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Agenda
Push vs. Pull Systems
Segmentation Strategies
n
n
Products
Supply Chains
Handling Uncertainty
10
20
21,600 Unique
Sandwiches!
Make to Order
Make to Stock
Engineer to Order
By J immy J ohn's Franchise, LLC http://upload.wikimedia.org/wikipedia/commons/e/e3/Jimmy_John_employees_having_fun_making_sandwiches.jpg
By U.S. Department of Agriculture (20111012-FNCS-LSC-0242) [ CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], v ia Wikimedia Commons
http://upload.wikimedia.org/wikipedia/commons/0/06/20111012-FNCS-LSC-0242_-_Flickr_-_USDAgov.jpg
Pull
n
n
n
Prepare
Components
Final
Assembly
Sell
Product
PUSH
PUSH
PUSH
PULL
PUSH
PUSH
PULL
PULL
PUSH
PULL
PULL
PULL
One-of-a-Kind Dagwood
Key Principles
n
n
Segmentation
Purchasing / Procurement
Forecasting / Demand Planning
Inventory Planning
Inventory Control
c
c
c
Summer
Winter
Fulfillment
Center
Distribution
Center
Fulfillment
Center
c
c
c
c
c
c
10
Service Level
Order Size/Volume
Demographic
Channel Segmentation
Adapted f rom Prashant Yadav (2005) Course Notes, Zaragoza Logistics Center.
11
Distribution of SKUs
12
Product Segmentation
Local Grocery Store
~20,000 SKUs
n Categories: Dry, Frozen, & Perishables
Analysis of Dry Goods (~8,000 SKUs)
n 1.156 M SKUs sold in 1 year
n
Mean 144
Median 72
Mode 0
Std Dev 355
Biggest Sellers?
Biggest Sales Day?
Top Sellers
1.
2.
3.
4.
5.
EVAPORATED MILK 12 OZ
BATHROOM TISSUE
BOTTLED WATER 1 GALLON
MACN CHEESE
CANNED WHITE TUNA
13
80%
70%
60%
50%
40%
144
30%
20%
10%
144
144
144
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percent of SKUs
Uniform
Normal
Power
LogNormal
14
70%
60%
y = 1.1245x0.3784
50%
R = 0.9717
40%
30%
20%
10%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Percent of Products
90%
100%
90%#
3% of volume is handled
by 43% of the lanes!
Percent'of'Total'Volume'(Shipments)'
80%#
70%#
60%#
50%#
40%#
30%#
20%#
10%#
0%#
0%#
10%#
20%#
30%#
40%#
50%#
60%#
Percent'of'Total'Lanes'(5'digit'postal'code'to'5'digit'postal'code)'
70%#
80%#
90%#
100%#
16
Fundamental Insight
17
ABC Analysis
18
19
Price
$ 2.25
$ 2.85
$ 1.50
$ 0.77
$ 4.45
$ 6.10
$ 3.10
$ 1.32
$ 12.80
$ 24.99
$ 7.75
$ 0.68
$ 0.25
$ 3.89
$ 7.70
$ 6.22
$ 0.85
$ 0.77
$ 1.23
$ 4.05
Di
Annual
Demand
260
43
21
388
612
220
110
786
14
334
24
77
56
89
675
66
148
690
52
12
4,677
ci D i
Annual $
Value
$ 585.00
$ 122.55
$ 31.50
$ 298.76
$ 2,723.40
$ 1,342.00
$ 341.00
$ 1,037.52
$ 179.20
$ 8,346.66
$ 186.00
$ 52.36
$ 14.00
$ 346.21
$ 5,197.50
$ 410.52
$ 125.80
$ 531.30
$ 63.96
$ 48.60
$ 21,983.84
1.
2.
3.
4.
Example:
Sample of 20 SKUs
Total of 4,677 units
Total ~$22k
20
Price
$ 24.99
$ 7.70
$ 4.45
$ 6.10
$ 1.32
$ 2.25
$ 0.77
$ 6.22
$ 3.89
$ 3.10
$ 0.77
$ 7.75
$ 12.80
$ 0.85
$ 2.85
$ 1.23
$ 0.68
$ 4.05
$ 1.50
$ 0.25
Di
Annual
Demand
334
675
612
220
786
260
690
66
89
110
388
24
14
148
43
52
77
12
21
56
4,677
ci D i
Annual $
Value
$ 8,347
$ 5,198
$ 2,723
$ 1,342
$ 1,038
$ 585
$ 531
$ 411
$ 346
$ 341
$ 299
$ 186
$ 179
$ 126
$ 123
$ 64
$ 52
$ 49
$ 32
$ 14
$ 21,984
ciDi
Cum $
Pct Ann
Value
$ Value
$ 8,347
38%
$ 13,544
62%
$ 16,268
74%
$ 17,610
80%
$ 18,647
85%
$ 19,232
87%
$ 19,763
90%
$ 20,174
92%
$ 20,520
93%
$ 20,861
95%
$ 21,160
96%
$ 21,346
97%
$ 21,525
98%
$ 21,651
98%
$ 21,773
99%
$ 21,837
99%
$ 21,890
100%
$ 21,938
100%
$ 21,970
100%
$ 21,984
100%
A Items:
80% of Value
20% of SKUs
B Items:
15% of Value
30% of SKUs
C Items:
5% of Value
50% of SKUs
21
C
Items
B
Items
95
%
85
%
75
%
65
%
55
%
45
%
35
%
25
%
A
Items
15
%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
5%
Distribution By Value
Percent of SKUs
CTL.SC1x - Supply Chain and Logistics Fundamentals
22
Demand variability
Economic value
Volatile: Sophisticated techniques; frequent reviews
Stable: Less sophisticated techniques; less frequent reviews
Unimportant: Unsophisticated techniques; infrequent reviews
Adapted f rom Prashant Yadav (2005) Course Notes, Zaragoza Logistics Center.
