Exploring Supply Chain Management through The Beer Game

Supply Chain Management: The Beer Game

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Summary

This lecture by Kettering University delves into the concepts and dynamics of supply chain management through an innovative exercise known as The Beer Game. Originating from a suggestion by Dr. Terry Lynch Caris, The Beer Game provides a hands-on platform to understand the intricacies and challenges of supply chains. It covers key aspects such as information flow, demand forecasting, and the bullwhip effect, illustrating how minor changes in consumer demand can have significant impacts throughout the supply chain. The lecture highlights the importance of reducing variability, improving technological integration, and fostering collaboration to optimize supply chain processes.

Highlights

The Beer Game is a useful exercise developed to understand supply chain dynamics 🔄.
Participants in The Beer Game tend to self-manage without communication, illustrating real-world supply chain issues 🤐.
The bullwhip effect explains how small demand changes can lead to larger supply chain disruptions 🌊.
Effective supply chain management relies on collaboration, technology, and communication 📶.
There are strategies available to mitigate common supply chain issues like variability and demand forecasting 🛠️.
Modern supply chain practices are evolving with technology and global opportunities 🌐.
Career opportunities in supply chain management are growing in leading companies like Amazon and Apple 📈.

Key Takeaways

Supply chain management is crucial for fulfilling customer requests efficiently 🍻.
The Beer Game demonstrates the complexities and dynamics of supply chains 🎲.
Effective supply chain management requires collaboration and communication 🗣️.
The bullwhip effect shows how small changes can cause large fluctuations 📈.
Technology and information sharing are vital for modern supply chains 💻.
Reducing variation is key to effective supply chain management 🎯.
Supply chain roles are challenging but offer immense opportunities 🚀.

Overview

Supply Chain Management at Kettering University incorporates an engaging teaching tool known as The Beer Game to illustrate the dynamics of supply chains. This game simulates a supply chain to highlight the challenges in managing production, distribution, and inventory in response to customer demand.

Participants in The Beer Game encounter the bullwhip effect firsthand, where small changes in consumer demand can lead to significant disruptions throughout the supply chain. This phenomenon emphasizes the importance of clear communication and collaboration across all levels of the supply chain to minimize variations and inefficiencies.

This informative session delves into the essential elements of successful supply chain management, including integrating technology and fostering communication. The game showcases the need for an adaptable and responsive approach, shedding light on the importance of these skills in real-world applications and future career opportunities.

Chapters

00:00 - 03:00: Acknowledgements and Introduction The chapter starts with acknowledgements, with special thanks to Provo Simpson for the opportunity. The speaker reflects on learning something new through this opportunity and expresses hope to share this insight.
03:00 - 08:00: Definition and Dynamics of Supply Chains The chapter introduces the topic of supply chains, emphasizing the significance of understanding their definition and dynamics. It mentions the importance of educational simulations like the beer game in teaching supply chain concepts. The speaker expresses gratitude towards Dr. Terry Lynch Caris for suggesting the game, which has become a valuable educational tool in supply chain courses. The presence of students and colleagues is acknowledged, highlighting a collaborative learning environment. Dr. Thomas Nick is mentioned as a collaborating member in the discussion.
08:00 - 13:00: Generalized Model of Supply Chains The speaker introduces Dr. Nia, who will assist with data entry to facilitate interaction during a game. The speaker humorously reflects on the title of the speaker series, questioning whether they are considered distinguished or non-distinguished. They highlight their unique experiences prior to their current role as a form of distinction.
13:00 - 18:00: The Beer Game Setup and Explanation The chapter introduces the speaker, who expresses a long-held desire to teach at the collegiate level and is currently teaching at Purdue for four years. The speaker humorously refers to themselves as a 'pracademic,' a blend of practitioner and academic, indicating a career transition from industry to academia. The speaker notes not having conducted any research yet. Subsequent content is cut off but seems to direct towards initial observations and experiences in this academic position.
18:00 - 30:00: Playing the Beer Game The chapter titled 'Playing the Beer Game' explores opportunities in innovation development and the speaker's primary career focus on product development processes. The text discusses supply chain management, highlighting how it was once a buzzword in the industry but has now become a subject taught by the speaker.
30:00 - 44:00: Key Dynamics and Principles of Supply Chain Management The chapter titled 'Key Dynamics and Principles of Supply Chain Management' opens with a fundamental explanation of what constitutes a supply chain. It is described as all activities involved, whether directly or indirectly, in fulfilling a customer request. This includes the entire network of suppliers, manufacturers, transporters, and warehouses that work together until the product reaches the customer. Furthermore, it's mentioned that these activities span across various functions within each company involved in the supply chain. Notably, the chapter highlights insights from Professor Chopra of Northwestern University, emphasizing the importance of product development as a starting point within the supply chain dynamics.
44:00 - 45:00: Conclusion and Career Opportunities The chapter discusses innovations in organizations and the importance of effective coordination of information across various functions like marketing, operations, distribution, finance, and customer service. It highlights how supply chains are dynamic network systems that require this coordination and provides an illustration from a text used by the speakers to emphasize the role of people in supply chains.

