Intro to Supply Chain Ch 8

What is Operations Management?

refers to managing the process of converting resources into goods and services, in alignment with the company's business strategy, as efficiently and effectively as possible while also controlling costs.

What varies by company and depends on the nature of the products or services in their portfolio?

Operations Management

What is Manufacturing?

To make or transform raw materials and components into a finished product, especially using a large-scale industrial operation.

Manufacturing includes what?

It includes all the machines, personnel, inventory handling, warehousing, facilities, and other resources necessary for the transformation.

What is Manufacturing Management?

It is the management of all the processes and resources involved in manufacturing.

What is LEAN?

It is an operating philosophy of waste reduction and value enhancement. It improves the supply chain "flow" by eliminating waste

What is Six Sigma?

It is a disciplined, statistical-based, data-driven methodology for identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes.

What is the difference between LEAN and Six Sigma?

Lean improves the supply chain "flow" by eliminating waste, while Six Sigma improves the supply chain "process" by reducing variation

LEAN and Six Sigma complement one another

true

Companies must develop a manufacturing strategy that ?

suits the type(s) of products they produce, their customers' expectations, and their strengths.

Manufacturing strategies can vary significantly depending on ?

the product and the customer requirements.

Developing a manufacturing strategy that suits a company's strengths is essential for ?

establishing and maintaining an effective supply chain.

What are the 4 Major Manufacturing Strategies?

1. Make-to-Stock (MTS)

2. Make-to-Order (MTO)

3. Assemble-to-Order (ATO)

4. Engineer-to-Order (ETO)

What is Make-to-Stock (MTS)?

It means manufacturing products for stock based on demand forecasts—push system.

Why is the biggest challenge of Make To Stock to avoid having excess inventory?

Because companies that operate with an MTS model tend to hold more inventory just in case they need it; therefore, they struggle to ensure that inventory levels don't get out of control.

What are two things to consider in Make To Stock?

— Since accurate forecasts will prevent creating excess inventory and avoid stockouts, the critical issue is how to forecast demands accurately.

— Most daily necessities such as foods, sundries, and textiles are MTS-type products.

What is Make-to-Order (MTO)?

It is a manufacturing strategy that starts the manufacturing process only after a customer's order is received.

Which strategy creates additional wait time for the customer to receive the product but allows customers to purchase products customized to their specifications?

Make-to-Order (MTO)

The MTO strategy relieves the problems of excessive inventory that is common with the ___?

Make-to-Stock strategy.

When is it not appropriate to use MTO?

• It is not appropriate for products where customers expect immediate availability/delivery. Example: Grocery items

• It is appropriate for highly configured products. Examples: aircraft, ocean vessels, bridges, or products that are very expensive to keep in inventory.

What is Assemble-to-Order (ATO)?

It is a manufacturing strategy where products ordered by customers are produced quickly and are customizable to a certain extent.

How is ATO a hybrid strategy?

Because it attempts to combine the benefits of both Make-to-Stock and Make-to-Order strategies, getting products into customers' hands quickly while allowing for some customization to take place.

How does ATO strategy work?

— The ATO strategy requires that the essential parts for the product are already manufactured but not yet assembled.

— Once an order is received, the parts are assembled quickly into the finished product, which is then sent to the customer.

— Example: Dell Laptop Computers

What is Engineer to Order (ETO)?

It is a manufacturing strategy in which the product is designed, engineered, and built to the customer's specifications after receipt of the order.

Which strategy is a more dramatic evolution of the Make-to-Order strategy?

Engineer-to-Order (ETO)

How does ETO work?

It involves building a unique product every time. There may be standard components from one product to another, but the finished product differs each time.

— Example: Customized piece of manufacturing equipment

In the ETO world, why can the cost of poor quality be very high?

Because the warranty costs and the cost of rework to replace an item in a complex assembly can seriously impact profit margins.

The manufacturing strategy defines what ?

It defines what cycle time (i.e., lead time) the customer will experience for delivery

What is the cycle time for MTS Strategy?

