Literatures and design model in SCM

1. Literatures and design model in SCM 2001. 6. 1 Eoksu Sim(ses@ultra.snu.ac.kr)

2. Contents • A framework of supply chain management literature • European Journal of Purchasing & Supply Management 7 (2001) 39-48 • A continuous model for production-distribution system design • EJOR 129 (2001) 287-298 MAI-LAB Seminar

3. A framework of supply chain management literature Keah Choon Tan University of Nevada Las Vegas, College of Business, Department of Management, 4505 Maryland Parkway, Box 456009, Las Vegas, NV 89154-6009, USA European Journal of Purchasing & Supply Management 7 (2001) 39-48

4. Introduction • Manufacturers and service providers • Collaborate with their suppliers • Upgrade their purchasing and supply management functions • from a clerical role to an integral part of a new phenomenon known as SCM • Over the last 10 years • These two traditional supporting functions of corporate strategy evolved along separate paths and eventually merged into a holistic and strategic approach to operations, materials, and logistics management, commonly referred to as SCM During 1990s • Wholesalers and retailers • Integrated their physical distribution and logistics functions • into the transportation and logistics perspective of SCM to enhance competitive advantage • This article • reviews the literature base and development of SCM along these two separate paths • integrates the two bodies of literature in the unification of SCM into commonly accepted terminology that includes all the value creating activities along the value chain MAI-LAB Seminar

5. Supply chain management defined • Harland(1996) : managing business activities and relationships • (1) internally within an organization • (2) with immediate suppliers • (3) with first and second-tier suppliers and customers along the supply chain • (4) with the entire supply chain • Scott and Westbrook(1991) and New and Payne(1995) : the chain linking each element of the manufacturing and supply process • from raw materials through to the end user, encompassing several organizational boundaries • Including Recycling and reuse Many buzzwords • Integrated purchasing strategy • Integrated logistics • Supplier integration • Buyer-supplier partnerships • Supply base management • Strategic supplier alliances • Supply chain synchronization and SCM No explicit description of SCM or its activities in the literature MAI-LAB Seminar

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8. SCM appears to treat all organizations within the value chain • as a unified ‘virtual business’ entity • In a truly ‘integrated’ SC, the final consumers pull inventory through the value chain • instead of the manufacturer pushing the items to the end users MAI-LAB Seminar

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10. Evolution of supply chain management • A key facilitating mechanism in the evolution of SCM • A customer-focus corporate vision • Drives change throughout a firm’s internal and external linkage MAI-LAB Seminar

11. Two alternative perspectives on supply chain management • A summary framework of the evolution of SCM • Along two separate paths  merged into a common body of literatures • The evolution of SCM • The purchasing and supply activities • The transportation and logistics functions with a focus on integration, visibility, cycle time reduction, and streamlined channels MAI-LAB Seminar

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13. Purchasing and supply perspective of the industrial buyers • Purchasing and materials management • A basic strategic business process • Rather than a narrow specialized supporting function to overall business strategy • SCM seeks improved performance • Elimination of waste • Use of internal and external supplier capabilities and technology Create a seamlessly coordinated supply chain • Transportation and logistics perspective of the merchants • Research in logistics : inbound and outbound logistics • It enables channel members to compete as a unified logistics entity • Instead of simply pushing inventory back along the value chain • An integrated logistics system encompasses • the integration of processes, systems and organizations that control the movement of goods from the suppliers to a satisfied customer without waste • The goal is to replace inventory with perfect information MAI-LAB Seminar

14. The geographical spreads of channel members and cost structures determine the structure of logistical support • The unified/integrated SCM strategy • Despite the increased emphasis of integrating purchasing into overall corporate strategy, the primary function of purchasing remained at clerical role of negotiating price/items • The goal of the integrated SC strategy • To create manufacturing processes and logistics functions seamlessly across the SC • As an effective competitive weapon that cannot be easily duplicated by competitors MAI-LAB Seminar

