Lecture supply chain management chapter 2 supply chain planning

06-Sep-21

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Learning objective

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Chapter 2: Supply Chain Planning
MsC. Bùi Thị Bích Liên

Gain a conceptual appreciation of the business
activities that drive supply chain operations
Exercise a high-level understanding of
activities involved in supply chain planning
Understand basic concepts of demand
forecasting and inventory management
Begin to assess how well these activities
operate within your own organization

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Contents

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7. SCOR MODEL
Processes and Operations Management Model in SC

1

 Introduction

1994, PRTM & AMR coordinated to develop model
1996, transfer to SCC

2

Demand Planning

Being used in many different areas
This model provides:
Background structure, business process re-structure
Unify the terminology in management

3

 Product Pricing

Establish the comparison standards, measure of performance
Model has 5 processes
Plan, source, make, delivery and return

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PLANNING IN SC
Planning and orienting for all
operations in SC
Analyze and
forecast

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PLANNING

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Rule

Environment
Market
Competitors

Using the information exactly and timely
Focus resources on priority goals
Sources

Integrating supply chain requirements
Identify final responsibility and specific action

Infrastructure
Info Technology
Finance
Human

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SOURCING IN SUPPLY CHAIN

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SOURCING IN SUPPLY CHAIN
Important
decision

Meet the requirement of
customers with lowest cost
Building CRM

Lowest Total
cost
Lowest price
per unit

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SOURCING IN SUPPLY CHAIN
Selecting suppliers:
• Identify the criteria
• Evaluate

• Sign for approval
• Control

Suppliers Relationship
management:
• Evaluate quality
• Adjust and complete

Why we buy?

Where we buy?
From which
suppliers

How much we
will buy?
When we buy?

How we
buy?

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OPERATION IN SUPPLY CHAIN

Role

Transaction
management:
• Price determination
• Order

• Delivery
• Documents
• Payment

Analyze, discuss
about demand for
sourcing:
• Know - how
• Describe

What we
buy?

Convert the raw material to finish products
There are more and more enterprises who
outsource their operation partly or entirely
(manufacturing, experiment, packing)
Requiring for objectives sharing and consistent
process
Manufacturing process depends on operation
model

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OPERATION IN SUPPLY CHAIN

Model

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DELIVERY IN SUPPLY CHAIN

When applied?

Make To
Stock

- Consumer goods
- Mass production, lot size selling

Make To
Order

- Several optional goods
- Partly completed product and assembled
completely after received the order

Assemble
To Order

- Variety of product and differentiation
- Not regular demand, limit quantity

Engineer
To Order

- Complicated products
- Special demand

Depends on
modes of selling

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- First requirement and the most
basic
- Plentiful product structure
- Adequate in quality and quantity
- Ready to serve customers

 Variety, sufficient
product
 Lead time
 Reliability
 Flexibility
 Information

Requirements in
delivering

DELIVERY IN SUPPLY CHAIN
Variety and sufficient
product

- Direct selling
- Indirect selling

Requirements

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DELIVERY IN SUPPLY CHAIN
Flexibility

Reliability


 Variability
Variability identification
identification and
and
response
response

 Current
Current resources
resources

 Priority
Priority rules
rules

- Lead time variety
- Order editing
- Safety inventory
Stability

level

Lead time
- From the time customer places
the order to receive the
product
- Depending on many factors: IT,
Inventory, transport, distance
…

Adaptive
capacity

Information
 Fully accurate and timely
 Simplicity and
convenience
 Before, within and after
transaction

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REVERSE IN SUPPLY CHAIN

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REVERSE IN SUPPLY CHAIN

Definition:

Reverse
logistics

Role:
- Meet
the
customer’s
requirement better
- Protect the environment

- A stage of supply chain
- Effectively managing production line,
package and related information
- From the destination to the origin
- Restore product value and waste disposal

Benefit
Creating smooth downstream logistics
 Defective products return to the downstream logistics channel quickly
Enhancing customer service
• Fix, repair, warranty

Characteristics:
- Small scale and dispersed
- Large recovery costs

- Lacking of service suppliers
who have enough capability

Save the cost for enterprise
• Recycled materials, recycled packaging, reselling products
Create a “green image” for businesses
• Reduce the impact to the environment

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REVERSE IN SUPPLY CHAIN
Green Supply Chain
New
materials
Procurement

