Supply Chain Design

LEADING QUESTIONS FOR SUPPLY CHAIN DESIGN:

  • How can we identify the suppliers that do not create value for our company?
  • İf there is more than supplier for the same SKU, which supplier should we favor?
  • How can we calculate a single value cost if there is more than one buying price for the same SKU?

DESIGN SUPPLY CHAIN TO:

Account for dynamic constraints to balance incompatible targets.

Design resources, processes, variables, parameters and targets completely.

Test performance by simulating targets and constraints.

Use prices, promotions and operating volumes as parametric decision variables.

Adjust customer service level to achieve strategic profitability.

Save time by reducing analysis and decision making time from weeks to hours.

USE PARAMETRIC SUPPLY CHAIN TO MAKE DYNAMIC DECISIONS.

 

Determine SKU’s Price, Quantity and Payment Terms depending on the suppliers type and group.

Determine the supplier types and groups as per Supply Chain and  geographical location.

Vary Payment Terms for special days and purchase campaigns.

Differentiate Discounts for the supply SKU, supplier and Supply Chain.

Base Purchase Quantity Returns on supplied  SKUs to avoid production quantity miscalculations.

Use Inventory Target Quantity to avoid supply stock outs.

 

For the period ending inventory, assign number of days –NOT quantity–the ending inventory is expected to meet the next period’s production.  For example, “the ending inventory should cover next period’s 60 days of production.”

If the Inventor Target Quantity is assisgned as a quantity but not as a days to meet next period’s production, the simulation results will show either “excess inventory” or “ stock-out”,  depending whether the productions are expected to decline or increase during the simulated period. Please note that 60 days is assigned before the expected production simulation is made.

Thus, the inventory policy rules should be stated as “days to meet the expected production.” Caution:  Production depends and is arithmetically tied to sales.

Match the SKUs obtained by “exploding” the product tree BOMs (Bill of Materials) with the suppliers.  In order to calculate the SKU’s arithmetic average cost,

For different suppliers that sell the same SKU, assign a percentage value to the SKU, showing the suppliers’ share in the total quantity of the SKU.  All percentages should add to 1.00 indicating that different suppliers share the supply of that SKU.

Multiply the percentage point of the supplier by the total purchasing cost of that particular supplier, finding the weighted cost of that supplier as compared to other suppliers.  Find a single weighted cost for that particular SKU to use it in inventory usage.

For the SKUs supplied by a single supplier, use 1.0 as the weighted cost of that SKU.

Use the currency and Payment Terms for each supplier as stipulated in the purchase contract.

Prepare the SUPPLY CHAIN DESIGN for parametric simulation with Supply Price, Supply Currency, Supply Chain Cost and other cost elements.

Caution:  SKU based Supply Quantities are calculated automatically by PRODUCTION DESIGN, which in turn is triggered by the Sales Quantity in the SALES DESIGN.  Therefore the organic chain relationship between Supply decisions and Sales decisions is established by the Sales Quantity thru PRODUCTON DESIGN.

Supply Quantity can also be posted as a direct input into SUPPLY CHAIN DESIGN if the user prefers to do so.  However, if this is preferred, the automatic supply chain optimization stops working since the user  breaks the organic chain relationships.  As such, inventory levels are arithmetically calculated without any optimization.