????(Make to stock) (push system)??????

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??1

• ????(Make to stock) (push system)??????
• ????? vs. ?????????????
• ???Coca Cola???
• ???????
• ??POS (pull system) ?????????

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??2which one is better?1
Push system
Pull system
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??2which one is better?2
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6.1 Introduction1

• Effective SCM implies
• Efficient integration of suppliers,
  manufacturers, warehouses, and stores.
• Coordinate activities across the supply chain
• Improve performance reduce cost, increase
  service level, reduce the bullwhip effect, better
  utilize resources, and effectively respond to
  changes in the market place.

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6.1 Introduction2

• Various supply chain integration strategies
• Push, pull, pushpull strategy.
• Matching products and industries with supply
  chain strategies.
• Demand-driven supply chain strategies.
• The impact of the Internet on supply chain
  integration.

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6.2 Push, Pull, Push-Pull Systems

• Push and Pull traditional categories of
  manufacturing operations
• More recent hybrid strategy of combining the two,
  Push-Pull systems

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Push-Based Supply Chains1

• Production and distribution decisions based on
  long-term forecasts.
• Manufacturer demand forecasts based on orders
  received from the retailers warehouses.

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Push-Based Supply Chains2

• Longer reaction time to changing marketplace
• Inability to meet changing demand patterns.
• ??,NOKIA????????????
• ??,???????????????Ultra Book However, ipad
  ???????
• Obsolescence of supply chain inventory as demand
  for certain products disappears.
• ??,DRAM

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Push-Based Supply Chains3

• Longer reaction time to changing marketplace
• Variability of orders received much larger than
  the variability in customer demand due to the
  bullwhip effect.
• Excessive inventories due to the need for large
  safety stocks
• Larger and more variable production
  batches(??????????????)
• Unacceeptable service levels
• Product obsolescence

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Bullwhip Effect in Push-Based Supply Chains

• Leads to inefficient resource utilization
• Planning and managing are much more difficult.
• Not clear how a manufacturer should determine
  production capacity? Transportation capacity?
• Peak demand?
• Average demand?
• Results
• Higher transportation costs
• Higher inventory levels and/or higher
  manufacturing costs
• more emergency production changeovers

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Pull-Based Supply Chains1

• Production and distribution demand driven
• Coordinated with true customer demand rather than
  forecast demand
• firm does not hold any inventory and only
  responds to specific orders.

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Pull-Based Supply Chains2

• Intuitively attractive
• Reduced lead times through the ability to better
  anticipate incoming orders from the retailers.
• Reduced inventory since inventory levels decrease
  with lead times
• Less variability in the system
• Decreased inventory at the manufacturer due to
  the reduction in variability.

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Problems of Pull-Based Systems

• Difficult to implement when lead times are so
  long that it is impractical to react to demand
  information
• Harder to leverage economies of scale
• Doesnt work in all cases ? ???mini,??????

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Push-Pull Strategy

• Some stages of the supply chain operated in a
  push-based manner
• typically the initial stages
• Remaining stages employ a pull-based strategy.
• Interface between the push-based stages and the
  pull-based stages is the pushpull boundary.

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Push-Pull Supply Chains
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Consider Two PC Manufacturers

• Build to Stock
• Forecast demand
• Buys components
• Assembles computers
• Observes demand and meets demand if possible.
• A traditional push system

• Build to order
• Forecast demand
• Buys components
• Observes demand
• Assembles computers
• Meets demand
• A push-pull system
• The push-pull boundary is at the beginning of
  assemble.

