lecture series: consumer electronics supply chain managementmetin/fujen/folios/ce... ·...
TRANSCRIPT
2003 © UTD
Lecture Series: Consumer Electronics Supply Chain Management
Mohit Junejai2 Technologies
Divakar Rajamani, Ph.D.University of Texas at Dallas
Center for Intelligent Supply Networks (C4ISN)
2003 © UTD
Lecture 2: Planning the Consumer Electronics Supply Chain
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Agenda
CE Products and Supply Chain StructurePlanning ProcessesInformation Flow across Planning ProcessesRolesKey Performance IndicatorsFuture Trends in Planning
2003 © UTD
CE Products and Supply Chain Structure
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PV-SD5000
Digital Still Cameras
Electric Shavers
Plasma TV
VCR’S
End Product Offerings - Diverse Product Range
4-month life cycle
50 % sales done in
December
Hi TechLow turn
High Margin
CommodityLow TechHigh Turn
Low Margin
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Consumer Electronics US Market Sales
US Consumers bought 95 billion dollars of CE product in 2002
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Supply Chain for End Product
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Industry Characteristics4 month lead time
Built to stock Delays,Out of stockOverstocked
Coordination
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CE Industry Issues
High degree of parts customizationLong R&D design process timesLong lead time to create additional capacity for custom partsPoor customer service / supply flexibilityLow re-use of partsShort component life cycles leading to service issues
High supply risk due to reliance on custom partsShort product lifecyclesHigh demand unpredictability, inflexible manufacturingUnresponsiveness to demand signals due to manual monthly planningFragmented procurement across factories
Inventory boom-bust cycle (bull-whip effect)Low customer service levelsGeographically fragmented supply chainMargin erosionHigh spares inventory, inconsistent availability
Stock outsReducing marginsHigh logistics costsHigh inventory, store level stockoutsHigh promotions costs
COMPONENTSUPPLIERS
OEMs SALES COMPANIES
RETAILERS
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Planning Processes
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CO
LLAB
OR
ATIO
NCE Industry Key Planning Processes
DEM
AND
LOG
ISTI
CSAL
LOC
ATIO
N
SupplierCollaboration
FactoryPlanning
CPFR
DemandPlanning
TransportationPlanning
AllocationPlanning
DistributionPlanning
DemandPlanning
TransportationPlanning
ReplenishmentPlanningSU
PPLY
FactoryCollaboration
DemandPlanning
TransportationPlanning
MasterPlanning Factory
Planning
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Planning Funnel
hour
sho
urs
days
days
wee
ksw
eeks
mon
ths
mon
ths
year
+ye
ar +
operationaloperational tacticaltactical strategicstrategicschedulingscheduling
Business Planning
Transportation Planning
SchedulingDistribution Planning
Master Planning
Demand Planning
Replenishment Planning
Factory Planning
Allocation PlanningCollaboration
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Demand Planning
DefinitionThe Demand Planning process helps predict and influence future sales by customer
Typical constraintsLack of visibility into future customer needs
The long product lead time introduces further uncertaintyComplex interaction between a wide array of products and brands
Lack of visibility to competitionLack of quality data
Availability of sales dataAvailability of POS data
BenefitsDecrease inventory obsolescence and mark downsIncrease customer service and fill rates
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Demand Planning
CE Industry ChallengesFrequent Promotions and MarkdownsFrequent new product introductions, short product life cycleSeasonal DemandLow forecast accuracy for new products, spiky demands
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Demand Planning
Retailersuse point of sale information to forecast their sales. They use merchandize planning to set pricing and markdowns on product.
Sales companies forecast based on shipments and historical sales, market information as well as planned promotions. They forecast across retailers in a market.
OEM’s forecast across sales companies based on market analysis, business plan as well as historical shipments to sales companies.
