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TheCharacteristicsofSupplyChainManagementComplexity,Variability,ConflictingObjectives0?1999AndersenConsulting0?1999AndersenConsultingOrderResponseTimeProductAvailabilityLeadTimeOrderChangesDueDatePerformanceResourceInvestmentAssetProductivityInventorySupplier&CapacityContractsLevelofServiceCostofServiceTheBusinessChallenges1?1999AndersenConsultingOrderResponseTimeResourceInComplexityVariabilityConflictingObjectivesWhatarethecharacteristicsofSupplyChanManagement,whyisitsohardtomanage?2?1999AndersenConsultingComplexityVariabilityConflictiComplexityLeadTimesLimitFlexibilityLittleorNoPredictabilityandPoorProductMix?ChronicCapacityShortagesCurrentProcessesandStructuresInhibitPerformanceInventoryUsedtoCoverProblemsComplications

intheElectronicsIndustryComplexityinComponent/SemiconductorManufacturingMasscustomizationPersonalizationProductmixeffectsoncapacityMultipleoptionsContractedvs.ownedcapacityCombinedmake-to-forecastandmake-to-orderInvertedBOMBinningMulti-stageglobalproduction3?1999AndersenConsultingComplexityLeadTimesLimitFleUncertaintyinthesupplychainresultsinsignificantvariabilityEarlyOn-timeLateEarlyOn-timeLateUnderForecastOverEarlyOn-timeLateCustomerDemandSupplierPerformanceManufacturingCustomerDeliveriesRawMaterialsFinishedGoodsPastPerformanceMarketResearchAnalyticalTechniqueIncentiveProgramsResponsivenessTransportationLocationQualityProcessDesignProductDesignCapacityQualityByTomDavis4?1999AndersenConsultingUncertaintyinthesupplychaiSupplyChannelOrdersActualLaunchRealShortageReturns/

CancellationsOver-SupplyChannelFillandPhantomDemandTargetLaunchEndofLifeTrueEndCustomerDemandUnitsPerPeriodTimeMultipleforecastsandunreliablefulfillmenttodaycreatethebullwhipeffect.5?AndersenConsulting1998SupplyChannelOrdersActualRealShortenedproductlifecyclehasincreasedtheuncertainty.Ramp-upOngoingEndofLife

Ramp-up Ongoing EndofLifeRoleofInventory High Usual LowCostofShortage High Usual LowCostofOverage Low Usual HighByProfessorHauL.Lee,StanfordUniversity6?1999AndersenConsultingShortenedproductlifecyclehVariabilityNaturalDemandMaterialsupplyProductionDistributionSelf-IntroducedReplenishmentstrategiesPlanningprocessesInventorystrategies7?1999AndersenConsultingVariabilityNatural7?1999AndeTraditionalfunctionalalignmentscontinuetoimpedeSupplyChainPerformance.—MisalignedFunctionalGoals&Behaviors—PurchasingManufacturingDistributionSales&

CustomerServiceGoal:Behavior:LowestpurchasepriceHighestutilizationLowestcost100%customersatisfactionLongleadtimesHighrawmaterialinventorylevelLongrunlengthsInflexibleschedulesHighWIPinventoryLongorderfilltimesInflexibleschedulesHighinventoriesPromiseflexibility8?1999AndersenConsultingTraditionalfunctionalalignmeConflictingObjectives-ManufacturingLittle’sLaw

Little’sLawAssetUtilizationWIPINVCycleTimeVariabilityThroughputWIPCycleTimeVariability9?1999AndersenConsultingConflictingObjectives-ManufConflictingObjectives-Customer

Little’sLawAssetUtilization

WIPINVCycleTimeVariabilityOrderResponseTime

EarlyWarningsDueDatePerformanceFillRates10?1999AndersenConsultingConflictingObjectives-CustoConflictingObjectives-Corporate

Little’sLawAssetUtilization

WIPINVCycleTimeVariabilityOrderResponseTime

EarlyWarningsDueDatePerformanceFillRatesMarketShareProfitMarketRisk11?1999AndersenConsultingConflictingObjectives-CorpoTheCharacteristicsofSupplyChainManagementComplexity,Variability,ConflictingObjectives12?1999AndersenConsulting0?1999AndersenConsultingOrderResponseTimeProductAvailabilityLeadTimeOrderChangesDueDatePerformanceResourceInvestmentAssetProductivityInventorySupplier&CapacityContractsLevelofServiceCostofServiceTheBusinessChallenges13?1999AndersenConsultingOrderResponseTimeResourceInComplexityVariabilityConflictingObjectivesWhatarethecharacteristicsofSupplyChanManagement,whyisitsohardtomanage?14?1999AndersenConsultingComplexityVariabilityConflictiComplexityLeadTimesLimitFlexibilityLittleorNoPredictabilityandPoorProductMix?ChronicCapacityShortagesCurrentProcessesandStructuresInhibitPerformanceInventoryUsedtoCoverProblemsComplications

intheElectronicsIndustryComplexityinComponent/SemiconductorManufacturingMasscustomizationPersonalizationProductmixeffectsoncapacityMultipleoptionsContractedvs.ownedcapacityCombinedmake-to-forecastandmake-to-orderInvertedBOMBinningMulti-stageglobalproduction15?1999AndersenConsultingComplexityLeadTimesLimitFleUncertaintyinthesupplychainresultsinsignificantvariabilityEarlyOn-timeLateEarlyOn-timeLateUnderForecastOverEarlyOn-timeLateCustomerDemandSupplierPerformanceManufacturingCustomerDeliveriesRawMaterialsFinishedGoodsPastPerformanceMarketResearchAnalyticalTechniqueIncentiveProgramsResponsivenessTransportationLocationQualityProcessDesignProductDesignCapacityQualityByTomDavis16?1999AndersenConsultingUncertaintyinthesupplychaiSupplyChannelOrdersActualLaunchRealShortageReturns/

CancellationsOver-SupplyChannelFillandPhantomDemandTargetLaunchEndofLifeTrueEndCustomerDemandUnitsPerPeriodTimeMultipleforecastsandunreliablefulfillmenttodaycreatethebullwhipeffect.17?AndersenConsulting1998SupplyChannelOrdersActualRealShortenedproductlifecyclehasincreasedtheuncertainty.Ramp-upOngoingEndofLife

Ramp-up Ongoing EndofLifeRoleofInventory High Usual LowCostofShortage High Usual LowCostofOverage Low Usual HighByProfessorHauL.Lee,StanfordUniversity18?1999AndersenConsultingShortenedproductlifecyclehVariabilityNaturalDemandMaterialsupplyProductionDistributionSelf-IntroducedReplenishmentstrategiesPlanningprocessesInventorystrategies19?1999AndersenConsultingVariabilityNatural7?1999AndeTraditionalfunctionalalignmentscontinuetoimpedeSupplyChainPerformance.—MisalignedFunctionalGoals&Behaviors—PurchasingManufacturingDistributionSales&

CustomerServiceGoal:Behavior:LowestpurchasepriceHighestutilizationLowestcost100%customersatisfactionLongleadtimesHighrawmaterialinventorylevelLongrunlengthsInflexibleschedulesHighWIPinventoryLongorderfilltimesInflexibleschedulesHighinventoriesPromiseflexibility20?1999AndersenCo

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