Title: Supply Chain Management
1Supply Chain Management
2Outline (last week)
- February 25 (Today)
- Network design simulation description
- Chapter 8
- Homework 4 (short)
- March 2
- Chapter 8, 9
- Network design simulation due before 500pm
- March 4
- Simulation results
- Midterm overview
- Homework 4 due
- March 9
- Midterm
3Outline
- March 2 (Today)
- Network design simulation
- Chapter 8, 9
- Chapter 8
- Sections 1, 2, and 3 only
- Chapter 9
- Sections 1, 2, and part of 3 only
- March 4
- Simulation results
- Midterm overview
- Important sections
- Formula sheet
- Practice questions
- March 9
- Midterm
4Simulation Assignment (25)
- Design the supply chain network for Jacobs
Industries on the fictional continent of Pangea - Jacobs only product is an industrial chemical
that can be mixed with air to form a foam (used
in air conditioner retrofit kits)
5Demand
- Average demand for Jacobs product in Pangea
- Existing and new markets
250
6Assignment
- Jacobs management would like to design a supply
chain network for Pangea. Its current network
consist of a factory in Calopeia with a capacity
of 20. You have been hired to suggest a network
design that will maximize profits for Jacobs
Industry. Designing such a network is complex and
includes the following decisions - Should the factory in Calopeia be expanded?
- Should factories in other regions be built? If
so, what should their capacity be? - What regions should each factory serve?
7Questions
- What to do with Fardo?
- Service Fardo demand from the mainland
- Service Fardo demand from local (to be built)
factory - Dont service Fardo demand
- What to do with Calopeia?
- Add capacity to existing factory or not
- Service other regions or not
- What to do with Sorange, Entworpe, and Tyran?
- Built new factory or not
- Service other regions or not
8From Forecasting to Planning
Capacity
How should a company best utilize the resources
that it has?
9From Forecasting to Planning
Capacity
How much should be produced and when?
10Aggregate Planning
- Aggregate planning
- A general plan that determines ideal levels of
capacity, production, subcontracting, inventory,
stockouts, and even pricing over a specified time
horizon (i.e. planning horizon) - Production rate (number of units to produce)
- Workforce (number of workers needed)
- Overtime (number of overtime hours)
- Machine capacity level (machine capacity needed)
- Subcontracting (subcontracted capacity)
- Backlog (total demand carried over to future
periods) - Inventory on hand (total inventory carried over
to future periods)
11Aggregate Planning
- Aggregate planning involves aggregate decisions
rather than stock-keeping unit (SKU)-level
decisions for a medium term planning horizon
(3-18 months)
All-Terrain Vehicle (ATV)
EngineAssembly
Transmission
Model A
Model B
Model C
Automatic
Manual
12Aggregate Planning Strategies
- Basic strategies
- Level strategy (using inventory as lever)
- Synchronize production rate with long term
average demand - Swim wear
- Chase (the demand) strategy (using capacity as
lever) - Synchronize production rate with demand
- Fast food restaurants
- Time flexibility strategy (using utilization as
lever) - High levels excess (machine and/or workforce)
capacity - Machine shops, army
- Tailored strategy
- Combination of the chase, level, and time
flexibility strategies
13Case Study Results
- In general, the chase strategy is used when
- Products are valuable
- Products are bulky or hard to store
- Products are perishable or carry an appreciable
risk of obsolescence - High variety
- Accurate sales predictions are hard to obtain
making stockpiling hazardous - Fashion items
- In general, the level strategy is used when
- Operators take a long time to become proficient
at critical tasks - Products with negligible probability of
obsolescence - Low variety
- Forecasts are quite good
14Aggregate Planning in Services
Is aggregate planning useful for the service
industry?
What is the major variable in managing supply for
service industries?
15Managing Supply
- Managing capacity
- Time flexibility from workforce
- Use of seasonal workforce
- Use of subcontracting
- Use of flexible facilities
- Managing inventory
- Built inventory for high-demand or predictable
demand products - Use common components across multiple products
16Managing Demand
- Pricing and other forms of promotion
- Timing of promotion is important
17Timing of Promotion
Why would a firm want to offer pricing promotions
during its low-demand periods?
Why would a firm want to offer pricing promotions
during its peak-demand periods?
18Why would a firm want to offer pricing promotions
during its low-demand periods?
Market growth new customers Forward buying
existing customers move up purchases
19Why would a firm want to offer pricing promotions
in its peak-demand periods?
- Price sensitivity is higher during periods of
peak demand - Brands that are losing market share reduce prices
Stealing share customers substitute the firms
product for a competitor product
20Managing Demand
- Pricing and other forms of promotion
- Timing of promotion is important
- Demand increases from promotion can result from a
combination of three factors - Market growth (increased sales, increased market
size) - Increase in consumption from both new and
existing customers - Example Toyota Camry attracting buyers who were
considering lower-end models - Stealing share (increased sales, same market
size) - Product substitution (overall demand stays the
same) - Example Toyota Camry attracting buyers who were
considering Honda Accord - Forward buying (same sales, same market size)
- Customers move up purchases (does not increase
sales)
21Factors Affecting Promotion Timing
Favors promotion during low-demand periods
Favors promotion during peak-demand periods
Favors promotion during peak-demand periods
Favors promotion during peak-demand periods
Favors promotion during low-demand periods
Favors promotion during low-demand periods
Favors promotion during low-demand periods