SCM3301 Exam #2
Weighted-point evaluation system
Value must add up to 1 to be Valid
Job or Batch Shop Feature: Work Load
Variable
The following are all typical reasons to Make or Insource EXCEPT: A. To utilize excess capacity B. When product life-cycles are short C. Better control over environmental impact D. To protect intellectual property E. To reduce handling/storage costs
When product life-cycles are short
The following are all typical reasons to Buy or Outsource EXCEPT: A. If low volumes increase costs B. When product life-cycles are short C. For a cost advantage D. When product life-cycles are stable E. To gain access to state-of-the-art technology
When product life-cycles are stable
M otion
Workers or machines that are moving, but not getting any work done
Performance Impact
affecting the way your company performs
Production Activity Control (PAC)
assures that in-house manufacturing takes place according to plan; also helps manufacturing managers identify potential problems and take corrective actions
Vendor Order Management
assures that materials ordered from supply chain partners are received when needed; also helps purchasing managers identify potential problems and take corrective actions
Global Sourcing
competing against World-Class organizations
Scope
description of the desired outcomes of a project
Master Scheduling
determines when specific products will be made, when specific customer orders will be filled, and what products/capacities are still available to meet new demand
Financial Impact
direct influence on bottom-line profits
Ethical Treatment of Workers
diversity & minorities, child labor, worker abuse, human rights, animal rights, safety, pay scales
Sales and Operations Planning (S&OP)
establishes overall production, workforce, and inventory levels (tactical capacity planning)
No Inspection
for Certified Suppliers
Sample Inspection
for established suppliers and purchases, utilizes statistical principles
100% Incoming Inspection
for new suppliers or new purchases
Pareto Chart
graphically orders categories of numerical data in descending order so that the most important categories are easily recognized
Individual Tasks
have a duration and precedence
Machining centers
machines or series of machines that complete several manufacturing steps
Lean systems
strive to SLOWLY reduce inventory levels. Reducing inventory will eventually expose a problem (waste) that can be systematically evaluated and eliminated
Single sourcing
the business practice of buying a particular product from only one supplier -Advantages: Volume Discounts, Reduction in Variability, Enables Strong Relationships -Disadvantages: Increased Supply Risk, Supplier Dependence, Must Monitor Best Practices
Cost Of Goods Sold (COGS)
the purchased cost of goods from outside suppliers
Scope Creep
the tendency for the scope to change throughout the duration of a project
𝑷𝑷=
𝒎𝒂𝒙𝒊𝒎𝒖𝒎(𝟎,𝑭𝑪−𝑭𝑮−𝑹𝑷)
(𝑷𝑶)𝒏𝒆𝒘=
𝒎𝒂𝒙𝒊𝒎𝒖𝒎(𝟎,𝑷𝑷−(𝑹𝑴)𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆−𝑺𝑹)
MRP calculates future needs for components & raw materials by
"Exploding the Bill of Material."
Units still available to meet customer needs:
(Available to Promise) *after filling Booked orders
The Six Sigma Improvement Methodology
(DMAIC)
Purchase Order (PO)
-A document that authorizes a supplier to deliver a product or service and often includes key terms and conditions such as price, delivery, and quality requirements [details taken from the Quotation or Proposal] -Legally binding agreement when formally accepted by the supplier
Product-based layout (continuous flow & production lines)
-A type of layout where resources are arranged sequentially, according to the steps required to make a product -Used for products with identical or highly similar designs -Think about the process used to make sandwiches at Quiznos or Subway
Functional layout (job shop & batch manufacturing)
-A type of layout where resources are physically grouped by function -Used for products with high degrees of customization or expertise required -Think about the process you must go through to sign up for and pay for classes
Forward Pass:
-ADDING durations -Choice? Pick the LATEST
Cause & Effect Diagram (Traditional)
-Also known as a fishbone or Ishikawa diagram -A graphical tool that allows one to explore potential causes for a problem -Used within a problem-solving team to brainstorm and identify root causes to a problem -There are more effective Root Cause Analysis methods used by companies today.
