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					Auto-ID Center



Building a General Business Case


Yun Kang, Ph.D. Candidate
Auto-ID Center
Massachusetts Institute of Technology




Auto-ID Center Confidential - Not for General Circulation
                  Benefits are many …

      Managing and Controlling Promotions
                                                               Reduced Product Shrinkage
Better Planning
                    Automatic Checkout
                                                           Accurate Inbound Freight Verification
    Reduced Stockout                      Inventory Reduction
                             Faster Receiving
  Theft Prevention
                                                         Accurate Order Fulfillment
                               Increased Production Responsiveness


 Automated Inventory Counting
                                                        Greater Production Flexibility
       Shorter Order Fulfillment Leadtime
                                                                    Produce-to-Real-Time-Demand


                  Auto-ID Center Confidential - Not for General Circulation
Types of benefits


                              Revenue vs. Cost


                           Internal vs. External


              Easy to quantify vs. Hard to quantify


          All benefits must translate into ROI!



Auto-ID Center Confidential - Not for General Circulation
    Yet to be quantified…


•   Inventory reduction due to demand and supply visibility
•   Faster and more accurate order fulfillment
•   Greater order fulfillment flexibility
•   Production flexibility
•   Produce-to-real-time-demand
•   Real-time control of promotions
•   …



    Most of the benefits are SC-integration-related!


    Auto-ID Center Confidential - Not for General Circulation
               Supply chain integration



                                      Information   Material
                   …                  Flow          Flow              …



      Supplier
                                POS
                                                           Supplier
                                                                                POS




Manufacturer                                                                     Retailer
                                  Retailer           Manufacturer
                                   Store                                          Store


                       DC                                                  DC




        Current Environment                                    Future Environment



               Auto-ID Center Confidential - Not for General Circulation
                                So how do we quantify these?

                                            Build a Simulation Model!
                    Inputs                                                                       Outputs



• Distribution network data                                                     • Performance metrics
 (e.g. # of facilities, location)                                                 - Production flexibility
• Historical demand data                                                          - Order fulfillment leadtime
 (e.g. order receipt, sales quantity)                          Model              -…
• Supply chain operations data                                                  • Quantified benefits
 (e.g. order fulfillment policy, inventory policy)                               - Supply chain cost reduction
                                                                                 - Revenue increase




                                Auto-ID Center Confidential - Not for General Circulation
    What else can simulation do for us?


•   Allow quantification of benefits involving complex dynamics
•   Perform sensitivity analysis
     - Helps make right business decisions
•   Define standard performance metrics
•   Ties in with the town test
•   Bring SC partners together and work out integration issues
•   Brings academics and industry together




•   Build a generic, company-independent model


    Auto-ID Center Confidential - Not for General Circulation
    Action items


•   Determine what to model
     - Choose partnering companies for initial model
     - Choose product family
•   Conduct field visits
     - Learn SC operations
     - Gather data
•   Build model, simulate, and present the findings




    Auto-ID Center Confidential - Not for General Circulation
the bull-whip effect



 demand




                                               demand
                    time                                    time




Auto-ID Center Confidential - Not for General Circulation
the bull-whip in real life

 bull-whip in real life




Auto-ID Center Confidential - Not for General Circulation
bull-whip in the beer game



         40                                                           RETAILER

                                                                      WHOLESALER

                                                                      DISTRIBUTOR

                                                                      FACTORY
Orders



         20




         0
              0   4   8    12    16   20      24    28      32   36
                                   Week
                                                                      Sterman’s control policy




Auto-ID Center Confidential - Not for General Circulation

				
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posted:11/21/2012
language:English
pages:11