The Characteristics of Supply Chain Management Complexity, Variability, Conflicting Objectives1 1999 Andersen ConsultingOrder Response TimeProduct AvailabilityLead TimeOrder ChangesDue Date PerformanceResource InvestmentAsset ProductivityInventorySupplier & Capacity ContractsLevel of ServiceCost of ServiceThe Business Challenges2 1999 Andersen ConsultingComplexityVariabilityConflicting ObjectivesWhat are the characteristics of Supply Chan Management, why is it so hard to manage?3 1999 Andersen ConsultingComplexityLead Times Limit FlexibilityLittle or No Predictability and Poor Product Mix?Chronic Capacity ShortagesCurrent Processes and Structures Inhibit PerformanceInventory Used to Cover ProblemsComplications in the Electronics IndustryComplexity in Component / Semiconductor Manufacturing Mass customization Personalization Product mix effects on capacity Multiple options Contracted vs. owned capacity Combined make-to-forecast and make-to- order Inverted BOM Binning Multi-stage global production4 1999 Andersen ConsultingUncertainty in the supply chain results in significant variabilityEarlyOn-timeLateEarlyOn-timeLateUnderForecastOverEarlyOn-timeLateCustomer DemandSupplier PerformanceManufacturingCustomer DeliveriesRaw MaterialsFinished Goods Past Performance Market Research Analytical Technique Incentive Programs Responsiveness Transportation Location Quality Process Design Product Design Capacity QualityBy Tom Davis5 1999 Andersen ConsultingSupplyChannel OrdersActual LaunchReal ShortageReturns/ CancellationsOver-SupplyChannel Fill and Phantom DemandTarget LaunchEnd of LifeTrue End Customer DemandUnits Per PeriodTimeMultiple forecasts and unreliable fulfillment today create the bullwhip effect.6Andersen Consulting 1998Shortened product life cycle has increased the uncertainty.Ramp-upOngoingEnd of LifeRamp-upOngoingEnd of Life Role of InventoryHighUsualLow Cost of ShortageHighUsualLow Cost of OverageLowUsualHighBy Professor Hau L. Lee, Stanford University7 1999 Andersen ConsultingVariabilityNatural Demand Material supply Production DistributionSelf-Introduced Replenishment strategies Planning processes Inventory strategies8 1999 Andersen ConsultingTraditional functional alignments continue to impede Supply Chain Performance. Misaligned Functional Goals & BehaviorsPurchasingManufacturingDistributionSales & Customer ServiceGoal:Behavior:Lowest purchase priceHighest utilizationLowest cost100% customer satisfactionnLong lead timesnHigh raw material inventory levelnLong run lengthsnInflexible schedulesnHigh WIP inventorynLong order fill timesnInflexible schedulesnHigh inventoriesnPromise flexibility 9 1999 Andersen ConsultingConflicting Objectives - ManufacturingLittles LawLittles LawAsset UtilizationWIP INVCycle TimeVariabilityThroughputWIP Cycle Time Variability10 1999 Andersen ConsultingConflicting Objectives - CustomerLittles LawAsset UtilizationWIP INVCycle TimeVariabilityOrder Response TimeEarly WarningsDue Date PerformanceFill Rates11 1999 Andersen ConsultingConflicting Objectives - CorporateLittles LawAsset UtilizationWIP INVCycle TimeVariabilityOrder Response TimeEarly WarningsDue Date PerformanceFill RatesMarket ShareProfitMarket Risk12 1999 Andersen Consulting