LOGISTICS & SUPPLY CHAIN MANAGEMENT Introduction & Course Outline
I Nyoman Pujawan, Ph.D, CSCP Professor of Supply Chain Engineering Department of Industrial Engineering ITS SURABAYA
Text Books The following text books are recommended, but not required: • Chopra, S., and Meindl, P. (2007). Supply chain management: Strategy, planning, and operations. 3rd Ed. New Jersey - Prentice-Hall. • Pujawan, I N. & Mahendrawathi Er. (2010). Supply Chain Management. 2nd Edition, Guna Widya
Pujawan, N. & Mahendrawathi (2010). Supply Chain Management. Edisi Kedua, Guna Widya.
EVALUATION • Exam 1 • Exam 2 • Tugas2 dll
35% 35% 30%
Agenda • Introduction to Logistics & SCM • Supply Chain Strategy • Demand Management, Inventory Control, Information Distortion • Supply Management • Network design • Transportation and distribution • Warehousing • Supply Chain Process & Performance • Technology in Supply Chain
Lecture 1 Introduction to Logistics & Supply Chain Management
Rail to truck , joint decision [transport, MH, storage] “Physical Distribution” 1963: National Council of Physical Distribution
Early use of term “Third party logistics” First time use of term “Supply Chain”
1960s 1940s, 1950s Unit load (Pallet) Intermodal container
ERP and IT fueled further Logistics
1982 1974
SOLE was formed
Nyoman Pujawan, 2014: dari berbagai sumber
Supply Chain Management: program is everywhere
1990s 1985 Council name changed to: Council of Logistics Management to reflect integration spirit
2002 1999
2005
ISCM Surabaya Widespread use of the term “Supply Chain Management”
Council name: Council of Supply Chain Management Professionals
Top Supply Chain Players 2012 (Gartner) TOR – ROA – Revenue Growth
10,1 – 4.4% – 37.7% 142,4 – 16.0% – 7.2%
74,1 – 20.2% – 51.5%
35,6 – 6.8% – 2.7%
5,5 – 9.2% – 2.5% 5,8 – 13.0% – 19.7%
The objective of a supply chain is to deliver value to customers in a cost effective way
Supply Chain Should Have A Strategy for Delivering Value to Customers Company
Customer Value Proposition
SC Strategy
High fashion content at a reasonable price
Speed to market
Everyday low pricing
Cost efficiency
Market responsiveness
Responsiveness through adjusting supply to demand on hourly basis
Product innovation
Efficiency through outsourced manufacturing and logistics
Customer experience
Responsiveness through configure-to-order
Adapted from Simchi-Levi, 2011
Supply Chain Management
What are happening before you can drink a cup of coffee?
Who did the processes?
And where they took place?
http://www.slideshare.net/cfsc/leveraging-institutional-dollars-for-a-just-and-healthy-food-system-coffee-supply-chain
Apparel Supply Chain
http://www.supplychain247.com/article/global_supply_chains_deciding_the_way_forward
A product flows through a very long process before consumed by the customers
How can these customers obtain products with high quality, competitive price, and quick response?
What is SC? • A series (or network) of companies who work collectively to make and deliver products and services to the end customers. This span from the raw materials extractors (at the upstream end) to the retailers / shops (at the downstream end). • In a SC there are three flows: materials, information, and cash / funds.
SIMPLE SC STRUCTURE UPSTREAM
SUPPLIER
DOWNSTREAM
MANUFAC TURER
DISTRIBU TOR
WHOLESA LER
RETAILER
physical flow
Materials/products, returns Payments flow
Cash, invoice, pricing, credit terms flow information flow
Capacity, delivery schedule, orders, point of sale
END CUSTOMER
What is a Supply Chain? • All stages involved, directly or indirectly, in fulfilling a customer request • Includes manufacturers, suppliers, transporters, warehouses, retailers, customers • Within each company, the supply chain includes all functions involved in fulfilling a customer request (product development, marketing, operations, distribution, finance, customer service) • All stages may not be present in all supply chains (e.g., no retailer or distributor for Dell)
What is Supply Chain Management
SUPPLY CHAIN MANAGEMENT DEFINITION • A process orientation, integrated approach to procuring, producing, and delivering products and services to customers (MIT) • A collaborative-based strategy to link cross enterprise business operations to achieve a shared vision of market opportunity (D.J. Bowersox, Michigan State) • The delivery of enhanced customer and economic value through synchronized management of the flow of physical goods and associated information from sourcing to consumption (LaLonde, Ohio State) • The process of strategically managing the procurement, movement and storage of materials, parts, and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of orders (Martin Christopher, Cranfield University)
Supply Chain Processes Supplier selection
Product development
Distribution Management
Sourcing
Production Planning
Demand forecast
Subcontracting
Inventory Control
Event Management
Performance monitoring
Warehouse Management
PLC Management
Supplier development
Resource Planning
Customer service
Supplier involvement in product development
Sales & Operations Planning
Vendor Managed Inventory
Collaborative Planning, Forecasting & Replenishment
SUPPLY CHAIN MANAGEMENT FUNCTIONS Two basic functions: Physically converting raw materials and components into products and delivering them to the end customers. Related to physical costs
Make sure that products/services delivered satisfy customer’s aspiration.