Supply Chain Management: The Beer Game Transcription

00:00 - 00:30 [Music] [Music] begin with a few acknowledgements uh first uh to Provo Simpson for the opportunity to do this uh it actually caused me to learn something I didn't realize and I'll hopefully have a moment
00:30 - 01:00 went to talk about that later um colleagues students especially I'm delighted to hear see students here um and Dr Terry Lynch Caris uh I recalled I'd forgotten but I recalled that the beer game actually came from her suggestion so I have a great dead of gratitude to you uh it's been a fabulous exercise for me in my supply chain courses and so uh I greatly appreciate that uh with me is Thomas Dr Thomas Nick
01:00 - 01:30 um Dr Nia is going to be helping me with the data entry uh so that during the game I can interact more freely with uh uh with the participants um I really had a hard time with the uh title of this speaker series uh because I'm either the IND distinguished or non- distinguished Professor um I I want to um emphasize that my um uh perhaps I'm distinguished in different ways uh given my experience before before I've come
01:30 - 02:00 here uh at Purdue I've always wanted to teach at the Collegiate level and so it's a great pleasure to be at kering I've only been here four years um I'm very new uh as you heard I'm I'm I'm not a doctor uh in the business department we like to call ourselves pracademic and that's a pract uh a practitioner who's gone to the dark side to become an academic um no research yet but uh even as we were looking at this um maybe
02:00 - 02:30 there's some opportunities in the area of innovation development which has been my primary focus of uh new cours work and has been my long-term joy in my career has been the process the business process of product development so um Supply Chain management uh to me when I was in industry was a buzzword it had been going around and people have been talking about it but now I actually teach it imagine that um so supply chain
02:30 - 03:00 what is a supply chain it's all the activities involved directly or indirectly in fulfilling a customer request and this typically includes the suppliers manufacturers Transporters warehouses you know everybody in the supply chain out to the customer but it also includes within each function or in each company the functions involved in fulfilling a request and I'm delighted to see that uh uh Professor chopr from uh uh Northwestern University has identified product development because it kind of begins with their with the
03:00 - 03:30 new ideas and things that are the innovations that are coming into the organization and of course through marketing operations distribution finance and customer service Supply chains are Dynamic Network systems that require effective coordination of information up and down the supply chain generally we look at Supply chains this week this way and uh Thomas and I use a text that has this illustration in it talking about people
03:30 - 04:00 who want ketchup and so the consumers here buy from the retail grocery store uh who gets it from the ketchup Factory and I noticed there's quite a bit of distribution here that doesn't occur but they identify Upstream uh uh tomato paste factories grading stations and tomato suppliers which would of course be the farmers and we often talk about tear in the supply chain that's very common in the automotive industry and in southeast Michigan the interesting thing is not only are you managing the product as it's mov moving this way but you're
04:00 - 04:30 managing information flows back and forth and cash flows of course coming back as people get paid here is a generalized model of a supply chain that comes from the text I use uh one of the texts I use is uh supply chain Logistics management by BX Claus Cooper they are professors from Michigan State University Michigan State actually has a really good competency in supply chain and logist Logistics
04:30 - 05:00 management and so I found their text to be the best for one of my courses and they have this illustration a supply chain is sourcing materials through a supply network which has a lot of nodes on this the one thing that you'll see about a supply chain is it's very much like an Information Network lots of nodes paths product moving information moving into your Enterprise your Enterprise purchases uh manufactures produces uh distributes and sells to
05:00 - 05:30 customers which they call customer accommodation and then you've got a distribution network of wholesalers and Distributors that move this product uh physically through the distribution channels to the customers typical Supply Chain Services uh are these generally a supply chain has value in that it buffers time between production and consumption the most obvious example of this is the fer and our food products we really like to
05:30 - 06:00 eat in the winter time but food is only produced in the summertime and so uh they're buffering time in the supply chain we also span distance the location of production and consumption is dramatically different typically and so a supply chain has an important function in spanning distance we call that Logistics and uh if you're with UPS art Logistics quantity producer special ize in large quantities and of a limited
