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Supply Chain Management:Supply Chain Management:Issues and ModelsIssues and Models

Lecture 1: IntroductionLecture 1: Introduction

Dr. Jinxing XieDr. Jinxing Xie

Department of Mathematical SciencesDepartment of Mathematical Sciences

Tsinghua University, Beijing 100084, ChinaTsinghua University, Beijing 100084, China

http://faculty.math.tsinghua.edu.cn/~jxiehttp://faculty.math.tsinghua.edu.cn/~jxie

Email: jxie@ math.tsinghua.edu.cnEmail: jxie@ math.tsinghua.edu.cn

Voice: (86-10)62787812 Fax: (86-10)62785847Voice: (86-10)62787812 Fax: (86-10)62785847

Office: Rm. 1308, New Science BuildingOffice: Rm. 1308, New Science Building

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Course InformationCourse Information Objective:Objective:

– Understanding the supply chain and related issuesUnderstanding the supply chain and related issues

– Introducing some models and technologies for supply chain Introducing some models and technologies for supply chain managementmanagement

Project / Assignment (choose any one)Project / Assignment (choose any one)– A review of literatures on a topic you are interestedA review of literatures on a topic you are interested

– A report which is a generalization to a paper A report which is a generalization to a paper

References: References: – Course notes at http://www.csiam.edu.cn/scmCourse notes at http://www.csiam.edu.cn/scm

– Some journal papers from Management Sciences et. al.Some journal papers from Management Sciences et. al.

Focus on:Focus on:– Issues (Problems) and ModelsIssues (Problems) and Models

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Example: Example: Stages of a Detergent Supply ChainStages of a Detergent Supply Chain

Customer wants detergent and goes to Wal-Mart

Wal-Mart

Store

Wal-Mart Or third-party DC

P&G or other manufacturer

Plastic producer

Chemical manufacturer

Paper manufacturer

Timber industry

Tenneco packaging

Chemical manufacturer

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WHAT IS A SUPPLY CHAIN?WHAT IS A SUPPLY CHAIN?

A Supply Chain A Supply Chain

consists of organizations that successively consists of organizations that successively transform raw materials into transform raw materials into

intermediate intermediate goods, then to final good, goods, then to final good, and finally deliver and finally deliver them to customers.them to customers.

A Supply ChainA Supply Chain

consists of all stages involved, directly or consists of all stages involved, directly or indirectly, in fulfilling a customer request.indirectly, in fulfilling a customer request.

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WHAT IS A SUPPLY CHAIN?WHAT IS A SUPPLY CHAIN?

The global network used to deliver products The global network used to deliver products and services from raw materials to the end and services from raw materials to the end customer through engineered flows of customer through engineered flows of information, physical distribution and cash.information, physical distribution and cash.

InformationSystems

World-WideRequirements

Planning

RelationshipManagement

LogisticsNetwork

DistributionProcesses

TheSupply Chain

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Understanding the Supply Understanding the Supply Chain:Chain:

Supply Network, Supply WebSupply Network, Supply Web Not only manufacturer and supplier, but also traNot only manufacturer and supplier, but also tra

nsporters, warehouses, retailers and customers tnsporters, warehouses, retailers and customers themselves.hemselves.

All functions involved in filling a customer reqAll functions involved in filling a customer request within each organization: new product devuest within each organization: new product development, marketing, operations, distribution, fielopment, marketing, operations, distribution, finance, and customer service.nance, and customer service.

