SCM 301 Exam 2

Decisions are based on

Decisions are based on

capital intensity

process flexibility

Capital Intensity

mix of equipment and labor

Process Flexibility

how easy it is to adjust the system for changes in design, volume, or technology

Benefits of the Right Process

increases productivity

reduces waste

increase profits

Two Main Factors that Influence Process Selection

how much volume does the process need to handle?

how much variety does the process need to handle?

Job Shop Process Type

high variety, low volume

mechanics

Batch Process Type

medium variety, medium volume

bakery

Assembly/Repetitive Process Type

low variety, high volume

Continuous Process Type

low variety, extremely high volume

gas pipelines

Project Process Type

extremely high variety, low volume

renovating a house

Repetitive Processing: Product Layout (assembly, continuous)

all products follow same or similar sequence

achieve large volume through standardization

organize equipment, activities for step-by-step flow

Intermittent Processing: Process Layout (job shop and services)

high degree of variety in job processing requirements

causes discontinuous workflow

activities, equipment organized by type or department

Fixed Layout (project)

large/bulky products, low volume, highly customized

equipment is transported to/products are built on-site

Two Primary Criteria for Process Selection of a Service

degree of customer contact

degree of customization

Warehouse Layout: two important considerations

frequency of orders or use of items

correlation between items

Retail Layout: two important considerations

traffic patterns and flow

way the layout influences customer attitude

Make-to-Order (job shop, batch)

when a customer orders a product, it is produced to their specifications

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

Make-to-Stock

products are sold to customer from finished goods inventory

Low Cost Producer

reduce production costs in low labor cost area

reduce transportation costs by locating near raw material providers

Differentiation Through Convenience

multiple locations (atms, service stations)

Decisions Impact

investment requirements

operating costs

revenues

operations in general

Site Selection Criteria: Manufacturing/Distribution

cost focus

transportation modes/cost

energy availability/costs

labor cost/availability/skills

building/leasing costs

Site Selection Criteria: Service/Retail

revenue focus

demographics

population

competition

traffic volume/patterns

customer access/parking

Factor Rating Method

includes qualitative and quantitative

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

Capacity

maximum load or ceiling on the output on operating unit can handle

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)

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

Measure of Capacity

availability of inputs (# of hospital beds)

rate of output (# of cans of coke produced)

Design Capacity

maximum designed output rate or service capacity

Effective Capacity

design capacity minus allowances for breaks, routine maintenance, planned absenteeism

Efficiency

actual output / effective capacity

Utilization

actual output / design capacity

Facility Design/Location

size and provision for expansion

distance to market

Product/Service Design and Product Mix

standardization of methods/material

Process Factors

output quality (how much need for inspection/rework)

process improvements (ways to increase productivity)

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)

Stage of Life Cycle

estimate the difference (and timing) of demand requirements during a product's life cycle

"Big Picture"

find the bottleneck operation

• operation with capacity lower than the capacities of other operations in the sequence

• bottleneck operation limits system capacity

Theory of Constraints

a constraint is something that limits the performance of a process or system in achieving its goals

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)

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

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

Supply Chain

sequence of organizations - their facilities, functions and activities - involved in producing and delivering a product or service

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

Logistics

movement of goods, services, information, and cash within a supply chain

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

Insourcing

you become someone else's outsourcer

Outsourcing

have someone else make your product

Offshoring

having someone else or yourself make a product over seas

Risk of Outsourcing

quality - having someone else does something for you it is going to be up to your standards

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

Risks in Supply Chain

disruptions in supply

quality issues

data security

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)

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

What is Cost of Goods Sold Made up of

60% purchased parts

In Retail, What is Inventory Made up of

90% cost of sales

Key Aspects of Procurement

cost of a good

quality of the goods

timing of deliveries

number of sources we buy from

Major Activities in Purchasing

identify sources of supply

negotiate contracts

issue purchase orders

evaluate suppliers

Vendor Analysis

criteria used to choose suppliers (lead time, flexibility, price, quality)

Supplier Audits

reviewing supplier adherence to requirements

Supplier Relationship Management

short-term transactions vs. long-term partnership

Leverage Items

high profit impact, low supply risk

exploitation of full purchasing power

targeted pricing strategies/negotiations

abundant supply

Strategic Items

high profit impact, high supply risk

development of long-term relationships

collaboration of innovation

natural scarcity

Non-Critical Items

low profit impact, low supply risk

product standardization

process efficiency

abundant supply

Bottleneck Items

low profit impact, high supply risk

low control of suppliers

innovation and product substitution and replacement

production-based scarcity

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

Inventory Management Decisions Effect Logistics

how much to hold

when to replenish

what form of inventory hold

where to hold

Square Root Rule

estimation of impact of changing the number of locations on inventory

Centralized Inventories

lower overall inventory

slower delivery

higher shipping costs

Decentralized Inventories

higher overall inventory

faster delivery times

lower shipping costs

Inventory Velocity

rate of which material moves through a supply chain

Higher Velocity

lower inventory holding costs

faster order fulfillment

faster goods turned into cash

Demand Variation

can cause inventory fluctuations to get out of control

Bullwhip Effect

inventory oscillations become progressively larger looking backwards through the supply chain

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)

Stockpiling

storing inventory to protect against seasonality in supply or demand

Production Support

storing parts and components to support a plant's operations

Break-Bulk , Consolidation , Cross-Docking

splitting shipments into individual orders and arranging local delivery to customers

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

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

Cross-Docking

multiple suppliers ship to warehouse and they split it apart from multiple suppliers and recombine them to shipments to multiple customers