Intro Supply Chain Exam 1 Rutgers Spiegle

Logistics

Plans, implements, controls flow/storage of goods from point of origin to point of consumption (in a single organization)

Logistic activities:

Inventory management, warehousing, distribution, transportation

Also includes aspects of marketing, new product development, finance, customer service order to cash

Flow of products

Raw materials to interm suppliers to manufacturers

to distributors to retailers to customers

Nodes connected by:

transportation and warehousing

Nodes integrated through

information and planning

Warehousing/Distribution

FACILITIES that allow companies to store materials and finished products to receive, breakdown, repackage, and ship materials out to a manufacturing location or to a customer.

Supply Chain Management

COORDINATION of a network of independent organizations (trading partners) CREATING product and MOVING it from suppliers to customers when/where wanted. Market for benefit of all companies in network.

What does supply chain management do?

DELIVERS VALUE by managing processes - partners collaborate efficiently, effectively, cost-consciously

What is goal of supply chain?

increase customer service while reducing inventory investment and operating expenses

Two reasons firms implement supply chain management?

Achieve cost savings and better coordinate resources

Modes of transportation

truck, rail, air, pipeline, water

intermodal

any combo of transportation for single shipment

Inbound transportation

suppliers: suppliers to manufacturer

outbound transportation

customers: wholesaler/distributor to retailer to customer

SC disruption

supplier cannot deliver material as planned

The manufacturer cannot continue production. temp stops production

causes backorder

No inventory available = stockout

backorder

cannot ship finished product to customers against their open orders

Stockout

no inventory available

SC Tiers

Tier 1 = direct suppliers/customers

1, 2, 3, n s/c can be both tier 1 & 2

Why important to identify Tier 1 sup/cust?

These are partners you want to build relationship with first

Service supply chain

about managing relationships between trading partners

SCOR Model

Supply Chain Operations Research Model

Plan Source Make Deliver and return and enable

Plan/Planning (SCOR)

DETERMINATION of marketing and distribution channels, promotions, quantities, timing, inventory and replenishment and production policies. SCOR

(not Supply chain planning--ch 3)

Source/Sourcing

the 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). SCOR

Make/Manufacture

the series of OPERATIONS performed to convert materials into a finished product.

most METRIC-intensive portion of the supply chain SCOR

Quality Management

an important aspect of the make/manufacturing process SCOR

Deliver

LOGISTICS phase. 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. SCOR

Return

Reverse logistics. planning and controlling the process of moving goods specifically from the point of consumption BACK TO POINT OF ORIGIN for repair, reclamation, remanufacture, recycling, or disposal. SCOR

Enable

additional aspect of SCOR

facilitate a company's ABILITY TO MANAGE the supply chain and are spread throughout every stage.

In other words, we want to enable our capabilities as we plan, source, make, and deliver (and return).

not a stage that occurs sequentially after all of the others.

MRP

Materials Requirements Planning - what materials needed

method of determining what materials are needed and when they are needed to support the production plan.

A computer-based materials management system that calculates the exact quantities, need dates, and planned order releases for subassemblies, component parts and materials required to manufacture a final product. (must be customized to meet your works)

MRP requires

The independent demand information, i.e., finished product forecast

Parent-component relationships from BOM

Inventory status of final product and each of the components and materials.

Planned order releases (output of MRP)

Advantages of MRP

provides planning info

disadvantage of MRP

loss of visibility; ignores capacity and shop floor conditions

MRP II

Manufacturing Resource Planning - improve internal communication and operations

A computer-based system that can create detail production schedules using realtime data.

used widely by itself, but also as a module of more extensive enterprise resource planning (ERP) systems."

Just In Time

a philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement

AS NEEDED - reduces inventory costs

Total Quality Management

management approach to long-term success through customer satisfaction based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work. Everyone in the organization has to take ownership for quality.

Business Process Reengineering

a procedure that involves the fundamental rethinking and RADICAL REDESIGN of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed.

Study ppt 1 slides 50+

study

2 supply chain capability models

efficient and responsive

efficient - low cost / functional products

responsive - fast / innovative products

Push or make to stock

Producing stock on the basis of ANTICIPATED DEMAND. Demand forecasting can be done via a variety of sophisticated techniques.

Pull or Make to order

Producing stock in response to actual demand

Forecasting

Business function that ESTIMATES FUTURE DEMAND demand of products so can be purchased/manu in appropriate quantities.

developed through data analysis and judgment

key building block

statistically wrong basis for downstream SC planning

Demand planning

Process of combining statistical forecasting techniques and judgment to construct demand estimates for products/services.

Mgmt review forecast to ensure that is is aligned with company strategy.

All areas affected by forecasting

key building block

Independent demand

demand for an item unrelated to demand for other itmes (demand is forecasted) "bicycle" EXTERNAL

dependent demand

demand is directed related to other items (demand is calculated) "components for bicycle" INTERNAL

Good forecasting

facilitates more effective planning - leads to reduced inventory, reduced costs, etc.