06:00 - 06:30 assortment so as a manufacturer we have a certain product line we produce truckload rail car load quantities and we uh ship that out to the distribution channels but uh assortment is what customers want customers want small quantities and wide assortment so this is these are the values that Supply chains provide uh to the marketplace when when I was studying
06:30 - 07:00 Supply Chain management to begin to teach it I realized I'd been in Supply chains for the bulk of my career but I really didn't understand what this phenomenon called Supply Chain management was and so part of my learning was kind of boiling it down I like to make things simple and uh that way I can understand it and this is what I found there are three things that summarize the practice the characteristics of Supply Chain management are performance Excellence
07:00 - 07:30 customer satisfaction at the lowest total cost what you're going to hear are some common themes if you're familiar with Total Quality Management lean systems all of these things have the same holistic approach and Supply Chain management simply adopts those there's truly a belief that we can do things much better and do it at lower cost which improves uh profitability uh improves sustain ability for the organization and uh
07:30 - 08:00 value for the shareholder of a public corporation the second is collaboration with supply chain Partners coordinating operating activities modern supply chain practitioners do very much to coordinate the activities between Enterprises we don't have a history of doing that especially in the United States uh we're very independent managers and so this kind of of uh approach and philosophy is somewhat new
08:00 - 08:30 Information Technology without information technology that we have now in high power software and lowcost Computing performance we cannot do the things that we do now in Supply Chain management so these are the three things that are driving uh Supply Chain management as a phenomenon now we're going to set up the beer game and uh this will take some time and hopefully we'll have some fun with this but I want to explain the
08:30 - 09:00 principles of the beer game as an exercise in understanding the Dynamics of operating systems um here is the beer game supply chain it's very simple that you'll never find a supply chain this simple in the business world you have only one participant in each stage commonly there's a network of Enterprises that are involved in a supply chain here we have a factory that
09:00 - 09:30 purchases materials and uh places orders for materials and they brew beer and they send that off to Distributors and Distributors Place orders with the factory when they need beer and they ship uh the factory ships them beer when they need it the wholesaler does the same thing they Place orders with the distributor and beer gets shipped to the wholesaler then the retailer orders get placed beer gets shipped and a eventually the consumer
09:30 - 10:00 gets their beer this is a what's known as a uh traditional supply chain an Echelon structure where we have one step after another this structure is important in Supply chains and very important in understanding the principles of the beer game so the structure is one thing and then the operating processes the participants in the beer chain will only have to do these three things ship beer manage invent and Order beer actually in
10:00 - 10:30 reality you only have to order beer because the worksheet that Thomas uh will be working will take care of shipping the beer automatically as soon as you have the orders and the inventory and it will also manage the inventory for you it'll do the classic inventory calculation which uh um we teach in accounting and Kathy I can't remember your last name I apologize I'm uh panicking here but um give me a moment
10:30 - 11:00 here to uh to get uh oh yes okay so on to the Beer game um here's the beer game situation and if you've been in my courses I've used the Bulldog beer bottle too many times we have a demand forecast it is miday in Michigan winter is gone and temperatures are rising beer is seasonal and demand rises in the summer and Peaks around the holidays recently demand has been steady at four pallets per week
11:00 - 11:30 this has been the demand at the retailer sales are expected to rise with temperature the Memorial Day holiday weekend and a sales promotion that the beer brand is um uh is going to be operating we have a performance goal pricing is Market driven beer is very fungible I mean if I don't have beer here I'll go down the street and get beer from another retailer so to maximize profit we do that by minimizing cost now we have two costs this is very
11:30 - 12:00 simple we only have an inventory holding cost of $1 per pallet per week and we have a $2 back order cost per pallet per week so $1 to hold inventory and if you run out of inventory the cost is $2 uh per pallet per week okay so let's play Thomas we'll get you up here now uh to help help me a little bit
