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Fundamentals of Industrial Plants

Supply chain strategy

Instructor:

Carlo Rafele

Dept.

of

Production

and

Management

Engineering

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2

1.MainrelationshipswithinSCM

2. Operational

links

between

actors

3. Contractsandbenefitsforactors

Contents

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3

Comprising different ways of collaboration in

the SCM

Knowing right application of relationships

Understanding the main logistic contracts

and applications

Lecture

Goals

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A New Supply Chain Paradigm A shift from a Push System

Production decisions are based on forecast

to a Push-Pull System

Initial portion of supply chain is replenished

based on long-term forecasts For example, parts inventory may be replenished

based on long term forecasts

Final supply chain stages based on actualcustomer demand

For example, assembly may be based on actualorders

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Push-Pull Supply Chains

Supply Chain Time Line

PUSH STRATEGY PULL STRATEGY

Low uncertainty High uncertainty

Suppliers Customers

Push-Pull Boundary

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Consider Two PC Manufacturers

Build to stock

Forecast demand Buys components

Assembles computers

Observes demand andmeets demand if

possible

A traditional PushSystem

Build to order

Forecast demand Buys components

Observes demand

Meets demand Assembles computers

A Push-Pull System

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Characteristics and Skills

Raw

materialCustomers

Low uncertainty

Long lead times

Cost minimization

Resource allocation

High uncertainty

Short cycle times

Service level

Responsiveness

Push-Pull Boundary

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Locating the Push-Pull Boundary

The Push section requires: Supply chain planning

Long term strategies

The Pull section requires: Order fulfillment processes

Customer relationship management

Buffer inventory at the boundary: The output of the tactical planning process

The input to the order fulfillment process

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Selecting the Best SC Strategy Higher demand uncertainty suggests Pull

Higher importance of economies of scale (EOS)suggests Push

High uncertainty and EOS not important: such

as the computer industry, implies Pull Low uncertainty and EOS important: such as

groceries, implies Push

Demand is stable Transportation cost reduction is critical

Pull would not be appropriate here.

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Selecting the Best SC Strategy Low certainty but low value of EOS (high volume

books and CDs) Either Push strategies or Push-Pull strategies might

be most appropriate

High uncertainty and high value of EOS For example, the furniture industry

How can production be Pull but delivery Push?

Is this a Pull-Push system?

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What Is the Best Strategy?

Pull

Pull

Push

Push

Demand

Uncertainty

Delivery Cost

Unit Price

Economies of Scale

H

H

L

L

I II

III IV1

2

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Choosing Between Push/Pull Strategies

Pull Push

Pull

Push

Economies of ScaleLow High

Low

High

DemandU

ncertainty

Industries where:

Customization is High Demand is uncertain Scale economies are Low

Computerequipment

Industries where:

Standard processes are thenorm

Demand is stable Scale economies are High

Grocery,Beverages

Industries where:

Uncertainty is low Low economies of scale Push-pull supply chain

Books, CDs

Industries where:

Demand is uncertain Scale economies are High intransportation Low economies of scale inproduction

Furniture

Where do the followingindustries fit in thismodel:

Automobile?

Aircraft?

Fashion?

Petroleum refining?

Pharmaceuticals?

Biotechnology?

Medical Devices?

Source: Simchi-Levi

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Different Location of the Push-Pull

Boundary

Raw

material Customers

Furniture Dell GMAmazonTraditional

retailers

Production Assembly ManufacturerDC

DistributorDC

Store

IKEA

PUSH PULL

Source: Tatjana Bolic Supply Chain Management

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Different Positions for the

Decoupling Point

Source: F.Dallari, Manuale di logistica MPH

PHASES OF THE MANUFACTURING LOGISTICS SYSTEM

SYSTEMEngineering Purchasing Manufacturing Assembling Delivery

Product

Building

Aircraft

Furniture

Car

Fridge

Light bulb

Forecasting not required

Forecasting not required

Forecasting about purchased materials

Customized on

demand

Componentscustomized on

demand

Catalogs

Customizationon standard

modules

Mass

production

Consumergoods