equipment is transported to/products are built on-site
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Two Primary Criteria for Process Selection of a Service
degree of customer contact
degree of customization
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Warehouse Layout: two important considerations
frequency of orders or use of items
correlation between items
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Retail Layout: two important considerations
traffic patterns and flow
way the layout influences customer attitude
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Make-to-Order (job shop, batch)
when a customer orders a product, it is produced to their specifications
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Assembly-to-Order (assembly, job shop, batch)
when a customer orders a product, it is produced from a standard set of modules and components to their specifications
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Make-to-Stock
products are sold to customer from finished goods inventory
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Low Cost Producer
reduce production costs in low labor cost area
reduce transportation costs by locating near raw material providers
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Differentiation Through Convenience
multiple locations (atms, service stations)
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Decisions Impact
investment requirements
operating costs
revenues
operations in general
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Site Selection Criteria: Manufacturing/Distribution
cost focus
transportation modes/cost
energy availability/costs
labor cost/availability/skills
building/leasing costs
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Site Selection Criteria: Service/Retail
revenue focus
demographics
population
competition
traffic volume/patterns
customer access/parking
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Factor Rating Method
includes qualitative and quantitative
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Center of Gravity Method
determines a location that minimizes shipping costs or travel time to destinations
often used with fire departments, schools, and distribution centers
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Capacity
maximum load or ceiling on the output on operating unit can handle
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Key Questions in Capacity Planning
what kind of capacity is needed? (decided by type of products/services)
how much is needed to match demand? (forecasting)
when is it needed? (forecasting)
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Importance of Capacity Planning
determines if system's rate of output can support future demand
affect operating costs
major determinant of initial product cost
affect delivery speed
usually long-term commitment of resources
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Measure of Capacity
availability of inputs (# of hospital beds)
rate of output (# of cans of coke produced)
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Design Capacity
maximum designed output rate or service capacity
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Effective Capacity
design capacity minus allowances for breaks, routine maintenance, planned absenteeism
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Efficiency
actual output / effective capacity
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Utilization
actual output / design capacity
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Facility Design/Location
size and provision for expansion
distance to market
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Product/Service Design and Product Mix
standardization of methods/material
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Process Factors
output quality (how much need for inspection/rework)
process improvements (ways to increase productivity)
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Factors to Consider when Perform In-House or Outsource
available capacity
expertise (do we have it? do we want it?)
quality considerations
nature of demand (high, stable demand = in-house) (wide fluctuations or small orders = outsource)
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Stage of Life Cycle
estimate the difference (and timing) of demand requirements during a product's life cycle
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"Big Picture"
find the bottleneck operation
operation with capacity lower than the capacities of other operations in the sequence
bottleneck operation limits system capacity
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Theory of Constraints
a constraint is something that limits the performance of a process or system in achieving its goals
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Bottleneck is One of These Constraints
market (insufficient demand)
resource (too little of one or more of workers, equipment, or space)
material (too little of one or more materials)
financial (insufficient funds)
supplier (unreliable, long lead time, standard quality)
knowledge or competence (know-how or skill missing or incomplete)
policy (laws or regulations interfere)
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TOC 5-Step Process: Optimizes System in Face of Bottleneck
identify the biggest constraint
run the operation to achieve maximum benefit, given the bottleneck's capacity
make sure other portions of the process support the decision made in step two
analyze how to overcome the constraint
repeat
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What Keeps TOC from Working?
