Supply Chain Management:
Issues and Models
Lecture 1: Introduction
Dr. Jinxing Xie
Department of Mathematical Sciences
Tsinghua University, Beijing 100084, China
http://faculty.math.tsinghua.edu.cn/~jxie
Email: jxie@ math.tsinghua.edu.cn
Voice: (86-10)62787812 Fax: (86-10)62785847
Office: Rm. 1308, New Science Building
1
Course Information

Objective:
– Understanding the supply chain and related issues
– Introducing some models and technologies for supply chain
management

Project / Assignment (choose any one)
– A review of literatures on a topic you are interested
– A report which is a generalization to a paper

References:
– Course notes at http://www.csiam.edu.cn/scm
– Some journal papers from Management Sciences et. al.

Focus on:
– Issues (Problems) and Models
2
Example:
Stages of a Detergent Supply Chain
Customer wants
detergent and
goes to Wal-Mart
P&G or other
manufacturer
Wal-Mart
Or thirdparty DC
Wal-Mart
Plastic
producer
Tenneco
packaging
Chemical
manufacturer
Chemical
manufacturer
Paper
manufacturer
Store
Timber
industry
3
WHAT IS A SUPPLY CHAIN?
A Supply Chain
consists of organizations that successively
transform raw materials into intermediate
goods, then to final good, and finally deliver
them to customers.
A Supply Chain
consists of all stages involved, directly or
indirectly, in fulfilling a customer request.
4
WHAT IS A SUPPLY CHAIN?
The global network used to deliver products
and services from raw materials to the end
customer through engineered flows of
information, physical distribution and cash.
The
Supply Chain
Information
Systems
World-Wide
Requirements
Planning
Relationship
Management
Logistics
Network
Distribution
Processes
5
Understanding the Supply Chain:
Supply Network, Supply Web
Not only manufacturer and supplier, but also
transporters, warehouses, retailers and
customers themselves.
 All functions involved in filling a customer
request within each organization: new product
development, marketing, operations,
distribution, finance, and customer service.
 SCM vs. Logistics (物流）

6
Supply Chain Stages
Distributor
Distributor
Supplier
Manufacturer
Supplier
Manufacturer
Supplier
Retailer
Customer
Retailer
Customer
Retailer
Customer
7
Connect Supply With Demand
Information
SUPPLY
Product
DEMAND
Cash
8
供应链概念模型
计划决策
生产
分销
供应商的
供应商
采购
生产
分销
供应商
采购
生产
分销
采购
生产
客户
计划调度
分销
采购
生产
客户的
客户
过程控制
生产过程
企业
9
供应链管理的三个层面
工厂和仓库等生产资源的数
量、布局和能力；产品设计；
市场开发等。
战略管理
战术管理
采购和生产决策；库
存策略；运输与配送
策略；联盟关系等。
作业管理
采购
生产
配送
营销
库存控制；生产计划
与调度；运输路线等。
10
Example 1: Typical U.S. Apparel
Industry Supply Chain
Average inventory and elapsed time (weeks):
• Materials:
6.5
• In-process:
9
6
• Finished goods:
7.5
9.5
• In-transit:
4
4
Fiber
suppliers
Textile
makers
Agents
Agents
Apparel
makers
12
Retailers
Agents
11
Discussion of Issues and opportunities for
improvement to U.S. Apparel Industry

Issues
– Supply chain is too long and too slow
» 58.5 weeks (excludes processing time & international transit
times)
– Little of this time is spent in processing
» Only 15 of the 58.5 weeks are in-process inventory
– Even in processing, the ratio of processing time to wait time is
notoriously low
– Thus, American apparel industry was reduced enormously during
the last 25 years

Opportunities
– Faster response to customer orders
– Eliminating unnecessary inventory, stockouts and markdowns
– $25 billion can be saved annually
12
Example 2:
HP DeskJet Printer Supply Chain
Supplier
Supplier
Supplier
Integrated
circuit
manufacturing
Printed
circuit
assembly
& test
Printed
mechanism
manufacturing
Asia-Pacific
distribution
center
Vancouver
4-5
final
weeks
assembly
California
&
1 day distribution
test
center
4-5
weeks
Supplier
European
distribution
center
Dealers
Dealers
Dealers
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Discussion of Example 2:
Improvement during the early 1980s
– Manufacturing cycle time reduced
» 8-12 weeks ==> 1 weeks
– Average inventory reduced
» 3.5 months ==> 0.9 months
– All finished goods inventory eliminated
– Importance of response time and transportation time
increased
– Further improvements should be made on supply
chain
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Discussion of Example 2:
Improvement of supply chain in 1990
– Time between order and
delivery reduced
Comparison of
Response Time
(months)
6
» Europe & Asia:
5.25 months ==> 1.25 months
» North-America:
4.25 months ==> 0.2 months
5.25
5
4.25
4
3
2
1.25
1
0.2
NorthAmerica
Europe &
Asia
0
19901990+
– Importance of transportation
time increased
» Europe & Asia: 1% ==> 12%
» North-America: 20% ==> 80%
15
Hints from Examples 1 and 2

