• Process Design • Product Design • Capacity • Quality
Under Forecast Over
Customer Demand
Raw Materials
Finished Goods
Early On-time Late
Supplier Performance
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Little or No Predictability and Poor Product Mix
Inventory Usedes Limit Flexibility
Current Processes and Structures Inhibit Performance
6
Ongoing Usual Usual Usual
End of Life Low Low High
Variability
Natural • Demand • Material supply • Production • Distribution Self-Introduced • Replenishment strategies • Planning processes • Inventory strategies
order • Inverted BOM • Binning • Multi-stage global production
3
Uncertainty in the supply chain results in significant variability
• Past Performance • Market Research • Analytical Technique • Incentive Programs
© 1999 Andersen Consulting
1
Resource Investment Asset Productivity Inventory Supplier & Capacity Contracts
What are the characteristics of Supply Chan Management, why is it so hard to manage?
Multiple forecasts and unreliable fulfillment today create the bullwhip effect.
Units Per Period
Channel Fill and Phantom Demand
Channel Orders True End Customer Demand
Ongoing
Ramp-up
End of Life
Role of Inventory Cost of Shortage Cost of Overage
Ramp-up High High Low
By Professor Hau L. Lee, Stanford University
© 1999 Andersen Consulting
The Characteristics of Supply Chain Management
Complexity, Variability, Conflicting Objectives
The Business Challenges
Level of Service
Cost of Service
Order Response Time Product Availability Lead Time Order Changes Due Date Performance
© 1999 Andersen Consulting
Complexity in Component / Semiconductor Manufacturing
• Mass customization • Personalization • Product mix effects on capacity • Multiple options • Contracted vs. owned capacity • Combined make-to-forecast and make-to-
By Tom Davis
© 1999 Andersen Consulting
Early On-time Late
Manufacturing
• Responsiveness • Transportation • Location • Quality
4
Early On-time Late
Customer Deliveries
Complexity
Variability
© 1999 Andersen Consulting
Conflicting Objectives
2
Complexity
Complications in the Electronics Industry
Chronic Capacity Shortages
January
Real Shortage
Over-Supply
Target Launch
Supply
Actual Launch
Returns/ Cancellations
Time
End of Life
©Andersen Consulting 1998
5
Shortened product life cycle has increased the uncertainty.
© 1999 Andersen Consulting
7
Traditional functional alignments continue to impede Supply Chain Performance.
— Misaligned Functional Goals & Behaviors—
Purchasing
Manufacturing Distribution
Sales & Customer Service
Goal:
Lowest purchase price
Highest utilization