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Supply Planning
DefinitionThe supply planning process optimizes the use of both capacity and material in order to maximize satisfying anticipated demand
Typical constraintsPlanning assumes fixed lead times – infeasibilitySimplistic inventory planning leads to overstock and lost sales situationsDistribution Space & Handling Constraints Manufacturing capacity constraintsPurchasing material constraints - alter production schedules
BenefitsReduce cost of inventory, expeditingGlobal coordination – sharing information across supply chain entities
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Supply PlanningCE Industry challenges – Replenishment and Distribution
Complex distribution network with possible alternates in fulfillment locationInventory management - Safety stock vs. CSL tradeoffInventory rebalancing between DC’s
CE Industry challenges – ManufacturingDiscrete Part Manufacturing: Factories aligned with product lines. Strategic sourcing – Supplier Selection, Scorecard and AllocationProduct sourcing – Obsolescence management, Part re-use, BOM gradingSignificant Material ConstraintsRequires Assembly coordinationSeasonal Build Ahead – high demand in the Christmas seasonManufacturing lot size
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Supply PlanningRetailers typically perform replenishment planning
calculate purchase from demand forecast and inventory / projected receiptsstore level inventory deployment plan
Sales companies perform a distribution plancreates the material purchasecreates the Inventory deployment across warehouses
OEMs create a capacity and material feasible master plan across factories and make factory sourcing decisions
OEM/Component supplier - Factoryeach factory creates a material and capacity feasible productionschedule and detailed material procurement plan based on its vendor allocation and preference rules
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Allocation PlanningDefinition
Allocation planning process refers to disaggregating expected supply / commits to the customer against anticipated demand. The order promising function is an extension of allocation planning where a sales order is promised against this allocation.
Typical constraintsAllocation constraints include allocating material across multiple dimensions (customer, product and time) and also account for customer demand fulfillment strategiesOrder promising constraints include accounting for real lead times to customer, accounting for alternate fulfillment locations and alternate products
BenefitsIncreased customer service and retentionIncreased profitsIncreased order promising accuracy – hitting promise dates in execution
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Allocation Planning
CE Industry ChallengesDefinition clear Tier structure between customers to allocate constrained supply
This structure tends to get changed annuallyDifferent customers can have agreements on shipments within different time windows – Weekly vsMonthly commitsProduct Substitution acceptable
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Allocation Planning
Sales companiescreate allocation plans from warehouse / Sales org to different retailers / groups of retailers
OEMs create allocation plans for allocation of finished goods between various sales companies – this is usually done as a part of the master plan
Component suppliers create allocation plans for components and capacity across various OEM’s
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Logistics PlanningDefinition
Logistics planning refers to planning of material transfer between source and destination locations
Selection of mode of transportMaximizing container densityMaintaining loading constraintsRoute selectionRegulations Shipment tracking
Typical constraintsContainer sizeStacking constraintsRoute optimization – hubs, merge in transits etc
BenefitsIncreased container utilizationReduced freight costsBetter shipment tracking
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Logistics Planning
CE Industry IssuesLoad building / Load Configuration – CE products have complex freight loading and configuration rulesTransportation Mode - Multi Modal - Air freight for expediting, truck for inland transport and ship for overseasLimited number of carriers that have ability to deliver the productDistribution cost as a percentage of Total Cost is high
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Logistics Planning
Retailers plan logistics from their warehouses to storessome retailers have negotiated product pick up agreements with sales companies / manufacturers
Sales companies plan logistics from their warehouses to retailers / smaller customers
OEMs plan logistics from factories / divisions to sales company warehouses
Component suppliers plan logistics from their plants to OEM assembly plants
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Collaboration
DefinitionCollaboration in the process of sharing information across supply chain entities in order to better meet end customer demand
Collaboration workflows typically enable electronic transfer of data like forecasts, commits, purchase orders, designs etc
Typical constraintsNot all supply chain entities are technologically advancedNot all entities can agree on sharing confidential data
BenefitsOn-time and more responsive deliveriesReduction in inventories through improved longer term visibilityReduction in costs – reduced obsolescence, better planned promotions, reduced markdowns and reduction in expedites
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Collaboration
CE Industry IssuesCollaborative replenishment planning for geographically separate DCs , plantsCollaborating on demand which is over a long lead timeCollaborating on joint promotions
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Collaboration Process
Collaboration Process is typically performed weekly
Retailer
OEM
Sales Company
Component Supplier
CPFR
FactoryCollab
SupplierCollab
Product LeadTime
Retail PO
Sales Co. PO
OEM PO
Retailer Purchase Forecast
