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52 Cards in this Set
- Front
- Back
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What is production planning? |
The administrative process that takes place within a manufacturing business andwhich involves making sure that sufficient raw materials, staff and othernecessary items are procured and ready to create finished products according tothe schedule specified. A typical large manufacturing business engaging inproduction planning will aim to maximize profitability while maintaining asatisfied consumer base. |
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Whatis the objective of S&OP? |
The concept of Sales and Operations Planning (S&OP) is a monthly-based businessprocess aimed at achieving a balance between a company’s overall demand andsupply. (balancing demand and capacity). |
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What data is needed to generate the S&OP? |
Sales planning: should include proposed sales-related activity such as campaigns, new-product launches, and product discontinuation, but also factor-in the likely impact of significant changes in markets and customer accounts. + Actual sales / forecasting!! Capacity: can be created through turning the sales plan into a rough production and distribution plan. Can we produce it?? Resource planning: How can we produce it / who should do it etc. |
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What is the aim of Sales and Operations? |
The aim of sales and operations planning is to get the whole company working from the same plan. Instead of having separate objectives and forecasts for sales, production, procurement, and the financial department, the S&OP process aims to create a coherent plan for the company that combines all these elements, that reflects the chosen strategy, that can be executed in practice, and is as comprehensive as possible. |
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Explainyour possible actions if your capacity cannot meet the demand. |
Capacity is defined as “the capability of a worker,machine, work center, plant, or organization to produce output per timeperiod.” The company could either hire more workers, outsource,expand production, increase the price... |
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What are the pros and cons of level production? |
Pros: "The advantage of allowingfor the maintenance of a stable work force and reducing inefficiencies causedby shutting down production during slow periods and accelerating work duringcrash production periods" Reduced labor costs Better customer service Improved quality control Better cash flow Cons: The cost of this strategy is the cost ofholding inventory, including the cost of obsolete or perishable items that mayhave to be discarded. |
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Describe the different production strategies? |
Chase: chase strategy looks to dynamically match demand with production. Level: establish average demandlevel and set production rate to that level Hybrid: use a combination of somechase and some level |
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What is the hybrid production strategy? |
Build-up inventory ahead of rising demand anduse backorders to level extreme peaksLayoff or furlough workers during lullsSubcontract production or hire temporaryworkers to cover short-term peaksReassignworkers to preventive maintenance during lulls |
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What is the chase strategy: |
A chase strategy implies matching demand and capacity period by period.This could result in a considerable amount of hiring, firing or laying off ofemployees; insecure and unhappy employees; increased inventory carrying costs;problems with labor unions; and erratic utilization of plant and equipment. Italso implies a great deal of flexibility on the firm's part. The majoradvantage of a chase strategy is that it allows inventory to be held to thelowest level possible, and for some firms this is a considerable savings. Mostfirms embracing the just-in-time production concept utilize a chase strategyapproach to aggregate planning. |
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What is the Master Production Schedule Planning? |
The MPS forms a basis for sales and production to determine what is to bemanufactured The MPS is a plan for manufacturing. Itreflects the needs of the marketplace and the capacity of manufacturing andforms a priority plan for manufacturing to follow.The MPS forms a vital link between sales andproduction as follows:• It makes possible valid order promises. TheMPS is a plan of what is to be produced and when. As such, it tells sales andmanufacturing when goods will be available for delivery.• It is a contract between marketing andmanufacturing. It is an agreed-upon plan. |
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What are the objectives of the Master Production Schedule Planning and how are they accomplished? |
Objectives– Maintain good customer service Make effective use of resources Maintain effective levels ofinventory Accomplishedby: Develop a preliminary MPS Check MPS against capacity andresources Reconcile any differences |
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What data is needed to generate the MPS (master production schedule)? |
Production Plan data Forecasts Actual customer orders Inventory levels Capacity constraints |
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Explain the “ProjectedAvailable” |
An inventory balance projected into the future. |
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What is the purpose of making a MRP and whatdata is needed? |
Lowest level –how many components do I need? Normally we do backwards delivery: here is thedelivery, when do I need to start producing?? The bom structure is used!Outcome: purchasing and production orders!! Objectives: To determine requirements (what to order, when, how much) and to keep priorities current (Componentsget used up, suppliers are late with delivery, scrap occurs, orders arecompleted, and machines break down. In this ever-changing world, a materialrequirements plan must be able to reorganize priorities to keep plans current.) |
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What is the purpose of Capacity Management? |
Do I have the capacity to meet the demands in the time provided? Can I actually producewhat is needed? Capacityis the capability of manufacturing to produce goods and services. Eventually itdepends on the resources of the company—the machinery, labor, and financialresources, and the availability of material from suppliers. In the short run,capacity is the quantity of work that labor and equipment can perform in agiven period. |