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General Strategy

• Make a part of the product to stock generic
  product (CPU,DRAM)
• The point where differentiation has to be
  introduced is the push-pull boundary
• Based on extent of customization, the position of
  the boundary on the timeline is decided

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Push-Pull Strategies? Advantage of the rules of
forecasting

• Forecasts are always wrong (pull strategy)
• The longer the forecast horizon the worst is the
  forecast (finished goods) (push-pull boundary)
• Aggregate forecasts are more accurate
  (components) (push strategy)
• The Risk Pooling Concept

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Push-Pull Strategies?Postponement

• The firm designs the product and the
  manufacturing process so that decisions about
  which specific product is being manufactured can
  be delayed as long as possible.
• The portion of the supply chain prior to product
  differentiation is typically operated using a
  push-based strategy.
• The portion of the supply chain starting from the
  time of differentiation is pull-based.

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What is the Best Strategy about Push Pull
Strategy?

H L
L H
Economies of Scale
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Selecting the Best SC Strategy1

• Higher demand uncertainty suggests pull
• Higher importance of economies of scale suggests
  push
• High uncertainty/ EOS not important (Box I) such
  as the computer industry implies pull (??,Dell
  Computer)
• Low uncertainty/ EOS important (Box III) such as
  groceries implies push
• Demand is stable
• Transportation cost reduction is critical
• Pull would not be appropriate here.
• ??,????

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Selecting the Best SC Strategy2

• Low uncertainty but low value of economies of
  scale (Box IV)(high volume books and cds
  (???????)
• Either push strategies or push/pull strategies
  might be most appropriate
• High uncertainty and high value of economies of
  scale (Box II)
• For example, the furniture industry
• How can production be pull but delivery push?
• Is this a pull-push system?

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????

• ???CD?push or push-pull????????
• ??????????????(push)
• ??????????????,???,???????(push-pull)
• ?????????????(pull) ,???????,???????????????,?????
  ????(push)???????

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Push-Pull Strategy ? Case Study

• Coca cola
• ???(???????????)(????)(??????POS?EOS)
• McDonalds
• Sport Obermeyer (example 6-3, p.196)
• Low-risk products ? push strategy
• High-risk products ? push-pull strategy
• ?????
• ????????????????????? push-pull strategy
• ????? push strategy

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Characteristics and Skills
Raw Material
Customers
Push
Pull

• Low
• High Uncertainty
• Short Cycle Times
• Service Level
• Responsiveness
• Order fulfillment

• High
• Low Uncertainty
• Long Lead Times
• Cost Minimization
• Resource Allocation
• Supply chain planning

Complexity Uncertainty Lead time Objective Focus P
rocesses
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Locating the Push-Pull Boundary1

• The push section
• Uncertainty is relatively low
• Economies of scale important
• Long lead times
• Complex supply chain structures
• Thus
• Management based on forecasts is appropriate
• Focus is on cost minimization
• Achieved by effective resource utilization
  supply chain optimization
• ??,IC??

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Locating the Push-Pull Boundary2

• The pull section
• High uncertainty
• Simple supply chain structure
• Short lead times
• Thus
• Reacting to realized demand is important
• Focus on service level
• Flexible and responsive approaches
• ??,????

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Locating the Push-Pull Boundary3

• The push section requires
• Supply chain planning
• Long term strategies
• The pull section requires
• Order fulfillment processes
• Customer relationship management
• Buffer inventory at the boundaries
• The output of the tactical planning process
• The input to the order fulfillment process.

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??

• ??????push-pull boundary?????
• ?????push (???????????)
• ?????pull(?????????????????)
• www.scubastore.com

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Locating the Push-Pull Boundary4
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6.3 The Impact of Lead Time1

• Longer the lead time, more important it is to
  implement a push based strategy.
• Typically difficult to implement a pull strategy
  when lead times are so long that it is hard to
  react to demand information.

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Impact of Lead Time2
FIGURE 6-10 Matching supply chain strategies
with products the impact of lead time and demand
uncertainty
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Impact of Lead Time3

• Box A
• Items with short lead time and high demand
  uncertainty
• Pull strategy should be applied as much as
  possible.
• Box B
• Items with long supply lead time and low demand
  uncertainty.
• Appropriate supply chain strategy is push.

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????

