3. Supply Chain Planning - Jul2010

8/8/2019 3. Supply Chain Planning - Jul2010

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Supply Chain Planning

Jul 2010


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1. Demand Planning

2. Product Design Planning

3. Supply Chain Operations Planning

4. Logistics Planning

Supply Demand


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Demand Planning strategicaspects

Bullwhip

Demand Variability Forecasting


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Bull Whip

Magnified Variation acrossthe Supply Chain

Variation from Customer to

Producer

Whats the reason for bull

whip effect?

Whats the solution?

Actual Demand Variation

Induced Variation in Distribution Demand

Felt Variation at Factory/RM/Up stream SC etc.

Bullwhip

Demand Variability

Forecasting


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Increasing Variability of OrdersUp the Supply Chain

Lee, H, P. Padmanabhan and S. Wang (1997), Sloan Management Review


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Coping with the Bullwhip Effectin Leading Companies Reduce uncertainty

POS, Sharing information/forecast/policies

Reduce variability

Minimise promotions/ Pricing consistency

Reduce lead times

EDI, Cross docking

Strategic partnerships Vendor managed inventory (VMI)

Data sharing

Collaborative Planning Forecasting and

Replenishment (CPFR) Role of IT


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Demand Variability

Competition

Seasonality

Product Life Cycle effect External factors

Promotions

Bullwhip

Bullwhip

Demand Variability

Forecasting


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Product Design Planning

Traditional Design Process Sequential

Over-the-wall design/development

Product Design for Supply Chain CE - DFM, DFL

Other Design Strategies Standardisation & Component commonality

Modularity

Postponement; Mass-customisation


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1. Demand Planning

2. Product Design Planning

3. Supply Chain Operations Planning

4. Logistics Planning

Supply Demand


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Sales and operations

planning

Demand

management

Master productionscheduling

Detailed materialPlanning (MRP)

Shop-floorsystems

Suppliersystems

Supply Chain Operations Planning Framework


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Demand Management

Includes

Forecasting

Order Management

Order processing (entry, book, acknowledgement,confirm)

Customer promising

CRM

Main interaction with Strategic Planning

S&OP

MPS

Demand mgmt should address complete demand aspects incl. spare parts, service levels etc.


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Forecasting

Whats a Forecast?

Whats a Plan?

Forecasts & Plans


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Two Types of Demand

Independent demand

Dependent demand

Which demand that a firm has complete control over?


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Customer Order Decoupling Point

It is the point at which the firm (as opposed tothe customer) becomes responsible fordetermining the timing and quantity ofmaterial to be produced

The point at which demand changes from

independent to dependent


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Forecasting Output

Strategic Planning

S&OP

MPS

for


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planning

Demand

management


Detailed materialplanning

Shop-floorsystems

Suppliersystems

Forecast

Forecasting


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Forecasting Techniques

Judgment

Market Research

Intrinsic (Time Series)

Extrinsic (Causal)

Other models

Forecasting


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Judgment Methods

Sales-force Estimation

Panels of Experts internal,external, both

Delphi method


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Market Research

Market Survey

Test Marketing Focus groups assembled

Responses tested

Extrapolations made


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Time Series (Intrinsic)

Moving Average

Weighted Moving Averages

Exponential Smoothing

Regression

Trend, Seasonality(Decomposition)

Other Models Holts

Box Jenkins


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Time Series Method Moving Average Weighted Moving Average Exponential Smoothing

Evaluating & Using Forecasts Forecast Error, Bias & MAD Aggregation

Pyramid Forecasts

Time-Series Forecasting


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Moving Average Model

Forecast = Average demand of the past N periods

Weighted Moving Average

Trade off : Stability Vs Responsiveness


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: Alpha, smoothing constant Dn : Demand for nth period

Fn : Forecast of nth period

Forecast(n+1) = Fn + (Dn - Fn )

Forecast(n+1) = . Dn + (1 ) . Fn


Trade off : Stability Vs Responsiveness


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Causal Methods (Extrinsic)

Based on data other than the databeing predicted

Examples include

Sales of other products

Inflation rates

GNP

Unemployment rates

Weather


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Forecast Error

Forecast Error = D F

Mean Error (Bias)

Mean Absolute Deviation (MAD)

Average past absolute error


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Pyramid Forecasting

TotalBusinessForecast ($)

Product Lines

Individual items

Roll up

Force down

Level 1

Level 2

Level 3


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Forecasting Approach

A Forecasting Framework

Aggregation

Time frame Technique

Mgmt involvement

Short term/tactical Vs strategic/long term

CRM application to learn specific customer needs


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How to

choose aforecastingtechnique/

model?

