Oscm Final Exam

Front 1

porsche supply chain

Back 1

supplier --> manufacturer --> retailer (dealer) --> end customer

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integrated supply chain

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SCM is the art and science of integrating the flows of products, info, and financials through the entire supply pipeline from the supplier's supplier to the customer's customer

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supply chain, marketing and production

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interface activities - production: product scheduling, plant location, purchasing
interface activities - marketing: customer service standards, pricing, packaging, retail location
-all in the internal supply chain

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what is operations?

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the process that is responsible for producing goods or services - operations and supply chains are intrinsically linked

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business output: goods vs. services

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see slide 10

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mission

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the reason for an organization's existence - the statement states the purpose of the organization - "what business are we in?"

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strategy

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a plan for achieving organizational goals: serves as a roadmap for reaching the organizational destinations

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organizational strategies

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overall strategies relate to the entire organization. support the achievement of organizational goals and mission

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functional level strategies

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strategies that relate to each of the functional areas and that support achievement of the organizational strategy

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tactics

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the methods and actions taken to accomplish strategies - the "how to" part of the process

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operations

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the actual "doing" part of the process - such as scheduling personnel

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productivity measures

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output / input

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product and service design

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translate customer wants and needs into product and service requirements; refine existing products and services; develop new products and services; formulate quality goals; formulate cost targets; construct and test prototypes

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types of processing

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see slide 16

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basic layout types

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product layouts, process layouts, fixed-position layouts, combination layouts

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specialization and global supply chain

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economies and companies could improve their "wealth" by allowing specialization of tasks; important role of logistics to help extend the market area of countries/companies thru improved efficiency to lower the "landed cost" in new market areas

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specialization and global supply chain 2

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the global supply chain is made up of the interrelated organizations, resources, and processes across countries, which create and deliver products and services to end consumers; global supply - chain is extended to many different countries around the world

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low-cost-country sourcing pros

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lower costs of production, increased number of suppliers, opportunities to identify improved processes and technologies

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low-cost-country sourcing cons

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identification of qualified suppliers, complexity of importing and exporting, communications and transportation, security, inventory costs, transportation costs

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transportation mode choice

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air, rail, motor, water, pipeline, intermodal

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benefits of good quality

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enhanced reputation for quality, ability to command premium prices, increased market share, greater customer loyalty, lower liability costs, fewer production or service problems, lower production costs, higher profits

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dimensions of product quality 1

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performance: main characteristics of the product
aesthetics: appearance, feel, smell, taste
special features: extra characteristics
conformance: how well the product conforms to design specifications

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dimensions of product quality 2

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reliability: consistency of the performance
durability: useful life of product
perceived quality: indirect evaluation of quality
serviceability: handling of complaints or repairs

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dimensions of product quality 3

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convenience: availability and accessibility of service
relability: ability to perform a service dependably, consistently, and accurately
responsiveness: willingness to help customers in unusual situations to deal with problems
time: speed with which the service is delivered

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dimensions of product quality 4

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assurance: knowledge exhibited by personnel and their ability to convey trust and confidence
courtesy: the way customers are treated by employees
tangibles: physical appearance of facilities, equipment, personnel, and communication materials
consistency: ability to provide the same level of good quality repeatedly

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appraisal costs

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costs of activities designed to ensure quality or uncover defects, such as costs of inspectors, testing, test equipment and labs

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prevention costs

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all TQ training, TQ planning, customer assessment, process control, and quality improvement costs to prevent defects from occurring

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failure costs

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costs incurred by defective parts/products or faulty services

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internal failure costs

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costs incurred to fix problems that are detected before the product/service is delivered to the customer

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external failure costs

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all costs incurred to fix problems that are detected after the product/service is delivered to the customer

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quality tools

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process maps, cause & effect diagram, histograms, check sheets, pareto charts, scatter plot, run charts, control charts

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statistical process control

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statistical evaluation of the output of a process
-helps us to decide if a process is "in control" or if corrective action is needed

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simple steps for statistical process control

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-sampling and sampling distribution
-control process (figures and charts)
-process capability

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process capability index - mean centered

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used to asses the ability of a process to meet specification
- UTL - LTL / 6 sigma.
- if Cp is > 1.33 - then the process is capable

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process capability index - mean shifted

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{ UTL - grand mean/ 3sigma, grand mean - LTL / 3sigma
if Cpk is > 1.33 than the process is capable

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project management decisions

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project success depends upon making key managerial decisions over a sequence of steps:
deciding which projects to implement, selecting the project manager, selecting the project team, planning and designing the project, managing and controlling project resources, deciding if and when a project should be terminated

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1970s supply chain planning

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MRP: initial MRP focused on material only, produced a schedule of shop order manufacturing dates; based production planning and inventory control system, MRP is used to manage manufacturing processes, no constraints on manufacturing capacity

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1980s supply chain planning

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MRP to MRPII (manuf. resource planning): infinite capacity manufacturing schedules are not realistic, because MRP ignored resource capacity; MRP scope was expanded to address machine and labor resources; MRP evolved to MRPII; MRPII capacity requirements planning to produce feasible schedules

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1990s supply chain planning

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ERP (enterprise resource planning): coordinates firm's entire business activities from suppliers through customers; centralized data base to facility flows across functional areas

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MRP overview

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see slide 33

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MRP inputs: master schedule

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1 of 3 primary inputs in MRP; states which end items are to be produced, when these are needed, and in what quantities; managers like to plan far enough into future so they have reasonable estimates of upcoming demands; master schedule should cover a period that is at least equivalent to the cumulative lead time

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Enterprise Resource Planning (ERP)

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provides central data "warehouse" - accounting and finance, sales, labor, inventory, production
- offer a single near real-time view of a company's available resources and commitments to customers

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ERP modules

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see slide 36

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inventory

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stock or stores of goods; vital part of business (necessary for operations and contribute to customer satisfaction)
- typical firm has 30% of its current assets and as much as 90% of its working capital invested in inventory

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carrying inventory?

