Supply Chain Management Issues and Models 1223719373067630 8

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1

Supply Chain Management:

Issues and Models

Lecture 1: IntroductionDr. Jinxing Xie

Department of Mathematical Sciences

Tsinghua University, Beijing 100084, Chinahttp://faculty.math.tsinghua.edu.cn/~jxie

Email: jxie@ math.tsinghua.edu.cn

Voice: (86-10)62787812 Fax: (86-10)62785847

Office: Rm. 1308, New Science Building



2

Course Information

Objective: – Understanding the supply chain and related issues

– Introducing some models and technologies for supply chain

management

Project / Assignment (choose any one) – A review of literatures on a topic you are interested

– A report which is a generalization to a paper

References: – Course notes at http://www.csiam.edu.cn/scm

– Some journal papers from Management Sciences et. al.

Focus on:

– Issues (Problems) and Models



3

Example:

Stages of a Detergent Supply Chain

Customer wants

detergent and

goes to Wal-Mart

Wal-Mart

Store

Wal-Mart

Or third-

party DC

P&G or other

manufacturer

Plastic

producer

Chemical

manufacturerPaper

manufacturerTimber

industry

Tenneco

packaging

Chemical

manufacturer



4

WHAT I S A SUPPLY CHAIN?

A Supply Chain

consists of organizations that successively

transform raw mater ials into intermediategoods, then to final good, and finally deliver

them to customers.

A Supply Chain

consists of all stages involved, directly or

indirectly, in ful f i l l ing a customer request.



5

WHAT I S A SUPPLY CHAIN?

The global network used to deliver productsand services from raw materials to the end

customer through engineered flows of

information, physical distribution and cash.

Information

Systems

World-Wide

Requirements

Planning

Relationship

Management

Logistics

Network

Distribution

Processes

The

Supply Chain



6

Understanding the Supply Chain:

Supply Network, Supply Web

Not only manufacturer and supplier, but also

transporters, warehouses, retailers and

customers themselves. All functions involved in filling a customer

request within each organization: new product

development, marketing, operations,distribution, finance, and customer service.

SCM vs. Logistics (物流）



7

Supply Chain Stages

Supplier

Supplier

Supplier

M an uf a c t ur e r

M

an uf a c t ur e r

Di s t r i b u

t or

D

i s t r i b u t or

Retailer

Retailer

Retailer

Customer

Customer

Customer



8

Connect Supply With Demand

SUPPLY DEMANDInformation

Product

Cash



9

供应链概念模型

计划决策

企

生产购分销供应商生产分销采购

客户生产分销采购

客户的客户

采购生产分销生产

供应商的供应商

过程控制计划调度

生产过程



10

供应链管理的个层面

采购生产配送营销

作业管理

战术管理

战略管理

工厂和仓库等生产资源的数

量、布局和能力；产品设计；市场开发等。

采购和生产决策；库

存策略；运输与配送策略；联盟关系等。

库存控制；生产计划与调度；运输路线等。



11

Example 1: Typical U.S. Apparel

Industry Supply Chain

Fiber

suppliers

Textile

makers RetailersApparel

makers

Agents Agents Agents

Average inventory and elapsed time (weeks):

• Materials: 6.5

• In-process: 9 6

• Finished goods: 7.5 9.5• In-transit: 4 4 12



12

Discussion of Issues and opportunities for

improvement to U.S. Apparel Industry

Issues – Supply chain is too long and too slow

» 58.5 weeks (excludes processing time & international transit

times)

– Little of this time is spent in processing» Only 15 of the 58.5 weeks are in-process inventory

– Even in processing, the ratio of processing time to wait time is

notoriously low

– Thus, American apparel industry was reduced enormously during

the last 25 years

Opportunities – Faster response to customer orders

– Eliminating unnecessary inventory, stockouts and markdowns – $25 billion can be saved annually



13

Example 2:

HP DeskJet Printer Supply Chain

Printedcircuitassembly& test

Printed

mechanism

manufacturing

Supplier

Supplier

Supplier

Vancouver

final

assembly

&

test

Asia-Pacific

distribution

center

Integrated

circuit

manufacturingDealers

Supplier

4-5

weeks

1 day

California

distribution

center

European

distribution

center

4-5weeks

Dealers

Dealers



14

Discussion of Example 2:

Improvement during the early 1980s

– Manufacturing cycle time reduced

» 8-12 weeks ==> 1 weeks

– Average inventory reduced» 3.5 months ==> 0.9 months

– All finished goods inventory eliminated

– Importance of response time and transportation timeincreased

– Further improvements should be made on supply

chain



15

Discussion of Example 2:

Improvement of supply chain in 1990

– Time between order and

delivery reduced

» Europe & Asia:

5.25 months ==> 1.25 months

» North-America:

4.25 months ==> 0.2 months

– Importance of transportationtime increased

» Europe & Asia: 1% ==> 12%

» North-America: 20% ==> 80%

Comparison of

Response Time

(months)

