Strategic planning. • Resource ... Which optimization problems have to be solved
? ... strategy. Structural. Supply chain design. Plant Design,. Operations. Quality.
Strategic planning
MBI Course Supply Chain Management:
Chapter 8: Strategic and Tactical Supply Chain Planning
• • • • •
Resource acquisition options Resource divestment options Competitive position Efficiency Time frame: 3-10 years
Marjan van den Akker
Strategic planning • • • •
Irreversible decisions Large investments Optimization models important Aggregate operational effects – Or solve operational problem as a subproblem
Tactical planning • Resource adjustment and allocation • Time frame: few months to a year
Taxonomy of resources • • • • • • •
Physical resources Human resouces Financial resources IT resources Marketing resources Organizational resources Legal resources
Resources
Resource-based view of the firm • Competitive position of the firm heavily depends on its resources and how they are used • Optimization model: determine optimal resource level
Case: AHOLD special shops
• Heterogeneous resources: average or marginal value are below market price
• Homogeneous resources: average or marginal value are about market price
• Stranded resources:
Zaandam
Hazerswoude
Oosterhout
value below market price Current situation: Separate DC’s and delivery.
Shadow prices are important !
Question: Is one combined DC an interesting option?
Case: AHOLD special shops • Strategic study: – Which issues have to be taken into account? – Which optimization problems have to be solved?
Types of supply chains (Fisher) • Functional products: – Predictable, stable demand – Long life-cycle
• Innovative products: – Difficult to predict demand – Short life-cycle
Types of supply chain (2) • Functional products: – Efficient supply chain – Minimize supply chain cost – Push model
• Innovative products: – – – – – –
Responsive supply chain Marketing more important Maximize customer service Flexibility (e.g. selection of suppliers) Manage product variety Pull model
Case: AHOLD special shops • Many different aspects • Performance:
• Logistics supply chain management is
concerned with the flow of raw material, work-in-process, and finished products needed to ensure that the company’s customers receive finished products at the correct time, in the correct location and in the correct amounts.
– Warehouse cost • Warehouse management • Inventory management: assume similar as before
– Transportation cost • Routing problem
– Customer service • Delivery frequency
• Operational problem was solved to answer strategic question: – Optimize routing of trucks – Simulation of warehouse would be interesting
Optimization modeling logistics: Important issues
Framework for Logistics Strategy Formation Customer service Strategic Network Network design strategy Structural Warehouse Transportation Materials
(Inventory)
Operations IT
management Management Functional Policies and Facilities and Organization, Procedures equipment Implementation
Take cost into account From Service Mark by Andersen Consulting ©
• • • • • •
Existing facilities, left open, expanded or shut down? Which new facilities, how much capacity and where? Mission of facility (which products)? What equipment? Which facility to which market/customer? Which suppliers for which facilities?
• 0-1 variables in Mixed Integer Linear Program
Change Man.
• Simulation of warehouse operations or inventory management
Framework for Manufacturing Strategy Formation
Supply chain design
Product competitiveness
• Decisions regarding own facilities • Relationship to suppliers
Strategic Supply chain Supply chain
New prod.
design strategy Structural Plant Design, Quality Supplier
development
Operations
Purchasing
IT
Transport,
management Management materials mng Functional Policies and Facilities and Organization, Procedures equipment Implementation
Change Man.
– – – – –
make-or-buy vertical integration mergers alliances short-term contracts
Take cost into account From Service Mark by Andersen Consulting ©
Decisions based on supplier value portfolio management The Kraljic Matrix (Kraljic, P)
Make or buy H L
Leverage Product Outsource
Develop
Buy-in
Contracting
C O R E
“Partnership”
Impact on Profitability Bottleneck Products
Routine Products Collaboration
H
Strategic Product
“Competitive Bidding”
H
In-house
Competence of Contractors
“Systems Contracting”
L
“Secure continuity of supply”
L L
Supply Risk
H
Case: Merger of paper companies
Case: Merger of paper companies
• Before merger:
• Decide on:
– American Paper: 3 plants, 25 DC’s, 7 days a week, long production runs – Beacon Paper: 7 plants, 22 DC’s, 5 days a week, short production runs
• After merger: – Overcapacity for production – Space at plants underutilized – Cost and equipment of plants varied a lot
– – – – – –
Number, size, location of plants Production (product groups) per plant Interplant shipping Assignment of markets to plants Capital equipment Workweek
• Large MILP: minimize production and distribution cost for given demand • Validation run with current data
• How to arrange production?
Optimization modeling manufacturing: Important issues • • • • •
How many plants? Mission of plants? Which product at which plant and in which amount? Which recipe for which product? Which technology?
Managing product variety • Common components: postpone differentiation • Vanilla boxes • Quick response to early sales
• 0-1 variables in Mixed Integer Linear Program
1975
2006
DC location (revisited) m Possible DC-locations
DC location • Data: – – – – – –
n Stores
all distances dij Demand store j: Dj Capacity DC i: Ci Handling cost DC per truckload at DC i: hi Fixed cost DC i: Fi Transportation cost: k cent per truck per kilometer
• Which possible DC’s should be opened and how to arrange transport so that cost are minimal?
