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APS DEFINED

APS can be defined in terms of dimensions.

APS Dimensions

One dimension is automation of supply chain policies and the business strategy. The policies characterize how customer service is to be delivered; how inventory is managed; forecasts are generated; assets are plans; etc. APS will fundamentally be used to test the cost and ben­efits of the various policies and strategies.

The second dimension is the sequence of major deci­sions along the physical supply chain, knowing which decisions are dependent (and integrated with other func­tions) and which are stand-alone, independent decisions.

The next dimension is risk. APS will help decision-makers understand the bounds of risk in both the short and long term.

Like it or not, despite the stated mission and vision, decisions are driven in different directions based on a wide variety of drivers. The marketplace is not the driver of decisions if management chooses to restrict the bud­get below what resources would be required to meet the demand. Efficient asset utilization requires forecasts to drive the production schedule. If customer orders drive the schedule then that is a conscience decision to sacri­fice costs and asset utilization. APS can be used to com­bine these two drivers and find a desirable compromise.

Similar to policies is associated value. Value has to be placed on risk and variability. Risk and variability are also highly related.

The last dimension is time. Planning levels (strate­gic, tactical, and operational); planning horizons; lead times; and frequency are considered in the problem for­mulation.

Policies

Some of the most common and important policies de­fine customer service; the order entry procedures; how forecasts are to be derived, safety stocks are to be set: manufacturing and order fulfillment sourcing; and manufacturing and replenishment lot sizes are to be set.

Value Statement

ERP systems and the Internet provide vast amounts of information. Much of it has minimal structure for see­ing the forest through the trees. Management reports aggregates information and gives it a time snapshot that allows managers to assess current and previous perfor­mance. Spreadsheets take management reports one step further to provide decision-makers the ability to what-if a limited number of situations to help them analyze a few options. Supply chain models use APS technology to take vast amounts of information, analyze many more options, and give the models an objective function so that an optimal solution can be sought.

Time Dimension

All supply chain models should be time-phased, mean­ing that they give different solutions as time progresses along. Different business questions can be categorized into a minimum of three time frames. Which time frame a particular questions falls under depends on the lead time of that question.

BUSINESS DRIVERS

What makes business so interesting and challenging is that four business drivers (customer service, asset utili­zation, cost/profitability, and risk management) are constantly being combined and balanced to provide control, growth, and stability to the business.

Continued

Part 1  Part 2   Part 3  Part 4  Part 5  Part 6  Part 7  Part 8


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