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Slides
BusinessLogisticsandSupplyChain
Management
AsvinGoel
asvin.goel@theklu.org
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Supplychainstrategy
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Pullbasedsupplychain
Inapullbasedsupplychain,productionand
distributionareinitiatedafterthedemandfor
specificproductsbecomesknown.
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Pushbasedsupplychain
Inapushbasedsupplychain,productionand
distributiondecisionsarebasedonforecastsand
initiatedbeforedemandbecomesknown.
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Whataretheadvantagesanddisadvantagesofpush
andpullbasedstrategies?
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Inpushbasedsupplychains,productsareproduced
beforedemandisknown.
Thus
someproductsmaybeproducedforwhichthere
willneverbeademand
somedemandmayhavetobeturneddown
becausetheproducthasnotbeenproduced
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Inpullbasedsupplychains,productsareproduced
afterdemandisknown.
Thustheleadtimemaybedisproportionatelyhigh
sothatsomedemandmaybelost.
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Unlikepullbasedsupplychainswithsmallorder
sizes,pushbasedsupplychainscanexploit
economiesofscaleinproductionanddistribution.
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Mixedpush/pullbasedsupplychain
Inmostsupplychainssomeproductionand
distributiondecisionsarebasedonforecastsand
othersarebasedonactualdemand.
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Decouplingpoint
Thedecouplingpointorpushpullboundaryisthe
pointatwhichthesupplychainstrategychanges
fromapushbasedtoapullbased.
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Thedecouplingpointcanbeanywhereinthesupply
chain.
Rawmaterial
supplier
Part
supplier
Component
supplier
Producer
Wholesaler
Retailer
Final
consumer
Whereisthebestpositionforthedecouplingpoint?
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Factorsinfluencingthechoiceofstrategy
Themainfactorsforpositioningthedecoupling
pointare
economiesofscale
leadtime
demanduncertainty
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Productionofvariants
Consideraproductthatcanbeproducedindifferent
variants.
Thisactivityis
specifictothe
productvariant
Producevariant
Activity1
Thisactivityis
performedforall
productvariants
Product
differentiation
actvity
Activity2
Thisactivityis
performedforall
productvariants
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Maketoorder
Produce
variant1
Produce
variant2
Deliver
Order
received
Demand
fulfilled
Produce
variant3
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Maketostock
Produce
variant
Demand
anticipated
Store
variant
Deliver
Order
received
Demand
fulfilled
Recycle
Product
obsolete
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Demanddidnot
realise
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Mixedmaketostockandmaketoorder
Activity1
Demand
anticipated
Product
differentiation
activity
Storeunfinished
product
Activity2
Deliver
Order
received
Demand
fulfilled
Recycle
Unfinished
productobsolete
Demanddidnot
realise
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Howdowedecideonthebeststrategy?
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Example:Computers
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Personalcomputersarecomposedofseveral
differentcomponents,e.g.chassis,motherboard,
CPU,memory,harddisk,graphicscard,operating
system,etc.Forallofthedifferentcomponentsthere
areseveraloptionstochoosefrom.
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Traditionally,mostpersonalcomputersweresoldin
stores.Thus,thedecisionontheconfigurationofthe
computerhadtobemadebeforeactualdemandwas
known.
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Assume,thereareonlytwochoicesforchassis,
motherboard,CPU,memory,harddisk,graphics
card,andoperatingsystem.Thenthereare2 = 128
configurations.
7
Whatarethechancesthatyougointoastoreand
findyourfavoriteconfiguration?
Whatcanastoredotoincreasechancesthatyou
findyourfavoriteconfiguration?
Whatcanastoredotoincreasechancesthatyou
willbuyacomputerevenifitdoesnothaveyour
favoriteconfiguration?
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Ifcomputersareassembledafterdemandisknown,
theexpensivespaceinretailstorescanbesavedand
heavydiscountsforunpopularconfigurationscanbe
avoided.
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Today,somecompaniesbuildalargeshareofthe
computersbasedonactualorders.
Inanexchangeforalongerleadtime,companies
benefitfromonlyhavingtostorepartsand
componentsratherthanspaceconsuming
assembledcomputersthatmaybecomeobsoleted
duetothespecificconfiguration.
Thisbenefitcanbesharedwiththeconsumersso
thattheyarewillingtowaitforacomputertobe
assembledandshipped.
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Exercise
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Letshavealookattwodifferentsupplychainsinthe
clothingindustry.
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H&Msupplychain
Source:Sourcemap
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Zarasupplychain
Source:Sourcemap
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Whataretheadvantagesanddisadvantagesofthe
differentsupplychainstrategiesofH&MandZara?
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Postponement
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Consideragainaproductthatcanbeproducedin
differentvariants.
Thisactivityis
specifictothe
productvariant
Producevariant
Activity1
Thisactivityis
performedforall
productvariants
Product
differentiation
actvity
Activity2
Thisactivityis
performedforall
productvariants
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Thedesignoftheprocessrequiresthattheproduct
differentiationactivityisperformedbeforeanother
activitywhichisthesameforallproductvariants.
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Example
Foranelectricdevicewehavetoattachthecountry
specificpowerplugandinstructionsbefore
packaging.
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Byredesigningtheprocessand/ortheproduct
layoutwemaybeabletomovetheproduct
differentiationactivitytoalaterpoint.
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Example
Wecandopackagingwithoutpowerplugand
instructions.However,wehavetobeabletoadd
themlater,e.g.byattachingagenericsocketand
addingcountyspecificplugandinstructionslateron.
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Redesignedprocess
Producegenericproduct
Activity1
Demand
anticipated
Activity2
Product
differentiation
activity
Storegeneric
product
Deliver
Order
received
Demand
fulfilled
Recycle
Genericproduct
obsolete
Demanddidnot
realise
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Bypostponingproductdifferentiationactivitiesas
muchaspossible,wegenerateagenericunfinished
productthatcanbecustomisedforthespecific
demandwhenthatdemandbecomesknown.
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Bythiswemayincreasethecostoftheprocessa
little,however,wecanavoidthatcustomised
productsareavailableformarketswherethereisno
demandandothersareoutofstockinmarkets
wherethereisdemand.
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Postponementcanalsobeusedtogainaccuracyby
usingshorttermratherthanlongtermforecasts.
Producegenericproduct
Activity1
Demand
anticipated
Activity2
Updateforecast
Product
differentiation
activity
Store
Deliver
Order
received
Demand
fulfilled
Recycle
Genericproduct
obsolete
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Demanddidnot
realise
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Postponementcanalsoallowfornewdistribution
strategiese.g.togainaccesstodistantmarketsby
outsourcing.
Produceanddelivervariant
Producegenericproduct
Product
differentiation
activity
Storegeneric
product
Activity1
Activity2
Demand
anticipated
Deliverto
regional
logistics
provider
Deliverto
customer
Order
received
Recycle
Genericproduct
obsolete
Inhouse
Outsourcedto
logistics
provider
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Summary
Wehadabrieflookpushandpullbasedsupply
chains
Westudiedhowpostponementcangenerate
benefits
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Afterthissessionstudentsshouldbeableto
describehowthelocationofthedecouplingpoint
caninfluencesupplychainperformance
describewhyandhowpostponementcangenerate
benefits
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