OM CORE FINAL!!!

Needed Inventories

Cycle stock (to balance supply & demand), safety stock, speculative stock (eco of buying), transit stock (geo specialization)

Financial Inventory Impact

BS: Inventory in current assets & reduction frees up cash, contributes to PP&E in fixed assets

IS: determined COGS, directly impacts revenue vie product availability & both Carrying, holding, stockout costs

Inv Turnover & DSO

Inventory Turnover is annual so 365/#

Days of Supply stays daily

Pros & Cons of high Inv Turn

Pros: freshness, less obsolescence risk, less holding cost, less asset investment

Cons: stockouts, higher COGS from small purchases, higher order track and processing costs

Service Level

How well customers demand med and stockouts avoided

Independent v Dependent Management systems

Independent: demand for goods sold beyond firms control

Dependent: demand for parts, can be managed via Materials Requirements Planning MRP

Continuous review vs. Periodic review

Continuous: inventory constant monitored, requires tech like scanners and POS

Periodic: management system reviews at regular interval, needs higher level of safety stock

How much to order each time?

Economic Order Quantity (EOQ)

When to place an order?

ddLt daily demand during lead time = d * t [ROP]

TSL

Target service level in newsvendor model, use the number in z chart to find the SD above the mean

Sections of Financial Statements most effected by SC design

Income Statement COGS & holding/setup/stockout costs

Balance Sheet Inventory 30% of assets

Components of enterprise inventory

RM, WIP, FG, MRO

Inbound flows

logistics managers work with supply managers to ensure flows of materials meet operational requirements

Outbound flows

logistics manager work with marketing to ensure customer requirements are satisfied

Integrated Logistics Management

Inventory management, logistics network design, material handling and packaging, distribution/fulfillment management, transportation management, order processing

Ocean freight

Standardized system adopted globally, helps minimize freight costs as a percent of total product cost, economies of scale in manufacturing

Transportation mode selection

Speed, availability (location serviceability), dependability (varience in expected delivery times), capability (can handle any load), frequency (# of scheduled moves), product value, sustainability

Trucking Industry Segments

Truck loads from shipper to consignee

Less-than-truckloads LTL less than 15k lbs, higher FC/time, higher MK costs bc they want full loads, dominated by a few large carriers

Speacility carriers ex. FedEx

Last Mile Delivery

From local distribution center to retail/customer, costly bc manual delivery of small number of items yet deliver mode options evolving

Transportation Service Selection Tradeoff Triangle

Transport Cots: transport itself, cost of inventory when traveling, service requirements

Inventory holding costs: value of inventory & shelf life

Warehouse operating cost: network configuration, product density, special storage / handling requirements

Logistics Network Design determines

Number and location of operations facilities

How customers will be served

Where inventory will be held

Which transportation modes will be used

Cost-to-service trade off

as service level increase, so do costs

Cost-to-cost trade off

increasing the cost of one logistics activity reduces the cost another

Facility location factors to consider

labor availability, proximity to suppliers/customers, costs of land and construction, taxes/regulations, transport infrastructure, employee quality of life, supply chian risk

Center of Gravity Assumptions

There’s a straight line distance between all locations

Amount of D is a good proxy measure of transportation cost

Qualitative factors like supply chain risk, labor availability, and incentives not considered

Purchasing v. Strategic sourcing

Purchasing is the actual buying: find suppliers, negotiate price, purchase orders, FE comply

Strategic sourcing supporting bigger goals: find which products key to success, supplier partnership, internally collaborate to produce products

Procurement Process

Commodity

worker sees need —> requisition —> approval process —> FE purchase order —> purchase gets product —> purchasing tells FE to pay

Sourcing Process

Speacility item

worker sees need —> request for proposal (RFP) with requirements for good and supplier evaluation criteria —> suppliers bid —> winnowing down review rounds —> suppliers ranked —> winner —> maybe negotiate final terms

6 Impact points with supply management goals

from fundamental procurement routines to strategic supply:

ensure availability & timely resource delivery

identify & mitigate supply chain risk —> supply chain resilience

reduce total costs —> TCO w/ hidden costs before and after so be aware

enhance quality —> quality is order qualifier & ISO 9000

access tech

ESG goals —> ISO 14000

Categories of supply chain strategies

Supplier # should standardize purchasing policy and item families, and “Modularize and Use Tiers” first tier for collab and work with second tier

