Strategic Decisions (Part I)

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Strategic Decisions (Part I)
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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

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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

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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

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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

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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

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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

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Understanding the Supply Chain
Cost-Responsiveness Efficient
Responsiveness
High
Low
Cost
High
Low
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Comparison of Efficient and Responsive Supply
Chains
Efficient Responsive
Primary goal Lowest cost Quick response
Product design strategy Min product cost Modularity to allow postponement
Pricing strategy Lower margins Higher margins
Mfg strategy High utilization Capacity flexibility
Inventory strategy Minimize inventory Buffer inventory
Lead time strategy Reduce but not at expense of greater cost Aggressively reduce even if costs are significant
Supplier selection strategy Cost and low quality Speed, flexibility, quality
Transportation strategy Greater reliance on low cost modes Greater reliance on responsive (fast) modes
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Case Study Bayers 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.

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Bayer HealthCares Challenges

• Realign planning processes in response to
  groupwide restructuring
• transparency in forecasting and inventory
• reduction in stocks of sales articles awaiting
  distribution.

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Bayer HealthCares 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

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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

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The Outcome

• Timely deliveries to customers
• Greater ability to control flow of goods and
  inventory
• Flexible, more accurate demand planning

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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?