Manufacture

Distribute

Recycled
materials
Reverse
Logistics
Centre

Recycle

Waste
proposal

Upstream
Re-manufacture
Repair

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1. Introduction

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What is supply chain planning?
Supply chain planning is the process of
planning a product from raw material to
the consumer. It includes supply planning,
production planning, demand planning,
and sales and operations planning

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 Supply planning determines how best to fulfill the
requirements created from the demand plan. The
objective is to balance supply and demand in a manner

that achieves the financial and service objectives of the
enterprise.
 Production planning addresses the production and
manufacturing modules within a company. It considers
the resource allocation of employees, materials, and of
production capacity.

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 Demand planning is the process of forecasting
demand to make sure products can be reliably
delivered. Effective demand planning can improve the
accuracy of revenue forecasts, align inventory levels
with peaks and troughs in demand, and enhance
profitability for a particular channel or product.
 Sales and operations planning (S&OP) is a monthly
integrated business management process that empowers
leadership to focus on key supply chain drivers,
including sales, marketing, demand management,
production, inventory management, and new product
introduction.

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2. Demand Planning

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The role of forecasting in SC

Demand Forecasting
Consequences of wrong forecasting
Forecasting variables
Forecasting methods

The basic for all strategic and planning
decision in a supply chain
Example:
 Production: scheduling, inventory, aggregate
planning.
 Marketing: sale force allocation, promotions,
new product introduction
 Finance: plant/equipment investment budget
 Personnel: workforce planning, hiring staffs.

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Forecast’s characteristics

- Measure the error
- Eg: car and car’s components

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Consequences of wrong forecast
 Missed profits/earnings
 Lost customers
 Missed orders
 Unacceptable forecast error
 Decreased market share
 Late-to-market and underperforming new products
 Supply interruption
 Lower inventory turnover
 Longer lead times

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Case Study?
Higher total costs
Poor use of resources
Increased obsolescence
Lack of teamwork and cohesion from the top
on down
Inaccurate and incomplete information

available for decision making and control
Inefficient planning process.

 />y_Chain_Management_Case_of_Cisco_S
ystems

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Demand
Market is growing or in recession period?
The market is at saturation or stable
demand?
Does the product have seasonal needs?
The market is in the development stage?

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Supply
Supply is determined by the suppliers and
leadtime:
 Few suppliers / long leadtime  instability
and difficult to forecast
 Many suppliers / short leadtime  easy to

forecast.

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Product characteristics
New or Old products?
 Example: in the summer (coat)
 Moon cakes

Alternative products
Supplementary products

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Competitive Environment
Market share?
Development trend of competitors?

 />rces/knowledge/modeling/forecastingmethods/

Market growth rate?

 />

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Qualitative method
Qualitative method is based on intuition,
observation ability or subjective opinion
about the market
This method is appropriate when there is
very little historical data to make a
forecast.

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Delphi method
Subjective opinions of the surveyed
subjects such as:





Department management of the business

Salesman
Investigate customers
Expert opinion inside and outside of the
business

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Causal
Predictive method based on determining
the relationship between quantities
(variables), then based on which to make
predictions.
 For example: Revenue & expenses;
advertising & profits; price & salary
 price and demand for gold; loan needs and
interest rates
 Gasoline prices increased, transport costs
increased

Scatter graph method
Regression analysis by the least squares
method

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Scatter method

𝑏=

∑  
∑  
∑  

– ∑  

Consumption volume of the company as
followed:

∑  

(∑   )

Quarter

-b
a: độ chặn (intercept)
b: độ dốc (Slope)
n: số dữ liệu ta có (no of data)
𝑎=

Sale (y)

 

Marketing cost (x)

𝑥𝑦

∑  

1
2
3
4

1000 units
10
15
5
20

1000 USD
45
55
35
65

 

1000

 Identify the correlation between revenue and marketing
cost?
 If marketing cost increases up to 75000 USD, how much the
revenue will be?

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Time series analysis
This method uses the historical data
assumption as a basis for forecasting
future needs
Model: moving average and exponential
smoothing
Application: when the data in the past is
reliable, the market is stable and the
demand curve is not volatile much.

