Supply Chain Management

1. Supply Chain Management Lecture 15

2. Outline • Today • Simulation game results • Midterm review • Next week • Midterm Tuesday March 9

3. The Teams

4. The Scores

5. 13 Jafar’s Crew 14 Team Bison $37,850,401 $37,305,034 20 40 40 16 10 40 COSTA 15 Do Nothing 16 $36,659,589 $35,394,768 20 20 16 16 16

6. AdWiJuMa 9 We Want Dutch Wafers 10 $40,150,372 $40,149,781 60 37 40 46 15 16 16 18 11 Brittany 12 $39,836,011 $39,581,049 112 30 118 36 16 16

7. The Designs Team Shinnannigans 5 Robert and Alex 6 $41,623,140 $41,461,152 60 60 40 45 15 20 16 15 10 16 7 No use for a name Team Predator 8 $41,011,414 $40,621,780 50 66 46 40 16 16 16 16 16 16

8. 2 Pole Position 4 Brown Squad $42,636,799 $42,401,421 100 53 55 56 16 Cobras 1 Pangeans for Outsourcing 3 $43,114,415 $42,529,886 72 95 71 65 16

9. The Results

10. Midterm • Questions? Stop by… • Friday March 5 • Monday March 8

11. Midterm • Chapter 1 • Sections 1, 2, 3, 4, 5 • Skipping • Section 1.5: Supply chain macro processes in a firm • Important concepts • Supply chain • Supply chain surplus • 3 decision phases in a supply chain • Cycle view • 4 process cycles • Push/pull view

12. Supply Chain Stages Q1 • A typical supply chain may involve a variety of stages Supplier Manufacturer Distributor Retailer Customer Most supply chains are actually supply networks

13. Midterm • Chapter 2 • Sections 1, 2, 3, (4e: also 4) • Important concepts • Competitive strategy • Supply chain strategy • Strategic fit • How is strategic fit achieved • Implied demand uncertainty • Responsiveness/efficiency • Issues affecting strategic fit • Scopes of strategic fit • Obstacles to achieving strategic fit (3e: Chapter 3 section 9)

14. What is Competitive Strategy? Q2 • Competitive strategy • Defines, relative to competitors, a company’s set of customer needs that it seeks to satisfy through its products and services • Wal-Mart • Everyday low prices (low cost retailer for a wide variety of products) • Coors • The coldest tasting beer in the world, brewed with Rocky Mountain spring water • Dell • Custom-made computer systems at a reasonable cost How do you execute your competitive strategy?

15. Midterm • Chapter 3 • Sections 1, 3, 4, 5, 6, 7, 8, (3e: also 9) • Hint • Sections 3 through 9 focus at:: Role in the competitive strategy, and Overall trade-off • Skipping • Sections 3 though 9: Information-related metrics • Important concepts • 6 drivers of supply chain performance • Facilities • Inventory • Transportation • Information • Sourcing • Pricing

16. Facilities Inventory Transportation Information Sourcing Pricing Logistical drivers Cross functional drivers From Strategy to Decisions Q3 Corporate Strategy Competitive Strategy Supply Chain Strategy Responsiveness Efficiency

17. Midterm • Chapter 4 • Sections 1, 2, 3 • Important concepts • Distribution • Factors influencing network design • Customer service components • Relationship between number of facilities and response time • Relationship between number of facilities and cost • 6 distribution network design options • Relative performance (advantages/disadvantages)

18. Transportation Cost and Number of Facilities Q4 Transportation Costs Number of Facilities

19. Manufacturers Manufacturers Manufacturers Manufacturers Manufacturers Manufacturers Retailer Distributor Warehouse Distributor Warehouse Distributor Warehouse Retailer Distributor Warehouse Distributor Warehouse Distributor Warehouse Mergers Distributor Warehouse Distributor Warehouse Retailer Retailer Retailer Consumers Consumers Consumers Consumers Consumers Consumers Design Options For a Distribution Network Q5

20. Midterm • Chapter 5 • Sections 1, 2 • Skipping • Section 5.2: Locating to split the market • Important concepts • 4 classifications of network design decisions • 8 factors influencing network design decisions • 6 facility strategic roles • Positive externalities

21. Factors Influencing Network Design Decisions Q6 • Strategic factors Strategic role GlobalCustomers Regional Customers Lead <advanced technology> Lockheed Martin’s JSF in Dallas Outpost <access to knowledge> Dell in Ireland Offshore <low-cost> <exports only> Many Asian plants Server <local market><avoid tariffs> Suziki’s Indian venture Maruti Source <low-cost><global market> Nike plants in Korea Contributor <customization> <development skills> Maruti

22. Factors Influencing Network Design Decisions Q7 • Macroeconomic factors • Quotas, tariffs, and tax incentives • Economic trade agreements: Nafta, EU, APTA, AFTZ • Exchange rate and demand risk • Different states or countries often offer economic incentives to companies that decide to set up shop there, including tax incentives and low-interest economic development loans How can trade agreements influence the number of facilities in a supply chain?

23. Factors Influencing Network Design Decisions Q7 • Political factors • Political stability • Infrastructure factors • Availability of transportation terminals, labor • Most of Amazon’s distribution centers are located near airports • Competitive factors • Positive externalities (many stores in a mall makes it more convenient for customers – one location for everything the customers need)

24. Midterm • Chapter 6 • Sections 1, (3e: 2), 3, 4, (4e: 5), (3e: 6) • Important concepts • Discounted cash flow • Net present value • Decision tree • Calculating NPV • Calculating NPV using decision trees • Risk management and network design

25. Midterm • Chapter 7 • Sections 1, 2, 3, 4, 5, 6 • Important concepts • Factors influencing demand forecast • 4 characteristics of forecasts • 4 forecast types • Static and adaptive • Static method, moving average, exponential smoothing, Holt's method • Calculating forecasts • Forecast errors • Calculating forecast errors

26. Types of Forecasts Q8 • Qualitative • Primarily subjective, rely on judgment and opinion • Time series • Use historical demand only • Causal • Use the relationship between demand and some other factor to develop forecast • Simulation • Imitate consumer choices that give rise to demand

27. Midterm • Chapter 8 • Sections 1, 2, 3 • Important concepts • Aggregate planning • Operational parameters • Aggregate planning strategies

28. Aggregate Planning Strategies Q9 • Basic strategies • Level strategy (using inventory as lever) • Synchronize production rate with long term average demand • Swim wear • Chase (the demand) strategy (using capacity as lever) • Synchronize production rate with demand • Fast food restaurants • Time flexibility strategy (using utilization as lever) • High levels excess (machine and/or workforce) capacity • Machine shops, army • Tailored strategy • Combination of the chase, level, and time flexibility strategies

29. Midterm • Chapter 9 • Sections 1, 2, 3 • Hint • Section 3 focus at Impact of promotion on demand (market growth, stealing share, and forward buying), and impact on promotion timing • Important concepts • Responding to predictable variability • Managing supply • Managing demand • 3 reasons for increase in demand due to promotion • Impact on promotion timing

30. Managing Demand Q10 • Pricing and other forms of promotion • Timing of promotion is important • Demand increases from promotion can result from a combination of three factors: • Market growth (increased sales, increased market size) • Increase in consumption from both new and existing customers • Example: Toyota Camry attracting buyers who were considering lower-end models • Stealing share (increased sales, same market size) • Product substitution (overall demand stays the same) • Example: Toyota Camry attracting buyers who were considering Honda Accord • Forward buying (same sales, same market size) • Customers move up purchases (does not increase sales)

31. Midterm Formula Sheet