Intro to Supply Chain Management Exam 1

Supply Chain Planning

Element in SCM responsible for determining how best to satisfy the requirements created by the Demand Plan.

objective: Balance the supply and demand in that benefits the financial and service objectives of the company

Long-Range

usually takes over a year, involves actions such as the construction of facilities and major equipment purchases

ex: Aggregate Production Plan (APP)
Level: executive

Intermediate Range

planning for about 3-18 months, shows the quantity and timing of end items

ex: Master Production Schedule
level: mid level

Short-range

planning cant exceed 3 months, detailed process for components and parts to support the master production schedule

ex: Materials Requirement Planning (MRP)
level: planner, 1st line supervisor

Business planning

Has a long term focus, provides the company's direction and objections for the next 2 to 10 years

- reevaluated annually

Aggregate Production Planning

planning process that translates annual business plans, marketing plans, and demand forecasts into a production plan for a product family in a plant or facility.

- at least a year of planning

purpose: establish production rates

goals: meet demand, use capacity efficiently, meet inventory policy, minimize costs

influencing demand

Do this so demand aligns with available production capacity

ex:airline weekend discounts

backordering

Accept that demand will be greater than supply capabilities during high demand periods and allow some demand to go unfulfilled. However, this action may create a negative customer experience and impact the company in both the short and long term.

counter-seasonal product mixing

develop a product mix with seasonal trends that level the
cumulative required production capacity

What is Supply Chain?

Any organization anywhere in the world, offering a product or a service has a supply chain

consists of the flow of materials and products

Links in the supply chain

requires suppliers, manufactures and customers

logistics

includes managing all of the inventory that flows through the supply chain, any warehousing needed to temporarily store that inventory, and of course all of the modes of transportation that we use to move that inventory from the point of origin to the destination, such as by Truck, Rail, Air, Water, and even Pipeline.

Supply Chain Tiers

Suppliers
- tier 1: direct supplier
-tier 2: indirect supplier

Customers
- tier 1: direct customer
-tier 2: indirect customer

Total Market Stockout

When customers sell all remaining inventory

Supply Chain Management

coordination of the network of otherwise independent trading partners, (meaning the suppliers, manufacturers and customers), who are creating a desired product or service, and then moving it through the supply chain out to customers, when and where the customer wants it.

Goals of Supply Chain Management

- increase customer service
- reducing inventory
- reducing operational expenses

SCOR Model (Supply Chain Operations Research)

plan -> source -> make -> deliver

Each trading partner has to follow these rules in order to satisfy the demand for product / service

Plan

establishes the parameters within which the supply chain will operate.

includes the determination of marketing and distribution channels, promotions, quantities, timing, inventory and replenishment policies, and production policies.

Source

process of identifying the suppliers that provide the materials and services needed for the supply chain to deliver the finished product(s) desired by the customer(s).

Make

series of operations performed to convert materials into a finished product.

Delivery

also known as the Logistics phase, this is the part of supply chain management that oversees the planning and execution of the forward flow of goods and related information between various points in the supply chain to meet customer requirements.

Return

(Reverse Logistics)→ point of consumption back to the point of origin for repair, recycling, or disposal.

The 4 Foundations of Supply Chain Management

- Operation Management: internal resources
- Supply management: supplies and suppliers
- logistics Management: all movement and storage if products
-Integration: enabling systems, completion of all 3 previous elements

Benefits of SCM

improved customer service, increased revenue, lower costs, less delays, etc

Demand

the need for a particular product or component. The demand could come from various sources such as a customer order, a forecast, the manufacturing of another product, etc.

independent demand: finished product
dependent demand: components and parts

Forecast

An estimate of future demand

uses data (mathematical)

Forecast Error

the difference between the actual demand and the forecast demand. The error can be quantified as an absolute value or as a percentage.

Mean Absolute Deviation (MAD)

measures the size of the forecast error in units.

Forecast Bias

is a consistent deviation from the mean in one direction; either high or low.

Bullwhip effect

Forecasts are based on statistics, rarely 100% accurate, therefore companies carry an inventory buffer called safety stock

Sales & Operations Planning

A process to develop tactical plans that provides management the ability to strategically direct the business to achieve a competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain.

