Post. Flashcards
Supply Chain network order from focal to third tier customer & supplier
- Center — Focal companyThird tier customer: whoever consumes it, last of the chain, product reaches its goal —> being marketed to this customerSecond tier customer: who ever buys from the storeFirst tier customer: supermarket etc. who buys from the factory1st and 2nd the priorities, 3rd the goalFirst tier suppliers: These are direct suppliers of the final product (food for cows)Second tire suppliers: These are suppliers or subcontractors for your tier 1 suppliers. (cows — milk products)
- Flow of service and information through all channels
Structure - Capacity Management: Optimum Capacity Level
Why is long-term capacity management important? And 2. key aspects
Because it has significant impact on
o Operational performance
o The design of configuration of supply networks
o Decision to develop in-house capacity, integrate vertically or outsource o For the network to operate efficiently all stages must balance otherwise the network will be limited to the smallest/slowest stage
key aspects
o capacity can either lead or lag demand
o Inventory can be used to smooth out the peaks
Optimum Capacity Level
About unit cost, when optimal and need to know where the optimum point is
when optimal economies of scale (cost lowest but optimal with demand) and when dis-economies of scale (over capacity, more costs)
Impact on: performance, design of supply chain network, decisions to in-house capacity, integrate vertically or outsource
Either leading or lagging strategies
What does mean to manage capacity?
Always sufficient capacity to meet Forecast demand
Timing - that demand is always greater than or equal to actual capacity
Smoothing with inventories means using the excess capacity in one period to produce inventory that supplies the under-capacity period
Inventories to obtain the advantage of both capacity leading and capacity lagging
Capacity leading advantages and disadvantages
+ always sufficient capacity to meet demand
+ capacity can serve for extra demand
+ start-up problems, less likely to affect supply
- low utilization of factories
- risk of overcapacity, more costs, since forecast not realised
- capital spending early
Capacity lagging advantages and disadvantages
+ always sufficient demand to keep factories working at full capacity
+ minimal overcapacity when demand drops
+ capital spending on factories delayed
- insufficient capacity to meet demand
- no ability to exploit short-term increase in demand
- start-up problems with new factories cause even worse undersupply
Scope: Configuring supply networks
When operations design their supply networks they have many choices to make, how much of the supply network they will own and manage themselves?
Key aspects for decision making
2 key aspects of supply network design
o Vertical integration and the direction
o Outsourcing
Verical integration upstream or downstream to narrow or wide extent:
Raw material supplier - component maker - assembly operation - wholesaler - retailer
Vertical integration if:
Activity of strategic importance
Company has specialized knowledge
Company’s operations performance superior
Significant operations performance improvement likely
lower cost in-house
Outsourcing if:
Not strategic
Company doesn’t have the knowledge
Can’t perform better than competitors
Not significant in performance
Outsourcing vs Offshoring
Offshoring deals with the location of operations
- Company doesn’t own the assets
- Outsourcing: domestic delivers of products & services
- Offshore outsourcing: overseas supplier delivers (international)
- Company owns the assets
- Domestic operations: focal operations, performs activities themselves
- Offshore operations: focal operation’s overseas operation delivers products & services (international)
Smoothing with inventory
Using the excess capacity in one period to produce inventory that supplies the under-capacity period — Only works if space for inventory: demand met by production and inventory - mostly in leading strategy
What is supply chain management?
Supply chain management is the management of the interconnection of organization that relate to each other through upstream and downstream linkages between the processes that produce value to the ultimate consumer in the form of products and services
Market-based/transactional supply arrangements = emphasis predominantly on contracting
Partnership supply arrangements = Emphasis predominantly on relationships
Supply Chain Relationship Arrangements
lowest involvement — virtual spot trading: outsources everything with many supplier
highest involvement — vertical integration: close with few suppliers, nothing outsourced
traditional market supply: contract agreements, arm’s length outsourcing some, or nothing, focused on product production
sources materials, provides them to a manufacturer to make the product –> sends them to a sales channel to be delivered to the customer
“Partnership” supply relationships: make everything, close with few
“Partnership” supply relationships
committed to work together mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship
high trust, collaboration in problem solving, early conflict resolution, understanding competencies to reduce costs, quality failures and solve problems early
The bullwhip effect
starts with change in demand affects retail store’s sales, wholesaler’s store orders, manufacturer’s orders to manufacture, manufacturer’s orders to it’s supplier: orders affects deliveries
The supplier selection process (your organization as customer, your customer)
Initial supplier qualification
Agree measurement criteria
Obtain relevant info
Make selection
Based on:
Supplier performance gap: how the supplier thinks it’s performing and how it thinks what the customer wants
Fulfillment perception gap: how supplier vs customer think of performance
Supplier improvement gap: how customer thinks the supplier is performing and what they really want
Requirements gap: what supplier thinks wants and what they really want
What is the difference between planning and control in operations?
