MITForumforSupplyChainInnovationshoumen@mit.eduMITCourse1.270/ESD.273(Fall2002MW4:00-5:30Rm1-246)Logistics&SupplyChainManagementPROFESSORDAVIDSIMCHI-LEVIUncertaintyinDemandPipelinesIgnitesSupplyNets9thOctober2002byShoumenDatta,ResearchScientistEngineeringSystemsDivision,SchoolofEngineeringExecutiveDirector,ForumforSupplyChainInnovation:Opinionsexpressedinthispresentationarethatoftheauthor.ItdoesnotrepresenttheconsensusopinionofMITasaninstitutionorotherfacultythatmaybedirectlyorindirectlyassociatedwithMITSchoolofEngineeringorMITSloanSchool.MITForumforSupplyChainInnovationshoumen@mit.eduToday’sdiscussionUNCERTAINTYURLforpowerpointpresentationCourse1.270/ESD.273SCMismanaginguncertainty.MITForumforSupplyChainInnovationshoumen@mit.eduNobelPrizeinEconomics2002(announcedtoday,09Oct2002)forhavingintegratedinsightsfrompsychologicalresearchintoeconomicscience,especiallyconcerninghumanjudgmentanddecision-makingunderuncertaintyforhavingestablishedlaboratoryexperimentsasatoolinempiricaleconomicanalysis,especiallyinthestudyofalternativemarketmechanismsDanielKahnemanVernonL.Smith1/2oftheprize1/2oftheprizeUSAandIsraelUSAPrincetonUniversityPrinceton,NJ,USAGeorgeMasonUniversityFairfax,VA,USAb.1934b.1927MITForumforSupplyChainInnovationshoumen@mit.eduBODYSCANNERBYTC2MITForumforSupplyChainInnovationshoumen@mit.eduInvasionoftheBodyScannersDigitallyspeakingMITForumforSupplyChainInnovationshoumen@mit.eduPartoftheProcessMITForumforSupplyChainInnovationshoumen@mit.eduPERSONALDIGITALPROFILEMITForumforSupplyChainInnovationshoumen@mit.eduCustomer:HowwillIlookinthisdress?Retailer:WhatshouldweorderforFall?Manufacturer:What’sthenextdemand?DataminingDataMartRetailersAccessoriesJewelry,ShoesShiseido,CoachHarrod's,M&SGucci,Bally'sGuerlain,PoloUSD,DEMEURO,INRYEN,YUANTRAVELHEALTHEDUCATIONARTS&MUSICCelebrityGalleryWorldHistoryofFashionTheWayWeWoreDataWarehouseBODYSCANeFASHIONEBCB2BAnneKleinLevis,BebeTalbots,AXChina,India,SiamFABRICSUPPLIERSDataWarehouseFABRICBROKERINDEPENDENTDESIGNBROKERGlobalDesignWAREHOUSEMEDIA/POPTailors------------------ContractShopsAmateur'sDesignForumManufacturingTailorBrokerOrderIndividualTailorsOn-callPreferenceSurveySHIPPINGMALLamJuliaRobertsFinancialRETURNCRMDONATESalvationArmyCAREGoodwilleBAYBoutiquesJCPenneyOutletStoresAmateurModelsSHIPPINGERPRETAILERSMACYS,NORDSTROM,BLOOMINGDALESPERSONALPROFILESOFTWAREPERSONALPROFILEANALYSISPortalManufacturerMITForumforSupplyChainInnovationshoumen@mit.edu051015201997199920012003CRM$billionCRM$billion1.22.33.75.47.911.516.81997199819992000200120022003CustomerRelationshipManagementEXPECTATIONvsRESULTSource:AMRResearch1999OctoberMITForumforSupplyChainInnovationshoumen@mit.eduUncertainty…….Lackofrule-basedresolution:expectationvsresultFinancialImpactCostofCorrectionSideEffectsMITForumforSupplyChainInnovationshoumen@mit.eduUncertainty…….FinancialImpactOpportunitylost:unabletorampupEconomicloss:unabletorampdownMITForumforSupplyChainInnovationshoumen@mit.eduSource:ForresterResearchMITForumforSupplyChainInnovationshoumen@mit.eduSource:ForresterMITForumforSupplyChainInnovationshoumen@mit.eduUncertainty…….CostofCorrectionResourcesInventoryMITForumforSupplyChainInnovationshoumen@mit.eduUncertainty…….SideEffects(undesirable)TackleonlysymptomsNegativefalloutMITForumforSupplyChainInnovationshoumen@mit.eduEBMinSCMofferslittleADAPTABILITYtoSENSEandRESPOND(SupplyChainEventmis-Management)•InsulationofPlanningfromExecution•IndividualoptimisationnotSCoptimisation•Smart-HubandDumb-SpokeConfiguration•IsolationofEnvironmentofOperationMITForumforSupplyChainInnovationshoumen@mit.eduSource:ForresterMITForumforSupplyChainInnovationshoumen@mit.eduTraditionalAdaptiveSource:ForresterMITForumforSupplyChainInnovationshoumen@mit.eduWhattodo?•Understandcustomerneed•Monitorsupplyavailability•Managesupplychainpartnerperformance•Decentralizeproblemsolving•Monitorcorrectiveactionsandfeedback•Includemacro-economicindicatorsMITForumforSupplyChainInnovationshoumen@mit.eduEvolvingAnalyticalToolsandEarlyUsersSource:ForresterMITForumforSupplyChainInnovationshoumen@mit.eduPortfolioofRealOptionsSource:HP&ForresterMITForumforSupplyChainInnovationshoumen@mit.eduUncertainty…….FinancialImpactOpportunitylost:unabletorampupEconomicloss:unabletorampdownMITForumforSupplyChainInnovationshoumen@mit.eduUncertainty…….Push-PullCaseStudybyDSLMITForumforSupplyChainInnovationshoumen@mit.eduMITForumforSupplyChainInnovationshoumen@mit.eduMITForumforSupplyChainInnovationshoumen@mit.eduUncertainty…..LeadTimeMITForumforSupplyChainInnovationshoumen@mit.eduPerformance……….MITForumforSupplyChainInnovationshoumen@mit.eduMITForumforSupplyChainInnovationshoumen@mit.eduMITForumforSupplyChainInnovationshoumen@mit.eduPerformance……….MITForumforSupplyChainInnovationshoumen@mit.eduForsameleadtime,optimizedsupplychainofferslowercostSafetyStockCostvsLeadTimeManagingFinancialCostofUncertaintyMITFo