SCM vs. Logistics (SCM vs. Logistics ( 物流）物流）

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Supply Chain StagesSupply Chain Stages

Supplier

Supplier

Supplier

Man

ufactu

rer M

anu

facturer

Distrib

utor

Distrib

utor

Retailer

Retailer

Retailer

Customer

Customer

Customer

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Connect Supply With DemandConnect Supply With Demand

SUPPLY DEMANDInformation

Product

Cash

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供应链概念模型

计划决策

企业

生产采购 分销

供应商

生产 分销采购

客户

生产 分销采购

客户的客户

采购 生产分销生产

供应商的供应商

过程控制

计划调度

生产过程

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供应链管理的三个层面

采购 生产 配送 营销

作业管理

战术管理

战略管理

工厂和仓库等生产资源的数量、布局和能力；产品设计；市场开发等。

采购和生产决策；库存策略；运输与配送策略；联盟关系等。

库存控制；生产计划与调度；运输路线等。

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Example 1: Typical U.S. Apparel Example 1: Typical U.S. Apparel Industry Supply ChainIndustry Supply Chain

Fiber

suppliers

Textile

makers RetailersApparel

makers

Agents Agents Agents

Average inventory and elapsed time (weeks):

• Materials: 6.5

• In-process: 9 6

• Finished goods: 7.5 9.5

• In-transit: 4 4 12

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Discussion of Issues and opportunities for Discussion of Issues and opportunities for improvement to U.S. Apparel Industry improvement to U.S. Apparel Industry

IssuesIssues– Supply chain is too long and too slowSupply chain is too long and too slow

» 58.5 weeks (excludes processing time & international transit times)58.5 weeks (excludes processing time & international transit times)– Little of this time is spent in processingLittle of this time is spent in processing

» Only 15 of the 58.5 weeks are in-process inventoryOnly 15 of the 58.5 weeks are in-process inventory– Even in processing, the ratio of processing time to wait time is notoriously lowEven in processing, the ratio of processing time to wait time is notoriously low

– Thus, American apparel industry was reduced enormously during the last 25 yearThus, American apparel industry was reduced enormously during the last 25 year

ss OpportunitiesOpportunities

– Faster response to customer ordersFaster response to customer orders– Eliminating unnecessary inventory, stockouts and markdownsEliminating unnecessary inventory, stockouts and markdowns– $25 billion can be saved annually$25 billion can be saved annually

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Example 2:Example 2: HP DeskJet Printer Supply Chain HP DeskJet Printer Supply Chain

Printedcircuitassembly& test

Printed

mechanism

manufacturing

Supplier

Supplier

Supplier

Vancouver

final

assembly

&

test

Asia-Pacific

distribution

center

Integrated

circuit

manufacturingDealers

Supplier

4-5weeks

1 day

California

distribution

center

European

distribution

center

4-5weeks

Dealers

Dealers

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Discussion of Example 2:Discussion of Example 2: Improvement during the early 1980s Improvement during the early 1980s

– Manufacturing cycle time reducedManufacturing cycle time reduced» 8-12 weeks ==> 1 weeks8-12 weeks ==> 1 weeks

– Average inventory reducedAverage inventory reduced» 3.5 months ==> 0.9 months3.5 months ==> 0.9 months

– All finished goods inventory eliminatedAll finished goods inventory eliminated– Importance of response time and transportation time Importance of response time and transportation time

increasedincreased– Further improvements should be made on supply Further improvements should be made on supply

chainchain

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Discussion of Example 2:Discussion of Example 2: Improvement of supply chain in 1990 Improvement of supply chain in 1990

– Time between order and Time between order and delivery reduceddelivery reduced

» Europe & Asia: Europe & Asia:

5.25 months ==> 1.25 months 5.25 months ==> 1.25 months

» North-America: North-America:

4.25 months ==> 0.2 months 4.25 months ==> 0.2 months

– Importance of transportation Importance of transportation time increasedtime increased

» Europe & Asia: 1% ==> 12% Europe & Asia: 1% ==> 12%

» North-America: 20% ==> 80%North-America: 20% ==> 80%

Comparison of Response Time

(months)

5.25

4.25

0.2

1.25

0

1

2

3

4

5

6

Eur

ope

&A

sia

Nor

th-

Am

eric

a

1990-

1990+

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Hints from Examples 1 and 2Hints from Examples 1 and 2 Further reduction in manufacturing cycle time is not highFurther reduction in manufacturing cycle time is not high

ly beneficial after the improvements of 1980s ly beneficial after the improvements of 1980s – Example 1: Only 15 of the 58.5 weeks are WIP inventoryExample 1: Only 15 of the 58.5 weeks are WIP inventory