Sales Co. Purchase Forecast
OEM Purchase Forecast
M1 M2 M3 M4 M5
POStatus
POStatus
POStatus
Retailer
Sales Company
Component Supplier
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Information Flow Across the Supply Chain
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Retail Planning Processes
DemandPlanning
DemandPlanning
DistributionPlanning
AllocationPlanning
ReplenishmentPlanning
CPFR
TransportationPlanning
TransportationPlanning
1. POS Forecast
2. Adjusted POSforecast
3. PurchaseForecast
4. SupplyCommit
5. InventoryDeployment
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Sales Companies Planning Processes
DemandPlanning
DemandPlanningDemand
Planning
MasterPlanning
FactoryPlanning
DistributionPlanning
AllocationPlanning
ReplenishmentPlanning
FactoryCollaboration CPFR
TransportationPlanning
TransportationPlanning
1. Total Sales Forecast
3. Sales co. PurchaseForecast
4. Commits
2. Total sales plan,Key retailer forecast
5. Inventory Deployment
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OEM’s Planning Processes
DemandPlanning
DemandPlanning
FactoryPlanning
MasterPlanning
FactoryPlanning
DistributionPlanning
AllocationPlanning
SupplierCollaboration
FactoryCollaboration
TransportationPlanning
7. ConstrainedSupply plan
1. Total manufacturingforecast
2. Production Requirements
3. Independent requirements
4. FactoryProcurement
5. Commit
6. Commit
8. Commit
2003 © UTD
Roles
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SupplierCollaboration
FactoryCollaboration CPFR
CO
LLAB
OR
ATIO
NCE Industry Key Planning Roles
DemandPlanning
DemandPlanning
DemandPlanningDE
MAN
D
TransportationPlanning
TransportationPlanning
TransportationPlanningLO
GIS
TICS
AllocationPlanning
ALLO
CAT
ION
FactoryPlanning
MasterPlanning
DistributionPlanning
ReplenishmentPlanningSU
PPLY Factory
Planning
MerchandisePlanner
Buyer
LogisticsPlanner
Merchandise &DemandPlanners
DemandPlanner
Procurement Planner
Procurement &Demand, MasterPlanners
Buyer & FactoryPlanners
Master, FactoryPlanner & Buyer
FactoryPlanner
DemandPlanner
DemandPlanner
LogisticsPlanner
LogisticsPlanner
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Planning Roles – Decisions they makeMerchandise Planner
Pricing decisions, demand forecasting-store level, promotions and CPFR
BuyerRetail
Replenishment at store level, create long term procurement plan, negotiate price for spot buys and inventory deployment plans, CPFR
Sales CompanyReplenishment at sales company DCs, create long term procurement plan and inventory deployment plans, factory collaboration
FactoryReplenishment at factory warehouses, create long term procurement plan, negotiate price for spot buys, supplier collaboration
Logistics PlannerCarrier/Mode selection, load consolidation configuration and routes – includes merge in transit
Master PlannerHigh level factory sourcing decisions, high level capacity and material plan, independent buy
Demand PlannerBusiness planning, forecasting, promotions, analysis of point of sale data, facilitate pricing decisions, CPFR
Factory PlannerCreate a detailed capacity and material plans, schedules at plant level, and supplier collaboration
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Key Performance Indicators
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Key Performance Indicators (KPIs)
Financial KPIs are used to measure the business performance (tactical and strategic)
Typically byDivision/CorporateQuarter/YearEntire Customer base
Operational KPIs are defined to monitor various planning processes (operational and scheduling)
Typically bySKU / Product FamilyCustomer/ Customer GroupWeek/Month
Can be used for scorecards
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Key Performance IndicatorsLogistics
Container utilizationNo of Empty trips% Expedites (Trans.)Number of Touches
SupplyPeriod of cover by SKU / Warehouse wrt Safety stockInventory turnsObsolescenceMaterial earliness (temporary inventory buildup) Safety stock shortage Material lateness Shortage - % demand fulfilled based on purchase planMarkdowns ($)Resource utilization
DemandForecast accuracy
Error in revenue forecast by customerError in revenue forecast by division / product familyForecast error wrt sales order2 month forecast cumulative error wrtshipment by key product / customer
Forecast volatility / stabilityWaterfall chart of dollarized forecast by customer (forecasted bucket)Forecast variance by month for key product / customer
AllocationConstrained Sales ($) by month vs business plan typically at division levelAllocated forecast ($) vs forecast by customerAllocation realized –Allocated forecast with sales order received at SKU
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Key Performance IndicatorsExecution scorecard
On time delivery against PO’s Right Quantity against POWeekly / Monthly Order Delivery (measures for order cycle)PO lead timeLock PeriodFill rateIn stock percentageMis-labelingPromotion order shipment (penalty for mis-shipment)
CollaborationBaseline Forecast vsCollaborative / Consensus ForecastCommit wrtCollaborated / Consensus forecast
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Future Trends in Planning
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VMI Trend in CE Industry
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VMI Trends for CE Retailers
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Outsourcing Assembly (or Kitting)
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Information Sharing and Collaboration for CE Retailers
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Information Sharing and Collaboration for CE Manufacturers
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Challenges in Retailer Interaction
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Challenges in Interaction with CE Manufacturers
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Frequency of Merchandising and Replenishment Planning
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Frequency of Demand and Supply Planning
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Delay in Demand Propagation