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Moving Average: simple method

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Moving average
• Advantages:

Simple moving average: n most recent periods
High value of n  more accurate

•

Simple

• Disadvantages:
•
•
•

No consider seasonality in this data
Having equal weight for 3 recent periods
Need huge amount of past data

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Example

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Ex. 2

Identifying revenue trend in 3 years?
Years

20X0
X1
X2
X3
X4
X5
X6

Sale (units)

390
380
460
450
470
440
500

Moving total of Moving average
3 years
of 3 years
Sale (1)
Sale (2) = (1)/3

Years

Number of
students

2006

7800

2007

7600

2008

9200

2009

9000

2010

9400

2011

8800

2012

10000

Moving total of MAV of 3
3 years
years

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Exponential smoothing

Moving average
 Weighted Moving average method: more weight to the
most recent period
 N = 3  maximum to the most recent data
 There is no set rule to give the value of the weights
 Experts: experiences, exposure
 There is some exceptional situations, we should not
assign the maximum weight to the most recent period
because of the temporary nature of particular
phenomena

 Whenever we update the data  we update the
forecast for the next period immediately
 Whatever is happening, whatever changes happened 
always include in our forecasting method and
continuously updated for next period refer time
 Advantage: used all the value

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Exponential smoothing

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Exponential Smoothing
Month
i

Ft – Forecast for period t
Ft-1 – Forecast for period t-1
Dt-1 – Real demand of period t-1
α- Smoothing constant

Real
demand
(Dt)

1

100

2

110

3

120

4

115

5

125

Predictable demand(Ft)
α=0.10
Ft,0.1
100

Error
0

α=0.40
Ft,0.4
100

Error
0

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The average method

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The mean method

Summarising: Y = T + S + C + R
Y: the actual time series
T: the trend series
S: the seasonal component
R: the residual component
C: the cyclical component  economist
Y = T + S + R

Summarising: Y = T x S x C x R
Y: the actual time series
T: the trend series
S: the seasonal component
R: the residual component
C: the cyclical component  economist
(không đưa vào dự báo)
Y = T x S x R

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Example:

The average method

a. Hãy vẽ đồ thị doanh số 3 tuần
b. Sử dụng phương pháp trung bình động và mơ hình cộng để
tìm ra xu hướng và điều chỉnh mùa vụ
c. Sử dụng phương pháp trung bình động và mơ hình nhân để
tìm ra xu hướng và điều chỉnh mùa vụ
d. Dự báo doanh số của tuần thứ 5, và doanh số thứ 6 tuần 9

Monday
Tuesday
Wednesday
Thursday
Friday

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Week 1
(1000 units)

Week 2

Week 3

80
104
94
120
62

82
110
97
125
64

84
116
100
130
66

B1: Tính tổng của chuỗi thời gian (Tính tổng các
số trong 1 chu kỳ theo phương pháp trượt)
B2: Tính số bình qn di động
B3: Xác định sự biến động về mùa vụ:
S=Y–T
B4: Xác định sự biến động trung bình của từng dữ
liệu theo mùa vụ
B5: Tìm cách triệt tiêu để tổng S tiến đến 0
B6: Tính mức biến động trung bình theo đơn vị
của dữ liệu. Xác định biến động và xu hướng theo
từng đơn vị mùa vụ

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Simulation

The mean method
B1: Tính tổng của chuỗi thời gian (Tính tổng các
số trong 1 chu kỳ theo phương pháp trượt)
B2: Tính số bình qn di động
B3: Xác định sự biến động về mùa vụ:
S=YxT
B4: Xác định sự biến động trung bình của từng dữ
liệu theo mùa vụ
B5: Tìm cách triệt tiêu để tổng S tiến đến 0
B6: Tính mức biến động trung bình theo đơn vị
của dữ liệu. Xác định biến động và xu hướng theo
từng đơn vị mùa vụ

Simulation method is a combination of
causal and time series methods to
simulate consumer behavior under
different conditions and circumstances.
Apply: sales fluctuations if prices fall
Volatility in market share if competitors
launch new products and open up shop
next door

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3. Product pricing

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3 C’ method

 Price of product as 3C methods

 Cost

 Incoterms 2020

 Competitors
Customer

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Pricing on cost
Total fixed cost: VNĐ 300 mil.
 Quantity of products: 10.000 items
 Variable unit cost: VNĐ150,000 đ/item
 Calculating the unit price if:
 Expected profit on price is 20%

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