Managing Uncertainty in the Supply Chain.ppt

Managing Uncertainty in the Supply Chain David Simchi-Levi Professor of Engineering Systems Massachusetts Institute of Technology Tel: 617-253-6160 E-mail: dslevi@ Outline of the Presentation Introduction Push-Pull Systems Case Studies High Tech Automotive Electrical Components Today’s Supply Chain Pitfalls Long Lead Times Uncertain Demand Complex Product Offering Component Availability System Variation Over Time The Dynamics of the Supply Chain The Dynamics of the Supply Chain What are the Causes…. Promotional sales Volume and Transportation Discounts Inflated orders Demand Forecast Long cycle times Lack of Information Example: Automotive Supply Chain Custom order takes 60-70 days Many different products High level of demand uncertainty Dealers’ inventory does not capture demand accurately GM estimates: “Research shows we lose 10% to 11% of sales because the car is not available” Supply Chain Strategies Achieving Global Optimization Managing Uncertainty Risk Pooling Risk Sharing From Sequential Optimization to Global Optimization A new Supply Chain Paradigm A shift from a Push System... Production decisions are based on forecast …to a Push-Pull System From Make-to-Stock Model…. Demand Forecast The three principles of all forecasting techniques: Forecasts are always wrong The longer the forecast horizon the worst is the forecast Aggregate forecasts are more accurate Risk Pooling A new Supply Chain Paradigm A shift from a Push System... Production decisions are based on forecast …to a Push-Pull System Push-Pull Supply Chains A new Supply Chain Paradigm A shift from a Push System... Production decisions are based on forecast …to a Push-Pull System Parts inventory is replenished based on forecasts Assembly is based on accurate customer demand ….to Assemble-to-Order Model Outline of the Presentation Introduction Push-Pull Systems Case Studies High Tech Automotive Electrical Components Shifting the Push-Pull Boundary:A Case Study Manu