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SupplyChainSystemsII:SupplyChainModules

MIT Center for Transportation & Logistics

EvolutionofSupplyChainTools

§ 1960-1970’s§ IBMdevelopedaBillofMaterialsProcessor(BOMP)§ Mainframebaseddatabasesystemsmainlytotrackmaterialsforlarge

manufacturers§ Closed-loop(shopfloormanagement)functionalityadded§ MRP(materialrequirementsplanning)isessentiallyatime-phasedorder

releasesystem

§ 1980’s§ MRP-II(manufacturingresourceplanning)introducedtointegrate

productionwithfinanceandmarketing§ FitinwithJust-In-Time(JIT)manufacturingmethodology§ Expandedtiestootherfunctions:S&OP,masterproductionplanning,

capacityplanning,etc.§ PrecursorofthelargerandmorecomprehensiveERPsystems

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EvolutionofSupplyChainTools§ 1990’s

§ MostMRP-IIfunctionsabsorbedintolargeERPsuites§ IntroductionofAdvancedPlanningSystems(APS)§ Introductionoffunctionspecificoptimizationbaseddecisionsupport

software(WMS,TMS,MES,InventoryOptimization,Procurement,etc.)§ WiderspreadadoptionofERPsystemstosmallandmid-sizedfirms

mainlyduetopotentialY2Kissues

§ 2000’s§ Introductionofweb-basedinterfaces§ Improvementsincommunication(XML,GPSpositioning)§ Wideradoptionofsharedorcloudbasedsolutions(SaaS)§ Consolidationofsupplychainsoftwarevendors§ Emergenceofsupplychainecosystemsorplatforms§ ExpansionofERPsystemstoincludeessentiallyallSCMfunctions

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ExtendingtheEnterprise

§ Integratedsupplychainsspanmultiplecompanies§ SystemscanbepartoftheERPitself,astandaloneapplication,or

partoflargersupplychaineco-system.§ Wewillfocusonthefunctionalityinthislesson.

§ PlanningApplications§ ProductionPlanning(PP)andAdvancedPlanningSystems(APS)

§ ExecutionApplications§ WarehouseManagementSystems(WMS)§ TransportationManagementSystems(TMS)§ ManufacturingExecutionSystems(MES)

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ERP

PLM

CRMSRM

SCM

ERP

PLM

CRMSRM

SCM

ERP

PLM

CRMSRM

SCM

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Planningvs.Execution

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Planning vs. Execution

ROAImpact

Fleet Routing/Scheduling

ShipmentConsolidation& Carrier Selection

TacticalTransportationModeling

SupplyChainStrategy/NetworkDesign

TransportationProcurement

Planning Tasks

Execution Tasks

Consists of a continuum of tasks, but . . .

. . . there is a gap!

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Questions Differ Based on Timeframe

Strategic

Tactical

Operational

• WhatcarriersshouldIpartnerwithandhow?• HowshouldIflowmyproducts?• ShouldIusepoolpoints,cross-docks,ormulti-stoproutes?• WhereshouldIusededicatedorprivatefleets,ifanywhereatall?• Whichcarriersprovidedqualityserviceinthepast?

• HowcanIquicklysecureratesforanewDC/plant/lane?• Whatlanesarehavingperformanceproblems?• Whichcarriersarecomplyingtoorexceedingtheircontracts?• Aresitemanagerscomplyingtothestrategicplan?• WhereshouldIestablishaseasonalcontract?

• WhichcarriershouldItenderthisloadto?• HowcanIcollaborativelysourcethisweeks’loads?• HowdoIpreventMaverick/Roguebehavior?• ShouldIuseacontractcarrierorlookatthespotmarket?• HowcanIbestcommunicatewithmycarriers?

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ApproachesDifferBasedonTimeframe

Analysis(Risk)

Management

SearchTime

Days

Weeks

Minutes

0% 100%

• Establishingplan&strategy• Eventbasedengagement• Non-routineanalysis- ValueFocus

Strategic

Tactical

Operational

• Executingthestrategicplan• Transactionbasedrules&processes• Automatedactions- ProcessFocus

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Strategic

Tactical

Operational

TechnologiesDifferBasedonTimeframe

Analysis Engine•Optimization •Simulation•Data Analysis

Communication•Web-based •File Exchange•Remote Access

Workflow Software •Compliance Tracking •Rules Engine•Transaction Processing

X X

X XXX

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AdvancedPlanningSystems

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AdvancedPlanningSystems§ Calleddifferentnamesbydifferentvendors§ Mostcommonfunctionality:

§ Networkdesign,§ Demandplanning,§ Productionplanning,§ Productionscheduling,§ Distributionplanning,and,§ Transportationplanning.