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What data is needed to generate the capacity plan? |
Sales, forecast, actual workers, actual space, actual machines (work hours etc.) |
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What is the purpose of Forecasting? |
Forecasting is inevitable in developing plans to satisfy future demand. Customers usually demand delivery in reasonable time, and manufacturers must anticipatefuture demand for products or services and plan to provide the capacity andresources to meet that demand. Firms that make standard products need to havesaleable goods immediately available or at least to have materials andsubassemblies available to shorten the delivery time. Firms that make-to-ordercannot begin making a product before a customer places an order but must havethe resources of labour and equipment available to meet demand. |
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Describe different forecasting methods |
Qualitative Techniques Extrinsic Intrinsic Average demand Moving averages Exponential Smoothing |
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· What is the purpose of holding RAW, WIP and FGinventory? |
Why do wehave finished goods in a supply chain? To reduce lead time. Why do wehave WIP in a supply chain? To constantly have some level of manufacturinggoing on. Why do wehave Raw Materials in a supply chain? Because our customers are not wiling towait for us to source our raw materials. |
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Explain why some companies are following a MTSand some MTO |
Depends on the company and the customer needs. MTO you’re taking out the risks of havingfinished goods, it requires that you can meet the lead time requirements from the customers. Push thede-coupling point to furthest extent! Postponement!! We want to invest incapacity not in inventory. Depends on avoluntary or LEAN environment! • MTO(Make To Order) is strictly 'make after an order arrives, making only thequantity ordered.' In such 'lead time' businesses there shouldn't be anyresidual stock, although there always is … overruns, customer changed theirmind or sourced elsewhere and so on. Production is the process where theproduction order is triggered from a Sales Order. Ex: The Prod process willstart only after receiving the sales order from the customer. In this case theproduct could be customer specific only (Variant) • MakeTo Stock (MTS) is ostensibly 'making enough, before the orders arrive, tosupply ex-stock'. Products are manufactured based on demand forecasts. Sinceaccuracy of the forecasts will prevent excess inventory and opportunity lossdue to stockout, the issue here is how to forecast demands accurately |
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Explain the cost of holding inventory |
The associated price of storing inventory or assets that remain unsold. Holdingcosts are a major component of supply chain management, since businesses mustdetermine how much of a product to keep in stock. This represents anopportunity cost, as the presence of the goods means that they are not being soldwhile that money could be deployed elsewhere. In addition, holding costsinclude the costs of goods being damaged or spoiled over time and the generalcosts, such as space, labor and other direct expenses. Inventorycarrying cost is a ratio which describes the relationship between thecost-of-owning-inventory-per-year and the inventory value. For example, if yourinventory carrying cost is 25% and your annual average inventory is $1M, thenyour annual cost of owning inventory is $250K. The rule ofthumb for inventory carrying cost is between 20% and 30% (however morerealistically bettern 8-10%). Inventory carrying cost is different for everybusiness. |
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Pros and cons of holding inventory |
Always keep in mind that: -having too much stock equals extra expense for you as it can lead to a shortfall in yourcash flow and incur excess storage costs -having too little stock equals lost income in the form of lost sales, while alsoundermining customer confidence in your ability to supply the products you claim to sell -having thewrong stock means lost income in the form of lost sales, write-downs and poorcustomer service. Having theright stock and being able to sell it can lead to: increasedsalesnewcustomers increasedcustomer confidence improvedcash flow newinvestors. |
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Discuss why supplychain management is a wider concept than logistics. |
Logistics is the process of strategically managing the procurement, movement and storage of materials,parts and finished inventory (and the related information flows) through the organisation and itsmarketing channels in such a way that current and future profitability aremaximized through the cost-effective fulfillment of orders. Thescope of logistics spans the organization, from the management of raw materialsthrough to the delivery of the final product. For the most part, the supplychain encompasses a bigger picture. Supply chain management is the umbrellathat covers all aspects of the sourcing and procurement of goods. Basically,SCM forms and manages the b2b links that allow for the ultimate sale of goodsto consumers. Logistics, basically getting the freight from one place to theother, is a function that falls under the wide umbrella of supply chainmanagement, but is only one part of the entire process |
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Explain how thesupply chain can become a competitive advantage. |
§ The basis for competing in this new era will be:Competitive advantage = Product excellence × Process excellence § Logistics and supply chain management canprovide a major source of competitive advantage -> This can be done through the 3 C’s (competitors, customers and costs). Value advantage ( The product is purchased not for itself but forthe promise of what it will ‘deliver") Cost advantage (the experience curve) |
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Explain what isoutsourcing and why do some companies use it and some not. |
"Outsourcing is often undertaken to provide enterprises a competitive advantage bydelegating business process to external agencies and realizing the benefits oflow labor, better quality and improved innovation."
