Uncertainty and Supply Chain Planning

UncertaintyandSupplyChainPlanningStephenC.GravesMITOctober2010IntentandOverview•Reviewanddiscusshowuncertaintyishandledinsupplychainplanning•Typesofuncertainties•Frameworkforplanning•Critiqueofcommonpractices•Possibleimprovements–Setoftacticaldecisionsascountermeasures–Currentplanningsystemsdonotprovideadequatedecisionsupport–ImplicationsforresearchandpracticeOctober2010StephenC.Graves2TypesofUncertainty•Uncertaintyindemandforecast•Uncertaintyinexternalsupplyprocess•Uncertaintyininternalsupplyprocess•Inducedvariability(ie,bullwhip)fromplanningrulesOctober2010StephenC.Graves3Uncertaintyindemandforecast•Mostprominentsourceofuncertainty•Quixoticdesireforbetterforecast•Prevalenceofforecastbias•ImportanceofunderstandingdynamicsofforecastprocessesOctober2010StephenC.Graves4October2010StephenC.Graves5October2010StephenC.Graves6October2010StephenC.Graves7October2010StephenC.Graves8TypesofUncertainty•Uncertaintyindemandforecast•Uncertaintyinexternalsupplyprocess•Uncertaintyininternalsupplyprocess•Inducedvariability(ie,bullwhip)fromplanningrulesOctober2010StephenC.Graves9TypesofUncertainty•Uncertaintyindemandforecast•Uncertaintyinexternalsupplyprocess•Uncertaintyininternalsupplyprocess•Inducedvariability(ie,bullwhip)fromplanningrulesOctober2010StephenC.Graves10TypesofUncertainty•Uncertaintyindemandforecast•Uncertaintyinexternalsupplyprocess•Uncertaintyininternalsupplyprocess•Inducedvariability(ie,bullwhip)fromplanningrulesOctober2010StephenC.Graves11IntentandOverview•Reviewanddiscusshowuncertaintyishandledinsupplychainplanning•Typesofuncertainties•Frameworkforplanning•Critiqueofcommonpractices•Possibleimprovements–Setoftacticaldecisionsascountermeasures–Currentplanningsystemsdonotprovideadequatedecisionsupport–ImplicationsforresearchandpracticeOctober2010StephenC.Graves12DemandForecastAggregateProductionPlanMasterProductionScheduleMRPShopFloorControlRMFGProductionFrameworkforclassicalproductionplanningPlanningorcontrolmoduleRawMaterial/FinishedGoodsinventoryPhysicalproductionprocessInformationflow–inputdataInformationflow–controldecisionsPhysicalproductflowLong-termShort-termOctober2010StephenC.Graves13DemandForecastAggregateProductionPlanMasterProductionScheduleMRPShopFloorControlRMFGProductionGenericFrameworkforsupplychainplanningLong-termShort-termOctober2010StephenC.Graves14DemandForecastAggregateProductionPlanMasterProductionScheduleMRPShopFloorControlRMFGProductionGenericFrameworkforsupplychainplanningLong-termShort-termOctober2010StephenC.Graves15DemandForecastAggregateProductionPlanMasterProductionScheduleMRPShopFloorControlRMFGProductionGenericFrameworkforsupplychainplanningLong-termShort-termOctober2010StephenC.Graves16DemandForecastAggregateProductionPlanMasterProductionScheduleMRPShopFloorControlRMFGProductionGenericFrameworkforsupplychainplanningLong-termShort-termOctober2010StephenC.Graves17DemandForecastAggregateProductionPlanShopFloorControlRMProductionFGMRPMasterProductionScheduleDemandForecastAggregateProductionPlanShopFloorControlRMProductionFGMRPMasterProductionScheduleIntentandOverview•Reviewanddiscusshowuncertaintyishandledinsupplychainplanning•Typesofuncertainties•Frameworkforplanning•Critiqueofcommonpractices•Possibleimprovements–Setoftacticaldecisionsascountermeasures–Currentplanningsystemsdonotprovideadequatedecisionsupport–ImplicationsforresearchandpracticeOctober2010StephenC.Graves19Commonapproachestohandlinguncertainty•MostplanningsystemstodoexplicitlytrackoraccountfornominaluncertaintyOctober2010StephenC.Graves20Commonapproachestohandlinguncertainty•Mostplanningsystemstodoexplicitlytrackoraccountfornominaluncertainty•Plansarecreatedbasedonassumptionsthatforecastareperfect,supplyprocessesarereliableOctober2010StephenC.Graves21Commonapproachestohandlinguncertainty•Mostplanningsystemstodoexplicitlytrackoraccountfornominaluncertainty•Plansarecreatedbasedonassumptionsthatforecastareperfect,supplyprocessesarereliable•Yetenvironmentisuncertain;hence,planningorganizationsdevelopandrelyonvariouscopingstrategiesOctober2010StephenC.Graves22Copingstrategy:regularreplanning•Planningsystemisre-runtocreatenewplan,inreactiontoforecastupdatesandsupplyrealizations•Replanningleadstoschedulechurnandnervousness,increasedvariability•Replanningresultsindistrustand“secondguessing”bysuppliers•SomeofthisisalleviatedbytimefencesandfrozenschedulesOctober2010StephenC.Graves23Copingstrategy:safetystocks•MostplanningsystemsallowforRMandFGsafetystocks•Limitedcapabilitytocoordinatestocklevels,orsetin-processbuffersOctober2010StephenC.Graves24RMProductionFGRMProductionFGPlannedleadtimes•Planningsystemsrelyheavilyonplannedleadtimes–Greatlysimplifycomplexplanningproblemsbyallowingdecomposition–Facilitatecoordinationofconcurrentsupplyactivities–ServeasaproxyfordealingwithcapacityconstraintsOctober2010StephenC.Graves25PlannedleadtimesOctober2010StephenC.Graves26FinGoodsLT=3daysLT=2daysLT=8daysLT=1dayCopingstrategy:inflatedplannedleadtimes•PlannedleadtimestranslatedirectlytoaWIPlevelbyLittle’sLawOctober2010StephenC.Graves27RM