Scm 301

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operations function

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Also called operations. The collection of people technology, and systems within an organization that has primary responsibility for providing the organization’s products or services

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supply chain

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A network of manufacturers and service providers that work together to convert and move goods from the raw materials stage through to the ender user. These manufacturers and service providers are linked together through physical flows, information flows, and monetary flows.

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upstream

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A term used to describe activities or firms that are positioned earlier in the supply chain relative to some other activity or firm of interest. Example: Corn harvesting takes place upstream of cereal processing, while cereal processing takes place upstream of cereal packaging.

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downstream

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- A term used to describe activities or firms that are positioned later in the supply chain relative to some other activity or firm of interest. Example: Sewing a shirt takes place downstream of weaving the fabric, while weaving eh fabric takes place downstream of harvesting the cotton.

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first-tier supplier

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A supplier that provides products or services directly to a particular firm

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second-tier supplier

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A supplier that provides products or services t a firm’s first-tier supplier.

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supply chain management

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The active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient way possible.

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SCOR model

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A framework developed and support by the Supply-Chain Council that seeks to provide standard descriptions of the processes, relationships, and metrics that define supply chain management. SCOR covers 5 broad areas:

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planning (SCOR)

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activities that seek to balance demand requirements against resources, and communicate these plans to the various participants.

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sourcing (SCOR)

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activities that include identifying, developing, and contracting with suppliers, and scheduling the delivery of incoming goods and services

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make/production (SCOR)

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activities that cover the actual products of a good or service

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delivery (SCOR)

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activities that include everything from entering customer orders and determining delivery dates to storing and moving goods to their final destinations

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return (SCOR)

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activites that include the activities necessary to return and process defective or excess products or materials.

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Electronic Commerce (e-commerce)

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the use of information technology solutions to automate business transcations. E-commerce promises to improve the speed, quality, and cost of business communications

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structural business elements

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one of two major decision categories addressed by a strategy. tangible resources, such as buildings, equipment, and computer systems

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Infrastructural business elements

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one of two major decision categories addressed by a strategy. includes the policies, people, decision rules, and organizational strucutre choice made by a firm.

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strategies

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the mechanisms by which businesses coordinate their decisions regarding structural and infrastructural elements

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mission statement

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a statement that expalins why an organization exists. it describes what is important to the organization, called its core values, and identifies the organization's domain

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business strategy

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the strategy that identifies the firm's targeted customers and sets time frames and performance objectives for the business.

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core competencies

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organizational strengths or abilities, developed over a long period, that customers find valuable and competitors find difficult or even impossible to copy

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functional strategy

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translates a business strategy into specific actions for the functional areas such as market, HR, finance, etc. Functional strategies should align with the overall business strategy and with eachother.

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operations and supply chain strategy

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a functional strategy that indicates how structural and infrastructural elements within the operations and supply chain areas will be acquired and developed to support the overall business strategy.

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value index

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a measure that uses the performance and importance scores for various dimensions of performance for an item or service to calculate a score that indicates overall value of an item or service to a customer

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quality

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the characteristics of a product or service that bear on its ability to satisfy stated or implied needs

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performance quality

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a subdimension of quality, addressing the basic operating characteristics of the product or service

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conformance quality

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a subdimsion of quality, addressing whether the product was made or the service performed to specifications

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reliability quality

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a subdimension of quality addressing whether a product will work for a longtime without failing or requiring maintenance

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delivery speed

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a performance dimension that refers to how quickly the operation or supply chain function can fulfill a need, once it has been identified

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delivery reliability

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a performance dimension that refers to the ability to deliver products or services when promised

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delivery window

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the acceptable time range in which deliveries can be made

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flexibility

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a performance dimension that considers how quickly operations and supply chains can respond to unique needs of different customers

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mix flexibility

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the ability to produce a wide range or products or services

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changeover flexibility

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the ability to provide a new product with minimal delay

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volume flexibility

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the ability to produce whatever volume the customer needs

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trade-off

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the decision by a firm to emphasize one performance dimension over another, based on the recognition that superior performance on some dimensions may conflict with superior performance on others

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order winners

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performance dimenions that diferentiate a company's products and services from its competitors'. Firms win the customer's business by providing superior levels of performance on order winners.

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order qualifiers

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performance dimensions on which customers expect a minimum level of performance. Superior performance on an order qualifier will not, by itself, give a company a competitive advantage.

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forecast

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an estimate of the future level of some variable. common variables that are forecasted include demand levels, supply levels, and prices.