Judgment

Market Research

Intrinsic (Time Series)

Moving Average Weighted Moving Average


Extrinsic (Causal)

Pyramid forecast


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Choosing a ForecastingTechnique some guidelines

What is the purpose of the forecast? Gross or detailed estimates?

Dynamics of the system being forecast?

Is it seasonal? Trending?

How important is the past in estimating the future?

Product Life Cycle

Most effective tocombine approaches

JudgmentMarket researchIntrinsic(Timeseries)Extrinsic(Causal)


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Planning Framework with DRP

Sales and operationsplanning

Demandmanagement


Detailed materialplanning

Shop-floorsystems

Suppliersystems

DRP

Logistics

&Transportation

DRP : Distribution Requirement Planning


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Demandmanagement



Shop-floorsystems

Suppliersystems

Sales & Operations Planning


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Supply Chain Operations Planning- Traditional planning sequence

Traditional Operations Planning

Business Planning

Sales Planning

Resource Planning Production Planning

Rough-cut Capacity

PlanningMaster Scheduling

Capacity Planning MRP

Execution System


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S&O Planning-led Approach

Business Planning

Resource PlanningSales & Operation

Planning

Rough-cut Capacity

PlanningMaster Scheduling

Capacity Planning MRP

Execution System

Supply Chain Operations Planning

- S&OP led


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Demandmanagement



Shop-floorsystems

Suppliersystems



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Master

ProductionSchedule

Period 1 2 3 4

Forecast 20 70 70 20

ProjectedAvailable 50 20 30 50

MPS 40 40 80 40

On Hand=30Safety Stock=20Batch = 40x


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What should be planned in MPS

MTS scenario End-items

ATO scenario Options or modulesfrom which a variety of end

products could be assembled

ATO/ MTO scenario Numbers of units of an average final product


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Demandmanagement



Shop-floorsystems

Suppliersystems



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BOM Bill of Materials

A

X (3) Y(2)

X Z

BOM explosion to generate material requirements


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Period 1 2 3 4 5 6

Gross Requirements 20 20 40 30 30 30

Scheduled Receipts 50

Projected Available Balance 15 45 25 55 25 65 35

Planned Order Release 70 70

Typical MRP Record

Lot Size (Q) = 70, LT=2, SS = 20


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Period 1 2 3 4 5 6

Gross Requirements 20 30 40 30 30 30

Scheduled Receipts

Projected Available Balance

Planned Order Release 150 200 150

MPS to MRP linkage

Period 1 2 3 4 5 6

Forecast 20 70 70 20

Projected Available

MPS 20 30 40 30 30 30

On Hand=30Safety Stock=0Batch = Any


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Demandmanagement



Shop-floorsystems

Suppliersystems



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Theory of


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Drum - Buffer Rope Scheduling

15

A

20

B

10

C

18

D

16

E

DRUM

ROPE

BUFFER

B

20

Capacity Constrained Resource

eo y oConstraints

Th f C t i t


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Throughput- rate at which money is generated by the system

through sales.

Inventory- all the money the system has invested in

purchasing things it intends to sell.

Operating expenses- all the money that the system spends to turninventory into throughput.

Increase Throughput, Reduce Inv. & Op. Ex.

Theory of Constraints

Fundamentals of Business Redefined


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Planning Framework with Capacity Planning

Resource

Planning

CapacityRequirementPlanning (CRP)


planning

Demand

management



Shop-floorsystems

Suppliersystems

Rough-cut CapPlanning

Advanced ProductionScheduling (APS) orFinite Loading,Input/Output Analysis

PAC

3. Supply Chain Planning - Jul2010

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