DECISION SUPPORT SYSTEMS: A CASE STUDY   IN VESTEL DURABLE GOODS MARKETING  pptx

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      DECISION SUPPORT SYSTEMS: A CASE STUDY   IN VESTEL DURABLE GOODS MARKETING  pptx

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Number18,2006 113    DECISIONSUPPORTSYSTEMS:ACASESTUDY INVESTELDURABLEGOODSMARKETING LutfuSagbansua UniversityofMississippi MIS/POMDepartment lutsua@gmail.com ABSTRACT Supply chain management d eals  with the efficient coordination of enterprises along a value chain to providegoodsandservicesto endusers.Thesuccessinmanagingasupplychainheavilydependsonthe effectiveusageoftechnology.Decisionsupportsystems(DSS)playsucharole.ADSSassistsandsupportsthe humandecisionmakerinthedecisionmakingprocess.ImplementationofsuchaDSStoolbyVestelDurable GoodsMarketingintheirdistributionresourceplanningprocessisanalyzedandpresentedinthisstudy. Keywords:DSS,SupplyChain,InformationTechnology,Distribution TƏDARÜKİDARƏETMƏŞƏBƏKƏSİVƏVESTEL ELEKTRİKMALLARININSATIŞINDATƏTBİQİ XÜLASƏ Tədarükİdarəetmə Şəbəkəsi son istifadəçilərə xidmət etmək və malları tədarük etmək üçün səmərəli kordinasiyalimüəssisələril əbirgəəlaqəqurur.Ağırbirtədarükzincirinin idərəolunmasındamüvəffəqiyyət qazanmaq,effektlitexnologiyanınistifadəsindənirəligəlir.Qərardəstəksistemidəeləbucürbirroloynayır. Bir Qərar Dəstək Sistemi, qərar vermə mərhələsində insanın qə rar qəbul etməsinə yardim edir və onu dəstəkləyir.Vesteltərəfindənmalbazarıvəonlarınpaylanmaresursplanlarıbucürbirqərarverməsistem alətinintərəfindəntəhlilolunuraqbutətqiqatobyektindətəqdimolunur. Açar sözlər:Texnikitəchizat,informasiyatexnologiyaları,çatdırılma INTRODUCTION Many of the advances in the control and management of supply chains are driven by advancing computer technology. Supply chainmanagementproblemsarenotsorigid and well defined that they can be delegated entirelytocomputers.Instead,inalmostevery case, the flexibility, intuition, and wisdom that is  a unique characteristic of humans is essential to manage the systems effectively. However, there are many aspects of these systems that can only be analyzed and understood effectively with the aid of a computer.Itisexactlythistypeofassistance whichdecision‐supportsystemsaredesigned to provide. As the name implies, these systems do not make decision, instead, they assistandsupportthehumandecisionmaker inhisorherdecision‐makingprocess. Decision‐support systems range from spreadsheets, in which users perform their own analysis, to expert systems, which attempt to incorporate the knowledge of expertsinvarious fieldsandsuggestpossible alternatives. The appropriate DSS for a particularsituationdependsonthenatureof the problem, the planning horizon, and the type of decisions that need to be made. In LutfuSagbansua JournalofQafqazUniversity 114 addition, there is frequently a trade‐off between generic tools that are not problem‐ specificandallowanalysisofmanydifferent kinds of data, and often more expensive systems that are tailored to a specific application. Within the various disciplines that make up supply chain ma nagement, DSSs are used to  address various problems, from strategic problems such as logistic network design to tactical problems such as the assignment of products to warehouses and manufacturing facilities, all the way through to day‐to‐day operation problems like production scheduling, delivery mode selection, and vehicle routing. The inherent sizeandcomplexityof manyofthesesystems make DSSs essential for effective decision making.DSSinsupplychainmanagementare often called Advanced Planning and Scheduling systems. These systems typically coverthefollowingareas:Demandplanning, supply planning, manufacturing planning andscheduling. Typically, decision‐support‐systems use the