Class 09: Exam 1 Concepts Review

Class 01

Supply Chain Management

  • Definition: Supply Chain Management (SCM) is the integration and coordination of business functions and processes across the supply chain to create value for the ultimate customer in an effective and efficient manner.
  • Materials Flow: Refers to the physical movement of items such as:
    • Raw materials
    • Parts, components, and semi-finished products
    • Finished products
  • Information Flow: The movement of relevant data and information including:
    • Sales, demand, and replenishment data
    • Production plans and schedules
    • Available production capacities
    • Shipment notifications and delivery dates
    • Inventory levels
  • Goals of SCM: To make and deliver the right product and service:
    • To the right customer
    • At the right cost
    • In the right quantity
    • At the right quality
    • At the right time
    • At the right place

Class 02

Operations

  • Definition: Operations as a business process refers to that part of a business organization responsible for producing and delivering its final products (goods and/or services).
  • Business School Areas of Study: Relevant areas include:
    • Corporation Finance
    • Operations
    • Marketing
    • Management
    • Information Systems
    • SCM (Supply Chain Management)
    • Accounting
    • Analytics

Areas of Operations-Based Competition

  • Marketing and operations both influence company competitiveness.
    • Marketing Perspective: Are we providing the right goods or services?
    • Operations Perspective: Are we providing better goods and services than our competition, and are we doing it efficiently?
  • Companies compete in areas including:
    • Cost / price
    • Innovation / quality
    • Location / time / flexibility
    • Product/service design / differentiation / specialization
  • Strategic Decision and Tactical Action:
    • Strategy: A differentiating idea or ideas serving as a roadmap for achieving organizational goals.
    • Tactics: The methods and actions taken to accomplish a strategy.

Calculating Productivity

  • Companies use Key Performance Indicators (KPIs) to measure operations, including:
    • Production: Changeover time
    • Inventory: Days of supply
    • Shipping: Order fill rate
  • Definition of Productivity: A measure of the effective use of resources, calculated as:
    • ext{Productivity} = rac{ ext{Outputs}}{ ext{Inputs}}
    • Outputs: Goods and services
    • Inputs: Labor, material, energy, and others.
  • Importance of Productivity:
    • Allows comparisons within the industry.
    • Evaluates performance over time, particularly post capital investments or operational changes.
    • At the national level, increasing productivity correlates to increasing wealth; without productivity gains, there’s no increase in wealth.

Class 03

Background: Why is Forecasting Important

  • Purpose of Forecasts: Used to predict future activity and drive decisions within a company, such as:
    • Staffing, production, purchasing, and distribution.
    • Make vs. buy / insource vs. outsource.
    • Capital expenditures.
  • Lead Times: Forecasts drive decisions due to associated lead times, including:
    • Staffing changes.
    • Production/purchase/distribution changes.
    • Sourcing changes for make vs. buy.
    • Capital expenditure changes.
  • Accuracy of Forecasts: Forecasts are inherently inaccurate and become less accurate with increased granularity, such as:
    • Forecasting demand for a national family of products by month.
    • Forecasting demand by SKU at a national level weekly.
    • Forecasting demand by SKU, by plant, daily.

Creating a Forecast

  • A forecast (demand plan) is typically established monthly and considers known customer/internal company actions.
  • Consensus Forecasts: Created with inputs from internal teams or external organizations.
  • Disaggregation of Forecasts: Necessary to align across plants and distribution centers serving specific customers and geographic regions.

Class 04

Forecast Accuracy

  • Importance of Measuring Forecast Accuracy: It is fundamental for selecting effective forecasting techniques.
  • Key Terms:
    • Forecast Error: The difference between actual and forecast values.
  • Methods of Assessing Forecast Error:
    • Mean Absolute Deviation (MAD): Average absolute error.
    • Mean Squared Error (MSE): Average of squared errors.
    • Mean Absolute Percent Error (MAPE): Average absolute percent error.
  • Advantages of Each Method:
    • MAD helps eliminate cancelling effects of positive and negative errors.
    • MSE identifies larger errors more effectively than smaller ones.
    • MAPE indicates significant errors more prominently compared to minor ones.

Class 05

Quality: Overview

  • Costs Associated with Quality:
    • Prevention Costs: Developing requirements, plans, maintenance procedures, re-design of products/processes, and training.
    • Appraisal Costs: Audits, inspections, testing, verification, and supplier ratings.
    • Internal Failure Costs: Rework when problems are identified before product departure, scrap, waste, etc.
    • External Failure Costs: Repairs, servicing, returns, litigation.

Background of Quality Control

  • Influential Individuals:
    • Walter Shewhart: Introduced the control chart in 1924; recognized different variations in processes:
    • Assignable-cause variation
    • Chance-cause variation
    • W. Edwards Deming: Advocated for systems-level responsibility for quality, prominent in Statistical Process Control.
    • Joseph M. Juran: Emphasized management's role, estimating that 80% of quality defects are controllable by management.

Quality Tools

  • Tools to measure process performance include:
    • Control charts, run charts, scatter diagrams.
    • Tools to identify significant factors include:
    • Pareto charts, histograms.
    • Tools for identifying root causes of variation are:
    • Flowcharts, cause-and-effect diagrams, check sheets.

Control Charts

  • Definition: A statistical chart displaying time-ordered values of a sample statistic to identify if a process is out of control.
    • Identifies variations due to chance vs. assignable causes.

Run Charts

  • Definition: Tool for tracking results over time to identify trends or patterns.

Scatter Diagrams

  • Definition: A graph showing the relationship between two variables, which helps in assessing correlation.
    • Example: Positive relationship between homework effort and exam scores.

Pareto Analysis

  • Technique Description: Classifies problem areas by importance, often following the “80-20” rule where 80% of problems stem from 20% of causes.

Histogram

  • Definition: A chart of an empirical frequency distribution to measure the significance of data.

Flowchart

  • Definition: A visual representation outlining a process and its elements.

Cause-and-Effect Diagram

  • Definition: Also known as a fishbone diagram, used to identify categories of factors potentially causing issues.

Check Sheets

  • Definition: Tools for recording and organizing data to identify recurring problems.

Class 06

Ensuring Quality Across the Supply Chain

  • Acceptance Sampling: Refers to sampling products provided by a supplier; random samples are tested against specifications.
    • If passed, the shipment is accepted; if failed, options include testing all products or rejection.

Statistical Process Control (SPC)

  • Relation to Quality: Used for products/services produced by a company to ensure quality control.
  • Graphs Used in Control: Distinguishes between variables and attributes data via charts.
  • Variable Data: Measured typically on continuous scales (e.g., length, time).
  • Attribute Data: Counted examples, like defective parts or incorrect claims.

Class 08

Managing Products or Services Differently

  • Life-Cycle Perspective: The need for varied management strategies depending on a product's life-cycle stage, driven by changes in demand impacting:
    • Productivity
    • Cost per unit
    • Profitability

Differentiation Strategies

  • Three Common Strategies:
    • Inventory Deployment Strategy: Make to stock vs. make to order.
    • Distribution Strategy: Distributed vs. drop ship.
    • Manufacturing Strategy: In-house production vs. contract manufacturing.

Postponement Strategy

  • Definition: Delaying the completion of a product closer to the time it is needed or consumed; common in packaging, labeling, documentation, and accessories.