Fundamentals of Operations Management BUS 3 – 140 Supply Chain Management Nov 6, 2007
Oct 29, 2014
Fundamentals ofOperations Management
BUS 3 – 140
Supply Chain Management
Nov 6, 2007
Page 2 2
Agenda
– Exam Recap and Review
– Process Alternatives and Selection
– Work Design
– Supply Chain Management
Exam Review
Page 4 4
27
15
10 10
0
5
10
15
20
25
30
A B C D/F
`
Grade Distribution – Exam 2
Count % of Total Cum %A+ 10 16.1% 16.1%A 15 24.2% 40.3%A- 2 3.2% 43.5%B+ 4 6.5% 50.0%B 6 9.7% 59.7%B- 5 8.1% 67.7%C+ 3 4.8% 72.6%C 3 4.8% 77.4%C- 4 6.5% 83.9%D+ 4 6.5% 90.3%D 1 1.6% 91.9%D- 3 4.8% 96.8%F 2 3.2% 100.0%Total 62
Grade
Page 5 5
Grade Distribution Comparison (Exam 1 to 2)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
A+ A A- B+ B B- C+ C C- D+ D D- F First Second
First SecondA+ 4.6% 16.1%A 16.9% 24.2%A- 10.8% 3.2%B+ 9.2% 6.5%B 9.2% 9.7%B- 15.4% 8.1%C+ 3.1% 4.8%C 9.2% 4.8%C- 7.7% 6.5%D+ 3.1% 6.5%D 4.6% 1.6%D- 3.1% 4.8%F 3.1% 3.2%
Page 6 6
Grade Change per Student – Exam 1 to 2
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35-3
0
-27
-24
-21
-18
-15
-12 -9 -6 -3 0 3 6 9 12
15
18
21
24
27
30
33
Change Count-1 2-2 2-3 2-5 3-6 2-7 2-9 1
-11 1-12 4-13 2-17 4-23 1-30 1
Change Count0 11 22 33 24 15 36 27 19 2
10 112 313 114 115 416 117 218 220 122 135 1
Page 7 7
Semester to Date Grade Distribution (Exams 1 & 2)
25
1615
5
1
0
5
10
15
20
25
30
A B C D F
Count % of Total Cum %A+ 1 1.6% 1.6%A 15 24.2% 25.8%A- 9 14.5% 40.3%B+ 3 4.8% 45.2%B 4 6.5% 51.6%B- 9 14.5% 66.1%C+ 2 3.2% 69.4%C 6 9.7% 79.0%C- 7 11.3% 90.3%D+ 4 6.5% 96.8%D 0 0.0% 96.8%D- 1 1.6% 98.4%F 1 1.6% 100.0%Total 62
Grade
Process Alternatives and Selection
Page 9 9
Inputs and Outputs when Selecting a Process
Capacity planning is focused on How Many (Quantity) that will be produced.Process planning is focused on HOW the items will be produced
Forecasting
Product andService Design
TechnologicalChange
CapacityPlanning
ProcessSelection
Facilities andEquipment
Layout
WorkDesign
INPUTSOUTPUTS
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
Page 10 10
Key Elements of Process Strategy
– Capital Intensity (does the output come more from machines or more from human labor?)
– Process flexibility required
– Technology
– Likelihood of Changes Product Design Volumes Technology
Page 11 11
Uses of Technology and Automation
Three (3) basic kinds of technology
Product or service innovation (Cell Phones, Computers, etc..)
Process technology (increasing quality and productivity, lowering costs)
Information Technology (speed, data storage and retrieval, complex and high-volume processing, process support)
Page 12 12
Process Types
Job Shop Batch Repetitive Assembly Continuous
Customized goods or services
Semi-standardized goods or services
Standardized goods or services
Highly standardized goods or services
Able to handle a wide variety of work
Flexibility Low unit cost (efficient) Very efficient
High Volume Very high volume
Slow, high cost per unit Moderate cost per unit Low flexibilityVery rigid (lack of variety)
Complex planning and scheduling
Moderate scheduling complexity
High cost of downtime Costly to change
Very high cost of downtime
Process Types
Description
Advantages
Disadvantages
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
Table 6.1
Page 13 13
Key Characteristics of different Process Types
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
Table 6.2Job Shop Batch Repetitive Assy Continuous Project
Cost Estimation Difficult Somewhat routine Routine Routine Simple to Complex
Cost per Unit High Moderate Low Low Very high
Equipment used General purpose General purpose Special purpose Special purpose Varied
Fixed costs Low Moderate High Very high Varied
Variable costs High Moderate Low Very low High
Labor skills High Moderate Low Low to High Low to High
MarketingPromote
"capabilities"
Promote capabilities, semi-standardized goods & services
Promote standardized goods
& services
Promote standardized goods
& servicesPromote capabilities
Scheduling Complex Moderately complex Routine RoutineComplex, subject to
change
Work Authorization
Work Order Work OrderBuild Plan / Material
movementBuild Plan / Machine
utilizationManagement
Work-In-Process (WIP) inventory
High High Low Low Varied
Work System Design
Page 15 15
Considerations in Work System Design
Observe actual performance and then establish a BASIS for any estimates
Sandwiches made per hour
Sales closed per quarter
Design changes per model
Other
Be careful to distinguish between “busy” and “valuable”
Track your own output and trends and see how you can improve your individual performance
Watch your boss
Supply Chain Management
Page 17 17
Operations is a Key Element of a Supply Chain
Revenue
Utilization of Assets
(People, Plant, Equip)
Cash
Inventory
BALANCING keeping Customers completely satisfied and Resourcesoptimally utilized ……. against spending the least amount of Cash
and carrying the least amount of Inventory
Page 18 18
Supply Chain Scope (this course shaded)
CustomerDemand
ProductionScheduling
MaterialsMgmt
Production ShippingCustomerService
• Forecasting
• Aggregate Planning
• Strategic Capacity Planning
• Demand & Supply Matching
• Scheduling
• Just In Time (JIT)
• Project Mgmt
• Inventory Mgmt
• MRP
• ERP
• Process Layout
• Work System Design
• Lean Operations
• Quality
Page 19 19