quantifiableinformation available to illustrate various  possible solutions, and  allo w  the decisionmakertodecidewhichoneisthemost appropriate, based on other,  possibly  non ‐ quantifiable factors. Often, DSSs allow the decisionmakertoanalyzetheconsequencesof decision, depending on different possible scenarios. This kind of  what ‐if analysis can  helpavoidproblemsbefore theyoccur. Manydecision‐supportsystemsusemathema‐ tical tools to  assist in the decision ‐making process. These tools, often from the mathe‐ maticaldisciplineofoperationsresearch,were firstdevelopedtoassistthearmedforceswith the enormous  logistical challenges of  World War II. Since th en, improvements in these techniques, as well as ever‐increasingcompu‐ terpower,havehelpedtoimprovethesetools andmakethemmoreaccessibletoothers. The to ols of art ificial intelligence are also  employed in the design  of decision‐support systems. Intelligent agents use AI to assist in decision making, especially in real‐time decision, suchasdetermininghowtosupplya customer in the shorte st possible time or to quote a delivery lead  time as  the cust o mer waitsonthephone.FollowingFox,Chionglo, and Barbuceanu, we define an agent as a softwareprocesswhosegoalistocommunicate and interact with other agents, so  that decisionsaffectingtheentiresupplychaincan bemadeonagloballevel. SUPPLYCHAINDECISIONSUPPORT SYSTEMS Supply chain management encompasses a  larger variety of decision. A list of such decisionsisprovidedbelow: ‐ DemandPlanning ‐ Logisticsnetworkdesign ‐ Inventorydeployment ‐ Salesandmarketingregionassignment ‐ Distributionresourceplanning ‐ Materialrequirementsplanning ‐ Inventorymanagement ‐ Productionlocationassignment/facility deployment ‐ Fleetplanning ‐ Leadtimequotation ‐ Productionscheduling ‐ Workforcescheduling SELECTINGASUPPLYCHAINDSS For each of the supply chain problems and issueslistedabove,decisionsupportsystems are available in many configurations,  platforms, and price ranges. DSS platforms have evolved in the last 15 years from relatively inflexible mainframe systems, to isolated PC tools, to client/ server processes; lately, there is a new breed of high‐ performance and extensible enterprise decision‐support applications. These systems come in a wide range of pricing from PC systems costing several thousand dollars to company‐wide installations costing a few milliondollars. DecisionSupportSystems:ACaseStudyinVestelDurableGoodsMarketing Number18,2006 115 When evaluating a particular DSS, the followingissuesneedtobeconsidered: ‐ Thescopeoftheproblemaddressedbythe decision maker, including the planning horizon. ‐ Thedatarequiredbythedecision‐support system ‐ Analysisrequirements,includingaccuracy of the model, ability to quantify perfor‐ mance measures, desired analytical  tools‐ thatis,optimization,heuristics,simulation, financial calculation requirements, and computationalspeedneeded. ‐ The system’s ability to generate a  variety ofsolutionssothattheusercanselectthe most appropriate one, typically based on issuesthatcannotbequantified. ‐ The presentation requirements, including issues such as user‐friendliness, graphic interface, geographic abilities, tables, reports,andsoon. ‐ Compatibility and integration with existingsystems. ‐ Hardware and software system require‐ ments, including platform requirements, flexibility to changes, user interfaces, and technicalsupportavailable. ‐ Theoverallprice,includin gthebasicmodel, customization,andlong‐termupgrades. ‐ Finally,considercomplementarysystems.  