Broad set of activities carried out by organizations
-Analyze sourcing opportunities -Develop sourcing strategies -Select suppliers -Procure goods and services -Measure and manage suppliers
Reasons to Make or Insource
-Better control over quality -Better visibility of process -Better control over social and environmental impact -To protect intellectual property -For Core Competencies -To utilize excess capacity -To reduce handling/storage costs -When product life-cycles are stable
Project Phases
-Concept Phase(1) -Project Definition Phase(2) -Planning Phase(3) -Performance Phase(4) -Postcompletion Phase(5)
Process Types
-Continuous Flow Processes -Production Line -Batch Manufacturing -Job Shop -Fixed Position Layout
How to Calculate Total Cost Analysis
-Convert each cost listed to $/part -Add together all $/part measures to find total $/part
Profit Leverage Effect
-Decreasing the money spent on purchasing functions increases profit FASTER than increasing revenue as a result of marketing and sales. -Every $1 saved in purchasing, lowers COGS by $1 and directly contributes $1 to bottom line profits.
Value Stream Process Map
-Diagrams the entire creation of value through a company. Each product category is mapped separately. -Arranged left to right, starting at raw materials and tracking the creation of value through to the customer. -Describes who does the work, in what quantities, the time it takes to do the work, and delays encountered. -The top of the Value Stream Map describes how information from the customer influences the process. -Used to decrease process delays and waste and to make sure the process can meet the customer requirements.
Ethical Sourcing
-Ethical Treatment of Workers -Fair Trade Products *Requires Verification and Management
When customization occurs early in the supply chain
-Flexibility in response to unique customer needs will be greater. -Lead times to the customer will tend to be longer. -Products will tend to be more costly.
When customization occurs late in the supply chain
-Flexibility in response to unique customer needs will be limited. -Lead times to the customer will tend to be shorter. -Products will tend to be less costly.
The Master Schedule Record
-Forecasted demand -Booked orders -Projected inventory levels -Production quantities -Units still available to meet customer needs (Available to Promise)
Level of Customer Contact
-Front Room -Back Room
Run Chart
-Graph of measured data over time -Often graphed with a horizontal line showing the average of the data
Scatter Diagram
-Graph of pairs of numerical data to determine potential relationships between two variables -Used in conjunction with Regression (a statistical calculation)
Control Charts (Statistical Process Control)
-Graphs used as a basic form of Statistical Analysis to determine whether changes are caused or random -Statistically Significant Control Limits are calculated and plotted -Charts are evaluated to see if data patterns violate expected random variation -Data points with less than 0.3% probability of occurring randomly are investigated -Statistical Acceptance Sampling
Sustainable Sourcing
-Green Purchasing -Sustainability
Reasons to Buy or Outsource
-If low volumes increase costs -To maintain strategic flexibility -To gain access to state-of-the art technology and processes -Cost and/or Quality Advantage -When suppliers are reliable -When relationships have been established -When product life-cycles are short
RFQ-Request for Quotation
-Includes all the characteristics required or desired -Includes: descriptions, specifications, quantities, delivery, terms of payment, contract length, etc -USE WHEN: Price is a dominant criteria, requirements are straightforward
Project delays or errors will always compromise on the overall Project Performance:
-Increasing the Cost -Reducing the Scope -Agreeing to a later delivery date (Time)
"Pure" Services
-Intangible Product -Output cannot be Stored (no inventory) -High Customer Contact and Involvement -Typically Small Markets -Quality is Perceived Subjectively *Think Haircut
Negotiating
-Interactive and iterative process for determining purchase conditions -Involves: Multiple communications to arrive at an agreement -USE WHEN: Exact specification and performance is unknown (new product development) and the buyer needs input or guidance or collaboration from the supplier.
FlowChart Process Map
-Involves a well defined start and finish connected by a variety of process steps. -Typically arranged top-down (but may be arranged left to right) to describe a process from start to finish. -Usually involves both tasks and options. There may be several possible paths to get from the start to the finish. -Used to understand and simplify complex processes
SwimLane Process Map
-Involves a well defined start and finish connected by a variety of process steps. Parallel work flows can be clearly seen. -Typically arranged left to right to describe a process from start to finish. The SwimLane Process -Map is arranged on a timeline. Tasks on the left must occur prior to tasks on the right. -The various functions/people/specialties each have a horizontal "swimlane" within which all of their responsibilities are listed. -Often used to describe processes that are managed by software.
