supply chains
yenomrah
AD680-Fall2019-Lecture_01-BBCopy3.pptxAD680: Global Supply Chains Lecture 1: Introduction to Global Supply Chains
Boston University
Metropolitan College
Fall 2019
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Topics
Supply Chain Background
Definitions
Manufacturing vs. Service Supply Chains
Operations Management Background
Manufacturing vs. Service Operations
Push vs. Pull, Buffering and Forecasting
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Definitions: Supply Chain
A supply chain is the entire system that a firm uses to provide goods and services to its customers:
Firm’s suppliers (raw material, component, etc)
Firm’s own operating systems (manufacturing processes or service providers)
Storage systems (where materials and product are held)
Distribution systems (trucking, shipping etc)
Customers (may include retailers or consumers – any entity receiving output from a business process is called a customer.)
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Definitions: Manufacturing vs. Service
A first classification of a supply chain is either a manufacturing or service supply chain:
Distinguishing characteristic: Tangible vs. intangible products
Examples of service supply chains:
Functions that provide services internally such as information technology, human resources, and marketing
External customers include those found in healthcare (radiology), banking (call center).
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Definitions: Members of a Supply Chain
A supply chain consists of “members” which may be
Departments, divisions
Suppliers, vendors
Partners, or
Any other entity that plays a role in delivering products or services.
These members are called “suppliers”
A member of a manufacturing supply chain would generally be classified in a hierarchical structure called “tiers”
Tier 1 supplier provides goods to the firm directly
Tier 2 supplier provides goods to Tier 1 suppliers
Tier 3 supplier provides goods to Tier 2 suppliers.
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Definition: Outsourcing vs. Offshoring
When a supplier is not owned by the firm, the work performed is said to be outsourced.
Outsourced entities may physically be located within the firm itself:
Food services (e.g., the firm’s cafeteria)
Information technology (e.g., contract workers)
Security (e.g, video system monitoring)
When a facility is located in another country, the work performed is said to be offshored.
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Definition: Global Supply Chains
A global supply chain is one in which some work is done at an international location.
Examples of global supply chains:
Many call centers are outsourced and often offshored to low-wage countries.
Even small firms operate outsourced (and offshored) supply chains -- a florist in the US may purchase tulips from a supplier in The Netherlands and roses from a supplier in Ecuador.
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Suppliers (e.g., foil, cardboard)
Raw Material Suppliers (e.g., multiple vendors)
ABS plastic
Logistics (land)
Logistics (air)
Packing
(Mexico)
Logistics (sea)
Small Customer
Large Customer
(e.g., Wal-Mart)
Consumers
Plastics Molding
(E. Europe)
A Global (Manufacturing) Supply Chain
Warehouse
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ABS Plastic – the raw material used to mold LEGO bricks.
A LEGO “die” – used to shape melted plastic into bricks (made in Germany).
A LEGO mold – placed in an injection molding machine and used to produce bricks in large quantities (mainly in Eastern Europe).
LEGO headquarters in Billund, Denmark.
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LEGO bricks produced in large batches.
LEGO bricks shipped to Mexico.
LEGO bricks stored prior to shipment to Mexico.
LEGO bricks moved to the packing facility.
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LEGO bricks stored prior to packing.
Pre-pack packing into foil bags.
Packing into various sized boxes.
Pre-packs stored in warehouse.
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LEGO sets stored in distribution center.
LEGO sets shipped to customers (i.e., retailers).
LEGO sets purchased by consumers.
LEGO sets transported to distribution facility.
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Payers/Insurance
Companies
(Mid West)
Claims Processing
(Ireland)
Radiology
Services
(India)
Hospitals
(CA)
Pharmaceuticals (Canada)
Device Manufacturing
A Global Supply Chain (Healthcare)
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Operations Management Background
Operations management vs. Supply Chain Management
Operations management (OM) is the operations related activities that takes place within a single manufacturing or service facility
Supply chain management is the operations and related activities that concern the coordination of operations among several facilities.