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4 Laws of Forecasting

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1: they are almost always wrong
2: near term forecasts tend to be more accurate
3: forecasts for groups of products/services tend to be more accurate
4: forecasts are no substitute for calculated values

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quantitative forecasting models

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forecasting models that use measurable, historical data to generate forecasts. these models can be divided into two major types: time serious and causal models

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qualitative forecasting techniques

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forecasting techniques based on intuition or informed opinion. these techniques are used when data are scarce, not available, or irrelevant

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market surveys

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structured questionnaires submitted to potentiaial customers, often to gauge potentional demand

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panel concensus forecasting

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a qualitative forecasting technique that brings experts together to jointly discuss and develop a forecast

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delphi method

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a qualitative forecasting technique that has experts work individually to develop forecasts. the individual forecasts are then shared among the group, after which each participant is allowed to modify his or her forecast based on information from the others. This is repreated until a consensus is reached.

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life cycle analogy method

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a qualitative forecasting technique that attempts to identify the time frames and demand levels for the introduction, growth, maturity, and decline stages of a new product or service.

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build-up forecasts

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a qualitative forecasting technique in which individuals familiar with specific market segments estimate the demand within these segments. These individual forecasts are then added up to get the overall forecasts

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time series forecasting models

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quantitative forecasting models that use time series to develop forecasts. with a time series model, the chronolgy of the observations, as well as their values, is important in developing forecasts

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randomness

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within the context of forecasting, unpredictable movement from one time period to the next

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trend

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long-term movement up or down in a time series

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seasonality

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a repeated pattern of spikes or drops in a time series associated with certain times of the year

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moving average model

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a time series forecasting model that derives a forecast by taking an average of recent demand values

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smoothing models

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another name for moving average models. the name refers to the fact that using averages to generate forecasts results in forecasts that are less susceptible to random cluctuations in demand

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weighted moving average model

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a form of the moving average model that allows the actual weights applied to past observations to differ

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exponential smoothing

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a special form of the moving average model in which the forecast for the next period is calcuated as the weighted average of the current period's actual value and forecast

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adjusted exponential smoothing model

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an expanded version of the exponential smoothing model that includes a trend adjustment factor

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linear regression

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a statistical technique that expressed the forecast variable as a linear function of some independent variable. linear regression can bu used to develop both time series and causal forecasting models.

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causal forecasting models

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a class of quantitative forecasting models in which the forecast is modeled as a function of something other than time.

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multiple regression

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a generalized form of linear regression that allows for more than one independent variable

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collaborative planning, forecasting, and replenishment (CPFR)

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a set of business processes, backed up by information technology, in which members agree to mutual business objectives and measures, develop joint sales and operation plans, and collaborate to generate and update sales and forecasts and replenishment plans.

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sales and operations planning

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a business process that helps firms plan and coordinate operations and supply chain decisions over a tactical time horizon

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strategic planning

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planning that takes place at the highest levels of the firm, addressing needs that might not arise for year into the future

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tactical planning

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planning that covers a shorter period, usually four months to a year out, although the planning horizon may be longer in industires with very long lead times (such as engineer-to-order firms)

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detailed planning and control

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planning that covers time periods ranging from weeks, down to just a few ours out in the future

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planning values

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values that decision makers use to translate tthe sales forecast into resource requirements and to determine the feasibility and costs of alternative sales and operations plans

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top-down planning

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a single aggregated sales forecast drives the planning process. for this to work, products/services must not change over time or the products/services has very similar resource requirements

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bottom-up planning

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resources requirements and product/service mix are very unstable. managers need to plan for each product/service then add up the requirements to get an overall picture

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level production plan

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an s&op plan in which proudction is held constant and inventory is used to absorb difference between production and the sales forecast

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chase production plan

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an s&op plan in which production is changed in each time period to match the sales forecast

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mixed production plan

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an s&op plan that varies bnoth product and inventory levels in a n effort to develop the most effective plan (combo of chase and level)

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load profile

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a display of future capacity requirements based on released and/or planned orders over a given span of time

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net cash flow

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the net flow of dollars into or out of a business of a period of time

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yield management

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an approach commonly used by services with highly perishable 'products,' in which prices are regulary adjusted to maximize total profit

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tiered workforce

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a strategy used to vary workforce levels, where additional full-time or part-time employees are hired during peak demand periods, while a smaller, permanent staff is maintained year-round.

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offloading

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a strategy for reducing an smoothing out workforce requirements by having the customers perform part of the work themselves

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optimization models

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a class of mathematical models used when the user seeks to optimize some objective function subject to some constraints.

