Demand Supply

Is DSN Important? “Nokia's infrastructure sales and profitability in the fourth quarter exceeded our expectations due to robust year-end spending by operators combined with our shortened delivery lead times. Profitability was also positively impacted by the successful resolution of a prior customer delivery issue as well as a product mix favoring highmargin products. In Asia-Pacific, we emerged as a clear leader in 3G WCDMA. “

THE CONCEPT OF DEMAND-SUPPLY NETWORK SUPPLY NETWORK

PAPER MILL

PRINTING HOUSE

REGIONAL WAREHOUSE

BOOKSTORE

STUDENTS

DEMAND NETWORK

PAPER MILL

PRINTING HOUSE

BOOK DISTRIBUTOR

BOOKSTORE

PROFESSOR

STUDENTS

DEMAND NETWORK + SUPPLY NETWORK = DSN Hoover, B, E. Eloranta, J. Holmström, K. Huttunen: "Managing the Demand-Supply Chain: Value Innovations for Customer Satisfaction", Wiley, New York, 2001

Concepts

TARGETS OF DSN

ASSETS

PROFITABILITY

CUSTOMER SATISFACTION

COSTS

Manage the flows (material, information, finance) of demand-supply chain to create customer satisfaction for maximising current and future network profitability • customer satisfaction

• OTD; do we measure customer's perception of on time delivery? how do we measure it? • AVAILABILITY; where do we measure it (customer, POS, site, DC)?

• asset performance

• Variable assets: do we know total network DOS and liability; upstream & downstream? • Fixed assets: do we see the difference between utilization vs. opportunity costs?

• cost efficiency

• do we know the total cost drivers throughout the network?

What is Supply Chain Planning ? Supply Chain is a set of activities (e.g. purchasing, manufacturing, logistics, distribution, marketing) that perform the function of delivering value to end customer

Traditionally, all the business units along a supply chain have their own objectives and these are often conflicting

There is no single plan to carry out supply chain activities

What is Supply Chain Planning ? There is need for a mechanism through which the execution of various business activities along a supply chain can be planned in an integrated fashion.

The supply chain planning is an effort to achieve the primary goal of “producing and distributing the merchandise at the right quantity, to the right locations, and at the right time with minimum system wide cost” in the presence of conflicting goals of various business units

Dynamics of Material Flow

Supplier

Plant

Warehouse

Logistics

Retailer

Dynamics of Order Flow

Supplier

Plant

Warehouse

Logistics

Retailer

Supply Chain Planning Processes Material Requirement Planning Component Requirement

Supplier

Demand Forecasting

Demand Planning

Production Plan

Plant

Warehouse

Logistics

Order Management

Retailer

Supply Chain Planning Decisions

STRATEGIC TACTICAL OPERATIONAL Procurement Manufacturing

Distribution

Logistics

Supply Chain Planning Decisions Selection •Allocation of Suppliers to the Plants

•Location, Number, Capacity of Plants •What Products to Produce •Which Plants to Produce them

• Procurement Policy

•Warehouse Allocation • Inventory Decisions • Manufacturing Policy

• Customer Allocation • Distribution Policy

• Production Schedule •Scheduling on Machines • Workload Balancing

• Finished Goods Inventory

• Supplier

•Location, Number, Size of Warehouses

• Mode of Shipment • Port Selection

• Vehicle Routing • Fleet Size

• Vehicle Routing

Results  Reduced inventory levels by 10-15%  Reduced markdown & scrap by 10-15%  Used resources10-20% more efficiently

Companies that utilized best-in-

 Improved delivery reliability by 95-95%  Reduced outages to 0-5%  Reduced cycle time by 10-20%  Reduced transportation cost by 10-15%

class SCM solutions have

The RosettaNet Value Proposition “A

company's demand management, direct material procurement, logistics, part management and order fulfillment processes are closely linked to supply chain partners. Value is created by close integration of these processes among the company’s suppliers, logistics & service providers and customers. Collaborative processes that provide visibility to forecasts, inventory levels, order execution, and shipments between trading partners achieve this. The collaborative process is hampered by lack of industrywide processes and data standards that enable system-to-system automation of core processes…..” “In today’s competitive world, well-oiled and responsive extended supply chains are increasingly becoming a foundation for competitive advantage. No longer can companies restrict their focus on increasing supply chain efficiencies within the four walls of the enterprise. The supply chain that extends beyond a company’s organizational boundaries increasingly determines its effectiveness. There is an increasing dependence on "collaboration" as key to bridging the boundaries – not only within the enterprise, but also between enterprises and across industry boundaries.” “Adoption of RosettaNet standards could well be a critical factor in bringing the high technology dream of dynamic value chain management to fruition.” Source: RosettaNet website, Implementing RosettaNet E- Business Standards for Greater Supply Chain Collaboration and Efficiency

Supply Chain Mo del Foundation papiNet messages can be categorized according to the Supply-Chain Council’s, Supply-Chain Operations Reference (SCOR) model Plan

• Product Attributes • Planning

Source

Make

Deliver

• Request For • Product • Delivery Message Quotation Quality • Goods Receipt • Availability • Usage • Purchase Order • Inventory • Invoice • Order Change Confirmation • Product • Call-Off Performance • Order Status • Inventory Status

Utility

• Credit/Debit Note • Business Acknowledgement • Information Request • Complaint • Complaint Request

Ex ecutio n St yle s Traditional

The papiNet Way

Approach:

“Efficient and cost effective transactions”

“An efficient and cost effective supply chain”

Scope:

Transaction between trading partners

The entire supply chain

Objectives:

Transactional efficiency

Operational improvement

ROI:

Break-even (at best)

Positive

Impact:

Enables reduced admin and systems cost

Enables reduced operating costs, improved quality, throughout and working capital

Potential $ Return:

Tens-hundreds of thousands/company

Tens-hundreds of millions/company

How viewed:

An IT project

A margin improvement projectstrategic enabler for supply chain improvements

The Supply Chain “Iceberg” Perceived Value Transactional Efficiency

Critical Data to improve: Trim waste

Multiple handling

Web breaks

Transit damage

Process delays

Press delays

Strip waste

Damage

Press damage End-to-end cycle-time

Yield

Delays

Warehouse fees

Late Deliveries

Excess freight Inventory turns

Intrinsic Value

papiNet Value Proposition Specifications •papiNet Messages •Common Definitions •Standards

Data Collection •Publishers/ Catalogers •Printers

Data Transmission (XML)

•Paper Companies

Standards are fundamental to an efficient supply chain:  Enable timely, efficient and effective communications  Avoid costly/non-value added translation activities  Enable fast and widespread connectivity  Avoid “one-off”custom connections

…This must be done, but it only enables collaboration

Supply Chain Benefi ts  Cost  Reduced inventories  Reduced waste  Reduced total system costs  Quality  Reduced variation and increased quality through data-driven performance feedback  Service  Establishment of a collaborative framework  Near real time information flow 

Business growth opportunities 

Preferred source for new opportunities



Expanded benefits to other customers

Th e Th ree Ts Velocity

Timeliness

Acceleration Collaboration Empowerment

The 3 Ts

Key Ingredients For Improving Supply Chain Efficiencies

Trust

Sharing

Information(eg. open schedules) Accountability

Understanding the process Transparency

Ability to see the real situation