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12000i2Technologies,Inc.CONFIDENTIAL1©2000i2TechnologiesIncCONFIDENTIALI2UIntelligentSupplyChainManagementCourseModuleModuleTwoTwo::UnsolvedUnsolvedIssuesinIssuesinSupplySupplyChainManagementChainManagementInthepreviousmoduleentitled‘GoalsandChallengesofSupplyChainManagement’,wehaveseenwhySupplyChainManagementisbecominganincreasinglycriticalbusinessprocess,andalsowhyitisbecomingmorechallengingduetothesurgeinvariabilityandcomplexityofthebusinessenvironment.ThefocusofthissecondmoduleistomakearealitycheckonhowcompaniesperformtodayintheSupplyChainManagementfieldandtohighlightthetypicalunsolvedproblemsleadingtoSupplyChainManagementsub-optimization.22000i2Technologies,Inc.CONFIDENTIAL2©2000i2TechnologiesIncCONFIDENTIALuMemorizethefourmajorrootcausesthatgenerateSCMdeficienciesuUnderstandthekeylimitationsoftheMRPII/DRPplanninglogics,andwhythesearebecomingincreasinglydamagingtocompaniesuBeabletotranslatethesedeficienciesintoaresultingnegativeimpactonoperationalperformanceuArticulatethetypicalmistakesmadebycompanieswhentryingtooptimizetheirSCMprocessesAftercompletingthismodule,youareexpectedto:32000i2Technologies,Inc.CONFIDENTIAL3©2000i2TechnologiesIncCONFIDENTIALToday’sRealityTheSupplyTheSupplyChainManagementChainManagementProcessesProcessesofofALLALLCompaniesCompaniesareareStillStillPlaguedwithPlaguedwithMajorMajorDeficienciesDeficienciesToday’srealityisaverysimple:AllcompaniesarestillplaguedwithmajordeficienciesintheirSupplyChainManagementprocesses.ThereisindeednosinglecompanyintheworldthatcanclaimtohavereachedfullSupplyChainManagementoptimization.Thefollowingslidesdescribethemajorrootcausesunderlyingthesedeficiencies.42000i2Technologies,Inc.CONFIDENTIALTheserootcausescanbegroupedinfourmaincategories.Thisslidewillsimplyintroducethem,whilethefollowingslideswilldetaileachofthemindividually.ThefirstcategoryistheLackofReliabilityofPlanningData,whichisstillaverysevereissueinmostcompanies.Inanycase,moreseverethanSeniorExecutiveswouldgenerallyguess.ThesecondcategoryistheInadequacyoftheGuidingPrincipleswhichdrivetheSupplyChainManagementdecisions.Wewilldetailwhatthismeansinafewslides.ThethirdcategoryistheLengthandtheInefficiencyofthePlanningProcesses.Thiscategoryshouldnotcomeasasurprisebasedonwhatwehaveanalyzedduringthefirstmodule.Finally,thelastcategoryistheLackofOptimizationCapabilities,thatpreventcompaniestotakeplanningdecisionswhichcanensureanoptimalbalancebetweendemandandsupply.Inmostcompanies,thecombinationofthesefourcategoriesofrootcausesendupcreatingasituationwheretheoperationalperformanceisseverelyimpacted,nomatterhowperfectthebusinessstrategyapplied.4©2000i2TechnologiesIncCONFIDENTIALLackofReliabilityofPlanningDataInadequacyofPlanningGuidingPrinciplesLackofOptimizationCapabilitiesRESEARCH&DEVELOPMENTMARKETINGPRODUCTIONPURCHASINGFINANCEANOBSTACLETOTHECOMPANY’SPERFORMANCELongandInefficientPlanningProcessesMajorRootCausesofPoorSupplyChainManagement52000i2Technologies,Inc.CONFIDENTIALLetusbeginwiththelackofreliabilityofplanningdata.5©2000i2TechnologiesIncCONFIDENTIALLackofreliabilityofplanningdataInadequacyofplanningguidingprinciplesLackofoptimizationcapabilitiesRESEARCH&DEVELOPMENTMARKETINGPRODUCTIONPURCHASINGFINANCEMajorRootCausesofPoorSupplyChainManagementLongandinefficientplanningprocessesANOBSTACLETOTHECOMPANY’SPERFORMANCE62000i2Technologies,Inc.CONFIDENTIALTheissueregardingthereliabilityofplanningdataisnotsomuchtheabilitytogetaccuratedataatsomepointintime,butrathertomakesurethatthedataremainspermanentlyvalid.Thisimpliesthatacompanyneedstohaveproceduresinplacethatensurepermanentvalidityondatasuchasstocks,billofmaterial,routing,availablecapacity,cycletime,batchsizes,yield,scrapfactors.Inotherwords,rolesandresponsibilitiesmustbeperfectlydefinedinordertomakesurethateverytimedataismodifiedorcreated(anewproduct,anengineeringchangeorder,anewsource,onatransportationroute,anewcustomer,anchangeinprice,etc.),thischangeisimmediatelyreflectedintheplanningprocessthroughanupdateofthefeedingdatabases.Inmostorganizations,today’srealityisthatsomeofthisdataisalwaysaccurate,othersaretemporarilyinaccuratebecauseofdelaysintheupdatingprocess,andsomeareeitherpermanentlyinaccuratebecauseofalackofproperaccountabilityorevennon-existent.Undersuchcircumstances,theSupplyChainManagementjustcannotbefullyoptimized;asitisdirectlydependantonthisdata,the“garbagein,garbageout”logicfindsitsfullapplicationhere,nomatterhowperfecttheSupplyChainmanagementguidingrules.6©2000i2TechnologiesIncCONFIDENTIALIsplanningdatapermanentlyvalid?BatchSizesYield/ScrapFactorStocksBillofMaterialsRoutingsAvailableCapacityCycleTimesLackofReliabilityofPlanningData72000i2Technologies,Inc.CONFIDENTIALThesecondcategoryofrootcauseistheinadequacyofguidingprinciplestomakeSupplyChainManagementdecisions.Thisisamorehiddenrootcause,butcertainlyoneofthemostdamagingforcorporations.7©2000i2TechnologiesIncCONFIDENTIALLackofreliabilityofplanningdataInadequacyofplanningguidingprinciplesLackofoptimizationcapabilitiesRESEARCH&DEVELOPMENTMARKETINGPRODUCTIONPURCHASINGFINANCELongandine

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