Improvements in supply chain is very beneficialImprovements in supply chain is very beneficial– Inventory cost reducedInventory cost reduced

» HP Case: 4 months inventory reduced, total cost reduces up HP Case: 4 months inventory reduced, total cost reduces up to 5%to 5%

– Time between order and delivery reducedTime between order and delivery reduced» Better sales forecasts, reduced wrong orders, markdowns, stBetter sales forecasts, reduced wrong orders, markdowns, st

ockouts and delays in deliveryockouts and delays in delivery

– Lower total cost & higher customer serviceLower total cost & higher customer service

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Objectives of Supply Chain Objectives of Supply Chain Management (SCM) Management (SCM)

To improveTo improve

the profitability and efficiency of the the profitability and efficiency of the supply chain and all organizations supply chain and all organizations involvedinvolved

By By – OptimizingOptimizing

the speed and certainty andthe speed and certainty and– MaximizingMaximizing

the net value added by all relevant the net value added by all relevant processesprocesses. .

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Decision phases in a supply chainDecision phases in a supply chain Depending on the time frame over which the Depending on the time frame over which the

decisions made applydecisions made apply– Supply chain strategy or design: next few yearsSupply chain strategy or design: next few years– Supply chain planning: yearly or monthlySupply chain planning: yearly or monthly– Supply chain operation: weekly or dailySupply chain operation: weekly or daily

Some key fieldsSome key fields– Supply chain design and product developmentSupply chain design and product development– Demand forecasting and customer relationshipDemand forecasting and customer relationship– Production planning and schedulingProduction planning and scheduling– Inventory managementInventory management– Transportation managementTransportation management– Location and Facilities managementLocation and Facilities management– Information management and Information TechnologyInformation management and Information Technology– ……..

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供应链管理的主要问题

网络结构设计与选址 (S)

库存控制 (S/T)

生产计划与调度 (S/T/O)

运输与物流管理 (T/O)

供应链联盟与合作关系 (S)

信息价值 (S)

产品设计 (S)

S －战略决策

T －战术决策

O －作业决策

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供应链管理的主要困难

复杂且庞大的网络和过程结构 复杂的产品结构 分布的管理和组织结构 动态系统，存在多种不确定因素

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供应链管理理论和技术供应链管理

确定性模型 随机性模型 启发式方法

概念 / 定性模型方法

定量模型方法 面向实例的经验方法

线性规划 非线性规划 目标规划 网络流 博弈论 确定性动态规划

随机动态规划 随机库存控制 排队优化 Markov 决策

禁忌搜索 模拟退火 遗传算法 Lagrangian 松弛 约束理论 多 Agent 技术 (DAI)

仿真Petri 网排队网络扰动分析 (PA)Markov 链

分析模型和方法 优化模型和方法

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The Virtual Enterprise

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Key Elements In Supply Chain UncertaintyKey Elements In Supply Chain Uncertainty DEMANDDEMAND

– Timing of Order - How predictable is this? Timing of Order - How predictable is this?

– Size and Composition of Order - Are there unexpected elements, and is it Size and Composition of Order - Are there unexpected elements, and is it subject to change? subject to change?

– Data Accuracy on Products Required, Delivery Data Accuracy on Products Required, Delivery

Points and TimingsPoints and Timings SUPPLYSUPPLY

– Lead Time to Supply - How predictable is this? Lead Time to Supply - How predictable is this?

– Quantity Supplied - Can the delivery be accepted without being counted? Quantity Supplied - Can the delivery be accepted without being counted?

– Quality of Supply - Can the supplies be used without testing? Quality of Supply - Can the supplies be used without testing?

