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Session 1:
Introduction
MGMT 664 Supply Chain Management
Gemma Berenguer
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Agenda
Introductions
Logistics of the course
Supply Chain fundamentals
Examples of successful supply chains
Form teams!
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About me
My name is GEMMA BERENGUER
I am a professor in Operations Management
My Research:
Supply chain design
Operations management for public and nonprofit institutions
Sustainable and socially responsible operations
My teaching:
MGMT 690:Sustainable (and socially responsible) Operations
MGMT660: Introduction to OM
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About you!
Quick survey
State/country of origin
Program
Some foodies, sports fans,
professional experience with Operations and/or SCM?
Out of 13 points for class participation, you get 1 point
for filling in the online survey
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About the course
Learn tools and methodologies to model and analyze
supply chain processes;
Learn how to manage uncertainty and risk, both within
the firm and across the supply chain;
Learn how to effectively coordinate supply chains
using contracts;
Study how companies have used the principles from this
course to significantly enhance their competitiveness
and to innovate business models.
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Course materials
Cases on Course Packet
Course slides and extra readings on Blackboard
Textbook of reference (not required but recommended)
Chopra, S., Meindl, P., Supply Chain Management: strategy,
planning, and operation, Pearson, 5th Edition, 2013.
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Additional resources
Another textbook:
Simchi-Levi, D., Kaminsky, P. Simchi-Levi, E., Designing and managing the
supply chain: concepts, strategies, and case studies, McGraw-Hill, 3rd
Edition, 2008.
Teaching assistants:
Gokul Madhusundararaju ([email protected])
Office hours:
Wednesdays 11am 12pm
By appointment
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Course outline
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Course outline
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Evaluation
Participation and attendance 13%
Individual homework 20%
Group assignments 30%
Negotiation exercise 6%
Supply chain game report 6%
Final exam 25%
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What is a supply chain?
https://www.youtube.com/watch?v=Mi1QBxVjZAw
How much of a bottle of water is profit?
What do hotels manufacture?
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What is a supply chain?
Definition:
comprises all the parties involved in providing a product or service to a
customer, either directly or indirectly,
What is supply chain management?
a set of approaches utilized to efficiently integrate suppliers,
manufacturers, warehouses, and stores, so that merchandise is produced
and distributed
at the right quantities,
to the right locations, and
at the right time,
in order to minimize system-wide costs while satisfying service level
requirements
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Supply chain (slide from: UC Berkeley professor Max Shen)
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Supply chain flows (1)
Information
Product
Firm Customer
Funds
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Supply chain flows (2)
Upstream Downstream
Material
Information
Finance
Hau L. Lee, Creating value through supply chain integration, Supply Chain Management
Review, 2000.
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Supply chain flows (2)
Upstream Downstream
Returns, repairs, raw materials,
servicing, recycling, intermediate
Material
disposal products, finished
goods
Sales, orders, capacity, promotion
Information inventory, quality, plans, delivery
promotion plans schedules
Payments, Credits, consignment,
Finance consignments payment terms,
invoice
Hau L. Lee, Creating value through supply chain integration, Supply Chain Management
Review, 2000.
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SCM decisions
What suppliers should we use and how many?
How many factories and warehouses should we have?
What products should each factory produce?
In what locations should our firm have factories and warehouses?
How do we set capacity at each location?
Given locations and capacities, what quantities should we
produce and store at these locations?
What quantities should move from location to location and at
what time?
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Decision phases of a supply chain
Supply chain strategy or design
How to structure the supply chain over the next several
years
Supply chain planning
Decisions over the next quarter or year
Supply chain operation
Daily or weekly operational decisions
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Supply chain Strategy phase
Decisionsabout the structure of the supply chain
and what processes each stage will perform
Strategic supply chain decisions
Locations and capacities of facilities
Products to be made or stored at various locations
Information systems type
Supply chain design must support strategic
objectives
Supply chain design decisions are long-term and
expensive to reverse must take into account
market uncertainty
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Supply chain Planning phase
Definitionof a set of policies that govern short-term
operations. Fixed by the supply configuration from
previous phase
Starts with a forecast of demand in the coming year
Planning decisions:
Planned buildup of inventories
Subcontracting, backup locations
Inventory policies
Timing and size of market promotions
Must consider in planning decisions demand uncertainty,
exchange rates, competition over the time horizon
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Supply chain Operations phase
Time horizon is weekly or daily
Decisions regarding individual customer orders
Supply chain configuration is fixed and operating policies are
determined
Goal is to implement the operating policies as effectively as
possible
Operational decisions
set order due dates
generate pick lists at a warehouse
allocate an order to a particular shipment
set delivery schedules
Much less uncertainty (short time horizon)
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Examples of best practices
DELL
Zara
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DELL
Direct business model
No middlemen
No warehouses
Suppliers are close by
Build-to-order strategy
Production doesnt begin until order is placed
There is never more than 4 hours inventory on hand
This leads to lower cost
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DELL Global Supply Chain
Canada,
Video cards
U.S., CPUs,
France,
Windows,
Soundcards China, Cases wt Power Korea, Japan
Supply, Cables, RAM Chips,
Network Cards, Monitors
Dell Assembly
Taiwan,
Austin, Texas
Mexico, Motherboard
Keyboards, Mouse Thailand,
Hard Drives Malaysia,
CD-ROMs
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Push/Pull view of a supply chain
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Push/Pull view of supply chain
process
Supplychain processes fall into one of two categories
depending on the timing of their execution relative to
customer demand
Pull:execution is initiated in response to a customer
order (reactive)
Push: execution is initiated in anticipation of customer
orders (speculative)
Push/pullboundary separates push processes from pull
processes
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DELLs supply chain
Before 2008
Focus on responsiveness
In 2008, Dell enters retail channel
The supply chain setup does not support low cost (online customers are
less price-sensitive than retail customers)
Need to re-engineer
Segment supply chain using:
Demand uncertainty
Cost drivers
Relationships with customers
Customer value proposition
Technology clock-speed
When One Size Does Not Fit All, MIT Sloan Management Review, 2012, Simchi-Levi,
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DELL customer driven supply
chain segmentation
Customer Type Strategy Push or Pull?