Firmaer bruger outsourcing til at opnå lavere pris og opnå en højereforrentningsgrad for den investerede capital. core competences-> outsourcing non-core competences to suppliers! Do core yourself,outsource the rest. Limit thatthe technology will not be used by competitors if you buy up the company. The pros of outsourcing Better revenue realization and enhanced returns oninvestment Lower labor cost and increased realization ofeconomics of scale Tapping in to a knowledge base for better innovation Frees management time, enabling companies to focus oncore competencies while not being concerned about outsourced routine activities Increases speed and the quality of delivery ofoutsourced activities Reduces cash outflow and optimizes resourceutilization The cons of outsourcing Possible loss of control over a company's businessprocesses Problems related to quality and turnaround time Sluggish response times coupled with slow issueresolutions Shortcomings in performance vs. expectations Lower than expected realization of benefits andresults Issues pertaining to lingual accent variation Anirate customer base coupled with enraged employee unions |
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Explain the “total cost of ownership” concept. |
Horse -> Acquisition cost Other costs: Management, maintenance, operating cost, inventory cost, technical support cost, training cost, disposal cost |
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Explain the process for how to develop a supplychain strategy. |
Steps: Understand the Business Strategy The first step is for supply chain executives to clearly understand how theenterprise chooses to compete. This is important not only for the obvious reasonof working off the “same play book,” but also for the reason that it forces thesupply chain operation to see itself as a customer facing entity serving thecompetitive goals of the enterprise—not merely an operational department. Assess the Extended Supply Chain Conduct a detailed, realistic assessment of the capabilities thatexist within the organization and even the extended supply chain. Begin by closelyscrutinizing your organization’s assets and evaluate how well they support thestrategy. Develop an Implementation Plan From this critical work emerges the “go forward” supply chain strategy – directlytied to the business strategy, highly specific as to enablers and metrics, and with adefined set of implementation requirements and contingencies. The developmentof an implementation plan should include activities and tasks, roles,responsibilities, a corresponding timeline, and performance metrics. Development Considerations - Cooperate and Collaborate with Your Partners – Throughout the developmentprocess remember to include your supply chain partners. While you don’t necessaryneed to divulge the full details of your strategy, you can certainly communicate howyou would like to do business. - Outsource Where Appropriate – Part of developing a supply chain strategy includesevaluating opportunities to outsource areas that are not your core competency. Howevercustomers are different, so there is a likelihood that I will need to usedifferent supply chains within my company and thereby segment the customers andmeet their individual demands! E.g. some customers might require customizedproducts quickly, whereas others will need it very cheap and therefore mightnot follow the same supply chai. Example: Companies such as Zara and H&Mneed supply chains that are effective for very short life cycle products.Whereas solutions focused retailers such as Home Depot or Bunnings must focuson high availability and good range management. Mass retailers such as Tesco orWal-Mart meanwhile need efficient low cost supply chains to compete in themarket place. |
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Explain the theory of setting customer serviceobjectives. |
The whole purpose of supply chain management and logistics is to provide customers withthe level and quality of service that they require and to do so at less cost tothe total supply chain. Customersegmentation! Some are more important that others, segment into a,b,c and d. Some mightbe more expensive that others and the other way around. Set the service targetto meet the different segments. if we onlyhave 1 type of service we might underservice and overservice different groups. A,b,c can bedone on segmentation on profits. A,b,c on products -> a product will receivea higher service level. Always put most into the a-products. |
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Explain how supply chain management can impactthe ROI. |
Use dupont model! If the customers are happy they will buy more. Lower inventory, better utilizationof machines. ROI: profit/capital employed In general: Profit shouldbe maximized, capital employment minimized to the best extent possible(however, there can be benefits to increasing the capital employed e.g. byfixed assets (en plov i stedet for en rive) if it can decrease the overallcosts (fewer labour hours). The higher an ROI the better. (Capital Employed: 100 kr, Rive: 7 kr profit =ROI: 7%, Capital employed: 200 kr, plov: 14 kr, ROI: 14%. |
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Explain the concept of “activity-based costing”. |
Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. The key to activity-based costing (ABC) is to seekout the ‘cost drivers’ along the logistics pipeline that cause costs becausethey consume resources. Thus, for example, if we are concerned to assign thecosts of order picking to orders then in the past this may have been achievedby calculating an average cost per order. In fact an activity-based approachmight suggest that it is the number of lines on an order that consume the orderpicking resource and hence should instead be seen as the cost driver. |
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Explain why some costs are going up and somedown when the number of outlets increases. |
Find the balance! It can be beneficial to have moreDCs in order to meet demand however there should be a good balance as theinventory, outlet, trunking and order processing costs will rise but theoverall local delivery costs will decline. Hence the total distribution costsshows a “smile” curve. |
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Explain the impact of having a lead-time gap tothe supply chain design. |
You need inventory (that is the impact) The leap time gap is the time it takes from the procurement of the raw materials to the point where the customer orders the product. |
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Explain what is a “decoupling point” and how do we work withthat in our supply chain design. |
Thatmeans when I have customer, where does the order go in and hit.
In logistics chains or supply chains the stages are operating normally both in push- and pull-manner. Push production is based on forecast demand and pull production is based on actual or consumed demand. The order fulfillment strategy determines the de-coupling point in the supply chain,which describes the point in the system where the "push" (or forecast-driven) and "pull" (or demand-driven) elements of the supply chain meet. The decoupling point always is an inventory buffer that is needed to cater for the discrepancy between the sales forecast and the actual demand (i.e. the forecast error). It has become increasing necessary to move the de-coupling point in the supply chain to minimize the dependence on forecast and to maximize the reactionary or demand-driven supply chain elements. |
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Explain why companies are using VMI for somecomponents and not for others. |
Vendor Managed Inventory: The manufacturer receiveselectronic data (usually via EDI or the internet) that tells him thedistributor’s sales and stock levels. The manufacturer can view every item thatthe distributor carriers as well as true point of sale data. The manufactureris responsible for creating and maintaining the inventory plan. Under VMI, themanufacturer generates the order*, not the distributor. Pros and Cons. For themanufacturer: he doesn’t have to do anything. For the supplier: better overview I wouldn’t do it for strategic components. (leverage, non-strategic andbottlenecks) –strategic components can’t be on such a simple ordering system becauseyou need a lot of co-development so if you use a lot and it has a high value (Kralich model) |
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Explain why an ”one size fits all” strategy isoften not optimal for a business. |
Different objectives, need different supply chains tomeet all demands to best extent. A,b,c! Lean? Agile? § Rather than the conventional ‘one size fitsall’ strategy for supply chain design, the need today is for multiple supplychain solutions. One way to identify what types of supply chain strategiesmight be appropriate in different circumstances is to position the products inan organisation’s portfolio according to their supply and demandcharacteristics. § By ‘supply characteristic’ is meant the leadtime of replenishment. This could be replenishment of the product itself if itis bought in (e.g. a retailer) or of components in the case of a manufacturer.Clearly, if replenishment lead times are short then a different supply chainstrategy can be employed than when lead times are long.§ Demand conditions may be characterised by thepredictability of demand. One measure of demand predictability is thevariability of demand; by definition demand that does not vary much from oneperiod to another is easier to predict |
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Explain the postponement strategy by giving areal live example |
Postponement refers to the process by which thecommitment of a product to its final form or location is delayed for as long aspossible. When decisions on the final configuration or pack have to be madeahead of demand there is the inevitable risk that the products that areavailable are not the ones the customer wants. • Anexample of late configuration is provided by Hewlett Packard and its DeskJetprinters. These products are designed so that they can be manufactured asgeneric, but incomplete, units. They are then localised at regional centreswhere the appropriate power pack, plug and cable, local packaging, etc., areadded. In this way inventory is minimised but availability is enhanced. Also; restaurants! |
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Explain how to synchronize activities in asupply chain. |
Process alignment and information sharing. § . The information to be shared between supplychain partners includes demand data and forecasts, production schedules, newproduct launch details and bill of material changes. To enable this level ofvisibility and transparency, synchronisation requires a high level of processalignment – which demands a high level of collaborative work! The basic idea behind quick response (QR) isthat in order to reap the advantages of time-based competition it is necessaryto develop systems that are responsive and fast. |