– Data Accuracy on Products Supplied and PricesData Accuracy on Products Supplied and Prices

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Good, Bad or Optimum InventoryGood, Bad or Optimum Inventory Once uncertainty is stripped away to the maximum practicable degree, Once uncertainty is stripped away to the maximum practicable degree,

inventory can then be determined at the correct (optimal) level (for each inventory can then be determined at the correct (optimal) level (for each stage of the supply chain and overall)stage of the supply chain and overall)

Profit Profit (or performance enhancement) from holding stock (or performance enhancement) from holding stock

equalsequals potential lost sales (or lost performance) potential lost sales (or lost performance)

timestimes the gross profit margin on sales (or added value) the gross profit margin on sales (or added value)

less less the cost of holding stock (interest plus holding costs, the cost of holding stock (interest plus holding costs,

which can be substantial in real terms and are oftenwhich can be substantial in real terms and are often

underestimated)underestimated)

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““Old” Order Driven Supply ChainOld” Order Driven Supply Chain

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Supply Planning Across the Virtual Supply Planning Across the Virtual EnterprisesEnterprises

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SCM vs. OR/MS/DSOperations Research and Management Science (OR/MS)

The professional disciplines that deal with the application of information The professional disciplines that deal with the application of information technology for informed decision-making technology for informed decision-making

Provide rational bases for decision making by seeking to understand and Provide rational bases for decision making by seeking to understand and structure complex situations and to use this understanding to predict system structure complex situations and to use this understanding to predict system behavior and improve system performance. behavior and improve system performance.

Much of this work is done using analytical and numerical techniques to Much of this work is done using analytical and numerical techniques to develop and manipulate mathematical and computer models of develop and manipulate mathematical and computer models of organizational systems composed of people, machines, and procedures. organizational systems composed of people, machines, and procedures.

The field is closely related to several other fields in the "decision sciences" -- The field is closely related to several other fields in the "decision sciences" -- applied mathematics, computer science, economics, industrial engineering, applied mathematics, computer science, economics, industrial engineering, and systems engineering. and systems engineering.

From http://www.informs.org/Join/Orms.html

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SCM vs. OM

What is Operations Management (OM)?

运作管理就是对公司（或组织）的提供主要产品或服务的运作管理就是对公司（或组织）的提供主要产品或服务的系统进行设计、运行、评价和改进。系统进行设计、运行、评价和改进。

OM is the set of activities that creates goods and services by traOM is the set of activities that creates goods and services by transforming inputs into outputs.nsforming inputs into outputs.

OM is the business function that manages that part of a business OM is the business function that manages that part of a business that transforms raw materials and human inputs into goods and sthat transforms raw materials and human inputs into goods and services of higher value. (narrow view)ervices of higher value. (narrow view)

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市场

企业战略

运作战略财务战略 营销战略

运作管理

人力 工厂 部件 工艺

计划与控制系统

输入

原料

顾客

输出

产品

服务 生产系统 (5P)

OMOM 概要模概要模型型

其他名称：生产管理

工业管理

工厂管理

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OM vs. OR/MS/DS vs. SS/SE vs. IE/EMOM vs. OR/MS/DS vs. SS/SE vs. IE/EM 运作管理是管理的一个运作管理是管理的一个

领域（管理职能）领域（管理职能） OR/MS/DSOR/MS/DS 是各领域在是各领域在

制定决策时都可能遇到制定决策时都可能遇到的定量方法 的定量方法

SS/SESS/SE 强调的是系统观强调的是系统观点、系统方法点、系统方法

IE/EMIE/EM 主要关注如何更主要关注如何更好地利用企业的资源，好地利用企业的资源，解决工程问题（如工业解决工程问题（如工业自动化等）自动化等）

OM

OR/MS/DS SS/SE

IE/EM

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供应链协调问题

运筹学

分布人工智能经济

学

供应链管理

目标冲突 分布决策结构：不一致决策激励 信息扭曲 非对称信息结构：不完全信息

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The Heritage of OMThe Heritage of OM 1776-1880: 1776-1880: 早期概念早期概念

– 专业化； 标准化零部件专业化； 标准化零部件 1880-19101880-1910 ：科学管理时代：科学管理时代

– GanttGantt 图；动作图；动作 // 时间研究；过程分析；排队论时间研究；过程分析；排队论 1910-19801910-1980 ：大批量生产时代：大批量生产时代