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objective function

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a quantitative function that an optimization model seeks to optimize (maximize or minimize)

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constraints

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quantifiable conditions that place limitations on the set of possible solutions. The solution to an optimization model is acceptable only if it does not break any of the constraints.

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rolling planning horizon

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requires updates to sales and operations plan on a montly or quarterly basis

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flexible manufacturing systems (FMSs)

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highly automated batch processed that can reduce the cost of making groups of similar products

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production line

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a type of manufacturing processed used to produce a narrow range of standard items with identical or highly similar designs

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product-based layout

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a type of layout where resources are arranged sequentially according to the steps required to make a product.

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cycle time

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for a line process, the actual time between completions of successive units on a production line

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continuous flow process

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a type of manufacturing process that closely resembles a production line process. the main difference is the form of th eproduct, which usually cannot be broken down into discrete units. example: oil, gas, yarn

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job shop

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a type of manufacturing processed used to make a wide variety of highly customzied products in quantities as small as one. job shop are characterized by general-purpose equipment and workers who are broadly skilled

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functional layout

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a type of layout where resources are physically grouped by function

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batch manufacturing

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a type of manufacturing processed where items are moved through the different manufacturing steps in gropus, or 'batches'

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fixed-position layout

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a type of manufacturing process in which the position of the product is fixed. materials, equipment, and workers are transported to and from the product.

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hybrid manufacturing process

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a general term referring to the manufacturing processes that seek to combine the characteristics, and hence advantanges, of more than one of the basic processes. example: FMS, machining centers, group technology

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machining center

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a type of manufacturing process that completes serveral steps w/o removing an item from the process

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group technology

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a type of manufacturing process that seeks to achieve the efficiencies of a line process in a batch environment, by dedicating equipment and personnel to the manufacture of products with simlar manufacturing characteristics

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cellular layout

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a type of layout typically used in group technology settings; resources are physically arranged accordin to the dominant flow of activities for the product family.

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product family

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in group technology, a set of products with very similar manufacturing requirements.

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make-to-stock (MTS)

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products that require no customization. general products that are produced in large enough volumes to justify keeping a finished goods inventory

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assemble- or finish-to order (ATO)

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products that are customized only at the very end of the manufacturing process

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Make-to-order (MTO)

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products that use standard components, but the final configuration of those components is customer-specific

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Engineer-to-order (ETO)

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products that are designed and produced from the start to meet unusual customer needs or requirements. they represent the highest level of customization

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law of variability

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the greater the random variability either demanded of the process or inherent in the process itself or in the items processed, the less productive the process is.

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capacity

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the capability of a worker, machine, work center, plant, or organization to produce output per time period.

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theoretical capacity

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the maximum output capacity, allowing for no adjustments for preventive maintenance, unplanned downtime, or the like.

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rated capacity

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the long-term, expected output capability of a resource or system

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lead capacity strategy

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a capacity strategy in which capacity is added in anticipation of demand

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lag capacity strategy

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a capacity strategy in which capacity is added only after demand has materialized

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match capacity strategy

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a capacity strategy that strikes a balance between the lead and lag strategies by avoiding periods of high under- or overutilization

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virtual supply chain

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a collection of firms that typically exists for only a short period. virtual supply chains are more flexbile than traditional supply chains, but less efficient.

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fixed costs

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expenses and organization incurs regardless of the level of business activity

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variable costs

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expenses directly tied to the level of business activity.

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indifference point

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the output level at which two capacity alternatives generate equal costs

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expected value

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a calculation that summarized the expected costs, revenues, or profits of a capacity alternative based on several demand levels, each of which as a different probability.

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decision tree

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a visual tool that decision makers use to evaluate capacity decisions. The main advantage of a decision tree is that the users can see the interrrelationships between decisions and possible outcomes

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break-even point

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the volume level for a business at which total revenues cover total costs.

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theory of constraints

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an approach to visualizing and managing capacity that recognized that nearly all products and services are created through a series of linked processes, and in every case, there is at least one process step that limits throughput for the entire chain

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5 steps to improve throughput

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1. identify constraint
2. exploit constraint
3. subordinate everything to the constraint
4. elevate the constraint
5. find new constraint, repeat

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business process

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a set of logically related taks or activites performed to achieve a defined business outcome

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primary process

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a process that addresses the main value-added activities of an organization

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support process

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a process that performs necessary, albeit non-value-added, activities

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development process

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a process that seeks to improve the performance of primary and support processes

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mapping

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the process of developing graphic representations of the organizational relationships and/or activities that make up a business process.

