Lecture supply chain management chapter 2 supply chain planning

Bùi Thị Bích LiênL o g oLearning objectiveGain a conceptual appreciation of the businessactivities that drive supply chain operationsExercise a high-level understanding ofactivities in

L o g o

Chapter 2: Supply Chain Planning

MsC Bùi Thị Bích Liên

L o g o Learning objective

Gain a conceptual appreciation of the business activities that drive supply chain operations

Exercise a high-level understanding of activities involved in supply chain planning

Understand basic concepts of demand forecasting and inventory management

Begin to assess how well these activities operate within your own organization

L o g o Contents

 Introduction

1

 Product Pricing

3

 Demand Planning

2

L o g o

7 SCOR MODEL

Processes and Operations Management Model in SC

1994, PRTM & AMR coordinated to develop model

1996, transfer to SCC Being used in many different areas This model provides:

Background structure, business process re-structure Unify the terminology in management

Establish the comparison standards, measure of performance Model has 5 processes

Plan, source, make, delivery and return

L o g o L o g o

L o g o PLANNING IN SC

Planning and orienting for all

operations in SC

Analyze and

forecast

Environment

Market

Competitors

Sources

Infrastructure Info Technology Finance Human

L o g o PLANNING

Rule

Using the information exactly and timely Focus resources on priority goals Integrating supply chain requirements Identify final responsibility and specific action

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SOURCING IN SUPPLY CHAIN

Meet the requirement of customers with lowest cost Building CRM

Lowest Total cost Lowest price per unit

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SOURCING IN SUPPLY CHAIN

Why we buy?

What we

will buy?

Where we buy?

From which suppliers When we buy?

How we buy?

Important decision

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SOURCING IN SUPPLY CHAIN

Selecting suppliers:

• Identify the criteria

• Evaluate

• Sign for approval

• Control

Analyze, discuss

about demand for

sourcing:

• Know - how

• Describe

Transaction management:

• Price determination

• Order

• Delivery

• Documents

• Payment Suppliers Relationship

management:

• Evaluate quality

• Adjust and complete

L o g o OPERATION IN SUPPLY CHAIN

Role

There are more and more enterprises who outsource their operation partly or entirely (manufacturing, experiment, packing) Convert the raw material to finish products

Requiring for objectives sharing and consistent process

Manufacturing process depends on operation model

L o g o OPERATION IN SUPPLY CHAIN

Make To

Stock

Make To

Order

Assemble

To Order

Engineer

To Order

- Consumer goods

- Mass production, lot size selling

- Several optional goods

- Partly completed product and assembled

completely after received the order

- Variety of product and differentiation

- Not regular demand, limit quantity

- Complicated products

- Special demand

L o g o DELIVERY IN SUPPLY CHAIN

Depends on

- Indirect selling

Requirements in delivering

 Variety, sufficient product

 Lead time

 Reliability

 Flexibility

 Information

L o g o DELIVERY IN SUPPLY CHAIN

Variety and sufficient

product

- First requirement and the most

basic

- Plentiful product structure

- Adequate in quality and quantity

- Ready to serve customers

Requirements

Lead time

- From the time customer places the order to receive the product

- Depending on many factors: IT, Inventory, transport, distance

…

L o g o DELIVERY IN SUPPLY CHAIN

Reliability

- Lead time variety

- Order editing

- Safety inventory

Stability level

Flexibility

 Variability identification and response

 Current resources

 Priority rules

Adaptive capacity

Information

 Fully accurate and timely

 Simplicity and convenience

 Before, within and after transaction

Flexibility

 Variability identification and response

 Current resources

 Priority rules

L o g o REVERSE IN SUPPLY CHAIN

Reverse

logistics

Definition:

- A stage of supply chain

- Effectively managing production line, package and related information

- From the destination to the origin

- Restore product value and waste disposal Role:

- Meet the customer’s

requirement better

- Protect the environment

Characteristics:

- Small scale and dispersed

- Large recovery costs

- Lacking of service suppliers

who have enough capability

L o g o REVERSE IN SUPPLY CHAIN

Creating smooth downstream logistics

 Defective products return to the downstream logistics channel quickly

Benefit

Enhancing customer service

• Fix, repair, warranty Save the cost for enterprise

• Recycled materials, recycled packaging, reselling products Create a “green image” for businesses

• Reduce the impact to the environment

REVERSE IN SUPPLY CHAIN

New materials Recycled materials

Procurement Manufacture Distribute

Reverse Logistics Centre

proposal

Re-manufacture Repair

Upstream

Green Supply Chain

L o g o

1 Introduction

L o g o What is supply chain planning?

