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Creating an Efficient & Responsive
Supply ChainPresented to the National Shipbuilding Research Program31 July 2007
Dr. Will iam R. Kil lingsworth
Executive Director, MIT Forum for Supply Chain Innovation
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MIT Forum for Supply Chain Innovation
Formed in 2002; European Section 2006
Led by the MIT School of Engineering & SloanSchool of Management
David Simchi-Levi, Charlie Fine,
Bill Killingsworth
Members Include Industry and Government
Hitachi Holding Co.
http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/http://www.dod.gov/7/29/2019 073107 Supply Chain Killingsworth(MIT)
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Major Research Areas
Matching Products with Supply Chain
Inventory Positioning/Push-Pull
Manufacturing & Distribution Network Design Strategic Suppliers, PSM
Visibility, Identification, and SensorNetworks
RFID, Wireless Networks
Interoperability Sensors, GPS
MIT Forum for Supply Chain Innovation
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Major Research Areas
Product Development and Life-Cycle Design Integral vs. Modular Design
Product Clockspeed
Make vs. Buy
Portfolio Management
Supplier and Customer Relations
Contracts: Risk and Profit Sharing
Collaboration in Forecasting, Planning & Execution
Communication; Supplier Committees Purchasing and Supply Management
MIT Forum for Supply Chain Innovation
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Risk Management in Global Supply Chains
Supply Risks
Demand Risks
Development of Mitigation Strategies
Major Research AreasMIT Forum for Supply Chain Innovation
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Todays Supply Chain Pitfalls Long Lead Times
Minimized Inventories
Uncertain Demand and Supply
Complex Product Offerings Component Availability
Downsizing/Out-sourcing
Globalization/Off- and near-shoring Shrinking Supplier Base
Troubled Supplier Relations
Fragile Supply Chains
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Designing the Supply Chainfor the Specific Product
Many companies attempt to shoveeverything through one supply chainstructure and then wonder why someproblems continue;
Must recognize that products have different
characteristics and generally need to bemanaged in a different manner with analigned supply chain; and
Efficiency and Responsiveness are generallyin direct conflict.
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Functional Products Innovative Products
Efficient
Supply
Chain
ResponsiveSupply
Chain
Match
MatchMismatch
Mismatch
Marshall L. Fisher, Harvard Business Review, March-April 1997
Fishers Framework
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DEMAND CHARACTERISTICS & SUPPLY CHAIN DESIGN
PushFast & Efficient
Push PullDelayed Differentiation
Distribution Strategy
Push PullDistribution Strategy
PullResponsive & Adaptive
Low High
Low
High
Demand
Volume
Demand
Uncertainty
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A Key Design Element:Push-Pull Supply Chains
The Supply Chain Time Line
Low Uncertainty High Uncertainty
CustomersSuppliers
PUSH STRATEGY PULL STRATEGY
Push-Pull Boundary
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Examples of Push Supply Chains Automotive
Mercedes in Vance, Alabama 160,000 M and R Class vehicles per year
Two Shifts
New vehicle comes off line every 90 seconds
Honda in Lincoln, Alabama 300,000 Odyssey Minivans and Pilot SUVs per year
Two production lines; two shifts
New vehicle comes off each line every 90 seconds Baby Care: Over 300,000,000 packages of
Pampers sold annually
Key Focus: Efficiency, Just in Time, Velocity &Coordination
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Examples of Push-Pull Supply Chains Dell
Buys to Forecast; Makes to Order
Modular Product Design
Delayed Differentiation
Dynamic Pricing to Correct for Forecast Errors
Furniture Make to Order Pull
Hold and accumulate for regional shipment Push What About Ikea?
