BLog test 2

Brand Power

is the measure of customer preference based on reputation, product quality and supply chain capabilities

Volume

is traditionally treated according to the principle of economy of scale

Variety

involves frequent product runs and high repetition of small lot sizes

Constraints

interact with volume and variety to create realistic manufacturing plans

Lead time

is the measure of elapsed time between release of a work order to the shop floor and completion of all work on the product to achieve ready-to-ship status

The 8 Dimensions of Product Quality

Performance
Reliability
Durability
Conformance
Features
Aesthetics
Serviceability
Perceived Quality

Performance

How well the product performs in comparison to how it was designed to perform

Reliability

Likelihood that the product will perform throughout its expected life

Durability

The actual life expectancy of the product

Conformance

Does the product meet its specifications as designed

Features

What different functions or tasks can the product perform

Aesthetics

Is the styling, color, workmanship pleasing to the customer

Serviceability

What is the ease of fixing or repairing the product if it fails

Perceived Quality

Based on customer's experience before, during and after they purchase a product

Total Quality Management (TQM)

a philosophy focused on meeting customer expectations with respect to all needs, across all company functions, and recognizing all customers, both internal and external

TQM's basic conceptual elements are:

─Top Management commitment and support
─Maintaining a customer focus in product, service and process performance
─Integrated operations within and between organizations
─A commitment to continuous improvement

ISO 9001:2008

sets out the requirements of a quality management system

ISO 9000:2005

covers the basic concepts and language

ISO 9004:2009

focuses on how to make a quality management system more efficient and effective

ISO 19011:2011

sets out guidance on internal and external audits of quality management systems

Engineer to Order (ETO)

is used when products are unique and extensively customized for the specific needs of individual customers

Make to Order (MTO)

relies on relatively small quantities, but more complexity
─Requires much interaction with customer to work out design and specification
─Usually shipped direct to customer
─Can utilize postponement

Assemble to Order (ATO)

is when base components are made, stocked to forecast, but products are not assembled until customer order is received (Manufacturing postponement practiced here)

Make to Stock (MTS)

features economies of scale, large volumes, long production runs, low variety, and distribution channels

Job shop

creates a custom product for each customer. High customization

Batch

process manufactures a small quantity of an item in a single production run

Line flow

process has standard products with a limited number of variations moving on an assembly line through stages of production

Continuous flow

process is used to manufacture such items as gasoline, laundry detergent and chemicals. Inflexible processes. High capital investment

Total Cost of Manufacturing (TCM) (aka Total Delivered Cost) includes:

─Procurement and production activities
─Inventory and warehousing activities
─Transportation activities

Mass Customization: What Is It?

Individually customized products being produced at the low cost of standardized, mass produced goods.

Objective of Mass Customization

-increase variety for customer while realizing the cost advantages of high volume continuous and line flow processes

Mass Customization: Where Does It Work?

Market Characteristics:
─Sufficiently large customer segment that values "translatable variety"
─Turbulent, dynamic market
─Unpredictable demand - but not entirely unpredictable!
─Little impact of regulation or other constraints (designer drugs?)

Product/Process Characteristics:
─Modular or adjustable product building blocks
─Predictable components/functions interactions
─Standardized process/skill building blocks
Reasonable lead times, steps, work content

Lean Systems

-Is a philosophy that is focused on the customer
-Defining principle is the elimination of "waste". Waste is anything that does not add value for the customer
- Emphasizes the minimization of the amount of all resources (including time) used in the operation of a company

Primary Objectives of Lean Systems

1.Produce only the products that customers want
2.Produce products only as quickly as customers want them
3.Produce products with perfect quality
4.Produce in the minimum possible lead times
5.Produce products with features that customers want and no others
6.Produce with no waste of labor, materials or equipment; designate a purpose for every movement to leave zero idle inventory.
7.Produce with methods that reinforce the occupational development of workers

The Elements of Lean Production

Waste Reduction
Lean Supply Chain Relationships
Lean Layouts
Inventory & Setup Time Reduction
Small Batch Scheduling
Continuous Improvement
Workforce Empowerment

-Six sigma

approach is to identify sources of variability and then systematically reduce them. Get to the "root cause"

The six sigma goal

is to achieve a process standard deviation that is six times smaller than the range of outputs allowed by the product's design specification

DMAIC methodology

is a systematic approach to eliminating defects and keeping the process in control

Logistical Interfaces

Resources must be procured, positioned, and coordinated as needed to support the manufacturing strategy selected