LITERATUREREVIEW Asupplychaincanbedefinedasanetworkof autonomous or semiautonomous business entities collectively responsible for procure‐ ment,manufacturinganddistributionactivities associated with one or more families of relatedproducts.Differententitiesinasupply chain operate subject to different sets of constraints and objectives. However, these entities are highly interdependent when it comes to improving performance of the supplychainintermsofobjectivessuchason‐ time delivery, quality assurance and cost minimization. As a result, performance of any entity in a supplychaindependsontheperformanceof others, and their willingness and  ability to coordinateactivitieswithinthesupplychain. A global economy and increase in customer expectations regarding cost and service have influencedmanufacturerstostrivetoimprove processes within their supply chains, often referred to as supply chain re‐engineering (Swaminathan,1996). Supply chain re‐engineering efforts have po‐ tential to impact the performance of supply chains.Oftentheyareundertakenwithonlya probabilistic view of the future, and it is essential to perform a detailed risk analysis before adopting a new process. In addition, many times these re‐engineering efforts are made under politically ad emotiona lly charged circumstances. As  a result, decision support tools that can analyze various alternativescanbeveryuseful inimpartially quantifying gains and helping the organizationmakethe rightdecision(Feigin, An,Connors,andCrawford1996). The goals of supply chain management are design, operation and maintenance of integrated value chains to satisfy consumer needs in the most efficient way by simultaneously maximizing customer service (Christopher,1998;Hewitt,1994;Ross,1998). Today, SCM is accepted as a concept integrating inter‐organizational business processesandcomprises other conceptssuch as Efficient Consumer Response, Quick Response, Continuous Replenishment and Customer Relationship Management (Bechtel and Jayaram, 1997). The  design of supply chains requires the specification of business processes and supply chain wide planning routinesasspecialtaskofthedevelopmentof information systems as the backbone of any supply chain integration. Information technologyiswidelyperceivedastheenabler of supply chain integration (Bechtel and Jayaram, 1997; Hewitt, 1994). Enterprises participating as partners in a supply chain LutfuSagbansua JournalofQafqazUniversity 116 havetoprovidetheiractivitiesina waythat maximizes the supplychainefficiency.Thus, they have to concentrate on their core competencies(Christopher,1998). TheneedforDSScomesfromagapthatexists in the typical organization’s information resource management scheme. This gap is a clear indicator that  classical data procession has not met the growing needs of modern businessconcerns.Forexample,today’schief executive is faced with an extensive list of fast‐developingproblems: - Thereisalargesetofincreasinglycomplex and comprehensive government agencies andregulationsimpactingonabusiness. - The economic climate has increased financialpressureonbusiness. - Many companies are now dealing in the world marketplace. With the improved capabilities of the transportation and communications industries, the business world has become smaller and more intensecompetitionhasresulted. Thesearesomeofthecurrentchallengesthat needtobeaddressed bybusiness. SUPPLYCHAINMANAGEMENTAT VESTEL Vestel Electronics A.S. is the largest electronics manufacturer in Turkey. Its core productTVswereaccountingfor70%oftotal salesin2000andmonitorsrepresented5%.In 2001,VestelElectronicsproducedatotalof4.6 million televisions, making up to 65% of the country’s total TV production. In 2002, TV productionincreasedto6.4million. While being a leading brand in the Turkish televisionmarketwith30%marketshareasof year2002VestelElectronicsisalsothelargest domestic brand exporter with 65% share. Being the largest full‐range television ODM (Original  Design and Manufacturing) in Europe,VestelElectronicshadamarketshare of17%inOEMsales. VESTELDISTRIBUTIONNETWORK