12:00 - 12:30 I'm going to I'm going to pick the retailers right here okay Katie you want to game the system you're welcome too okay uh so we'll have these three people right here and so uh you are going to be our retailers okay we got a little name tent for you everybody knows who the retailer is uh Katie you know the drill okay what's that oh I forgot to mention this exercise has nothing to do with drinking
12:30 - 13:00 beer did I fail to mention that oh I am so sorry yeah this has nothing to do with drinking beer uh would you two gentlemen like to uh to be our wholesalers can we can can you do that for us you want to do that okay be our wholesalers I don't know what is involved but that's okay oh you'll learn quickly okay Schaefer Kathy schaer Dr schaer sorry uh let's see you know this do you yeah yeah yeah oh they don't okay here
13:00 - 13:30 they're going to we're going to do them they're going to be the GE beer game okay you're going to be our Distributors Neil and who wants the you guys yeah okay who who wants to do it the more the merrier all four of us okay all four of you oh good no they'll never make a decision okay okay so we have our retailer our wholesaler our distributor and our Factory teams okay your management you
13:30 - 14:00 got to manage the beer game you can see here that everybody has inventory of 12 pallets of beer in every stage of the supply chain uh things are good here in week zero there are no back orders there's no inventory cost um and in fact we have no orders placed on the supply chain so your job is to um manage uh the supply chain you will I will ask you to place
14:00 - 14:30 orders uh for for beer and you will manage your inventory level to minimize your inventory cost but try to avoid stocking out if you do then you'll have a back order cost and of course the whole objective is to minimize the total cost of the supply chain so uh everybody will be able to see we have all the information here all the calculations are taken care of all you have to do is order beer so uh let's go um let's see I
14:30 - 15:00 I'm so used to be working that spreadsheet thank you so much Thomas I greatly appreciate it okay retailers they they want to order four four four pallets of beer okay wholesalers you got to order beer manage your inventory you want five you want five okay they want five gotta do okay we're doing well we're doing well five they're GNA do five okay what's that you want to order beer
15:00 - 15:30 okay did I mention we have to do 50 weeks okay 50 weeks is my target we really got to move okay five five okay I this is a new strategy here okay now uh uh retailers give us four you want four okay wholesalers two two ah see wisely managing their inventory minimizing that inventory cost distributor
15:30 - 16:00 five and Factory four okay very good retailers four four four okay wholesalers don't five five okay five uh four they want to Man Four okay everybody's doing really well the Retailer's inventory is getting a little low okay and the factory three three okay three managing
16:00 - 16:30 that inventory reducing their yeah they got the highest inventory carrying costs that's you're not getting any orders are you yeah okay okay well you know it takes a little time to brew beer and get it out there into this yeah there's there's a little bit of a of lag you know okay retailer eight eight okay eight one one one very good very managing that inventory four four for the distributor and for the factory Z zero they're not
16:30 - 17:00 Brewing any beer no no need for beer this week everybody gets a vacation retailer eight wholesaler three four for the uh distributor and Factory Z zero okay good
17:00 - 17:30 okay very good oh gee what's happening uh you don't have any inventory what's going on here you got to order some beer let's go eight okay they're ordering eight wholesaler five five okay they're under five distributor zero and Factory Five okay five retailer eight
17:30 - 18:00 eight wholesaler 10 10 10 okay 10 distributor zero Factory 10 okay okay yeah Factor realizing they're running out of beer retailer okay eight wholesaler
18:00 - 18:30 five five okay distributor yeah uh it takes time to get beer you know it's one week to order one week to deliver and you have to have a source of Supply um what's going your inventory is not changing that's because the inputs are equaling the outputs and so everything's fine is this a problem you say I'm sorry you say oh okay okay and how much do you
18:30 - 19:00 wish to order four okay very good Factory three retail eight please eight wholesale eight distributor
19:00 - 19:30 in Factory two two okay retail eight please Okay Wholesale 10 10 distributor 10 10 Factory three three okay retail eight please
19:30 - 20:00 eight you got some back orders there you might want to take care of that no people will wait for their beer okay wholesaler 12 12 distributor 20 he's going to make up for that problem okay factory five five just two Z two 20 uh let's not do let's do 10 okay 10 hey
20:00 - 20:30 all right just a little coaching there little management education okay okay retailer 16 16 oh it's October Fest wholesaler 16 okay distribut
20:30 - 21:00 20 Factory 20 going wrong going one with the program retailer eight eight Okay Wholesale I'm sorry 12 okay distributor 20 and the factory 30 30 okay pranked it up yeah let's go