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purchase discount (price discrimination), production transportation economies, seasonality, uncertainties in demand and leadtime

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functional types of inventory

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purpose: cycle stock (certainty) and safety stock (uncertainty)
manufacturing process: material inventory, work in process inventory, finished goods inventory

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inventory dimensions

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SKU (stock keeping unit) is a unique identifier for each distinct product and service
- width: number of SKUs
- depth: quantity of each SKU

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objectives of inventory control

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level of customer service: having the right goods available in the right quantity in the right place at the right time
costs of ordering and carrying inventories: to achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds

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inventory decisions

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when to order? - reorder point model
how many to order? - economic order quantity

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the reorder point

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(demand is variable in the real world) - as the amount of safety stock carried increases, the risk of stockout decreases
- ROP = expected demand during lead time + safety stock

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effects of safety stock

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improve customer service (fewer stockouts, lost sales, lost customers), higher inventory costs (average inventory on-hand and safety stock), trade-off stockout costs vs. inventory costs

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required info to calculate safety stock with uncertain demand

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assumed distributions (normal and Poisson), average demand, standard deviation of demand, average lead time (perf. cycle time), standard deviation of lead time (perf. cycle time)

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calculate covariance

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standard deviation of demand during lead time

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establish customer service level

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probability that item will be in stock

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Calculating reorder point with uncertain demand

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to meet demand during the replenishment lead time, the reorder point must include a safety stock linked to demand variability
- average demand per period x lead time (average demand during leadtime) + number of standard deviations and the standard deviation of lead time demand ("safety stock")

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calculating reorder point with uncertain lead time

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demand per period x average lead time + number of standard deviations and standard deviation of lead time

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inventory costs

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purchase cost: amount paid to buy inventory
holding (carrying) costs: cost to carry an item in inventory for a length of time, usually a year
ordering costs: costs of ordering and receiving inventory

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inventory costs 2

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setup costs: costs involved in preparing equipment for a job, analogous to ordering costs
shortage costs: costs resulting when demand exceeds the supply of inventory; often unrealized profit per unit

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carrying costs

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storage space and handling service cost (taxes and insurance); capital cost (opportunity cost associated with investing in inventory or any asset); risk cost (damage, theft)

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ordering costs

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IT costs for inventory stock level tracking; preparing and processing purchase orders and receiving reports; inspecting and preparing inventory for sale

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tradeoff of carrying and ordering costs

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ordering costs and carrying costs respond in opposite ways to increases in order quantity; this reinforces the logisticians need to be able to separate costs by how they behave in relation to changes in volume; optimal order quantity for the sum of carrying and ordering costs

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graphical representation of tradeoff of carrying and ordering costs

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see slide 51

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Basic Economic order quantity (EOQ)

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used to find a fixed order quantity that will minimize total annual inventory costs

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assumptions of EOQ

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only one product is involved; annual demand requirements are known; demand is even throughout the year; lead time does not vary; each order is received in a single delivery; there are no quantity discounts

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total annual inventory cost

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annual holding cost + annual ordering cost
- Q/2 (H) + D/Q (S)
- Q=order quantity in units
- H=holding (carrying) cost per unit
- D=Demand
- S=ordering cost

Front 66

how many to order?

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optimal order quantity - remember our calculus, taking 1st derivative with respect to Q, setting equal to 0 and solving
- square root of 2DS/H
-H=carrying cost per unit for period
-Q=order quantity
-S=order cost
-D=annual demand

Front 67

EOQ with quantity discount

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if discounts are available for certain order quantites, order quantity no longer just affects order costs and carrying costs
- affects cost of purchasing it
- total cost consists of order cost, carrying cost and purchase cost

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step by step EOQ

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EOQ with quantity discounts
- compute basic EOQ, fall within one of price ranges specified by supplier
- if EOQ falls within cheapest price range, EOQ is optimal order quantity
- EOQ does not - all price ranges having lower prices than range EOQ falls in must be evaluated
- optimal quantity will be at lowest allowable quantity of a price range

Front 69

total cost with quantity discount equation

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TC = D/Q (S) + Q/2 (H) + PD
D=annual demand
Q=order quantity
S=cost per order
H=carrying cost
P=price per unit

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operations method qualitative

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analytical modeling, heuristic models, survey, panels, consensus meeting

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quantitative operations method summary

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regression (statistics and econometrics), time series, simulation

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class experiment importance

Back 72

important for demand forecasting in supply chain
--forecasting is good, but it cannot guarantee the ultimate solution/decision

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overcasting supply chain demand

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something bad is going to happen and whole supply chain will suffer

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when to forecast?

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24 weeks before - and then every 2 weeks before production and that way we can keep updating forecasting