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D Lab: Supply Chains
• Introduction
• Class objectives, syllabus, requirements and expectations
• SC overview
• SC examples
• SC and developing countries
© Stephen C. Graves 20141
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Class Objectives
• Introduce concepts of supply chain design and operations with a focus on supply chains for products destined to improve quality of life in developing countries
• Objectives are to develop an understanding of the challenges
in the design and planning of supply chains, to learn applicable modeling skills and problem-solving tools and to have the opportunity to apply these skills in a real-world project.
• What are your objectives?
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Requirements and Expectations
• Come to class prepared
• Individual assignments: problem sets & a series of short write-ups
• Group assignment: term project
• Group size: 2 - 4 students
• Participate in class; provide feedback on how to improve
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Supply Chain Management
• Supply chain is two or more parties linked by a flow of resources – typically material, information and money
• SCM entails the management of activities surrounding the flow of raw materials to the finished product or service enjoyed by the end customers, and back, in the case of recycling and returns.
• SCM: Buy, Make, Move, Store, Sell
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SCM spans the functions of operations, marketing and finance
Make the Stuff
SUPPLY CHAIN MANAGEMENT
Sell the Stuff Finance the Stuff
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Supply Chain Management
• SCM is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandize is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system-wide costs while satisfying service level requirements
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Projects 2012: D lab supply chains
• Natural Dye Crayons
– Sourcing of raw material
– Capacity assessment
– Distribution channels
• Ag Waste Charcoal
– Cost modeling and process analysis
– Right level of centralization vs. decentralization
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Projects 2012: D lab supply chains
• EssMart
– Design of distribution system
– Assortment planning
– Inventory planning
• Freedom Chair
– Cost modeling and process analysis
– Amount of local content
• Moringa Oil
– Assessment of demand and possible market channels
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Projects 2013/sp: D lab supply chains
• Pure Home Water
– Bottleneck analysis of supply chain
– Examination of micro-finance options for distribution and marketing
• SolarClave
– Evaluation of sourcing and manufacturing options
– Identification of opportunities for design improvement
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Projects 2013/sp: D lab supply chains
• Barefoot Power
– Determine best way to handle warrantee claims
– Where and how to do repairs?
– How much inventory, who holds it and where?
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Projects 2013/Fa: D lab supply chains
• TEWDI Charcoal
– Built a spreadsheet model to:
• Determine production capacity, given space constraints
• Model return on investments from improving production technology
• Optimize labor allocations and assignments
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Projects 2013/Fa: D lab supply chains
• Wecycler
– How it improve SC performance as firm scales
– Mapping of SC
– Root cause analysis of missed productivity targets
– Proposed treatments to address issues and improve productivity
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© Wecyclers. All rights reserved. This content is excluded from our Creative Commonslicense. For more information, see http://ocw.mit.edu/help/faq-fair-use/.
© Stephen C. Graves 201413
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Potential Projects
Name Area
Air Liquide Frugal oxygen SC for supporting
hospitals
ARTI Charcoal Project
Charcoal Briquettes: modeling new production line
Wecyclers Better route planning; better
customer retention
Ghonsla SC for insulation panels;
transportation improvement
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Overview of the Course
Manufacturer
Distributor
Consumer
Supplier
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Demand Estimation
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Capacity Planning, Process Analysis, and Production Flow Control
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Inventory Management
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Supply Chain Contracts
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Lean Production System
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SC Design
Who serves whom?
How many locations and where?
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Reverse Logistics and Recycling
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Common reasons for system slack
• Uncertainty in input or output processes, or in demand • Time lags & capacity limits • Scale economies • Predictable variability in supply or demand • Conflicting objectives or incentives • Need for immediate or short service times
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Supply Chain Example
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Facts about Kerosene
• Over US$ 10 Billion is spent each year on kerosene for lighting homes in poor countries
• Nearly 4 million women suffer from severe burns from open fires and kerosene lighting each year
• 1.6 million deaths per year in developing countries are caused by indoor air pollution due to traditional fuels
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Price: $20-$30 Price: > $100
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BFP’s Supply Chain
All Rights Reserved Copyright, Stephen C. Graves 2014 2299 © Stephen C. Graves 2014
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BFP’s Supply Chain
Manufacturer
in China
BFP Distribution Center
Kenya/Uganda
Non-Profits
Retail
Businessmen
Consumers
?
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BFP Distribution Center Manufacturer Kenya/Uganda in China
BFP’s Supply Chain - Manufacturing • Slow • Products transported
by ship • Large volume of
products • High transportation
costs • Little uncertainty • Plenty of information
and visibility • Known costs
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BFP Distribution Center
Kenya/Uganda
Non-Profits
Retail
Businessmen
Consumers
?
BFP’s Supply Chain - Distribution • Fast
• Products transported by truck or bike
• Low volume of products
• Low transport cost
• A lot of uncertainty
• Little information andvisibility
• Unknown # of tiers
• Unknown costs
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BFP’s Supply Chain
• How can we couple these two “systems”?
• Slow • Fast
• Large volume of • Low volume of
products products
• Little uncertainty • Low transport cost
• A lot of visibility A lot of uncertainty Inventory
•• Little visibility
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Challenges in Emerging Markets: What’s different?
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Uncertainty • Lack of information
• Lack of Visibility
• Currency fluctuations
• Supply Chain disruptions
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Market in Kenya Market in Kenya
Contrasts: Modern vs. Traditional
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SCs and developing countries: what’s different?
• Delivered cost is of primary importance for consumer goods
• Lead times longer, more uncertain
• More uncertainty in demand, in supply
• SC disruptions may be more common
• Information and logistical infrastructures are much less developed
• More tiers across SC; more hand-off’s
• Service aftermarket (ie repair parts and service) may not exist
• Financial credit may be less common
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Assignment for Monday • Pick a product that you own, or use, or consume. • Describe its supply chain as you know or imagine it, going as far upstream as
possible to raw materials. – Where and how was it made? – Where were its components made? – Where were the raw materials sourced from? – How long did this take? How many steps and movements?
• What type of slack might there be in this supply chain, and where, and for what reasons?
• What do you imagine are the key challenges in the planning and operation of this supply chain?
• Please submit a 1 page write up addressing these points.
• Slack --- is meant to convey an allowance in the system to accommodate uncertainty in the supply chain, or inflexibilities, or to take advantage of economies of scale or scope
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Start reading “The Goal”
The Goal: A process of ongoing improvement by Eliyahu Goldratt
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15.772J / EC.733J D-Lab: Supply ChainsFall 2014
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