Supply Chain Management Exam 2

Procurement

Tactical aspect of the buy process; The purchase of merchandise or services at the optimum total cost, the correct quantity, time and quality; Day to day purchasing function

Strategic Sourcing

The institutional process that continuously reevaluates and improves the purchasing activities of a company; focuses on improving

Supplier Scorecard

Monitor performance across multiple metrics over extended time period; Categorize suppliers based on their scores; offer additional business to best performers

Outsourcing

Purchasing a product, part, or component from an outside supplier vs. manufacturing it in-house; the act of moving a firm's internal activities and decision responsibility to outside providers; requires a "make or buy" analysis

Costs and Challenges of Outsourcing

Insufficient supply, poor quality supply, expensive supply, long lead-time of supply

Production

Process by which the inputs are combined and transformed into outputs; we can produce both goods and services

3 Key Components of Production

How much output to make, which transformation process to use, how much of each input is required

Lean Production

A business model that emphasizes eliminating waste while delivering quality products at the least cost to the manufacturer and customers.

Objectives of Lean Production

Reduce production resource requirements, increase manufacturing velocity and flexibility, improve quality and eliminate defects

Mass Customization

Using specific details the customer gave to produce their unique product

Project Layout

Fixed location layout where the product remains in place for the duration of production; typically used to build a one-of-a-kind product; production activities revolve around a fixed location (ex: assembly of a cruise ship)

Factors of Project Layout

o Facility size: At customer site

o Process Flow: Independent activities

o Speed: Slow

o Run Length: Unique events

o Labor content: Very high

o Skill level: High

o Material requirements: Somewhat predictable

o Scheduling: Uncertain, frequent changes

o Challenges: Estimating completion time, managing critical activities

Workcenters

Process-focused layout that groups together similar equipment or functions

Factors of Workcenters

o Facility size: Usually small

o Process Flow: Many patterns

o Speed: Slow

o Run Length: Short

o Labor content: Very high

o Skill level: High

o Material requirements: Hard to predict

o Scheduling: Uncertain, frequent changes

o Challenges: Estimating labor utility, debottlenecking fast response

Manufacturing Cells (Plant within a Plant)

Process-focused layout that dedicates production areas to a narrow range of products with similar requirements (ex: factory that builds safety products for cars)

Factors of Manufacturing Cells

o Facility size: Moderate

o Process Flow: Dominant patterns

o Speed: Moderate

o Run Length: Moderate

o Labor content: Varies

o Skill level: Mixed

o Material requirements: More predictable

o Scheduling: Varies, frequent expediting

o Challenges: Balancing stages, responding to diverse needs

Assembly Line

Product-focused layout; machines and workers are arranged according to the progressive sequence of operations needed to make high quality products; benefits = cost efficient, eliminate cross-flows and backtracking, limit work-in-process, streamline production time

Factors of Assembly Line

o Facility size: Often large

o Process Flow: Rigid pattern

o Speed: Fast

o Run Length: Long

o Labor content: Low

o Skill level: Low

o Material requirements: Predictable

o Scheduling: Fixed

o Challenges: Productivity improvement, occasional rebalancing

Continuous Flow

Product-focused layout; high-volume flow with little flexibility; used for high-volume standardized products like paper, chemicals, and beverages; production work via equipment, workers monitor and repair; creates: economies of scale, low-cost production

Factors of Continuous Flow

o Facility size: Large

o Process Flow: Inflexible

o Speed: Very fast

o Run Length: Very long

o Labor content: Very low

o Skill level: Varies

o Material requirements: Very Predictable

o Scheduling: Inflexible, technology dictates

o Challenges: Avoiding downtime, expansions, cost minimization

Break-Even Analysis

basic mathematical technique that allows a comparison of total costs for different processes. This technique takes the fixed costs and variable costs and finds the break-even point for which the cost of two or more processes are equal in cost.

Assembly Line Balancing

production strategy that involves setting an intended rate of production for required materials to be fabricated within a particular time frame; effective line balancing requires assuring that every line segment's production quota can be met within the time frame using the available production capacity

Logistics

Coordinating function in a supply chain; part of supply chain management that focuses on the planning, implementation, and control of the flow and storage of goods, relevant information, and related services; Grown to importance today because it promotes activity and strategic integration, boosts demand, promotes efficiency and profitability, and supports the creation of utility

Transportation

focuses on the efficient physical flows of product between facilities across the supply chain; links all pick-up and deliver-to points; highest cost logistics function ($848 billion)

Key Considerations of Transportation

o Volume of freight

o Customer location

o Product characteristics

o Product value

o Service requirements

Primary purposes of holding 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 deliver time, to take advantage of economic purchase order size

Fixed Order Quantity Model

Suggest appropriate reordering intervals; point out why you should reduce order placement costs

-Order Quantity: Set quantity ordered at variable time intervals

-Order Timing: When inventory drops to the reorder point

-Order Trigger: Event triggered

Fixed Time Period Model

Every time period, a variable order is placed to bring the inventory level up to maximum desired quantity

-Order Quantity: Variable quantity ordered at set times

-Order Timing: When the time to reorder arrives

-Order Trigger: Time triggered

Continuous Replenishment Model

Combines FTP and FOQ methods; Vendor re-supplies customer based on point-of-sale data, inventory levels, & warehouse information, rather than purchase orders

Post-Sales Customer Service

A series of activities designed to enhance the level of customer satisfaction - that is, the feeling that a product or service has met the customer expectation

Call Centers

Respond to customer through inquiries, orders, complaints, helpdesk, dispatching, credit, and return authorization

Service Parts Logistics

Management of the time critical delivery of spare parts to end users as part of an after sales service; critical for maintaining high value items; highly fragmented activity (3rd party suppliers, 3rd party logistics suppliers, in-house service)

Service Parts Logistics vs. Traditional Logistics

o Item demands = Low (1 to 2 a year)

o Demand Events = Random

o Response Times = 2 - 4 hours

o Delivery Network = Increasing in complexity

o Profit Margins = Increasing

o Inventory Strategy = Pre-Position

o IT Investment = Under-funded

Reverse Logistics

Post-sales service activity that deals with returns, remanufacturing, and refurbishment

Challenges of Reverse Logistics

o Product quantity not uniform

o Product damaged or defective

o Product not packaged consistently or properly

o Different product flows (Return & repair, return & deploy, remanufacture or recycle)

o Poor visibility (returns volume)

o Returns condition assessment (resell, recondition, refurbish, remanufacture, cannibalize, recycle, dump)

Resell

Form of return; most profitable option, market unused products as new

Recondition

Form of return; repackage or clean the products to return it to a "like new" state

Refurbish

Form of return; perform simple product repairs

Remanufacture

Form of return; conduct extensive product repairs which may require product disassembly and rebuilding

Cannibalize

Form of return; retrieve reusable parts from products that are otherwise unrepairable or too costly to fix

Recycle

Form of return; retrieve materials for conversion into other products with different purposes

Dump

Form of return; Send defective or broken products to a landfill