4230 test 2

Level production strategy

1 of the strategies used for completing aggregate plan, uses a constant output rate and capacity while varying inventory and backlog levels to handle the fluctuating demand pattern. Firm keeps its workforce levels constant and relies on fluctuating finished goods inventories and backlogs to meet demand. B/C of the constant output rate and capacity, it is more suited for firms that require highly skilled labor. Higher morale and worker effectiveness compared to chase strategy. FG inventory accrues while cumulative demand remains less than cumulative production and then relies on a series of backlogs to handle the demand from august through November. Inventory carrying and stockout costs are the major concerns and this strategy works well with make-to-stock firms which emphasize immediate delivery of off-the-shelf, standard goods at low prices, firms seeking low price will use this strategy and it works well in a situation where highly skilled workers are needed in tight labor market.

Chase production strategy

1 of the strategies used for completing aggregate plan. It adjusts output to match the demand pattern during each production period, using this the firm will hire and lay off workers to match production rate to demand, workforce fluctuates from month to month but FG remains constant. Has a negative motivational impact on the workers and assumes workers can be hired and trained easily to perform the job, FG inventories always remain constant but workforce fluctuates in response to demand pattern. Works well for MAKE TO ORDER firms because they cannot rely on finished goods inventory to satisfy fluctuating demand, can be a problem though because these often require skilled labor.

Legal forms of transportation

1. Common carriers = offer transportation services to all shippers at published rates between designated locations and they must offer their services to general public without discrimination and cahrge same rates for the same service to all customers. Legally bound to carry all freight as long as there is enough space, the fee is paid and no reasonable grounds to refuse exist(most heavily regulated) 2. Contract carriers = might also be common carriers but they are not bound to serve the general public but specific customers under contractual agreements. Some have specific capabilities allowing them to offer lower prices than common carriers shippers and carriers are free to negotiate 3,. Exempt carriers = for hire carriers, exempt from regulation of services and rates. classified as exempt if they transport certain exempt products(produce, livestock, coal, garbage) ex = schoolbuses, ambulance. All carriers can act as exempt for specific commodities 4. Private carrier = not subject to economic regulation and typically transports goods for company owning the carrier. firms transporting their own products typically own and operate fleets of trucks and/or airplanes, large enough to make cost less than what it would be if firm hired a transp. provider. This option gives flexibility and control of product movements.

EOQ Assumptions

1. Demand is known and constant 2. Order lead time is known and constant 3. Replenishment is instantaneous(no partial shipments) 4. Price is constant 5. Holding cost is known and constant 6. Order cost is known and constant 7. Stockout are not allowed Total annual inventory cost is the sum of the annual purchase cost, the annual holding cost, and the annual order cost. Purchase cost does not effect the order decision if there is no quantity discount and is thus ignored in classic EOQ model. When using EOQ, annual holding cost will equal the annual order cost. IF order size is smaller than EOQ, annual holding cost is lower where annual order cost is higher and annual total cost is higher.

Terms used in MRP

1. Parent- item generating demand for lower level components 2. Components - parts demanded by a parent 3. Gross requirement- time phased requirement prior to considering on-hand inventory and lead time to obtain them 4. Net requirement - unsatisfied item requirement for specific time period 5. Scheduled receipt- committed order awaiting delivery for a specific period 6. Projected on-hand inventory- projected inventory at the end of the period(Beg inv - gross requirement) 7. Planned order receipt- projected receipt based on the generation of a planned order release 8. Explosion- describes process of converting parent items planned order release into component gross requirements 9. Firmed planned order- cant automatically change

Lead, lag, and match strategies

1. lead capacity strategy = proactive approach that adds or subtracts capcity in anticipation of future market conditions and demand 2. lag strategy = reactive approach that adjusts capcaity in response to demand. In favorable conditions the lag strategy does not add capacity unitl the firm is operating at full capacity. Conservative approach that can cause lost opportunity when demand increases rapidly whereas lead strategy is more agressive and can result in escess inventory/idle capacity. Lead better for short product life cycles 3. Match strategy = moderate strategy that adjusts capacity in small amounts in response to demand and changing market conditions

location strategies

1. market positioned: locates warehouses close to customers to maximize customer service levels, recommended when high levels of competition and dist. flexibility, generate transp. economies 2. Product positioned strategy: places warehouses close to sources of supply to enable form to collect goods and consolidate into TL quantities, minimizing inbound transp. costs. works well when large quantities purchased from many sources. 3. Intermediately positioned: places warehouses midway b/t sources of supply and customers, recommened when dist service requirements are high and customers order assortments purchased from many suppliers. NOT BASED ON PROFIT

7 wastes

1. overproducing(unnecessary items) 2. Waiting(excess idle time) 3. Transportation(excess movement of materials b/t processing steps) 4. Overprocessing(non-value adding mfg, handling, packaing) 5. excess inventory(storage of excess RM, WIP, FG) 6. Excess movement 7. Scrap and rework

4 types of inventory

1.Raw materials: unprocessed purchase inputs, become part of FG after mfg process is completed. Reasons for keeping rm inventory include volume purchases to create transportation economies or take advantage of quantity discounts; stockpiling in anticipation of price increases or avoid short supply 2. WIP: Materials partially processed but not ready for sales, keep to decouple processing stages or break dependencies b/t work centers 3. FG: completed products ready for shipment, often kept to buffer against unexpected demand changes and to anticipate downtime; ensure production economies when setup cost is high or stabilize production rates for seasonal products 4. Maintenance repair and op. supplies: used when producing the products but are NOT parts of the products(solvents, cutting tools, lubricants) reasons for storing are to gain purchase economies and to avoid material shortages that may shut down production

reorder point

2 major inventory decisions are to determine the right order quantity or lot size and when to release an order. The reorder point is the lowest inventory level at which a new order must be placed to avoid a stockout. When demand and lead time are known/constant, the reorder point is equal to demand. In reality though, demand and lead time tend to vary and uncertain demand/lead time raises the possibility of stockouts, thus requiring safety stock to be held to safeguard against variations in demand or lead time.

