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Supply Chain John Vande Vate Spring, 2007 1.

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Presentation on theme: "Supply Chain John Vande Vate Spring, 2007 1."— Presentation transcript:

1 Supply Chain John Vande Vate Spring, 2007 1

2 Make-to-X Make-to-Order Make-to-Forecast Make-to-Stock 2

3 Managing Variability Three Levers: Inventory Capacity Time
Which levers are MTO, MTF, MTS using? 3

4 Which Levers Make-to-Order Capacity!
Time: If we can convince the customer to wait… Inventory 4

5 Pros-Cons MTO: MTF MTS Pros: Cons: Cons
Little or no finished goods inventory Customization can be competitive advantage Cons: Manufacturing subject to high demand variability Lead-time can be competitive disadvantage MTF Helps smooth capacity requirements Can respond to (foreseen) changes in demand Product availability Cons Only as good as the forecast No real limit on inventory MTS Minor smoothing of capacity requirements Definite capacity on inventory Manufacturing still subject to demand variability Inventory 5

6 Make-to-X Make-to-Order: Make-to-Forecast: Make-to-Stock: When:
The product cannot be inventoried The product is highly customized Prices are declining Customers will wait or the process is quick Make-to-Forecast: Customers won’t wait or the process is too long Capacity is constrained Product is perishable Make-to-Stock: Commodities with little differentiation Capital intensive manufacturing 6

7 The Point Make to Order is not a superior strategy
It is a superior strategy for some markets It Supports highly customized products Eliminates finished goods inventories Reduces reliance on forecasting 7

8 Mixed Strategies MTS/F up to a point MTO from this point on
Typically this point where product differentiates The Question: When in the process to assign the customer? The trade-off Later means shorter lead times Later means process has undergone more differentiating steps… 8

9 Digression: Push-Pull
This point is often called the “Push-Pull Boundary” Confusion about what is Push, what is Pull Hopp, Spearman paper attempt to resolve Thought provoking. Not definitive 9

10 Postponement Delaying the point of differentiation and with it, the transition to Make-to-Order, until later in the process Examples: HP Printers in Europe Milliken Carpet Tiles Philips Bulk Packaging BMW Paint Shop Cell Phone Mfg. 10

11 Bulk Packaging Delayed customer specific packaging
Don’t have to forecast sales by customer Shortens order-to-delivery window Allows efficiency in in-bound transportation 11

12 HP Imaging & Printing Delaying product differentiation to local market

13 IPS Product Platforms e-enabled appliance digital multi-function
- volume business - standard configurations - low product complexity color LaserJet/ fast color ink network printer basic office printing toner cartridge - value business - customized configurations - high complexity

14 Competing with Dell The BTO advantage The BTO dis-advantage
Low FG inventory Customizable product Quick delivery Short cash-to-cash cycle Purchase components at last minute The BTO dis-advantage High manufacturing costs – Can’t move desktops to China High delivery costs Hard to consolidate last mile 14

15 HP Adaptive Supply Chain Strategy
Mfg Planning Order Fulfillment Logistics Procurement Industry Standard Servers Commercial Printing Digital Imaging Shared Printing Personal Printing Supplies Portables & Handhelds Business PC & Workstation Consumer PC Monitors & Options Network Storage Solutions Business Critical Servers ESG IPG PSG Product Set Managed Services Solutions Customer Support Solutions Consulting & Integration Sol.. HPS Solutions (ESG / HPS) Product/Service Generation Customer Segment Consumer Enterprise Direct / Indirect GTM SMB No Touch Low Touch Value Add High Value & Solutions Services 15

16 Dell’s Strategy Bulky differentiated products, e.g., desktops and servers Build to order in the US High value density differentiated products, e.g., lap tops Build to order in China and airfreight Undifferentiated products Make the supplier hold the inventory 16

17 Impact on product flows
HP Postponement: Impact on product flows Mfg, localization distribution Mfg localization, distribution

18 18

19 Evolution of Postponement
Localization Slot Localization(Manuals; Cables) Packaging Packaging lines(Bulk Pack etc.) Integration Assembly and test(Formatters etc.) Evolution of Postponement

20 Postponement Benefits Inventory Flexibility (Demand signals)
Freight efficiency (Bulk shipping) Cost reductions (Local procurement) Speed (Time-to-market) Legal (Tax & duties, Export regulations) Measures Service Level Total Supply Chain cost

21 BMW Example Positioning the Boundary in BTO 21

22 The BMW Production System
Production sequence set throughout manufacturing Body Shop Assembly Paintshop Start customer order Re-sort BMW-Production System Assembly Start customer order ‘Late order assignment’ Zentrale Maßnahme, die die Reihenfolgestabilität liefern wird, ist das BMW-Produktionssystem, auf das im anschließenden Vortrag näher eingegangen wird. Hier an dieser Stelle sei nur soviel gesagt, daß wir die Reihenfolgestabilität nicht mittels der Perlenkettenfertigung zu realisieren versuchen, sondern unseren eigenen Weg entschieden haben. Basis ist die späte Auftragszuordnung zum Montagestart und der ‘eingefrorene Horizont’ zwischen der Ordereinplanung und dem Montagestart. Im letztgenannten Prozessabschnitt wird eine sogenannte Komponentensteuerung Anwendung finden. Sie soll sicherstellen, daß die Karossen rechtzeitig in der erforderlichen Reihenfolgesequenz zur Verfügung stehen. Body Shop Paintshop Assort Component Control ‘frozen horizon’

23 Production Control Systems for Body/ Surface/ Assembly
Component Control ... Order assignment not until assembly start Das folgende Beispiel zeigt Ihnen noch einmal die Wirkungsweise der Komponentensteuerung. Aus dem Bedarf der Montage wird unter Berücksichtigung des Sortierspeicherinhalts der Bedarf für Decklack, Füllerbereich, Rohbau-Finish bis zu einzelnen Rohbauuntergruppen vorgegeben. Sequence stability 100% Body Shop Paintshop Planning Start of Assembly Painted car bodies are handled as supply parts 23

24 Milliken The Millitron
Computer-controlled micro jets inject dye with surgical precision deep into the face of the carpet. 400 micro-jets per square inch Can blend colors on carpet As carpet passes through the Millitron, entire designs can be changed without as much as a pause. 24

25 25

26 Printed Carpet Tile 26

27 Opportunity From Catastrophe

28 The Fire Tuesday, January 31, 1995 destroyed Milliken & Company's Live Oak/Milstar Complex and Carpet Service Center. A 600,000 sq ft carpet manufacturing, warehousing, cutting and distribution facility. Total loss over $400 million. 28

29 Opportunity From Catastrophe

30 Reconstruction 30

31 Before the Fire Several base tiles feed
Several “gun bars” or color schemes Frequent and long changeovers Push to base tiles, Pull to customer orders Push-Pull interface before the millitron 31

32 After the Fire One base tile One or two gun bars Nearly no changeovers
Millitron is the push-pull interface 32

33 Discussion The relationship between postponement & inventory pooling
Manufacturing operations spread across the supply chain Blurring of the distinctions between distribution and manufacturing Emerging competition between contract manufacturers and logistics service providers Lean is production accomplished with minimal “buffering” costs Remember the three buffers: Inventory, time, capacity 33

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