The chapters on the Definition of a Supply Chain Project (Chapter 15) and the Selection Process of a TPT (Chapter 16) have been rewritten in the light of new experiences and research results. A typology of supply chains (Chapter 3) will help the reader identify which characteristics of a specific TPT match the requirements of the supply chain at hand, and which do not, thereby guiding the selection process of a TPT.
Basics of Supply Chain Management
Supply Chain Management: An Overview
Definitions
To ease complexity, a given organization may focus on only one part of the overall supply chain. This is because no single organizational unit is now solely responsible for the competitiveness of its products and services in the eyes of the end customer, but the supply chain as a whole.
Building Blocks
Overcoming organizational barriers, aligning strategies and accelerating flows in the supply chain are common topics. We are now able to define the term Supply Chain Management as the task of integrating organizational units in a supply chain and coordinating material, information and financial flows to meet (ultimate) customer requirements with the aim of improving the competitiveness of a supply chain as a whole.1;2.
Customer service
Competitiveness
- Customer Service
- Integration
- Coordination
- Relating SCM to Strategy
- Foundations
- Origins
- Channel Research
- Collaboration and Coordination
- Location and Control of Inventories in Production-Distribution Networksin Production-Distribution Networks
- Bullwhip Effect in Production-Distribution Systems
- Hierarchical Production Planning
An appropriate organizational culture and a commitment to contribute to the objectives of the supply chain will be of great importance. In the case of a global supply chain, special attention should be paid to cross-cultural business communication (Ulijn and Strother1995).
Motivation and Goals
In turn, supply chain analysis must evolve in parallel with changes in the real world. These units are then linked to the supply chain processes as well as the cost accounting systems of the individual companies.
Process Modeling .1 Concepts and Tools.1Concepts and Tools
- The SCOR-Model
The relevance of the SCOR model for measuring current supply chain performance has also been confirmed in a literature review by Akyuz and Erkan (2010, p. 5152). Sales and marketing as well as product development and research are not dealt with within the SCOR model (Supply Chain Council2012, p. i.2).
Process Types
In the scope of return are processes for returning defective or excess supply chain products as well as MRO products. The return process extends the scope of the SCOR-model into the area of post-delivery customer service.
Process Categories
It also includes managing supplier networks and contracts as well as inventories of delivered products. Make covers processes for planning production activities, production and testing, packaging and releasing products for delivery.
Process Elements
- Performance Measurement
- General Remarks
- Key Performance Indicators for Supply Chains
- Inventory Analysis
- Production Lot-Sizing or Cycle Stock
- Transportation Lot-Sizing Stock
- Inventory in Transit
- Seasonal Stock or Pre-built Stock
- Work-in-Process Inventory (WIP)
- Safety Stock
- Motivation and Basics
- Functional Attributes
- Structural Attributes
- Example for the Consumer Goods Industry
- Example for Computer Assembly
Furthermore, the identification of changes in the structure or type of supply chain (see Chapter 3) should be supported. Furthermore, the indicators should be evaluated on how they translate into the strategic goals of the supply chain. As they address different aspects of the supply chain, they are grouped into four categories.
The attribute major constraints gives an impression of what the most important bottlenecks in the supply chain (as a whole) are.
Advanced Planning
What is Planning?
At the latest when the planning horizon is reached, a new plan should be created that reflects the current state of the supply chain. At the beginning of the second period (February), a new plan is made that takes into account the actual events in the first period and updated forecasts for future periods. Hierarchical planning is a compromise between feasibility and consideration of interdependencies between planning tasks.
The design of a hierarchical planning system (HPS) requires careful definition of the modular structure, the assignment of planning tasks to the modules, and the specification of the information flows between them.
Planning Tasks Along the Supply Chain
- Supply Chain Planning Matrix
- Long-Term Planning Tasks
- Mid-Term Planning Tasks
- Short-Term Planning Tasks
- Coordination and Integration
Marginal gains from potential sales and fixed costs for assets must be considered in the objective function of the product program optimization problem. Therefore, it is reasonable to determine them based on the forecasting error to be calculated in the forecasting procedure. Medium-term distribution planning includes planning transport between warehouses and determining required stock levels.
Short-term production planning involves determining lot sizes and lot sequences on machines.
Examples of Type-Specific Planning Tasks and Planning ConceptsConcepts
- Consumer Goods Industry
- Computer Assembly
In a make-to-stock (D make-to-stock) environment, final items must be produced as planned, i.e., to make medium-term planning more realistic, short-term level decisions, made at later times, must be anticipated . Consequently, the general guidelines of the medium-term planning level should be divided into more detailed guidelines for the short-term level.
Only in this (rather rare) case must the distribution system be incorporated into the master plan.
Concepts of Advanced Planning Systems
Structure of Advanced Planning Systems
The Planning Situation
Instead, a rough estimate of distribution costs and times between production sites and markets is sufficient for supply chain design. The supply chain design planning horizon typically spans several years, up to 12 in the automotive industry. However, much of the long-term data required for supply chain design is highly uncertain.
These aspects of international trade must be taken into account in the design of the supply chain.
Strategic Network Design Models .1 Basic Components.1Basic Components
- Dealing with Uncertainty
- Extensions
In the case where sales must meet a certain demand, there is no impact of the decision variables on revenue. Extension of the model to after-tax NCF will be considered in Section 6.2.3. The depreciation allowance depends on the country's tax laws and the number of years after the investment is made.
It is a linear flow function only if the number of series per period is fixed.