incorrectly identifying the bottleneck
maximizing output in individual departments instead of considering the bottleneck
lack of communication about how to optimize the bottleneck
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Supply Chain
sequence of organizations - their facilities, functions and activities - involved in producing and delivering a product or service
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Supply Chain Management
strategic coordination of business functions within a business organization and throughout its supply chain for the purpose of integrating supply and demand management
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Logistics
movement of goods, services, information, and cash within a supply chain
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Key Aspects of Supply Chain Managment
determining appropriate level of outsourcing
managing procurement
managing suppliers
managing customer relationships
being able to quickly identify problems and respond to them
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Insourcing
you become someone else's outsourcer
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Outsourcing
have someone else make your product
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Offshoring
having someone else or yourself make a product over seas
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Risk of Outsourcing
quality - having someone else does something for you it is going to be up to your standards
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Benefits of Outsourcing
frees up equipment from being updated
having employees on your books
other company assumes risk of fluctuations of demand and hold the capacity
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Risks in Supply Chain
disruptions in supply
quality issues
data security
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Risk Responses in Supply Chain
supplier relationships (foster partnership w/other companies so one one backstabs and creates long-term contracts)
supply chain visibility (sharing info across supply chain between suppliers and buyers)
event-response capability (developing ability to take action when an event happens)
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Ethical Issues in Supply Chain
bribery
greenwashing (claiming eco friendly when isn't)
ignoring health, safety, and environmental standards
violating worker's basic rights
mislabeling country of orgin
selling goods abroad that are banned at home
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What is Cost of Goods Sold Made up of
60% purchased parts
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In Retail, What is Inventory Made up of
90% cost of sales
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Key Aspects of Procurement
cost of a good
quality of the goods
timing of deliveries
number of sources we buy from
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Major Activities in Purchasing
identify sources of supply
negotiate contracts
issue purchase orders
evaluate suppliers
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Vendor Analysis
criteria used to choose suppliers (lead time, flexibility, price, quality)
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Supplier Audits
reviewing supplier adherence to requirements
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Supplier Relationship Management
short-term transactions vs. long-term partnership
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Leverage Items
high profit impact, low supply risk
exploitation of full purchasing power
targeted pricing strategies/negotiations
abundant supply
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Strategic Items
high profit impact, high supply risk
development of long-term relationships
collaboration of innovation
natural scarcity
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Non-Critical Items
low profit impact, low supply risk
product standardization
process efficiency
abundant supply
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Bottleneck Items
low profit impact, high supply risk
low control of suppliers
innovation and product substitution and replacement
production-based scarcity
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Components of the 'Perfect Order'
delivered right products on time
processed correctly, a complete and undamaged shipment
shipped using the customer's preferred method
provided advanced shipping notification of delivery
customers could track the order during shipment
delivered on time and undamaged
listed the correct billing for services provided
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Inventory Management Decisions Effect Logistics
how much to hold
when to replenish
what form of inventory hold
where to hold
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Square Root Rule
estimation of impact of changing the number of locations on inventory
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Centralized Inventories
lower overall inventory
slower delivery
higher shipping costs
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Decentralized Inventories
higher overall inventory
faster delivery times
lower shipping costs
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Inventory Velocity
rate of which material moves through a supply chain
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Higher Velocity
lower inventory holding costs
faster order fulfillment
faster goods turned into cash
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Demand Variation
can cause inventory fluctuations to get out of control
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Bullwhip Effect
inventory oscillations become progressively larger looking backwards through the supply chain
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Asses and Select Transportation Modes
speed (elapsed time required to move from point of origin to destination)
availability (ability to service any possible location)
dependability (the variance in the expected delivery times)
capability (ability to handle any type of product and or size of load)
frequency (number of scheduled movements that can be arranged by a shipper)
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Stockpiling
storing inventory to protect against seasonality in supply or demand
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Production Support
storing parts and components to support a plant's operations
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Break-Bulk , Consolidation , Cross-Docking
splitting shipments into individual orders and arranging local delivery to customers
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Break-Bulk
supplier ships entire shipment to warehouse for everything the customer of that company bought from the supplier and the warehouse breaks it down and ships it locally
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Consolidation
multiple suppliers ship to warehouse/distribution centers where warehouse combines shipment from a number of sources into on larger shipment that goes to a single location
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Cross-Docking
multiple suppliers ship to warehouse and they split it apart from multiple suppliers and recombine them to shipments to multiple customers
Studied by 26 people
