- 1.
The Characteristics of
Supply Chain Management
Complexity, Variability, Conflicting Objectives0© 1999 Andersen Consulting
- 2. Order Response Time
Product Availability
Lead Time
Order Changes
Due Date PerformanceResource Investment
Asset Productivity
Inventory
Supplier & Capacity ContractsLevel of
ServiceCost of
ServiceThe Business Challenges1© 1999 Andersen Consulting
- 3. ComplexityVariabilityConflicting ObjectivesWhat are the characteristics of Supply Chan Management, why is it so hard to manage?2© 1999 Andersen Consulting
- 4. ComplexityLead Times Limit FlexibilityLittle or No Predictability and Poor Product Mix?Chronic Capacity
ShortagesCurrent Processes and Structures Inhibit PerformanceInventory Used to Cover ProblemsComplications in the Electronics IndustryComplexity in Component / Semiconductor Manufacturing
Mass customization
Personalization
Product mix effects on capacity
Multiple options
Contracted vs. owned capacity
Combined make-to-forecast and make-to-order
Inverted BOM
Binning
Multi-stage global production3© 1999 Andersen Consulting
- 5. Uncertainty in the supply chain results in significant variabilityEarlyOn-timeLateEarlyOn-timeLateUnderForecastOverEarlyOn-timeLateCustomer DemandSupplier PerformanceManufacturingCustomer
DeliveriesRaw
MaterialsFinished
GoodsPast Performance
Market Research
Analytical Technique
Incentive ProgramsResponsiveness
Transportation
Location
QualityProcess Design
Product Design
Capacity
QualityBy Tom Davis4© 1999 Andersen Consulting
- 6. SupplyChannel OrdersActual
LaunchReal ShortageReturns/CancellationsOver-SupplyChannel Fill and Phantom DemandTarget
LaunchEnd of LifeTrue End Customer DemandUnits Per PeriodTimeMultiple forecasts and unreliable fulfillment today create the bullwhip effect.5©Andersen Consulting 1998
- 7. Shortened product life cycle has increased the uncertainty.Ramp-upOngoingEnd of Life Ramp-up Ongoing End of Life
Role of Inventory High Usual Low
Cost of Shortage High Usual Low
Cost of Overage Low Usual HighBy Professor Hau L. Lee, Stanford University6© 1999 Andersen Consulting
- 8. VariabilityNatural
Demand
Material supply
Production
Distribution
Self-Introduced
Replenishment strategies
Planning processes
Inventory strategies7© 1999 Andersen Consulting
- 9. Traditional functional alignments continue to impede Supply Chain Performance.— Misaligned Functional Goals & Behaviors—PurchasingManufacturingDistributionSales & Customer ServiceGoal:Behavior:Lowest purchase priceHighest utilizationLowest cost100% customer satisfactionLong lead times
High raw material inventory levelLong run lengths
Inflexible schedules
High WIP inventoryLong order fill times
Inflexible schedulesHigh inventories
Promise flexibility 8© 1999 Andersen Consulting
- 10. Conflicting Objectives - ManufacturingLittle’s Law Little’s LawAsset
UtilizationWIP
INVCycle
TimeVariabilityThroughputWIP
Cycle Time
Variability9© 1999 Andersen Consulting
- 11. Conflicting Objectives - Customer Little’s LawAsset
Utilization WIP
INVCycle
TimeVariabilityOrder Response Time Early
WarningsDue Date PerformanceFill
Rates10© 1999 Andersen Consulting
- 12. Conflicting Objectives - Corporate Little’s LawAsset
Utilization WIP
INVCycle
TimeVariabilityOrder Response Time Early
WarningsDue Date PerformanceFill
RatesMarket ShareProfitMarket
Risk11© 1999 Andersen Consulting