SCM Exam 2

Goal of waiting line management

Balance the cost paid by the customers (time) with the cost paid by the company (money spent to maintain the system).

3 Parts of a waiting line system

input source - people that might want service

waiting line - area in which customers wait for service

Service Facility - area in which customers receive service

4 Managerial Considerations in Queues

Customers

waiting lines

employees

service facilities

Queue

The line

Channel

line; often refers to number of lines available at each step

Phase

a single-step process

Finite vs Infinite populations

number of possible customers is limited

number of possible customers is very high or even unlimited

Balking

leaving without even trying or ever being in the line

Reneging

leaving after waiting for a while in line

Jockeying (Line jumping)

when customer is in one line but then decides to switch to another line

Arrival (Lambda) rates

Number of customers arriving per unit of time

1/inter arrival time

Service (Mu) rates: define and calculate

Number of customers that will be served per unit of time

1/service time

Service utilization factor (Rho)

the percentage of time the server is busy

lambda/mu

arrival rate/service rate

Wholesaler

Organizations that purchase goods from manufacturers in large amounts at discount prices then foes and sell them in retail stores

ex- eBay, Cotsco, Etsy, etc

Dropshipper

A company that gets an order and then relies on a third-party wholesaler to complete the order

Franchise

A company that owns the rights and the name then charges prospective franchisees to open an outlet under their name

Last Mile

Portion of the supply chain between the final inventory holding facility and the end consumer.

Planogram

a map of where every product goes on a retail store shelf

Retail Layouts

Customer flow - How do customers typically navigate the retail store?

Perimeter vs. Central - location of high-profit items, low-profit items ; location of high theft items

aisles - main avenues for major store traffic ; product aisles

VMI - Vendor Managed Inventory

Inventory planning is where the supplier accepts negotiated responsibilities that typically include monitoring and restocking

ex- monitor instore inventories / initiate orders to the store when inventory is low / bring the items into the store and onto the shelf / planogram the shelf space

Scan-based trading

A system where the supplier owns the inventory on the retail store shelf ;

Retail stores pay the supplier only when the product on the shelf is sold.

Reverse Logistics

The management of products that flow backward in the supply chain (upstream), away from the consumer and back in the direction of manufacturers.

Omni-channel retailing

retailers that are fully committed to engaging customers via catalogs, phone calls, websites, email, internet chat rooms, social media sites or mobile apps, and in stores

Chargebacks

Retail organizations penalize their suppliers/ vendors for any minor and significant supply chain offenses.

GOAL to motivate vendor compliance in the areas of on-time shipments, shipment accuracy, product quality, incorrect packaging, label errors

Supply chain integration

the bringing together of supply chain partners; the coordination of the business processes between these diverse supply chain partners

Obstacles to integration

poor communication

Unwillingness to share with supply chain partners

lack of trust between partners

Push system characteristics

Consumer demand is known as an expected; preemptively buy materials, manufacture finished goods, and deliver them to store

Pull system characteristics

System activated by consumer demand; will not make and store finished goods inventory, they wait for the order to start working on it

Pull System: Cost of miscalculations

• Design, Marketing (prediction of the amount of units sold)

• Supply Chain (Find suppliers: machines, employees, real estate logistic partner’s transportation)

• Finance ($$ needed to pay bills).

Postponement

A system that combines elements of both push and pull system

ex- Chipotle, subway, etc

Supply chain goals trade-offs

cost

quality

speed

Flexibility

Bullwhip effect

Fairly stable demand results in the rapid growth of the amount of inventory that is carried as one travels upstream in the supply chain;

Very high and very low supply levels
Despite fairly constant demand levels. THANKS TO Poor forecasting, Poor analysis, Poor communication

4 Causes of the bullwhip effect

• order batching - The company places large and infrequent orders from its suppliers

• Forward buying - customers buy more product than needed

• Rationing - Sometimes suppliers do not have enough inventory to satisfy the demand of all their customers

• Short gaming - customers only receive a fraction of their placed order

Order batching vs forward buying

• The company places large and infrequent orders from its suppliers

• customers buy more products than needed

Rationing vs. Shortage Gaming

• Sometimes suppliers do not have enough inventory to satisfy the demand of all their customers

• customers only receive a fraction of their placed order

Lead time gaming example from lecture

Medical Team

Order #1

The medical team needs medicine in week 8

Medicine arrives in week 10; medical team: “Unacceptable!”