Cycle counting

A commonly used technique in which physical inventory is counted on a periodic basis to ensure that physical inventory matches current inventory records. Helps to identify obsolete stocks and inventory problems so that remedial action can be taken in a reasonable amount of time but it can be costly and time consuming, often disrupting operations. It reduces disruption and is popular among orgs. with large inventory for firms that cannot be closed for an extended period. It provides info of where all the stock is, allows firm to write off inventory losses and identifies shrinkage problems due to damage and theft.

Resource requirements planning(RRP)

A long range capacity planning module, used to check whether aggregate resources are capable of satisfying the aggregate production plan(gross labor hrs and machine hrs). Capacity expansion options at this level involve a long-range commitment like new machines or facilities, must be revised if unable to meet APP. Once the APP is feasable it is disaggregated into a more detailed medium-range production plan the master production schedule. The rough cut capacity plan is used to check the feasibility of the master production schedule. RCCP converts MPS from production to capacity required, options for increasing medium-range capcity include overtime, subcontracting, adding resources, and an alternate routing.

System nervousness/Time fence system

A situation where a small change in the upper-level production plan causes a major change in the lower level production plan. Frequent changes to the MPS can be costly and may create system nervousness. Time fence system counters this problem and seperates the planning horizon into two segments: a firmed and a tentative segment. Firmed = demand time fence. stretches from the current period to a period several weeks in future. Stipulates that the production plan or MPS cannot be altered w/o senior mgmt. Tentative = stretches from end of the firmed segment to several weeks farther in future, and master scheduler can change production to meet changing conditions.

Material Requirements plan

A software based production planning and inventory control system that has been used widely by manufacturing firms for computing dependent demand and timing requirements. Span of MRP has evolved to include aggregate production planning, master production scheduling and capacity requirements planning to become closed-loop MRP. It further evolved into manufacturing resource planning 2 by including other aspects of materials and resource planning. Current generation of MRP system is known as the ERP system. MRP is used to calculate exact quantities, need dates, and planned order releases for components and subassemblies needed to manufacture the final products listed on the MPS. For MRP systems to work they require: 1. independent demand info, 2. parent-component relationships from B.O.M., 3. inventory status of final product. All of this info used to compute net requirements and then offsets net requirements with appropriate lead times to ensure timely order releases. MRP provides lots of VISIBILITY to plan ahead but the need for offsetting net requirements by the lead time to obtian planned order releases causes a LOSS OF VISIBILITY. MRP ignores all capcaity and shop floor conditions.

Master production schedule

A time-phased, detailed disaggregation of the aggregate production plan, listing the exact end items to be produced. It is more detailed than the aggregate production plan and the planning horizon is shorter than the aggregate production plan but must be longer than a firm's production lead time to ensure the end item can be completed within the planning horizon. Sum of weekly MPS matches the quantity of the APP for that same month. Service industry = appointment book(ensures skilled labor capacity is not overbooked). EX = Use medical appointment scheduling software. The production quantity required to meet demand from all sources, the basis for making time requirements. Alos provides vital information on whether additional orders can be accepted for delivery in specific periods

Quantity discount model

AKA price break model, it is one variation of the classic EOQ model and it relaxes the constant unit price assumption by allowing purchase quantity discounts. In this case, the unit price of an item is allowed to vary with the order size creating an incentive for the buyer to purchase in larger quantities to take advantage of the quantity discount provided the savings is greater than the extra cost of holding larger inventory levels. Unlike EOQ, annual purchase cost is now important in determining optimal order size and corresponding total annual inv. cost. This model must consider the trade-off b/t purchasing in larger quantities to take advantage of the price discount and higher holding costs. Purchase price per unit no longer fixed like in classic EOQ, and TAIC now includes annual purchase cost varying depending on order quantity. There is an EOQ associated with each price level but it may not be feasible at a certain price. The order quantity that yields the lowest total annual inventory cost is the optimal order quantity

Electronic Data interchange

Computer to computer exvhange of business documents such as purchase orders, order status inquiries and reports, promotion announcements and shipping and billing notices. These were engineered to replace legacy MRP systems in order to coordinate information requirements in a complex multiunit global environment. Legacy MRP system = broad label used to describe an older information system that usually works at an operational level to schedule production within an organization, they were designed to perform a very specific operational function and were programmed as independent entities with little regard for meeting requirements or coordinating with other functional areas, they lacked analytical capabilities.

Inventory models

Deterministic inventory models: assume demand, delivery lead time and other parameters are deterministic. These models use fixed parameters to derive the optimum order quantity to minimize total inventory costs. The are also known as fixed order quantity models. The economic order quantity, quantity discount and economic manufacturing quantity models are the 3 most widely used fixed order quantity models

Inventory management

Inventory is very important, accounting for more than 10% of total rev/assets for some orgs. These policies affect how efficiently a firm deploys its assets in producing goods and services. the right amount of inventory supports manufacturing, logistics, and other functions, but excessive inventory is a sign of poor inventory mgmt creating unnecessary waste of scarce resources, it also effects financial performance. Large piles of inventory delay a firm's ability to respond swiftly to production problems and changes in technologies and market conditions.

JIT/Lean

JIT originally associated with toyota, it encompasses continuous problem solving to eliminate waste. Lean thinking is broader, although closely related to JIT and describes a philosophy incorporating tools that seek to economically optimize time, human resources, assets, and productivity, while improving product and service quality. Lean production is organizing work and analyzing the level of waste in the process to fit a lean process flow. Goals are to reduce production throughput times and inventory levels, cut lead times and improve responsiveness w/ fewer people.