– 流水线；经济批量；线性规划；流水线；经济批量；线性规划； PERT/CPMPERT/CPM ；； MRPMRP 1980-19951980-1995 ：精益生产时代：精益生产时代

– JITJIT ；； TQMTQM ；； EDIEDI ；； CAD/CAM/CAPPCAD/CAM/CAPP 1995-20051995-2005 ：大批量、顾客化生产时代：大批量、顾客化生产时代

– 全球化；信息化（全球化；信息化（ INTERNETINTERNET ；； E-Commerce)E-Commerce)– 敏捷制造；敏捷制造； BPRBPR ；； ERPERP ；主动学习的组织；主动学习的组织– 供应链管理（供应链管理（ SCMSCM ））

成

本

质量

顾客

作为学科， OM 诞生于 50 年代末 60 年代初

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Goods and services designGoods and services design What product should we offer?What product should we offer? How should we design these products and services?How should we design these products and services?

Managing qualityManaging quality Who is responsible for quality?Who is responsible for quality? How do we define the quality we want in our service or How do we define the quality we want in our service or

product?product? Process and capacity designProcess and capacity design

What process will these products require and in what order?What process will these products require and in what order? What equipment and technology is necessary for these What equipment and technology is necessary for these

processes?processes?

What Operations Managers do?What Operations Managers do?(Top 10 Research Directions)(Top 10 Research Directions)

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Location strategiesLocation strategies Where should we put the facility?Where should we put the facility? On what criteria should we bas the location decision?On what criteria should we bas the location decision?

Layout designLayout design How should we arrange the facility?How should we arrange the facility? How large must the facility be to meet our plan?How large must the facility be to meet our plan?

Human resources and job designHuman resources and job design How do we provide a reasonable work environment?How do we provide a reasonable work environment? How much can we expect our employees to produce?How much can we expect our employees to produce?

Supply chain managementSupply chain management Should we buy or produce the component?Should we buy or produce the component? Who are our suppliers and who can integrate into our e-Who are our suppliers and who can integrate into our e-

commerce program?commerce program?

What Operations Managers What Operations Managers do?do?

(Top 10 Research Directions)(Top 10 Research Directions)

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Inventory controlInventory control How much inventory of each item should we have?How much inventory of each item should we have? When do we reorder?When do we reorder?

Intermediate, short-term, and project schedulingIntermediate, short-term, and project scheduling Is subcontracting production a good idea?Is subcontracting production a good idea? Are we better off keeping people on the payroll during Are we better off keeping people on the payroll during

slowdowns?slowdowns? MaintenanceMaintenance

Who is responsible for maintenance?Who is responsible for maintenance?

What Operations Managers What Operations Managers do?do?

(Top 10 Research Directions)(Top 10 Research Directions)

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Exciting New Trends in OMExciting New Trends in OMLocal or national focus Global focus, international OM

Batch (large) shipments Just-in-time shipments

Low-bid purchasingSupply chain partners, ERP,

e-Commerce

Lengthy product developmentRapid product development,

alliances

Standardized products Mass customization

Job specializationEmpowered employees,

teams, and lean production

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Important Research Field Important Research Field - Service Operations Management- Service Operations Management IntangibleIntangible Produced and consumed simultaneouslyProduced and consumed simultaneously UniqueUnique High customer interactionHigh customer interaction Inconsistent product definitionInconsistent product definition Knowledge-basedKnowledge-based DispersedDispersed Difficult to automateDifficult to automate Difficult to measure qualityDifficult to measure quality …………..

