Continuous… 

Category of industry (or products) that especially needs SCM
1) many sort and small amount production
2) products which need wide area logistic networks
3) large temporal fluctuation of demand change
4) short lifecycle products

Types of Supply Chains

(1) Push vs. Pull 

A simple supply chain
A——-B A: Manufacturer B: Finished Goods Inventory (FGI) Buffer

Push system: Completed A products are sent (pushed) to B regardless of system condition.
Pull system: Removal of a product from the finished goods buffer signals the execution of inventory change, and trigger the execution of supply from A.

The production and distribution decisions with Push or Pull strategies
◆ Push supply chains:
Long term forecasts
More time to react to changing market place
Bullwhip effect
◆ Pull supply chains:
Demand driven
Elimination of inventory, reduction of bullwhip effect and increased service levels
Difficult to keep service level for longer lead time 

Bullwhip Effect in push type SCM

Procter and Gamble, manufacturers Pampers
The supply chain for Pampers is broadly as follows:

Suppliers—Manufacture—Distributer—Retailer—Customer
The following demand curves are observed in PG’s supply chain:

Production Distribution Models

Push-Pull Supply Chain:
Hybrid of the Push & Pull systems
Initial stages – Push-based strategy
Final stages – Pull-based strategy
The push part – where long-term forecasts have small uncertainty and variability.
The pull part – where uncertainty and variability are high

Types of Supply Chains (2)

Lean supply chain (LSC):
Lean supply chain employs lean production and time compression in paralled. Not adapatable to future market requirements. 

Agile supply chain (ASC):
Agile supply chain responds to unpredictable market changes and capitalizes on them and exploits a dynamic type of alliance known as a “virtual organization”. A virtual organization is the integration of core competencies distributed among a number of carefully chosen but real organizations.

Hybrid supply chain (HSC):
A hybrid supply chain helps to achieve mass customization by postponing product differentiation until final assembly. The lean supply chain is utilized for component productions. The agile part of the chain establishes a company-market interface to understand and satisfy requirements by being responsive and innovative.

What Makes SCM Difficult? 

◆ Variations Over Time
Environment changes over time
◆Conflicts
Achieving Global Optiimization vs. Local Optimization
Minimizing the cost and maximizing the service level is frequently a difficult task for a single facility. SCM tries to optimize these globally.
◆ Uncertainty
Customer demand can never be forecasted exactlly, travel times will never be certain, machines and vehicles will breakdown.

Variations Over Time
Supply Chain evolves over time.
Customer demand and supplier capatilities change over time. Cumstomer-supplier relationship changes over time (customer power increases, …etc.)
Seasonality
Competitors pricing strategies
Advertising and Promotions
Promotions destroy the simplicity of a predictable demand for a good product at a reasonable price.

Conflicting Objectives in the Supply Chain 

1. Puurchasing
◆ Stable volume requirements
◆ Flexible delivery time
◆ Little variation in mix
◆ Large quantities

2. Manufacturing
◆ Long run production
◆ High quality
◆ High productivity
◆ Low production cost

3. Warehousing
◆ Low inventory
◆ Reduced transportation costs
◆ Quick replenishment capability 

4. Customers
◆ Short order lead time
◆ High in stock
◆ Enormous variety of products
◆ Low prices

Uncertainty (examples)
Compaq computer estimates it lost $500 million to $1 billion in sales in 1995 because its laptops and desktops were not available when and where customers were ready to buy them.
Boeing Aircraft, one of America’s leading capital goods producers, was forced to announce write downs of $2.6 billion in October 1997. The reason? “Raw material shortages, internal and supplier parts shortages…” (Wall Street Journal, Oct. 23. 1997)

Uncertainty in Supply Chain
◆ Demand uncertainty: uncertainty of customer demand for a product
◆ Implied demand uncertainty:
the uncertainty that exists due to the portion of the demand the supply chain must handle and attributes the customer desires.
ex.) Firms, which sell same products to different customer segments who have different attributes face a different implied demand uncertainty (parts for manufacturing or maintenance, personal use or business use, etc.) 

Impact of Customer Needs on Demand Uncertainty

Customer Need	Causes implied demand uncertainty to increase
Range of quantity increases	Wider range of quantity implies greater variance in demand
Lead time decreases	Less time to react to orders
Variety of products required increases	Demand per product becomes more disaggregated
Number of channels increases	Total customer demand is now disaggregated over more channels
Rate of innovation increases	New products tend to have more uncertain demand
Required service level increases	Firm now has to handle unusual surges in demand

Supply Chain Challenges

Achieving Global Optimization under:
Conflicting Objectives
Complex network of factilities
System Variations over time 

Managing Uncertainty
Matching Supply and Demand
Demand is not the only source of uncertainty (delivery lead times, component availability, machine breakdowns, natural disasters…etc.)

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