Slides_for_class_7

Slides_for_class_7 - Page 1 Proprietary and Confidential...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Page 1 Proprietary and Confidential Vivecon 2002 Copyright Blake Johnson, Stanford University Lambda plans and executes to Agilents range contract terms and utilization, not a range forecast Planning Agilent: Order given actual demand and updated range forecast, subject to range contract terms Lambda: Execute based on range contract terms and Agilents orders 800 Firm 2500 Peak Flex 1500 Flex Agilent: Range forecast + performance objectives Range contact terms Lambda: Plan to range contract terms Execution Page 2 Proprietary and Confidential Vivecon 2002 Copyright Blake Johnson, Stanford University As a supplier under range contracts How might Lambda estimate the probability distribution of Agilents future orders within the range contract flex ranges? Should Lambda plan and execute to ensure it will be able to perform fully to the contract ranges? If Agilent is concerned Lambda may not know, or may choose to not do, what it needs to do to perform fully, what audit or verification rights could it request? If it sold the same products to multiple customers, how should Lambda plan and execute? If it has range contracts with all its customers? If it has range contracts with some of its customers, but not others? In either case, should Lambda plan and execute to ensure it will be able to perform fully to all its range contract commitments? Copyright, Blake Johnson Comparison with todays status quo How process is supposed to work:- Buyer forecast is correct- Supplier plans to forecast Range forecast / plan (contract) / performance management alternative:- Substitute best available demand forecast range (buyer information)- Plan and execute to buyers P&L performance objectives over range (buyer incentives) How process does work: Buyer forecast will change Supplier planning process: Guess buyer forecast error range Invest to optimize own P&L performance over range Example business: Large capital costs, low margins High capacity utilization essential Decision: Under-invest in capacity Demand Jan Mar Jun Sept Supplier capacity decision Buyer forecast Supplier production decisions Demand Jan Mar Jun Sept Supplier capacity decision Suppliers guess of buyer forecast range Buyer forecast Copyright, Blake Johnson Suppliers Procurement Supply chain Business unit # 1 Business unit # 2 Partners Product # 1 Product # 2 Product # 1 Product # 2 Firm commitment Flex agreement Guaranteed supply commitment Firm commitment Flex agreement Guaranteed supply commitment Firm commitment Flex agreement Guaranteed supply commitment Firm commitment Flex agreement Guaranteed supply commitment Firm commitment Flex agreement Guaranteed supply commitment Firm commitment Flex agreement Guaranteed supply commitment Firm commitment Flex agreement Guaranteed supply commitment...
View Full Document

Page1 / 33

Slides_for_class_7 - Page 1 Proprietary and Confidential...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online