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ISEN 315 Spring 2011 Dr. Gary Gaukler. Exam 2 Review. Exam 2 Review. Exam 2 Review. Exam 2 Review. Push and Pull Production Control. “Push” system: Determines when and how much to produce based on forecasts of future demands
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Push and Pull Production Control “Push” system: Determines when and how much to produce based on forecasts of future demands “Pull” system: Initiates production of an item only when the item is requested
Pull vs Push Systems • By pulling material in small lots, inventory cushions are removed, exposing problems and emphasizing continual improvement • Manufacturing cycle time is reduced • Push systems dump orders on the downstream stations regardless of the need
Supply Chain What is a Supply Chain? Network of entities: • Suppliers (and their suppliers) • Manufacturers of semi-finished and finished products • Distributors • Customers
Supply Chain Flows Downstream flows: Upstream flows:
Challenges in Supply Chains • Complex networks • Complex products • Uncertainties: • Pressure points:
Improving a Supply Chain Initially can focus on individual nodes: • Points to review: • Stocking levels • Service levels • Improve existing operations
Control Knobs • Service level target • Supplier lead times: average and variability • Review periods • Process cycle times • Process variability • Forecast error • Capacity
Bullwhip Effect Bullwhip: Increasing variability of orders up the supply chain
The Bullwhip Effect • Consequences of the Bullwhip:
Bullwhip Picture borrowed from Hau Lee
45,000 350,000 40,000 300,000 35,000 250,000 30,000 25,000 200,000 20,000 150,000 15,000 100,000 10,000 50,000 5,000 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Bullwhip in Electronics Industry Peripheral Product Consumables 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 week week Unit orders from a major retailer to manufacturer Total unit sales at outlets of retailer Slide borrowed from Hau Lee
What Causes this Effect? Lee et al. 1997: Reactions to demand signals Order batching Price fluctuations Shortage gaming
What Causes this Effect? Reactions to demand signals Order batching Price fluctuations Shortage gaming