Customer Delivery Cycle

What is the cycle time for ATO Strategy?

Manufacturing Cycle

What is the cycle time for MTO Strategy?

Procurement Cycle

What is the cycle time for ETO Strategy?

Product Design

What are Manufacturing Processes?

Any manufacturing strategy involves developing a manufacturing process that will create the product as designed. These processes are determined based on product variety and volume.

What are the two categories for manufacturing processes?

1. Intermittent Processes - used to produce many products with different processing requirements in lower volumes.

Ex: Job Shop & Batch

2. Repetitive Processes - used to produce one or a few standardized products in high volumes.

Ex: Line Flow & Continuous Flow

Intermittent Processes -

used to produce many products with different processing requirements in lower volumes.

ex: Job Shop & Batch

Repetitive Processes -

used to produce one or a few standardized products in high volumes.

ex: Line Flow & Continuous Flow

What is the criteria for Job Shop Production (a.k.a., Project Production)?

− Creates a custom product for each customer

− One or small number of items produced, generally one unit manufactured at a time.

− High customization - Normally made to customer's specifications

− Often undertaken by small, specialist businesses

What are examples of Job Shop Production (a.k.a., Project Production)?

• Custom Home or Office Construction

• Ship Builders

• Specialty bakers

What is the criteria for Batch Production?

− Manufacturing a small fixed quantity of an item in a single production run.

− Each item in the batch goes through one stage of the production process before the whole batch moves on to the next stage.

− Aims to achieve better use of equipment

− Produces good quality products more economically than manufacturing them individually

What are examples of batch production?

• Bakeries, Dairies

• Textiles, Sneakers

• Furniture, appliance

• Pharmaceuticals, fragrances

What is the criteria for Line Flow Production (a.k.a., Mass Production)?

− Used for standardized products with a limited number of variations

− Product moves on an assembly line through various stages of production

− When one task is finished, the next task must start immediately. Therefore, the time taken on each task must be the same

What are examples of Line Flow Production (a.k.a., Mass Production)?

• Automobile Assembly

• Cell Phones

• Packaged goods

What is the criteria for Continuous Flow Production?

− Significant capital investment dedicated to one product

− Involves a series of inflexible, highly automated processes through which raw materials flow. Workers act as monitors rather than active participants.

− Typically, production runs 24 hours a day, with the result being production of a large quantity of finished product

What are examples of Continuous Flow Production?

• Oil and Gas refining,

• Chemical processing,

• Water,

• Paper

What are some other Manufacturing Topics?

1. Artificial Intelligence and Machine Learning

2. Automation and Smart Manufacturing

3. Internet of Things (IoT)

4. 3D Printing

What is Artificial Intelligence (AI)?

It is a branch of computer science that creates systems capable of simulating human intelligence, such as learning, reasoning, problem-solving, perception, and decision-making. It enables computers to process vast data to perform complex tasks

What is Machine Learning (ML)?

It is a subset of artificial intelligence (AI) that enables computers to learn patterns from data and make decisions or predictions without being explicitly programmed for every specific task. It uses algorithms to analyze large datasets, improve performance through experience, and make predictions or decisions on new data.

How does AI and Machine Learning drive better decision-making in manufacturing?

1. Predictive maintenance - AI analyzes sensor data to anticipate equipment failure, reducing downtime by servicing machines only when necessary.

2. Improve production quality - AI-powered visual inspection detects defects and process anomalies in real time with high accuracy, surpassing manual inspection capabilities.

3. Reduce waste - Improved process control reduces material waste and lowers carbon footprints.

What is Automation in manufacturing?

It refers to using technology and machines to perform specific tasks without requiring humans to intervene.

What is the goal of automation?

The goal is to increase efficiency, productivity, and accuracy, reducing manual labor and minimizing the risk of human error.

Automation in manufacturing is achieved by using programmable devices, systems, and tools such as AI, robots, and computer controlled machines.

What is Smart Manufacturing?

It involves using advanced, connected technologies to coordinate physical and digital processes within factories and across the supply chain, aiming to improve performance.

