• 1. The Characteristics of Supply Chain Management Complexity, Variability, Conflicting Objectives0© 1999 Andersen Consulting
    • 2. Order Response Time Product Availability Lead Time Order Changes Due Date PerformanceResource Investment Asset Productivity Inventory Supplier & Capacity ContractsLevel of ServiceCost of ServiceThe Business Challenges1© 1999 Andersen Consulting
    • 3. ComplexityVariabilityConflicting ObjectivesWhat are the characteristics of Supply Chan Management, why is it so hard to manage?2© 1999 Andersen Consulting
    • 4. ComplexityLead 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 production3© 1999 Andersen Consulting
    • 5. Uncertainty in the supply chain results in significant variabilityEarlyOn-timeLateEarlyOn-timeLateUnderForecastOverEarlyOn-timeLateCustomer DemandSupplier PerformanceManufacturingCustomer DeliveriesRaw MaterialsFinished GoodsPast Performance Market Research Analytical Technique Incentive ProgramsResponsiveness Transportation Location QualityProcess Design Product Design Capacity QualityBy Tom Davis4© 1999 Andersen Consulting
    • 6. SupplyChannel 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.5©Andersen Consulting 1998
    • 7. Shortened product life cycle has increased the uncertainty.Ramp-upOngoingEnd of Life Ramp-up Ongoing End of Life Role of Inventory High Usual Low Cost of Shortage High Usual Low Cost of Overage Low Usual HighBy Professor Hau L. Lee, Stanford University6© 1999 Andersen Consulting
    • 8. VariabilityNatural Demand Material supply Production Distribution Self-Introduced Replenishment strategies Planning processes Inventory strategies7© 1999 Andersen Consulting
    • 9. Traditional functional alignments continue to impede Supply Chain Performance.— Misaligned Functional Goals & Behaviors—PurchasingManufacturingDistributionSales & Customer ServiceGoal:Behavior:Lowest purchase priceHighest utilizationLowest cost100% customer satisfactionLong lead times High raw material inventory levelLong run lengths Inflexible schedules High WIP inventoryLong order fill times Inflexible schedulesHigh inventories Promise flexibility 8© 1999 Andersen Consulting
    • 10. Conflicting Objectives - ManufacturingLittle’s Law Little’s LawAsset UtilizationWIP INVCycle TimeVariabilityThroughputWIP Cycle Time Variability9© 1999 Andersen Consulting
    • 11. Conflicting Objectives - Customer Little’s LawAsset Utilization WIP INVCycle TimeVariabilityOrder Response Time Early WarningsDue Date PerformanceFill Rates10© 1999 Andersen Consulting
    • 12. Conflicting Objectives - Corporate Little’s LawAsset Utilization WIP INVCycle TimeVariabilityOrder Response Time Early WarningsDue Date PerformanceFill RatesMarket ShareProfitMarket Risk11© 1999 Andersen Consulting