21:00 - 21:30 retail 10 wholesale 15 15 distributor 20 20 Factory 20 retail eight Okay Wholesale 12 distributor 20 20 Factory 20
21:30 - 22:00 20 okay retail eight wholesale 10 six for the distributor and Factory we'll go down to eight eight man there's a lot of beer in the supply chain but retail is only using eight okay retp 10 10 Okay Wholesale 12 12
22:00 - 22:30 distributor what six six okay Factory four managing that inventory retail eight eight wholesale nine nine distributor six six Factory four very good four okay
22:30 - 23:00 retail only about 30 left to go so 16 16 wholesale 15 distributor 10 Factory eight retail four oh wa you getting too much inventory Okay Wholesale five five distributor six six
23:00 - 23:30 Factory six six okay settling down here retail seven seven wholesale zero zero okay good managing that inventory zero zero and Factory zero zero well people are lining up at the UN employment line right
23:30 - 24:00 now retail none zero oh zero zero okay whol sale Z zero zero and Factor not zero zero retail
24:00 - 24:30 I see this is going oh oh Thomas you're Advanced one week click it back one week just click it down one week there that's reflecting the proper week when after we enter in the week 23 then we update okay um wholesale zero zero distributor zero zero and
24:30 - 25:00 Factory two two whole Palace two whole Palace Okay now click there we go okay thank you retail zero wholesale Zer zero distributor we shut down we shut down summer shut down yep zero Factory zero zero
25:00 - 25:30 okay retail four oh yeah your getting a little wholesale five five zero zero for the distributor and Factory we good at zero good at zero retail oh no inventory and got some back orders oo
25:30 - 26:00 wholesale two two okay zero zero for the distributor Factory zero zero okay retail 20 20 wholesale 16 16 distributor 12 12 Factory eight eighty
26:00 - 26:30 retail 30 wholesale 25 25 okay good keeping up with those retail distributor 20 Factory let's go 18 18 Retail
26:30 - 27:00 eight wholesale 10 distributor Factory 20 20 okay um retail eight wholesale n nine
27:00 - 27:30 distributor 20 Factory 30 30 not going to run out of beer zero zero 15 distributor 12 Factory Five okay
27:30 - 28:00 retail wholesale 12 12 Distributors 12 and Factor five five five retail eight eight wholesale 10 10 distributor 14 14 Factory let go 10
28:00 - 28:30 10 I think we're good uh What do you call that the professor Caris The Horizon where you tell them it's 50 and we really only do 30 or so yeah it's it's I'm giving you the false impression that there is no end to the GL to the game but the uh uh the game is done okay and Thomas thank you so much I really appreciate it let's look at the charts we w
28:30 - 29:00 fascinating now now tell me Katie Kat's actually done this were you truly trying to gain the system or you were trying you started out trying to manage your inventory you were and then what happen oh okay so you chose to yeah and they really pumped it in there I've had students who have done it before do both ways some try to uh gain the system and
29:00 - 29:30 some try to optimize the system the reality is in weeks one two and three it was four pallets per week actual demand and they're the only ones that see actual demand and this is typical of the traditional way of doing Supply chains in week four in week four it jumps up to 8 pallet per week and then it stays there the rest of the game eight pallet per week this is called a step change
29:30 - 30:00 and it provides A disruption to the Dynamics of the system which everybody tries to compensate for throughout the remainder of the game but the nature of System Dynamics is that you're already losing it's just too difficult to manage the supply chain so let's discuss some of the principles of this
30:00 - 30:30 no this is this is great we did a super job up down up down that's exactly what we want to see well done I always kind of worried you know whether it's going to work out or not I've done this about 10 or 12 times and it's always worked out quite well um let's take a look at the data or not the data let's take a look at the principles
30:30 - 31:00 okay this is an exercise to illustrate System Dynamics it was created by MIT it's available as a board game and a software simulation and um uh our beard game is kind of an acceleration of the whole process normally if you look at this this is actually brandise University and they use this exercise as a freshman inter or excuse me not freshman an MBA weekend orientation interu to explain the complexities of business
31:00 - 31:30 and uh this is a video of the software simulation that's also available let's review the beer game participants typically crack the whip in fact this phenomenon in Distribution Systems is known as The Bu whip effect and the idea is that a little change over here by the consumer translates into big changes up the supply chain the game starts with steady demand
31:30 - 32:00 an increase in demand is generated just once and this induces variation in the system participants try to compensate but errors are Amplified the whole exercise I absolutely love because it's an exercise in expectation failure okay we learned this word from uh Kent Ban's book what the best college teachers do which were on Friday thank you also the professor GIS we're studying this u in
