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Understanding Biomass Supply Chains:The Uncertainty Framework
NEWBio Short Course SeriesBioenergy Supply Chain Business Opportunities
April 23, 2013
Presented by:
Yaru Liu � Evelyn Thomchick � Kusumal RuamsookThe Pennsylavania State University
The Uncertainty Framework
SCM is the art and science of integrating the flows of products, information and financials through the entire supply pipeline from the supplier’s supplier to the customer’s customer.
Suppliers Contracted Manufacturers
Manufacturers Wholesalers/Distributors
Retailers/ Customers
Product/Services Flow
Information Flow
Cash Flow
Demand Flow
2Source: John J. Coyle, Center for Supply Chain Research Presentation
Retail StoreRetailer Warehouse
Manufacturing Warehouse
Manufacturing Plant
Wholesaler Warehouse
Raw Material Supplier
Source: John J. Coyle, Center for Supply Chain Research Presentation 3
Source: Council of Supply Chain Management Professionals
© 2013 All rights reserved.4444
Demand and supply uncertainties affect how the supply chain should be devised.
Demand UncertaintiesUncertainties
Supply Uncertainties
Supply Chain Uncertainties
Source: Lee (2002), Aligning Supply Chain Strategies with Product Uncertainties, California Management Review
Demand Uncertainty
FUNCTIONAL- Low demand
uncertainties (stable, or more predictable)
- Long product life
INNOVATIVE- High demand
uncertainties
(variable, or
difficult to
forecast)
Supply Uncertainty
STABLE- Less breakdowns- Stable & higher
yields- Less quality
problems
EVOLVING- Vulnerable to
breakdowns- Variable & lower
yields- Potential quality
6
- Long product life- Low inventory
cost- Low profit
margins- Low product
variety- Low stockout cost- Low obsolescence
forecast)
- Short selling
season
- High inventory cost
- High profit
margins
- High product
variety
- High stockout cost
- High obsolescence
- Less quality problems
- More supply sources
- Reliable suppliers- Less process
changes- Less capacity
constraint- Dependable lead
time
- Potential quality problems
- Limited supply sources
- Less reliable suppliers
- More process changes
- Potential capacity constrained
-Variable lead time
EFFICIENT RESPONSIVE
SU
PP
LY
UN
CER
TA
INT
Y
Low (Stable)
DEMAND UNCERTAINTY
Low (Functional Products) High (Innovative Products)
Examples: Grocery, basic Examples: Fashion
7
RISK-HEDGING AGILE
SU
PP
LY
UN
CER
TA
INT
Y
High (Evolving)
Examples: Grocery, basic apparel, food, oil and gas
Examples: Fashion apparel, computers
Examples: Hydro-electric power, some food produce
Examples: Telecom, high-end computers
Source: Lee (2002), Aligning Supply Chain Strategies with Product Uncertainties, California Management Review
Demand Uncertainty(Bioenergy)
FUNCTIONAL
- Long product life
- Low obsolescence
INNOVATIVE
- High demand
uncertainties
Supply Uncertainty(Switchgrass, Miscanthus,
Willow)
EVOLVING
- Variable yields
8
- Low obsolescence
- Low inventory
cost
- Low stockout cost
- Low profit
margins
- Low product
variety
uncertainties
(e.g. prices of
fuel and
substitute
products)
- Variable,
difficult to
forecast
- Variable yields
- Potential quality problems
- Limited supply sources
- Less reliable suppliers
- More process changes
- Potential capacity constrained
- Variable lead time
SU
PP
LY
UN
CER
TA
INT
Y
Low (Stable)
DEMAND UNCERTAINTYLow (Functional Products) High (Innovative Products)
EFFICIENT RESPONSIVE
Livestock bedding, straw bale housing, low-grade feed, substrate for growing mushroom,
9
RISK-HEDGING AGILE
SU
PP
LY
UN
CER
TA
INT
Y
High (Evolving)
Bio-energy ●
● Bio-degradable plastics
Pellets●
low-grade feed, substrate for growing mushroom, soil conservation
●
SU
PP
LY
UN
CER
TA
INT
Y
Low (Stable)
DEMAND UNCERTAINTYLow (Functional Products) High (Innovative Products)
EFFICIENT RESPONSIVE
10
RISK-HEDGING AGILE
SU
PP
LY
UN
CER
TA
INT
Y
(Stable)
High (Evolving)
• Inventory pooling• Multiple supply bases• Alternative supply • Lead-time reduction• Process flexibility
• Risk-hedging, plus:─ Postponement ─ Mass
customization─ Supplier hub close
to production site
Contacting the SpeakersContacting the Speakers
Yaru Liu:
Evelyn Thomchick:
Kusumal Ruamsook:
