Lecture two Flashcards
The production process
The production processes are used to make any manufactured item
Three steps of the production process
Step 1 - Source the parts needed
Step 2 - Make the product
Step 3 - Deliver the product
Customer order decoupling point
Point where inventory is positioned to allow entities in the supply chain to operate independently
The last point in the supply chain where inventory is held.
This means that for a company that requires a lot of customization on their products, this point would be earlier and the final production steps are based on what he wants. If you are building economies of scale where every product is likely the same, the decoupling point would be the last step in the production process.
Four production environments
Make to stock
Assemble to order
Make to order
Engineer to order
Make to stock (production environments)
Customer is served “on-demand” from finished goods inventory
E.g. Television, Clothing or packaged food products
Final products are produced to fulfill expected orders in the next production period
Essential issue of Make to stock
Balance the level of inventory against the level of customer service
Easy with unlimited inventory, but inventory costs money
Trade-off between the cost of inventory and level of customer service must be made
Because it is based on expected demand you will always have too little or too much inventory; you must account for that
Trade off of make to stock can be improved by
Better knowledge of customer demand
Faster transportation
Faster production
Flexible manufacturing
Use lean manufacturing to achieve higher service levels for a given inventory investment
Assemble to order (product environment)
Preassembled components, subassemblies and modules are put together in response to a specific customer order
Define a customers order in terms of alternative components
E.g. dell computers
Design should enable flexibility in combining components
Assemble to order advantages
Significant advantages from moving the customer order decoupling point from finished goods to components
Wide variety of finished goods combinations can be built from a set of components
Total number of combinations = N1 x N2 x … x Nn
negatives of assemble to order production
Risk of lost sales due to low supply
Potentially longer lead times to produce goods
Make to order (production environment)
The product is built directly from raw materials and components in response to a specific customer order
Engineer to order (production environments)
Firm works with the customer to design and then make the product
Customer order decoupling point could be in either raw materials at the manufacturing site or the supplier inventory
Depending on how similart he products are it might not even be possible to pre-order parts
Boeing process for making commercial aircraft is an example
advantages of make to order
Waste minimization
Reduce the risk of inefficiency (accuring additional unnecessary costs)
Customizable products
Disadvantages of make to order
Irregular sales demand (all of a sudden huge sales and no way to get all orders out)
Material stock falling behind
Customer wait time