Example of Supply Chain Strategy
Responsiveness to Market opportunities Speed to react Credibility of commits Assurance of delivery
Optimum utilization of resources Manufacturing Product life cycle Suppliers Transportation and Logistics
Scalability for growth and increased complexity
Secure collaboration and visibility among customers, suppliers, and the enterprise
MAXIMIZE PROFITABLE REVENUE
Optimal Inventory Company owned Supplier owned Customer owned
Optimal headcount Manufacturing Support Worldwide indirect
Lean optimization for entire Supply Chain Optimized Supply Chain Network (including
integrating Mergers & Acquisitions) Automation whenever possible and supported
by business case
MINIMIZE TOTAL COST
Assured Supply and best value Accurate and timely exchange of demand and supply data Shared savings from continuous improvement Other Other
MAXIMIZE CUSTOMER SATISFACTION
Page 20 20
The Increasing Emphasis on Supply Chain Management
Improve operations
Opportunities and Risks of outsourcing
Rising transportation costs
Competitive pressures
Globalization
e-commerce
Complexity of supply chains
Manage inventories
Supply Chain Management is not simply a cost / efficiencydiscipline. It is a key differentiator in gaining
customer satisfaction, market share and loyalty
Several factors are driving this trend:
Page 21 21
Benefits of Supply Chain Management
Organization Benefit
Campbell Soup Doubled inventory turnover rate
Hewlett-Packard Cut supply costs 75%
Sport Obermeyer Doubled profits and increased sales 60%
National Bicycle Increased market share from 5% to 29%
Wal-Mart Largest and most profitable retailer in the world
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
Page 22 22
Benefits of Supply Chain Management
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
Lower inventories
Higher productivity
Greater agility
Shorter lead times
Higher profits
Greater customer loyalty
Integrates separate organizations into a cohesive operating system
Monitoring Inventory is CRITICALat virtually every step in the Chain
Page 23 23
Selected Supply Chain Metrics
Perspective Metrics
On-Time delivery
Order fulfillment lead time
Fill Rate (% of demand met from stock)
Perfect order fulfillment
Supply Chain response time
Upside (and downside) production flexibility
Supply chain management cost
Warranty cost as a % of Revenue
Value add per employee
Total inventory days of supply
Cash-to-cash cycle time
Net asset turns
Assets / Utilization
Reliability
Flexibility
Expenses
* From Stevenson, Operations Management, Ninth Edition, McGraw Hill Irwin
Table 11.4
Page 24 24
Logistics
The management of inventory at motion and at rest
Logistics *
That part of the supply chain that plans, implements, andcontrols the efficient, effective flow and storage of goods,
services, and related information from the point of origin to thepoint of consumption in order to meet customers’ requirements
Logistics – from the Council of Logistics Management (CLM)
The movement of goods from the point of origin to the point ofconsumption: a subset of the overall Logistics process
Transportation
* Leenders, Johnson, Flynn, and Fearon, Purchasing and Supply Management, Thirteenth Edition, McGraw Hill Irwin
Page 25 25
Services provided by Third Party Logistics providers (3PL)
– Economies of Scale
– Professional focus and expertise
– Warehousing
– Outbound and Inbound transportation
– Freight bill auditing and payment
– Freight consolidation
– Distribution
– Order Fulfillment
– Cross-docking
– Packaging
– Returns
Major Carriers enable their customers to focus on core competencies,while the carrier drives efficiencies and increased services in
transportation and logistics
Page 26 26
Reverse Logistics
Processing returned goods Sorting, examining/testing, restocking, repairing Reconditioning, recycling, disposing
Gatekeeping Providing Return Material Authorization (RMA) screening goods to prevent incorrect acceptance of goods
Avoidance finding ways to minimize the number of items that are returned
Good career opportunityfor an entry level job
The backward flow of goods
returned to the supply chain
Page 27 27
Example of Reverse Logistics
CustomerReturns
DamagedProduct
ProductReceivedat Local
Service Center
ProductCollected
and Forwardedto Repair Center
ProductRepaired toRefurbished
Status
RefurbishedProduct sent to
DistributionCenter(s)
RefurbishedProduct shippedFrom FGI at DC
Damaged Units
Repaired Units
Page 28 28
Distribution Requirements Planning (DRP)
Expansion of MRP principles to plan and coordinate: Transportation
Warehousing
Regional allocations
Equipment
Financial flows
The right amount of inventory,at the right place, at the right time
Page 29 29
Supply Chain Metrics
Perspective Metrics
On-Time delivery
Order fulfillment lead time
Fill Rate (% of demand met from stock)
Perfect order fulfillment
Supply Chain response time
Upside (and downside) production flexibility
Supply chain management cost
Warranty cost as a % of Revenue
Value add per employee
Total inventory days of supply
Cash-to-cash cycle time
Net asset turns
Assets / Utilization
Reliability
Flexibility
Expenses
Page 30 30
Supply Chain Challenges
Barriers to integration of organizations
Top management support
Dealing with trade-offs
Small businesses
Variability and uncertainty
Long lead times