Most of the production occurs in a plant in Manisa. Imported goods are also received there. Until 1999, the company had four warehouses,servingthedealersandoutletsin different regions of the country. Distribution isperformedbyHorozLogistics.Withtheflat price per item pricing scheme given by the third‐party‐logistics (3PL) company, it was clear that there was no need to keep four warehouses. This led to an initiative of warehouse consolidation, whereby the distribution network took its  current form with two warehouses. Other than the reductionindurablegoodsmarketcausedby thefinancialcrisisinTurkeyin2001,Vestel’s productionhasincreasedcontinuouslyasitis statedinthefollowingtable. Table1.ThenumberofUnitsShipped:Annualyand Monthly  2000 2001 2002 2003 Annual 900,000 518,867 592,652 1,007,701 Monthly 75,000 43,239 49,387 83,975 • In2001,duetothefinancialcrisisinTurkey,the durablegoodsmarketreducedby48% ANEWPLANNINGSYSTEM:MANUGISTICS TRANSPORTATIONMANAGEMENT Given the object ive  of a better measurable system, Vestel decided to implement Manugistics’NetworkTransportManagement (MTM) module  as the nex t improvement effortsforthedistributionsystemin2000.This package was chosen based on service options madeavailableinTurkeyby the various SCP providers and subsequent to anegotiation on price.VestelDurableGoodsMarketingwasthe firstcompanyinTurkeytoimplementsucha transportationplanningsystem,andremained theonlycompanyin2003. The distribution planning program is run daily to schedule deliveries to Vestel’s customers. The planning process is a part of theorderfulfillmentprocess: DecisionSupportSystems:ACaseStudyinVestelDurableGoodsMarketing Number18,2006 117 OrderEntry  OrderAuthorization  DistributionPlanning  StockMovement  Billing  Distribution MTMCAPABILITIES MTMisatransportationoptimizationsoftware program, which provides the optimal route and truck planning for daily‐prepared deliveries. The inputs to the system are location of Vestel’s warehouses, transfer stations, and its customers; customer orders, transportation modes, and associated costs. The optimization program uses these inputs and finds  a solution within the constraints imposedbythemanagementtominim izethe totaltransportationcosts.Therouteandtruck planningismadeaccordingtotheinputsand theconstraints. There are 3 different location types in MTM: warehouse, transfer station, customer. All the locationshavezipcodesgenera tedspecifically for MTM. These  codes are different for each province.Somebigprovincesaredividedinto two or more regions. Th e distances  between eachtwozipcodesareputinanetworktable. The distance between two points location in thesamezipcodeissettobe3km. VestelDurableGoods MarketingInc.hastwo warehouses, one in Manisa and the other in Istanbul. There are 9 regions throughout Turkey and the total number of transfer station in these regions is 19. The logistics companyownsandoperatesthesestations. The volume information for each product is providedasaninput intothesystem. Three different size trucks can be used for transportation in addition to a direct cargo alternative.Thecostsofusingeachalternative are set in the system. 10‐wheel or 8‐wheel trucks are used for the transportation to transfer station from the warehouses. Small trucks then make  the deliveries from the transfer stations to the customers. There is  also a direct cargo alternative from the warehouse in Manisa. Dealers with high volume demand can have direct deliveries with large trucks. MTM selects the direct cargo option based on transportation costs. Trucks utilizations constitute an important criterionfor decidingondeliverymode. Themanagementuses twopoliciesrelatedto efficiency and customer service. The first policy is related to truck utilization.A truck hastobeatleast65%fullinordertodepart