Final for supply chain

What is Operations and Supply Chain
Management?

The design, operation, and improvement of the systems that create
and deliver the firm’s primary products and services
Operations and Supply Chain Management (OSCM) is concerned
with the management of the entire product production or service
delivery system

Operations and Supply Chain Processes

Planning, Sourcing, Making, Delivering, Returning

Planning

processes needed to operate an existing supply chain
strategically

Sourcing

selection of suppliers that will deliver the goods and services
needed to create the firm’s product. A set of pricing, delivery, payments, and
partner relationship metrics needed

Making

producing the major product or providing the service

Delivering

logistics processes such as selecting carriers, coordinating the
movement of goods and information, and collecting payments from
customers

Returning

processes for receiving worn-out, defective, and excess
products back from customers

Pure goods

Purely goods, just like the name suggests
Tangible
Less interaction with customers
Often homogeneous
Not perishable – can be inventoried
Examples: Food products, chemicals, mining

Core goods

Goods with services built into them
Tangible
Less interaction with customers
Often homogeneous
Not perishable – can be inventoried
Examples: Appliances, Automobiles, Data storage systems

Core services

Services with goods built into them
Intangible
Interaction with customer required
Inherently heterogeneous
Perishable/time dependent
Defined and evaluated as a package of
features
Examples: Hotels, Airlines, ISPs,

Pure services

Purely services just like the name suggests
Intangible
Interaction with customer required
Inherently heterogeneous
Perishable/time dependent
Defined and evaluated as a package of
features
Examples: University, Medical, Investment

Efficiency

Doing something at the lowest possible cost

Effectiveness

Doing the right things to create the most value for
the customer

Triple Bottom Line

Social responsibility, Economic prosperity, Environmental stewardship

Social responsibility

business practices should be fair to labor, the community, and the region where the firm conducts business

Economic prosperity

shareholders must be compensated via a competitive return

Environmental stewardship

the company should protect the environment as much as possible

Competitive Dimensions

Cost or Price, Quality, Delivery Speed, Delivery Reliability, Coping with Changes in Demand, Flexibility and New-Product Introduction Speed, Other Product-Specific Criteria

Order Winner

are criteria that differentiate the products or
services of one firm from those of another
Features that customers use to determine which product to
ultimately purchase
Example: Color of iPhone

Order Qualifier

are screening dimensions that permit a firm’s
products to be considered as possible candidates for purchase
Features customers will not forego
Example: Charging port for iphone

Laws of Forecasting

1.Forecasts are always inaccurate and should thus include both the expected value of the forecast and a measure of forecast error
2.Long-term forecasts are usually less accurate than short-term forecasts
3.Aggregate forecasts are usually more accurate than disaggregate forecasts
4.In general, the farther up the supply chain a company is, the greater is the distortion of information it receives

Decoupling points

occur when inventory is positioned in the supply chain to allow processes or entities to operate independently

Qualitative Forecasting Techniques

Generally used to take advantage of expert knowledge
Useful when judgment is required, when products are new, or if the firm has little experience in a new market
Examples of techniques:
Market research
Panel consensus
Historical analogy
Delphi method

Quantitative Forecasting Techniques

Data-based mathematical process that sales teams use to understand performance and predict future revenue based on historical data and patterns
Examples of techniques:
Time series analysis
Causal relationships
Simulation

Capacity

the ability to hold, receive, store, or accommodate

Best operating level

the level of capacity for which process
was designed and defined as a volume of output at which
average unit cost is minimized

Capacity utilization rate

a measure of how close the firm is to its best
possible operating level

Economies of Scale

the idea that as a plant gets larger and volume
increases, the average cost per unit drops

Diseconomies of Scale

at some point, the plant becomes too large and
average cost per unit begins to increase

Plant within a plant

divides existing large plants into separate smaller plants so that it can be the most efficient at a limited set of production objectives

Decision tree

is a schematic model of the sequence of steps
in a problem – including the conditions and consequences of
each step
help analysts understand the problem and assist
in identifying the best solution

components:
Decision nodes – represented with squares
Chance events – represented with circles
Branches – links between nodes, show the choices available
to the decision maker

Project (chapter 4)

A series of related jobs, usually directed toward some major output and requiring a significant period of time to perform

Critical Path

The sequence(s) of activities in a project that form(s) the longest chain in terms of their time to complete

Slack time

The time that an activity can be delayed without delaying the entire project; the difference between the late and early start times of an activity

Early start/Early finish schedule

A project schedule that lists all activities by their early start times

Late start/Late finish schedule

A project schedule that lists all activities by their late start times. This schedule may create savings by postponing purchases of materials and other costs associated with the project

Make-To-Stock

A production environment where the customer is served "on-demand" from finished goods inventory

Assemble-to-Order

Preassembled components, subassemblies, and modules are put together in response to a specific customer order

Make-to-Order

The product is built directly from raw materials and components in response to a specific customer order

Engineer-to-Order

Firm works with the customer to design and then make the product

Organization of production processes

Project, Workcenter, Manufacturing cell, assembly line, continuous process

Project

the product remains in a fixed location, equipment is moved to the product

Workcenter

similar equipment or functions are grouped together

Manufacturing cell

a dedicated area where products that are similar in processing requirements are produced

Assembly line

work processes are arranged according to the progressive steps by which the product is made

Continuous process

(assembly line only) the flow is continuous, such as with liquids

Service package

a bundle of goods and services that is provided in some environment

Poka-yokes

procedures that block the inevitable mistake from becoming a service defect ("avoid mistakes")

Sales and operations planning

is a process that helps firms
provide better customer service, lower inventory, shorten
customer lead times, stabilize production rates, and give top
management a handle on the business
trade-offs in the number of workers employed, work hours, inventory, and shortages

