1. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 1 OUTLINE Questions? Comments? Quiz Stories or experiences with supply chains? Chapter 2 and 3 (Chopra)

2. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 2 Strategic Framework for Analyzing Supply Chains Chapter 2 – Performance (Chapter 3 – Drivers and Obstacles)

3. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 3 Performance - Uncertainty Demand uncertainty – customers’ demand for a product –What else is uncertain?

4. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 4 Performance - Responsiveness Wide ranges of quantities Short lead times Large variety Innovation Service level – what do you think this means? Supply uncertainty Responsiveness comes at a cost

5. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 5 Performance – Strategic fit Match the supply chain’s responsiveness to the implied uncertainty of supply and demand Balance between responsiveness and effectiveness (cost)

6. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 6 Performance – Product Life Cycle Demand – uncertain to relatively certain Margins from high to low Availability essential early to capture the market Price – unimportant to important

7. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 7 Performance – Inter-company Scope A strategic fit between companies in a supply chain is important because competition is shifting: –From company vs. company –To supply chain vs. supply chain

8. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 8 Definitions Facilities – places where product is Stored Assembled Fabricated Inventory – Raw materials Work in process (WIP) Finished goods (FG) Transportation Spares

9. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 9 Definitions - continued Transportation – moving inventory from point to point –Ground »Road »Rail »Pipe line »Barge –Air –Ship Information –Data –Analysis

10. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 10 Barge transportation

11. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 11 Southeastern Arizona – Galiuro Mountains

12. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 12 Southeastern Arizona – El Paso to LA Pipeline

13. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 13 El Paso to LA Pipeline - Station

14. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 14 Framework

15. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 15 Facilities Role in the chain – the where of the supply chain Role in the competitive strategy – Location, location, location Components of decisions –Location –Capacity –Operational methods –Warehousing methods –Tradeoff: Responsiveness vs. Efficiency

16. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 16 Inventory Role in the supply chain – alleviate mismatch between supply and demand –Increase demand that can be satisfied –Exploit economies of scale –Definitions: »Material flow (Flow time) – elapsed time between material entering the supply chain and exiting »Throughput – rate at which material moves through the chain »Little’s law: Inventory = Throughput x Flow time »Flow time is also called cycle time

17. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 17 Inventory - continued Role in competitive strategy: responsiveness Components of inventory decisions: –Cycle inventory – satisfies demand between replenishments –Safety Stock – protects against variations in demand –Seasonal Inventory – built up to counter demand that exceeds capacity –Sources – from whom to buy (or make)

18. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 18 Transportation Role: move material Role in competitive strategy: match required responsiveness Components of decisions: –Mode (rail, truck, air, ship, pipeline, electronic) –Route and network selection –Sourcing »Who provides transportation services?

19. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 19 Information Role: connects the members of the chain and supports daily operations Role in strategy: most important underpinning Components of decisions: –Push/pull –What to share –Forecasting and planning –Pricing Enabling technologies: Software (EDI, ERP, SCM)

20. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 20 Obstacles Increasing variety Shorter life cycles Demanding customers Decreasing vertical integration Globalization

21. FACILITIES PLANNING ISE310L SESSION 5 Chapters 2_3, September 8, 2015 Geza P. Bottlik Page 21 “Mr. Osborne, may I be excused? My brain is full”