5.25

4.25

0.2

1.25

0

1

2

3

4

5

6

E u r o p e &

A s i a

N o r t h -

A m e r i c a

1990-

1990+



16

Hints from Examples 1 and 2

Further reduction in manufacturing cycle time is not

highly beneficial after the improvements of 1980s

– Example 1: Only 15 of the 58.5 weeks are WIP inventory

Improvements in supply chain is very beneficial

– Inventory cost reduced» HP Case: 4 months inventory reduced, total cost

reduces up to 5%

– Time between order and delivery reduced

» Better sales forecasts, reduced wrong orders,

markdowns, stockouts and delays in delivery

– Lower total cost & higher customer service



17

Objectives of Supply Chain

Management (SCM)

To improve

the profitability and efficiency of the supply chain and all organizations

involvedBy

– Optimizing

the speed and certainty and – Maximizing

the net value added by all relevant

processes.



18

Decision phases in a supply chain

Depending on the time frame over which thedecisions made apply – Supply chain strategy or design: next few years

– Supply chain planning: yearly or monthly

– Supply chain operation: weekly or daily

Some key fields – Supply chain design and product development

– Demand forecasting and customer relationship

– Production planning and scheduling

– Inventory management – Transportation management

– Location and Facilities management

– Information management and Information Technology

– ….



19

供应链管理的主要问题

网络结构设计与选址 (S)

库存控制 (S/T)

生产计划与调度(S/T/O)

运输与物流管理(T/O)

供应链联盟与合作关系(S)

信息价值 (S)

产品设计 (S)

S－战略决策

T－战术决策

O－作业决策



20

供应链管理的主要困难

复杂且庞大的网络和过程结构

复杂的产品结构

分布的管理和组织结构

动态系统，存在多种不确定因素



21

供应链管理理论和技术

供应链管理

确定性模型随机性模型启发式方法

概念/定性模型方法定量模型方法面向实例的经验方法

线性规划

非线性规划目标规划

网络流

博弈论

确定性动态规划

随机动态规划

随机库存控制排队优化

Markov决策

禁忌搜索

模拟退火遗传算法

Lagrangian松弛

约束理论

多Agent技术 (DAI)

仿真

Petri网

排队网络

扰动分析 (PA)Markov链

分析模型和方法优化模型和方法



22

The Virtual Enterprise



23

Key Elements In Supply Chain Uncertainty

DEMAND

– Timing of Order - How predictable is this?

– Size and Composition of Order - Are there unexpected

elements, and is it subject to change?

– Data Accuracy on Products Required, DeliveryPoints and Timings

SUPPLY

– Lead Time to Supply - How predictable is this?

– Quantity Supplied - Can the delivery be accepted without being counted?

– Quality of Supply - Can the supplies be used without

testing?

– Data Accuracy on Products Supplied and Prices



24

Good, Bad or Optimum Inventory

Once uncertainty is stripped away to the maximum practicable

degree, inventory can then be determined at the correct

(optimal) level (for each stage of the supply chain and overall)

Profit (or performance enhancement) from holding stock

equals potential lost sales (or lost performance)

times the gross profit margin on sales (or added value)

less the cost of holding stock (interest plus holding costs,which can be substantial in real terms and are often

underestimated)



25

“Old” Order Driven Supply Chain



26

Supply Planning Across the Virtual

Enterprises



27

SCM vs. OR/MS/DSOperations Research and Management Science (OR/MS)

The professional disciplines that deal with the application of informationtechnology for informed decision-making

Provide rational bases for decision making by seeking to understand and

structure complex situations and to use this understanding to predict system behavior and improve system performance.

Much of this work is done using analytical and numerical techniques todevelop and manipulate mathematical and computer models of organizationalsystems composed of people, machines, and procedures.

The field is closely related to several other fields in the "decision sciences" --applied mathematics, computer science, economics, industrial engineering,and systems engineering.

From http://www.informs.org/Join/Orms.html



28

SCM vs. OM

What is Operations Management (OM)?

运作管理就是对公司（或组织）的提供主要产品或服务的

系统进行设计、运行、评价和改进。

OM is the set of activities that creates goods and services bytransforming inputs into outputs.

OM is the business function that manages that part of a businessthat transforms raw materials and human inputs into goods andservices of higher value. (narrow view)



29

市场

企业战略

运作战略财务战略营销战略

运作管理

人力工厂部件工艺

计划与控制系统

输入

原料

顾客

输出

产品

服务

生产系统(5P)