Purposes of Mapping
-It creates a common understanding of the content of the process: its activities, its results, and who performs the various steps. -It defines the boundaries of the process. -It provides a baseline against which to measure the impact of improvement efforts. -It makes the process visible so that people can discuss it, trouble-shoot it, improve it. -It forces people to address what is actually happening in the organization. The mapping activity itself often highlights problems that can be addressed & improved.
Line Balancing Process Map
-Lists all the individual tasks of all the functions/people involved in a process. -Graphically describes how long each function/person takes to complete a process compared to a target rate for the process. -Used to "rebalance" the process by changing the responsibilities of individual functions/people: -Allowing overworked functions/people to transfer some of their responsibility to underutilized functions/people.
Degree of Customization
-Lower customization allow for standardized processes. Primary measurements are related to productivity and cost -Higher customization requires flexible processes. Primary measurement becomes customer satisfaction .
Advantages of MRP
-MRP is directly tied to the master production schedule and indicates the exact timing and quantity of orders for all components. -MRP allows managers to trace every order for lower-level items through all the levels of the BOM, up to the Master Production Schedule. -MRP tells a firm and its suppliers precisely what needs to be made when. -MRP is automated when using an ERP system -When used within an ERP system, requirements can be calculated and communicated across Supply Chain Partners
Special Considerations in MRP
-MRP requires organizational discipline and accurate information. -MRP must be able to accommodate uncertainty (variability in quantities, timing, quality, schedule) -MRP nervousness - A term used to refer to the observation that any change, even a small one, in the requirements for items at the top of the bill of material can have drastic effects on items further down the bill of material.
Four Levels of Customization
-Make-to-Stock (MTS) -Assemble-to-Order (ATO) -Make-to-Order (MTO) -Engineer-to-Order (ETO)
Master Scheduling:
-Makes specific the overall resource levels established by S&OP. -States exactly when and in what quantities specific products will be made. -Links production with specific customer orders, allowing the firm to tell the customer exactly when an order will be filled. -Informs the operations manager what inventory or resources are still available to meet new demand.
Master Scheduling Purposes:
-Maximize labor and equipment utilization -Minimizing costs -Ensure adequate finished goods inventories to fill customer orders on time -Match the average production rate with the average sales rate over the planning horizon
Settlement and Payment
-May be paid through Electric Funds Transfer (EFT) -Payment is aligned with Quotation, Receipt, and Inspection
Layouts are designed to
-Minimize movement of Materials & People -Maximize utilization of Machines & People -Maximize productivity & quality of Machines & People -Manage complexity - improve management of processes -Manage interactions between Machines, People, Customers, Stakeholders
Visual Management: Using simple visual controls to make:
-Normal and abnormal conditions visible -Make waste and problems obvious -Make processes simple, straightforward, obvious -Make it easier to do the right thing and harder to do the wrong thing -Common Visual Controls: Outlining, shadowboards, color coding
The Procure-To-Pay Cycle
-Ordering -Follow-Up and Expediting -Receipt and Inspection -Settlement and Payment -Records Maintenance
Outcomes of Critical Path Method
-Provides a graphical display of project complexity -Provides a graphical display of activity or task precedence -Provides an estimate of the earliest completion-time of the project -Indicates which activities or tasks are "critical" and cannot be delayed -Indicates which activities are non-critical and how long they can be delayed without delaying the entire project (slack).
Backward Pass:
-SUBTRACTING durations -Choice? Pick the EARLIEST
Qualitative criteria from Bauer SCM Recruiting Companies: SSQDC
-Safety: Internal and External -Sustainability: Green and Ethics -Quality: Consistency, Conformance, Service -Delivery: Reliability, Speed, Capacity -Cost: Total Cost of Ownership
7 Wastes TYPICALLY recognized by Lean Professionals:
-T ransportation -I nventory -M otion -W aiting -O verproduction -O verprocessing -D efects
Risk Assessment and Strategy
-Take a Broad View of Potential Risks -Prioritize Risk Potential -Develop Risk Management Strategies
"Pure" Manufacturing
-Tangible Product -Output can be Stored (inventory) -Low Customer Contact and Involvement -Typically Large Markets -Quality Can be Measured Objectively *Think of Shampoo
Gantt Charts Demonstrate:
-Task Duration -Task Precedence -Task Milestones & Deadlines -Task Responsibility -Critical Tasks/Critical Path -Tasks With Slack -Project Completion Date
Three dimensions on which services can differ and compete
-The nature of the Service Package -The degree of customization -The level of customer contact
A business improvement methodology that focuses an organization on:
-Understanding and managing customer requirements -Aligning key business processes to achieve those requirements -Utilizing rigorous data analysis (statistics) to understand and ultimately minimize variation in those processes -Driving rapid and sustainable improvement to the business processes.
