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

2. 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

3. SYST 4050 Slides
The Teams
Chapter 1

4. SYST 4050 Slides
The Scores
Chapter 1

5. 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
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6. 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
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7. 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
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8. 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
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9. SYST 4050 Slides
The Results
Chapter 1

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. Design Options For a Distribution Network
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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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. SYST 4050 Slides
Midterm Formula Sheet
Chapter 1