Further reduction in manufacturing cycle time is not
highly beneficial after the improvements of 1980s
– Example 1: Only 15 of the 58.5 weeks are WIP inventory

Improvements in supply chain is very beneficial
– Inventory cost reduced
» HP Case: 4 months inventory reduced, total cost
reduces up to 5%
– Time between order and delivery reduced
» Better sales forecasts, reduced wrong orders,
markdowns, stockouts and delays in delivery
– Lower total cost & higher customer service
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Objectives of Supply Chain
Management (SCM)

To improve
the profitability and efficiency of the
supply chain and all organizations
involved
 By
– Optimizing
the speed and certainty and
– Maximizing
the net value added by all relevant
processes.
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Decision phases in a supply chain

Depending on the time frame over which the
decisions made apply
– Supply chain strategy or design: next few years
– Supply chain planning: yearly or monthly
– Supply chain operation: weekly or daily

Some key fields
–
–
–
–
–
–
–
–
Supply chain design and product development
Demand forecasting and customer relationship
Production planning and scheduling
Inventory management
Transportation management
Location and Facilities management
Information management and Information Technology
….
18
供应链管理的主要问题
 网络结构设计与选址 (S)
 库存控制 (S/T)
 生产计划与调度(S/T/O)
 运输与物流管理(T/O)
 供应链联盟与合作关系(S)
 信息价值 (S)
 产品设计 (S)
S－战略决策
T－战术决策
O－作业决策
19
供应链管理的主要困难
 复杂且庞大的网络和过程结构
 复杂的产品结构
 分布的管理和组织结构
 动态系统，存在多种不确定因素
20
供应链管理理论和技术
供应链管理
概念/定性模型方法
定量模型方法
分析模型和方法
仿真
Petri网
排队网络
扰动分析 (PA)
Markov链
面向实例的经验方法
优化模型和方法
确定性模型
随机性模型
启发式方法
线性规划
非线性规划
目标规划
网络流
博弈论
确定性动态规划
随机动态规划
随机库存控制
排队优化
Markov决策
禁忌搜索
模拟退火
遗传算法
Lagrangian松弛
约束理论
多Agent技术 (DAI)
21
The Virtual Enterprise
22
Key Elements In Supply Chain Uncertainty

DEMAND
– Timing of Order - How predictable is this?
– Size and Composition of Order - Are there unexpected
elements, and is it subject to change?
– Data Accuracy on Products Required, Delivery
Points and Timings

SUPPLY
– Lead Time to Supply - How predictable is this?
– Quantity Supplied - Can the delivery be accepted without
being counted?
– Quality of Supply - Can the supplies be used without
testing?
23
– Data Accuracy on Products Supplied and Prices
Good, Bad or Optimum Inventory

Once uncertainty is stripped away to the maximum practicable
degree, inventory can then be determined at the correct
(optimal) level (for each stage of the supply chain and overall)
Profit (or performance enhancement) from holding stock
equals potential lost sales (or lost performance)
times the gross profit margin on sales (or added value)
less the cost of holding stock (interest plus holding costs,
which can be substantial in real terms and are often
underestimated)
24
“Old” Order Driven Supply Chain
25
Supply Planning Across the Virtual
Enterprises
26
SCM vs. OR/MS/DS
Operations Research and Management Science (OR/MS)

The professional disciplines that deal with the application of information
technology for informed decision-making

Provide rational bases for decision making by seeking to understand and
structure complex situations and to use this understanding to predict system
behavior and improve system performance.

Much of this work is done using analytical and numerical techniques to
develop and manipulate mathematical and computer models of organizational
systems composed of people, machines, and procedures.

The field is closely related to several other fields in the "decision sciences" -applied mathematics, computer science, economics, industrial engineering,
and systems engineering.
From http://www.informs.org/Join/Orms.html
27
SCM vs. OM
What is Operations Management (OM)?

运作管理就是对公司（或组织）的提供主要产品或服务的
系统进行设计、运行、评价和改进。

OM is the set of activities that creates goods and services by
transforming inputs into outputs.

OM is the business function that manages that part of a business
that transforms raw materials and human inputs into goods and
services of higher value. (narrow view)
28
其他名称：生产管理
OM概要模型
财务战略
市场
工业管理
企业战略
工厂管理
运作战略
营销战略
运作管理
输入
原料
顾客
人力
工厂
部件
计划与控制系统
工艺
输出
产品
服务
生产系统(5P)
29
OM vs. OR/MS/DS vs. SS/SE vs. IE/EM




运作管理是管理的一个
领域（管理职能）
OR/MS/DS是各领域在
制定决策时都可能遇到
的定量方法
SS/SE强调的是系统观
点、系统方法
IE/EM主要关注如何更
好地利用企业的资源，
解决工程问题（如工业
自动化等）
OM
IE/EM
OR/MS
/DS
SS/SE
30
供应链协调问题
 目标冲突
 分布决策结构：不一致决策激励
 信息扭曲  非对称信息结构：不完全信息
运筹
学
供应链
分布
经济 管理
人工智能
学
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The Heritage of OM