Implementation
Cycle stock is caused by a process running in intermittent batches and is half the average batch size both at the entrance and at the exit of the process. Generate scenarios: This step uses a model of uncertainty that expresses the behavior of the uncertain data in the view of the decision maker. This allows the incorporation of additional operational uncertainties, e.g. the short-term variation of the demand or of the availability of a machine, which leads to the more accurate calculation of performance measures such as service levels or flow times.
The key performance indicators obtained in the evaluation step are compared to the best practice standards of the relevant industry.
Applications
- Computer Hardware
- Automotive Industry
- Chemical Industry
- Pharmaceutical Industry
- Forest Industry
One of the first studies on the redesign of a large global supply chain using an optimization model was presented by Arntzen et al. It allows the flexible use of several levels of design, from the global network of sites for the production of components and for final assembly to the detailed configuration of production equipment and technology selection. The model of Bihlmaier et al. 2009) which was developed for Daimler's global supply chain considers demand uncertainty using stochastic programming.
The results of the model influenced the reopening of the closed furnace and the conversion of the existing equipment into the largest silicon furnace in the world. 2001) present a model of the global production network for active ingredients, the first stage of pharmaceutical production.
Strategic Network Design Modules in APS Systems
The design of robust value-creating supply chain networks: a critical assessment. European Journal of Operational Research. Strategic supply chain optimization for the pharmaceutical industry. Industrial & Engineering Chemistry Research Modeling, measuring and controlling risk. A global supply chain model with transfer pricing and transportation cost allocation. European Journal of Operational Research.
Dynamic sequencing and cut consolidation for the parallel hybrid-cut nested L-shape method. European Journal of Operational Research.
Demand Planning
A Demand Planning Framework
Thus, an important aspect of demand planning is the determination of appropriate planning structures for products, customers, and time. Furthermore, the collection and sharing of data is done on the basis of predefined demand planning structures. This is called statistical forecasting and usually occurs in step 2 of the demand planning process (see above).
This feedback loop between demand planning and master planning is often called sales and operational planning S&OP (see Section 8.4).
Demand Planning Structures
- Time Dimension
- Product Dimension
- Geography Dimension
- Consistency of Forecast Data
For example, forecast planners from the sales organization would enter their forecast at the "subset" level, that is, at each level there may be one or more time series representing the forecasted quantities. Equal distribution: The estimated amount of the higher level is distributed equally to the items at the lower level.
Existing lower-level quantities: If predicted quantities already exist at the lower level, the percentage distribution of instances is calculated and applied to the higher-level predicted quantity.
Demand Planning Process
In the third stage of the demand planning process, judgmental forecasts are created by multiple departments. The rules used for selection are derived from specific expert knowledge or past research. However, it is much faster to calculate and check the dependent demand as part of the demand planning process and update the forecast immediately.
The final step in the demand planning process is the formal approval and technical release of the forecast.
Statistical Forecasting Techniques
- Moving Average and Smoothing Methods
- Regression Analysis
Since any question history is distorted by random noise, the accurate estimation of parameters for the model is a critical task. The weight for the observations decreases exponentially, with the last question given the highest weight. For reliable estimations of the seasonal coefficients, it is necessary to consider at least two cycles of demand history (eg 2 years).
The following example shows the application of linear regression for the ice cream model: Assuming the ice cream seller meets the following requirements.
Demand Planning Controlling
- Basic Forecast Accuracy Metric
- Aggregation of Forecast Accuracy by Time
- Aggregation of Forecast Accuracy by Product and Geography In many industries, the units of measures, the sales quantities, the contributionIn many industries, the units of measures, the sales quantities, the contribution
- Forecast Value Added
- Biased Forecasts
There are many methods for aggregating forecast accuracy or forecast error over time. MSE is the variance of the forecast error over the considered time period. Such a warning system can be triggered by thresholds based on one of the forecast accuracy criteria.
The prediction accuracy of a product group can be determined based on the weight per product as.
Additional Features
- Life-Cycle-Management and Phase-In/Phase-Out
- Price-Based Planning
- Sporadic Demand
- Lost Sales vs. Backorders
- Model Selection and Parameter Estimation
- Safety Stocks
- What-If Analysis and Simulation
As described in Section 7.2, time series can be disaggregated to lower levels of the demand planning structures using disaggregation rules. The criterion for the evaluation is usually one of the prediction accuracy measures described above. Therefore, the risk time is equal to the sum of the review interval and the replenishment time: RDLCt.
For continuous review systems the opposite is true, as the order quantity is fixed and the order cycle time depends on demand.
The Decision Situation
- Planning Horizon and Periods
- Decisions
- Objectives
- Data
- Results
For example, the Production Planning and Scheduling module must take into account the amount of planned inventory at the end of each master planning period and the reserved capacity up to the planning horizon. The corresponding quantities produced, moved or stored must be determined in the master planning process. Capacity expansions must be modeled as decision variables in Master Planning if production quantities also depend on these improvements.
The different prices of suppliers must be considered in the objective function if master planning models are extended to optimize supply decisions.
Model Building
- Modeling Approach
Seasonal inventory, which is the difference between the minimum inventory and the planned inventory level, for each product, period, and DC.
Model Macro-Level
Model Micro-Level
Transport costs from Plant 1 to DC 1 are linear with 2 million units per unit of both product 1 and 2, and to DC 2 costs of 3 million units per unit of product are incurred.
Model Planning-Profile
- Model Complexity
- Aggregation and Disaggregation
- Relations to Short-Term Planning Modules
- Using Penalty Costs
- Generating a Plan
- Sales and Operations Planning
It is therefore important to know which decisions lead to which complexity of the model. The second affects the objective function of the base model by setting cost parameters. To build the expected base model, the main influences of the short-term planning decisions within Master Planning must be identified.
In order to properly interpret the costs of the objective function, it is important to separate the costs into accounting and penalty costs.