Key Focus for Push-Pull are Responsiveness to
Market of One , then efficiency
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Raw Material
Supplier
Material
Manufacturers
/ Assemblers
Material
RetailerEnd-Users
Material
Shipbuilders
Boeing
Dell
HP
Pampers
Push
Buy to Order
(manufacturing
postponement high)
Ship to Stock
(manufacturingpostponement low)
Pull
Push Pull
Push Pull
Push Pull
Push Pull
Make to Order
Assemble to Order
Make to Stock
Denotes a Stockhold ing
Decoupling Point
PUSH PULL SUPPLY CHAINS
Source: Towill (2005) Decoupling for Supply Chain Competitiveness
Driven
byF
orecast
Driven
by
Deman
d
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Source: James Womack and Daniel T. Jones, Lean Thinking (New York: Simon & Schuster, 1996).
Five Lean Fundamentals
Specify value: Value is defined by customer in terms ofspecific products and services
Identify the value stream: Map out all end-to-end linkedactions, processes and functions necessary fortransforming inputs to outputs to identify and eliminatewaste
Make value flow continuously: Having eliminated waste,make remaining value-creating steps flow
Let customers pull value: Customers pull cascades allthe way back to the lowest level supplier, enabling just-in-time production
Pursue perfection: Pursue continuous process ofimprovement striving for perfection
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Command
Prime
First Tier
Suppliers
Depot
Second Tier
Suppliers
Raw Material
Suppliers
Orders
The Typical Sequentially Cascading Supply Chain
Sequentially Cascading
Supply Chains Are GenerallyNeither Efficient,
Nor Responsive
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The Sequential
Enterprise
The Goal: Transform the Enterprise
Command
Prime
First Tier
Suppliers
Depots
Second Tier
Suppliers
Raw Material
Suppliers
Orders
Customer
Distribution
Points
Command
PrimeManufacturers
1st , 2nd
And 3rd
TierSuppliers
Raw MaterialSuppliers
Integrated
CollaborativeSupply
Network
Depots
Transform
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Steps in the Transformation
Define and Map the Nature of the
Supplier Network
Identify Strategic Partners
Enable Visibility, Collaborative
Forecasting, Planning and Execution Maintain Positive Supplier Relations
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Systems Supplier
Systems Supplier
Structure Supplier
Structure Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Final Assembly
Manufacturer Contract
Product Flow
Traditional Supply Chain Structure
Rotor Head Suppliers
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Company HRev Limiter 197 Days
Company E
Bushing 080 Days
Company F
Bushing
Company I
ID Plate 120 Days
ID Plate 110 Days
Company DD
Droop Stop 250 DaysArm 250 Days
Plate-Class 250 Days
Liner 197 Days
Block 275 Days
Stop 250 Days
Washer 280 Days
Pin Assembly 173 Days
Pin Assembly 210 Days