LTL/TL

LTL = less than truckload carriers, move small packages or shipments that take up less than one truckload, and the shipping fees are higher per hundred weight than TL fees, since the carrer must consolidate many small shipments into one truckload and then break the truckload back down into individual shipments at the destinations for individual deliveries. USING LTL is much less expensive than TL for many companies but LTL amoutns to only 5% of trucking rev and is comprised of a few very large LTL carriers and small regional carriers. TL carriers have trailers dedicated to a single shipper's cargo, customers load full trailers and TL company transports the shipment to a final destination. Top five TL carriers = 8% of the market. General freight carriers carry majority of goods and include common carriers whereas specialized carriers transport liquid petroleum, household goods ag commodities etc. Road trains = trucks pulling more than two trailers seen in australia where trucks are used instead of railroads

Lean thinking and SCM

Lean production emphasizes reduction of waste, continuous improvement and the synchronization of material flows from within the org. and eventually including the organization's first tier suppliers and customers. SCM encourages cross-training, satisfying internal customer demand, moving products or people through the production system quickly, and communicating end-customer demand forecasts and production schedules up the supply chains, as well as optimizing inventory levels across supply chains. Firms increasingly implementing lean along supply chains, YOKOTEN = "across everywhere", meaning the sharing of best practices, and supply chains represent the best opportunities for results from lean implementations. Many firms successfully implement a few lean activities at a time. Lean programs can vary significantly based on a company's resource capabilities, product and process orientation, and past failures or successes with other improvement projects

Periodic review system

Lowers inventory review costs, a system where physical inventory is reviewed at regular intervals, such as weekly or monthly. However, more safety stock would be required for the periodic review system to buffer the added variation due to the longer review period. 3 systems available.(nQ, s, r), (S,R), (s,S,R).

Manufacturing resource planning

Manufacturing resource planning was an outgrowth of the closed loop MRP system, business and sales plans were incorporated and a financial function was added to link financial mgmt to operations, marketing, and other functional areas. Concept was that the information system should link internal operations to financial function to provide mgmt with current data, including sales, purchasing, production, inventory, and cash flow as well as perform what if analyses as internal and external conditions change. . It primarily focuses on one unit's internal operations and lacks the capability to link many operations of an organization's foreign branches with its headquarters as well as the capability to directly interface with external supply chain members.

Capacity requirements planning(CRP)

Short-range capacity planning technique that is used to check the feasibility of the material requirements plan and the time phased MRP is used to compute the detailed capacity requirements for each workstation during specific periods to manufacture the items specified in the mrp. RCCP may show that sufficient capacity exists to execute master production schedule but CRP my indicate that production capacity is inadequate during specific periods. Long term capacity can be increased through new techniques, workers, and new machines/faciliteis and contraction can be achieved through reducing workforce, machines and facilities

Distribution requirements plan(DRP)

Time phased finished goods inventory replenishment plan in a distribution network. A logical externsion of MRP system, it ties the physical distribution system to the manufacturing planning and control system by detemining the aggregate time-phased net requirements of the finished goods, and provides demand information for adjusting the MPS. MRP is driven by production schedule while DRP is driven by customer demand, MRP operates in a dependent demand situation whereas DRP operates in an INDEPENDENT demand setting. DRP time-phases the movements of finished goods inventory from manufacturing site to the central supply warehouse and dist centers. BENEFIT = it extends manufacturing planning and control visibility into the dist. system to allow the firm to adjust its production plans and avoid stocking excessive FGs. It provides time-phased information needed for the manufacturing and dist systems to effectviely allocate finished foods and production capacity to improve customer service and inventory investment.

Operations planning

Usually hierarchical and can be divided into 3 broad categories: long range(year or more, more general, aggregate units), intermediate(6-18 months), short range(weekly, daily, or hourly).Long range established first and then used to guide the medium range plans which are subsequently used to guide the short range plans. Long range involves major strategic decisions like construction of new facilities whereas medium range involve minor changes like employment levels. Short range are the most detailed and specify exact end items on a weekly, daily or hourly basis.

Statistical reorder point with constant demand and probabilistic lead time

When demand is constant and lead time is unknown but can be specified by means of a normal distribution, the safety stock is used to buffer against variations in the lead time instead of demand. When BOTH DEMAND AND LEAD TIME are unknown but can be specified by means of a normal distribution, safety stock must be held to cover the variations in both demand and lead time, resulting in higher safety stocks when compared to variations in the demand or lead time only.

Economic Order Quantity (EOQ)

a classic independent demand inventory system that provides useful ordering decisions and the basic order decision is to determine the optimal order size that minimizes total annual inventory costs which is the sum of the annual order cost and the annual inv. holding cost. The issue resolves around the trade-off b/t annual inventory holding cost and annual order cost: when order size is small orders have to be placed on frequent basis causing high annual order costs; however, the firm has a low avg inventory level for this item causing low annual inv. holding costs. Large order size = less frequent orders, lower order costs but high avg inventory levels causing higher holding costs. EOQ model seeks to find optimal order size that minimizes the sum of the two annual costs. Classic EOQ model is very robust to minor errors in estimating cost parameters such as holding rate, order cost or annual usage.

The aggregate production plan

a hierarchical planning process that translates annual business plans and demand forecasts into a production plan for all products. Demand mgmt = determining the aggregate demand based on forecasts of future demand, customer orders, special promotions, and safety stock. This forecast then sets aggregate utilization, production rate, workforce levels and inv. balances. These plans typically stated in terms of product families. Planning horizon is normally one year and usually extended or rolled forward by 3 months every quarter. APP disaggregates the demand forecast information and links the long range business plan to the medium-range master production schedule. Relevant costs include inventory cost, setup cost, machine operation cost, hiring cost, firing, training, overtime. 3 basic strategies firms use to complete the aggregate plan

cost of service pricing

a pricing strategy used when carriers desire to establish prices that vary based on their fixed and variable costs. To do this, carriers must be able to identify the relevant costs and accurately allocate these to each shipment it varies based on volume and distance. As shipping volume increases, portion of fixed costs that are allocated to each shipment decreases allowing the carrier to reduce its prices. Large volume shipments allow carriers to charge carload or truckload rates instead of LTL rates. This pricing represents teh base, or lowest shipping price for carriers and in a highly competitive market, carriers will price just above these levels to maintain some minimal level of profitability

Value of service pricing

a strategy that allows carriers to price their services at competitive levels the market will bear. In this case prices are thus based on the level of competition and the current demand for each service and it is a profit maximizing pricing approach. If a carrier has a service that is in high demand with little competition, prices will consequently be quite high competition will increase, causing prices to fall. As the level of competiion increases, carriers will seek ways to reduce their costs to maintain profitability. This pricing has dominated toady because demand for some transportation services exceeds supply, used in the airline industry.

