Transcript Bounded Rationality

Welcome
Strategies of Network Companies
Jonathan Wareham
[email protected]
Topics
1. What are Supply Chain
Management Systems?
2. How do they work?
3. What can they do?
4. What can they not do?
5. An economic model of virtual
organizations – The WS paradigm
Traditional supply chain obsolescence
Direction of flow of demand
Direction of flow of product
Point of differentiation
Distribution costs
Market mediation costs
Raw Material
vendor
Tier-II
Suppliers
Tier-I
Suppliers
Manufacturers
Distribution
Centers
Retailers
Customer
Zones
RFID Tags
What is RFID? -- The Tags
Tags can be attached to
almost anything:
 pallets or cases of product
 vehicles
 company assets or personnel
 items such as apparel,
luggage, laundry
 people, livestock, or pets
 high value electronics such
as computers, TVs, camcorders
Are All Tags The Same?
Basic Types:
Active
Tag transmits radio signal
Battery powered memory,
radio & circuitry
High Read Range (100
meters)
Passive
Tag reflects radio signal
from reader
Reader powered
Shorter Read Range
(10cm – 5 meters)
RFID the Supply Chain
Tag
Antenna
- Transmits
- Coiled
identification antenna of
data to a
reader
reader
creates
magnetic
field with
coiled
antenna
of tag
Reader
- Transmit
data to
middleware
- Associates
tag info with
product info
Middleware Supply chain
execution
- Backend SCE
- Process
or ERP
information
from reader systems
receives
- Filters data
Information
- Sends data
to backend
servers
How far, how fast, how much, how many, attached to what?
Low Frequency
No regulation
Penetrate materials (water, wood, tissue well)
Slow read speed
Small range
No penetration of iron and steel
Medium Frequency
Little data, small distance
Thin tags
Low cost
High data rates
Govt regulated
Non mental penetrating
High Frequency
Penetrate materials
Small tag size
High data transfer
Long range
Non-water or tissue penetrating
Non-regulated in some regions
expensive
Where can RFID add value?
 From Manufacturing
 Through Distribution
 Transportation
 Into a Store’s Back Room
Inventory
 On the Shelf
 At the Cash
Register
 Out the Door
as an anti-theft
device
Top 100 Suppliers:
 Suppliers will mark inbound cases and
pallets with RFID - 1 January 2005 - May,
2003 specification calls for ≈256 bit
read/write tag
• 1 EPC tag per carton – 100% read on conveyor
• 1 EPC tag per pallet – 100% read at Inbound dock
• Conveyor speed of up to 600 feet per minute
• 3 Texas Distribution Centers
• January 2005
Why???
 Stock management /perishables (field
to fork)
 In-stock levels
 Invoice reconciliation: damaged,
deductions, performance penalties,
etc.
 Scan Based Trading or VMI
 Improved analytics & POS data
 All reads available to suppliers within
30 minutes
Guidelines for using RFID
 Bar codes cannot be used
 Counting versus identification (reverse
logistics)
 Use of 3Party logistics and suppliers
 Data collection is chaotic (battlefields,
hospitals, retails shops)
 Exact configuration of the good must be
maintained
 Counterfeit protection
 High Risk scenarios, drugs, hospitals
 Collecting data outside of retailer (smart
refrigerators, medicine cabinets, etc)
Traditional supply chain obsolescence
Direction of flow of demand
Direction of flow of product
Point of differentiation
Distribution costs
Market mediation costs
Raw Material
vendor
Tier-II
Suppliers
Tier-I
Suppliers
Manufacturers
Distribution
Centers
Retailers
Customer
Zones
Example Problem Space
Credit
Service
Purchase
Invoice
Order
Client
Consolidate
Results
PO Service
Inventory
Service
 Sell 50,000 computers with only 4
days of inventory
 Keep few suppliers very close
 30 suppliers 75% of materials
 When order is made, signal is sent to
supplier, 90 minutes later, supplies
are delivered to Dell.
 “We sell what we have, we don´t sell
what we don´t have”
Dell From HBR
 Have as few suppliers as possible
 In real time, communicate your
inventory levels and replenishment
needs to them
 Order from suppliers only when you
receive demand from customers.
Example Problem Space
Credit
Service
Purchase
Invoice
Order
Client
Consolidate
Results
PO Service
Inventory
Service
Example: Self-describing data
Data stream in a typical interface…
“ABC47-Z”, “100”, “STL”, “C”, “3”, “28”
Same data stream in XML…
<INVENTORY>
<PART_NUM>ABC47-Z</PART_NUM>
<QUANTITY>100</QUANTITY>
<WAREHOUSE>STL</WAREHOUSE>
<ZONE>C</ZONE>
<AISLE>3</AISLE>
<BIN>28</BIN>
</INVENTORY>
XML Auction Demo
Web Services Overview
Application Model
Partner
Web Service
Other Web Services
Internet + XML
End Users
YourCompany.com
Application Business Logic Tier
Data Access and Storage Tier
Other Applications
Partner
Web Service
Web Services Overview
Portals
Ads
Mail
Other
Svcs
Calendar
Weather
Finance
News
Web Service Demos
 WebMethods.net
 http://www.webservicelist.com/
 http://www.xmlwebservices.cc/index
_Samples.htm#Top
 http://www.asitis.co.uk/webservices/
Underlying Technologies
Web Services Stack
Directory: Publish & Find Services:
UDDI
Inspection: Find Services on server:
DISCO
Description: Formal Service Descriptions:
WSDL
Wire Format: Service Interactions:
SOAP
Universal Data Format:
XML
Ubiquitous Communications:
Internet
Simple, Open, Broad Industry Support
Underlying Technologies
Web Services Stack
UDDI
Inspection
http://www.ibuyspy.com/ibuyspy.disco
Request Discovery Document
DISCO
Return Discovery Document (XML)
Description
WSDL
http://www.ibuyspy.com/ibuyspycs/InstantOrder.asmx?wsdl
Request Service Description
Return Service Description (XML)
Wire Format
Request Service
Return Service Response (XML)
SOAP
Web Service
Web Service Client
Link to Discovery Document (XML)
UDDI or
other
directory
service
Directory
http://www.uddi.org
Locate a Service
SCM Software –Who?
What does SCM software do?
 2 Main Functions: Tracking & Optimization

