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2019 | Book

Basics of Supply Chain and Operations Management Read chapter Read first chapter

Global Supply Chain and Operations Management

A Decision-Oriented Introduction to the Creation of Value

Authors: Prof. Dr. Dmitry Ivanov, Prof. Dr. Alexander Tsipoulanidis, Prof. Dr. Jörn Schönberger

Publisher: Springer International Publishing

Book Series : Springer Texts in Business and Economics

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

The second edition of this textbook comprehensively discusses global supply-chain and operations management, combining value creation networks and interacting processes. It focuses on the operational roles in the networks and presents the quantitative and organizational methods needed to plan and control the material, information and financial flows in the supply chain. Each chapter starts with an introductory case study, and numerous examples from various industries and services help to illustrate the key concepts. The book explains how to design operations and supply networks and how to incorporate suppliers and customers. It also examines matching supply and demand, which is a core aspect of tactical planning, before turning to the allocation of resources for fulfilling customer demands.

This second edition features three new chapters: “Supply Chain Risk Management and Resilience”, “Digital Supply Chain, Smart Operations, and Industry 4.0”, and “Pricing and Revenue-Oriented Capacity Allocation”. These new chapters provide the structured knowledge on the principles, models, and technologies for managing the supply-chain risks and improving supply-chain and operations performance with the help of digital technologies such as Industry 4.0, additive manufacturing, Internet-of-Things, advanced optimization methods and predictive analytics. The existing chapters have been updated and new case studies have been included. In addition, the preface provides guidelines for instructors on how to use the material for different courses in supply-chain and operations management and at different educational levels, such as general undergraduate, specialized undergraduate, and graduate courses. The companion website www.global-supply-chain-management.de has also been updated accordingly. In addition, the book is now supported by e-manuals for supply-chain and operations simulation and optimization in AnyLogic and anyLogistix.

Providing readers with a working knowledge of global supply-chain and operations management, with a focus on bridging the gap between theory and practice, this textbook can be used in core, special and advanced classes. It is intended for broad range of students and professionals involved in supply-chain and operations management.

Table of Contents

Frontmatter

Introduction to Supply Chain and Operations Management

Frontmatter
1. Basics of Supply Chain and Operations Management
Abstract
This chapter introduces global supply chain and operations management. The underlying issues related to transformation process(es) and value creation are analysed. The terms operations, supply chains, operations management and supply chain management are defined. Subsequently, typical decisions made in the scope of supply chain and operations management are systematically rolled out. Practical and relevant objectives for measuring supply chain and operations performance are discussed. Finally, the question of which qualifications a future supply chain and operations manager should obtain is addressed and discussed, along with possible career paths in the field.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
2. Examples from Different Industries, Services, and Continents
Abstract
This chapter provides up-to-date examples of supply chain and operations management in manufacturing, services, and e-operations. The case-studies include examples of operations and supply chains from different industries, services, and continents. Particular focus is directed to e-operations and e-supply chains. With the help of the case-studies, readers obtain an overview of typical decisions and trade-offs in supply chain and operations management that will be addressed in detail in later chapters of the textbook. An E-Supplement containing additional case studies and video streams provides further insights related to the content of this chapter.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
3. Processes, Systems, and Models
Abstract
This chapter starts with an introductory case-study from the aerospace industry. First, the interrelations between business processes, quantitative models, and information systems are discussed. Next, the role of business process management in operations and supply chains is considered. Subsequently, the effects of management information systems in supply chain and operations management are analysed. In particular, ERP, APS, WMS as well as RFID technologies are considered. Second, the terms “planning,” “problem,” and “decision” are clarified. The role of models and modelling in decision-making is discussed. Furthermore, this chapter analyzes the crucial role of uncertainty, resilience, and risk management in decision-making. Finally, quantitative methods of decision-making are presented and discussed with regard to their applicability to supply chain and operations management. An E-Supplement provides additional case studies and video streams.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger

Designing Operations and Supply Network: Strategic Perspective

Frontmatter
4. Operations and Supply Chain Strategy
Abstract
This chapter discusses basic supply chain and operations strategies. It starts with an introductory case-study concerning supply chain strategies in the apparel industry. In the first part, operations strategies as well as the “strategic fit” are discussed. Subsequently, efficient and responsive supply chain strategies are distinguished. In the second part, the bullwhip-effect in supply chain and mitigating coordination strategies such as Vendor-managed Inventory (VMI) and Collaborative Planning, Forecasting, and Replenishment (CPFR) are presented. Finally, issues of supply chain resilience and sustainability are discussed. Additional case studies, Excel templates, tasks, and video streams enrich this chapter as part of an e-supplement.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
5. Sourcing Strategy
Abstract
This chapter discusses sourcing strategies. It starts with an introductory case-study considering the logistics coordination concept of a global car manufacturer. First, the roles of purchasing, procurement, and sourcing in supply chain and operations management are elaborated. The basic elements of a sourcing process are defined. Next, the issues of make-or-buy versus outsourcing, as well as organizational issues in sourcing are discussed. Subsequently, sourcing strategies are classified according to the number of suppliers, geographical supplier distribution, and sourcing principles. The methods of spend analysis and supplier selection are presented. Basic elements of the supplier relationship management (SRM) are classified. All proposed concepts are further illuminated by examples such as the sourcing strategy of a global electronics company and the just-in-time strategy in the automotive industry. Additional case studies, Excel templates, tasks and video streams as part of an E-supplement enrich this chapter.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
6. Production Strategy
Abstract
In this chapter, production strategies are discussed. It begins with an introductory case-study considering production strategies at global electronics companies. Push and pull views of the supply chain are discussed. Next, the concepts of mass customization and modularization as well as the order penetration point and postponement approaches are introduced. Subsequently, basic production strategies in the supply chain are depicted. Finally, a method for analysis of the order penetration point in the supply chain is presented. The concepts are assessed with numerous examples, such as production strategies in furniture, automotive, and aerospace industries. Additional case studies, Excel templates, tasks and video streams as part of an E-supplement enrich this chapter.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
7. Facility Location Planning and Network Design
Abstract
This chapter starts with an outline of a recent real-world location planning problem. It provides the analysis of different decision tasks in a typical location planning scenario and reveals the interactions between individual decision situations of the tasks. The generic decision task regarding which regions should be incorporated into a supply network is addressed. A further part is dedicated to the identification of explicit location proposals for those regions that contribute to supply chain cost efficiency. The multiple factor search for the right location for a facility in a region is addressed in the final section. The chapter is completed by the respective E-Supplement providing additional case studies, Excel templates, tasks and video streams.
We have already discussed the performance, success, and failures of SCs. Now it is time to discuss approaches for creating such a network. In particular, it is necessary to clarify important decisions that must be made in order to finally set up a SC. Such a network setup comprises both decisions about the usage and installation of network nodes (represented by factories and/or warehouses or any other immobile equipment such as supply regions or markets) as well as transportation links connecting different network nodes in order to enable the flow of materials as well as information between these nodes. In order to set up a supply network, we have to cope with the challenge that long-lasting SC design (SCD) decisions (with several years of validity) have to be coordinated with mid-term network configuration decisions (commitments for some weeks or months) as well as with operational deployment decisions.
This chapter starts with an outline of a location planning problem in Sect. 7.1. Next, in Sect. 7.2, we analyze different decision tasks in a typical location planning scenario and reveal the interactions between individual decision situations of the three aforementioned categories (long-, mid- as well as short-term planning). The generic decision task regarding which regions should be incorporated into a supply network is addressed in Sect. 7.3. Section 7.4 is dedicated to the identification of explicit location proposals for those regions that contribute to SC cost efficiency. The multiple factor search for the right location for a facility in a region is addressed in Sect. 7.5.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
8. Distribution and Transportation Network Design
Abstract
This chapter addresses basic strategies for the configuration of physical distribution and transportation networks so that given supplying locations are physically connected with demanding locations. In the beginning, a case study concerning the challenges related to the installation of transportation links is discussed. The next section suggests generic types of transportation network setups as a starting point for the setup of more sophisticated network layouts. Subsequently, the concept of shipment consolidation as the key approach to the realization of economies of scale in transportation is considered. Additionally, different transport network configuration objectives and their balancing are analyzed, so that efficient and profitable network layouts can be set up. The incorporation of transport service providers (freight carriers) is discussed. Finally different case studies regarding distribution network design are presented and the concepts, models, and principles are discussed with numerous examples such as distribution and transportation strategies at global retailers. The chapter is accompanied by an E-Supplement providing additional case studies, Excel templates, tasks and video streams.
In Chap. 7, we discussed the identification of appropriate facility locations. The SCOM theory states that the interactions of several facilities and their common activities have a crucial impact on the success of a supply network. Therefore, the linkage of these facilities also plays an important role in the SC configuration phase. In this phase, key decisions related to the availability of facilities have already been made, but their physical connections through the installation of appropriate transportation links has not been addressed yet.
In this chapter, we will discuss basic strategies to configure distribution and transportation networks so that given supply locations are physically connected with demand locations. In Sect. 8.1, we introduce a case study to discuss the challenges related to the installation of transportation links. Section 8.2 introduces generic types of transportation network setups as a starting point for more sophisticated network layouts. Section 8.3 introduces the concept of shipment consolidation as the key approach to the realization of economies of scale in transportation. Section 8.4 is dedicated to the presentation of different transport network configuration objectives and their balancing so that efficient and profitable network layouts can be set up. Section 8.5 surveys the optimization of the incorporation of transport service providers (freight carriers). Section 8.6 is devoted to different case studies of distribution network design.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
9. Factory Planning and Process Design
Abstract
In this chapter, factory planning and process design principles and models are discussed. It starts with an introductory case-study considering factory planning issues at an e-car manufacturer. At the beginning, the role of factory planning in supply chain and operations management is discussed. Next, factory planning processes are presented. Subsequently, the role and methods of capacity planning are considered. Furthermore, options for process flow design are elaborated. Finally, lean production systems are presented. The chapter is accompanied by an E-Supplement providing additional case studies, Excel templates, tasks and video streams.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
10. Layout Planning
Abstract
In this chapter, inventory management principles are discussed. It begins with an introductory case-study covering different inventory management principles in automotive, electronics, and e-commerce industries. Then, the trade-off between “service levels” and “costs” in inventory management is highlighted. Next, the role of inventory in the supply chain is analyzed. To this end, the ABC and XYZ analysis is introduced and the use of the EOQ/EPQ models for independent inventory demand is explained. Subsequently, how to compute a reorder point and how to calculate service levels and probabilistic inventory models is shown. Following this, the applicability of dynamic lot-sizing models is elaborated. Finally, the computation of the effects of inventory aggregation is discussed and the ATP/CTP concept is explained. The chapter is accompanied by an E-Supplement which provides additional case studies, Excel templates, tasks, and video streams.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger

Matching Demand and Supply: Tactical and Operative Planning

Frontmatter
11. Demand Forecasting
Abstract
In this chapter, demand forecasting methods are considered. At the beginning, the role of demand forecasting in supply chain and operations management is discussed. Next, the role of expert methods in forecasting is analyzed and application of statistical methods for forecasting is demonstrated. Subsequently, it is shown how forecasts are calculated based on statistical methods, as well as how to understand and apply measures for forecast quality assessments. The chapter is enriched by an E-Supplement which provides additional Excel templates, tasks, and video streams.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
12. Production and Material Requirements Planning
Abstract
In this chapter, the sales and operation planning (S&OP) concept is presented. It starts with an introductory case-study considering sales and operations planning at a petrochemistry company. In the beginning, different planning horizons and the role of aggregate planning are discussed. Afterwards, different options for matching demand and supply at an aggregated level are explained. Next, the rolling planning concept is introduced. Subsequently, the concept of the master production schedule (MPS) is presented. We will learn how to apply linear programing methods to production planning. Finally, the principles of exploiting the bill-of-materials are discussed to show how dependent material requirements can be computed while taking lead time into account. This chapter is accompanied by an E-Supplement providing additional case studies, Excel templates, tasks and video streams.
Suresh Chandra has just received the demand forecast data for next year. He is new in the company and responsible for operations planning. His previous experiences in different companies provided him with valuable knowledge and tools for aggregate planning, master production scheduling, and material requirements planning. In the new position, his responsibility was to integrate all these activities into the operations planning.
The previous operations planning manager applied the following concept. First, sales and production plans were set up very early (typically in September of the previous year), and then agreements with customers and suppliers were signed. The problem with this system was that production and material procurement were not flexible enough to react to demand fluctuations. In addition, since the structure of the products was set up far in advance, the possibility of product individualization according to customer orders was missing.
Janna, who is a trainee in the SCOM department, should support Suresh in the redesign of the operations planning system. Janna and Suresh understand that matching demand and supply should take place as close as possible to the date when a customer order or demand is known. Janna makes a suggestion: “We could make production planning on a weekly basis each Friday for the following week when customer orders and demands are known”. Suresh saw two problems here. First, it would be difficult to plan material requirements since many purchased items had quite a long lead time. Second, frequent production setups are expensive and not always possible for technological reasons.
Then Janna proposed analyzing which data should be set up for a long period of time (so-called design variables) and which data can be adjusted during the planning process (so-called control variables). This was a really good idea. Suresh and Janna invited marketing, sales, manufacturing, and procurement managers to a meeting and jointly analyzed the as-is planning process.
They found that rough demand data and production quantities for each month must really be known in advance. It is necessary to plan capacities and personnel, and to make basic agreements with customers and suppliers. At the same time, such data are not required in detail for each product. It would be enough to aggregate products into product families according to marketing and sales interests.
For manufacturing, it is important to know detailed data on production quantities at least 3–5 days before the beginning of the next month. This would be the basis for calculating master production schedules among all the production factories in the SC which are interconnected in the technological process. For procurement, such a timeline would also be okay for calculating material requirements and replenishing items from suppliers, while taking lead times into account.
Then, daily production plans can be set up. Suresh asked if it could be demonstrated that it would be possible to update production plans twice a month using new demand information.
Janna also noticed that exact material specifications were not available for all products. This could create difficulties in procurement planning and result in missing items in production, and very expensive breaks in manufacturing. Indeed, each product was composed of 2000 parts on average. Even if one part was missing, delivery delays would occur. Suresh asked if this problem could be rectified and all the BOM (Bill-of-Materials) entered into the ERP system.
In this chapter, we learn basic methods of operations planning which will help Janna and Suresh increase profits and reduce costs.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
13. Inventory Management
Abstract
In this chapter, inventory management principles are discussed. It starts with an introductory case-study considering different inventory management principles in the automotive, electronics, and e-commerce sectors. In the beginning, the trade-off between “service levels” and “costs” in inventory management is highlighted. Next, the role of inventory in the supply chain is analyzed. Therefore, the ABC and XYZ analysis is introduced and the use of the EOQ/EPQ models for independent inventory demand is explained. Subsequently, how to compute a reorder point and how to calculate service levels and probabilistic inventory models is shown. Then, the applicability of dynamic lot-sizing models is elaborated. Finally, a discussion and computation of the effects of inventory aggregation takes place leading to an explanation of the ATP/CTP concept. The chapter is accompanied by an E-Supplement providing additional case studies, Excel templates, tasks, and video streams.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
14. Routing and Scheduling
Abstract
In this chapter, scheduling and routing principles are discussed. At the beginning, a typical case for operative decision making and mathematical graphs for the representation of decision situations in a network structure are introduced. Additionally, first insights into the algorithmic processing of graph-data as the basic ingredient for decision making in network structures are provided. The consideration of complex restrictions during the deployment of a resource is discussed by means of the traveling salesman problem (TSP), in which the sequencing of operations to build a schedule for a resource is the focus of decision making. The integrated consideration of assignment and scheduling/sequencing decision problems under limited resource availability is addressed in the context of the capacitated vehicle routing problem (CVRP). Finally, a short introduction to the scheduling of production machines is given. The chapter is completed by an E-Supplement providing additional case studies, Excel templates, tasks and video streams.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger

