ISEN 315Spring 2011

Dr. Gary Gaukler

Exam 2 Review

Exam 2 Review

Exam 2 Review

Exam 2 Review

Push and Pull Production Control

“Push” system: Determines when and how much to produce based on forecasts of future demands

“Pull” system: Initiates production of an item only when the item is requested

By pulling material in small lots, inventory cushions are removed, exposing problems and emphasizing continual improvement

Manufacturing cycle time is reduced Push systems dump orders on the

downstream stations regardless of the need

Pull vs Push Systems

What is a Supply Chain?

Network of entities:• Suppliers (and their suppliers)• Manufacturers of semi-finished and finished products• Distributors• Customers

Supply Chain

Downstream flows:

Upstream flows:

Supply Chain Flows

• Complex networks• Complex products• Uncertainties:

––

• Pressure points:––

Challenges in Supply Chains

Initially can focus on individual nodes:• Points to review:

– Stocking levels– Service levels

• Improve existing operations

Improving a Supply Chain

• Service level target• Supplier lead times: average and variability• Review periods• Process cycle times• Process variability• Forecast error• Capacity

Control Knobs

Bullwhip: Increasing variability of orders up the supply chain

Bullwhip Effect

The Bullwhip Effect

• Consequences of the Bullwhip:

Picture borrowed from Hau Lee

Bullwhip

Bullwhip in Electronics Industry

week

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

Peripheral Product Consumables

week

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

1 4 7 101316192225283134374043464952

Unit orders from a major retailer to manufacturer

Total unit sales at outlets of retailerSlide borrowed from Hau Lee

What Causes this Effect?

Lee et al. 1997:

Reactions to demand signals

Order batching

Price fluctuations

Shortage gaming

What Causes this Effect?

Reactions to demand signals

Order batching

Price fluctuations

Shortage gaming

Mitigating the Bullwhip Effect