23
24
Functional
Innovative
Demand
Predictable
Unpredictable
Life Cycle
Short <1 yr
Margin
5% to 20%
20% to 60%
Variety
Low (10-20)
High
Error at Production
~10%
~40-100%
1% to 2%
10% to 40%
0%
10% - 25%
6 mon to 1 yr
1 day to 2 wks
Efficiency
Source: F isher, M. (1997) What Is the R ight Supply Chain for Your Product?, Harvard Business R eview. Adapted from Sheffi (2010) ESD.260 Course Notes
By Balougador (Own w ork) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], http://commons.wikimedia.org/wiki/File%3ACampbellsModif.
By (Own w ork) [GPL (http://www.gnu.org/licenses/gpl.html), GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0-2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/3.0)],
25
CTL.SC1x -
Supply Chain and Logistics Fundamentals
Lesson: Key concepts
http://commons.wikimedia.org/wiki/File%3ASmart_phone.jpg
Intermediate
Design
Slow/Low Cost
On shore
Near shore
Off shore
(e.g., US/Europe)
International
Shipping
Air Freight
Rail/Truck
Ocean
Final Assembly
Location
On Shore
Near Shore
Off Shore
On Shore
Near Shore
Off Shore
(Factory/DC)
(Factory/DC)
(Factory/DC)
Build to Stock
Configure to Order
Build to Order
Manufacturing
Location
Order Fulfillment
Location
Inventory Stocking
Model
Source: Olavsun, Lee, & DeNyse (2010) A Portfolio Approach to Supply Chain Design, Supply Chain Management R eview. Adapted from Sheffi (2010) ESD.260 Course
Notes
26
Fast / High
Cost
Manufacturing
Location
Order Fulfillment
Location
Inventory Stocking
Model
Slow/Low Cost
On shore (e.g.,
US/Europe)
International
Shipping
Final Assembly
Location
Intermediate
Design
Rail/Truck
On Shore
On Shore
(Factory/DC)
Build to Stock
Source: Olavsun, Lee, & DeNyse (2010) A Portfolio Approach to Supply Chain Design, Supply Chain Management R eview. Adapted from Sheffi (2010) ESD.260 Course Notes
Hp500-1" by Oguenther - Own w ork. Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Hp500-1.png#mediaviewer/File:
27
Fast / High
Cost
Intermediate
Design
Slow/Low Cost
Manufacturing
Location
International
Shipping
Ocean
Final Assembly
Location
Order Fulfillment
Location
On Shore
On Shore
(Factory/DC)
Inventory Stocking
Model
Configure to Order
Source: Olavsun, Lee, & DeNyse (2010) A Portfolio Approach to Supply Chain Design, Supply Chain Management R eview. Adapted from Sheffi (2010) ESD.260 Course Notes
"Hp-deskjet-895cxi". Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons - http://commons.wikimedia.org/wiki/File:Hp-deskjet-895cxi.jpg#mediaviewer/File:Hp-desk
"MFHP1600" by LupisSM - Own w ork. Licensed under Creative Commons Attribution-Share Alike 3.0-2.5-2.0-1.0 via Wikimedia Commons -
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28
Fast / High
Cost
Intermediate
Design
Slow/Low Cost
Manufacturing
Location
International
Shipping
Ocean
Final Assembly
Location
Off Shore
Order Fulfillment
Location
Inventory Stocking
Model
On Shore
(Factory/DC)
Build to Stock
Source: Olavsun, Lee, & DeNyse (2010) A Portfolio Approach to Supply Chain Design, Supply Chain Management R eview. Adapted from Sheffi (2010) ESD.260 Course Notes
"MFHP1600" by LupisSM - Own w ork. Licensed under Creative Commons Attribution-Share Alike 3.0-2.5-2.0-1.0 - http://commons.wikimedia.org/wiki/File:MFHP1600.JPG#mediaviewer/File:MFHP1600.
29
Handling Uncertainty
30
31
Normal Distribution
( x0 )2
( )
f x x0 =
Normal ~N(, )
x 2
fx (x 0 )
Spreadsheets
NORMINV(probability,,) =+kx
NORMDIST(x,,,1) =P[x<+kx]
Area =
P[x<+kx]
Area =
P[x+kx]
=1-P[x<+kx]
Transformation: k = (x-)/x
Spreadsheets
NORMSINV(probability) =k
NORMSDIST(k) =P[u<k]
2 x2
fu (u 0 )
( )
f u u0 =
Area =
P[u<k]
n
n
2
3
68.3%
95.5%
99.7%
0
Lesson: Key concepts
x02
2
Area =
P[uk]=
=1-P[u<k]
Confidence Intervals
n
x0
+kx
u0
32
Poisson Distribution
Poisson ~P()
Probability of x events occurring w/in a time period
n Mean = Variance =
x0
e
n
F(x0) = POISSON(x0,,1)
F[x0 ] = Prob !" x x0 #$ =
x!
x=0
n
30%
2.2
25%
Probability
20%
15%
10%
5%
0%
0
10
11
12
13
14
15
16
17
Random Variable
CTL.SC1x - Supply Chain and Logistics Fundamentals
33
34
Segmentation Strategies
n
n
Handling Uncertainty
n
n
Normal Distribution
Poisson Distribution
35
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3.0 http://commons.wikimedia.org/wiki/File:Jack_Russell_tilting_her_head.jpg
caplice@mit.edu