Questions to ask when selecting a manufacturing process
-What are the physical requirements of the company's product? -How similar to one another are the products the company makes? -What are the company's production volumes? -Where in the value chain does customization take place (if at all)?
Projects are:
-non-routine, making planning difficult -complex, involving a variety of skills and capabilities -typically require significant levels of cross-functional and inter-organizational coordination -clear starting and ending points after which the people and resources dedicated to the project are reassigned
Strategic Sourcing Steps:
1.) Assess Opportunities 2.) Profile Internally and Externally 3.) Develop the Sourcing Strategy 4.) Screen Suppliers & Create Selection Criteria 5.) Conduct Supplier Selection 6.) Negotiate & Implement Agreements
Efficiency
= 100% (Actual Outputs / Standard Outputs)
Productivity
= Outputs / Inputs
Lean:
A "perspective" that identifies and removes waste from processes and builds a culture where everyone in the organization is involved in improvement.
Merchandise inventory
A balance sheet item that shows the amount a company paid for the inventory it has on hand at a particular point in time
Pareto Chart
A bar graph that visually displays frequency count data from highest to lowest
LeanSigma or Lean Six Sigma:
A conscious effort to incorporate both Lean and Six Sigma in the way an organization is managed.
Master Scheduling
A detailed planning process that tracks production output and matches this output to actual customer orders.
Available to Promise
A field in the master schedule record that indicates the number of units that are available for sale each week, given those that have already been promised to customers.
Gantt Chart
A graphical tool used to show expected start and end times for project activities and to track actual progress against these time targets.
Hybrid Manufacturing Process
A group of processes that seeks to combine the characteristics, and hence advantages, of more than one of the classic processes.
The Make-or-Buy Decision
A high-level, strategic decision regarding which products or services will be provided internally (Make) and which will be provided by external supply chain partners (Buy)
Critical Path Method
A network-based technique in which there is a single time estimate for each activity.
Material Requirements Planning (MRP)
A planning process that translates the master production schedule (Independent Demand Items) into planned orders for the actual parts and components needed (Dependent Demand Items) to produce the master schedule.
Total cost analysis
A process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options
Primary process
A process that addresses the main value-added activities of an organization: Creating value for external customers
Support process
A process that performs necessary, albeit not value-added activities: Creating value for internal customers
Continuous Flow Processes
A process that produces highly standardized products using a tightly-linked, paced sequence of steps -Example products: oil, gas, oils, beverages, fluids, yarn and fabric
Development process
A process that seeks to improve the performance of primary and support processes (Process Improvement)
Job Shops
A process used to make a wide variety of highly customized products in quantities as small as one. -Examples include custom furniture, specialized machine tools used by manufacturers, restoration work, custom clothing, emergency room
Production Line
A process used to produce a narrow range of standard items with identical or highly similar designs. -Examples: high-volume standardized products such as automobiles, candy bars, paper, pens
Batch Process
A process where items are moved through the different manufacturing steps in groups or batches. -Examples: mass-market consumer products such as hand tools, computers, clothing, shoes, books, packaged food items, office furniture, etc
Critical Path:
A sequence of tasks for which there is no extra time available. Delays on the Critical Path will delay the entire project.
Process
A set of logically related tasks or activities performed to achieve a defined business outcome...to create value for a customer
Product Family
A set of products that require similar processing
Planning and control:
A set of tactical and execution-level business activities that includes -master scheduling -material requirements planning -production activity control -vendor order management.
Kraljic's Portfolio analysis
A structured approach used by decision makers to develop a sourcing strategy for a product or service, based on the value potential and the relative complexity or risk represented by a sourcing opportunity
Check Sheet
A structured form for collecting and analyzing frequency count data
Critical Task:
A task along the critical path
Project
A temporary endeavor undertaken to create a unique product, service, or result.
