Lecture_05.pdf

SDM 5001 SYSTEMS ARCHITECTURE

LECTURE 5 ARCHITECTING SINGLE SYSTEM: SUPPLY CHAIN

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SDM 5001 SYSTEMS ARCHITECTURE

LECTURE 5.1 SYSTEMS ARCHITECTURE OF A SERVICE FIRM PIZZA DELIVERY SERVICE

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A Service Systems Architecture Intent / Goal: Requirements: Viewpoint: Concept of Operations:

To serve pizza to consumers in their home To receive orders in Pizza kitchen To deliver pizza to consumer home Pizza company order

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Process Flow Chart

Customer place orders

Office makes payments

process orders

Kitchen bakes pizzas

Process + Operands

Behaviour

Functions

Customer + Order

Phone In Order

Place Order

Store + Order

Process Order

Confirm Order

Chef + Ingredients

Bake Pizza

Cook Pizza

Motor Cyclist + Pizza

Travel

Deliver Pizza

Delivery Point + Money COD (cash on delivery)

Payment

Motor Cyclist delivers pizzas

makes payments

Delivery Point

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DSM Process/Logical Architecture Process Flow Chart

Orders Orders

Customer

Process

Bake

X

Process place orders

Deliver Pay makes payments

process orders

Kitchen bakes pizzas

Motor Cyclist delivers pizzas

makes payments

Delivery Point

Pay X2.1

X

Bake

Store

Deliver

X X2.2

X2.3 X2.4

X1.1 X1.2

X and X1.1 (Dependent Elements) o Orders Process Bakes Delivers X1 (Coupled Elements) o X1.1 Motor Cyclist Delivery and Receive Payment o X1.2 Payment made to Motor Cyclist for Delivery X2 (Interdependent Elements) o X2.1 Customer Made Payment o X2.2 Motor Cyclist Deliver to Customer o X2.3 Motor Cyclist Update Pizza Hut with Delivery o X2.4 Payment Recorded in Pizza Hut © LGChan

DSM Functional Architecture Functional Architecture Place Orders

Physical Components Functions

Place Orders Record Orders

Record Orders

Phone

Store

Delivery

Payment

Bank

X

X

Delivery Payment

Motor Cyclist

X

Bake Pizza Bake Pizza

Kitchen

X X1

X1

X

Payment Functions requires o Store (to receive payment), o Motorcyclist (to collect payment), and o Bank (to make payment)

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Functional Architecture

Physical Architecture

Place Orders

Phone/Internet

Record Orders

Store

Bake Pizza

Kitchen

Delivery

Motor Cyclist

Payment

Bank

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DSM Physical Architecture Physical Architecture Phone/Internet

Store

Physical Components Physical Components

Phone

Phone

Store

Bank

Bank

X

Kitchen Motor Cyclist

Motor Cyclist

X

Store

Kitchen

Kitchen

X X

X X

X

Motor Cyclist Pizza Store Module Bank

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Systems Architecture of Service Payment Systems

Communication Systems

Food Ordering Systems

Transport Systems

Kitchen

Interfaces

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SDM 5001 SYSTEMS ARCHITECTURE

LECTURE 5.3 MANAGING SUPPLY CHAIN BULLWHIP

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Measurements of Bullwhip Impact Bullwhip Effect = Bullwhip = 1 Bullwhip > 1 Bullwhip < 1

Variance Orders Variance of Demand

no variance amplification bullwhip present in amplification bullwhip dampening or smoothing

Net Inventory Amplification =

Variance of Net Inventory Variance of Demand

Higher Net Inventory Amplification More Safety Inventory Buffer Lower Net Inventory Amplification Less Safety Inventory Buffer (Net Inventory are either Inventory or Backlog)

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Typical Supply Chain Structures 1 Traditional supply chain – each member sends an order to its supplier which delivers what is required. each member receives information about demand from the immediate downstream level and transmits it as orders to the immediate upstream level

2 Reduced supply chain – one member or more of the traditional supply chain is/are eliminated. Do not use retailers, such as direct sales of articles to end consumers on the Internet (Amazon)

3 e-shopping supply chain (traditional single-level supply chain) – Factory receives the products or services demand directly from the end customer (Dell Computers)

4 EPOS system – whole supply chain has access to data about current sales to the end consumer for demand forecasts Each member knows the real products demand that the end customer requests in each period.

