Module 1 Section E Flashcards
Forecast-Driven Enterprise
-manufacturer or service supplier uses a forecast - an estimate of future demand - as basis of its org. strategy
Push System:
* when supply chain works in response to forecasts
* in production, the production of items at required times based on given schedule planned in advance
* in material control, the issuing of material according to given schedule or issuing material to job order at its start time
* in distribution, a system for replenishing field warehouse inventories where replenishment decision making is centralized, usually at manufacturing site or central supply facility
-everything is pushed downstream from one point to the next according to schedules based on forecasts
-root causes of bull whip effect:
* failure to communicate actual demand + over-reliance on forecasts
* solution: better visibility in both directions but especially of promotions, order to replenish safety stock, and other info on actual demand; rely less on forecasting
RISK:
* build-up of inventory all along supply chain; inventory costs money while it sits in retail stockroom, DC, or preproduction sotrage area
* runs risk of becoming obsolute or irrelevant; can also run short of stock
* forecasts can be wrong in either direction
Demand-Driven Enterprise
**Demand-driven material requirements planning (DDMRP) ** - method for planning material needs that enables org to build more closely to actual market requirements
Demand-driven supply network: situation in which customer purchase initiates real-time information flows through supply chain that consequently cause movement of product through network
Pull system:
1. in production, production of items only as demanded for use or to replace those taken for use
2. in material control, the withdrawal of inventory as demanded by using operations; material not issued until signal comes from user
3. in distribution, system for replenishing field warehouse inventories where replenishment decisions are made at field warehouse itself, not at central warehouse or plant
-focused on customer demand
-production process is based on actual demand info and product is turn out only in response to actual orders (on-demand) –> no fixed production schedule –> decrease in lead time
-inventory buffers reduced –> trade partners need to develop agility (ability to respond to variability in flow of orders based on sales)
-rely more on MTO or ATO
RISK: order will begin to come in above capacity and all along supply chain there be will be expensive activity to run plant overtime, expedite more and faster transportation or convince customer to wait/accept a substitute product
Decoupling Points
-locations in product structure or distribution network where inventory is placed to create independence between processes or entities
Example: push-pull frontier –> determining best point for moving from psh to pull is an important ops. strategy decision
Engineer-to-Order (ETO)
-products whose customer specifications require unique engineering design, significant customization, or new purchased materials
-each customer order results in a unique set of part numbers, bills of material, and routings
-product volume low
-product variety high
-extensive lead times (once designs are finalized, there is additional lead time for purchasing of materials for manufacturing); assembly and shipping also add to lead time
Make-to-Order
-production environment where good or service can be made after receipt of customer’s order
-final product is usually a combination of standard items and items customer-design to meet special needs of customer
-where options or accessories are stocked before customer orders arrive, term assemble-to-order is frequently used
-produces nothing until customer order is received
-org may still carry inventory , but it’s in form of raw materials e.g. custom windows or cabinets
-delivery lead time is fairly long –> includes production, assembly, and shipping
-best when variety is medium to high and volume is low to medium
-demand management involves determining how much engineering and manufacturing capacity will be necessary in order to meet needs of future customers
-options or accessories are stocked before a customer order arrives
Options = choice that must be made by customer or company when customizing end product; in many compnies option means mandatory cjoice from limited selection
Assemble-to-Order
-production environment where a good or service can be assembled after receipt of customer’s order
-key components (bulk, semi-finished, intermediate, subassembly, fabricated, purchasing, packing, etc) used in assembly or finishing process are planned and usually stocked in anticipation of order
-receipt of order initites assembly of customized product
-strategy is useful where large number of end products (based on selection of options/accessories) can be assembled from common components
-sometimes called build-to-order, finish-to-order, package-to-order
-more common than MTO
-Components = raw material, part, or subassembly that goes into hgiher-level assembly, compound or other item; may include packaging material for finished items
-finished product is then assembled only upon receipt of order e.g. laptops ordered online from manufacturer or motorcycle from dealership
-key inventory is that of components rather than finished product
-shorter lead time consisting of only assembly and shipping since components are already in inventory –> lower inventory costs than MTS because components can be made into wide variety of end products, if all built, would require significantly more inventory overall
-products are high enough in volume with adequate variety to justify making components and subassemblies in advance / variety is low to medium
Make-to-Stock
-production environment where products can be and usually are finished before receipt of customer order
-customer orders are typically filled from existing stocks and production orders are used to replenish those stocks
-products items for inventroy based on forecasts of demand e.g. can of soup or clothing store’s t-shirts