Four approaches to achieve this are:
─Just-in-Time (JIT)
─Materials Requirements Planning (MRP)
─Design for Manufacture (DFM)
Design for Logistics (DFL)

Just-in-time (JIT) Interfaces

-Purchased materials and components arrive at the manufacturing or assembly point just at the time they are required for the transformation process

-Raw material and work in process inventories are minimized

-Demand for materials depends on the finalized production schedule

-Close cooperation with suppliers is essential!
-Lot sizes are as low as one unit

Materials Requirements Planning (MRP) Interfaces

-Procurement has a key role in insuring all the components are obtained on time to make an end item
-Planning sometimes spans multiple manufacturing locations

Design for Manufacture

-Design-for-assembly - focuses on minimizing the number of parts and on easing assembly processes.
-Design-for-product-serviceability - focuses on easing the disassembly and reuse of product components.
-Design-for-six-sigma - systematically evaluates the consistency with which a good or service can be produced or delivered given the capabilities of the processes used.

Design for Logistics Interfaces

-Design for logistics concept incorporates the requirements and framework for logistical support of the product in the early phases of product development

Benefits of Integrated Operations Planning

-Facilitates more effective planning with shorter cycle times.
-Offers capability to consider the extended supply chain and make appropriate trade-offs to achieve optimal performance.
-More effective and responsive planning allows a more level assignment of resources for existing sourcing, production, storage, and transportation capacity.
-Greater integration with financial plans.
-Increased inclusion of strategic initiatives and activities.
-Improved simulation and modeling of alternatives.
Easier translation between aggregate and detailed planning levels.

Three Drivers of Effective Supply Chain Planning

1. Supply Chain Visibility
2. Exception Management to respond to disruptions and minimize potential problems
3. Enables identification of trade-offs that can increase functional costs, but lower total system costs

§Common software applications for most planning environments include:

─Demand planning
─Production planning
─Logistics planning
─Inventory deployment

Demand Planning

-Demand management system is the information technology component of the sales and operations planning (S&OP) process

-Demand management develops the forecasts used by other supply chain processes to anticipate sales levels

-Forecasts are then used to
determine production and inventory requirements

-Must maintain forecast data consistency across multiple products and warehouse facilities

Demand Planning - Potential Issues / Watch-Outs

The future might be significantly different than the past
Marketing:
-May low ball the forecast numbers because if actual sales exceed their forecast, they can look like hero's in the organization.
-May inflate the forecast numbers to essentially create "2 sets of books", the real forecast and the inflated forecast to ensure that Logistics plans for plenty of inventory

Production Planning

Production planning systems match the requirements plan with the production constraints, i.e. Advanced Planning & Scheduling (APS)
-Limitations can include material, facility, equipment and labor availability
Effective planning creates a time-sequenced plan to manufacture the correct items in a timely manner while operating within constraints

Logistics Planning & Inventory Deployment

Logistics planning integrates overall movement demand, vehicle availability, and relevant movement cost into a decision support system that seeks to minimize overall freight expense

Logistics Requirements

+Forecasts (sales, marketing input, histories, accounts)
+Customer orders (current orders, future committed orders, contracts)
+Promotions (promotion, advertising plans)
=Period demand

‒Inventory-on-hand
‒Planned receipts (from 3rd party manufacturer or internal plant)

=Period logistics requirements

Forecasting

-is the specific definition of what is projected to be sold, when and where
─Many logistics and supply chain activities must be completed in anticipation of a sale
- approaches to achieve enhanced service or reduced inventory

Forecasting Requirements

-match the product requirements of customers with capacity of the enterprise and supply chain
-must be more timely and accurate to align

Logistics Forecasts are Necessary To

-Support collaborative planning
-Drive requirements planning
-Improve resource management through cost trade-offs of strategies

base demand

long-term average demand after other components are removed

Seasonal Component

annual recurring upward or downward movement in demand

Trend Component

long range shift in periodic sales

Cyclic Component

periodic shifts in demand lasting more than a year

Promotional Components

is demand swings initiated by a firms marketing activities

Irregular Component

includes random or unpredictable quantities that do not fit other components

Categories of Forecast Techniques

Qualitative
Time Series
Causal

Qualitative

relies on expert opinion and special information

Time series

focuses entirely on historical patterns and pattern changes to generate forecasts

Causal

uses specific information to develop relationships between lead events and forecasted activity

