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Supply chain control

Supply chain control. Sanjay Sarma, MIT (Currently on leave-of-absence as CTO of OATSystems). Some caveats. This is a very speculative talk Academic rigor has not been applied No paper written No proofs No formulations presented Simply brainstorming. In real life: planning and execution.

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Supply chain control

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  1. Supply chain control Sanjay Sarma, MIT(Currently on leave-of-absence as CTO of OATSystems)

  2. Some caveats • This is a very speculative talk • Academic rigor has not been applied • No paper written • No proofs • No formulations presented • Simply brainstorming

  3. In real life: planning and execution • You plan • and you execute • This talk has to do with execution • The tie between the two is strong. • poor execution impacts performance • performance impacts forecasts • forecasts impact the next plan and so on. • But today the exploitation of that is weak • Systems not observable • Systems not controllable

  4. What is a supply chain plan? • A sequence of actions (and some control policies) related to material movement • Move this amount of inventory • At this time • To these locations • Supply chain plans updated weekly • Hope everything works out Does it?

  5. Evidence points to poor execution • Inventory Management: • Inventory uncertainty: • 65 % of 370,000 records inaccurate (Raman et. al.) • Transportation uncertainty: Perfect delivery is dismal • Stock-outs: • Average 9% out of stock in retailers world-wide • Lost sales due to stock-outs: 4% (Gruen. et. al.) • Overstock: Huge channel inventories • CPG average 11 weeks inventory • Retailers average 7 weeks inventory • Locked up capital, industry-wide (Industry studies.) • Expiry • Drug FIFO’s • Recalls

  6. Something goes wrong in the execution • Mis-packaging • Misplacements • Mis-shipments • Delays/non-action • Shrinkage • “Expansion” • FIFO violations, expiry • Signal errors

  7. Front Back STAGING SORTING TRANSFER SORTING TRANSFER Goods transfer in the retail supply chain: Good intentions Retailer’s DC Manufacturing plant Manufacturer’s DC Retailer BASKET TRANSFER AGGREGATION TRANSFER CONTAINER PALLET CASE SLEEVE SINGLES Themes: timely transfer error-proof operations minimize shrinkage

  8. Front Back STAGING CONTAINER SORTING TRANSFER SORTING TRANSFER PALLET CASE SLEEVE SINGLES Don’t ask Too much inventory Errors Shrinkage Wasted effort Mis-shipments Shrinkage Errors Inefficiencies Shrinkage Mis-shipments Holes Extras wasted actions PI resets Why are CPG and retail industries interested? Retailer’s DC Manufacturing plant Manufacturer’s DC Retailer BASKET TRANSFER AGGREGATION TRANSFER

  9. RFID adds something special • Observability (in the loose sense) • Serialized • Many points in the supply chain (internal states) • Real-time, non-line-of-sight • On-demand • Sensory • Is the system controllable? • Early research says yes in principle, even in the face of error • Kang, Y. and Gershwin, S. B. 2003 • Atali, Lee and Ozer, 2004 • Hardgrave, B., Waller, M. and Miller, R. “Does RFID reduce OOS? A Preliminary Analysis.” Technical Report, Information Technology Research Institute, Sam Walton School of Business, University of Arkansas, 2005. • Control it everywhere.But: where is the actuator?

  10. Actuator = new business processes • Different tick rates and organizational reach • Internal actuators • Wipes on conveyors • AutoPickLists on handhelds (perhaps driven by Akyut’s algorithm) • Updated lead-times • Emergency orders • External actuators • The ability to message a truck driver • The ability to message the retailer’s handheld • The ability to send your people to the facility

  11. Why are plans so “batchy?” • Time delays in getting information • Slow computing • Lack of information – statistical significance • Perhaps RFID can move the needle

  12. time Planning versus Control High Level Plan Execution Sequence signal Ground Reality

  13. time Planning versus Control High Level Plan Execution Sequence Ground Reality Also makes the system more agile Will this bring manufacturing back to the US?

  14. IT Systems: past and present Business logic Business logic Data collection Business logic Data collection Data collection Business logic Data collection Distributed computing and control

  15. Summary • This industry is now tending to look at plan execution • Control policies around execution • Control policies include business process re-engineering Quality loss Preferred value

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