Transcript Document 7298169

Supply Chain Management
Lecture 15
Outline (last week)
• February 25 (Today)
– Network design simulation description
– Chapter 8
– Homework 4 (short)
• March 2
– Chapter 8, 9
– Network design simulation due before 5:00pm
• March 4
– Simulation results
– Midterm overview
– Homework 4 due
• March 9
– Midterm
Outline
• March 2 (Today)
– Network design simulation
– Chapter 8, 9
• Chapter 8
– Sections 1, 2, and 3 only
• Chapter 9
– Sections 1, 2, and part of 3 only
• March 4
– Simulation results
– Midterm overview
• Important sections
• Formula sheet
• Practice questions
• March 9
– Midterm
Simulation Assignment (25%)
• Design the supply chain network for Jacobs Industries on
the fictional continent of Pangea
– Jacobs only product is an industrial chemical that can be mixed
with air to form a foam (used in air conditioner retrofit kits)
Demand
• Average demand for Jacob’s product in Pangea
– Existing and new markets
140
120
120
100
100
80
60
80
40
60
20
40
0
1
20
145 289 433 577 721 865 1009 1153 1297 1441
0
1
145 289 433 577 721 865 1009 1153 1297 1441
18
16
14
18
12
16
10
8
14
18
6
12
16
250
10
14
8
12
6
10
4
8
2
6
0
4
1
2
0
1
142 283 424 565 706 847 988 1129 1270 1411
142 283 424 565 706 847 988 1129 1270 1411
4
2
0
1
142 283 424 565 706 847 988 1129 1270 1411
Assignment
• Jacobs management would like to design a supply chain
network for Pangea. It’s current network consist of a
factory in Calopeia with a capacity of 20. You have been
hired to suggest a network design that will maximize
profits for Jacobs Industry. Designing such a network is
complex and includes the following decisions:
– Should the factory in Calopeia be expanded?
– Should factories in other regions be built? If so, what should their
capacity be?
– What regions should each factory serve?
Serve region?
Calopeia
Sorange
Tyran
Entworpe
Fardo
Factory?
YES
Total
Capacity?
40
Calopeia
YES
Sorange
YES
Tyran
YES
Entworpe
YES
Fardo
YES
YES
20
YES
YES
YES
YES
NO
Questions
• What to do with Fardo?
– Service Fardo demand from the mainland
– Service Fardo demand from local (to be built) factory
– Don’t service Fardo demand
• What to do with Calopeia?
– Add capacity to existing factory or not
– Service other regions or not
• What to do with Sorange, Entworpe, and Tyran?
– Built new factory or not
– Service other regions or not
From Forecasting to Planning
2500
Forecast
Demand
2000
1500
Capacity
1000
500
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Month
How should a company best utilize the
resources that it has?
From Forecasting to Planning
2500
Forecast
Demand
2000
1500
Capacity
1000
500
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Month
How much should be produced and
when?
Aggregate Planning
• Aggregate planning
– A general plan that determines ideal levels of capacity,
production, subcontracting, inventory, stockouts, and
even pricing over a specified time horizon (i.e. planning
horizon)
•
•
•
•
•
•
•
Production rate (number of units to produce)
Workforce (number of workers needed)
Overtime (number of overtime hours)
Machine capacity level (machine capacity needed)
Subcontracting (subcontracted capacity)
Backlog (total demand carried over to future periods)
Inventory on hand (total inventory carried over to future periods)
Aggregate Planning
• Aggregate planning involves aggregate decisions rather
than stock-keeping unit (SKU)-level decisions for a
medium term planning horizon (3-18 months)
All-Terrain
Vehicle (ATV)
Engine
Assembly
Model A
Model B
Transmission
Model C
Automatic
Manual
Aggregate Planning Strategies
• Basic strategies
– Level strategy (using inventory as lever)
• Synchronize production rate with long term average demand
• Swim wear
– Chase (the demand) strategy (using capacity as lever)
• Synchronize production rate with demand
• Fast food restaurants
– Time flexibility strategy (using utilization as lever)
• High levels excess (machine and/or workforce) capacity
• Machine shops, army
– Tailored strategy
• Combination of the chase, level, and time flexibility strategies
Case Study Results
• In general, the chase strategy is used when
– Products are valuable
– Products are bulky or hard to store
– Products are perishable or carry an appreciable risk of
obsolescence
– High variety
• Accurate sales predictions are hard to obtain making stockpiling
hazardous
• Fashion items
• In general, the level strategy is used when
– Operators take a long time to become proficient at critical tasks
– Products with negligible probability of obsolescence
– Low variety
• Forecasts are quite good
Aggregate Planning in Services
Is aggregate planning useful for the service
industry?
What is the major variable in managing supply
for service industries?
Managing Supply
• Managing capacity
–
–
–
–
Time flexibility from workforce
Use of seasonal workforce
Use of subcontracting
Use of flexible facilities
• Managing inventory
– Built inventory for high-demand or predictable demand products
– Use common components across multiple products
Managing Demand
• Pricing and other forms of promotion
– Timing of promotion is important
Timing of Promotion
Why would a firm want to offer pricing
promotions during its low-demand periods?
Why would a firm want to offer pricing
promotions during its peak-demand periods?
Why would a firm want to offer pricing
promotions during its low-demand periods?
Market growth – new customers
Forward buying – existing customers move up purchases
Why would a firm want to offer pricing
promotions in its peak-demand periods?
• Price sensitivity is higher during periods of peak
demand
• Brands that are losing market share reduce prices
Stealing share – customers substitute the firm’s product for a
competitor product
Managing Demand
• Pricing and other forms of promotion
– Timing of promotion is important
• Demand increases from promotion can result from a
combination of three factors:
– Market growth (increased sales, increased market size)
• Increase in consumption from both new and existing customers
• Example: Toyota Camry attracting buyers who were considering
lower-end models
– Stealing share (increased sales, same market size)
• Product substitution (overall demand stays the same)
• Example: Toyota Camry attracting buyers who were considering
Honda Accord
– Forward buying (same sales, same market size)
• Customers move up purchases (does not increase sales)
Factors Affecting Promotion Timing
Factor
Impact on Timing of Promotion
High forward buying
Favors promotion during low-demand periods
High ability to steal
market share
Favors promotion during peak-demand periods
High ability to increase
overall market
Favors promotion during peak-demand periods
High margin
Favors promotion during peak-demand periods
Low margin
Favors promotion during low-demand periods
High holding cost
Favors promotion during low-demand periods
High costs of changing
capacity
Favors promotion during low-demand periods