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Slides_for_class_1 - MS&E 369 Supply Chain Risk and...

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MS&E 369: Supply Chain Risk and Flexibility  Management Introduce myself and course Topics and motivation Use of class time, homework, and course requirements Overview of main ideas of course Relationship to other supply chain classes and methods Portfolio builder game 1
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Today’s business environment Accelerated evolution of: Products Markets  Technologies Firms, including their networks and basis for competition  Transition from vertically integrated to horizontal, network- based business models Macro-level change - Internet, China, India, Middle East, energy prices… 2
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Proactive management of demand and supply  uncertainty Definition: Quantify and proactively plan for range of possible          supply and demand outcomes Business  value: 1. Performance 2. Alignment 3. Risk management How: 1. Improve supply chain planning and risk 2. Leverage differences in counterparty goals,  beliefs, capabilities, and circumstances 3. Gain advantage in information and analytics Make pie bigger Bigger share of pie 3
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Supply chain planning today is deterministic We don’t drive like this Why run our business this way? 1. We know the forecasts will be wrong - Ours - Customers, suppliers, partners… - Supply and demand 2. But we bet our future performance on them anyway - Plans, collaboration, incentives, performance projections - Ours, customers, suppliers, partners… 3. We pay the price when forecasts and plans change Operating performance: Customer and market performance: Financial performance:                     Organizational performance: Costs, constraints, liabilities, inventory, expediting… Service level, lost sales, wrong product… Cost, margin, revenue, inventory, liability… Fire-fighting, conflict, lack of accountability 4
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- Shortages - Inventory and liability - Cost and margin risk - Capacity utilization I ncom e statem ent Profits Revenues Costs Material cost Write-downs  /  write -offs  I nventory holding costs  Balance sheet Assets Inventory Liabilities Material liabilities Capacity Too much Cost Too little Uncertainty not part of planning   Unplanned performance   - Ours - Customers - Suppliers - Commitments - Coordination Plan Reality Operating and financial performance - Re-planning - Re-coordinating - Constraints - Fire-fighting - Conflict - Performance shortfalls - Surprises - Lack of control - Lack of accountability "We have been sold out worldwide since we launched Wii…We're working very hard to make sure that consumers are satisfied this holiday, but I can't guarantee that we're going to meet demand…the ability to ramp up production and to sustain it is not a switch that you flick on" - September 2007 President and CEO Reggie Fils-Aime, Nintendo of America: 5
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