Planning = deciding
- What activities should take place in the operation
- When they should take place
- What resources should be allocated to them
Control is
- Understanding what is actually happening in the operation
- Deciding whether there is a significant deviation from what should be happening
- Changing resources in order to affect the operation’s activities
- balance; long, medium and short-term planning and control - volume-variety effects when volume high — variety low: planning long term volume low — variety high: more flexible, short term planning
Long-term planning and control
Focus on planning
Uses aggregated demand forecasts
Determines resources in lump form
Objectives mostly financial
Medium term planning and control
Uses partially dis-aggregated demand forecasts
Determines resources and contingencies
Objectives: finance and operations terms
Short-term planning
Focus on control
Uses totally dis-aggregated forecasts and actual demand
Makes interventions and correct deviations from plans
Ad hoc consideration of operations objectives
How do supply and demand affect planning and control?
They affect dependent and independent demand:
Dependent demand
= demand for tyres is governed by the planned number of cars to be made by the auto plant
Independent demand
= demand for tyres is largely governed by random factors
Independent demand (not too predictable, tire fitting service, demand flexible) is the demand for a finished good, such as a car, while dependent demand (relatively predictable, tires for a car company, sells mostly on orders) is the demand for a component part of a finished good, such as the tires on a car.
—> affects the production schedule operations volume and capacity management planning
What are the planning and controlling activities?
- Loading = how much to do, finite / infinite loading
- Sequencing = in what order to do things
a. Setting priorities based on predefined set of rules
b. DD = Earliest Due Date first
c. Last in, first out
d. First in, First out
e. Longest Operation Time (LOT): keeps utilization high
f. Shortest Operation Time (SOT): eases cash-flow, short invoice - Scheduling = when to do things
a. Gantt chart showing the schedule for jobs at each process stage - Monitoring and control = are activities going to plan?
a. Push system = where items are moved onto the next stage as soon as they have processed
b. Pull system = when items are moved only when the next stage wants them
P:D ratios
P = process time / total throughput time
D = demand time
If P:D ratio is 1, means that the customer waiting time equals the time it takes to obtain the resources, produce the product or service, and deliver it to the customer, usually exceeds 1
(look through examples on lecture 9.)
How do increasing integration of information systems and increasing impact on the whole supply chain correlate?
From least (o) to most including of all parts (1)
Material Requirements planning - Focus on material flows
Manufacturing resource planning - Inclusion of capacity dimension
Enterprise resource planning
Web integrated enterprise resource planning (e-commerce)
Meaning that companies have evolved to the use of the whole supply chain with integration of information systems. More trust and communication - less things in-house.
Control systems - MRP: Material requirements planning
MRP: Balancing supply and demand
What do you need?
1. The materials you need to support the gross demand for your business
a. For sale in the stores or online
b. To fulfill customer orders placed in advance
c. For the production/manufacturing process
What do you have?
1. The inventory that you have in store, whether in the shops, or in warehouses, or in
the pipeline
Crucial components
1. Master Production Schedule
2. Bill of Materials
Based on all the information: demand from customers, info from suppliers — MRP: purchase orders, materials plan and works order
Control systems - Bill of Materials in MRP
- BOM and product structure, is the linking pin between MPS and Material Requirements planing (MRP) records
- Product structure consists of various levels, with the finished product being level 0
- The structure: levels tell what products do you need to make the product and the order quantity (x) for them. Lead times (LT) tell how long does it take for the part to get there (dependencies). If you cannot deliver, production stops.
- LT: some are dependent resources — LT crucial, the others can be started based on the final date and their lead times.
- Uses back scheduling — MRP netting process (project mgmt)
