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 ?

Supply Chain Modeling and Analysis Agenda

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

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.

Supply Chain Modeling and Analysis, February 2005

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

Supply Chain Modeling and Analysis, February 2005

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
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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 Modeling and Analysis, February 2005

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

Supply Chain Modeling and Analysis, February 2005

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!

Supply Chain Modeling and Analysis, February 2005

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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
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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
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Supply Chain Modeling and Analysis, February 2005

Supply Chain Management

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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Supply Chain Modeling and Analysis, February 2005

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
Internal or External

Customers Customer

SCOR Model

Supply Chain Council & Supply Chain Operations Reference (SCOR) Model Overview
Supply-Chain Council, Inc. www.supply-chain.org

Supply Chain Modeling and Analysis, February 2005

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Supply Chain Management

(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
Internal or External

Your Company

Customer
Internal or External

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 Modeling and Analysis, February 2005

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

Supply Chain Modeling and Analysis, February 2005

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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 Modeling and Analysis, February 2005

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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

Supply Chain Modeling and Analysis, February 2005

ts duc s Pro ervice &S

Customers & Consumers

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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
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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

Supply Chain Modeling and Analysis, February 2005

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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

Supply Chain Modeling and Analysis, February 2005

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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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Supply Chain Modeling and Analysis Agenda

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.

Supply Chain Modeling and Analysis, February 2005

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