Related to market mediation costs
Supply Chain Processes • Physical – – – – –
Pengadaan Produksi Transportasi Pergudangan Penanganan retur
• Market Mediation – – – –
Promosi Perancangan produk Survey pasar Diskon harga (markdown)
EVOLUTION OF INTEGRATION (Adapted from Christopher, 1998)
Purchasing
Material Ctrl
Materials Mgmt
Suppliers
Production
Mfg. Mgmt
Internal SC
Sales
Distribution
Customers
Distribution
Maturity Model of SCM
Extended enterprise
Integrated enterprise Multiple dysfunction
Semifunctional enterprise
Dell’s Model monitor
A survey of SCM Progress by Computer Sciences Corp. and Supply Chain Management Review Survey (2003): Wal-Mart & Dell far and away received the most number of mentions for ‘best in class’ SC.
computer assembly
DELL (Texas)
SONY (Mexico)
Assembly point Customer order
CUSTOMER Airbone takes monitor & computer assembly and send them to the customers
The best computer company is the one that does not make it! (Jarillo, 2002)
Case Study 2: Zara Deliver twice a week Stores are over 1500 across the globe Only 15-20% of sales are with markdown price
Supply Chain is Going Global
Economic reasons for a global supply chain
https://operationsroom.wordpress.com/2013/05/09/will-the-bangladeshi-factory-collapse-change-globalapparel-supply-chains/
Supply Chain is Going Global
http://gifsgallery.com/supply+chain+gif
Tugas 1 • Amati supply chain sebuah produk / perusahaan • Gambar strukturnya • Gambar aliran produk dan informasi • Identifikasi persoalan • Buat beberapa rekomendasi perbaikan
Supply Chain Strategy
Diskusi Bandingkan antara air dalam kemasan dengan HP dari sisi: • Ketidakpastian pasar yang dihadapi • Value proposition (competitiveness factor) • Pricing strategy • Capacity strategy • Transportation strategy
SUPPLY CHAIN MANAGEMENT FUNCTIONS Two basic functions: Physically converting raw materials and components into products and delivering them to the end customers. Related to physical costs
Make sure that products/services delivered satisfy customer’s aspiration.
Related to market mediation costs
Supply Chain Processes • Physical – – – – –
Pengadaan Produksi Transportasi Pergudangan Penanganan retur
• Market Mediation – – – –
Promosi Perancangan produk Survey pasar Diskon harga (markdown)
material
produksi
transport
simpan
marketg
markdown
margin
material
produksi
transport
simpan
marketg
markdown
margin
Different Focus of Supply Chains
Efficient supply chain Emphasis on physical activities
Market responsive supply chain Emphasis market mediation activities
Different Product Characteristics IN N O V A TI V E
F U N C TI O N A L
Product Types (Reflect Market Requirements) Aspek
Fungsional
Inovatif
Siklus hidup
Panjang, bisa lebih dari 2 tahun
Pendek, antara 3 bulan sampai 1 tahun
Variasi per ketegori
Sedikit, 10 – 20 variasi
Banyak, bisa mencapai ribuan
Volume per SKU
tinggi
rendah
Peramalan permintaan
Relatif mudah, akurasi tinggi
Sangat sulit, kesalahan ramalan tinggi
Tingkat kekurangan produk (stockout rate)
Hanya 1% - 2%
Bisa sampai 10% - 40%
Kelebihan persediaan di akhir musim jual
Jarang karena musim jual sangat panjang
Sering terjadi
Biaya penurunan harga jual (markdown)
Mendekati 0%
10 – 25%
Marjin keuntungan per unit yang terjual dengan harga normal
rendah
tinggi
Elements of SC Strategy
SC Strategy Facility location
Production system
Inventory
Transport
Supply
Product develop ment
Two Distinctive SC Strategies (reflect resource consolidation) Keputusan taktis
Efisien
Responsif
Lokasi fasilitas
Tempatkan pabrik di negara yang ongkos tenaga kerjanya murah.
