Transcript Lecture 3 Supply Cha.. - University of St Andrews

International Supply Chain
Management
Compiled by Rulzion Rattray
International Supply Chains
• Periodic Economic swings and localised
protectionist policies.
• International supply chains frequently
consist of many autonomous organisations.
• Informational & procedural relationships
often result in dialogues that seem like arms
length negotiations
Orders
Orders
Delivery
Orders
Delivery
Delivery
Manufacturer
Retailer
Capacity
Required
Adapted from:
Houlihan, J.B. (1998)
“Manufacturing
Issues”, Booz Allan
& Hamilton, New
York.
Amplification Effects
• Demand upswing produces shortages
somewhere in the supply chain, (maybe
only shortages in inventory).
• Reaction; local protection, orders increase,
“growth psychosis effect”.
• If there is unreliable or slow delivery local
protection can result in local decisions to
increase inventory
Perceived Demand
Adapted from:
Houlihan, J.B. (1998)
“Manufacturing
Issues”, Booz Allan
& Hamilton, New
York.
Internal vulnerability




Extend market distance
Production distributions attitudes
Poor information processing
Inventory overhang distortions
Production
Capacity:
Apparent demand
Real demand
Time
Vulnerability in the Organisation
Capacity Required:
Apparent
Real
Production Flywheel Effect
Shortages
Over
ordering
Demand
distortion
Safety Stock
Increase
Unreliable
delivery
Localised
Protection
effect
Adapted from:
Houlihan, J.B. (1998)
“Manufacturing
Issues”, Booz Allan
& Hamilton, New
York.
120
5%
Normal level
80
Actual level
with sales drop
40
120
80
40
120
80
40
120
80
40
Normal level for
new sales volume
10%
Evidence of decoupled
Inventory planning cycles.
20% A 5% downturn in sales
Results in a 40% downturn in
Manufacturing requirement
40%
Adapted from:
Houlihan, J.B. (1998)
“Manufacturing
Issues”, Booz Allan
& Hamilton, New
York.
Service Capacity & Inventory
• How can amplification effects be dealt
with?
• Any service level can be achieved through
Stock or Production capacity or a
combination.
• Choice depends on:
– Inventory holding costs
– Cost of incremental capacity
Balancing the Supply Chain
• This requires a shift in control policy
towards a systems perspective.
• Also requires a shift in management to one
that spans the traditional boundaries of
responsibility.
• Tackling blockages in information transfer
particularly in international supply chains
Time Lags in the Supply Chain
Market data
Assessed for
Production 6 week
obsolescence
Raw material
inventory
Suppliers
Procurement
orders
Average inbound data flow
In process
inventory
Manufact.
orders
2.5 Weeks
3 Weeks
Distribution
inventory
Manufact.
orders
Factory
orders
Selling point
inventory
Distribution
orders
Customer
orders
Customer
orders
1
Priorities set
with no indication
of market priorities
Distortions due
to inventory policies
Only place
market demand
visible
17 working days 15 working days
Average outbound goods flow
Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.
Conclusions
• International supply chains are typified by:
– poor flows of information,
– Local autonomy
– Incompatible operating procedures
• Integration of Supply Chains will require:
– Management of data capture & flow across
functional boundaries without delay
– Linked systems & shared ownership of
information.
• Increased inventory not the only answer!
References
• Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan &
Hamilton, New York.
• Christopher, M., (1995), “Logistics the Strategic Issues”, Chapman
Hall, London.
• Christopher, M., (1998), “Logistics and Supply Chain Management.
Strategies for Reducing Cost and Improving Service”, Financial Times
Pitman Publishing, London.
• Stacey, R, (1996), Strategic Management & Organisational Dynamics,
Pitman, London.
• Tayor, D. (1997),“Global Cases in Logistics and Supply Chain
Management”, Thomson International Business Press, London.