§ Usedprimarilyasdecisionsupportsystem§ Typicallyutilizeslargescalemixedintegerlinearprograms(MILPs)andsometimessimulation

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AdvancedPlanningScale&Scope

§ PlanningHorizons(roughguidelines– eachfirmdiffers)

§ <3monthsout– MasterProductionSchedule(MRP,DRP)§ <4weeksout- FrozenMPS§ 5to8weeksout– SlushMPS– somechangesallowed(+- 10%)§ >8weeksout– WaterMPS– morechangesareallowed(+- 30%)

§ 3-18monthsout– AggregatedPlanning§ >18monthsout– LongRangePlanning– NetworkDesign,etc.

§ Longerrangemodelsusedin“whatif”analysis§ Oftencustomizedtospecificindustry

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Now 3 Mon 18 Mon

FrozenSlush

WaterMPS Aggregate Planning Long

Range Planning

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AdvancedPlanningSystem§ Inputs(fromERPorothersystems):

§ Currentcosts,manufacturingandstoragecapacities,consensusforecast,salesorders,productionstatus,purchaseorders,andinventorypolicyrecommendations,etc.

§ DecisionProcess:§ Largescaleoptimization(MILP)acrossmultiplefacilitiesandtime

horizonsinasingleplanningrun§ Generatesunconstrained,constrained,andoptimalplans

§ Outputs:§ Demandforecastandplanformeetingdemand§ Afeasibleproductionplanforfutureperiodstoincludeallocationof

productiontoplants§ Allocationoforderstosuppliers§ Identificationofbottlenecks§ RootCauseAnalysis

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TransportationManagementSystems(TMS)

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TransportationManagementSystems(TMS)§ Definition:

§ TMSissoftwarethatfacilitates(1)procurementoftransportationservices,(2)short-termplanningandoptimizationoftransportationactivities,assets,andresources,and(3)executionoftransportationplans.(Gonzalez,A.2009)

§ Oftensegmentedorspecializedbygeography(domestic,international)and/ormode(ocean,air,rail,fulltruckload,less-thantruckload,parcel,privatefleetetc.)

§ CoreFunctionality(notallsystemshaveall)

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§ Transportationprocurement§ Modeandcarrierselection§ Carriercommunication

(EDI/XML/Web)§ Routingguidegenerationand

maintenance

§ Fleetmanagement§ Audit,payment,andclaims§ Appointmentscheduling§ Yardmanagement§ Routeplanning(multi-stop,

continuousmove)

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TMS– ConnectingProcurement&Execution

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Routing Guide

Strategic Bid

SpotMarket

?

Reverse Auctions

Optimization based bidding added to every TMS solution by early 2000’s

There were over 50 Internet Truckload Exchanges in 2000

CAR R I ERS

Electronic Catalog

Public/Private Exchange

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Transportation Execution§ ConnectstoOrderManagementSystems(OMS),Payment

Systems,andtheERP§ Servesastheinterfacetothecarriers§ Objective:

§ Moveproductsfrominitialorigintofinaldestinationinmostcosteffectivemannerwhilemeetinglevelofservicestandards

§ Executestheplanusingtheprocuredcarriersbasedonreal-timeinformation

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PLAN:CreateShipmentsfromOrdersEXECUTE:SelectandtendertoCarriersMONITOR:VisibilityofthestatusofShipmentsRECONCILE:AuditinvoicesandpayforTransportation

PLAN RECONCILEMONITOREXECUTE CompletedShipments

AcceptedShipmentsShipmentsOrders

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Execution Considerations § Considerations

§ Howdoordersdrop?Batchedvs Continuous?§ Howmuchtimeisallowedbetweendropandmust-ship?Weeks?Days?Hours?Minutes?

§ Whatpercentageoforderschangeafterrelease?§ Howdotheychange?Quantity?Mix?Destinations?Timing?§ Whatisthelengthofhaul?§ Howmanyordersare“inplay” atanytime?

