Supply Chain Management SYST 4050 Slides Supply Chain Management Lecture 15 Chapter 1

Outline Today Next week Simulation game results Midterm review SYST 4050 Slides Outline Today Simulation game results Midterm review Next week Midterm Tuesday March 9 Chapter 1

SYST 4050 Slides The Teams Chapter 1

SYST 4050 Slides The Scores Chapter 1

SYST 4050 Slides 13 Jafar’s Crew Team Bison 14 $37,850,401 $37,305,034 20 40 40 16 10 40 COSTA 15 Do Nothing 16 $36,659,589 $35,394,768 20 20 16 16 16 Chapter 1

SYST 4050 Slides 9 AdWiJuMa 10 We Want Dutch Wafers $40,150,372 $40,149,781 60 37 40 46 15 16 16 18 11 Brittany 12 $39,836,011 $39,581,049 112 30 118 36 16 16 Chapter 1

SYST 4050 Slides Team Shinnannigans 5 The Designs 6 Robert and Alex $41,623,140 $41,461,152 60 60 40 45 15 20 16 15 10 16 No use for a name 7 Team Predator 8 $41,011,414 $40,621,780 50 66 46 40 16 16 16 16 16 16 Chapter 1

Pangeans for Outsourcing SYST 4050 Slides Pole Position 2 Brown Squad 4 $42,636,799 $42,401,421 100 53 55 56 16 1 Cobras 3 Pangeans for Outsourcing $43,114,415 $42,529,886 72 95 71 65 16 Chapter 1

SYST 4050 Slides The Results Chapter 1

Midterm Questions? Stop by… Friday March 5 Monday March 8 SYST 4050 Slides Midterm Questions? Stop by… Friday March 5 Monday March 8 Chapter 1

Midterm Chapter 1 Sections 1, 2, 3, 4, 5 Important concepts Skipping SYST 4050 Slides Midterm Chapter 1 Sections 1, 2, 3, 4, 5 Skipping Section 1.5: Supply chain macro processes in a firm Important concepts Supply chain Supply chain surplus 3 decision phases in a supply chain Cycle view 4 process cycles Push/pull view Chapter 1

Most supply chains are actually supply networks SYST 4050 Slides Supply Chain Stages Q1 A typical supply chain may involve a variety of stages Supplier Manufacturer Distributor Retailer Customer Most supply chains are actually supply networks Chapter 1

Midterm Chapter 2 Sections 1, 2, 3, (4e: also 4) Important concepts SYST 4050 Slides Midterm Chapter 2 Sections 1, 2, 3, (4e: also 4) Important concepts Competitive strategy Supply chain strategy Strategic fit How is strategic fit achieved Implied demand uncertainty Responsiveness/efficiency Issues affecting strategic fit Scopes of strategic fit Obstacles to achieving strategic fit (3e: Chapter 3 section 9) Chapter 1

What is Competitive Strategy? SYST 4050 Slides What is Competitive Strategy? Q2 Competitive strategy Defines, relative to competitors, a company’s set of customer needs that it seeks to satisfy through its products and services Wal-Mart Everyday low prices (low cost retailer for a wide variety of products) Coors The coldest tasting beer in the world, brewed with Rocky Mountain spring water Dell Custom-made computer systems at a reasonable cost How do you execute your competitive strategy? Chapter 1

Midterm Chapter 3 Sections 1, 3, 4, 5, 6, 7, 8, (3e: also 9) SYST 4050 Slides Midterm Chapter 3 Sections 1, 3, 4, 5, 6, 7, 8, (3e: also 9) Hint Sections 3 through 9 focus at:: Role in the competitive strategy, and Overall trade-off Skipping Sections 3 though 9: Information-related metrics Important concepts 6 drivers of supply chain performance Facilities Inventory Transportation Information Sourcing Pricing Chapter 1

From Strategy to Decisions SYST 4050 Slides From Strategy to Decisions Q3 Corporate Strategy Competitive Strategy Supply Chain Strategy To understand how a company can improve supply chain performance in terms of responsiveness and efficiency we must examine (and make decisions about) the logistical and cross-functional drivers of supply chain performance Responsiveness Efficiency Facilities Inventory Transportation Information Sourcing Pricing Logistical drivers Cross functional drivers Chapter 1

Midterm Chapter 4 Sections 1, 2, 3 Important concepts Distribution SYST 4050 Slides Midterm Chapter 4 Sections 1, 2, 3 Important concepts Distribution Factors influencing network design Customer service components Relationship between number of facilities and response time Relationship between number of facilities and cost 6 distribution network design options Relative performance (advantages/disadvantages) Chapter 1

Transportation Cost and Number of Facilities SYST 4050 Slides Transportation Cost and Number of Facilities Q4 Transportation Costs Includes both inbound and outbound transportation cost If the number of facilities is increased to a point where inbound lot sizes are very small and result in a significant loss of economies of scale in inbound transportation, increasing the number of facilities increases total transportation cost Number of Facilities Chapter 1

Design Options For a Distribution Network SYST 4050 Slides Design Options For a Distribution Network Q5 Retailer Consumers Distributor Warehouse Manufacturers Retailer Manufacturers Consumers Retailer Mergers Consumers Manufacturers Distributor Warehouse Manufacturers Consumers Distributor Warehouse Manufacturers Consumers Distributor Warehouse Manufacturers Consumers Chapter 1

Midterm Chapter 5 Sections 1, 2 Important concepts Skipping SYST 4050 Slides Midterm Chapter 5 Sections 1, 2 Skipping Section 5.2: Locating to split the market Important concepts 4 classifications of network design decisions 8 factors influencing network design decisions 6 facility strategic roles Positive externalities Chapter 1