32:00 - 32:30 our book club and what is great about this is it really sets up a whole course for the remainder of the term for me students realize that this whole thing isn't so easy and it's nice to have this exercise to demonstrate how what you think would be pretty straightforward uh causes the problems in the system then then we can use the principles of Supply Chain management to explain uh what is going on the most important
32:30 - 33:00 is uh in supply chain Dynamics is variation reduction reducing variation is a primary objective of Supply Chain management the sources of variation in supply chain are not obvious in this Dynamic supply chain system and the bull whip effect is the phenomenon that occurs when acting in isolation with limited information supply chain managers make decisions that are
33:00 - 33:30 availability is our number one priority
33:30 - 34:00 we have to have the material there to
34:00 - 34:30 sell to the customer or provide for production and so there's a psychological effect that causes people to not have just in time inventory but just in case inventory there's also demand forecasting inaccuracy you didn't know what the real demand was and traditionally that was the case in the supply chain people simply reacted to what they were seeing in the next participant in the supply chain and finally information and
34:30 - 35:00 decision isolation why weren't you guys talking to each other nobody talked to each other Supply chains typically don't have the ability to talk to each other at least traditionally and here we are in the room I've given you perfect information you had everything you needed to know the only thing you could have done was was talk you could have talked to each other and that didn't happen interestingly in the board game that's done at MIT they actually have a rule
35:00 - 35:30 you cannot talk to each other I have never ever said that in the beard game and nobody ever talks to each other we're Americans we make our own decisions believe it or not this is 50 years old this phenomenon was known in distributions in the 30s and the 4S but Professor J W Forester of MIT created a mathematical model to
35:30 - 36:00 simulate the effects here is the 10% step change in retail sales that translates into a 16% step change in distributor orders which translates into a 28% increase in Factory warehouse orders from the Distributors which translates into a 40% increase in factory production output and you can see the swings youve got the Coto relationship that occurs throughout the supply chain until it settles down notice that it
36:00 - 36:30 does start to settle down at 10% above what's interesting is if you have seasonality where you increase retail sales and reduce retail sales the whole thing goes haywire and I saw this in my industry and compound on that factory capacity well what happens is the factory goes up and it stays flat because you can't produce anymore and it makes the swing even worse because people panic because there's a rush on Goods there's not enough in Supply Professor Forester saw these three
36:30 - 37:00 principles in uh System Dynamics structure multi-step organizational chains like his original observation create structural problems in the supply chain and in fact way back in 1961 he said you know if we could get rid of some of these steps in the supply chain it would probably work a lot better and he simulated it and demonstrated it that led to some of the principles we're seen in modern fling where you order direct from the
37:00 - 37:30 manufacturer delays there's implementation and information delays we don't have perfect information we get updates late we uh takes it takes time to implement improvements or uh expansions of production capacity uh these kinds of things are delays in the system which compound the problem and that creates amplification we overcompensate our decisions to taking into account the things that we perceive are going on in the
37:30 - 38:00 system this was his original chart and um unless you were alive at this time which thankfully I was only one it was one year before my birth but um more than 50 years ago you do this all uh manually there were graphic artists that created this his computer output on a really old IBM uh was Matrix kind of thing that showed symbols going up and down and somebody made a very
38:00 - 38:30 beautiful illustration of System Dynamics showing the relationships all of this he programmed with mathematical equations and he got this knowledge from his electrical engineering background in Servo mechanism Control Systems he created some of the first Concepts or built on the first Concepts in Servo control and he utilized the information feedback controls as part of System
38:30 - 39:00 Dynamics they are curval linear equations we in business we're we're straight line people in business we like nice linear relationships engineering you like these things these are your domain uh this is challenging for us business people but he also did a continuous variable simulation I'm very big in management science techniques I've done a lot of simulation work but mostly discreet event this is high power stuff here are strategies to mitigate the bull