5 VMI-type supply chain – agreement between distributor and retailer (or between the manufacturer and the distributor) Distributor knows not only the end consumer’s sales (receives information about them), but also the retailer’s inventory and it manages this level 3 Ref: S.M. Disney, M.M. Naim, A. Potter (2004) Assessing the impact of e-business on supply chain dynamics. Int. J. Prod. Econ. 89, 109–118

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BULLWHIP MANAGEMENT STRATEGIES

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Four Main Causes of Bullwhip Effect Forrester Effect (Forrester 1961) or Demand Amplification – processing demand signal leads to adjusting demand forecasts and, as a result, parameters are adjusted to the inventory replacement rule (econometric forecasting)

Burbidge Effect (Burbidge 1991) or Lot Sizing – managing orders downstream the supply chain (or in the manufacturing process) into lots to gain economies of scale in lot size changing activities (machine configurations, or managing and receiving an order)

Houlihan Effect (Houlihan 1987) or Rationing and Scarcity of finished goods (rationing and gaming) – when scarcity, or unserved orders, occur in traditional supply chains (encouraged by suppliers to stimulate demand), customers increase their orders

Promotion Effect or Prices variations – offering products at lower prices to stimulate demand. The presumption of elastic demand temporarily increases demand ratios when customers make good use of this chance to buy in anticipation or increase their stocks Ref: H.L. Lee, P. Padmanabhan, S. Whang (1997) The bullwhip effect in supply chains. Sloan Management Review. Vol 38, pp 93–102

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4+1 Principles in Supply Chain Manufacturing Strategy Control system principle Need to select the most suitable control system to accomplish the user objectives

Time-compressing principle Activity should be carried out in the minimum time required to accomplish task objectives Necessary to eliminate added time without value, or the system’s idle time, and to deliver what is required on time

Information transparency principle Market information should be made available to all participants at the shortest possible time

Levels elimination principle There should be the minimum number of appropriate levels for the accomplishment of the supply chain’s goals, and there should be minimum stocks in the right place and at the right time

Synchronization principle All events are synchronized so that that orders and deliveries are visible at all the discrete time points (Ref: D.R. Towill, Forridge (1997) Principles of good practice in material flow. Production Planning Control. Vol 7, pp 622–632)

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Bullwhip Effect Control Strategy 1

Coordinating Mechanisms o shared information o supply chain alignment o operational efficiencies

7 Ref: H.L. Lee, P. Padmanabhan, S. Whang (1997) Information distortion in a supply chain: the Bullwhip Effect. Management Science. Vol 43, pp 543–558

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Bullwhip Effect Control Strategy 1 1 Avoiding many demand forecast updates Methods to achieve this: o Demand data are available at all the supply chain levels (EDI, Internet, etc.), and this would be an EPOS-type (Electronic Point of Sales) supply chain structure. o Demand and inventories data are available at all the supply chain levels: Example: VMI-type (Vendor Managed Inventory) supply chain structure o Direct sales will be made to the end consumer and this will be an e-shopping type supply chain structure

2 No Lot Sizing JIT (Just In Time) replenishment is an effective way to mitigate the effect by using smaller lot sizes or a more frequent replenishment system. The reason for large lot sizes may be due to costs relating to the order and to transport Recommend to use of external logistics operators

8 Ref: H.L. Lee, P. Padmanabhan, S. Whang (1997) Information distortion in a supply chain: the Bullwhip Effect. Management Science. Vol 43, pp 543–558

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Bullwhip Effect Control Strategy 2 3 Stable prices o o o o

Reduce the frequency and level of discounts in prices. EDLP (Everyday Low Price) strategies CRP (Continuous Replenishment Program) strategies ABC (Activity Based Costing) systems

4 Eliminate rationing products situations o Share information about capacities and inventories o Work with customers to advance the production of seasonal sales.

5 Other Strategies o Include information systems. o Define new organizational relationships (multiple suppliers, trusted relationships) o Implement new measures and incentives systems 9 Ref: H.L. Lee, P. Padmanabhan, S. Whang (1997) Information distortion in a supply chain: the Bullwhip Effect. Management Science. Vol 43, pp 543–558

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Period Batch Control Supply Chain Manufacturing Rule 1. Only manufacture those products that can be quickly dispatched and invoiced to customers Rule 2. Only manufacture those components in one period that are needed in the next period Rule 3. Minimize the materials processing time Rule 4. Use the shortest planning period that can be efficiently managed Rule 5. Only accept deliveries from suppliers in small batches and when required for processing or assembly

References J.L. Burbidge (1961) The new approach to production. Production Engineer. Vol 40, pp 769–784 J.L. Burbidge (1983) Five golden rules to avoid bankruptcy. Production Engineer. Vol 62, pp 13–14

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END OF LESSON MANAGING SUPPLY CHAIN BULLWHIP

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