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Designing Effective Supply Chains

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Overstock/Stockouts. Shipment size. Transportation delay. Manufacturing. Utilization ... Willingness of customers to accept less-than-perfect products. Disruptions ... – PowerPoint PPT presentation

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Title: Designing Effective Supply Chains


1
Designing Effective Supply Chains
  • Class 2
  • David Dilts

2
First, what are some common SC Performance Metrics
  • Cost
  • Inventory Factors
  • Turns
  • Fill-rate
  • Just-in-time
  • Overstock/Stockouts
  • Shipment size
  • Transportation delay
  • Manufacturing
  • Utilization
  • Setup Reduction
  • Inventory Buffers
  • Time factors
  • Lead times
  • Just-in-time
  • Restocking time
  • Product design time
  • Cash cycle
  • Quality factors
  • Willingness of customers to accept
    less-than-perfect products
  • Disruptions

3
Designing an effective supply chain strategy
  • Consider nature of demand or ones product
  • Potential product lifecycle / industry clockspeed
  • Demand stability
  • Product Variety
  • Market standards for times and service
  • Availability of suppliers
  • Your position in the supply chain

4
Fishers hypotheses
  • Supply chains can be divided into two categories
  • Primarily functional
  • Examples
  • Primarily innovative
  • Examples

5
Functional Vs Innovative Products Differences in
Demand Characteristics
6
What should be the dominate strategy for each
type of supply chain?
  • For Functional products?
  • For Innovative products?
  • What type of suppliers should you have for each
    SC type?

7
Impact of Stockouts
  • Contribution margin (price variable cost) /
    price
  • For Innovative Products
  • With a contribution margin of 50, and an average
    stockout rate of 20, cost of stockouts .5.2
    10 of sales
  • For Functional Products?

8
Focus of supply chains for functional products.
  • The Campbell Soup example.
  • Traditional Operations Research Foci
  • Efficiency
  • Maximizing fill rates.
  • Minimization of variety
  • Co-ordination
  • Long-range Forecasting
  • The 3-Cs
  • Command
  • Coordination
  • Control

9
Focus of supply chains for innovative products
  • Cannot control so manage
  • Except uncertainty.
  • Reduce uncertainty.
  • Avoid uncertainty.
  • Hedge against uncertainty.
  • Needs
  • Fast, accurate response.
  • Close customer and supplier relationships
  • Sense and respond management
  • Ability to use mass customization
  • Increase price

10
Question
  • Is Dell computer a functional or innovative
    supply chain?
  • Does a hospital need a functional or innovative
    supply chain?

11
A strategic approach to SC design
12
Changing Environments
13
Cost Relationship between design content and
manufacturing process
14
Rethinking Manufacturing
  • From
  • Separate but equal
  • Multiple Sourcing
  • Individual Decisions
  • Excess Capacity
  • Variable Production
  • To
  • Strategic Decisions
  • Strategic Processes
  • Unified Decisions
  • Right Capacity
  • Level Production

15
Strategic Identification Process
16
Strategic vs. Non-strategic
  • Strategic Items
  • Complex Items
  • Unique Processes
  • Single Supplier
  • Schedule Drivers
  • Prototypes
  • Non-Strategic Items
  • Simple Items
  • Common Processes
  • Many Suppliers
  • Schedule Flexibility
  • Typical Items

17
Strategic Processes
18
Strategy Procurement Planning Grouping of
strategic items by similarities
19
Strategy Procurement Planning Grouping of
non-strategic items by similarities
system
20
Strategy Procurement Planning Final results of
item process grouping
All items placed in a category
system
  • Key
  • Red Strategic Item Yellow Strategic process
  • Blue Non-Strategic items/process White
    Unique, but non-strategic item/process

21
Strategy Procurement Planning Logistics
Considerations
System
22
Strategy Procurement Planning Supplier
Considerations
system
23
Integration of Process Strategy
24
Factory Sizing Strategy
25
Summary
  • Look for parts commonalities at product design
  • Divide products processes into strategic and
    not-strategic
  • Group products processes if possible
  • Investigate Logistics supplier considerations
  • Look to minimize internal disruptions by using
    suppliers
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