• ??? vs. ?????? ? short lead time and high demand
  uncertainty vs. long lead time and low demand
  uncertainty ? pull vs. push

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Impact of Lead Time4

• Box C
• items with short supply lead time and highly
  predictable demand.
• Continuous replenishment strategy
• Suppliers receive POS data
• They use these data to prepare shipments at
  previously agreed-upon intervals
• A pull strategy at the production and
  distribution stages and push at the retail
  outlets.
• ??,???????????????(??????)

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Impact of Lead Time5

• Box D
• Items with lead times are long and unpredictable
  demand
• Inventory is critical in this type of environment
  
• Requires positioning inventory strategically in
  the supply chain

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????

• ??? vs. Blu-ray ? short lead time and low demand
  uncertainty vs. long lead time and high demand
  uncertainty ? continuous replenishment vs.
  inventory positioning

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6.4 Demand-Driven Strategies

• Requires integrating demand information into the
  supply chain planning process
• Demand forecast
• Use historical demand data to develop long-term
  estimates of expected demand
• Demand shaping
• Firm determines the impact of various marketing
  plans such as promotion, pricing discounts,
  rebates, new product introduction, and product
  withdrawal on demand forecasts.

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Effect of forecast error

• ??????????????????????,???????????,???????????

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???????

• ??????(mean absolute deviation, MAD)
• ????(mean squared error, MSE)
• ?????????(mean absolute percent error, MAPE)

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?????1????

• ?????(Center Line, CL)CL0
• ????(Upper Control Limit, UCL)
• ????(Lower Control Limit, LCL)

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?????2?????

• ??????????????????
• ???0????,??4???5????????????????????????,?????????
  ???,??????????
• ???????MAD??,?????????MAD

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?????????

• ???-????????????????????????? ????? ???
• ?????????????????????????(???)
• ???????????????????????????
• ????????????????,???????????????????????
• Collaborative Planning Forecasting and
  replenishment, CPFR)

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??

• 3DS????
• ??????????????

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??

• ???? vs. ????
• ???? ? ?? ? ???? vs. ?????????
• ??????? (click-and-mortar) vs. ?????
  (brick-and-mortar)
• ??,??????????
• ??????? vs. ??????

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????

• ?????????,?????? ? ???? (the long tail)
• ??
• ????80?????400???,??1400???????????
• 7net
• ??
• ?????!?????LV??? ????2?

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??

• Amazon ???

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6.5 The Impact of the Internet on Supply Chain
Strategies1

• Expectation that increasing use of the internet
  would solve a lot of the business problems
• However, reality was very different
• Many of the problems in the internet-based
  businesses were related to logistics strategies

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????

• ?????
• ???? vs. ?????????????
• ????????,????

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The Impact of the Internet on Supply Chain
Strategies2

• E-business strategies were supposed to
• Reduce cost
• Increase service level
• Increase flexibility
• Increase profit

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Reality is downfall

• Peapod Example
• Founded 1989
• 140,000 members, largest on-line grocer
• Revenue tripled to 73 million in 1999
• 1st Quarter of 2000 25M Sales, Loss 8M

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Reality is successful

• Dell Example
• Dell Computer has outperformed the competition in
  terms of shareholder value growth over the eight
  years period, 1988-1996, by over 3,000 (see
  Anderson and Lee, 1999)
• Amazon.com Example
• Founded in 1995 1st Internet purchase for most
  people
• 1996 16M Sales, 6M Loss
• 1999 1.6B Sales, 720M Loss
• 2000 2.7B Sales, 1.4B Loss
• 2005 Revenue reached 8.49B with total profit of
  359M

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What is E-Business?1

• E-business is a collection of business models and
  processes motivated by Internet technology, and
  focusing on improving the extended enterprise
  performance
• E-commerce is the ability to perform major
  commerce transactions electronically

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What is E-Business?2

• e-commerce is part of e-Business
• Internet technology is the driver of the business
  change
• The focus of E-Business is on the extended
  enterprise
• Intra-organizational
• Business to Consumer (B2C)
• Business to Business (B2B)