Best = consistently accurate as possible; minimize error (need verifiability)

Bad forecasting

root cause for more inventory etc

Two basic forecasting techniques

Qualitative - opinion/intuition; depends on skill/experience

Quantitative - mathematical models/historical data

factors that influence demand

market changes, seasonality, competitive activity

Quantitative forecasting techniques

time series - future is extension of past; historical data (purpose - to collect and study past data to predict future)

cause and effect--simple linear/multiple linear regression (assumes factors predict future demand)

Five qualitative models

Personal Insight--fastest/cheapest/unreliable

Jury of Executive Opinion--group panel forecast

Delphi Method--same as jury but decisions collected separately (time consuming)

Sales Force Estimation - same as jury but salespeople (not ideal for long term forecasting)

Customer Survey--customer opinion (no bias; time consuming)

Quantitative TIME SERIES forecasting techniques

Naive - sets demand for next period exactly same as current period

Simple moving average - calculated average of historical demand most recent time periods (equal values)

Weighted moving average - not all historical time periods valued equally

Exponential smoothing - more sophisticated version of weighted. 3 elements last period's forecast/demand and smoothing factor btn 0-1

Linear trend forecasting - best fit line across demand data of entire time series

Main purpose of time series modeling

Collect and study past data to generate probable future

Quantitative CAUSE AND EFFECT forecasting techniques

Simple and multiple linear regression

Regression uses historical relationship between independent (bike) and dependent (parts) variables to predict future values of dependent variable

Simple linear regression

model the relationship between a SINGLE independent variable and a dependent variable (demand) by fitting a linear equation to the observed data.

Multiple linear regression

model the relationship between TWO OR MORE independent variables and a dependent variable (demand) by fitting a linear equation to the observed data.

ex advertising and promotion and selling price

Other forecasting models used

Drift Method

Holt's Linear Trend Method

Holt-Winters Seasonal Method

Autoregressive Integrated Moving Average (ARIMA)

Box-Jenkins

X-11

Econometric Model

Input-Output Model

You may learn more about some of the models in other courses.

Fundamentals of forecasting

1. forecast most likely wrong

2. Simple forecast methodologies trump complex ones (danger is complexity)

3. Correct forecast does not prove forecast method is correct

4. If you dont use the data regularly trust it less

5. All trends eventually end

6. Hard to eliminate bias

7. Technology is not the solution to better forecasting (its a tool) - people are the answer.

Since forecasts inaccurate, companies track the forecast...

against actual demand and measure the size and type of the forecast error.

Forecast Error

the difference between the actual demand and the forecast demand.

a critical role in tracking forecast accuracy, monitoring for exceptions, and benchmarking the forecasting process.

Forecast Deviations

MAD, MAPE, MSE, Forecast Bias, RSFE

Mean Absolute Deviation (MAD)

measures the size of the forecast error in UNITS.

Mean Absolute Percent Error (MAPE)

measures the size of the error in percentage terms. It is calculated as the average of the unsigned percentage error.

Mean Squared Error (MSE)

magnifies the errors by squaring each one before adding them up and dividing by the number of forecast periods.

Forecast Bias

a consistent deviation from the mean in one direction; either high or low. (consistently over/under)

Variations in Quantitative Forecasting

Trend, Random, Seasonal, Cyclical

Trend Variations: movement over time (laptops)

Random: Instability by random occurances short-term (hurricane)

Seasonal repeating patterns year to year (holiday, swimsuits)

Cyclical: wavelike pattern extend over years. hard to predict (GDP)

Running Sum of Forecast Errors (RSFE)

a measure of forecast bias. RSFE indicates the tendency of a forecast to be consistently higher or lower than actual demand.

+ = low forecast demand (underestimated)

- = high overestimated demand

Tracking Signal

indicator that forecast bias is present. is forecast within acceptable limits? If not, there is a bias

Bullwhip effect

less info available as go backward from consumer BACK to supplier. Greater need for safety stock. Supply chain participants second-guess and over-react, creating bullwhip effect.

Rising demand = increased orders.

Falling demand = decrease and inventory accumulates

When ripple felt by retailer, retailer adjusts to wholesalers on up. magnitude of fluctuation becomes unrecognizable by time reach supplier

Safety Stock

Inventory above needed to meet anticipated demand and protect against uncertainty of supply/demand

aka "buffer stock"

Make-to-stock will carry safety stock

How to alleviate bullwhip effect

COLLABORATION through electronic data interchange (EDI), point of sale (POS)

SYNCHRONIZING supply chain by coordination

REDUCING INVENTORY by just-in-time (JIT), vendor management inventory (VMI), and quick response (QR)

CPFR: Collaborative planning, forecasting, replenishment

CPFR

Collaborative planning, forecasting, replenishment

business practice combining intelligence of multiple partners sharing plans etc. real benefit: SHARING OF FORECASTS

Significantly reduces bullwhip effect by:

Better customer service

Lower inventory costs

Improved quality

Reduced cycle time

Better production methods

Reducing the bullwhip effect means

the reduction of safety stocks (and associated costs) within and across the trading partners in a supply chain.