Master Production Scheduling

represents what the company plans to produce expressed in specific product configurations, quantities, and dates.

statement of production not demand
horizon: 3-18 months

Available to Promise (ATP)

A calculation to provide a response to customer order inquiries, based on product availability

Time Fencing

Even small changes in the MPS can cause major changes in the detailed production schedule, creating nervousness and instability throughout the organization

Firm time fence: the point when changes can no longer be made automatically by the planning system.

Planned Time Period: The planning system is free to create or make changes to planned orders in this time period based on the data and planning logic determined by the company.

Basic Production Strategies

- Level Production Strategy
- Chase Production Strategy
- Hybrid Production Strategy

Level Production Strategy

Maintains a constant production rate and allows inventory and backlog to vary according to fluctuating demand.

best in make to stock

Chase Production Strategy

Adjusts the production rate and capacity to exactly match demand.

best for make to order firms

Hybrid Production Strategy

Sets a baseline production rate based on a stable core workforce, and then uses other short-term means, such as overtime, subcontracting and part-time labor to manage short-term fluctuations in demand.

Material Requirements Planning (MRP)

A computer-based materials management tool that calculates the exact quantities, need dates, and planned order releases for all the component parts and materials required to manufacture a product.

Bill of Materials

document that shows an inclusive listing of all raw materials, component parts, and assemblies making up the final product.

Gross Requirement

a time phased requirement prior to netting out on hang inventory and lead time

Net Requirements

Gross requirement for period minus current on-hand inventory.

Projected Available Inventory

Beginning inventory minus gross requirements, plus scheduled receipts plus planned receipts from planned order releases

Planned Order Release

– A specific order for a specific item and quantity to be released to the shop or to the supplier.

Firmed Planned Order

order that can be frozen in quantity and time so that the MRP computer logic cannot automatically change when conditions change

Scheduled receipt

A committed order awaiting delivery for a specific period

Lead Time

The time it takes to process and prepare material, produce the product, and transport it to the customer

Time Bucket

Unit of time (days, weeks, etc)

Planning Factor

The number/quantity of each component or material needed to produce a single unit of the parent item

MRP Explosion

The process of converting a parent item’s planned order releases into component gross requirements

Pegging

Relates the gross requirements for a component part to the planned order releases of the parent item, so as to identify the source(s) of the item’s gross requirements. Pegging can be thought of as active where-used information.

Safety Stock

a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. Over planning supply versus demand can be used to create safety stock.

capacity

the maximum amount of work that an organization is capable of completing in a given period.

Resource Requirement Planning (RRP)

Long range capacity planning module

Rough cut Capacity Planning

Medium range capacity planning module used to check the feasibility of the MPS.

Capacity Requirement Planning

Short range capacity planning module used to check the feasibility of MRP.

Distribution Requirement Planning

A time-phased finished good inventory replenishment plan in a distribution network.

Advanced Planning and Scheduling (APS)

process by which resources and capacity are optimally allocated to meet demand.

Enterprise Requirements Planning Systems (ERP)

Information system connecting all the functional areas and operations of an organization via common software infrastructure and database.

Sharing inför with each other

inventory

the quantities of goods and materials that are held in stock.

Company biggest asset

Categories of Inventory

raw materials: Purchased items or extracted materials that are converted via the manufacturing process into components and products.

work in process:A good or goods in various stages of completion throughout the plant

finished goods:products are available for sale and/or shipment to the customer.

maintenance, repair, operating (MPO):Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations

Functions of Inventory

○ 1. To meet Customer Demand (cycle stock)
○ 2. To buffer against uncertainty in demand and or supply (safety stock)
○ 3. To decouple supply from demand (strategic stock)
○ 4. To decouple dependencies in the supply chain

Cycle Stock

inventory to satisfy immediate demand

Strategic Stock

additional stock beyond safety stock, used for specific purposes

cost related to inventory

direct
indirect
variable
fixed
carrying
order

order cost

preparation
transportation
receipt
material handling

carrying cost

capital
taxes
insurance
obsolescence
storage