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The Grocery Industry

• From Push Systems...
• Supermarket supply chain
• ...To Pull Systems
• Peapod, 1989-1999
• Picks inventory from stores
• Stock outs 8 to 10
• And, finally to Push-Pull Systems
• Peapod, 1999-present
• Dedicated warehouses allow risk pooling (covers a
  geographical area larger than the one covered by
  an individual supermarket)
• Stock outs less than 2

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Challenges for On-line Grocery Stores

• Transportation cost
• Density of customers
• Very short order cycle times
• Less than 12 hours
• Difficult to compete on cost
• Must provide some added value such as convenience
• Is a push-pull strategy appropriate?
• What might be a better strategy?
• Low demand uncertainty, high economies of scale
  (transportation cost) push strategy is better?
• ??,???

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Less than 300,000 shoppers
Source D. Ratliff
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A New Type of Home Grocer

• grocerystreet.com
• On-line window for retailers
• The on-line grocer picks products at the store
• Customer can pick products at the store or pay
  for delivery
• Yahoo????

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The Book Selling Industry

• From Push Systems...
• Barnes and Noble
• ...To Pull Systems
• Amazon.com, 1996-1999
• No inventory, used Ingram to meet most demand
• Why?
• And, finally to Push-Pull Systems
• Amazon.com, 1999-present
• 7 warehouses, 3M sq. ft.,
• Why the switch?
• Volume grew
• Profit margins ?, service level ?, etc.

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Direct-to-ConsumerCost Trade-Off
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Industry BenchmarksNumber of Distribution
Centers
Food Companies
Chemicals
Pharmaceuticals
Avg. of WH
3
14
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- High margin product - Service not important (or
easy to ship express) - Inventory
expensive relative to transportation
- Low margin product - Service very important -
Outbound transportation expensive relative to
inbound
Sources CLM 1999, Herbert W. Davis Co
LogicTools
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The Retail Industry

• Brick-and-mortar (?????) companies establish
  virtual retail stores ? click-and mortar
  (???????)
• Wal-Mart, K-Mart , Barnes , 7-11 (7net)
• An effective approach - hybrid stocking strategy
• High volume/fast moving products for local
  storage
• Low volume/slow moving products for browsing and
  purchase on line (risk pooling)

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??

• Another case ??????
• ??????????
• 7net

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??

• ????? vs. Coca Cola

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E-Fulfillment

• How have strategies changed?
• From shipping cases to single items (????????)
• From shipping to a relatively small number of
  stores to individual end users. (??)
• Increased the importance and the complexity of
  reverse logistics
• ??,????(B2C)

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E-Fulfillment Requires a New Logistics
Infrastructure
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E-business Opportunities1

• Reduce Facility Costs
• Eliminate retail/distributor sites
• Reduce Inventory Costs
• Apply the risk-pooling concept
• Centralized stocking
• Postponement of product differentiation
• Use Dynamic Pricing Strategies to Improve Supply
  Chain Performance
• Dynamic pricing ????????????

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E-business Opportunities2

• Supply Chain Visibility
• Reduction in the Bullwhip Effect
• Reduction in Inventory
• Improved service level
• Better utilization of Resources
• Improve supply chain performance
• Provide key performance measures
• Identify and alert when violations occur
• Allow planning based on global supply chain data

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????

• ??????? or ????????
• ????
• ????
• ????
• ????
• ????
• ????
• ??
• ??
• ??????
• ????????
• ??

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Summary

• Implementation of push-pull strategies and
  demand-driven strategies have helped many
  companies to improve performance, reduce costs,
  increase service levels.
• Collapse of many Internet companies shows that
  e-business has great challenges.
• Companies need to
• Identify the appropriate supply chain strategy
  for individual products.
• Case for no physical infrastructure or inventory
  is tenuous
• Pushpull strategy
• advocates holding inventory
• although it pushes the inventory upstream in the
  supply chain.