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Strategic Decisions (Part I). Decision Phases of a Supply Chain. Supply chain strategy or design Automate flow of information between company and supply chain partners Supply chain planning
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Decision Phases of a Supply Chain • Supply chain strategy or design • Automate flow of information between company and supply chain partners • Supply chain planning • Generate demand forecasts for a product (demand planning) and help develop sourcing and manufacturing plans for that product • Supply chain operation • Manage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner
Supply Chain Strategy or Design • Decisions about the structure of the supply chain and what processes each stage will perform • Strategic supply chain decisions • Locations and capacities of facilities • Products to be made or stored at various locations • Modes of transportation • Information systems • Supply chain design must support strategic objectives • Supply chain design decisions are long-term and expensive to reverse – must take into account market uncertainty
Supply Chain Processes • Plan: Balancing demand and supply to meet sourcing, production, and delivery requirements • Source: Procurement of goods and services needed to create a product or service • Make: Processes that transform a product into a finished state • Deliver: Processes to manage order transportation and distribution • Return: Processes associated with product returns and post delivery customer support
Processes and Related Efficiency Problems in Supply Chain • Processes • Inventory moving through a retail store or warehouse • Products moving by trucks, trains and ships through a supply chain • Efficiency Problems • What is the best delivery policy for goods at a warehouse? • How much inventory should be kept on the shelves in a retail store • How should inventory be distributed along a supply chain
Demand Forecasting in a Supply Chain • The basis for all strategic and planning decisions in a supply chain • Used for both push and pull processes • Examples: • Production: scheduling, inventory, aggregate planning • Marketing: sales force allocation, promotions, new production introduction • Finance: plant/equipment investment, budgetary planning • Personnel: workforce planning, hiring, layoffs • All of these decisions are interrelated
Forecasting Methods • Qualitative: primarily subjective; rely on judgment and opinion • Time Series: use historical demand only • Static • Adaptive • Causal: use the relationship between demand and some other factor to develop forecast • Simulation • Imitate consumer choices that give rise to demand • Can combine time series and causal methods
Understanding the Supply Chain: Cost-Responsiveness Efficient Responsiveness High Low Cost High Low
Case Study :Bayer’s Forecasting and Planning with SAP • A large healthcare company with more than 36,000 employee and recently underwent a restructuring. • It requires a new solution that give key regional market direct access to the central planning system.
Bayer HealthCare’s Challenges • Realign planning processes in response to groupwide restructuring • transparency in forecasting and inventory • reduction in stocks of sales articles awaiting distribution.
Bayer HealthCare’s Supply Chain Solution • To integrate central planning functions into the regional sales subsidiaries more effectively and implementing global sales and replenishment /quantity planning • VMI – both with and without consignment stock – forms the basis for centralized replenishment /quantity planning
How did SAP technology help Bayer HealthCare? • To involve an upgrade of SAP Advanced Planning & Optimization (SAP APO) – functionality currently available in mySAP Supply Chain Management
The Outcome • Timely deliveries to customers • Greater ability to control flow of goods and inventory • Flexible, more accurate demand planning
Discuss the following questions: • What problems do Bayer HealthCare address? How does SAP supply chain solution help solve these problems? • What issues and challenges do Bayer HealthCare present? What can be done to address these issues? • What are the business as well as the technology issues that should be addressed when Bayer HealthCare implement SAP solution?