Chapter 3: Supply Processes Flashcards
a process that focuses on buying merchandise or services at the optimum possible total cost in the correct amount and quality for an organization; day-to-day purchasing function
procurement (the buy process)
The Buy Process initiates the flow of ________ in the supply chain.
materials
the identification, acquisition, access, positioning and management of resources and related capabilities the organization needs or potentially needs in the attainment of its strategic objectives
supply management
the institutional process that continuously re-evaluates and improves the purchasing activities of a company
strategic sourcing
Strategic sourcing focuses on improving _________.
procurement
3 reasons why procurement (the buy process) is so important:
1. Organizations are no longer ______ _______.
2. Supply base is ________ ________.
3. Procurement can provide ________ _______.
- vertically integrated
- geographically dispersed
- competitive advantage
What is the goal of procurement?
to reduce total cost of ownership (TCO)
everything that goes into the finished goods being produced; used in the production process and affect product value
direct materials (ex: Apple has to get the raw materials, component parts, modules, and individual parts that go into an IPhone)
consumed as part of the production process, but are not “product ingredients”; used outside of the production process
indirect materials (maintenance, repair, and operations supplies, which help keep the production process running effectively)
Supply risk is _____ when the item is a scarce raw material, when its availability could be affected by natural disaster, when the flow could easily be disrupted, or when there are few suppliers.
high
Profit impact is ______ when the item has significant value to the organization’s output (could be because it makes up a high proportion of the output or because it drives quality)
high
Within Kraljic’s Project Portfolio Purchasing Model, what are the 4 items measured in regards to supply risk vs. potential profit impact?
- Noncritical items
- Bottleneck items
- Leverage items
- Strategic items
Which items have a LOW supply risk and a LOW profit impact?
noncritical items
useful approaches for purchasing these include stockpiling when the item is available and looking for ways to control vendors.
bottleneck items
Which items have a HIGH supply risk and a HIGH profit impact?
Strategic items
Which items have a HIGH supply risk and a LOW profit impact?
bottleneck items
purchasing approaches: using your full purchasing power, substituting products or suppliers, and placing high volume orders.
leverage items
Which items have a LOW supply risk and a HIGH profit impact?
leverage items
these critical goods deserve the most attention from purchasing managers. Options include developing a long-term supply relationship, analyzing and managing risk regularly, planning for contingencies and considering making the items in house rather than buying it, if appropriate.
strategic items
What are the 3 benefits of the Buy Process?
- Reduction in cost per unit
- Control (over consumption and volume)
- Efficiency (through standardization)
What is the 5 step procurement process? **
- Identify material and service needs
- Evaluate suppliers
- Supplier Selection
- Release order to supplier (execution phase)
- Monitor orders and evaluate performance
The appropriate purchasing approach for critical goods is to:
a. build relationships with strategic suppliers
b. work with a limited number of suppliers
c. focus on gaining the cheapest cost from any supplier
d. use multiple suppliers in a competitive bidding scenario
a. build relationships with strategic suppliers
the process of analyzing an organization’s spending and using this analysis to make effective decisions about the acquisition of products and services. (trying to make the buy process more consistent and effective) (trying to figure out what to buy and from whom to achieve high quality, timeliness, and low cost)
strategic sourcing
What are the 5 reasons we should BUY (external manufacturing)?
- Costs less
- We lack the capacity
- We lack the skills
- Cut inventory costs (cost reduction)
- Focus on our core competencies
What are the 5 reasons we should MAKE (internal manufacturing)?
- Produce it cheaper in-house
- We have proprietary designs (knowledge protection)
- We can leverage our suppliers
- No one knows it better than we do (lack of external knowledge)
- Production is our core competency
What are the 3 risks of outsourcing?
- Insufficient supply
- Poor product quality
- Long supply lead-time
The growing importance of purchasing has shifted from a ______ to a more _______ role.
tactical; strategic
focuses on the creation of something and the creation of value; the process by which inputs are combined and transformed into output
production (the MAKE process)
focuses on tangible product creation. Required input materials are transformed, assembled, processed, or converted into finished products
manufacturing
In developing a production plan and schedule, we need to make 3 Key Decisions (3 Key Components to Production) **:
- How much output to make
- Which transformation process to use
- How much of each unit is required
What are the 2 types of input in production?
- Transformed resources
- Transforming resources
all the raw materials, individual parts, and components that we assemble into a finished product.
transformed resources
the supporting tools that we need to execute the production process (convert the inputs into outputs)
transforming resources (ex: faculty equipment, staff, and the related resources that facilitate production)
day to day operation or action that takes place inside the factory. (The “verb”/ “action” of the production process)
transformation process
T or F: output may be goods, services, information, or a combination of the three; it isn’t just the finished product, it can be components and ingredients used in other production applications
True
What types of production processes are available for companies to use?
- Job Production
- Batch Production
- Continuous (or mass) Production
What type of production process does this describe:
- Creating custom products for specific clients
- Project oriented: one entire product may be created before the next project is initiated. (ex: customized motorcycle shop)
- Benefits: Customization, high quality.
- Drawbacks: expensive, slow, and low volume way to build goods.
Job Production
What type of production process does this describe:
- Used to produce products in groups.
- All components are completed at a workstation before moving onto the next. (ex: a bakery would use batch production)
- Benefits: production line flexibility, product volume and diversity
- Drawbacks: down-time between processes causes lower output
Batch Production
What type of production process does this describe:
- Creating a steady flow of goods through a factory. Traditional assembly lines convert inputs into products without delays, changeovers, or interruptions.
