SCM 4362 Exam 1

Medium-range forecast (Asset Utilization)

-Monthly/Quarterly planning bucket -3 months to 2 years planning horizon -Seasonal production, inventory, employment, budgeting

How did SO shorten lead times?

Automation/warehouse/working with clients: -used computer systems -prepositioned materials -air freight -worked with clients -offered discounts

An MPC System Framework

FRONT END: Activities and systems for overall direction setting ENGINE: Systems for detailed material and capacity planning BACK END: MPC execution systems

Time between successive units

Flow: seconds Repetitive: seconds-minutes JIT: minutes-days MRP: days-weeks Project: weeks-months

How do you categorize IKEA's products?

Functional

What are IKEA's priorities?

Good quality at a lower price

Flexible manufacturing capacity

achieve optimal flexibility with machines and processes

Demand management

coordinates demand quantities and timing coordinated with the planning and control activities.

Flow

(continuous production-chemical plants, food, etc.)

Repetitive

(longer production cycles- automobiles)

MRP (materials requirement planning)

(management of complicated parts product-airplanes)

Just in time

(shorter production cycles- TVs, personal computers)

Project

(unique, long duration-ships)

Make to stock

-Customer demand is filled from finished goods inventory (e.g., household supplies, cosmetics, grocery items) -Key focus of demand management is maintenance of finished goods inventories -Physical distribution is a key concern

Process view of supply chains

-Customer order cycle -Replenishment cycle -Manufacturing cycle -Procurement cycle

Assemble to order

-Customer requirements are met by a combination of standard options (e.g., personal computers, fast food) -Primary task of demand management is to define the customer's order in terms of components and options (configuration management) -Significant advantages from moving finished goods to components

Long-range forecast (Asset Acquisition)

-yearly planning bucket -2-10 years planning horizon -New product planning, facility construction, technology

Engineer to order

-Firm works with the customer to design the product, then produces the product, starting with raw materials (e.g., industrial equipment, houses) -Primary task of demand management is gathering information about customer needs and coordinating with engineering and manufacturing

Realities of forecasting

-Forecasts are always inaccurate. -Short term forecasts tend to be more accurate than longer term forecasts. -Aggregate forecasts (e.g., by product family or geographic region) tend to be more accurate than individual forecasts. -In general, the farther up the supply chain a company is, the greater is the distortion of information it receives. -Forecasts are presented by two numbers: -an expected value -a measure of accuracy (e.g., standard deviation, mean absolute deviation, etc.)

Describe objectives and characteristics of the Information and Decision Solutions (IDS) group. How did IDS support the Global Business Units (GBU)?

-IDS established standards for data type and quality -automated generation of many reports -improved overall quality of analytics at P&G -assembled centralized forecasting that would use statistical methods to provide the GBU's company leadership with clearer vision of future market development

Role of demand management

-Information gathering: Forecasting customer demand, entering actual customer orders, capturing and monitoring market data (trends, styles, etc.), determining specific product requirements. -Communicating with customers: Promising delivery dates, confirming order status, communicating changes, understanding needs through customer relationship management (CRM). -Identifying all sources of demand for manufacturing capacity, including service-part demands, intracompany requirements, and promotional inventory build-up or other needs for pipeline inventory stocking.

Make to order

-Items built to customer specifications, starting with raw materials (e.g., airplanes) -Primary task of demand management is gathering information about customer needs and coordinating with manufacturing

Typical MPC Support Activities --Short Term

-Need for detailed scheduling of resources to meet production requirements. -"People working on the right things" MPC system must--- -Track the use of resources Monitor execution results -Provide information to managers, customers, and suppliers

Qualitative forecasting

-Primarily subjective, rely on judgment, used when little historical data is available, when experts have market intelligence (e.g., new product, new technology).

Quantitative forecasting

-Time Series Used when there is stable historical demand data. -Causal Used when demand forecast is highly correlated with certain factors in the environment (promotions, state of economy, interest rates). -Simulation Used to imitate consumer choices that give rise to demand.

Short-range forecast (Asset Execution)

-Weekly/Monthly planning bucket - 1-26 week planning horizon -Job scheduling, worker assignments, inventory stocking

'Why Forecasts Fail' Results about prediction from social sciences

-future is a bit like the past -models explain the past -simple models don't work as well as complex models -statistical predictions> human predictions -expert predictions are just as good as a random person's prediction -people are still surprised when they find out their mistakes -averaging independent predictions improves forecasting accuracy

Describe P&Gs restructuring initiative including, objectives and the four independent global organizations. What did they hope to achieve?