Nafta

a trading accord between the U.S. and its two largest trading partners, canada and mexico. Onjectives are to facilitate cross-border trade among the 3 countries, increase investment opportunities, and promote fair trade. Critics say that it is responsible for job loss and stagnation driven by low wage competition.

Inventory turnover ratio

absolute dollars invested do not provide sufficient evidence about whether a company is using inventory wisely. This ratio is a widely used measure to determine how efficiently a firm is using its inventory to generate revenue and it shows how many times a company turns over its inventory in an accounting period. Higher turnovers are. a positive trend b/c it indicated the company generates more revenue per dollar in inventory investment. Higher turnovers allow the company to increase cash flow and reduce carrying costs. Low turnover may point to overstocking or deficiencies in product line. FORMULA IS COST OF REV/ AVG INV. Avg inventory is the mean of beg. and end inv.

Reverse logistics

aka returns mgmt, refers to the backward flow of goods from customers in the supply chain occurring when goods are returned, either by end product user or business customers within the supply chain. The movement , storage and processing of returned goods. Returns increasing because of online shopping. Returns can have significant impacts on costs, the environment, customer service and reputation and profitability if not managed properly. All about damage control. Returns are zombie inventory(won't die) taking up shelves or creating bottlenecks, but it can be optimized to create value through resale/reuse.

Enterprise Resource Planning (ERP)

an umbrella system that ties together a variety of specialized systems, such as manufacturing resource planning, logistics and warehousing, accounting and finance, human resource mgmt, customer relationship mgmt, and supply chain mgmt using a common, shared, centralized database. It is a broadly used industrial term to describe the multimodule application software for managing an enterprise's internal functional activities, as well as its suppliers and customers. It initially focused on integrating the internalA business activities of a multifacility organization, or enterprise, to ensure that it was operating under the same info system. Allows firms to deal directly with key suppliers to assess avaialbility as well as allows customers to directly access firm's inventory info. It utilizes the idea of a centralized and shared database system to tie the entire org. together. Eliminates inconsistency and incompatibility created when different areas use different systems. ERP integrates the internal operations of an enterprise with a common software platform and centralized database system. Minimizes bullwhip effect and minimizes delivery lead times.

Economic manufacturing quantity model

another variation of the classic EOQ model, it relaxes the instantaneous replenishment assumption by allowing usage or partial delivery during production, it is especially appropriate for a manufacturing environment where items are being manufactured and consumed simultaneously. Inventory builds up gradually during the production period rather than at once as in the EOQ model. Total annual inventory cost is annual product cost + annual holding cost + annual setup cost. The product cost does not affect the order decision if the unit cost of each product is constant.Production rate must be. greater than demand rate b/c of simultaneous consumption/production.

Transportation mgmt systems

applications allowing firms to find carriers, select the best mix of transportation services and pricing to determine the best use of containers or truck trailers, better manage transportation contracts, rank transportation options, clear customs, track fuel usage and product movements and track carrier performance. Helps with visibility issues. Many TMS softwares now allow for customs declaration, calculation and payment of tariffs, duties and duty drawbacks and advanced filing of shipment manifests. warehouse mgmt systems = track and control the flow of goods from receiving dock of a warehouse or DC until item is loaded for outbound shipment to the customer, goals include reducing dist. center costs, streamlining good flow, reducing time in Dcs.

negotiated pricing

becoming more common since the deregulation of transportation. Additionally, shippers today are inclined to develop alliances with logistics companies because of the key role they play in allowing firms and their supply chains to be more responsive to changing demand. Shippers want carriers to use cost of service pricing while carriers want to use value of service pricing and prices are negotiated such that they fall somewhere b/t these two levels allowing carriers to cover their fixed and variable costs and make a reasonable profit and allowing shippers to get the logistics services they want at reasonable prices.

best-of-breed vs single integrator

best of breed= picks the best application or module for each individual function required for the supply chain, it can result in several different applications that must be integrated to work as a single coordinated system to achieve the global scope. critiscism is that multiple softwares/databses may be required to link everything affecting efficiency single integrator = picks all desired applications for a single vendor for the ERP system allowing all applications to work well together this becomes more attractive as companies become more global, the IT department prefers this method, but business managers prefer best-of-breed. Best of breed is rare now but they are better suited to more intricate workplaces while single integrator is better for less complex. Primary requirements of successful ERP implementation are computer support and accurate inputs.

Advantages of ERP Systems

can enhance the firms capability to fully utilize capacity, accurately schedule production, reduce inventory, meet delivery due dates, and improve efficiency and effectiveness of the supply chain. Primary advantage over legacy is that it uses a single database and a commmon software infrastructure to provide a broader scope and up to date information, enabling mmgt to make better decisions swiftly. ERP is also robust in providing real time info and can communicate info about operational changes to supply chain members quickly. Designed to take advantage of internet technology can access the system via the internet. Helps orgs. reduce supply chain inventories through visibility reducing bullwhip effect. Helps orgs. standardize manufacturing processes eliminating redundant resources. It enables an organization to efficiently track employees time and performance and to communicate with them via a standardized method

green reverse logistics

can have a positive impact on the environment through recycling, reusing or refurbishing. Green reverse log. programs include reducing the environmental impact of certain modes of transportation used for returns, reducing the amount of disposed packaging and product materials by redesigning and making use of reusable totes and pallets.

Motor carriers

choice depends on factors like goods to be transported, how quickly goods are needed, price shippers are willing to pay and locations of shippers and customers. Motor carriers or trucks are the most flexible mode of transportation and account for 70% of all the freight tonnage moved in the U.S.(10.5 billion tons in 2015), largest of the 5 modes. They offer door to door service, local pickup and delivery and small as well as large shipment haiuling. very low fixed and vc, compete favorably with rail and air carriers for short to medium hauls(> 1K miles) and still competetive with other modes for long shipments especially if there are multiple delivery locations. Offer variety of specialized services from refrigerated to livestock, automobile hauling. Primary disadvantages of motor carriers are weather and traffic problems

Lean systems and the environment

clear linkage b/t lean and environmental sustainability and lean systems can have a positive environmental impact as they reduce waste and the costs of environmental mgmt. Firms found minimizing inventories and adopting quality standards more likely to practice pollution prevention. Creating lean processes is a necessary element in successful SCM and another necessary element is the practice of continuous quality improvement.