OM概要模型其他名称：生产管理

工业管理

工厂管理



30

OM vs. OR/MS/DS vs. SS/SE vs. IE/EM

运作管理是管理的一个领域（管理职能）

OR/MS/DS是各领域在制定决策时都可能遇到

的定量方法 SS/SE强调的是系统观点、系统方法

IE/EM主要关注如何更

好地利用企业的资源，解决工程问题（如工业自动化等）

OM

OR/MS

/DS

SS/SE

IE/EM



31

供应链协调问题

运筹学

分布

人工智能经济学

供应链管理

目标冲突分布决策结构：不一致决策激励

信息扭曲非对称信息结构：不完全信息



32

The Heritage of OM

1776-1880:早期概念 – 专业化；标准化零部件

1880-1910：科学管理时代 – Gantt图；动作/时间研究；过程分析；排队论

1910-1980：大批量生产时代 – 流水线；经济批量；线性规划；PERT/CPM；MRP

1980-1995：精益生产时代 – JIT；TQM；EDI；CAD/CAM/CAPP

1995-2005：大批量、顾客化生产时代 – 全球化；信息化（INTERNET；E-Commerce)

– 敏捷制造；BPR ；ERP；主动学习的组织

– 供应链管理（SCM）

成

本

质量

顾客

作为学科， OM诞生于50年代末60年代初



33

Goods and services design What product should we offer?

How should we design these products and services?

Managing quality Who is responsible for quality?

How do we define the quality we want in our service or product?

Process and capacity design

What process will these products require and in what order?

What equipment and technology is necessary for these processes?

What Operations Managers do?

(Top 10 Research Directions)




34

Location strategies Where should we put the facility?

On what criteria should we bas the location decision?

Layout design

How should we arrange the facility? How large must the facility be to meet our plan?

Human resources and job design How do we provide a reasonable work environment?

How much can we expect our employees to produce?

Supply chain management Should we buy or produce the component?

Who are our suppliers and who can integrate into our e-commerce program?





35

Inventory control How much inventory of each item should we have?

When do we reorder?

Intermediate, short-term, and project scheduling Is subcontracting production a good idea?

Are we better off keeping people on the payroll duringslowdowns?

Maintenance Who is responsible for maintenance?





36

Exciting New Trends in OM

Local or national focus Global focus, international OM

Batch (large) shipments Just-in-time shipments

Low-bid purchasingSupply chain partners, ERP,

e-Commerce

Lengthy product developmentRapid product development,

alliances

Standardized products Mass customization

Job specializationEmpowered employees,

teams, and lean production



37

Important Research Field

- Service Operations Management

Intangible

Produced and consumed simultaneously

Unique

High customer interaction

Inconsistent product definition

Knowledge-based

Dispersed Difficult to automate

Difficult to measure quality

…….



38

Strategic

Tactic

Operational

Levels of

Decision

Qualitative

Quantitative

Research Methods



39

Research Methods

Empirical – Case study

– Survey

– Panel study

– Database

Theoretic models – Deterministic models

– Uncertainty models

Simulation

Expert system(knowledge model)

Simulation

Motivation and Objective

Experiment design

Independent variables

Dependent variables

Simulation run

Data analysis

Findings

Insights



40

建立 OR/MS理论模型的一般步骤

模型准备模型假设模型构成

模型求解模型分析模型检验

模型应用

Applied Mathematics – Mathematical Modeling:

Motivation,Formulation,Solution,Validation

“源”远“流”

长

f i d S i



41

Established March 1999, Newest within INFORMS

Membership: 950, Largest within INFORMS

Society Webpage: http://msom.society.informs.org The methods which MSOM members apply in order to

help the operations function add value to products andservices are derived from a wide range of scientific

fields, including operations research and managementscience, mathematics, economics, statistics,information systems and artificial intelligence.

Manufacturing and Service

Operations Management Society

* INFORMS: Institute for Operations Research and Management Science

Merged from ORSA (1952) and TIMS (1953) in 1994



42

Source of ReferencesTop journal:

Operations Research (OR)Management Science (MS)

Quasi-Top journal: Operations Research Letters (ORL)

IIE Transactions (IIET)

Naval Research Logistics (NRL)Mathematics of Operations Research (MOR)

Journal of operations management (JOM)

Major journal: European Journal of Operational Research (EJOR)

International Journal of Production Research (IJPR)International Journal of Production Economics (IJPE)

Journal of the Operational Research Society (JORS)

…



43

OM Related Journals

JOM (J. of OM)

IJOPM (Int. J. Op. Prod. Mgmt.)

POM (Prod. & OM)

IJPR (Int. J. of Prod. Research)

IJPE (Int. J. of Prod. Economics)

PIMJ (Prod. Invent. Mgmt. J.)

MS（Management Sciences)

HBR (Harvard Business Rev.)

EJOR

Sloan Mgmt. Review

MS (SSCI, SCI)

OR (SCI)

JOM

IJOPM

IJPR (SCI)

POM (SCI)

EJOR (SCI, SSCI)

HBR

Academy of Mgmt. Journal

DS (Decision Sciences) (SSCI)

Relevance Ranks (1999, JOM) Quality

MSOM



44

Summary

What is Supply chain / SCM?

What kinds of issues SCM concern?

What are the Theory and Techniqueswhich can be possibly potential in SCM?

SCM vs. OR/MS/DS/OM/IE/EM/SS/SE?

Top journals publishing SCM studies



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