-new structure allows P&G to more effectively develop and implement innovations on a global scale quickly 1. global business units 2. market development org 3. global business unit 4. corporate functions

How did Passerini structure the Global Business Services (GBS) organization with respect to Information Technology? What role did centralizing GBS and keeping IT activities in-house play?

-renamed information technology activities "information and decision solutions" -continuously looked for ways to improve data availability and accessibility -keeping IT activities in house helped with capabilities and innovation, system design, and architecture

Describe the forecasting and Business Sufficiency Models developed by IDS. How are they applied? What impact did they have on P&G's culture?

-the models captured the most recent data and conducted a large # of simulations to provide leaders with a measure of the likelihood that the business would be able to deliver on previously set goals and targets -they addressed key business domains including: product, custom supply chains, distribution channels, HR etc.

Challenges faced by Sport Obermeyer

-too many changes -unpredictable demand -understocking -overstocking -overselling -underselling

What are the tools to cope with uncertainty in demand?

1. Accept it 2. Reduce uncertainty Find new data that can serve as a new indicator Use common components in different products 3. Avoid uncertainty Cut lead times Increase flexibility Obtain by flexible manufacturing By creating make to order environments Hedge against remaining uncertainty with buffers of inventory and excess capacity

The three A's in dealing with coconut uncertainty

1. Accepting operations are uncertain 2. Asses levels of uncertainty 3. Augment range of uncertainty

Seven steps in forecasting

1. Determine the use of the forecast 2. Select the items to be forecast 3. Determine the time horizon of the forecast 4. Select the forecasting model(s) 5. Gather the data 6. Make the forecast 7. Validate and implement results

Demand management must conform to:

1. firm strategy 2. manufacturing capabilities 3. customer needs

Independent demand

Customer demand that is not directly influenced by the actions of the firm (e.g., orders for end-products)

Dependent demand

Demand that is driven by the plans and activities of the firm (e.g., components, warehouse demand)

Typical MPC Support Activities --Long Term

MPC system provides information to determine: -The appropriate amount of capacity (including supplier capacity) to meet the market demands of the future. -The appropriate mix of human resource capabilities, technology, and geographic locations.

Customer order decoupling point

MTS: finished goods ATO: work in process MTO: raw materials ETO: suppliers

What is accurate response?*

Minimizes impact of inaccurate forecasts -figures out what they can/can't predict -makes SC fact and flexible so managers can postpone decisions

SCM 2 main functions

Physical function Market Mediation function

Physical (efficient) function

Raw materials --> finished goods and logistics spend money on transportation, inventory, production ex: innovative products

Macro Process (software) view of supply chains

SRM: source, negotiate, buy, design collaboration, supplier collaboration ISCM: strategic planning, demand planning, supply planning, fulfillment, field service CRM: market, price, sell, call center, order management

Typical MPC Support Activities --Intermediate Term

The fundamental issue is matching supply and demand in terms of both volume and product mix.

What is seasonal variation?

When demand contains both seasonal and trend effects at the same time, the question is how they relate to each other.

Integration within all groups of the macro process is

crucial for success in SCM

Delayed product differentiation

delaying finishing products until the last reasonable moment in order to meet demand and avoid surplus supply

Decoupling point

dependent becomes independent

Control

determines how capacity will be converted into products, and how the plans will be modified to accommodate forecast errors and other changes in assumptions. Most control functions are located in the MPS module.

Innovative products

ex: fashion and technology high profit margins, unpredictable demand, short life cycles

Functional products

necessities ex: gas and groceries stable, predictable demand, low profit margins, long life cycles

Planning

occurs mainly in the SOP module.

How was forecasting done at SO?

panel of experts collectively decided a forecast quantity for each product ---take early write orders a basis

'Just in Time for the Holidays' What are the approaches suggested in the article to deal with the uncertainty (shift) in the demand for seasonal products?

stop thinking of yourself as a victim, and stop reacting to fads. Instead, create them.

Market mediation (responsive)

supply = demand focuses on customer satisfaction spend money on supply > demand ex: functional products

Component commonality

using the same components for different end products

Multiplicative seasonal

variation increases as the trend increases. Forecast = Trend × Seasonal

Additive seasonal

variation is constant regardless of changes in average demand Forecast = Trend + Seasonal