10/15/2015

Slides

BusinessLogisticsandSupplyChain
Management
AsvinGoel
asvin.goel@theklu.org

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Supplychainstrategy

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Pullbasedsupplychain
Inapullbasedsupplychain,productionand
distributionareinitiatedafterthedemandfor
specificproductsbecomesknown.

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Pushbasedsupplychain
Inapushbasedsupplychain,productionand
distributiondecisionsarebasedonforecastsand
initiatedbeforedemandbecomesknown.

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Whataretheadvantagesanddisadvantagesofpush
andpullbasedstrategies?

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Inpushbasedsupplychains,productsareproduced
beforedemandisknown.
Thus
someproductsmaybeproducedforwhichthere
willneverbeademand
somedemandmayhavetobeturneddown
becausetheproducthasnotbeenproduced

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Inpullbasedsupplychains,productsareproduced
afterdemandisknown.
Thustheleadtimemaybedisproportionatelyhigh
sothatsomedemandmaybelost.

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Unlikepullbasedsupplychainswithsmallorder
sizes,pushbasedsupplychainscanexploit
economiesofscaleinproductionanddistribution.

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Mixedpush/pullbasedsupplychain
Inmostsupplychainssomeproductionand
distributiondecisionsarebasedonforecastsand
othersarebasedonactualdemand.

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Decouplingpoint
Thedecouplingpointorpushpullboundaryisthe
pointatwhichthesupplychainstrategychanges
fromapushbasedtoapullbased.

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Thedecouplingpointcanbeanywhereinthesupply
chain.
Rawmaterial
supplier

Part
supplier

Component
supplier

Producer

Wholesaler

Retailer

Final
consumer

Whereisthebestpositionforthedecouplingpoint?

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Factorsinfluencingthechoiceofstrategy
Themainfactorsforpositioningthedecoupling
pointare
economiesofscale
leadtime
demanduncertainty

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Productionofvariants
Consideraproductthatcanbeproducedindifferent
variants.
Thisactivityis
specifictothe
productvariant

Producevariant

Activity1

Thisactivityis
performedforall
productvariants

Product
differentiation
actvity

Activity2

Thisactivityis
performedforall
productvariants

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Maketoorder
Produce
variant1

Produce
variant2

Deliver

Order
received

Demand
fulfilled

Produce
variant3

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Maketostock
Produce
variant
Demand
anticipated

Store
variant

Deliver
Order
received

Demand
fulfilled

Recycle
Product
obsolete

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Demanddidnot
realise

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Mixedmaketostockandmaketoorder
Activity1
Demand
anticipated

Product
differentiation
activity

Storeunfinished
product

Activity2

Deliver

Order
received

Demand
fulfilled

Recycle
Unfinished
productobsolete

Demanddidnot
realise

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Howdowedecideonthebeststrategy?

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Example:Computers

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Personalcomputersarecomposedofseveral
differentcomponents,e.g.chassis,motherboard,
CPU,memory,harddisk,graphicscard,operating
system,etc.Forallofthedifferentcomponentsthere
areseveraloptionstochoosefrom.

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Givenk componentswithn optionstherearen

differentalternativeconfigurations.

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Traditionally,mostpersonalcomputersweresoldin
stores.Thus,thedecisionontheconfigurationofthe
computerhadtobemadebeforeactualdemandwas
known.

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Assume,thereareonlytwochoicesforchassis,
motherboard,CPU,memory,harddisk,graphics
card,andoperatingsystem.Thenthereare2 = 128
configurations.
7

Whatarethechancesthatyougointoastoreand
findyourfavoriteconfiguration?
Whatcanastoredotoincreasechancesthatyou
findyourfavoriteconfiguration?
Whatcanastoredotoincreasechancesthatyou
willbuyacomputerevenifitdoesnothaveyour
favoriteconfiguration?

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Ifcomputersareassembledafterdemandisknown,
theexpensivespaceinretailstorescanbesavedand
heavydiscountsforunpopularconfigurationscanbe
avoided.

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Today,somecompaniesbuildalargeshareofthe
computersbasedonactualorders.
Inanexchangeforalongerleadtime,companies
benefitfromonlyhavingtostorepartsand
componentsratherthanspaceconsuming
assembledcomputersthatmaybecomeobsoleted
duetothespecificconfiguration.
Thisbenefitcanbesharedwiththeconsumersso
thattheyarewillingtowaitforacomputertobe
assembledandshipped.

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Exercise

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Letshavealookattwodifferentsupplychainsinthe
clothingindustry.

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H&Msupplychain

Source:Sourcemap

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Zarasupplychain

Source:Sourcemap

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Whataretheadvantagesanddisadvantagesofthe
differentsupplychainstrategiesofH&MandZara?

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Postponement

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Consideragainaproductthatcanbeproducedin
differentvariants.
Thisactivityis
specifictothe
productvariant

Producevariant

Activity1

Thisactivityis
performedforall
productvariants

Product
differentiation
actvity

Activity2

Thisactivityis
performedforall
productvariants

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Thedesignoftheprocessrequiresthattheproduct
differentiationactivityisperformedbeforeanother
activitywhichisthesameforallproductvariants.

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Example
Foranelectricdevicewehavetoattachthecountry
specificpowerplugandinstructionsbefore
packaging.

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Byredesigningtheprocessand/ortheproduct
layoutwemaybeabletomovetheproduct
differentiationactivitytoalaterpoint.

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Example
Wecandopackagingwithoutpowerplugand
instructions.However,wehavetobeabletoadd
themlater,e.g.byattachingagenericsocketand
addingcountyspecificplugandinstructionslateron.

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Redesignedprocess
Producegenericproduct

Activity1
Demand
anticipated

Activity2

Product
differentiation
activity

Storegeneric
product

Deliver

Order
received

Demand
fulfilled

Recycle
Genericproduct
obsolete

Demanddidnot
realise

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Bypostponingproductdifferentiationactivitiesas
muchaspossible,wegenerateagenericunfinished
productthatcanbecustomisedforthespecific
demandwhenthatdemandbecomesknown.

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Bythiswemayincreasethecostoftheprocessa
little,however,wecanavoidthatcustomised
productsareavailableformarketswherethereisno
demandandothersareoutofstockinmarkets
wherethereisdemand.

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Postponementcanalsobeusedtogainaccuracyby
usingshorttermratherthanlongtermforecasts.
Producegenericproduct

Activity1
Demand
anticipated

Activity2

Updateforecast

Product
differentiation
activity

Store

Deliver
Order
received

Demand
fulfilled

Recycle
Genericproduct
obsolete

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Demanddidnot
realise

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Postponementcanalsoallowfornewdistribution
strategiese.g.togainaccesstodistantmarketsby
outsourcing.
Produceanddelivervariant
Producegenericproduct
Product
differentiation
activity

Storegeneric
product

Activity1

Activity2

Demand
anticipated

Deliverto
regional
logistics
provider

Deliverto
customer

Order
received

Recycle
Genericproduct
obsolete

Inhouse

Outsourcedto
logistics
provider

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Summary
Wehadabrieflookpushandpullbasedsupply
chains
Westudiedhowpostponementcangenerate
benefits

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Afterthissessionstudentsshouldbeableto
describehowthelocationofthedecouplingpoint
caninfluencesupplychainperformance
describewhyandhowpostponementcangenerate
benefits

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