Pharma company says: late delivery

The medical team says: late delivery
Pharma company reports 75% on-time delivery (OTD) across the global supply chain.

Order #2

Medical team needs medicine in week 6

gaming: “We need medicine in week 4.”

Medicine arrives in week 5

Pharma company says: late delivery

the medical team says: early delivery

Pharma company is NOW reporting: 40% OTD across their global supply chain

5 Methods for controlling bullwhip effect

• Everyday Low Pricing: suppliers resist the urge to have sales promotions, and instead, they offer their lowest prices everyday

• Vendor Management Inventory Systems: systems where buyers share inventory information with suppliers

• Information sharing: real-time information sharing between supply chain partners allows organizations to see transactions and inventory movements across the supply chain

• Improve buyer-supplier relationships: develop strong buyer-supplier relationships that result in the sharing of supply chain responsibilities

• Practice lean manufacturing: defects, waste, and a general lack of supply chain stability result in higher levels of uncertainty

EDLP - Everday Low Pricing

suppliers resist the urge to have sales promotions, and instead, they offer their lowest prices everyday

Lean manufacturing (Lean)

Production philosophy that strives to meet consumer demand and desires but with minimal inventory levels and minimal supply chain waste.

Rocks and water analogy

In supply chain management, we use this story to explain how companies use inventory to hide the weaknesses of a supply chain. Imagine that each rock represents a different supply chain weakness: Poor forecasting, high defect rates, unreliable suppliers, theft, unreliable shippers, etc. In each case, more inventory might help hide these weaknesses.

Imagine if a company removed the rock instead of hiding it with more water. In other words, imagine if they fixed the problem instead of hiding it with inventory. This is what companies that embrace lean systems try and do every day. Rather than hide from their problems, they would prefer to expose the problems and thus eliminate the threat of becoming an even bigger and more costly problem in the future.

Quality at the Source

empowering every employee to be a quality inspector and manager, having knowledgeable employees helps identify errors and act on change

Poka-Yoke (mistake proofing)

Lean companies find ways to eliminate some types of errors, in other words, it gets to the point in which it is impossible to commit an error

Profit motivations

Most companies decisions are directly or indirectly related to corporate profit; companies want to maximize profit

Global Brand strategy

As companies expand their supply chains globally, especially to new consumer markets, these companies must be prepared to deal with differences in:

- Packaging laws

- Accepted packaging conventions

- Environmental requirements

- Different distribution and retail systems

- Different consumer tastes and needs

- Laws that impact truck size

- Label requirements

Benefits and Risks of Utilizing External Partners

Speed

Expertise

Resource Utilization

Focus on Core Competencies

Insourcing

When a company uses its resources to deliver services

ex- ford manufactures their own cars

Outsourcing

When a company contracts an outside firm to perform services or operations that could be or were previously performed in-house

ex- Apple buying batteries from other companies

Offshoring

When a company moves manufacturing out of its home country, the company still owns the manufacturing facility, but it is not in its home country

Offshoring & Outsourcing

When a company uses a contractor in another country to perform services

Near-sourcing

Type of offshoring/ offshoring and outsourcing where the location of the manufacturing facility is relatively close to the location of the consumer

Contract manufacturers

A company that produces goods on behalf of another organization

EMS (Electrical Manufacturing Services) industry & benefits

Companies that can manufacture, assemble, test, service, package, and service electronic goods to another company.

Ex in class- Microsoft bought most of the Xbox assembling parts from an EMS

Infrastructure

The physical structures and equipment used to move goods; can also refer to the organization that supports the movement of goods

Longshoreman

Person that works at an ocean port; a person who loads and unloads cargo

Customs and Regulations Considerations

The government establishes customs agencies to control the goods that enter and leave the country; they monitor whether importers and exporters are adhering to the regulations established.