Local v. Global sourcing basically cost vs. delivery/LT community

Transactional v. Partnership w. commodity transaction oriented & custom more collaborative partnership

Toyota Production System (TLS)

OG lean thinking, focus on quality and eliminating waste of ALL kinds

Defect is something customer notices that is missing or notices and doesn’t want

to be adding value, activity must: change the product in a valuable way or something customer is willing to pay more for

Lean basic tenets or principles

Manage using data

Waste is a symptom of underlying problem and is an improvement opportunity

Goals are to be met (realistic)

Standardization is fundamental

Process focus

7 Forms of Waste

Transportation

Inventory

Motion (of people)

Waiting

Overproduction

Over-processing (extra resources)

Defects (less than specification customer requested)

Lean concepts

Value stream mapping

Minimize quality problems (Poka-Yoke mistake proofing)

Just in time (JIT) production to min inv

Kanbans inventory replenish signals

Kaizen culture of continuous improvement

Total productive maintenance

5S organize

manufacturing cells (Labor line balancing U)

Value stream mapping

flowchart to analyze where value is or isn’t being added

Holding inventory issues

Ties up cash

Creates hidden liability (obscelensce, tech change, popularity)

Hides defects

JIT Production

Needs frequent supplier shipments to lower inventory

Exposes problems

Lower the “water level” (inventory) to expose problems; too much inv is sign of deeper issues

Pull logic ex. sale of unit pulls replacement from FG, pulling upstream with Kanban

Heijunka

Mix production to reduce FG inventory levels

Allows operations to achieve level, mixed model scheduling ideally batch size = 1

Single Minute Exchange of Dies (SMED)

To minimize changeover times

Separates internal & external setup, turning internal to external; streamlining

5S

to organize and maintain workspace

Sort

Set in Order

Shine

Standardize (rules)

Sustain (daily routine)

Plan-Do-Check-Act

process for managing continuous improvement projects (Kaizen)

Specifications

acceptable variation before calling something defective

meanwhile abnormal variations for assignable causes

Frameworks for capability analysis

Capability Analysis

Conformance analysis

Investigating for assignable cause (histograms, check sheets, cause-effect diagram, pareto)

Eliminating assignable cause

Capability Analysis

Process Capability Cp & Cpk used at process startup comparing process output to customer’s specifications; capable when Cp > 1

Use Cpk when process not centered

Conformance Analysis

Used on-going during operation to ensure consistency w/ Statistical Process Control (SPC) that compares process output to control limits we established

Uses x bar and R Charts

X bar and R chart

collect data when process in control

per sample calc mean

per sample calc range R

Calc overall grand mean

Calc mean range (R-bar)

Compute control limits and make the charts

Plot new x bar and R values on control charts

6 sigmas in expected zone 99.7%

A2 is limits for 99.7

D3 LB

D4 UB

Plot concurrent charts with x and R o monitor central tendency & dispersion in same period

Eight Dimensions of Product Quality

Durability, Aesthetics, Performance, Features, Reliability, Conformance (specifications met), Serviceability, Perception

Nine Dimensions of Service Quality

TTRACCCER

Time, tangibles, reliability, assurance, convenience, consistency, courtesy, expectancy, responsiveness

Only same: reliability

High Quality benefits

reputation, market share, premium prices, lower liability exposure, customer loyalty, lower costs, high productivity, higher profits

Costs of Quality

Prevention, Appraisal, Internal Failure, External Failure

Prevention costs less than appraisal

Quality of Mangement

Has gone from reactive quality assurance to progressive proactive mistake prevention

Deming fundamentals of Total Quality management (TQM)

To identify problem root causes & collect process data, reducing variation & circle

Customer focus, product/service design meet customer wants, fail-safe processes, track results, extend concepts throughout supply chain, top management commitment

Six sigma level of quality DMAIC

No more that 3.4 defects per million skinnnyyyyy; two sigma blue goes even out of the bounds

Define

Measure

Analyze

Improve

Control (sustain)

Pareto

80% of problems come from 20% of items

Project Management challenges

Not routine

Need multiple inputs and activities from different sources

Involves interrelated tasks (in order)

large scale and often delated

Project planning

What tasks needed?

When can we complete the entire project?

When should we schedule a particular task?

Goal: shorten the critical path (CPM) needing early start/finish and late start/finish; Gantt chart

Project phases

Defie project goals

Develop detailed project plan

Launching and implementing project plan

Monitoring and controlling the project

Evaluating the project

Risks: tech, organizational, scheduling, financial