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have traditionally been
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OM Background: Manufacturing vs. Service
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| Characteristics | Manufacturing | Service |
| Activity Time Duration | Fixed | Variable |
| Flow Unit | Tangible | Intangible |
| Role of Information | Supports Flow | Is the Flow Unit |
| Process Flow | Within a Department | Across Departments |
| Quality Definitions | Formal Specifications | Informal & Subjective |
| Quality Control | Inspection Plans | Management Reviews |
| Contact w/ Customers | Minor | Major |
| Priority Setting | Formal Plans/Schedules | No Explicit Priority Setting |
| Main Resource | Machinery | Labor |
| Buffering Mechanism | Inventory or Capacity Buffers | Capacity Buffers |
| Cost Structure | Primarily Visible | Mostly Hidden |
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Outputs are tangible for manufacturing, but intangible for services.
Activity times for services vary, but they are constant for manufacturing.
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*Source: Maleyeff, J. (2008), “Analysis of Service Processes Across a Range of Enterprises,” Journal of Service Science and Management, 2(1,) pp. 28-35.
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OM Background: Push versus Pull
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PUSH
Forecast
PULL
Almost all services are classified as pull systems.
Push systems are usually associated with cost efficient supply chains – they tend to rely on inventory buffers to guard against uncertainty.
Pull systems are usually associated with responsive supply chains – they tend to rely on capacity buffers to guard against uncertainty.
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OM Background: Push vs. Pull
Push system characteristics:
Push systems seek cost efficiencies, so they often create large batch sizes so that economies of scale are realized.
Push systems are more robust (they work well in the presence of long lead times, poor quality or poor system reliability) so they cannot highlight problems.
In the presence of high demand uncertainty, push systems can result in both high overstock costs for some items and high understock costs for others.
Pull system characteristics:
Operate with lower inventory levels and are less robust.
Works under high process reliability and short production lead times
Can highlight problems so quality is improved.
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Push–Pull (Hybrid) Supply Chain
Initial forecast & determination of inventory buffer by product (large batches)
e.g., make
“safe” quantities
for each product
“Push” Production
Revised forecast & determination of capacity buffer by resource (small batches)
e.g., weekly
replenishment
cycle
“Pull” Production
Jan
Dec
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OM Background: Dealing with Uncertainty (Buffering)
“Buffering” is how operating systems minimize the impact of demand and other uncertainties.
Buffering can be found in both push and pull systems; it is done in one of two ways:
With INVENTORY, at a targeted level of product manufacturing:
raw material (most desirable)
work-in-process (i.e., partially made products)
final products (least desirable)
With CAPACITY, for critical resources:
labor
equipment, facilities.
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Background: Forecasting
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A forecast can be based on judgements (i.e., by humans), models (i.e., by mathematical equations), or collaboration (i.e., by organizations).
A forecasting model is chosen based on its ability to accurately predict the past
and therefore less than effective when the future is not perfectly aligned with the past.
To be most effective, those providing forecasts should be integrated with those who use forecasts to make decisions,
but this sometimes is not the case, especially in large organizations.
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Uses of Forecasts
Long range facility planning (many years)
e.g., buildings, major equipment, location.
Medium range capacity planning (many months)
e.g., machines, labor, tools.
Short term scheduling (many weeks or days)
e.g., personnel, supplies.
The most obvious applications of forecasting are for products that may be manufactured in global supply chains, but forecasting is also important in services.
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Forecasts: Characteristics
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The forecast will be wrong,
A forecast is more accurate for larger groups,
Forecast accuracy is inversely proportional to the time horizon, and
A forecast is useful only when a range of uncertainty is provided.
Average Forecast Error ≈ 40%
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Forecast of Annual Sales (made Week 0)
Actual Annual Sales
Accuracy of Annual Forecast
(Made Week 0)
Each point represents one product.
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Average Forecast Error ≈ 20%
Forecast of Annual Sales (made Week 13)
Actual Annual Sales
Accuracy of Annual Forecast
(Made Week 13)
Each point represents one product.
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