Supply chain planning is the process of planning a product from raw material to the consumer It includes supply planning, production planning, demand planning, and sales and operations planning

L o g o

Supply planning determines how best to fulfill the

requirements created from the demand plan The

objective is to balance supply and demand in a manner

that achieves the financial and service objectives of the

enterprise.

Production planning addresses the production and

manufacturing modules within a company It considers

the resource allocation of employees, materials, and of

production capacity.

L o g o

Demand planning is the process of forecasting demand to make sure products can be reliably delivered Effective demand planning can improve the accuracy of revenue forecasts, align inventory levels with peaks and troughs in demand, and enhance profitability for a particular channel or product.

Sales and operations planning (S&OP) is a monthly integrated business management process that empowers leadership to focus on key supply chain drivers, including sales, marketing, demand management, production, inventory management, and new product introduction.

L o g o

2 Demand Planning

Demand Forecasting

Consequences of wrong forecasting

Forecasting variables

Forecasting methods

L o g o The role of forecasting in SC

The basic for all strategic and planning decision in a supply chain

Example:

 Production: scheduling, inventory, aggregate planning.

 Marketing: sale force allocation, promotions, new product introduction

 Finance: plant/equipment investment budget

 Personnel: workforce planning, hiring staffs.

L o g o Forecast’s characteristics

- Measure the error

L o g o

- Eg: car and car’s components

L o g o L o g o

Consequences of wrong forecast

Missed profits/earnings

Lost customers

Missed orders

Unacceptable forecast error

Decreased market share

Late-to-market and underperforming new products

Supply interruption

Lower inventory turnover

Longer lead times

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Higher total costs

Poor use of resources

Increased obsolescence

Lack of teamwork and cohesion from the top

on down

Inaccurate and incomplete information

available for decision making and control

Inefficient planning process

L o g o Case Study?

https://www.academia.edu/9864312/Suppl y_Chain_Management_Case_of_Cisco_S ystems

L o g o L o g o

Demand

Market is growing or in recession period?

The market is at saturation or stable demand?

Does the product have seasonal needs?

The market is in the development stage?

L o g o Supply

Supply is determined by the suppliers and

leadtime:

 Few suppliers / long leadtime  instability

and difficult to forecast

 Many suppliers / short leadtime  easy to

forecast.

L o g o Product characteristics

New or Old products?

 Example: in the summer (coat)

 Moon cakes

Alternative products

Supplementary products

L o g o Competitive Environment

Market share?

Development trend of competitors?

Market growth rate?

L o g o

https://corporatefinanceinstitute.com/resou rces/knowledge/modeling/forecasting-methods/

https://otexts.com/fpp2/case-studies.html

Qualitative method

Qualitative method is based on intuition, observation ability or subjective opinion about the market

This method is appropriate when there is very little historical data to make a

forecast

L o g o

Subjective opinions of the surveyed

subjects such as:

 Department management of the business

 Salesman

 Investigate customers

 Expert opinion inside and outside of the

business

L o g o Delphi method

L o g o Causal

Predictive method based on determining

the relationship between quantities

(variables), then based on which to make

predictions

 For example: Revenue & expenses;

advertising & profits; price & salary

 price and demand for gold; loan needs and

interest rates

 Gasoline prices increased, transport costs

increased

L o g o

Scatter graph method

Regression analysis by the least squares method

L o g o Scatter method

𝑏 = ∑∑   – ∑ ∑(∑ )    

𝑎 = ∑  - b ∑  

a: độ chặn (intercept) b: độ dốc (Slope) n: số dữ liệu ta có (no of data)

L o g o

Consumption volume of the company as followed:

 Identify the correlation between revenue and marketing cost?

 If marketing cost increases up to 75000 USD, how much the revenue will be?