Rail carriers

compete most favorably when distance is long and shipments are heavy/bulky. Relatively slow and inflexible, but rail carriers are less expensie than air or motor carriers and can compete well on long hauls. They have also purchased trucking companies and can offer point to point pickup and delivery service using motor carriers and rail flatcars that carry the trailers(trailer on flatcar service). Railroads at a disadvantage compared with motor carriers with respect to shipment damages, equipment availability and service frequency. Keeping track of rail cars and getting them where they are needed can be problematic, real time location systems are used to mitigate this. New trend = use of high speed trains

Dependent vs. Independent Demand

dependent: internal demand for parts based on the demand of the final product in which the parts are used. Subassemblies, components and raw materials are examples of dependent demand items. May have a pattern of abrupt and dramatic change b/c of dependency on demand of final product. Can be calculated once demand of final product is known so MRP software is useful, based on bill of materials and master production schedule independent: demand for end product, pattern affected by trends, seasonal patterns and general market conditions. Cannot be derived using mrp logic and must be forecasted based on market conditions

Poka-Yoke

developed by shigeo shingo, this is error or mistake proofing and the idea is to design processes such that mistakes or defects are prevented from ocurring in the first place and if they do occur, further errors are also prevented. These mechanisms can be electrical, mechanical, visual, procedural, or any other method that prevents problems, errors or defects and they can be implemented anywhere in the org. Poka-yokes lead to higher levels of quality and customer service.

Small batch production scheduling

element of lean, actually accomplishing this is different than saying it. Using level production schedules of small batches communicated throughout the production process is a primary strategy of lean production. Small batch scheduling drives down costs by reducing purchased, WIP, and FG inventories, and makes the firm more flexible to meet varying customer demand. Maintaining a set level, small batch production schedule also allows suppliers to anticipate and schedule deliveries resulting in fewer late deliveries. Moving small production batches is accomplished with kanbans(signal). Lean systems are also pull systems where nothing is provided until a downstream demand occurs. Kanbans used to control the flow of inventory through the facility and inventories are not allowed to accumulate beyond the size of each container and # of containers.

Waste elimination

element of lean, includes reducing excess inventories, material movements, production steps, scrap losses, rejects and rework. The desired outcome is value enhancement. Waste is a catch all term encompassing things such as excess wait times and inventories, wasted or unneeded material and people movements, too many processing steps, variabilities in processing, and any other non-value adding activity. Ohno developed the 7 wastes and the common term across all of them is excess. To identify wastes, workers must be continually assessing processes, methods and materials through worker-mgmt interactions and customer feedback. Waste reduction results in lower costs, shorter lead times, better quality and competitiveness.

Inventory and setup time reduction

element of lean, inventory is considered waste b/c it hides problems, so the reduction allows these problems to become visible. Properly maintained equipment breaks down less often so less safety stock is needed to keep downstream processing areas supplied with parts to be further processed. Reducing lot sizes means increasing the number of setups and since increasing setups takes more time, firms must find ways to reduce these setup times through setup preparation work while previous lots are being processed, moving machine tools closer to machines, standardizing procedures, and purchasing automated machines.

Lean supply chain relationships

element of lean, it is common for firms to hold safety stocks b/c suppliers are inconsistent, but holding high levels of inbound, internal, outbound inventories costs the firm money while not adding much, if any value to the products or the firm. When focal firms, suppliers, and customers work together to identify customer requirements and remove wastes, it marks the beginning of lean supply chain relationships. This includes having suppliers deliver smaller quantities, more frequently to the point of use, reducing avg inventory levels, but increasing inbound transp. costs which can be reduced by locating warehouses close to the buyer. Making smaller, frequent purchases from few suppliers puts focal firm in greater dependence on suppliers so quality is very important. Mutual dependencies and benefits occur from these, increasing product value and competitiveness.

Lean layouts

element of lean, these are arrangements that reduce wasted movements of workers, customers and/or WIP, and achieve smooth product flow through the facility. Lean layouts allow people and mats to move only when and where they are needed as quickly as possible, thus whenever possible departments that frequently transport parts should be located close together to minmize movement. Lean layouts are very visual with unobstructed lines of visibility, making it easy for operators at one processing center to monitor work at others. The closeness facilitates teamwork and joint problem solving and requires less floor space. Lean layouts allow problems to be tracked to their source quicker

Workforce commitment

employees play a significant role in lean process b/c of dependency on waste reduction and cont. improvement. Managers show strong support for lean production efforts by providing subordinates with the skills, tools, time and other necessary resources to identify process problems and implement solutions, and they also create a culture in which workers are encouraged to speak up. In lean systems, emps are cross trained on many production processes to enable capacities to be adjusted as needed when machines break down or when workers are absent. Emps given time during the day to reduce setup times and solve other problems. Workers are empowered to shut down processes when problems occur and emps are considered one of the most important parts of lean orgs.

Bill of materials

engineering document that shows an inclusive listing of all component parts and assemblies making up the final product. Includes the planning factor(calculation showing the number of units of a specific component required to make one unit of a higher level part). Level numbers increase as one moves down on the BOM. Level 0 is the final product which is independent demand item(demand for final products and service parts, affected by trends, seasonal patterns and market conditions). Dependent demand items(internal demand for parts based on the demand of the final product in which the parts are used). It can also be presented as the indented bill of materials where level number increases by one at each indentation level. Super Bill of materials enables firm to forecast using percentages and fractions.