C-TPAT

A voluntary program developed by US Customs for companies importing goods to the US; it is voluntary but if you are not part of it your shipment will have to go through a longer line

3PL (Third-Party Logistics company)

A contractor that performs one or more logistics functions for their client to facilitate effective and efficient movement in the supply chain

Freight forwarder

A contractor that helps companies organize efficient and effective shipment of goods from one point in the supply chain to another

Customs house broker

A contractor that helps a client’s goods clear customs in a foreign country

FTZ - Free Trade Zone

Geographic area sanctions by the government where items are not under the control of customs authorities; finished goods can be re-exported without ever being inspected or taxed by customs officials

Duty Drawbacks

When you can ask for some of the tariff money back

• typically, 90% return of tariff

Bonded Warehouse

A building or secure area where you can hold goods that will require a tariff paid; goods can be manipulated here, and they can stay here for up to 5 years

Shipping documents – Three Purposes

• Transportation Documents - Documents are proof that the cargo was received

• Financial Documents - documents needed Whenever cargo changes hands, it is considered a crucial part of the supply chain process

• International Shipments Documents - documents needed when goods cross borders, customs officials look for this documentation to check for legal infractions

Four Common Logistics Documents

• Bill of landing - the most crucial shipping document ; 3 main purposes: the contract between shipper and carrier, receipt of goods for the shipper, and acts as a certificate of ownership

• Packing list - provides significant detail on what is being shipped

• Commercial Invoice - a vital document that provides a reasonable summation of the items being shipped, the parties involved, cargo values, and other information important to supply chain members and customs officials

• Certificate of Origin - certifies that the goods were, in fact, manufactured in the country specified.

Performance metric

A single performance measurement used to evaluate, motivate and improve performance

System of metrics

A collection of measurements used to evaluate a process, person, company, etc. from multiples perspectives

Common Measurement Pitfalls

Common errors companies often make

• managers fail to use the data

• blind belief in institutional metrics

• measuring selectively

• utilizing too many metrics

Managerial paralysis (Analysis Paralysis)

A situation where managers are inundated with data. The overflow of data slows decision-making and may even result in manager stalling or avoiding decision-making

KPIs

Key Performance Indicator

individual performance metrics identified by the company as being imperative to achieving the organization’s most important goals

KPI Drilldown

Allows managers to get more detailed view of the elements that might constitute or explain the KPI

Attributes of a good metric

List that guides in creating high-quality individual metrics;

easily understood

attainable

strategically oriented

easy to measure

corrective actions

Cheater proof

Consequences of poor metrics

• supply chain goals are not met

• poor output and bad decisions

• waste

• undesirable employee behaviors

• employee victimization

• decay in corporate culture

3 key attributes for a system of measurement

Effectiveness - measure of desired outcomes

Efficiency - measure of the resource used

adaptability - measure of the conditions under which the task was completed

Executive dashboards

A computer-generated visual representation of a company’s performance that is often available to executives on nearly any of their digital devices

BSC (Balanced Scorecard)

A performance management tool that focuses on both strategic activity and strategic outcomes. helps to look for problems before these problems impact financial results proactively

SCOR Model - Supply Chain Operations Reference model

Measurement tool that enables supply chain partners to track performance, communicate progress, and develop opportunities for improvement.

Supply Chain Analytics

Set of tools and methods that use supply chain data to help organizations answer some fundamental but essential questions

Supply Chain Mapping

The documentation of all the facilities, suppliers, customers, and other supply chain partners in a supply chain.

Descriptive Analytics

Supply chain metrics that report the past and/or present results of the supply chain.

Diagnostic Analytics

Supply chain metrics that attempt to explain why recent results may have occurred.

Prescriptive Analytics

Supply chain models that provide recommendations for different supply chain decisions, actions, or strategies.

Predictive Analytics

Supply chain models/forecasts that provide probabilities for different supply chain outcomes.

Internet of Things (IoT)

A network of objects that all have digital sensors; the digital sensors have processing capabilities that allow the objects to exchange data with other devices in the network

Supply Chain Optimization

An advanced form of analytics that uses historical data and real-time data to create a sophisticated inventory and resource plan to manage costs and meet demand.

Cognitive Supply Chain

A network that uses multiple technologies and tools like traditional analytics, IoT, machine learning and AI to predict, plan, execute, learn and communicate across the supply chain at a much faster pace than humans

Supply Chain Modeling

Simulations that explain an entire supply chain or a supply chain process.

Shrinkage Calculations