SC Modeling 1

Supply Chain Modeling and Analysis
Alexandria February 2005 Supply Chain ModelingSpeaker: Dr. Amr Eltawil and Analysis, February 2005
Who am I?
Dr. Amr Eltawil. Lecturer, Production Engineering Department Faculty of Engineering, Alexandria University. Ph.D. Industrial Engineering, joint research program between Alexandria University and University of Miami, Florida, USA. Interests:
Supply Chain Management Operations Research applications. Manufacturing Systems Modeling and Simulation. Applied Statistics. Decision Support Systems (MIS, MRP, ERP, CRM, CMMS)
Supply Chain Modeling and Analysis, February 2005
Supply Chain Modeling and Analysis Agenda

Introduction to Supply Chain Management Unilever Supply Chain Model Forecasting Inventory Management: Production and Operations Planning Supply and distribution strategies
Supply Chain Modeling and Analysis, February 2005 ?

Introduction to Supply Chain Management. Unilever Supply Chain Model. Forecasting. Production Planning. Inventory Management. Supply and distribution.
What is a Supply Chain?

A supply chain refers to the flow of materials, including:
information, Services or materials Cash from suppliers through factories and manufacturers to customers.
A Generic Supply Chain

Sources: plants vendors ports Plants: plants Regional Warehouses: stocking points Field Warehouses: stocking points Customers, demand centers sinks
Supply
Inventory Purchase
Inventory Inventory
Transportation
Cycle View of Supply Chains

Customer
Customer Order Cycle
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Any cycle 0. Customer arrival 1. Customer triggers an order 2. Supplier fulfils the order 3. Customer receives the order
Manufacturer
Procurement Cycle
Supplier
Supply Chain Modeling and Analysis, February 2005 `
Detergent supply chain:

Unilever or other manufacturer Third party DC Albertsons Supermarket Customer wants detergent
Plastic Producer
Tenneco Packaging
Chemical manufacturer (e.g. Oil Company)
Chemical manufacturer (e.g. Oil Company)
Paper Manufacturer
Timber Industry
Supply Chain Management

A supply chain consists of
Supplier Manufacturer Distributor Retailer Customer
Upstream
Downstream
SCM aims to Match Supply and Demand, profitably for products and services Achieves
SUPPLY SIDE
DEMAND SIDE
The right
Product
+ + + + +
The right The right The right The right
The right
Price
Store
Quantity
Customer
Time
Higher
Profits
Importance of Supply Chain Management

In 2000, the US companies spent $1 trillion (10% of GNP) on supply-related activities (movement, storage, and control of products across supply chains). Source: State of Logistics Report
Frequent Supply shortages Inefficient logistics Low order fill rates
Tier 1 Supplier
Manufacturer
Distributor
Retailer
Customer
High stockouts
Glitch-Wrong Material, Machine is Down effect snowballs
High inventories through the chain
Ineffective promotions
High landed costs to the shelf
Eliminating inefficiencies in supply chains can save millions of $.

Supply Chain Modeling and Analysis, February 2005 ??
SCM Generated Value

Minimizing supply chain costs while keeping a reasonable service level customer satisfaction/quality/on time delivery, etc. This is how SCM contributes to the bottom line SCM is not strictly a cost reduction paradigm!
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SCM in a Supply Network

Supply Chain Management (SCM) is concerned with the management and control of the flows of material, information, and finances in supply chains.
Cash Products and Services Information
THAILAND INDIA N-Tier Suppliers Suppliers MEXICO Logistics TEXAS Distributors US Retailers
Supply Side
OEM
Demand Side
Demand Supply
The task of SCM is to design, plan, and execute the activities at the different stages so as to provide the desired levels of service to supply chain customers profitably
Supply Chain Material and Information Flows

Supplier
Market research data scheduling information Engineering and design data Order flow and cash flow Ideas and design to satisfy end customer Material flow Credit flow
Customer
Inventory
Supplier
Manufacturer
Inventory Inventory
Customer
Supplier Distributor
Inventory
Customer
??

Companies no longer compete solely as individual entities, but rather as supply chains. The survival of the single company depends on the management's ability to integrate the company in a network. Therefore, successful SCM will determine the ultimate success of the single enterprise. This requires companies to be far more open and to engage in a closer and more integrated cooperation with other companies than has previously been the case.
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Definitions: SCM
The Council of Logistics Management defines supply chain management as:
Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.
Source: Council of Logistics Management Supply Chain Modeling and Analysis, February 2005 ??
Definitions: Logistics
The Council of Logistics Management defines logistics as: Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements.
Source: Council of Logistics Management Supply Chain Modeling and Analysis, February 2005 ??
General Supply Chain Model