Supply Chain Planning

Element of SC determines how best to satisfy requirements created by demand plan. Balance financial/service objectives & satisfy customer at same time (Ch 3)

Planning Processes

APP, MPS, MRP, DRP, Capacity Planning

Aggregate Production Planning (APP)

Master Production Scheduling (MPS)

Materials Requirement Planning (MRP)

Distribution Requirements Planning (DRP)

Capacity Planning

SC Planning 3 hierarchical broad categories

Long-range, Intermediate range, Short-range

LR-strategy/facilities construction: Aggregate Production Plan APP

IR: quantity/timing of end items pickup trucks: master production schedule MPS

SR: components/parts: materials requirement planning MRP

Closed loop MRP

Synchronizes the purchasing or materials procurement plans with the master production schedule. called a closed loop MRP because of its feedback feature.

Enterprise Requirements Planning (ERP)

an extension MRPII and includes DRP which DETERMINES NEED to replenish finished product inventory at branch warehouses, when there are MULTIPLE WAREHOUSES in the network.

Business Plan

LT focus 2-10 yrs, reviewed annually. states the company's objectives for profitability, growth rate, and return on investment

STARTING POINT for developing the organization's Production Plan or Aggregate Production Plan

Sales & Operations Planning (S&OP)

Process that brings all D/S plans for the business together to provide management with the ability to strategically direct the business to achieve a competitive advantage

If capacity = demand then efficient

c > d promo and advertising

c < d subcontract

Aggregate Production Plan (APP)

Hierarchical planning PROCESS THAT TRANSLATES annual business, marketing plans, and demand forecasts INTO A PRODUCTION PLAN for a product family* in a plant or facility

at least 1 year & rolled forward by three months every quarter.

Aggregate Planning

ESTABLISHES PRODUCTION RATES that will achieve management's objective of satisfying customer demand by maintaining, raising, or lowering inventories, while attempting to keep the workforce relatively stable.

Steps to develop Aggregate Production Plan

1. determine DEMAND

2. determine CAPACITY for each period

3. identify CONSTRAINTS

4. determine direct LABOR

5. identify STRATEGIES

6. AGREE on plan

2 Aggregate planning strategies

demand options

supply options

Aggregate planning strategies: demand options

influencing demand - aligns to produc capacity

backordering during high demand

counter-seasonal product mixing

Aggregate planning strategies: supply options

change inventory levels

change capacity

MPS Master Production Schedule

A detailed disaggregation of the aggregate production plan (APP), listing the exact end items to be produced by a specific period

DRIVES THE BUSINESS

ATP Available to promise

Business function that provides a response to customer order inquiries, based on resource availability.

2 ATP methods of calculating quanities

DISCRETE available to promise (on hand supply-ordered)

CUMULATIVE available to promise

Time fencing

SEPARATING the planning horizon INTO FIRMED time period AND PLANNED time period:

firmed time period: CURRENT date to several weeks future. cannot make automatic changes.

planned time period: end of firmed time period to end of horizon. free to make changes.

Firmed Time Fence

established at the outer limit of firmed time period to signify when changes can no longer be made automatically by the planning system.

3 basic production strategies

LEVEL, CHASE, MIXED

level production strategy - constant output

Chase production strategy - capactity to demand

Mixed production strategy - stable & st force

Level production strategy

Relies on a constant output rate while varying inventory and backlog according to fluctuating demand. Make to stock

chase production strategy

Adjusts CAPACITY TO MATCH DEMAND. Firm hires and lays off workers to match finished output to demand. Finished goods inventory remains constant. MAKE TO ORDER

Mixed production strategy

Maintains stable core workforce while using other short-term means, such as overtime, subcontracting and part time helpers to manage short-term demand.

bill of materials (BOM)

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

single level - directly in use (planning factor)

multi level - directly/indiretly used

planning bom - artificial grouping of items (product family) used to facilitate master scheduling/

Capacity planning

RRP, RCCP, CRP

Resource Requirement Planning (RRP)

Rough-Cut Capacity Planning (RCCP)

Capacity Requirement Planning (CRP)

Resource Requirement Planning (RRP)

Long range capacity planning module used to check whether aggregate resources APP

Rough-cut capacity planning (RCCP)

A medium-range capacity planning module used to check the feasibility of the Master Production Schedule. Converts MPS from the production needed to the capacity required, then compares it to capacity available.

capacity requirement planning (CRP)

A short-range capacity planning module used to check the feasibility of the Material Requirements Plan.

Distribution Requirements Planning (DRP)

A time-phased finished good inventory replenishment plan in a distribution network. The function of determining the need to replenish inventory at branch warehouses.

logical extensIon of MRP