15. Conditions conducive to supply chain management • The single most important prerequisite • A change in the corporate cultures of all members in the value chain to make it conducive to SCM • Effective SCM rests on the twin pillars • Trust and communication • Procurement and logistics professionals • Have The necessary expertise in the critical functions of their own enterprise • Fully understand how it affects the entire value chain • C/S SCM software, electronic commerce component, sharing information, EDI, direct transfer of information b/w retailers and vendors MAI-LAB Seminar

16. Conclusion • SCM descriptions • A handy synonym to describe the purchasing and supply activities of manufactures, • The transportation and logistics functions of the merchants and retailers • All the value-adding activities form the raw materials extractor to the endusers, and including recycling • Strategic alliance MAI-LAB Seminar

17. A continuous model for production-distribution system design Abdullah Dasci, Vedat Verter Faculty of Management, McGill University, 1001 Sherbrooke St. W., Montreal, Que., Canada H3A 1G5 EJOR 129 (2001) 287-298

18. Introduction • The long-term performance goals for this production-distribution system • To define policies regarding the firm’s SC strategy • The production-distribution system design problem(PDSDP) involves the determination of the best configuration • Location, size, technology content and product range to achieve the firm’s long-term goals • Many analytical approaches • Discrete mixed integer programming models • This paper • An overview of the state of the art in discrete models for facility design • A continuous approximation framework MAI-LAB Seminar

19. An overview of the discrete models for PDSDP • Models • Uncapacitated facility location problem(UFLP)  Limited availability, capacitated version of UFLP, increasing the number of echelons, multi-period models • Time-phased planning is important • The structural decisions made in designing supply chains are irreversible • Global manufacturing firms • International production-distribution networks • Must optimize configuration decisions simultaneously • Because a sequential approach(i.e., first deciding facility locations, then deciding facility sizes, and finally deciding the technology content at each facility) would lead to sub-optimal solutions MAI-LAB Seminar

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21. A continuous approximation model • Discrete model’s weaknesses • Data and computational requirements increase  data reliability and model accuracy decrease  continuous approximation could be a remedy to these weaknesses • The model presented in this paper • A generalization of Geoffrion and Erlenkotter’s models • An extension of the continuous approximation model for the facility design problem proposed by Verter and Dincer • To open new facilities in a market area • Each facility serves a single service region • To decide the number of facilities, their locations, and respective service regions MAI-LAB Seminar

22. Irregular shape MAI-LAB Seminar

23. The objective • To minimize total costs , which are the sum of fixed costs of opening new plants, capacity acquisition and transportation costs • A general form of capacity acquisition and operating cost under economies of scale is given by • Therefore, total capacity cost is defined as MAI-LAB Seminar

24. The transportation cost expression • The shape of each region, location of the facility in the service region, distance metric, vehicle sizes and shipment schedules • Total transportation cost MAI-LAB Seminar

25. The proposed facility design model MAI-LAB Seminar

26. A solution framework • The proposed solution method • An extension of handling headways(time b/w successive shipments) in the logistics literature. • The objective • To find optimal service regions first and then determine the precise facility locations by subsequent analysis MAI-LAB Seminar

27. Conclusions • Overview of discrete and continuous approximation models for the PDSDP • Although discrete models are capable of identifying an optimal configuration, data and computational requirement increase tremendously for complex cases while model stability and applicability decrease • Continuous models are essentially simple algebraic expressions amenable to efficient solution procedures • Clearly, these two approaches complement each other • A continuous approximation based analysis • valuable insights about structural decisions and possible alternatives • A more detailed discrete model based on these insights • the optimal configuration MAI-LAB Seminar

28. References • Burgess, R., 1998, Avoiding supply chain management failure: lesson from business process reengineering. International Journal of Logistics Management 9 (1), 15-23 • New, S.J., 1997. The scope of supply chain management research. Supply Chain Management 2 (1), 15-22 • V. Verter, M.C. Dincer, Facility location and capacity acquisition: An integrated approach, Naval Research Logistics 42 (1995) 1141-1160 MAI-LAB Seminar