 10 And lost flexibility
  11. 11. 4. Production Planning  Production Planning  Setting FarFar Away site as a base line  Keeping flexibility on PrettyClose site 11
  12. 12. Choose “Far Faraway site” to utilize its larger production capacity and lower cost to build up base inventory. Year 1 Year 2 12
  13. 13. Choose “Pretty close site” to utilize its advantage of shorter lead time for keeping flexibility. Year 3 Year 4 13
  14. 14. 5. Supplier Choice  Supplier Choice  The consideration for lead time, capacity, setup cost, and unit cost Lead time Base line FarFar Away Far Away Flexibility Pretty Close Ve-Ri-Fas Capacity Setup cost Unit cost (as of 1st year) 4 mth 60K $1,000K A: $137, B: $157 3 mth 60K $2,000K A: $137, B: $157 0 mth 35K $1,000K A: $147, B: $167 0 mth 40K $2,000K A: $147, B: $167 No any reasons why we had to consider Far Away and Ve-Ri-Fas sites at the 1st phase to cover demand and flexibility. 14
  15. 15. 5. Supplier Choice  Supplier Choice  We did not hesitate to change the order during the year to cover the drastic demand change in 4th year Actual deman in year 4 Change order cost 160 140 120 100 80 60 40 20 0 8,000 6,000 4,000 2,000 0 Model A Model B 1st 2nd 3rd 4th year year year year Changed our mind to quickly response the demand to acquire more profit than change order cost! But… no enough capacity 15
  16. 16. 6. buy information  How was the buy information beneficial for us? Year Buy information Model B Result Model A Would you like us to set up this industry conference ?? First $2,000,000? for Model A Model B ?? -4%~+6% (-2K ~ +3K) -11%~+28% (-4K ~ +10K) Second likely to go up 10% down -4%~+7% (-3K ~ +5K) -13%~+46% (-2K ~ +7K) Third Stable 20% down -8%~+1.5% (-5K ~ +1K) -54%~+0% (-13K ~ +0K) Final Stable 20% up -11%~+4% (-5K ~ +2K) -20%~+129% (-12K ~ +75K) Lesson & Learn:  Buying information is important because the prediction before the year start cannot be reliable.  Her prediction seemed to be “bad shot” Gwyneth:Marketing Department 16
  17. 17. Valuation of buy information  How was the buy information worth of $2,000,000 ? Overestimation Underestimation Items of Loss Inventory cost & Liquidation cost Opportunity cost Calculation of Loss (per unit) Equal values of 2,000,000 A : about $70/ unit B : about $163 /unit A: 28 K unit B: 12 K unit A: $73-78 / unit B:$93-98 / unit A : 25 K units B : 20 K units Lesson & Learn:  Buy information seems to be helpful if the prediction will be more accurate. 17
  18. 18. Appendix 18
  19. 19. Fist Year 19
  20. 20. Second Year 20
  21. 21. Third Year 21
  22. 22. Final Year 22

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