39:00 - 39:30 we reducing uncertainty by providing centralized information about demand reducing variability uh by delivery reliability and promotional volume spikes eliminating those V those spikes reducing leap Time by improving responsiveness collaboration by information sharing across the supply chain the bull whip effect illustrates the necessity of all three of the characteristics of modern Supply Chain management the supply chain revolution of the of uh
39:30 - 40:00 the 21st century was built on the 20th century where things were very slow to deliver we had poor delivery reliability there were large inventories in the system transportation was slow and regulated we have now days to move product high in delivery reliability inventory is sized in place to meet customer need transport is very efficient and economical Supply chains have anticipatory elements
40:00 - 40:30 and responsive elements generally where the customer order arrives determines whether you're more of a responsive business that pulls your product through the supply chain or whether you're more of an anticipatory business that feeds or pushes the product to the customer if you think about food we're way out here as a customer we go to the shelf and pick up the food off of the Shelf everything has occurred for us up to that point of time if you're Dell
40:30 - 41:00 computer the customer order arrives back here and the only thing they've done is prepare the design and the materials and then they rapidly produce it to deliver to the customer after the order arrives here is the traditional distribution supply chain customers go to the store the store gives them the products when they run low they have more delivered from the Distribution Center the manufacturer delivered to the distribution center and on a request for
41:00 - 41:30 order much like the beer game the flexible Network structure at Dell says the customer doesn't even have to come to us they just send us a communication signal through the internet and we assemble the product from all of the components that we have available in just a few hours and deliver it in a few days well if you also bundle with it a widescreen TV uh dell can provide that and they send a signal out to their suppli of that and actually send it to a
41:30 - 42:00 UPS hub and have that order merge together as one order to deliver to you a customer Network structures have um importance in design much of what DR Sanders uh Dr ly Lynch Carris uh deal with in ime is this is designing the network structure the whole purpose of a network structure and warehouses within the network structure are simply to minimize Transportation cost and we do
42:00 - 42:30 that by consolidating truckload shipments of our Goods so that is the only purpose of a warehouse here is the cross do distribution center of uh Walmart notice the traditional Sam's Club distribution center right next to it this is storage this is flow every morning trucks come in they all line up by the afternoon all of these trailers are full a product going to the Walmart stores inventory doesn't sit it flows
42:30 - 43:00 through the system sales and operations planning is one of the strategies in Supply Chain management that uh is an important um business process that's dramatically changing the way we do um uh Supply Chain management I'm running out of time so let me kind of briefly scan through these um this is uh an outline of that business process we use optimization
43:00 - 43:30 methods in Supply Chain management uh these are operations research models we have facility location models sales and operations planning models product availability models and transportation models all of these vary by the steps in the supply chain and the level of detail and time frame of the planning Horizon from many years out to the day-to-day operations of the supply chain here is an example of an aggregate
43:30 - 44:00 planning model real math is pretty neat stuff and these are the things that are actually very enjoyable to do this is a quite simple one often these VAR uh models have thousands of variables uh equations and constraints I'm going to close with this because we're out of time careers and Supply Chain management they are challenging we have complex big problems to solve there are new expect expectations and Innovations driving
44:00 - 44:30 changes it's changing it advancements are driving improvements and the adoption rate remains low what's remarkable about modern Supply Chain management is that so few companies are really implementing it effectively it's growing it's difficult to export uh Logistics you need to do it if you want to sell things and globalization is actually driving opportunities for students then finally it's leading leading supply chain practitioners are
44:30 - 45:00 highquality firms Amazon Apple Dell the list goes on um many of the firms that we know brands that we identify with um have behind it a very very competent uh Supply Chain management capability so I can't conclude with some of the things and I apologize to my colleagues because I wanted to show some of their work and conclude with some of the things I'm interested in pursuing but I'm going to stop right there [Music]