Online sales Build-to-order PULL
Popular online Build-to-stock PUSH-PULL Procurement, production
sales and shipping to stocking points are all
based on forecast; shipment to customer
locations is based on realized demand
Retail channels Build-to-Plan PUSH Strategy, procurement,
production and shipment decisions are all
based on forecast
Enterprise clients Build-to-Spec PUSH-PULL Products are assembled to
order using components ordered well
ahead of time, based on forecast
When One Size Does Not Fit All, MIT Sloan Management Review, 2012, Simchi-Levi,
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DELLs four supply chains
When One Size Does Not Fit All, MIT Sloan Management Review, 2012, Simchi-Levi,
Clayton and Raven
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Cost-Responsiveness Efficient Frontier
Responsiveness
High DELLs position
before 2008
Low
Cost
High Low
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Zara Fast Fashion supply chain
VIDEO: ZARA
Answer the following questions while watching the video:
How often the assortment is modified in stores?
How many global warehouses?
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What is behind Zaras success?
Stockout often
Produce in the most expensive part of the world
Redesigns apparel all time, which lead to demand uncertainty
Does not advertise
No product innovation
No technology innovation
Not a new niche
Zara innovates through better supply chain management!
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What is beyond Zaras success?
It transferred Dells build to order model to the apparel industry. It
produces fashion to order
Close production location (Spain and Mexico), short lead times
Quantity decisions made days before sales
Detailed product differentiation decision is postponed (design team
develops platform models but holds off finalizing detailed designs)
Few days of inventory
21-29 day cycle (from design to sales/discount) (16months for others)
It pays with more expensive capacity, but the trade-off is favorable
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Achieving Strategic Fit
Responsive
supply chain
Responsivenes
s spectrum Extra reading:
What is the
right supply
chain for your
product?
Efficient
supply chain
Certain Implied Uncertain
demand uncertainty demand
spectrum
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Matching supply chain with
products
Functional Products Innovative Products
Efficient
supply chain
Responsive
supply chain
Extra reading: What is the right supply chain for your product?
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Matching supply chain with
products
Functional Products Innovative Products
Efficient
Match Mismatch
supply chain
Responsive
Mismatch Match
supply chain
Extra reading: What is the right supply chain for your product?
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Facilities
Efficient Responsive
Small number of large facilities Larger number of smaller facilities
Operate with high utilization Flexible facilities
Cheap location Location close to markets
Assembly line Job shop
Use of automation
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Inventory
Efficient Responsive
Minimize inventory Inventory close to the customer
Large inventory
High variety
Cost of under-stocking is high
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Transportation/Shipping
Efficient Responsive
Transportation cost Transportation need (expediting, air,
(truck/rail/grounds) express carriers)
Full truckloads Less than truckload (LTL)
Small number of large shipment Large number of small shipments
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Sourcing
Efficient Responsive
Focus on cost Flexible suppliers
Single sourcing Dual sourcing (multiple)
Outsource In-house
Purchase in bulk Small shipments
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Pricing
Efficient Responsive
Low High
EDLP Loyal customer
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Efficient/responsive supply chains
Efficient supply chain Responsive supply chain
Supply demand at the lowest Respond quickly to demand
Primary goal
cost
Maximize performance at a Create modularity to allow
Product design
minimum product cost postponement of product
strategy
differentiation
Lower margins because Higher margins because price is
Pricing strategy price is a prime customer not a prime customer driver
driver
Manufacturing Lower costs through high Maintain capacity flexibility to buffer
strategy utilization against demand/supply uncertainty
Minimize inventory to lower Maintain buffer inventory to deal
Inventory strategy
cost with demand/supply uncertainty
Lead-time Reduce, but not at the Reduce aggressively, even if the
strategy expense of costs costs are significant
Select based on cost and Select based on speed, flexibility,
Supplier strategy
quality reliability, and quality
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Next day
Form your groups!
Session 2: Forecasting in supply chain
Gemma Berenguer/MGMT 664