-demand management involves maintenance of finished goods inventories; customers buy products directly from available inventory so customer service is determined by whether item is in stock or not available
-lead time can be very short, as it is limited to shipping
-high inventory costs
-orgs may choose to:
1. manufacture inventory at economies of scale in just 1 or few locations so inventory is relatively inexpensive to produce
2. develop regional manufacturing centers and maintain lower overall inventory, but develop faster distribution methods;
2. others choose lean manufacturing (making items only in response to replenidhment orders) so they can achieve higher customer service levels with much lower inventory investment level
Configure-to-Order (CTO)
-same lead time as ATO, but allows customer to configure product, selecting from various features and options
-results in potential for entirely unique configurations that have not been produced before
-lack of design time requires reduces lead time to nearly equal to MTO
-components may not be may not be manufactured until order is received, but typically they are based on existing designs
Mass Customization
-attempt to serve markets that desire both high volume and high variety
-manufacturing cost is low due to large volume, allowing customers to specify an exact model out of a large volume of possible end items
-customers allowed some degree of customization while manufacturing produces products at nearly same cost as that of a high-volume process
-usually considered a subset of ATO and CTO because customer is choosing among previously manufactured or purchased options
-lead times can be longer
Example: personal computer order in which customer specifies processor speed, memory size, hard disk size/speed, removable storage device characteristics, etc. when PCs are assembled on one line and at low cost
Postponement
-product design, or supply chain strategy that deliberately delays finals differentiation of a product (assembly, production, packaging, tagging, etc) until latest possible time in process
-this shift product differentiation closer to consume to reduce anticipatory risk of producing wrong product –> eliminates excess finished goods in supply chain
-ATO strategy that often performs final assembly in distribution center because assembly usually does not require specialized equipment or extensive manufacturing expertise
Example: putting country-specific power supply in unit or labeling boxes for specific language
-can be used to reduce manufacturing costs by producing generic versions in high volume and delaying final configuration much closer to customer e.g household paint
Benefits: inventory reduction, lower production costs, improve response time to customer requests
Modular Design
-subdivides product/process into smaller parts that can be independently created and then assembled, which provides customer with more options at an affordable manufacturing cost
**Modular design strategy **= strategy of planning and designing products so that components or subassemblies can be used in current and future products or assemble to product multiple configurations of a product e.g. cars, personal computers
Modularization = in product development, use of standardized parts for flexibility and variety; allows product development cost reductions by using same item(s) to build variety of finished goods; 1st step in developing planning bill of material process
-more expensive by diagnosis and repair are easier; reduction of number of parts at final assembly
Package-to-Order
-type of ATO that uses postponement to delay packaging items produced and stores in bulk until orders for specific package sizes are received
-item is common across many different customers; packaging determines end product
Remanufacturing
-industrial process in which worn-out products are restores to like-new condition
-aspect of reverse logistics
-materials may be reused and recycled from worn-out products
Manufacturing Strategy
-collective pattern of decisions that acts upon formulation and deployment of manufacturing resources
-to be most effective, it should act in support of the overall strategic direction of the business and provide for competitive advantages
-focused on ensuring the correct product/service is supplied in correct volume with the required availability and quality
Product-Process Matrix and Manufacturing Environments
-vertical axis describes variety among products that ops. has capability to product
-horizontal axis refers to volume that ops. has capability to produce
Scales
1. customer lead time - longer for engineer or substantially customized products/service; shorter for assembled or stock items
2. tasks - diverse & completed (ETO) <—> repeated and divided (MTS)
3. frequency - frequency with which units can be produced will strongly impact their cost; project (ETO / own customer schedules ), intermittent (include work center and batch) & flow (line and continuous)
Manufacturing Philosophy
-set of guiding principles, driving forces, and ingrained attitudes that helps communicates goals, plans, and policies to all employees; reinforced through conscious and subconscious behavior within the manufacturing org
Manufacturing Environment
-framework in which manufacturing strategy is developed and implemented
-elements include external environmental factors; corporate strategy, business unit strategy, other functional strategies (marketing, engineering, etc), product selection, product/process design, product/process technology and management competencies
-often refers to whether a company, plant, product or service is MTS, MTO, ATO
Manufacturing Process
-series of operations performed upon material to convert it from raw material or a semifinished start to a state of further completion
-can be arranged in a process layout, product layout, cellular layoutm or fixed-position layout
-can be planned to support MTS, MTO, ATO, etc. based on strategic use and placement of inventories
Facility Layout
-describes where machines and utilities will be located in a facility + arranagement of processes