Inventory costs

goal is to control inventory costs and minimize stockouts. 1. direct costs = those driectly traceable to unit produced like amount of materials and labor used to produce a unit of the FG 2. Indirect costs = cannot be traced directly to unit produced synoymous with mfg overhead, maintenance repair and op. supplies, heating, lighting. 3. Fixed costs = independent of output quantity(buildings, equipment, plant security) 4. variable costs = change as a function of output level(direct materials and labor costs). More important to control variable costs 5. Order costs = direct variable costs associated with placing an order(managerial and clerical costs for prepping purchase) 6. Holding/carrying costs = costs incurred for holding inventory in storage(handling charges, warehousing expenses Setup costs used in place of order costs for mfg context to describe costs for setting up machines

Manufacturing resource planning

grew from material resource planning and it combined MRP with master production scheduling, rough-cut capacity planning, capacity requirement planning, and other operations planning software modules. This eventually evolved into enterprise resource planning (ERP) in the 90s. DIST Requirements Planning(DRP) describes the time phased net requirements from central supply warehouses and dist centers and it links production with dist planning by providing aggregate time phased net requirement information to the master production schedule.

Risk pooling

important decision of private warehouses is where to locate as this decision effects the number neeed, required capcaities, system inventory levels and customer service levels. As number of warehouses used increases, warehousing system becomes more decentralized where responsiveness and delivery service levels increase since goods will be closer to customers and can be delivered more quickly but operating and inv. costs are higher. In a centralized system fewer warehouses means outbound transp. costs will be higher and service levels lower but system costs lower. RISK POOLING describes the relationship b/t number of warehouses, inventories and customer service, when market demand is random it is very likely that higher than avg demand from some customers will be offset by lower than avg demand from others. As # customers served by a single warehouse increases, demand variabilities will tend to offset each other more often. Amount of safety stock needed decreases, more centralized it is, lower the safety stock required.

Toyota production system

lean production is closely related to this. This is a methodology created to make the best use of an organizations time, assets, and people in all processes in order to optimize productivity. Built by Sakichi Toyoda after studying Ford and adapted the production of small quantities using smaller, more frequently delivered batches(ford called it flow production, precursor to JIT). Eiji Toyoda built foundation for TPS. Taiichi Ohno played major role in establishing low-batch principles. They realized wastes(MUDA) everywhere and this brought the idea that parts should be produced as needed by the next step in the process when a signal(kanban) was used and this was called the Kanban/JIT system. Shingo and Deming also impactful in TPS. Total quality control was the final piece of the TPS and was later renamed total quality mgmt. The term lean did NOT originate at toyota, but in a benchmarking study

Continuous improvement

lean systems never ending works in progress. Kaizen = ways to reduce supplier delivery and quality problems, solve movement problems, visibility, machine breakdown, machine setup and internal quality problems. Translates to "good change", a kaizen blitz is a rapid improvement or workshop aimed at finding big improvements, most kaizen improvements are small individual events emphasizing creativity.

aggregate production plan, MPS, MRP

long range production plan; it sets average output rate, workforce size, utilization, inventory and backlog levels for a plant. The master production schedule(MPS) is a medium range plan and is more detailed than the aggregate production plan as it shows the quantity and timing of the end items that will be produced. The material requirements plan (MRP) is a short range materials plan it is the detailed planning process for the required component parts to support the master production schedule, its a system of converting the end items from the master production schedule into a set of time-phased component part requirements.

Horizontal collaboration

meant to combat energy wastes and "empty miles". It is the process of two or more companies cooperating at the same level on a certain market activity to realize benefits they could not achieve independently.

Planned Order Releases

most important output of MRP, for items manufactured in-house, planned order releases are transmitted to the shop floor, but for purchased items, planned order releases are transmitted to suppliers directly or via the purchasing department. It is a specific order to be released to the shop(if made in house) or to the supplier(if component is purchased) to ensure that it is available on the need date. Key consideration = planned order releases of parent determine gross requirements of the components

3PL services

most logistics companies offer both transportation and warehousing services allowing firms to make better use of dist alternatives such as transportation mode, storage location and customs clearance. Some 3Pls provide complete end to end services like network optimization, light mfg, and other value added services. trends impacting 3pl is near-shoring and oil/gas in north dakota. Outsourcing to 3pl is beneficial for small firms with no internal logistics expertise and large firms with sizeable and varied logistics needs. 3Pl supply base reduction similar benefits to supply base reduction. To minimize logistics costs while meeting customer requirments, firms identify the most desirable transp. modes and 3PL services available. Alliances are useful. Sometimes companies will use transp. intermediaries(agencies that bring shippers and transp. providers together)

inventory

ncludes all the materials and goods that are purchased, partially completed materials and component parts, and the finished goods produced. The primary functions of inventory are to buffer uncertainty in the marketplace and to decouple or break the dependencies between stages in the supply chain. Safety/buffer stock can be used to cushion uncertainties due to fluctuations in supply, demand, and /or delivery lead time. The right amount of inventory enables a work center to operate without interruption when other work centers in the same production process are off-line for maintenance or repair, as well as allows a faster work center to operate smoothly when constrained by slower upstream work centers. Geographical specialization is used sometimes and for manufacturers inventory also acts as stored capacity

time and place utility

necessary for moving purchased materials from suppliers to buyers, moving WIP materials within a firm, returning or recycling goofs and also storing these items along the way. Effective logistics systems needed for commerce to exist. Products have little value to customers until moved to customers usage areas. Logistics provides time and place utility. Time utility = created when customers get products delivered at precisely the right time(not earlier or later) logistics creates this by determining how deliveries can be made in a timely manner. Place utility = created when customers get things delivered to their desired locations

Continuous review system

order quantity and reorder point inventory models assume physical inventory levels are precisely known at every point in time implying stock movements must be updated in real time and no discrepancies b/t physical inventory and stock record. This system is an inventory mgmt system where the physical inventory levels are counted on a continuous or daily basis, can be difficult/expensive to implement. Implies physical inventory is known at all times, more expensive. Only uncertainty is magnitude of demand during delivery lead time so only safety stock required is for stockouts for this time period. Two types: 1. (s, Q) = orders same quantity, when reorder point reached, works when 1 unit demanded at a time. 2. (s, S) = inventory falls below ROP, sufficient units ordered to bring inventory up to predetermined level, similar to (s,Q) if quantity demanded is 1 at a time.

