Information Technology & Information Sharing in Supply Chains
-
Upload
raven-glenn -
Category
Documents
-
view
33 -
download
0
description
Transcript of Information Technology & Information Sharing in Supply Chains
1
Information Technology & Information Sharing in Supply Chains
Zhi-Long ChenMichael O. Ball
Robert H. Smith School of BusinessUniversity of MarylandCollege Park, MD 20742
2
Supply Chain Management as a Competitive Weapon
It is becoming more difficult for companies to compete on cost or even product quality to seek new competitive advantages, companies are looking to innovative supply chains that can provide:– New levels of customer service especially in terms of order
promising response and reliability
– Greater product variety – extreme case customizable products
– Fast introduction of new technologies
– Fast introduction of new products may need to quickly reconfigure supply chain including supply chain partners
Great burden on IT infrastructure.
3
Importance of Fast Access to Supply Chain Information
order
dist centeravailability
factoryavailabilitylocal
availability
remote retailavailability
IT Infrastructure: provides “visibility”across global supply chain to allowsearch for product availability
4
Push and Pull Production Systems
Order raw materials
transport & storage
Produce product
Deliver product to customer/retailer
transport & storage
customer orderForecast demand
Order raw materials
transport & storage
Produce product
Deliver product to customer/retailer
transport & storage
customer order
PUSH VS PULL
5
Push-Pull Systems
product models
Manufacturingincl final assembly
suppliers
generic products and components
Manufacturing
Assemblyto
order
Push-pull boundaryinventory
forecast driven order driven
6
Assemble-to-Order
In an assemble-to-order (ATO) production environment, final product assembly is not carried out until a customer order is received.
ATO Advantages:– Greater product variety
– Fast integration of new technologies
– Lower inventory costs
Making it work requires sophisticated order promising and fulfillment systems
7
Order Promising Decision Support in an ATO Setting
Capacity Availability
Capacity Planning
Aggregate Planning
Master ProductionScheduling (MPS)
Material RequirementsPlanning (MRP)
Production
Assembly
Packaging
Shipping
Picking
x
Order promising in assemble-to-order environment:match available resources to customer orders
Resources:• raw material and component availability• production capacity
customerorders
• Order Promising Decisions: accept/reject/split order; order quantities and delivery dates• Considerations: order profitability; customer priority; customer satisfaction (reducing response/delivery time); production efficiency
8
Decision Models + Flexible IT Flexibility in Production Planning and Order Handling
4/5 4/6 4/7 4/8 4/9promise
dateFactory 1
Factory 2
4/2 new
orders
promisedateFactory 1
Factory 2
4/3 new
orders
promisedateFactory 1
Factory 2
4/4 new
orders
Flexibility can substantially improve overall business performance but it is far from commonplace!!!
9
Information Technology Challenges
• Integration of business information systems: ERP, supply chain mgmt, etc.
• Inter-company communication (vital in today’s multi-company supply chains)
• Making sophisticated business systems available to small and medium-sized firms
• Non-technical challenges: – international regulatory and standards issues– balancing need to share with privacy needs
10
Phenomenon Observed in Supply Chain
Ord
er
Siz
e
Time
CustomerDemand
CustomerDemand
Retailer OrdersRetailer OrdersDistributor OrdersDistributor Orders
Production PlanProduction Plan
11
Bullwhip Effect
The bullwhip effect is a phenomenon observed in supply chains wherein the demand variability increases as one moves upstream from retailers to distributors to manufacturers
RetailersWarehouses/Distributors
Manufacturers
12
Bullwhip EffectBullwhip EffectExample: Example: P&G Diapers
13
Bullwhip is Bad
It distorts the order information & amplifies order variability.
• Impact of Bullwhip Effect:
-- Inventory: More safety stock needed
-- Customer Service: Lower service level, more likely to cause stockouts and lost sales
-- Manufacturing: Lower capacity utilization
-- Transportation: Lower utilization of transportation
-- Warehousing: More warehouse capacity neededHigher costs
14
• Root Causes: Lack of Information
1. Demand forecast updating
2. Rationing and shortage gaming
Causes of Bullwhip Effect
15
Cause 1: Demand Forecast Updating (Demand Signal Processing)
• Retailers forecast customers demand and then place orders with manufacturer• Manufacturer receives orders from retailers
Orders from downstream in the past p time periods Dt-p, Dt-p+1, …, Dt-1
Order Qt goes to upstream
CustomersMfctr.Lead time L
Demand variability gets amplified from downstream to upstream!
- Commonly, the variability of Q is 2 to 15 times the variability of D
Retailers
16
Cause 2: Rationing and Shortage Gaming
• As a result, customers’ orders give the supplier little information on a product’s real demand, a particularly vexing problem for new products
• When product demand exceeds supply, a manufacturer often rations its product to customers. Example:
Car ManufacturerAvailable = 200
Dealer 1
Dealer 2
Order = 100
Order = 200
Received = 67
Received = 133
Only 2/3 of the order can be fulfilled
Need = 120
Need = 180
Order = 180
Order = 270
• Knowing the manufacturer policy, customers exaggerate their real needs when they order (game the system). Example:
Car Manufacturer
Dealer 1
Dealer 2
Available = 500
Received = 180
Received = 270
17
Information Sharing to Counteract the Bullwhip
•Sharing sales and inventory data•Allocation based on past sales
2. Shortage Gaming
•Use of point-of-sale (POS) data•Electronic data interchange (EDI)•Vendor-managed inventory•Lead-time reduction
1. Demand Signal Processing
InitiativesCause of Bullwhip
18
Famous Success Story: Benetton
• Benetton, the Italian sportswear manufacturer, was founded in 1964. In 1975, Benetton had 200 stores across Italy.
• Ten years later, the company expanded to the U.S., Japan and Eastern Europe. Sales in 1991 reached 2 trillion.
• Many attribute Benetton’s success to successful use of communication and information technologies in their supply chain.
19
Famous Success Story: Benetton
1. Integrated Information Systems
• Global EDI network that links agents with production
and inventory information
• EDI order transmission to HQ
• EDI linkage with air carriers
• Data linked to manufacturing
2. Coordinated Planning
• Frequent review allows fast reaction
• Integrated distribution strategy
20
Information Sharing Challenges
• Build strategic partnerships between manufacturers, distributors, and retailers
• Develop effective collaborative demand forecasting methods
• Create effective mechanisms for information sharing across supply chain partners:– Technical issues
• Integrating incompatible systems• standards
– Business issues: • incentives to share• Overcoming privacy/proprietary information concerns