𝑥 𝑦

L o g o Time series analysis

This method uses the historical data

assumption as a basis for forecasting

future needs

Model: moving average and exponential

smoothing

Application: when the data in the past is

reliable, the market is stable and the

demand curve is not volatile much

L o g o

L o g o Moving Average: simple method

Simple moving average: n most recent periods

High value of n  more accurate

L o g o Moving average

• Advantages:

• Simple

• Disadvantages:

• No consider seasonality in this data

• Having equal weight for 3 recent periods

• Need huge amount of past data

L o g o Example

Identifying revenue trend in 3 years?

3 years

Moving average

of 3 years Sale (1) Sale (2) = (1)/3

L o g o

Ex 2

students

Moving total of

3 years

MAV of 3 years

L o g o Moving average

 Weighted Moving average method: more weight to the

most recent period

 N = 3  maximum to the most recent data

 There is no set rule to give the value of the weights

 Experts: experiences, exposure

 There is some exceptional situations, we should not

assign the maximum weight to the most recent period

because of the temporary nature of particular

phenomena

L o g o Exponential smoothing

 Whenever we update the data  we update the forecast for the next period immediately

 Whatever is happening, whatever changes happened  always include in our forecasting method and continuously updated for next period refer time

 Advantage: used all the value

L o g o Exponential smoothing

Ft – Forecast for period t

Ft-1 – Forecast for period t-1

Dt-1 – Real demand of period t-1

α- Smoothing constant

L o g o Exponential Smoothing

Month

i demandReal (Dt)

Predictable demand(Ft)

Ft,0.1 Error Ft,0.4 Error

6

L o g o The average method

Summarising: Y = T + S + C + R

Y: the actual time series

T: the trend series

S: the seasonal component

R: the residual component

C: the cyclical component  economist

Y = T + S + R

L o g o The mean method

Summarising: Y = T x S x C x R

Y: the actual time series

T: the trend series

S: the seasonal component

R: the residual component

C: the cyclical component  economist (không đưa vào dự báo)

Y = T x S x R

L o g o Example:

a Hãy vẽ đồ thị doanh số 3 tuần

b Sử dụng phương pháp trung bình động và mô hình cộng để

tìm ra xu hướng và điều chỉnh mùa vụ

c Sử dụng phương pháp trung bình động và mô hình nhân để

tìm ra xu hướng và điều chỉnh mùa vụ

d Dự báo doanh số của tuần thứ 5, và doanh số thứ 6 tuần 9

Week 1

(1000 units)

L o g o The average method

B1: Tính tổng của chuỗi thời gian (Tính tổng các

số trong 1 chu kỳ theo phương pháp trượt)

B2: Tính số bình quân di động

B3: Xác định sự biến động về mùa vụ:

S = Y – T

B4: Xác định sự biến động trung bình của từng dữ liệu theo mùa vụ

B5: Tìm cách triệt tiêu để tổng S tiến đến 0

B6: Tính mức biến động trung bình theo đơn vị của dữ liệu Xác định biến động và xu hướng theo từng đơn vị mùa vụ

L o g o The mean method

B1: Tính tổng của chuỗi thời gian (Tính tổng các

số trong 1 chu kỳ theo phương pháp trượt)

B2: Tính số bình quân di động

B3: Xác định sự biến động về mùa vụ:

S = Y x T

B4: Xác định sự biến động trung bình của từng dữ

liệu theo mùa vụ

B5: Tìm cách triệt tiêu để tổng S tiến đến 0

B6: Tính mức biến động trung bình theo đơn vị

của dữ liệu Xác định biến động và xu hướng theo

từng đơn vị mùa vụ

L o g o Simulation

Simulation method is a combination of causal and time series methods to simulate consumer behavior under different conditions and circumstances

Apply: sales fluctuations if prices fall

Volatility in market share if competitors launch new products and open up shop next door

L o g o

3 Product pricing

Price of product as 3C methods

Incoterms 2020

L o g o

3 C’ method

Cost

Competitors

Customer

L o g o Pricing on cost

Total fixed cost: VNĐ 300 mil.

 Quantity of products: 10.000 items

 Variable unit cost: VNĐ150,000 đ/item

 Calculating the unit price if:

 Expected profit on price is 20%

L o g o

L o g o

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