Plug 176 DaysTank Assembly
Beam
Cap
Company Q
Pitch Housing
Company L
Washer 167 Days
Company M
Support 119 Days
Company P
Hub 300 Days
Hub-Class 320 Days
Pin-Class 290 Days
Pin 250 Days
Company R
Cover 180 Days
Retainer 180 Days
Company W
Weight 126 Days
Weight 100 Days
Company G
Seal 120 Days
Seal 120 Days
Sleeve 120 Days
Seal 120 Day
Seal 189 Days
Company B
Shaft 176 Days
Company N
Weight
Company BB
Washer 110 Days
Company CRev Spring 155 Days
Company T
Adapter 100 Days
Weight 113 Days
Liner 210 Days
Spacer 176 Days
Lower Liner 197 Days
Tank 281 Days
Bolt 260 Days
Company D
Bolt 210 Days
Company K
Shim 075 Days
Shim
Company X
Collar
Cover Assembly
Company Y
S him 150 Days
Company Z
Ring 150 Days
Company AA
Shaft
Sleeve
Company CC
Washer 100 Days
Retainer 100 Days
Company EE
Washer 120 Days
Company FF
TankCompany U
Base
ShieldCompany GG
Cover 080 Days
Company HH
Tank Assembly
Company V
Boot 260 Days
Rotor Head SuppliersCompany A
Bolt 134 Days
Prime/LCMC
Company J
Stop 210 Days
Nut Plain 239 Days
Nut 170 DaysBracket Assembly
Company O
Sleeve Bushing 231 Days
Sleeve 120 Days
Washer 168 Days
Nut 155 Days
Key
Company S
Bearing 180 Days
Bearing 170 Days
Bearing 230 Days
Bearing 250 Days
Bushing Sleeve 275 Days
Hydroform
Cover 170 Days
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Shaft Assembly Supply Chain (1 of 2)
Prime
Comp A
Retainer
90 (M)
50 (M)Anodize (10)
Paint (10)
20 (M)
Comp A
Retainer
Comp D
(material)
OutsideProcessing
(35)
35 (M)
10 (M)
Comp A
AdapterOutside Processing1 (10)
Outside Processing2 (10)
20 (M)
Comp E
(material) 125 (M)100 (M)
Comp A
40 (M)
Comp F (Forge) 30 (M)130 (M)
Adapter
Outside Processing3 (10)
Outside Processing4(10)
Outside Processing5 (20)
Comp B
Spacer
118 (M)
In-house Mfg
Subassembly A (30)
Subassembly B (30)
Adapter (300)
Comp C
(material)10 (M)
158
150
200
250
168
50 (PA)
50 (PA)
50 (PA)
50 (PA)
50 (PA)
150 (M)Company G
(material)
100/mo
100/mo
100/mo
100/mo
6/moN/A
Notes: (A) Supplier Admin Lead Times
(M) Supplier Mfg Lead Times
(PA) Prime Administrative Lead TimesRed denotes Prime Lead TimesPurple denotes monthly capacity without
impact to normal through put
Now 350 Mfg Days!
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Shaft Assembly Supply Chain (2 of 2)
Prime
Comp HBolt
30 (M)
40 (M)Comp I
(material)10 (M)
Comp H
Comp J
(casting)
Finishing, coating
and paint (15)
15 (M)80 (M)
Comp L
Bearing
Outside
processing 40 (M)20 (M)
Comp Q55(M)48 (M)
Washer
Comp S
Plate Assembly
110 (M)
Support Assembly
Comp K
(material)
120 (M)
Comp LSubcontract
Machining20 (M) 60 (M)Comp G
(material)135 (M)
10 (M) w/LTA
Comp M
(material)
Tube
50 60 (M)
Comp NOutside
processing
Comp P
(material)10 (M) 22 (M)
15 (A)100 (M)
Mount
10 (A)
N/A
200
265
260
197
150
160
50 (PA)
50 (PA)
50 (PA)
50 (PA)
50 (PA)
50 (PA)
50 (PA) N/A
N/A
500/mo
100-150/mo
150/mo
50/mo
100/mo
Comp R
(material)
Now 350 Mfg Days!