for its destination. Otherwise it waits until this rate is achieved. The maximum waiting time  is the other policy related to customer service.Thiswaitingtimeisrestrictedtobeat most 3 days to provide a good service to distributors. After 3 days, even if a truck is not65%full,itwillleavethewarehouseeither by truck or by cargo, whichever is more efficient. MTM does not optimize truck loading.SinceMTMdoesnotpla ninsidethe truckaloadingproblemmayoccur.Giventhe differenceinshapeofthevariousgoodsbeing transported, not all items planned by MTM may be loaded on a truck due to  space constraints. As a result,  volumes were increasedtoenablethefeasibilityoftheplans generated by the software. While truck load optimization would be feasible for simple deliveries between two points, the Vestel distribution problem is significantly more complex due to routes that have multiple drop‐off points. As a result, the planning objective is not to find the loading that maximizes truck utilization, but rather the loadingthatallows forthebestunloadingof LutfuSagbansua JournalofQafqazUniversity 118 trucks without having to load and unload differentitemsatthevariousdrop‐offpoints. In 2002, Vestel scheduled on average 125 truckseverydayanddelivered49,000products to1000differentlocationseverymonthusing thisplanningsystem. Table2.TransportationFigures Year Month Amount Total Scheduled Truck Volume (dm 3 ) Cumula‐ tive Truck Utiliza‐ tion January 41,153 18,667,200 61% February 43,160 16,691,200 57% March 35,594 17,062,400 57% April 46,284 25,747,200 68% May 58,658 32,291,200 64% June 64,319 25,102,400 72% July 60,552 35,147,200 70% August 46,983 26,148,800 82% September 43,418 20,894,731 85% October 52,533 26,940,860 73% November 69,612 32,733,792 66% 2002 December 68,257 25,111,986 76% January 77,063 28,046,400 89% February 82,877 25,745,600 91% March 104,717 33,944,000 90% April 115,406 31,480,000 95% May 158,242 43,228,800 93% 2003 June 154,923 42,427,200 90% IMPLEMENTATIONISSUESFORVESTEL Theresultsobtainedfromtheimplementation of Manugistics were phenomenal. The truck utilization went up while the transportation costsdecreasedbetween1999‐2003. Table3.DecreaseinTotalTransportationCostfrom 1999to2003  1999 2000 2001 2002 2003 IndexTrans. Cost/Sales Revenue 100.00 119.92 96.69 84.08 81.32 IndexTrans. Cost/Costof GoodsSold 100.00 118.21 98.84 87.91 80.67 Indexof TL/dm3 transporta‐ tion 100.00 109.82 124.61 158.93 163.12 In 2002, transportation costs were decreased by 46% despite the increase in diesel prices and increase in Consumer Price Index. The unit cost of transportation per item went downinsomecasesbyasmuchas75%. Table4.TheUnitTransportationCostDecrease Between1999‐2002 Products %ChangeinUSD TV‐42.92% WashingMachine‐47.36% Refrigerator‐12.92% DishWasher‐44.73% MiniMusicPlayer(portable)‐68.62% Midimusicplayer‐41.50% Micromusicplayer‐28.64% Smallhomeappliances‐51.25% Receiver‐66.41% Dishantenna‐33.52% TVrack‐62.49% Minirefrigerator‐48.97% Carpetwashingmachine‐29.31% Airconditioner(split)‐76.69% Airconditioner(window)‐64.48% Computer ‐66.20% Aspirator ‐52.06% Oven ‐60.77% Stove ‐34.78% Flasheater‐45.10% Vacuumcleaner‐71.20% In addition to the new planning system, a numberofotherfactorswerealsoinstrumental in achieving high utilization rates. First, the number of orders entered manually into the system decreased. The total volume also increasedin2003. Increaseinpre‐paidord ershelpedtoachieve amoreevendistributionof theorderswithin amonth.    