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Explain why lead times are so much in focuswithin supply chain management. |
§ By gaining earlier warning of requirementsthrough improved visibility of the “real” demand. àThe challenge is to find a way to receive earlier warning of the customers’requirements. Hence, the faster one can receive the order (production by demand) the lessneed there will be for any inventory, warehouses, depots etc. hence the better,than if it is merely driven by forecast which can be difficult. Reducingthe gap can be achieved by shortening the logistics lead time (end-to- endpipeline time) whilst simultaneously trying to move the customer’s order cyclecloser by gaining earlier warning of requirements through improved visibilityof demand. |
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Explain the cash-to-cash cycle time impact onthe Economic business performance. |
As we have already observed, a basic concern of any organisation is: how long does it taketo convert an order into cash? In reality the issue is not just how long ittakes to process orders, raise invoices and receive payment, but also how longis the pipeline from the sourcing of raw material through to the finishedproduct because throughout the pipeline resources are being consumed andworking capital needs to be financed. From the moment when decisions are takenon the sourcing and procurement of materials and components, through themanufacturing and assembly process to final distribution, time is beingconsumed. That time is represented by the number of days of inventory in thepipeline, whether as raw materials, work-in-progress, goods in transit, or timetaken to process orders, issue replenishment orders, as well as time spent inmanufacturing, time in queues or bottlenecks and so on. The control of thistotal pipeline is the true scope of logistics lead-time management. Impact: cash flow cycle analysis examines the inventory, accounts receivable and accounts payable ledgers. Positive cash conversion cycles occur when the time in inventory and accounts receivable is greater than the time it takes to pay the supplier. Positive numbers aren't necessarily a good sign, and low numbers indicate a more effectively managed operation – the money isn’t tied up for long in inventory or accounts receivable. Some business models -- cash-only, service providers or extended accounts payable time frames -- generate a healthy negative cash conversion cycle. |
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Explain the concept of bottleneck management |
The essence of optimised production technology OPT is that allactivities in a logistics chain can be categorised as either ‘bottlenecks’ or‘non-bottlenecks’. A bottleneck is the slowest activity in a chain and whilstit may often be a machine, it could also be a part of the information flow suchas order processing. The throughput time of the entire system is determined bybottleneck activities. It follows therefore that to speed up total systemthroughput time it is important to focus on the bottlenecks, to add capacitywhere possible and to reduce set-ups and set-up times if applicable.the outputof any system is restricted by the output of any bottleneck. It might notalways be the same area/machines. It will change according to our order books. |
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Explain the bullwhip effect and how to mitigateit. |
A small change in the forecast can have a big changein the production further on. Butterflies. Why does that happen? E.g.promotions, seasonal -> they are magnified because of inventory qualities.Another reason why we have VMI. § The customer might have an increase in sales andhence all orders will be amplified because all places have a small buffer,which means that throughout the process the effect will cause the orders to beamplified. This can be because of bad communication and disorganization. § Small variation in customer demand is amplifiedupstream in the supply chain, causing huge swings in demand! Bygaining access to real demand, by using ePOS, and developing interconnectedprocesses throughout the supply chain and sharing data, you can prevent tobullwhip effect! |
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Explain the positive effects of “quick response” |
§ If you can reduce the lead times you don’t need toforecast so far out, less safety stock -> inventory will be reduced ->lead time is gonna come even further down. The basic idea behind quick response (QR) is that inorder to reap the advantages of time-based competition it is necessary todevelop systems that are responsive and fast. QR delivery systems are inventory management systemsdesigned to reduce the retailer’s lead time for receiving merchandise, therebylowering inventory, improving customer service levels, and reducing logisticsexpenses Pros Reduces lead time Increases product availability Lowers inventory investment Cons Smaller orders with greater - more expensive totransport and more difficult to coordinate Computer hardware and software must be purchased byboth parties |
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Explain why do we often experience high levelof complexity in our supply chains nowadays. |
Outsourced to far east asia (non-core competenses) ,long supply chains higher risk of variation, trends with customers, volatilemarket •The idea of a chain suggests a series of linearone-to-one relationships whereas the reality is that the focal firm lies at thecentre of a complex web of interconnected and interrelated yet independententities. |