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






Factory Scheduling
Bar Code Warehouse Management
Transportation Routing and Scheduling
Inter Organizational Systems
Collaborative Planning & Optimization
Multi – echelon optimization
E-Procurement & Marketplaces
Supplier Contract Management
RFID Management Systems
The Bullwhip Effect
Upstream amplification of demand variation
Progression of a brushfire to an inferno!
Customer
Retailer
Distributor
Factory
Tier 1 supplier
Equipment
Machine Tools at Bullwhip Tip
50%
-100%
Data from United States, 1961-1991 (GDP, vehicle production, and machine tool orders
% change GDP
% change vehicle production index
% change net new orders machine tool industry
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
-50%
1963
0%
1961
% Change, year to year
100%
80
70
60
50
40
30
20
10
0
Week
21
19
17
15
13
11
9
7
5
Factory
Distributor
Wholesaler
Retailer
Customer
3
1
Order
The Diaper Supply Chain!
Ripples to tidal waves
Stockpiles and stockouts
Insufficient or excessive capacities
Higher costs
Interorganizational Systems: CRP
BIG RETAILER
< 3% stock outs
Warehouse 1
< 14days inventory
P&G
Warehouse 2
Before CRP
Budget
BIG RETAILER
Actual
Warehouse 1
P&G
Warehouse 2
•Volume discounts
•New product promos
•Here and now discounts
•Trade marketing
•Bonuses….
Differences
3,500 modular
parts
30+ suppliers
Over 1,000,000
parts in just
one car!
 Bringing vertical coordination to the
network… but how?
Ronald Coase (1937)
Why do we have firms?
there must be some cost in using the price
mechanism.
• Price discovery/search costs
• Contract negotiation
• Long term stability of supply sources
(uncertainty)
Ergo, operation of the market costs something, and by forming
and organization and letting some authority to allocate
resources, some costs are saved
Basic attributes of transactions
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
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Specificity
Frequency
Duration
Complexity
Uncertainty
Difficulty of measuring performance
Connectedness
Asset Specificity
 Investments made to allow two
parties to exchange but has little or
no value outside of the exchange
relationship
 Site specificity
 Physical-asset specificity
 Dedicated assets
 Human capital
 Lead to higher transaction costs and
the problem of “hold-up”
Specificity & Frequency
Specificity
Standard
Occasional
Frequency
Frequent
Medium
High
Standard Equipment
Customized Equipment
Constructing a plant
Machinery, PCs, Automobiles
Machinery requiring some custom config.
Turn-key projects
Markets
Company to company negotiation
Company to company negotiation
Once off negotiated transaction
Semi-complex contracts
Very complex contracts/government regulation
Standard Raw Material
Customized Material
Value adding processes as specific site
Sugar, RAM chips, Steel
Raw mat. with special process unique to customer
production processes within one or several
factories within same location/proximity
Markets
Joint ventures, transfer of equity
Hierarchies
Contracts short to medium term
Long-term binding contracts with
Internal integration/ vertical conglomerate
I year supplier: price based on index
significant investment
Product Complexity
IT, Complexity & Specificity
Hierarchy
Market
Asset specificity
Example Problem Space
Credit
Service
Purchase
Invoice
Order
Client
Consolidate
Results
PO Service
Inventory
Service
Traditional supply chain obsolescence
Direction of flow of demand
Direction of flow of product
Point of differentiation
Distribution costs
Market mediation costs
Raw Material
vendor
Tier-II
Suppliers
Tier-I
Suppliers
Manufacturers
Distribution
Centers
Retailers
Customer
Zones