§ KeyDecisions§ LoadBuilding(Consolidation&Routing)§ CarrierSelection

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MIT Center for Transportation & Logistics

Kansas

P

St.. Paul

15,000 lbs

D

D

D

D

D

Atlanta18,000 lbs

D

2,000 lbs

2,000 lbs

2,000 lbs

2,000 lbs

Pool8,000 lbs

Load Building

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1. DirectLTLfromKCto6destinations2. Multi-stopTLfromKCtoalllocations3. MSTLfromKCtoSt.PaultoPoolPoint(dropoff4localLTLshipments)continue

toAtlanta

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TMSCarrierCommunication&Selection

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PrimaryEDITransactionSets

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204– MotorCarrierLoadTendern Usedbyshipperstotenderanofferforashipmenttoafulltruckloadmotorcarrier.Itmaybeusedfor

creating,updatingorreplacing,orcancelingashipment.n Maycontaininfoon:Carrieridentification,Scheduling,Equipmentrequirements,Ship-tolocation,Contact

atdestination,Descriptionofgoods,andShippinginstructions990- ResponsetoaLoadTender

n Usedbymotorcarrierstoindicatewhetheritwillpickupashipmentofferedbytheshippern Five potentialresponses(Accepted,Declined,Acceptedwithconditions,Spotbidrequestaccepted(w/bid

amount),Spotbidrequestdeclined214- TransportationCarrierShipmentStatusMessage

n Usedbycarrierstoprovideshippersandconsigneeswiththestatusoftheirshipments.n Maycontaininfoon:Origin,Currentlocation,Datesandtimesforpickupand/orestimateddelivery,Proof

ofdelivery,Shipmentstatusdetailstoincludereasonsforexceptions,andShipmentdescription.

Shipper CarrierEDI204

Tender

Accept?EDI990- Decline

Response No

YesEDI990- Accept

Response

EDI214- StatusEDI214- Status

EDI214- StatusEDI214- Status

Status Enroute

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Types of Capacity

Primary - Contracted CarrierDedicated FleetContinuous MoveSpot Carrier

PrimaryCarrier A

Carrier BCarrier B

Carrier BCarrier B

Dedicated

Carrier CContinuous Move

Carrier D

Spot

Carrier E

Spot

Carrier A

Spot

Carrier Selection

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MIT Center for Transportation & Logistics

Load 1

Primary

Dedicated

Spot

Continuous Move

CapacityRequirement

Load 2

Load 3

Load n

.

.

.

($,#,Timing,Service)

Carrier Selection

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MIT Center for Transportation & Logistics

CarrierSelectionwithAutomatedEscalation

24AdaptedfromMaziarz,M,(2002)logistics.com.

Carrier

Accept?

OrderManagement

System

Load

NotLT>tMIN ?

SelectAppropriate:(1)CarrierGroup&

(2)ClearingMechanism

No

Yes

CarrierCarrierCarrier

Offer

Response(s)OK?

Yes

Done

SelectCarrierfromRoutingGuide

Tender

Tender

Yes

No

TransportationManagementSystem

MIT Center for Transportation & Logistics

Num

ber o

f Car

riers

Range of Pricing

Primary

Step 1

LaneBackup

Step 2 Step 4

AllRelevantCompanyCarriers

(DynamicPrices)

AllRelevantCompanyCarriers(QuotedRates)

Step 3 StepsStep 5

PublicMarket

AutomatedEscalationProcess

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MIT Center for Transportation & Logistics

Approaches Must Be Linked

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Contract Dynamic

Static

Dynamic

How

do

I sel

ect

each

car

rier?

How do I price each load?

IIII

IIIV

Strategic Lane Assmt

Strategic Lane Assmt

w/ Tier Pricing

Dynamic Pricing in Private Exchange

Flexible Assmt Dynamic Carrier

Selection

Tier IUses strategic routing guide

Tier IIISpot execution –highly variableTier II

Increased flexibility in execution

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WarehouseManagementSystems&Automation

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MIT Center for Transportation & Logistics

WarehouseManagementSystems(WMS)§ Definition:

§ WMSisasoftwaresystemthatfacilitatesallaspectsofoperationswithinawarehouseordistributioncenterandintegrateswithothersystems.

§ Notthesameasinventorymanagementsystemsthatdeterminestockinglevelsandreplenishmentpolicies– theycomplement.