Technologies used in Smart Manufacturing include :

Cloud Computing, Machine Learning, Augmented Reality, Sensors, Automation, and Additive Manufacturing

What is The Internet of Things (IoT)?

It is a network of physical objects connected to the Internet that can communicate with each other and the cloud. These objects are

embedded with sensors, software, and other technologies, creating a vast network of interconnected devices that can collect and exchange data and perform various tasks autonomously.

IoT devices can be used in manufacturing to monitor what?

machine performance, detect equipment failures, and optimize production processes.

For example, sensors can monitor the temperature and humidity in a manufacturing facility, ensuring optimal conditions for producing sensitive products. They can also track inventory, manage supply chains, and monitor the quality of finished products.

What are the risks and challenges of IoT :

Cybersecurity and privacy risks

Interoperability issues

Data overload

Cost and complexity

Regulatory and legal challenges

What is 3D Printing?

It is an additive manufacturing process in which a physical object is created from a digital design by printing thin layers of material in liquid or powdered plastic, metal, or cement and then fusing the layers.

Fabricating an object layer by layer, according to a digital "blueprint," allows for what?

limitless customization and designs of more incredible intricacy.

Additive manufacturing creates new options for how, when, and where products and parts are fabricated which results in what?

less reliance on suppliers.

3D printing produces less waste and less need for ?

storage or warehousing.

What requires no tools or molds and enables complex designs to make their way to market faster than traditional processes?

3D Printing

What allows 3D printing to assist with prototypes, product enhancements, and both low-volume and high-volume production?

The speed and cost-effectiveness of it

What is Total Manufacturing Cost (TMC)?

It is the aggregate cost of producing products. It incorporates fixed and variable costs used in the product's manufacturing.

How is TMC generally expressed?

TMC is generally expressed as cost per unit by applying the total cost to the number of units produced. It includes material, labor and overhead costs.

What is the aggregate cost of producing and delivering products to your customers?

Total Cost of Manufacturing (TCM)

TMC incorporates___?

It incorporates TMC + procurement, storage, and delivery.

In TCM, as the volume goes up, what 3 things happen?

A. Manufacturing and Procurement costs go down due to economies of scale.

B. Inventory carrying and Warehousing costs go up.

C. Transportation costs go down but level off at high volumes as the shipping container gets filled and another container must be used.

History of LEAN: What happened in the 1910s?

Henry Ford's mass production line

- Switched from craft production to mass production

History of LEAN: What happened in the 1940s?

Taichi Ohno and Shigeo Shingo created the Toyota Production System (TPS)

- This involves "Just in time" & "automation with human touch"

History of LEAN: What happened in the 1988?

The term LEAN coined by John Krafcik

- He was an MIT grad student, CEO Hyundai America, CEO Waymo

History of LEAN: What happened in the 1990?

The book called The Machine that Changed the World came out which was written by James P. Womack, Daniel T. Jones, and Daniel Roos

In the 1990s, Supply Chain Management combined:

Quick Response - the rapid replenishment of a customer's stock by a supplier with direct access to data from the customer's point of sale.

Efficient Consumer Response (ECR) - a strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers.

Just-in-Time (JIT) - an inventory strategy to decrease waste by receiving materials only when and as needed in the production process, thereby reducing inventory costs.

Keiretsu Relationships - involves companies both upstream and downstream of a manufacturing process, remaining independent but working closely together for mutual benefit

Quick Response -

the rapid replenishment of a customer's stock by a supplier with direct access to data from the customer's point of sale.

Efficient Consumer Response (ECR) -

a strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers.

Just-in-Time (JIT) -

an inventory strategy to decrease waste by receiving materials only when and as needed in the production process, thereby reducing inventory costs.

Keiretsu Relationships -

involves companies both upstream and downstream of a manufacturing process, remaining independent but working closely together for mutual benefit

The combination of these concepts (Quick response, ECR, JIT, and Keiretsu Relationships) has emerged as the philosophies and practices known as ?