Forecasting Accuracy

Improving accuracy of forecasts requires error measurement followed by analysis

Sales & Operations Planning (S&OP)

is an integrated combination of
─Organizational processes
─Personal responsibility and accountability
─Information systems (financial, marketing and supply chain planning)

8 Keys to Successful S&OP Implementation

1. Executing the process every month
2. Process ownership and clarity of roles and responsibilities
3. Organizational commitment to achieving high forecast accuracy (senior management commitment & performance objectives)
4. Focus should be on the next 3 to 12 months (not short-term)
5. One plan that integrates the actions of the entire organization
6. Senior management decision making (bottom-up / top-down)
7. Measuring end-to-end supply chain performance
8. S&OP forecast versus operating plan or budget

Collaborative Planning, Forecasting and Replenishment

combines the intelligence of multiple trading partners in planning and fulfilling customer demand by using common metrics, language and firm agreements to improve efficiency for all participants.

Collaborative Planning, Forecasting and Replenishment aspects

Strategy & Planning
Demand and Supply Management
Execution
Analysis

Strategy & Planning:

establishes the ground rules for the collaborative relationship

Demand & Supply Management:

consists of sales forecasting, order planning/forecasting, inventory positions, and transit lead times.

Execution:

consists of order generation, and order fulfillment.

Analysis:

exception management and performance assessment.

CPFR Process Steps

-Develop a joint business plan
-Create a joint calendar to determine product flow
-Create a common sales forecast based on shared knowledge of each trading partner's plan
(-Share common forecast between retailer and suppliers
-Use an iterative process to share the forecast and requirements plan)
-Use the common sales forecast to develop

Benefits of CPFR - Five Major Categories

1.Improved Customer Service Through Better Forecasting Techniques

2.Lower Inventories for Higher Profits

3.Improved ROI on Technology Investment

4.Improved Relationships Between Trading Partners

5. Cost Reduction

The primary functions of inventory are:

-Buffer uncertainty in the marketplace
-Decouple dependencies in the supply chain
-Balancing Demand and Supply
-Geography

Cycle Stock

(aka base stock) is inventory to satisfy actual or projected demand in the next immediate time period.

Safety Stock

is inventory held for the purpose of buffering against variations or uncertainty in demand or supply.

Anticipation (Speculative) / Strategic Inventory

to hedge a currency exchange, take advantage of a discount, protect against a major short-term disruptive event in supply, take advantage of a major business opportunity for sales, and/or provide for life cycle changes; seasonal, launch, bridging, etc.

Pipeline Inventory

represents the inventory being held by third parties outside the firm in the "downstream" external supply channel.

Maintenance, Repair, and Operations (MRO)

are items that are needed by the firm to operate the business and/or produce products but do not end up as part of the final product.

Obsolete Inventory

is stock that is expired/out-of-date or no longer needed.

Inventory Control

is the managerial procedure for implementing an inventory policy

Demand Uncertainty

involves the variation in sales during the lead time necessary to replenish inventory

Supply Uncertainty

involves variation in the time and/or quantity necessary to replenish inventory.

Time Buckets

are discrete increments of time used to facilitate planning activities

Reorder Point

defines when a replenishment order is initiated.

Carrying Cost

is the expense associated with maintaining inventory.

Safety Time

is ordering an item earlier than necessary based on the lead time, to assure timely arrival.

Fill Rate

represents the magnitude of a backorder or stockout. Can be case fill rate, line fill rate, etc.

Service Level

is a performance target specified by management and defines inventory performance objectives

Economic Order Quantity

- A quantitative decision model based on the trade-off between the annual ordering costs and the annual inventory holding costs

Ordering Costs

are incurred each time an order is placed
- preparation costs
- transportation costs
- receipt processing costs
-Material handling costs

Inventory Carrying Cost

is the expense associated with maintaining inventory

What are the 2 types of uncertainty we are trying to account for with safety stock?

Demand Uncertainty
Supply Uncertainty

Inventory Control Using Reactive Approaches

Periodic Review
Perpetual Review

Periodic Review

monitors inventory status of an item at regular intervals such as weekly or monthly

§Perpetual Review

continuously monitors inventory levels to determine inventory replenishment needs

Independent Demand

- The demand for the final product. Has a demand pattern affected by trends, seasonal patterns, & general market conditions.
Forecasted Demand
Example: Pick-up Truck

Dependent Demand

- Describes the internal demand for parts based on the demand of the final product in which the parts are used.
Determined / Calculated Demand
Example: Pick-up Truck Engine