MIT Course 1.270 / ESD.273 (Fall 2002 MW 4:00-5:30 Rm 1-246) Logistics & Supply Chain Management PROFESSOR DAVID SIMCHI-LEVI,Uncertainty in Demand Pipelines Ignites Supply Nets by Shoumen Datta, Research Scientist Engineering Systems Division, School of Engineering Executive Director, Forum for Supply Chain Innovation http:/supplychain.mit.edu/innovation,Disclaimer: Opinions expressed in this presentation are that of the author. It does not represent the consensus opinion of MIT as an institution or other faculty that may be directly or indirectly associated with MIT School of Engineering or MIT Sloan School.,Todays discussion,UNCERTAINTY,URL for powerpoint presentation http:/supplychain.mit.edu/innovation Education Course 1.270 / ESD.273,SCM is managing uncertainty.,Nobel Prize in Economics 2002 (announced today, 09 Oct 2002),“for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty“,“for having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms“,BODY SCANNER BY TC2,Disruptive Technology ?,Invasion of the Body Scanners,Digitally speaking,Part of the Process,PERSONAL DIGITAL PROFILE,Customer: How will I look in this dress?,Retailer: What should we order for Fall ?,Manufacturer: Whats the next demand?,Data mining,Data Mart,Retailers,Accessories,Jewelry, Shoes,Shiseido, Coach,Harrods, M&S,Gucci, Ballys,Guerlain, Polo,USD, DEM,EURO, INR,YEN, YUAN,TRAVEL,HEALTH,EDUCATION,ARTS & MUSIC,Celebrity,Gallery,World History of,Fashion,The Way We Wore,Data Warehouse,BODY SCAN,eFASHION,EBC,B2B,Anne Klein,Levis, Bebe,Talbots, AX,China, India, Siam,FABRIC,SUPPLIERS,Data,Warehouse,FABRIC,BROKER,INDEPENDENT,DESIGN,BROKER,Global Design,WAREHOUSE,MEDIA / POP,Tailors,-,Contract Shops,Amateurs,Design Forum,Manufacturing,Tailor Broker,Order,Individual Tailors On-call,Preference Survey,SHIPPING,MALL,a,m,Julia Roberts,Financial,RETURN,CRM,DONATE,Salvation Army,CARE,Goodwill,eBAY,Boutiques,J C Penney,Outlet Stores,Amateur,Models,SHIPPING,ERP,RETAILERS,MACYS, NORDSTROM, BLOOMINGDALES,PERSONAL,PROFILE,SOFTWARE,PERSONAL,PROFILE,ANALYSIS,Portal,Manufacturer,Customer Relationship Management EXPECTATION vs RESULT,Source: AMR Research 1999 October,UNCERTAINTY,U n c e r t a i n t y.,Lack of rule-based resolution: expectation vs result Financial Impact Cost of Correction Side Effects,U n c e r t a i n t y.,Financial Impact Opportunity lost: unable to ramp up Economic loss: unable to ramp down,Source: Forrester Research,Source: Forrester,U n c e r t a i n t y.,Cost of Correction Resources Inventory,U n c e r t a i n t y.,Side Effects (undesirable) Tackle only symptoms Negative fall out,EBM in SCM offers little ADAPTABILITY to SENSE and RESPOND ( Supply Chain Event mis-Management ),Insulation of Planning from Execution Individual optimisation not SC optimisation Smart-Hub and Dumb-Spoke Configuration Isolation of Environment of Operation,Source: Forrester,Traditional Adaptive,Source: Forrester,What to do ?,Understand customer need Monitor supply availability Manage supply chain partner performance Decentralize problem solving Monitor corrective actions and feedback Include macro-economic indicators,Evolving Analytical Tools and Early Users,Source: Forrester,Portfolio of Real Options,Source: HP & Forrester,U n c e r t a i n t y.,Financial Impact Opportunity lost: unable to ramp up Economic loss: unable to ramp down,U n c e r t a i n t y. Push-Pull Case Study by DSL,How to read diagrams,Uncertainty Lead Time,Performance .,Performance .,For same lead time, optimized supply chain offers lower cost,Safety Stock Cost vs Lead Time Managing Financial Cost of Uncertainty,Uncertainty Procurement,Push-Pull Supply Chains,The Supply Chain Time Line,Customers,Suppliers,PUSH STRATEGY,PULL STRATEGY,Push-Pull Boundary,From Make-to-Stock Model.,Configuration,Assembly,Suppliers,to Assemble-to-Order Model,Configuration,Assembly,Suppliers,PLM a cause of UNCERTAINTY in SCM,Source: Forrester,CPLM CPFR,Source: Forrester,PLM,Source: Forrester,Whats wrong with this illustration ?,Imagination is out of focus !,Source: Forrester,Distributed Data in Connected Environments,Evolution ?,Can this evolutionary “vision” succeed ?,Source: Forrester,Real-time Data Layer,D2B,Semantic Web www.w3c.org,802.11 UWB,dERP,Internet 0 Internet 1 Internet 2,A G E N T S,S E C U