1776-1880: 早期概念
成
– 专业化； 标准化零部件

1880-1910：科学管理时代
– Gantt图；动作/时间研究；过程分析；排队论

1910-1980：大批量生产时代
– 流水线；经济批量；线性规划；PERT/CPM；MRP

1980-1995：精益生产时代
– JIT；TQM；EDI；CAD/CAM/CAPP

1995-2005：大批量、顾客化生产时代
– 全球化；信息化（INTERNET；E-Commerce)
– 敏捷制造；BPR；ERP；主动学习的组织
– 供应链管理（SCM）
作为学科， OM诞生于50年代末60年代初
本
质
量
顾
客
32
What Operations Managers do?
(Top 10 Research Directions)

Goods and services design



Managing quality



What product should we offer?
How should we design these products and services?
Who is responsible for quality?
How do we define the quality we want in our service or
product?
Process and capacity design


What process will these products require and in what order?
What equipment and technology is necessary for these
processes?
33
What Operations Managers do?
(Top 10 Research Directions)

Location strategies



Layout design



How should we arrange the facility?
How large must the facility be to meet our plan?
Human resources and job design



Where should we put the facility?
On what criteria should we bas the location decision?
How do we provide a reasonable work environment?
How much can we expect our employees to produce?
Supply chain management


Should we buy or produce the component?
Who are our suppliers and who can integrate into our e34
commerce program?
What Operations Managers do?
(Top 10 Research Directions)

Inventory control



Intermediate, short-term, and project scheduling



How much inventory of each item should we have?
When do we reorder?
Is subcontracting production a good idea?
Are we better off keeping people on the payroll during
slowdowns?
Maintenance

Who is responsible for maintenance?
35
Exciting New Trends in OM
Local or national focus
Global focus, international OM
Batch (large) shipments
Just-in-time shipments
Low-bid purchasing
Supply chain partners, ERP,
e-Commerce
Lengthy product development
Rapid product development,
alliances
Standardized products
Mass customization
Job specialization
Empowered employees,
teams, and lean production
36
Important Research Field
- Service Operations Management










Intangible
Produced and consumed simultaneously
Unique
High customer interaction
Inconsistent product definition
Knowledge-based
Dispersed
Difficult to automate
Difficult to measure quality
…….
37
Research Methods
Strategic
Tactic
Operational
Levels of
Decision
Qualitative
Quantitative
38
Research Methods

Empirical
–
–
–
–

Case study
Survey
Panel study
Database
Theoretic models
– Deterministic models
– Uncertainty models


Simulation
Expert system
(knowledge model)
Simulation
 Motivation and Objective
 Experiment design
 Independent variables
 Dependent variables
 Simulation run
 Data analysis
 Findings
 Insights
39
建 立 OR/MS 理 论 模 型 的 一 般 步 骤
模型准备
模型假设
模型构成
模型检验
模型分析
模型求解
模型应用
“源”远“流”
长
Applied Mathematics – Mathematical Modeling:
Motivation,Formulation,Solution,Validation
40
Manufacturing and Service
Operations Management Society




Established March 1999, Newest within INFORMS
Membership: 950, Largest within INFORMS
Society Webpage: http://msom.society.informs.org
The methods which MSOM members apply in order to
help the operations function add value to products and
services are derived from a wide range of scientific
fields, including operations research and management
science, mathematics, economics, statistics,
information systems and artificial intelligence.
* INFORMS: Institute for Operations Research and Management Science
Merged from ORSA (1952) and TIMS (1953) in 1994
41
Source of References
Top journal:
Operations Research (OR)
Management Science (MS)
Quasi-Top journal:
Operations Research Letters (ORL)
IIE Transactions (IIET)
Naval Research Logistics (NRL)
Mathematics of Operations Research (MOR)
Journal of operations management (JOM)
Major journal:
European Journal of Operational Research (EJOR)
International Journal of Production Research (IJPR)
International Journal of Production Economics (IJPE)
Journal of the Operational Research Society (JORS)
…
42
OM Related Journals
Relevance










Ranks (1999, JOM)
JOM (J. of OM)
IJOPM (Int. J. Op. Prod. Mgmt.)
POM (Prod. & OM)
IJPR (Int. J. of Prod. Research)
IJPE (Int. J. of Prod. Economics)
PIMJ (Prod. Invent. Mgmt. J.)
MS （Management Sciences)
HBR (Harvard Business Rev.)
EJOR
Sloan Mgmt. Review











Quality
MS (SSCI, SCI)
OR (SCI)
JOM
IJOPM
IJPR (SCI)
POM (SCI)
EJOR(SCI, SSCI)
HBR
Academy of Mgmt. Journal
DS (Decision Sciences) (SSCI)
MSOM
43
Summary
What is Supply chain / SCM?
 What kinds of issues SCM concern?
 What are the Theory and Techniques
which can be possibly potential in SCM?
 SCM vs. OR/MS/DS/OM/IE/EM/SS/SE?
 Top journals publishing SCM studies

44
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