Notes: (A) Supplier Admin Lead Times
(M) Supplier Mfg Lead Times
(PA) Prime Administrative Lead Times
Red denotes Prime Lead TimesPurple denotes monthly capacity without
impact to normal through put
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Product Flow
Systems
Partner
Structure
Partner
Partner/Supplier
Contract
Large ScaleLarge Scale
Systems IntegratorSystems Integrator
Final Assembly
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Pre-Integration
Integrator owned product in several levels of the supply chain
Drives the requirement for multi-tier visibility
A
B
C
Strategic Partner Structure
D
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Typical Benefits of Procurement & Supply Management
(PSM) More Effective Buying Techniques
Spend Analysis Who buys what from whom with
what funds Market Intelligence What is happening in the market,
raw material trends
Logistical Efficiencies Enhancing PLT, ALT, AssetManagement
Savings Opportunities Opportunities to save money
Process Efficiencies Streamline current supply
chain processes & integrate
Improvements ViaPSM Analysis & Strategic Sourcing
Maturity Model for Collaboration and Process Interoperability
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* Source: AMR Research, Inter-Enterprise Supply Chain Coordination Needs a Platform,, 2003
Every departmentEvery department
for itselffor itself
Every companyEvery company
for itselffor itself
SingleSingle--TierTier
PartneringPartnering
MultiMulti --tiertier
FederationFederation
Slow & sequential planningSlow & sequential planning
Internal optimizationInternal optimization
Data sharingData sharing
withwith
11stst Tier partnersTier partners
Process MaturityProcess Maturity Information MaturityInformation Maturity
ReactingReacting
AnticipatingAnticipating
CollaboratingCollaborating
OrchestratingOrchestrating
MultiMulti --tiertier
Visibility,Visibility,
CollaborationCollaboration
Supply Network
Yield Management
ImprovedMarketShare
Improved
Margins
Demand Network
Optimization
Maturity Model for Collaboration and Process Interoperability
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Exostar Solution: Multi-tier visibility
Exostar Conference: October 9, Washington DC
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Tier 1 SuppliersPrime or SI
Tier 2..n Suppliers
Forecast & Commit Cycle
Order Management Cycle
Consumption Replenishment
Logistics Management
COMPONENTS
WHERE USED
Gain Consolidated Visibility Across Tiers
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RFID Industry Transformations -- CapGemini
Textiles
Food
HighTec&White
Goods
LuxuryItems
Courier&Postal
InternationalLog
istics
DC / Warehouse Operations X X X X X X X X X
International Trade / Customs / Security X X X X X X
Pedigree / Track / Trace / Theft / Counterfeit X X X X X X X X X
Cold Chain Logistics X X X X X X X X
Inventory Management / Real-Time Optimization X X X X X X X X X XMobile (Returnable) Asset Management / Utilization X X X X X X X X X X X
Store Operations / Consumer Driven Replenishment X X X X
Asset Maintenance & Monitoring (MRO / SPL) X X X X X X
Mission Demand Planning X
Managed Service Provision X X X X X X X X X
Information Sharing (EDI, GDS, EPCIS) X X X X X X X X X XManufacturing (Work in Progress) X X X X X X X X
Reverse Logistics (Returns / Recalls / Waste) X X X X X X X X X X X
Government
FinancialDocuments&Securitie
s
Distribution
RFID Enabled Supply Chain Transformation
Opportunities
Aviation
Automotive
Energy/Utilities
Defense
Retail&CPG
Manufacturing
&Packaging
LifeSciences
/Pharma
Healthcare
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DC / Warehouse Operationsy Improved In-Bound / Receiving
y Improved Out-Bound / Loading
y
Improved Stagingy Improved Picking
y Improved Packaging
y Improved Miss-placed Items
y
Improved Cross Docking
Receiving Marshalling Cross sorting
PackingLoadingShipping
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GovernmentRelations
Public Relations
Community
RelationsCustomer Relations
Where is Supplier Relations?
What is Supplier Relations?
Investor Relations
Employee Relations
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Four Columns of Collaboration
The Toyota Model
OpenCommunication
Strong Supplier RelationsStrong Supplier Relations
SupplierAssociations
On-site Support
& Training
Reduce SupplierBurden
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Conclusions
Think Globally;
Act Globally; and
Do Not Stop With Local Islands of
Optimization
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Summary: Enabling Both Efficiency andResponsiveness in a Pull Supply Chain
Streamline supply chain through the use ofstrategic partners;
Involve strategic partners in design and
development process; Identify critical bottlenecks and lead time
drivers; develop corrective actions;
Enable visibility, collaborative planning andforecasting; and
Strengthen supplier relations.
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Coming Events You Are Invited
14-15 November 2007 Road Trip for Forum! To Be Held at GE Global Research Labs
Schenectady, New York
Real Time Global Tracking and Logistics
Wireless Sensors and Networks
29-30 November 2007 European Road trip! To Be Held at the Newly Opened DHL InnovationCenter near Bonn, Germany
Sponsored by the European Section of the MIT Forumfor Supply Chain Innovation, Hasso Plattner Institute