Cari lokasi yang dekat pasar, punya akses tenaga terampil dan teknologi yang memadai
Sistem produksi
Tingkat utilitas sistem produksi harus tinggi
Sistem produksi harus fleksibel dan ada kapasitas ekstra
Persediaan
Perlu upaya meminimasi tingkat persediaan
Diperlukan persediaan pengaman yang cukup di lokasi yang tepat
Transportasi
Pengiriman TL / CL atau subkontakkan ke pihak ketiga
Diperlukan transportasi cepat. Bila perlu tetapkan kebijakan LTL / LCL
Pasokan
Pilih supplier dengan harga dan kualitas sebagai kriteria utama
Pilih supplier berdasarkan kecepatan, fleksibilitas, dan kualitas
Pengembangan produk
Fokus ke minimasi ongkos
Gunakan modular design dan tunda differensiasi produk sebisa mungkin (postponement)
Strategic Fit
responsif
Tidak cocok
Strategic Fit
Tidak cocok efisien fungsional
inovatif
Differences In DP / OPP Strategies perancangan produk
MTS ATO
MTO ETO
fabrikasi
perakitan
pengiriman
Moving DP / OPP Backward / Forward • What would be the implications on: –Inventory levels? –Lead times?
Postponement • Manufacturing Postponement manufacturing postponement is to retain the product in a neutral and non-committed status as long as possible in the manufacturing process. This means to postpone differentiation of form and identity to the latest possible point
Why Manufacturing Postponement? • • • •
To support mass customization Large product variety with uncertain mix Many common components / sub-assemblies Relatively short lead time for final configuration (compared to waiting time tolerated by customers) • Stages often postponed: final assembly, packing, labeling, color mixing, etc.
An Illustrative Case • You manage a company producing toys. Assume you have 2 basic forms and 10 different colors. The current process of producing the toys are: – Buy standard A1 paper – Color the paper – Cut it into two different forms
• Draw the production process • Do you see any problem in your production system? How would you improve it?
The concept of Manufacturing Postponement Customized products
The concept of Manufacturing Postponement Customized products
WIP of colored papers
Material (white paper) inventory
Coloring process
Paper Cutting process
The Concept of manufacturing Postponement • How if the mix of colors becoming more uncertain? • How if the number of color options grows to 100? • How if the production process is arranged differently?
The concept of Manufacturing Postponement Customized products
The concept of Manufacturing Postponement Customized products
Standard components
Standard raw material
Paper Cutting process
Stable volume, uncertain mix Too risky to differentiate early!!!
Coloring process
An Illustration of Manufacturing Postponement
Standard items, differs only in size
Customization process, products have different colors
UNITED COLORS OF BENETTON
A Change in Decoupling Point Postponement
Benetton Spin or Purchase Yarn Dye Yarn
Finish Yarn Manufacturing Garment Part
Join Parts
Spin or Purchase Yarn
Manufacturing Garment Part Join Parts Dye Yarn
Finish Yarn
Benetton Postponement • Why the change? – The change enables Benetton to start manufacturing before color choices are made
• What does the change result in? – Delayed forecasts of specific colors – Still use aggregate forecasts to start manufacturing early – React to customer demand and suggestions
• Issues with postponement – Costs are 10% higher for manufacturing – New processes had to be developed – New equipment had to be purchased
Modelling Postponement Impact
Postponement Example • Demand for Blue and Green t-shirts – 50% probability 100 – 50% probability 200
• Production alternatives Produce 150 of each color ahead of time Produce 300 plain t-shirt which can be dyed after demand is observed
Postponement: Example First Alternative – 25% probability -- short 50 of each – 25% probability -- extra 50 of each – 50% probability -- short 50 of one, extra 50 of the other
Second Alternative – 25% probability -- short 50 of each – 25% probability -- extra 50 of each – 50% probability -- no shortage or extra
Perhitungan Expected Profit • Each t-shirt has a cost of IDR 100,000,- and sold at normal price of IDR 200,000,- but if not sold at normal price it has to be discounted at IDR 50,000,• What is the expected profit for the above two alternatives?