LEAN Manufacturing

LEAN is NOT ...?

a toolbox of methods, ideas, or methodologies, it is philosophy & culture

What is the goal of LEAN?

The goal of LEAN is the elimination of waste and the minimization of the amount of all resources used in the operation of a company

LEAN regularly results in:

Large cost reductions

Improved quality

Increased customer service

LEAN is standard in many industries

true

How is "value" defined in LEAN?

It is defined as the inherent worth of a product as judged by the customer and is reflected in its selling price and market demand.

What activities add value?

Any activity that increases the market, form, or function of the product/service adds value. Things for which the customer is willing to pay.

Value Added Process -

Process steps transform or shape a product or service, which is eventually bought by a customer.

Non-Value-Added Process -

Process steps that take time, resources, or space but do not transform or shape a product or service nor bought by a customer.

Value-Added Activities:

Transform material or information that is desired

Customer wants it and is willing to pay for it

Done right the first time

Non-Value-Added Incidental Waste:

No value created but

required by current thinking

required by process limitations

required by current technology

required by current regulations

Non-Value-Added Pure Waste:

Unnessary, consumes resources and creates no value for the customer

Could and should be stopped, would be invisible to the customer

LEAN is composed of what three components working in unison?

A. LEAN Manufacturing

B. Respect for People

C. Total Quality Management

What is used in manufacturing processes that is also used for lean supply chains ?

LEAN Manufacturing tools, techniques, and principles that have been proven to be effective at driving waste out of the manufacturing process

What are the steps of LEAN Manufacturing and Supply Chains?

1. Focus on satisfying customer demand

2. Communicate demand forecasts and production schedules throughout the supply chain

3. Quickly move products through the production system

4. Optimize inventory levels across the supply chain

5. Increase the value, capabilities, and flexibility of the workforce through cross-training

6. Extending collaboration and alliances beyond just 1st tier suppliers and customers to include 2nd and 3rd tier suppliers and customers.

What are the elements of LEAN Manufacturing?

1. Waste Reduction

2. LEAN Layouts

3. Inventory, Setup Time, & Changeover Time Reduction

4. Small Batch Scheduling and Uniform Plant Loading

5. LEAN Supply Chain Relationships

6. Workforce Empowerment

7. Continuous Improvement

What is Waste Reduction in LEAN Manufacturing?

Firms reduce costs and add value by eliminating waste from the

production system.

Waste encompasses wait times, inventories, material and

people movement, processing steps, variability, and other

non-value-adding activities.

What are the 8 Waste Categories?

1. Defects - Work not done right the first time, such as scrap and rework.

2. Overproduction - Producing sooner, faster, or in greater quantities than customer demand

3. Waiting - People or parts that wait for a work cycle to be completed

4. Non-Utilized Talent - Not using employees' full intellectual contribution.

5. Transportation - Unnecessary movement of materials or parts between processes

6. Inventory - Raw material, WIP, or finished goods which is not having value added to it

7. Motion - Unnecessary movement of people or multiple hand-offs

8. Extra-Processing - Processing beyond the standard required by the customer

In LEAN waste reduction, what percentage of the process steps or activities are value added?

10%

Reducing wastes consequently results in:

Reduced cycle times

Greater throughput

Better productivity

Improved quality

Reduced costs

Implement LEAN to reduce waste can...?

can improve customer satisfaction and give the company a competitive advantage!!

What is LEAN Layout?

A facility design strategy that minimizes waste, reduces material handling, and optimizes flow to improve productivity and safety.

Are very visual (lines of visibility are unobstructed), with operators at one processing center able to monitor work at another

In LEAN Layout, you should develop manufacturing cells, which means?

─ Processing similar parts or components, saving duplication of equipment and labor

─ Are often U-shaped to facilitate easier operator and material movements

Some inventory may be necessary, but excess inventory is a ?

waste

Why is excessive inventory a waste?

Because excess inventory takes up space and costs money to hold, maintain, protect, secure, and insure.

It ties up financial capital, which could be used for other aspects of the business.