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process map

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a detailed map that identifies the specific activities that make up the informational, physical, and/or monetary flows of a process

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swim lane process map

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a process map that graphically arranges the process steps so that the user can see who is responsible for each step

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productivity

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a measure of process performance; the ratio of outputs to inputs

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single-factor productivity

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a productivity score that measures output levels relative to a single input

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multifactor productivity

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a productivity score that measures output levels and relative to more than one input

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efficiency

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a measure of process performance; the ratio of actual outputs to standard outputs. usually expressed in %

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standard output

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an estimate of what should be produced, given a certain level of resources

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inventory

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stocks or items used to support production, supporting activities, and customer service.

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cycle stock

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components or products that are received in bulk by a downstream partner, gradually used up, and then replenished again in bulk by the upstream partner.

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safety stock

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extra inventory that companies hold to protect themselves against uncertainties in either demand or replenishment time

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anticipation inventory

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inventory that is held in anticipation of customer demand.

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hedge inventory

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a type of safety stock. inventory to buffer events that may not happen, such as employee strikes, prices increases, unsettled governments, etc.

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transportation inventory

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inventory that is moving from one link to another

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smoothing inventories

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inventories used to smooth out differences between upstream products levels and downstream demands

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inventory drivers

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business conditions that force companies to hold inventory

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supply uncertainty

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the risk of interruptions in the flow of components from upstream suppliers

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demand uncertainty

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the risk of significant and unpredictable fluctuations in downstream demand

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independent demand inventory

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inventory items with demand levels that are beyond a company's complete control

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dependent demand inventory

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inventory items whose demand levels are tied directly to the company's planned production of another item.

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periodic review system

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an inventory system used to manage independent demand inventory. the inventory level for an item is checked at regular intervals and restocked to some predetermined level

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service lvel

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a term used to indicate the percentage of time inventory levels will be high enough to meet demand during the reorder period.

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continuous review syste,

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an inventory system used to manage independent demand inventory. the inventory level for an item is constantly monitored, and when the reorder point is reach, an order is released

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Economic Order Quantity (EOQ)

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the order quantity that minimizes annual holding and ordering costs for an items.

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single-period inventory system

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a system used when demand occurs in only a single point in time

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target service level

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for a single-period inventory system, the service level at which the expected cost of a shortage equals the expected cost of having excess units

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target stocking point

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for a single-period inventory system, the stocking point at which the expected cost of shortage equals the expected cost of having excess units.

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planning and control

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a set of tactical- and execution-level business activities that includes master scheduling, material requirements planning, and some form of production activity control and vendor order management

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master scheduling

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a detailed planning process that tracks production output and matches this output to actual customer orders.

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forecasted demand

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in the context of master scheduling, the company's best estimate of the demand in any period

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booked orders

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in the context of master scheduling, confirmed demand for products

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master production schedule

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the amount of product that will be finished and avaible for sale and the beginning of each week. The MPS drives more detailed planning activities, such as MRP

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available to promise (ATP)

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a field in the master schedule record that indicates the number of units that are available for sale each week, given those that have already been promised to customers.

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planning horizon

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the amount of time the master schedule record of MRP record extends into the future. In general, the logner the production and supplier lead times are, the longer the planning horizon must be

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rough-cut capacity planning

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a capacity planning technique that uses the master production schedule to monitor key resource requirements.

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material requirements planning (MRP)

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a planning process that translates the master production schedule into planned orders for the actual parts and components needed to produce the master scheduled items.

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dependent demand inventory

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inventory items whose demand levels are tied directly to the production of another item

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Bill of material (BOM)

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a listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly.

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product structure tree

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a record or graphical rendering that shows how the components in the BOM are put together to make the Level 0 item

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planning lead time

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within the context of MRP, the time from when a component is order until it arrives and is reayd to use.

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exploding the BOM

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the process by which one works backwards from the master production schedule for a level 0 item to determine the quanity and timing of orders for the various subassemblies and components. exploding the BOM is the underlying logic used by MRP

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scheduled receipts

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orders already processed

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planned receipts

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new orders

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net requirements

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gross requirements - ending inventory from last time period - scheduled receipts

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gross requirements

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what is needed each week

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parent/child relationship

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refers to the logical linkage between higher- and lower- level items in the BOM

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MRP nervousness

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a term used to refer to the observation that any change, even a small one, in the requirements for items at the top of the BOM can have drastic effects on the items further down the BOM

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job sequencing rules

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ruesl used to determine the order in which jobs should be processed whne resources are limited and multiple jobs are waiting to be done

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distribution requirements planning (DRP)

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a time-phased planning approach similar to MRP that uses planned orders at the point of demand (warehouse, customer) to determine forecasted demand at the source level (often a plant)