Supply Chain Management

Lecture 15

Outline

• Today– Simulation game results– Midterm review

• Next week– Midterm Tuesday March 9

The Teams

Place Team End moneyAdWiJuMaBrittanyBrown SquadCobrasCOSTADo NothingJafar's CrewNo use for a namePangeans for OutsourcingPole PositionRobert and AlexTeam BisonTeam PredatorTeam ShinnannigansWe Want Dutch Wafers

The Scores

Place Team End money1 43,114,415.242 42,636,799.363 42,529,886.204 42,401,421.855 41,623,140.346 41,461,152.917 41,011,414.468 40,621,780.339 40,150,372.51

10 40,149,781.6111 39,836,011.6412 39,581,049.5513 37,850,401.6514 37,305,034.7515 36,659,589.5316 35,394,768.57

Place Team End money1 43,114,415.242 42,636,799.363 42,529,886.204 42,401,421.855 41,623,140.346 41,461,152.917 41,011,414.468 40,621,780.339 40,150,372.51

10 40,149,781.6111 39,836,011.6412 39,581,049.5513 37,850,401.6514 37,305,034.7515 36,659,589.5316 Do Nothing 35,394,768.57

COSTA

20

161616

$36,659,58915

Team Bison

40

40

$37,305,03414Jafar’s Crew

4020

1016

$37,850,40113

Do Nothing

20

$35,394,76816

118112

16

$39,836,01111

AdWiJuMa

4060

1516

$40,150,3729 We Want Dutch Wafers

4637

1816

$40,149,78110

3630

16

$39,581,04912 Brittany

The Designs

Team Predator

4066

161616

$40,621,7808No use for a name

4650

161616

$41,011,4147

Robert and Alex

4560

201610

$41,461,1526Team Shinnannigans

4060

151516

$41,623,1405

Brown Squad

5653

$42,401,4214Pole Position

55100

16

$42,636,7992

Cobras

7172

16

$43,114,4151 Pangeans for Outsourcing

6595

$42,529,8863

The Results

Place Team End money1 Cobras 43,114,415.242 Pole Position 42,636,799.363 Pangeans for Outsourcing 42,529,886.204 Brown Squad 42,401,421.855 Team Shinnannigans 41,623,140.346 Robert and Alex 41,461,152.917 No use for a name 41,011,414.468 Team Predator 40,621,780.339 AdWiJuMa 40,150,372.51

10 We Want Dutch Wafers 40,149,781.6111 39,836,011.6412 Brittany 39,581,049.5513 Jafar's Crew 37,850,401.6514 Team Bison 37,305,034.7515 COSTA 36,659,589.5316 Do Nothing 35,394,768.57

Midterm

• Questions? Stop by…– Friday March 5– Monday March 8

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

Supply Chain Stages

• A typical supply chain may involve a variety of stages

Manufacturer Distributor Retailer CustomerSupplier

Most supply chains are actually supply networks

Q1

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)

What is Competitive Strategy?

• 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?

Q2

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

From Strategy to Decisions

Corporate Strategy

Competitive Strategy

Supply Chain Strategy

Responsiveness Efficiency

Facilities Inventory Transportation Information Sourcing Pricing

Logistical drivers Cross functional drivers

Q3

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)

Transportation Cost and Number of Facilities

Number of Facilities

TransportationCosts

Q4

Design Options For a Distribution Network

Retailer

Manufacturers

Consumers

RetailerMergers

Consumers

Manufacturers

DistributorWarehouse

Manufacturers

Consumers

DistributorWarehouse

DistributorWarehouse

Manufacturers

Consumers

DistributorWarehouse

DistributorWarehouse

Manufacturers

Consumers

DistributorWarehouse

Retailer

Consumers

RetailerRetailer

DistributorWarehouse

Manufacturers

DistributorWarehouse

Q5

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

Factors Influencing Network Design Decisions

• Strategic factors

GlobalCustomers

Offshore<low-cost>

<exports only>Many Asian plants

Source<low-cost>

<global market>Nike plants in Korea

Regional Customers

Server<local market><avoid tariffs>

Suziki’s Indian ventureMaruti

Contributor<customization>

<development skills>Maruti

Lead<advanced technology>

Lockheed Martin’s JSF in Dallas

Outpost<access to

knowledge>Dell in Ireland

Strategic role

Q6

Factors Influencing Network Design Decisions

• 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

How can trade agreements influence the number of facilities in a supply chain?

Q7

Factors Influencing Network Design Decisions

• 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)

Q7

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

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

Types of Forecasts

• 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

Q8

Midterm

• Chapter 8– Sections 1, 2, 3– Important concepts

• Aggregate planning• Operational parameters• Aggregate planning strategies

Aggregate Planning Strategies

• 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

Q9

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

Managing Demand

• 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)

Q10

Midterm Formula Sheet