Supply Chain Coordination & Information Integration

1. Supply Chain Coordination & Information Integration 第七單元(2) ：Supply Chain Coordination & Information Integration 郭瑞祥教授 • 【本著作除另有註明外，採取創用CC「姓名標示－非商業性－相同方式分享」台灣3.0版授權釋出】 1

2. Outline • Part I: Coordination in a supply chain • Part II: Information integration 2

3. Coordination in a Supply Chain - The Bullwhip Effect - 長鞭效應(Bullwhip Effect) CoolCLIPS網站 Codigofonte.net網站 Codigofonte.net網站 IC設備與 零件業 IC製造業 電腦周邊業 電腦組裝業 配銷業 臺灣大學 郭瑞祥老師 存 貨 存 貨 存 貨 存 貨 存 貨 Microsoft。 Microsoft。 Microsoft。 Microsoft。 Microsoft。 Microsoft。 3

4. Increasing Variability of Orders Consumer Sales Retailer ‘s Orders to Manufacturer 20 20 15 15 Order Quantity Order Quantity 10 10 5 5 0 0 Time Time Wholesaler’s Orders to Manufacturer Manufacturer’s Orders to Supplier 20 20 15 15 Order Quantity Order Quantity 10 10 5 5 0 0 Time Time 4

5. The Main Factors of Bullwhip Effect • Demand forecasting • Lead time • Batch ordering • Price fluctuating • Shortage gaming Microsoft。 5

6. Demand Forecasting • Each player in supply chain forecasts its demand by its order which is more variable than the customer demand. • When placing order, inventory policies such as (S,s) or (R,Q), lead time, and safety stock policy further distort the demand information. • Contributing factors • No visibility of end demand • Multiple forecasts 6

7. Solutions • Sharing of point-of-sale data • Implementing collaborative forecasting and planning • Designing single stage of control of replenishment (VMI) • Large retailers usually share their future order forecast by weighted binding promises, e.g., Dell shares 12-week forecast with the first 4-week forecast 100% confirm and next 8-week forecast 75% confirm. • It’s more important to share future demand forecast than to share the past customer demands. • Aggregate demand usually decreases the variability of the forecast. 7

8. Lead Time • Lead time is used to estimate the safety stock and reorder point. So when lead time increases, the variability in order quantities increases. • Lead time usually has a trade-off relationship with inventory. However, more accurate demand forecast andinstant information sharing could simultaneously decrease both. 8

9. Lead Time Reduction Solutions • Order lead time: the time it takes to produce and ship the item. • Information lead time: the time it takes to process an order. • Order lead time can be reduced through cross-docking. • Information lead time can be reduced through the use of electronic data interchange (EDI), E-market, or other tools. 9

10. Batch Ordering • For economic reason, orders are usually placed by a large quantity, called batch size, especially when (S,s) or (R,Q) policy is adopted. • Transportation strategies (full truckload quantities) add up to the reasons of batch ordering. • Contributing factors • High order cost • Full truck load economies 10

11. Solutions • EDI & computer-assisted ordering (CAO) • Discounted on assorted truckload, consolidated by 3rd party logistics • Regular delivery appointment • Volumeand not lot size discounts • Volumeand not lot size discounts 11

12. Price Fluctuation • Discount and promotion policies add up to the reasons of demand variability. • Customers and retailers usually stock up when prices are ready to increase. • Contributing factors • High-low pricing leads to forward buy • Delivery and purchase are not synchronized 12

13. Solutions Reduce both the frequency and the level of wholesale price discounting • Establishing an EDLP policy • Use CAO (computer-assisted ordering) or CRP (continuous replenishment program) to acknowledge the company the excessive costs of forward buying • Implement ABC (activity-base costing) system • Adopt limited purchase quantities • Adopt scan based promotions 13

14. Shortage Gaming • When retailers and distributors suspect that a product will be in short supply, and therefore anticipate receiving supply proportional to the amount ordered, inflated orders will occur. • When the period of shortage is over, the orders goes back to their regular level. • Contributing factors • Proportional rationing scheme • Ignorance of supply conditions • Unrestricted orders & free return policy 14

15. Solutions To prevent shortage situations, a supplier can • Share capacity and inventory information • Work with customers to place orders well in advance of the sales season • Charge penalty for exaggerated gaming • Allocate based on past sales. • Build trust and partnership 15

