LOGISTICS & SUPPLY CHAIN MANAGEMENT

LOGISTICS & SUPPLY CHAIN MANAGEMENT Introduction & Course Outline I Nyoman Pujawan, Ph.D, CSCP Professor of Supply Chain Engineering Department of In...
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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?