Plan
Deliver Return
Source Return
Make
Deliver Return
Source Return
Make
Deliver Return
Source Return
Make
Deliver Return
Source Return
Suppliers Supplier
Supplier
Internal or External
Your Company
Customer
Customers Customer
SCOR Model
Supply Chain Council & Supply Chain Operations Reference (SCOR) Model Overview
Supply-Chain Council, Inc. www.supply-chain.org
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(Integrated Components)
Deliver Return Source Return Make Deliver Return
Plan
Source Return
Make
Deliver Return
Source Return
Make
Deliver Return
Source Return
Suppliers Supplier
Supplier
Your Company
Customer
Customers Customer
Long Range Planning
Demand Planning
Master Production Schedule Logistics Materials Planning Customer Order Management Procurement Factory Planning
Product & Component Design
Supply Chain Planning
Mid-Term Planning / S&OP
Short -Term Planning
Time Horizons
Years / Quarters
Quarters / Months / Weeks
Weeks / Days / Minutes
Supply-Chain Management
Planning, organizing, directing, & controlling flows of materials
Begins with raw materials Continues through internal operations Ends with distribution of finished goods
Involves everyone in supply-chain
Example: Your suppliers supplier
Objective: Maximize value & lower waste

Supply Chain Modeling and Analysis, February 2005 ?^
The SCM Advantage

The key objective of SCM is to create and maintain an efficient and effective integrated network of business relationships. Effective SCM can ensure more efficient and accurate order processing, reductions in inventory levels, narrower market-window achievement, lower transaction and materials costs, as well as strategic relationships with suppliers
If you get it right
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What might go wrong?

Inadequate or poor quality planning Inaccurate or unrealistic forecasts Unreliable production, inventory, and other business data Unreliable supply chain partners Lack of awareness of how IT can help
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SC Performance Drivers
Supply Chain
INPUTS
OUTPUTS
PERFORMANCE DRIVERS
Quality Service Flexibility Cost Social

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What is a World Class Supply Chain?
??
Supply Chain Vision

Deliver perfect flow of material, product, information and cash to/from material sources and end users:
Smooth Continuous Efficient Minimum Cost
Materials Factory Distribute
Info rma tion
Store
ts duc s Pro ervice &S
Customers & Consumers
??
??
One Size Does Not Fit All

Unilever operates in many unique markets with different:
Consumer Requirements Distribution Channels Customer Structures Competitors
These markets require a different supply chain response and it is this response that we must focus on
How to Have a World Class Supply Chain?

We must create a competitive advantage from supply chain everywhere that we operate. To do this the supply chain must have the ability to: Identify the supply chain capabilities that deliver a competitive advantage Continuously monitor the market for changing requirements Rapidly build and implement these capabilities
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Critical Success Factors Total consumer and customer focus Process organisation with cross-functional

teams Understanding and use of trade-offs Performance measurement Integrated information systems Integrated planning systems - one set of plans Appropriate manufacturing technology Supplier partnerships
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Magnitude of Supply Chain Management

Compaq estimates it lost $0.5 billion to $1 billion in sales in 1995 because laptops were not available when and where needed When the 1 gig processor was introduced by AMD (Advanced Micro Devices), the price of the 800 meg processor dropped by 30% P&G (Proctor&Gamble) estimates it saved retail customers $65 million (in 18 months) by collaboration resulting in a better match of supply and demand
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Quantitative and analytical methods for Supply Chain Management modeling, analysis and design
Day 1: Forecasting. Day 2: Inventory Management. Day 3: Production and aggregate planning. Day 4: Distribution decisions and Design of distribution networks.
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??

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Supply Chain Modeling and Analysis

Supply Chain Modeling and Analysis, February 2005

Supply Chain Modeling and Analysis Agenda

Supply Chain Modeling and Analysis Agenda

What is a Supply Chain?

Supply Chain Modeling and Analysis, February 2005

A Generic Supply Chain

Supply Chain Modeling and Analysis, February 2005

Cycle View of Supply Chains

Detergent supply chain:

Chemical manufacturer (e.g. Oil Company)

Chemical manufacturer (e.g. Oil Company)

Supply Chain Modeling and Analysis, February 2005

Supply Chain Management

Supply Chain Modeling and Analysis, February 2005

Importance of Supply Chain Management

Glitch-Wrong Material, Machine is Down effect snowballs

High inventories through the chain

High landed costs to the shelf

Eliminating inefficiencies in supply chains can save millions of $.

SCM Generated Value

Supply Chain Modeling and Analysis, February 2005

SCM in a Supply Network

Supply Chain Material and Information Flows

Supply Chain Modeling and Analysis, February 2005

Supply Chain Management

Supply Chain Modeling and Analysis, February 2005

General Supply Chain Model

Supply Chain Modeling and Analysis, February 2005

Supply Chain Management

Long Range Planning

Product & Component Design

Supply Chain Planning

Mid-Term Planning / S&OP

Short -Term Planning

Quarters / Months / Weeks

Weeks / Days / Minutes

Supply Chain Modeling and Analysis, February 2005

Involves everyone in supply-chain

Example: Your suppliers supplier

Objective: Maximize value & lower waste

The SCM Advantage

What might go wrong?

Supply Chain Modeling and Analysis, February 2005

Quality Service Flexibility Cost Social

What is a World Class Supply Chain?

Supply Chain Modeling and Analysis, February 2005

Supply Chain Vision

Info rma tion

Supply Chain Modeling and Analysis, February 2005

ts duc s Pro ervice &S

Customers & Consumers

One Size Does Not Fit All

How to Have a World Class Supply Chain?

Supply Chain Modeling and Analysis, February 2005

Supply Chain Modeling and Analysis, February 2005

Magnitude of Supply Chain Management

Supply Chain Modeling and Analysis Agenda

Supply Chain Modeling and Analysis, February 2005

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