§ BenefitsofaWMS:

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§ real-timestockvisibilityandtraceability,

§ improvedlaborproductivity,§ reductioninmis-picks,§ reductioninreturns,

• Closelyconnectedtoautomationintermsofmaterialhandlingandpaperlessdeviceinterfaces(identificationandcommunication)

§ moreaccuratereporting,§ improvedresponsiveness,§ greaterdatavisibility,§ improvedcustomerservice,and§ minimizedpaperwork.

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WarehouseAutomation§ Automaticidentificationtechnologies

§ Barcodesandbarcodescanners§ Radiofrequencytags(RFID)andantennae§ Smartcardsandmagneticstripes§ Visionsystems

§ Automaticcommunicationtechnologies§ Radiofrequencydatacommunications§ Synthesizedvoice§ Virtualdisplays§ Picktolight/voicesystems

§ Automatedmaterialhandlingtechnologies§ Carousels§ Conveyors/robotics§ Flowracks§ AS/RS– Automatedstorage&retrievalsystems

29allimagesinpublicdomain– sourcedWikipedia

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WarehousingOptions

SystemThroughput

Costto

Com

pany

PublicWarehousing

LeasedWarehousing

PrivateWarehousingManualHandlingSystems

PrivateWarehousingAutomatedHandlingSystems

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WMSSoftwareComponents§ OrderProcessing

§ Orderchecking&batching§ Allocation§ Auto-replenishment

§ Receiving§ ASNplanning§ Inboundtracking§ Deliveryappointmentscheduling§ POverification§ Returnsprocessing

§ Put-Away§ Palletizing§ Zoningandslotting§ Random/directedputaway§ Routingforputaway &

replenishment31

§ Picking§ Batch/Wave/Zone/Directedpicking§ Carton/palletselect§ Assembly/kitting§ Pick-to-light/voice

§ Shipping§ Palletsequencing&Loadplanning§ Palletlayering§ Trailermanagement

§ LaborManagement§ Individual/teamperformancemgmt§ Laborscheduling§ Timestandards

§ EquipmentSupport§ Interfacetoautomatedequipment§ Equipmentmaintenance

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ManufacturingExecutionSystems

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MIT Center for Transportation & Logistics

ManufacturingExecutionSystem(MES)§ Definition:

§ MESisasoftwaresystemthatmanagesandmonitorsallwork-in-process(WIP)intheproductionprocess.

§ ThisincludesintegratingwithanERPtomanagetheexecutionofreleaseofproductionorderstofinishedgoodsdelivery,triggersupplychainreplenishments,andenhanceproducttraceabilitythroughmanufacturing.

§ FunctionalitywithinanMES:

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§ Machinescheduling,§ Processmanagement,§ Documentcontrol,§ Labormanagement,§ Inventorymanagement,

• Moreofaninternalfacingsystem– notusuallyconnectedtothelargersupplychainnetwork.

§ Product(WIP)tracking,§ Performanceanalysis,§ Labormanagement,§ Qualitymanagement,§ Productionreporting.

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KeyPoints

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MIT Center for Transportation & Logistics

SCMApplicationsExtendtheEnterprise

§ AdvancedPlanningSystems(APS)§ Longrange,optimization-baseddecisionsupporttools

§ ExecutionSystems§ TransportationManagementSystems(TMS)§ WarehouseManagementSystems(WMS)§ ManufacturingExecutionSystems(MES)

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ERP

PLM

CRMSRM

SCM

ERP

PLM

CRMSRM

SCM

ERP

PLM

CRMSRM

SCM

MIT Center for Transportation & Logistics

Planningvs.Execution:Approaches

Analysis(Risk)

Management

SearchTime

Days

Weeks

Minutes

0% 100%

• Establishingplan&strategy• Eventbasedengagement• Non-routineanalysis- ValueFocus

Strategic

Tactical

Operational

• Executingthestrategicplan• Transactionbasedrules&processes• Automatedactions- ProcessFocus

MIT Center for Transportation & Logistics

Strategic

Tactical

Operational

Planningvs.Execution:Technology

Analysis Engine•Optimization •Simulation•Data Analysis

Communication•Web-based •File Exchange•Remote Access

Workflow Software •Compliance Tracking •Rules Engine•Transaction Processing

X X

X XXX

MIT Center for Transportation & Logistics 38

TopSupplyChainPlanningVendors

Source:Trebilcock,B.(2016)LogisticsManagement,http://www.logisticsmgmt.com/article/top_20_software_suppliers

MIT Center for Transportation & Logistics

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“Jasper– justexcitedtobeinthecar”photocourtesyJenniferSexton