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Explain the 8 sources of complexity: |
1. Network Complexity The more nodes and links that exist in a network thenclearly the more com- plex it becomes. As a result of outsourcing non-coreactivities many companies are today much more reliant on external suppliers ofgoods and services. Those external suppliers also are dependent upon a web ofsecond tier suppliers, and so on. 2. ProcessComplexity Underpinning every supply chain are innumerableprocesses – processes internal to the firm as well as those processes managedby upstream and downstream partners. Often these processes have been developedin a haphazard way and have been added to and modified to reflect currentrequirements and as a result have become more complex. This complexity ismanifested in processes with mul- tiple steps, often performed in series ratherthan in parallel. 3. RangeComplexity Most business organisations find that the range ofproducts and/or services that they offer to the market has a tendency to growrather than reduce. The rate of introduction of new products or services, newpack sizes or variants and brand extensions seems to outpace the rate at whichexisting products or services are eliminated. The general effect of thismushrooming of the product/service portfolio is to extend the ‘long tail’ ofthe Pareto distribution. 4. ProductComplexity Product complexity can arise because the number ofcomponents or sub- assemblies is high, or because there is little commonalityacross the Bills of Materials for different products. The less the commonalityat the Bill of Materials level the less the flexibility to vary product mix orvolume. 5. CustomerComplexity Customer complexity arises as a result of too manynon-standard service options or customised solutions. The costs of servingdifferent customers can vary signifi- cantly. Each customer will exhibitdifferent characteristics in terms of their ordering patterns, e.g. frequencyof orders, size of orders, delivery requirements and so on. These differenceswill be increased further as a result of the availability of different serviceoptions or packages and/or customisation possibilities. 6. SupplierComplexity The size of the supplier base can add to supply chaincomplexity by increasing the number of relationships that must be managed aswell as increasing total transaction costs. 7. OrganisationalComplexity Most businesses have traditionally organised aroundfunctions and departments and their organisation charts have many levels andtend to be hierarchical in their structure. Such ‘vertical’ organisationalarrangements are no doubt administratively convenient in that there can be a‘division of labour’ between functions as well as effective budgetary control.However, they tend to inhibit agility because they are, of necessity, inwardlylooking with a focus on efficiency rather than customer facing with a focus oneffectiveness. A further problem is that over time the functions have atendency to become ‘silos’ with their own agendas and they can lose sight of thefundamental purpose of the business, i.e. to win and keep profitable customers. 8. InformationComplexity The volume of data that flows in all directions isimmense and not always accurate and can be prone to misinterpretation. Theso-called ‘bullwhip’ effect is a manifestation of the way that demand signalscan be considerably distorted as a result of multiple steps in the chain. Theantidote to information complexity is firstly a reduction in the other sevensources of complexity as well as greater visibility. A key to that visibilityhas to be a greater level of collaborative working across the supply chainwhere information transparency is seen as a vital pre-requisite for a moreefficient and effective value delivery system. |
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Explain how to handle this complexity. |
Become quicker, The first step in managing supply chain complexity isto understand where it is coming from. A good starting point to identifying thesource of complexity is to review the eight categories previously identified,i.e. network, process, range, product, customer, supplier, organisational andinformation complexity. |
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Explain the “Butterfly” effect. |
If something happens on the other side of the world,it might happen over here too. • The idea is that a butterfly, flapping its wings somewhere over the Amazon basin, can cause a hurricane thousands of miles away! Whilst this exam- ple of what issometimes described as ‘chaotic’ effects may be a little far-fetched, itprovides a useful reminder of how the ‘law of unintended consequences’ applies to today’s highly interconnected supplychains. E.g. Volcano → Effect onsupply chain because airplanes could not fly. |
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Explain trade-offs in global logistics |
Production, material costs will come down,transportion will go up, inventory is not gonna be stable (it has to increaseto guard against fluctuations). • Thereis a danger that some global companies in their search for cost advantage maytake too narrow a view of cost and only see the purchasing or manufacturingcost reduction that may be achieved through using low-cost supply sources. Inreality it is a total cost trade-off where the costs of longer supply pipelinesmay outweigh the production cost saving. |
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Explain what is “focused factories” and why do some companies have it and others not. |