Tactical capacity resources

Current physical capacity (plant and equipment) is usually nearly fixed in the short run

Production planning strategies

the plans for meeting demand
includes: Chase strategy, Stable workforce, Level strategy

Chase strategy

Match the production rate by hiring and laying off employees
Must have a pool of easily trained applicants to draw on

Stable workforce

Vary the number of hours worked through flexible work
schedules or overtime

Level Strategy

Maintain a stable workforce working at a constant output rate

Pure strategy

A simple strategy that uses just one option, such as hiring and firing workers, for meeting demand

Mixed strategy

A more complex strategy that combines options for meeting
demand

Master production schedule

deals with end items (finished goods items sold to customers) – major input to the MRP process To determine an acceptable feasible schedule to be released to the shop, trial master production schedules are tested using the MRP program

Material Requirements Planning

The logic that ties production functions together from a
material planning and control view
A logical, easily understood approach to the problem of
managing the parts, components, and materials needed to produce end items
Dependent demand drives the system
How much of each part to obtain?
When to order or produce the parts?

MRP explosion

The logic used by MRP is often referred to as explosion calculations, since the requirements shown in the MPS are “exploded” into detailed schedules for each item managed by the system

Bill of Materials

Complete list of components for a manufactured or assembled item

Lead time offsetting

Since there is typically a lead time associated with each order, the next step is to find a schedule for when orders are actually released. Offsetting the planned-order receipts by the required lead time does this. This schedule is referred to as the “planned-order release.”"

Dimensions of design quality

Performance, Features, Reliability/durability, Serviceability, Aesthetics, Perceived Quality

Performance

Primary product or service characteristics

Features

Added touches, secondary characteristics

Reliability/Durability

Consistency of performance over time, probability of failing, useful life

Serviceability

Ease of repair

Aesthetics

Sensory characteristics

Perceived Quality

Past performance and reputation

Four costs of quality

Appraisal costs, Prevention costs, Internal failure costs, External failure costs

Appraisal costs

Costs of the inspection, testing, and other tasks to ensure that the
product or process is acceptable
example: inspecting materials delivered by a supplier

Prevention costs

Sum of all the costs to prevent defects
example: employee training and certification

Internal failure costs

Costs for defects incurred within the system: scrap, rework, repair
example: product rework

External failure costs

Costs for defects that pass through the system
example: product returns

The International Organization for Standardization (ISO)

has developed specifications that define best-quality practices and are accepted internationally

ISO 9000

relates to manufacturing and business-to-business processes

ISO 14000

is concerned with environmental management

ISO 26000

encourages organizations to discuss social responsibility issues and possible actions with relevant stakeholders

Variation caused by identifiable factors is called

assignable variation and can possibly be managed

Variation inherent in a process is called

common or random variation

Reasons for holding more inventory

To maintain independence of operations, To meet variation in product demand, To allow flexibility in production scheduling, To provide a safeguard for variation in raw material delivery time, To take advantage of economic purchase order size, Many other domain specific reasons

Reasons for holding less inventory

High holding costs tend to favor low inventory levels

Independent demand

The demands for various items are unrelated to each other

Dependent demand

The need for any one item is a direct result of the need for some other item, usually an item of which it is a part

Inventory Costs

Holding (or carrying) costs, Setup (or production change) costs, Ordering costs, Shortage costs

Lean Logic

Lean is based on the logic that nothing will be produced until it is needed, A sale pulls a replacement from the last position in the system, This triggers an order to the factory production line, Each upstream station then pulls from the next station further upstream

Value Stream

These are the value-adding and non-value-adding activities required to design, order, and provide a product from concept to launch, order to delivery, and raw materials to customers

Waste Reduction

The optimization of value-adding activities and elimination of non-value-adding activities that are part of the value stream

8 lean wastes

Waste from overproduction, Waste of waiting time, Transportation waste, Inventory waste, Processing waste, Waste of motion, Waste from product defects, Talent waste

Kanban

The kanban card is an example of this type of system

Bullwhip effect

phenomenon of variability magnification as we move from the customer to the producer in the supply chain

Total cost of ownership

an estimate of the cost of an item that includes all the costs related to the procurement and use of an item, including any related costs in disposing of the item

Six different transportation modes

Water, Rail, Highway, Hand Delivery, Pipeline, Air

Water

• Limited to certain geographic areas
• Ocean, inland waterway system, coastal waters
• Very large loads at very low cost
• Slowest
• Dominant in global trade
• Containers

Rail

• Move commodities over large distances

• High fixed costs in equipment and facilities

• Scheduled to maximize utilization

• Transportation time can be long

• Trains ‘built’ not scheduled

Highway

Cost components
1.Fixed infrastructure and equipment
2.Labor and fuel
3.Variable depending on passenger/cargo
• Key issues
￿ Location/number of hubs
￿ Fleet assignment
￿ Maintenance schedules
￿ Crew scheduling
￿ Prices and availability

Air

Cost components
1.Fixed infrastructure and equipment
2.Labor and fuel
3.Variable depending on passenger/cargo
• Key issues
Location/number of hubs
Fleet assignment
Maintenance schedules
Crew scheduling
Prices and availability

Pipeline

High fixed cost
• Primarily for crude petroleum, refined petroleum products, natural gas
• Best for large and stable flows
• Pricing structure encourages use for predicable component of demand

Hand Delivery

• Small packages up to about 150 pounds
• Expensive
• Rapid and reliable delivery
• Small and time-sensitive shipments
• Provide other value-added services
• Consolidation of shipments a key factor

Intermodal

• Use of more than one mode of transportation to move a shipment
• Grown considerably with increased use of containers
• May be the only option for global trade
• More convenient for shippers – one entity
• Key issue – exchange of information to facilitate transfer between different modes