- Rely heavily on automation with limited labor input to continuously create output.
- Benefits: Automation = high volume ; Fewer errors = lower cost
- Drawbacks: expensive to build and operate
Continuous (mass) production
How do you decide which production process/method is appropriate for your situation?
- Decision is a function of your organization’s product ______ and _______.
- volume; variety
Match the following to which production process:
1. The lower the volume, and the wider the variety of product…
2. High volume, low variety…
3. High volume, multiple products…
- Job Production
- Continuous Production
- Batch Production
What are the 5 goals of production?
- Quality - do things right
- Speed - keep up with demand
- Dependability - do things on time
- Flexibility - develop ability to change
- Cost - perform at a minimum cost
involves developing a plan regarding production’s role, activities, and objectives; must be aligned/support the overall business strategy, focus on future demand and needs of customers, and promote quality, speed, flexibility, and efficiency
production strategy
What are the 4 main production strategies?
- Push strategy
- Pull strategy
- Production strategy
- Lean strategy
Which production strategy does this describe?
mass production strategy, where we build a lot of product, drive it out to the market, and hope that it sells. → can build lots of products fast and inexpensively. But, this may create unwanted inventory and you lack the ability to handle special customer requests because the process is very sequential (limited flexibility).
push strategy
The push strategy works well for standardized (high/low) cost goods.
low (ex: canned foods, soft drinks)
Which production strategy waits for customer orders (demand), which drives the product through the production system.
pull strategy
T or F: The pull strategy is more expensive, but more flexible/scalable and avoids stockpiles of unwanted inventory.
True
Which production strategy works well for high-value, customized products, and have short product life cycles (like lean production, flexible manufacturing, and adaptive manufacturing)?
pull strategy
Which production strategy does this describe:
Involves the timing of production (before or after the receipt of customer orders)
production strategy
What are 2 methods of the production strategy?
- Make To Stock
- Make To Order
Which method of the production strategy does this describe?
traditional production method; products are made in anticipation of future orders/ demand; supports the push production strategy.
Make to Stock (MTS)
Which method of the production strategy does this describe?
group of production methods that are triggered by actual customer orders; follows the demand-pull strategy.
Make-to-Order
T or F: The Make-To-Stock and Make-To-Order can be used in combination. A common product platform is built; customization happens after order is made.
True
Which production strategy emphasizes eliminating waste while delivering higher quality products at the least cost to the customer; embodies the pull strategy
lean strategy
What are the 3 objectives of the lean strategy?
- Reduce production resource requirements
- Increase manufacturing flexibility/velocity
- Eliminate defects to improve quality
What are the 4 key drivers of the production strategy?
- Product characteristics/demand
- Degree of vertical integration
- Need for production flexibility
- Quality/service requirements
T or F: A make to stock push production strategy allows you to provide some customization to meet customer requests.
False; MAKE TO ORDER pull strategy
What are the 2 types of manufacturing layouts?
- Process Layout
- Product Layout
Which type of manufacturing layout does this describe:
- a bakery would use this. - workstation’s in the kitchen focusing on mixing, cutting and rolling, baking, and decorating. The finished products are then taken to the counter for sale. Workstations produce high volumes of output before sending the batch of semi-finished goods to the next workstation.
- creates production flexibility, but creates some inefficiencies due to handling and flow issues.
process layout
Which type of manufacturing layout does this describe:
- locates the work stations and equipment along a sequential line of production (ex: assembly line).
- can lead to a higher rate of production, but lacks flexibility to make a variety of products.
product layout
What issues and factors drive the production layout decision? (3 things)
- Product characteristics
- Business strategy
- Constraints of physical structure
What are the 5 types of facility layouts?
- Project layout
- Work-centers layout
- Manufacturing cells layout
- Assembly line layout
- Continuous flow layout
Which type of facility layout:
process-focused layout that dedicates production areas to a narrow range of products with similar requirements. (creates a plant within a plant → different parts of our factory have product-focused workgroups that make different families of products) (ex: factory that builds safety products for cars) Generates higher production efficiency, reduces waste and inventory levels, and shortens production cycle time.
manufacturing cells layout
Which type of facility layout:
product-focused layout; high volume flow with little flexibility; used for high-volume standardized products like paper, chemicals, and beverages; production work is done by the equipment, while workers monitor and repair. (ex: a paper plant) → creates economies of scale, and low-cost production, but the layout has very little flexibility.
continuous flow layout
Which type of facility layout:
fixed location layout where the product remains in place for the duration of production. Typically used to build a one-of-a-kind product. Production activities revolve around a fixed location. (ex: assembly of a cruise ship)
project layout
Which type of facility layout:
process-focused layout that groups together similar equipment/functions. Provides flexibility and lower equipment investment.(ex: bakery)
work-centers layout
Which type of facility layout:
product-focused layout; machines and workers are arranged according to the progressive sequence of operations needed to make high quality products. → cost efficient, eliminates cross-flows and backtracking, limit work-in process, streamline production time.
assembly line layout
What is the strategy behind the mass production system?
a. Establish customization capabilities.
b. Make goods to stock
c. Eliminate production waste
d. Make goods to order
b. make goods to stock
Which production process layout makes a small variety of goods in large volumes through high speed, rigid pattern flows, with a fixed schedule?
a. Assembly line layout
b. Lean manufacturing layout
c. Continuous flow layout
d. Project layout
a. assembly line layout