The idea behind the focused factory is simple: by limiting the range and mix of products manufactured in a single location thecompany can achieve considerable economies of scale. Typically the nationallyoriented business will have ‘local-for- local’ production, meaning that eachcountry’s factory will produce the full range of products for sale in thatcountry. On the other hand the global business will treat the world market asone market and will rationalise its production so that the remaining factoriesproduce fewer products in volumes capable of satisfying per- haps the entiremarket. Heinz produces tomato ketchup for all of Europe from just three plants and willswitch production depending upon how local costs and demand conditions varyagainst exchange rate fluctuations. However, a number of crucial logistics trade-offs maybe overlooked in what might possibly be a too-hasty search for low-costproducer status through greater economies of scale. The most obvious trade-offis the effect on transport costs and delivery lead times. The costs of shippingproducts, often of relatively low value, across greater distances may erode someor all of the production cost saving. Similarly the longer lead times involvedmay need to be countered by local stock holding, again possibly offsetting theproduction cost advantage. Further problems of focused production may beencountered where the need for local packs exist, e.g. with labelling indifferent languages or even different brand names and packages for the sameproduct. This problem might be over- come by ‘postponing’ the final packaginguntil closer to the point-of-sale |
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Explain why we are centralizing inventories. |
Making useof the well-known statistical fact that consolidating inventory into fewerlocations can substantially reduce total inventory requirement, organisationshave been steadily closing national warehouses and amalgamating them intoregional distribution centres (RDCs) serving a much wider geographical area.Manyorganisations are now recognising the advantage of managing worldwideinventories on a centralised basis. To do so successfully, however, requires aninformation system that can provide complete visibility of demand from one endof the pipeline to another in as close to real time as possible. Equally suchcentral- ised systems will typically lead to higher transport costs in thatproducts inevitably have to move greater distances and often high-cost airexpress will be necessary to ensure short lead times for delivery to thecustomer. |
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Explain why supply chains are more vulnerabletoday. |
A focus on efficiency ratherthan effectiveness The globalisation of supply chains Focused factories andcentralised distribution The trend to outsourcing Reduction of the supplier base Demand is morevolatile PLC is shorter Increase salespromotions Natural Disasters Strikes Terrorist Attacks Adoption of LEAN, JITand supplier reduction Outsourcing Offshoring |
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Explain how to manage risks in the supply chain. |
dual-sourcing (e.g. have an extra sourcing partner), sharinginformation, having redundancies (if factory a cannot produce, make surefactory b can). Understand the supply chain Need to look both upstream and downstream in the supply chain.Mapping the supply chain to identity all links Improve the supply chain Simplification, improving process reliability, reducing process variabilityand reducing complexity. Identify the critical paths Locate and Evaluate the weakest links in the chain where you have,Long lead timesBottlenecksSingle source supply Manage the critical paths Development of a contingency planCould be necessary with a reengineering of the supply chainCause and effect analysis Improve network visibility Make the supply chain visible to all links, ensure good communication. Establish a supply chain continuity teamA team with specific focus on the supply chainIdeally the team should be cross-functional and are able to undertake detailedanalysis and implementation involved in the supply chain management process. Work with suppliers and customers toimprove supply chain risk management proceduresCommunicate with both suppliers and customers to better understand andimprove the supply chain. |
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Explain how supply chains are working with theconcept of CSR. |
Corporate Social Responsibility. Tripple bottom line! Are they workingaccording to reasonable conditions? Reducing water, electricity etc -> co2down. The triple bottom line concept emphasizes the importance of examining the impact of business decisions on three key areas: Environment (planet) Economy (profit) Society (people) Managing the supply chain tosupport the triple bottom line could be supportive for both the environment,economy and society, because the company have fewer cost due to the better useof resources. In the context of supply chains we can build on the triple bottom line philosophy to encompass the wider idea that sustainability is concerned with ensuring the long- term viability and continuity of the business as well as contributing to the future well-being of society. Need to look at sustainability for the entire product life cycle Supply chain managers have to think outside the box and not just move production asap to the cheapest part of the world → CO2 charges can change the price of shipping. |
