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MITCourse1.270/ESD.273(Fall2002MW4:00-5:30Rm1-246)Logistics&SupplyChainManagementPROFESSORDAVIDSIMCHI-LEVI,UncertaintyinDemandPipelinesIgnitesSupplyNetsbyShoumenDatta,ResearchScientistEngineeringSystemsDivision,SchoolofEngineeringExecutiveDirector,ForumforSupplyChainInnovation/innovation,Disclaimer:Opinionsexpressedinthispresentationarethatoftheauthor.ItdoesnotrepresenttheconsensusopinionofMITasaninstitutionorotherfacultythatmaybedirectlyorindirectlyassociatedwithMITSchoolofEngineeringorMITSloanSchool.,Todaysdiscussion,UNCERTAINTY,URLforpowerpointpresentation/innovationEducationCourse1.270/ESD.273,SCMismanaginguncertainty.,NobelPrizeinEconomics2002(announcedtoday,09Oct2002),forhavingintegratedinsightsfrompsychologicalresearchintoeconomicscience,especiallyconcerninghumanjudgmentanddecision-makingunderuncertainty,forhavingestablishedlaboratoryexperimentsasatoolinempiricaleconomicanalysis,especiallyinthestudyofalternativemarketmechanisms,BODYSCANNERBYTC2,DisruptiveTechnology?,InvasionoftheBodyScanners,Digitallyspeaking,PartoftheProcess,PERSONALDIGITALPROFILE,Customer:HowwillIlookinthisdress?,Retailer:WhatshouldweorderforFall?,Manufacturer:Whatsthenextdemand?,Datamining,DataMart,Retailers,Accessories,Jewelry,Shoes,Shiseido,Coach,Harrods,M&S,Gucci,Ballys,Guerlain,Polo,USD,DEM,EURO,INR,YEN,YUAN,TRAVEL,HEALTH,EDUCATION,ARTS&MUSIC,Celebrity,Gallery,WorldHistoryof,Fashion,TheWayWeWore,DataWarehouse,BODYSCAN,eFASHION,EBC,B2B,AnneKlein,Levis,Bebe,Talbots,AX,China,India,Siam,FABRIC,SUPPLIERS,Data,Warehouse,FABRIC,BROKER,INDEPENDENT,DESIGN,BROKER,GlobalDesign,WAREHOUSE,MEDIA/POP,Tailors,-,ContractShops,Amateurs,DesignForum,Manufacturing,TailorBroker,Order,IndividualTailorsOn-call,PreferenceSurvey,SHIPPING,MALL,a,m,JuliaRoberts,Financial,RETURN,CRM,DONATE,SalvationArmy,CARE,Goodwill,eBAY,Boutiques,JCPenney,OutletStores,Amateur,Models,SHIPPING,ERP,RETAILERS,MACYS,NORDSTROM,BLOOMINGDALES,PERSONAL,PROFILE,SOFTWARE,PERSONAL,PROFILE,ANALYSIS,Portal,Manufacturer,CustomerRelationshipManagementEXPECTATIONvsRESULT,Source:AMRResearch1999October,UNCERTAINTY,Uncertainty.,Lackofrule-basedresolution:expectationvsresultFinancialImpactCostofCorrectionSideEffects,Uncertainty.,FinancialImpactOpportunitylost:unabletorampupEconomicloss:unabletorampdown,Source:ForresterResearch,Source:Forrester,Uncertainty.,CostofCorrectionResourcesInventory,Uncertainty.,SideEffects(undesirable)TackleonlysymptomsNegativefallout,EBMinSCMofferslittleADAPTABILITYtoSENSEandRESPOND(SupplyChainEventmis-Management),InsulationofPlanningfromExecutionIndividualoptimisationnotSCoptimisationSmart-HubandDumb-SpokeConfigurationIsolationofEnvironmentofOperation,Source:Forrester,TraditionalAdaptive,Source:Forrester,Whattodo?,UnderstandcustomerneedMonitorsupplyavailabilityManagesupplychainpartnerperformanceDecentralizeproblemsolvingMonitorcorrectiveactionsandfeedbackIncludemacro-economicindicators,EvolvingAnalyticalToolsandEarlyUsers,Source:Forrester,PortfolioofRealOptions,Source:HP&Forrester,Uncertainty.,FinancialImpactOpportunitylost:unabletorampupEconomicloss:unabletorampdown,Uncertainty.Push-PullCaseStudybyDSL,Howtoreaddiagrams,Uncertainty.LeadTime,Performance.,Performance.,Forsameleadtime,optimizedsupplychainofferslowercost,SafetyStockCostvsLeadTimeManagingFinancialCostofUncertainty,Uncertainty.Procurement,Push-PullSupplyChains,TheSupplyChainTimeLine,Customers,Suppliers,PUSHSTRATEGY,PULLSTRATEGY,Push-PullBoundary,FromMake-to-StockModel.,Configuration,Assembly,Suppliers,toAssemble-to-OrderModel,Configuration,Assembly,Suppliers,PLMacauseofUNCERTAINTYinSCM,Source:Forrester,CPLM.CPFR,Source:Forrester,PLM,Source:Forrester,Whatswrongwiththisillustration?,Imaginationisoutoffocus!,Source:Forrester,DistributedDatainConnectedEnvironments,Evolution?,Canthisevolutionary“vision”succeed?,Source:Forrester,Real-timeDataLayer,D2B,SemanticW,802.11UWB,dERP,Internet0Internet1Internet2,AGENTS,SECURITY,RealTimeDistributedDataInfra-de-structurewithEmbeddedAgents,,TheSemanticWebBus(WebVan!),TimBerners-Lee:SemanticWeb,,Observation199883millionaccesstheInternetinlanguagesotherthanEnglish,Projection200570%of1billionusersmaynotspeakEnglish,FACT46%USbusinessrefuseintlorderbecausetheylackmeanstoprocessthem.,Japanese,Spanish,German,French,Chinese,Dutch,Korean,Swedish,Italian,1771,1825,1886,1939,1977,1997,IndustrialRevolution,1800,InformationEvolution,1853,1913,1969,2005,2025,RapidAdoption,IntroductionofTechnology,1853,1913,1969,2025,2061,2081,Conceptualadvancesoccurabouttwiceacenturyandleadtowealthofnations,Textile,Railway,Auto,Computer,DistributedIntelligence,Nanotech,Source:NormanPoire,Economist,AGENTS,LocatingthePush-PullBoundary,PLANEXECUTESENSERESPOND,DEMAND,EXCEPTION,SupplyChainEvolvesto.,Customer,CustomersDC,MANUFACTURER,RawmaterialSUPPLIERS,Store,Store,Store,Store,Store,Store,Store,Store,DC,DC,DC,Paper,Medical,Cotton,REALTIMEePCePCdatafromRFIDTag,Replenishmentneeds,Confirmation,Loads,StoreOrders,Status,ImmediateReplenishmentneeds,Futureshippingneeds,ReplenishmentneedsdeterminedfromRFIDTaginfo“IntelligentSignal”,PORTALS/Exchange,Transport,CustomerInfoCenter,ManufacturerHQ,realtimeRFIDdata,PersonalCare,ConsumerTissue,HealthCare,InformationAgent,InventoryEarlyWarningAgent,TLBAgent,Cross-DockingAgent,AgentsbasedAdaptiveNetwork,ConsumptionInventoryDataDCtoMfr,SupplyChainsReal-timeAdaptableDemandNetworks,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Customer,Store,Store,Store,Store,Store,Store,Store,Store,Industrybestnowversuswhatcanbeachieved:Needtoevolve,Day7Received,unloaded&stockedonstoreshelves,SCOTT,Replenishedin7days,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,ConsumerBuysSCOTT2pmDay0,FutureSC:ConsumerPurchase,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:RFID“Smart”TagRead,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:RFID“Smart”TagDataTransmittedinRealTime,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:RFID“Smart”TagDataReceivedinRealTime,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:RFID“Smart”TagDatahelpsDetectOOSDanger,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:RFID“Smart”TagDatacoupledwithSmartPlanner,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:RFID“Smart”TagDatacoupledwithSmartPlanner,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:RFID“Smart”TagDatacoupledwithSmartPlanner,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:SmartPlanningseguestoTLB,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:SCOTTPaperTissuereceivedatCDC,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,FutureSC:CDCShipstoStore,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Day1,Day3,Day4,Day5,Day6,Day7,Day8,Day2,Day0,Transport,CustomerCenter,Manufacturer,Customer,Store,Store,Store,Store,Store,Store,Store,Store,Replenishedin13hoursroomforimprovementtounder10hrs,FutureSC:RFID“Smart”tagdataaidsReplenishmentin13hrs,DC,DC,DC,Paper,Medical,Cotton,Plant,DC,Plant,DC,Customer,Store,Store,Store,Store,Store,Store,Store,Store,Replenishedin7days,FutureSC:CanyouaffordtoexcludeRFID“Smart”tagdata?,2008:P&Gshortensreplenishmentcyclefrom120daysto1day1,Source:P&G,Forrester,2008:P&Gshortensreplenishmentcyclefrom120daysto1day2,Source:P&G,Forrester,2008:P&Gshortensreplenishmentcyclefrom120daysto1day3,Source:P&G,Forrester,2008:P&Gshortensreplenishmentcyclefrom120daysto1day4,Source:P&G,Forrester,2008:P&Gshortensreplenishmentcyclefrom120daysto1day5,Source:P&G,Forrester,2008:P&Gshortensreplenishme

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