Advanced Topics in Supply Chain and Operations Management

Frontmatter
15. Supply Chain Risk Management and Resilience
Abstract
This chapter is devoted to risk management in the supply chain. The chapter starts with fundamental definitions of uncertainty and risks. Subsequently, risk classifications are presented. Decisions in the scope of supply chain risk management are discussed. Reasons for different supply chain risks and the mitigation strategies are shown. The special focus is directed towards the disruption risks and the ripple effect in supply chains. Finally, supply chain resilience concept is presented.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
16. Digital Supply Chain, Smart Operations and Industry 4.0
Abstract
The supply chain is as good as the digital technology behind it. This chapter is devoted to the digitalization of supply chain and operations management (SCOM). The chapter starts with the concept of SCOM excellence and continues with fundamental definitions of digital supply chains and operations. Subsequently, digital technology classifications of SCOM are presented in terms of the SCOR model. Decision-making support improvements in the digital SCOM framework are discussed from qualitative and quantitative perspectives.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
17. Pricing and Revenue-Oriented Capacity Allocation
Abstract
This chapter provides a structured introduction to important ideas and procedures of revenue management (RM) with a focus on price determination. The exploration of the opportunities as well as limitations of RM is guided by a comprehensive case study from the transportation sector. After you have successfully worked through this chapter you will be able to answer the following basic question of pricing: How can we determine adequate and customer-specific prices for the products we sell to our customers?
Section 17.1 introduces a comprehensive case study from the transportation sector. We discuss methods for the determination of best-selling prices in Sect. 17.2 for situations with sufficient capacity. If the available capacity is scarce and several products and/or customers compete for it, it is necessary to adopt the price setting process (Sect. 17.3). Section 17.4 extends the pricing tools to resource networks if more than one potentially scarce resource is involved in the production of a service or product. Prices are set prior to incoming demand and therefore pricing requires the involvement of demand estimations. If these estimations are inappropriate, the prices will also be. To overcome this methodological shortcoming in pricing, the concept of “Dynamic Pricing” is proposed which aims to adjust prices reactively to observed market demand. We will introduce Dynamic Pricing in Sect. 17.5. We summarize the main findings from this chapter and outline further issues in RM in Sect. 17.6.
Dmitry Ivanov, Alexander Tsipoulanidis, Jörn Schönberger
Backmatter
Metadata
Title
Global Supply Chain and Operations Management
Authors
Prof. Dr. Dmitry Ivanov
Prof. Dr. Alexander Tsipoulanidis
Prof. Dr. Jörn Schönberger
Copyright Year
2019
Electronic ISBN
978-3-319-94313-8
Print ISBN
978-3-319-94312-1
DOI
https://doi.org/10.1007/978-3-319-94313-8