Factors Influencing Network Design Decisions SYST 4050 Slides Factors Influencing Network Design Decisions Q6 Strategic factors Strategic role Global Customers Regional Customers Lead <advanced technology> Lockheed Martin’s JSF in Dallas Outpost <access to knowledge> Dell in Ireland Offshore <low-cost> <exports only> Many Asian plants Server <local market> <avoid tariffs> Suziki’s Indian venture Maruti Source <low-cost> <global market> Nike plants in Korea Contributor <customization> <development skills> Maruti Chapter 1

Factors Influencing Network Design Decisions SYST 4050 Slides Factors Influencing Network Design Decisions Q7 Macroeconomic factors Quotas, tariffs, and tax incentives Economic trade agreements: Nafta, EU, APTA, AFTZ Exchange rate and demand risk Different states or countries often offer economic incentives to companies that decide to set up shop there, including tax incentives and low-interest economic development loans Technological factors * High fixed costs (less facilities) – Intel Semiconductor manufacturing * Low fixed costs (more facilities) - Coca Cola bottling Macroeconomic factors * Trade agreements (NAFTA, EU, APTA–Asian Pacific Trade Agreement, AFTZ–African Free Trade Zone) have led to consolidation * End of quotas has led to consolidation of apparel manufacturing in China * Flexible facilities (capacity) can help reduce the effect of exchanges rates Political factors * Infrastructure factors * Amazon distribution centers are all close to airports How can trade agreements influence the number of facilities in a supply chain? Chapter 1

Factors Influencing Network Design Decisions SYST 4050 Slides Factors Influencing Network Design Decisions Q7 Political factors Political stability Infrastructure factors Availability of transportation terminals, labor Most of Amazon’s distribution centers are located near airports Competitive factors Positive externalities (many stores in a mall makes it more convenient for customers – one location for everything the customers need) Chapter 1

Midterm Chapter 6 Sections 1, (3e: 2), 3, 4, (4e: 5), (3e: 6) SYST 4050 Slides Midterm Chapter 6 Sections 1, (3e: 2), 3, 4, (4e: 5), (3e: 6) Important concepts Discounted cash flow Net present value Decision tree Calculating NPV Calculating NPV using decision trees Risk management and network design Chapter 1

Midterm Chapter 7 Sections 1, 2, 3, 4, 5, 6 Important concepts SYST 4050 Slides Midterm Chapter 7 Sections 1, 2, 3, 4, 5, 6 Important concepts Factors influencing demand forecast 4 characteristics of forecasts 4 forecast types Static and adaptive Static method, moving average, exponential smoothing, Holt's method Calculating forecasts Forecast errors Calculating forecast errors Chapter 1

Types of Forecasts Q8 Qualitative Time series Causal Simulation SYST 4050 Slides Types of Forecasts Q8 Qualitative Primarily subjective, rely on judgment and opinion Time series Use historical demand only Causal Use the relationship between demand and some other factor to develop forecast Simulation Imitate consumer choices that give rise to demand Qualitative They are primarily subjective; rely on judgment and opinion, intuition, surveys, or comparative techniques. They produce information typically no quantitative, and subjective. Its non-scientific nature makes it difficult to standardize or validate for accuracy, Appropriate when there is little historical data or there is market intelligence. Time Series It uses historical demand only; appropriate when the basic demand pattern varies little between years, the basic premise is that the future demand pattern will be mostly a replication. It uses mathematician and statistical models as forecasting tools which can be static or adaptive to new demand patterns. Causal It uses the relationship between demand and some other factor (e.g. the state of the economy, interest rates) to develop forecast. For example, if is know how level service can influence sales, then by knowing the level of service provided, the level of sales can be projected. We can say that service causes sales. Another example is forecasting the impact of price promotion on demand. Usually it is very difficult to find good cause-and-effect relationships. Simulation This method imitates consumer choices that give rise to demand. It can combine time series and causal methods Chapter 1

Midterm Chapter 8 Sections 1, 2, 3 Important concepts SYST 4050 Slides Midterm Chapter 8 Sections 1, 2, 3 Important concepts Aggregate planning Operational parameters Aggregate planning strategies Chapter 1

Aggregate Planning Strategies SYST 4050 Slides Aggregate Planning Strategies Q9 Basic strategies Level strategy (using inventory as lever) Synchronize production rate with long term average demand Swim wear Chase (the demand) strategy (using capacity as lever) Synchronize production rate with demand Fast food restaurants Time flexibility strategy (using utilization as lever) High levels excess (machine and/or workforce) capacity Machine shops, army Tailored strategy Combination of the chase, level, and time flexibility strategies Chapter 1

Midterm Chapter 9 Sections 1, 2, 3 Hint Important concepts SYST 4050 Slides Midterm Chapter 9 Sections 1, 2, 3 Hint Section 3 focus at Impact of promotion on demand (market growth, stealing share, and forward buying), and impact on promotion timing Important concepts Responding to predictable variability Managing supply Managing demand 3 reasons for increase in demand due to promotion Impact on promotion timing Chapter 1

Managing Demand Q10 Pricing and other forms of promotion SYST 4050 Slides Managing Demand Q10 Pricing and other forms of promotion Timing of promotion is important Demand increases from promotion can result from a combination of three factors: Market growth (increased sales, increased market size) Increase in consumption from both new and existing customers Example: Toyota Camry attracting buyers who were considering lower-end models Stealing share (increased sales, same market size) Product substitution (overall demand stays the same) Example: Toyota Camry attracting buyers who were considering Honda Accord Forward buying (same sales, same market size) Customers move up purchases (does not increase sales) Chapter 1

SYST 4050 Slides Midterm Formula Sheet Chapter 1