16. A Framework for Supply Chain Coordination 16

17. Designing a Relationship with Trust • Assess the value of the relationship • Identify operational roles and decision rights for each party • Create effective contracts • Design effective conflict resolution mechanisms 17

18. Outline • Part I: Coordination in a supply chain • Part II: Information integration 18

19. Information Driver • Role in supply chain: • Role in competitive strategy: • Characteristics of information required: • Connect various stages in SC • Crucial to daily operations in each stage • For growth need • For cost reduction • Accurate • Accessible timely • Right kind 19

20. Basic Components of Information • Supplier information • Manufacturing information • Distribution and retailing information • Demand information • Products, price, lead time, location, order status, modification, payment • Products, quantity, location, lead time, trade-offs, cost, batch size • Products, location, quantity, mode, price, stored quantity, lead time • Customers, price, location, quantity, forecast 20

21. What is e-Business? • Business transacted over the Internet • Is product information displayed on the Internet? • Is negotiation over the Internet? • Is the order placed over the Internet? • Is the order tracked over the Internet? • Is the order fulfilled over the Internet? • Is payment transacted over the Internet? 21

22. What is e-Business? • “The business-wide integration of processes, applications and organizational structure to create a high-performance business model in the internet economy” -- R. Kalakota & M. Robinson • “e-Business is about transforming key business processes with networking technology” -- K&M and IBM • “An e-Business is an organization that connects critical business systems directly to their critical constituencies via intranets, extranets and internet” -- IBM’s definition IBM e-business in the City(no longer available) 本作品轉載自(http://www.cleverstuff.net/images/IBM-e-business-in-the-City.jpg)，瀏覽日期2012/05/18，依據著作權法第46、52、65條合理使用。 22 Wikipedia

23. Business to Consumer Business Efficiency • Communication • Process Automation • Knowledge Management • Building Brands • e-commerce • Customer Service • Relationship Marketing Business to Business • Supply Chain • Time to Market • Communication The e-Business Environment The INTERnet INTRAnet e-business EXTRAnet The Application of Web Technology In Three Areas : Intranet, Intranets & Extranet 23

24. MRP MRP II Payroll HR GL AP FMIS AR Evolution of e-Business EDI EIS Distribution Planning Scheduling 1970s 1980s 1990s 2000s 24 Source: Business Online

25. EDI e-Commerce e-Business EIS BI Distribution APS/SCM Planning Scheduling MRP MRP II Payroll HR GL AP FMIS AR Evolution of e-Business CRM ERP 1970s 1980s 1990s 2000s 25 Source: Business Online

26. S C U U P S P T Supply Enterprise Customer L O Chain Resource Relationship Management Planning Management I M E E R R S S e-Business Architecture Business Value Business Strategy e-Commerce Knowledge Management Business Intelligent e-Business Enabling Web+IT Integration Technology Value Source: IBM 26

27. Basic Evaluation Framework • How does business on-line impact revenues? • How does business on-line impact costs? • Facility (site + personnel) • Inventory • Transportation • Information • Should the e-commerce channel position itself for efficiency or responsiveness? • Who in the supply chain can extract most value? • Is the value to existing players or new entrants? 27

28. The Computer Industry: Dell On-line Customer Order and Manufacturing Cycle Procurement cycles PUSH PROCESSES PULL PROCESSES Customer Order Arrives 28

29. Potential Opportunities Exploited by Dell • Revenue opportunities • 24 hour access for order placement • Direct sales • Providing customization and large selection information • Flexibility on pricing and promotion • Faster time to market • Efficient funds transfer - reduce working capital • Revenue negatives • Longer response time than store and no help with selection 29 WikimediaCommons

30. Potential Opportunities Exploited by Dell • Cost opportunities • Direct sales eliminating intermediary • Customer participation: Call center & catalog costs • Information sharing in supply chain • Reduce facility costs • Geographical centralization and reduced inventories • Postpone product differentiation to after order is placed using product platforms and common components • Outbound transportation costs increase 30 WikimediaCommons

31. Opportunities • Significant, but must be combined with component commonality, and build to order. Must move product customization to pull phase of supply chain and hold inventories as common components during the push phase • Opportunity most significant for new, hard to forecast products • Complements strength of existing retail channels 31

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