Capacity planning

organizations must also account for capacity constraints. A set of capacity plans is used in conjunction with the materials plan to ensure capacity is not over-or underutilized. Capacity refers to a firm's labor and machine resources, it is the maximum amount of output that an org. is capable of completing in a given period of time

transportation regulation vs deregulation

regulation = laws that protect consumers in areas of transportation monopoly pricing, safety and liability deregulation = laws that seek to reduce government regulation in the transportation industry, allowing market forces to dictate services offered. Some argue for regulation saying that it ensures adequte transportation thorughout the country while protecting consumers in terms of monopoly pricing, safety and liability. Deregulation argued to be good b/c it encourages competition and allows prices to adjust as supply, demand and negotiations dictate. Deregulation has resulted in greater use of cost of service pricing, rising freight rates for LTL shipments and more safety problems, as operators tended to let fleets age and reduce maintenance levels. Industry remains essentially deregulated today but some regulations still exist.

impact of reverse logistics on supply chain

significant challenges to a SC, it is viewed as an unwanted activity of scm and seen as a cost of doing business. Problems include the inability of information systems to handle returns or monitor reverse product flow, lack of worker training in reverse logistics procedures, little or no identification on returned packages, the need for adequate inspection and testing of returns, and the placing of potentially damaged returned products into sales stocks. Poor reverse logistics system can effect supply chain financially and customer perception. Returns are 3-4x more expensive than forward outbound shipments. An effective process can create goodwill and enhance customers' perceptions of product quality and purchase risk and from a quality perspective this info can be used in root cause analysis to reduce future design errors. #1 reason for return = defective/damaged item. From a logistics perspective returned items can still create value.

Mixed production strategy

strives to maintain a stable core workforce while using other short-term means such as overtime, additional shift, subcontracting, or hiring of part time and temporary workers to manage short-term high demand. These firms will then schedule preventative maintenance, produce complimentary products w/ similar resources or continue to produce the end items, holding these as FG during the off-peak-demand hours. Firms w/ multiple products and customers seking both low-cost and make to order items may opt for this to minimize stockouts and cycle time.

disadvantages of ERP system

substantial capital investment is needed to purchase and implement the system(training, hardware, software, customization, internal staff costs). They are very difficult to implement. Primary criticism is that the software is designed around a specific business model based on specific business processes so the adopting firm must change its business model and associated processes to fit the built in business model designed into the ERP system. This is unusual where a software system determines the business practices and processes a firm should implement instead of designing the software to support existing business practices. Many implementation challenges still remain unsolved.

Square root rule

suggests that the system average inventory is equal to the original system inventory times the ratio of the square root of the new number of warehouses to the square root of the original number of warehouses. 1. Safety stock and avg inv: centralized warehousing = safety stock decreases 2. Responsiveness: centralization increases, lead times increase and risk of late deliveries reducing ability to respond quickly 3. Customer service to the warehouse: centralization increases, cust service increases 4. transp costs: centralization increases, outbound transp increase but inbound transp costs decrease 5. warehouse system capital and ordering costs: centralization increases, operating costs decrease b/c fewer warehouses Argument for location is optimal location is where transp costs are minimal

terms of sale

suppliers terms can effect transportation costs. Free on board (FOB) destination pricing is a price quotation that includes transportation to the buyers location when products are purchased from a supplier, means that the supplier will be the legal owner of the product until it safely reaches its destination. usually preferred for high value shipments, small shipments or when the buyer has little transportation expertise. FOB origin pricing = a price quote in which the buyer may decide to purchase goods and provide the transportation to the shipping destination, the supplier quotes are lower. Line haul rates = charges for moving goods to a nonlocal destination

Five-S

technique for waste reduction. It is five japanese words coming from toyota that relate to indsutrial housekeeping. The idea is that by implementing five-s, the workplace will be cleaner, more organized and safer, thereby reducing processing waste and improving productivity. Also a problem identification and prevention system. Five-Why: root cause isnt established until why has been asked 5 times. 1. Sort, 2. Set in order(tidiness), 3. Sweep or shine(purity), 4. standardize(cleanliness), 5. self discipline/sustain. Sort/set in order want to eliminate searching/unnecessary movements, sweep refers to proper workplace cleaning, standardize reduces process variabilities. Some firms add a 6th S = Safety/surprises

Lean Six Sigma

the combining of lean thinking and six sigma quality practices. These go hand in hand as lean production is all about reducing waste while six sigma is all about solving problems and improving quality. Reducing lead times and inventory levels, providing better delivery performance and lower cost are lean production activities while solving these process problems through monitoring, statistical control are six sigma activities.

Logistics

the practice of moving and storing goods to meet customer requirements for the minimum cost. The process of planning, implementing and controlling procedures for the efficient and effective transportation and storgage of goods including services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. Transportation, warehousing, info systems and customer service play very important roles in logistics. Logistics = what creates the flow of goods b/t supply chain partners such that costs service requirements comp adv and profits can be optimized. Extremely valuable to supply chains, it is what effectively links each partner

Resource planning

the process of determining the production capacity required to meet demand. Capacity = the maximum workload that an organization can complete in a fixed period. Discrepancy between an org's capacity and demand results in inefficiencies, either in underutilized resources or unfulfilled orders. Goal of resource planning is to minimize this discrepancy. One of the most critical activities of an org. is to balance the production plan with capacity as this impacts how effectively the org. deploys its resources in producing goods and services. Capacity may be stated in terms of LABOR, MATERIALS, OR EQUIPMENT. Excess capacity leads to higher costs. Firms generally run at about 85% capacity.

Available-to-promise quantities

the uncommitted portion of a firms planned production, it is used to promise new customer orders. The difference between confirmed customer orders and the quantity the firm planned to produce, based on the MPS. Provides a mechanism to allow the master scheduler or sales personnel to negotiate new orders and delivery due dates with customers or quickly respond to customers changing demands. 3 methods include 1. discrete Available to promise, cumulative ATP without look ahead, and cumulative ATP with look ahead

intermodal transportation

the use of combinations of the various transportation modes, very popular transportation arrangement and can make movement of goods cheaper, quicker and more secure. Deregulation of the transportation industry suppered intermodal growth to the levels of today. Most companies today will transport shippers' goods for a price and then determine the best intermodal transportation and warehousing arrangements to meet customer requirements as cheaply as possible. Most common combinations are truck trailer on flatcar(TOFC) and container on flatcar(COFC) or piggyback service where standardized shipping containers are transported via rail flatcar and also placed on a truck chassis or ocean going container ship. These combos combine flexibility of motor carriers with economy of rail/water carriers. Another example are ROROS(roll-on-roll-off) vessels allowing trailers to be directly driven on and off the ship inte secured garages without cranes.