DecisionSupportSystems:ACaseStudyinVestelDurableGoodsMarketing Number18,2006 119 Table 5. Weekly Distribution of the Monthly Revenue and Truck Utilizations FirstWeek SecondWeek ThirdWeek FourthWeek 2003Jan‐June 19.5% 20.8% 24.3% 35.4% 2002Jan‐June 10.28% 17.17% 19.91% 52.65% WeeklyDistribution 2002Jan‐Dec 9.92% 18.42% 19.62% 52.04% 2003Jan‐June 93% 94% 71% 90% 2002Jan‐June 41% 44% 53% 79% CumulativeTruck Utilization 2002Jan‐Dec 78% 72% 75% 78% Figuresbelowreflecttheincreasedtruckutilizationratesandthetotalscheduledtruckvolumes. Truckutilizationratesarecalculatedusingthefollowingformula:CumulativeTruckUtilization= TotalTransportedVolume(dm 3 )/TotalScheduledTruckVolume(dm 3 ). Figure 1. Cumulative Truck Utilization (%) Cumulative Truck Utilization 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% January February March April May June July August September October November December January February March April May June 2002 2003 Cumulative Truck Utilization Figure 2. Total Scheduled Truck Volume (dm 3 ) Total Scheduled Truck Volume (dm3) 0 5000000 10000000 15000000 20000000 25000000 30000000 35000000 40000000 45000000 50000000 January February March April May June July August September October November December January February March April May June 2002 2003 Total Scheduled Truck Volume (dm3)  LutfuSagbansua JournalofQafqazUniversity 120 CONCLUSIONS Decision support systems for supply chain managementareafastgrowingsector of the logisticssoftwareindustry.DSSswillcontinue evolvingandadoptingstandardfeaturesand interfacesinordertoadapttothecompetitive environmentandprovidetheflexiblesolutions requiredintoday’smarkets().Sincethebasic data  that are required to make decisions are being collected, there is a strong drive to utilizethisinformationinsophisticatedways  to gain competitive advantage by improving service and cutting supply chain costs. ‘Integration with ERP systems’, ‘Improved optimization’,and‘Developmentofstandards’ are the current major trends  in DSS and especially supply chain DSS and advanced planningsystems. ThesuccessthatVestelhasexperiencedatthe endoftheimplementationofaDSSmodelin the distribution planning process has once againprovedtheimportanceandvitalroleof DSSineffectivesupplychainpractices. REFERENCES  Bechtel, C., Jayaram, J., (1997), “Supply Chain Management: A strategic Perspective”, The InternationalJournalofLogisticsManagement8,pp. 15‐34.  Christopher,M.,(1998),“LogisticsandSupplyChain Management. Strategies for Reducing Cost and Improving Service”, 2 nd  ed., Financial Times Professional,London,UK.  Deutsch, C. H., (1996), “New Software Manages SupplytoMatchDemand”,NewYorkTimes.  Feigin, G., An, C., Conners, D., Crawford, I., (1996), “ShapeUp,ShipOut”,OR/MSToday,24‐30.  Fox, M. S., Chionglo, J.F., Barbuceanu, M., (1993), “TheIntegratedSupplyChainManagementSystem” Workingpaper,UniversityofToronto.  Hewitt, F., (1994), “Supply Chain Redesign”, The InternationalJournalofLogisticsManagement,5,pp. 1‐9.  Lee, H. L., Billington, C., (1992), “Managing Supply Chain Inventory: Pitfalls and Opportunities”, Sloan ManagementReview,33(3),65‐73.  Proudlove, N. C., Vadera, S. K., Kobbacy, A. H., (1998), “Intelligent Management Systems in Operations”,TheJournaloftheOperationalResearch Society,Vol.49,No.7,pp.682‐699.  Ross, D. F., (1998), “Competing Through SupplY Chain Management. Creating Market‐Winning Strategies Through Supply Chain Partnerships”, KluwerAcademicPublishers,Boston,MA,etal.  Simchi‐LeviD.,Kaminsky,P.,Simchi‐Levi,E.,(2000), Designing and Managing the Supply Chain, McGraw‐Hill,USA.  Swamithan, J. M., (1996), “Quantitative Analysis of Emerging Practices in Supply Chains”, Ph.D. Dissertation,GSIA,CarnegieMellonUniversity.  Swaminathan,J.M.,Smith,S.F.,Sadeh,N.M.,(1996), “Modeling Supply Chain Dynamics: A Multiagent Approach”,DecisionSciences.  Tan, B., Aksin, Z., (2004), “Vestel: Improving Distribution Management and 3PL Relations”, Case StudyforKocUniversity.  Vierck, K.R., (1981), “Decision Support Systems: An MISManagerPerspective”,MISQuarterly,pp.35‐48.

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