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Strategic

Tactic

Operational

Levels of Decision

Qualitative

Quantitative

Research MethodsResearch Methods

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Research MethodsResearch Methods EmpiricalEmpirical

– Case studyCase study– SurveySurvey– Panel studyPanel study– DatabaseDatabase

Theoretic modelsTheoretic models– Deterministic modelsDeterministic models– Uncertainty modelsUncertainty models

SimulationSimulation Expert system Expert system

(knowledge model)(knowledge model)

SimulationSimulation Motivation and ObjectiveMotivation and Objective Experiment designExperiment design

Independent variablesIndependent variables Dependent variablesDependent variables

Simulation run Simulation run Data analysisData analysis FindingsFindings InsightsInsights

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建 立 OR/MS 理 论 模 型 的 一 般 步 骤

模型准备 模型假设 模型构成

模型求解模型分析模型检验

模型应用

Applied Mathematics – Mathematical Modeling:Motivation,Formulation,Solution,Validation

“ 源”远“流”长

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Established March 1999, Newest within INFORMSEstablished March 1999, Newest within INFORMS Membership: 950, Largest within INFORMSMembership: 950, Largest within INFORMS Society Webpage: http://msom.society.informs.org Society Webpage: http://msom.society.informs.org The methods which MSOM members apply in order to The methods which MSOM members apply in order to

help the operations function add value to products and help the operations function add value to products and services are derived from a wide range of scientific fielservices are derived from a wide range of scientific fields, including operations research and management scieds, including operations research and management science, mathematics, economics, statistics, information synce, mathematics, economics, statistics, information systems and artificial intelligence.stems and artificial intelligence.

Manufacturing and Service Operations Management Society

* INFORMS: Institute for Operations Research and Management Science

Merged from ORSA (1952) and TIMS (1953) in 1994

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Source of ReferencesSource of ReferencesTop journal:Top journal:

Operations Research (OR)Operations Research (OR)Management Science (MS)Management Science (MS)

Quasi-Top journal:Quasi-Top journal: Operations Research Letters (ORL)Operations Research Letters (ORL)IIE Transactions (IIET)IIE Transactions (IIET)Naval Research Logistics (NRL)Naval Research Logistics (NRL)Mathematics of Operations Research (MOR)Mathematics of Operations Research (MOR)Journal of operations management (JOM)Journal of operations management (JOM)

Major journal:Major journal: European Journal of Operational Research (EJOR)European Journal of Operational Research (EJOR)International Journal of Production Research (IJPR)International Journal of Production Research (IJPR)International Journal of Production Economics (IJPE)International Journal of Production Economics (IJPE)Journal of the Operational Research Society (JORS)Journal of the Operational Research Society (JORS)……

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OM Related JournalsOM Related Journals

JOM (J. of OM)JOM (J. of OM) IJOPM (Int. J. Op. Prod. Mgmt.)IJOPM (Int. J. Op. Prod. Mgmt.) POM (Prod. & OM)POM (Prod. & OM) IJPR (Int. J. of Prod. Research)IJPR (Int. J. of Prod. Research) IJPE (Int. J. of Prod. Economics)IJPE (Int. J. of Prod. Economics) PIMJ (Prod. Invent. Mgmt. J.)PIMJ (Prod. Invent. Mgmt. J.) MS MS （（ Management Sciences)Management Sciences) HBR (Harvard Business Rev.)HBR (Harvard Business Rev.) EJOREJOR Sloan Mgmt. ReviewSloan Mgmt. Review

MS MS (SSCI, SCI)(SSCI, SCI) OR OR (SCI)(SCI) JOMJOM IJOPMIJOPM IJPR IJPR (SCI)(SCI) POM POM (SCI)(SCI) EJOREJOR(SCI, SSCI)(SCI, SSCI) HBRHBR Academy of Mgmt. JournalAcademy of Mgmt. Journal DS (Decision Sciences) DS (Decision Sciences)

(SSCI)(SSCI)

Relevance Ranks (1999, JOM) Quality

MSOMMSOM

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SummarySummary

What is Supply chain / SCM?What is Supply chain / SCM? What kinds of issues SCM concern?What kinds of issues SCM concern? What are the Theory and Techniques What are the Theory and Techniques

which can be possibly potential in SCM?which can be possibly potential in SCM? SCM vs. OR/MS/DS/OM/IE/EM/SS/SE?SCM vs. OR/MS/DS/OM/IE/EM/SS/SE? Top journals publishing SCM studies Top journals publishing SCM studies

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