The Statistical Reorder Point with Probabilistic Demand and Constant Lead Time

this model assumes the lead time of a product is constant while the demand during the delivery lead time is unknown but can be specified using a normal distribution. B/c reorder point is to determine lowest inventory level at which a new order should be placed, demand prior to a purchase order does not directly affect ROP. The in-stock probability = Service Level. Statistical reorder point can be calculated as the avg demand during the delivery lead time + desired safety stock.

objective of transportation

transportation services can go broke doing things inefficiently. Logistics managers seek to maximize value for their employers by correctly communicating the firm's service needs to for hire transportation providers. Services and prices are negotiated such that the transportation provider's delivery costs are covered while allowing them an acceptable profit contribution, managers must ensure that the desried services are performed effecrtively. Transportation objectives should be to satisfy customer requirements while minimizing costs and making a reasonable profit, this also means deciding which forms of transportation, material handling, and storage, along with the most appropriate vehicle scheduling and routing to use

ABC inventory control system

useful technique to determine which inventories should be counted more frequently and managed more closely and which should not. Often combined with 80/20 rule or pareto analysis suggesting that 80% of objective can be achieved by doing 20% of tasks, recommending these tasks receive highest priority. This system prioritizes inventory into groups a, b, and c where A items get highest priority and C gets lowest and are typically the most numerous, priority often determined by annual dollar usage or shelf life, sales volume or other criteria. A items should have higher safety stock levels to guard against stockouts stockouts may be allowed for C items. ABC inventory matrix is a diagram that illustrates whether a firm's physical inventory matches its inventory usage, its derived by plotting an ABC analysis based on inv usage classification on vertical axis and an ABC analysis based on physical inventory classification on horiz. axis.

Air carriers

very expensive relative to other modes but VERY fast for long distances. Account for only a small portion of total freight hauled since they cannot carry extreely heavy or bulky cargo, but for light high value goos that need to travel long distances quickly, air transportation is the best of the alternatives. Incidence of shipment damage is low and schedule frequency is good, but it is limited in terms of geographic coverage as most small cities fo not have airports so air transp. must be combined with motor carrier service for these locations. Most demand today in asia-pacific region

water carriers

very inexpensive but also VERY slow and inflexible. inland waterway is used for heavy bulky, low value materials(coal, grain and sand) competing primarily with rail and pipeline carriers limited to water areas so growth is limited. water carriers typically paired with motor carriers. Development of supertankers and containerships have added a new dimension to water transportation. Shipping containers allow almost any packaged product to be shipped overseas adding an element of protection to the cargo

pipeline carriers

very specialized with respect to the products they can carry but once the initial investment is recovered, there is little additional maintenance costs so long term pipeline transportation tends to be very inexpensive. Pipelines can haul materials that are only in a liquid or gaseous state and so the growth potential for pipelines is quite limited and one of the items they haul is coal in water form called coal slurry. other items include water, oil, gasoline, and natural gas

warehousing and distribution

warehouses enable firms to store their purchases, WIP and FG as well as perform breakbulk and assembly activities. They allow faster and more frequent deliveries of FG to customers, which in turn can result in better customer service. Viewed as a competitive resource. Demand for warehouese growing rapidly as disposable income increases b/c consumers buy more goods that must move through dist. systems. Often warehouses are not used to store things, but rather to receive bulk shipments, break them down, repackage various items into outgoing orders and then dist. them to a mfg location. Crossdocking = continuous replenishment where incoming goods are sorted and then shipped out to final dest. w/o the need to store the goods, takes place within 24 hrs used to replenish high demand inventories, often used as Dist. centers. In some cases firms moving warehouses closer to suppliers, customers or to more centralized locations depending on customer service requirements. Warehouses are used to support purchasing, production and dist activities.

Consolidation warehouses

warehouses that collect large numbers of LTL shipments from nearby regional sources of supply, then deliver in TL or CL quantities to a manufacturer. Allows firms to realize both purchase economies and transp. economies, firms can buy goods in bulk at lower costs and then ship these goods at TL or CL rates either to a DC or directly to mfg center. Private warehouses = owned privately by an org. Firms with large volumes of goods to store or transfer, give an opportunity to reduce the costs of warehousing as well as control the levels of service provided to customers, firms are free to decide what to store,m what to process, what types of security and equipment to use. Use of private is increasing as supply chains become more global, generates income and tax advantages(vas majority of overall warehouse space) can be a great financial risk and loss of flexibility to firm, restrict firms to locations that may not be good over time and capacity is inflexible. Public warehouses: for profit orgs that lease a wide range of light mfg, warehousing and dist services to other companies. Provide the services of breakbulk, repackaging, assembly, quality inspections, material handling, and short/long term storage. Provide more flexibility than private(test market areas). Lower costs Private = large established market w/ mature products, public for developing markets

lean warehousing

warehouses will have to develop leaner capabilities as items move more quickly through them. Examples include: greater emphasis on cross docking(fewer goods stored avg inv decrease, SKU increase), reduced lot sizes and shipping quantities(smaller but more frequent), commitment to customers and service quality, increased automation, increased assembly operations(warehouses responsible for final assembly), tendency to be green. Official definition is "when warehousing, crossdocking, packaging and freight consolidation is offered to companies who are looking to increase speed and reduce costs as much as possible to compete)

Manufacturing cells

work cells, designed to process any parts, components or jobs requiring the same or similar processing steps, saving duplication of equipment and labor termed part families. U-shaped to facilitate easier operator and material movements within the cell. MFG cells are small assembly lines and are designed to be flexible, allowing machine configs to change as requirements do.