Fixed-Position Layout
A type of manufacturing process in which the position of the product is fixed. -Examples: shipbuilding, construction projects, and traditional home building
Back Room
Activities done away from the customer, low customer contact. Activities carried out much like a manufacturing process - "Backstage Activities" and "Support Processes"
Determine the "Start" Activity(s)
Activities without a predecessor Early Start = 0
Service Package
All the physical and intangible activities that a service organization provides
Six Sigma:
An improvement framework that targets problem-solving and consistency using a well-defined set of analytical tools - many of which are based on statistics.
Step 1:
Assess Opportunities
Production Line/ Continuous Feature: Material Handling
Automated (Conveyor)
Histogram
Bar graph showing how often each different value in a set of data occurs
Projected Ending Inventory
Best estimate of what inventory levels will look like at the end of each planning period based on current information.
The following are all typical reasons to Buy or Outsource EXCEPT: A. To maintain strategic flexibility B. To gain access to state-of-the-art technology C. For a cost advantage D. When product life-cycles are short E. Better control over environmental impact
Better control over environmental impact
The following are all typical reasons to Buy or Outsource EXCEPT: A. For a cost advantage B. When product life-cycles are short C. To gain access to state-of-the-art technology D. To maintain strategic flexibility E. Better control over quality
Better control over quality
Profit Leverage Effect Formula
COGS Savings/ Pretax Profit Margin =Sales must increase by to have the same effect
%COGS
COGS/Sales Revenue
Material Requirements Planning (MRP)
Calculates the timing and quantities of material orders needed to support the master schedule
Projected inventory levels:
Calculation of future inventory levels
Supply Chain Disruptions
Caused by natural disasters, economic or political events.
Job or Batch Shop Feature: Product Documentation & Specifications
Changes Often
Measure: (DMAIC)
Collecting data on the process, variation, defects
Job or Batch Shop Feature: Scheduling
Complex, Changes Routinely
Step 5:
Conduct Supplier Selection
Booked orders:
Confirmed customer orders for shipment
Kanban system
Containers, cards, or visual limits that signal when work needs to be done or replenishment needs to be initiated.
Financial Performance
Cost Of Goods Sold (COGS), Merchandise inventory, and Profit margin
Incremental Direct Costs
Costs that are incurred only after a certain number of products are produced. "Each time you produce X, a cost of $Y is incurred." Examples: Direct Labor, Transport Cost, Direct Maintenance Cost, Setup Cost
Indirect Costs
Costs that are not tied directly to the level of operations or supply chain activities. "If you make/do more, the unit cost does not change." Examples: Administrative Costs, Overhead, Depreciation, Basic Utilities
Direct Costs
Costs tied directly to the level of operations or supply chain activities. "If you make/do more, the unit cost increases directly." incurred." Examples: Part-Time Labor, Direct Material Costs, Direct Energy Costs
Business processes are
Cross-Functional, involving a variety of functions (people)
Group technology/Cellular Layout
Dedicating equipment and people to producing all the products within a product family
Time
Delivery speed, Delivery reliability
Improve: (DMAIC)
Designing and testing process improvements designed to meet goals
Purpose of Spend Analysis
Determine where efforts to change purchasing practices will have the most influence
Step 3:
Develop the Sourcing Strategy: Make or Buy
Front Room
Direct customer interface, high customer contact. Activities designed to guide the customer through the process - "Onstage Activities"
Crashing:
Efforts to shorten the duration of a project or to make up delays that have occurred.
Lean managers
Encourage and Appreciate problems emerging - because it gives them a chance to improve the process.
D efects
Errors in production
Forecasted demand:
Estimate of future demand during the planning period
Lean Supply Chain Management
Extending Lean principles throughout the supply chain - to suppliers and customers.
Slack:
Extra time that is available for task completion. Tasks with available slack may be delayed without delaying the entire project.
Simplified Material Requirements Planning Calculations FG =
Finished Goods Currently On-Hand
Production Line/ Continuous Feature: Scheduling
Fixed Over a Time Horizon
Simplified Material Requirements Planning Calculations FC =
Forecast for Finished Goods Requirements *Requirements or anticipated requirements over the planning period
Master Black Belt
Full-time Six Sigma expert responsible for managing Six Sigma events
Black Belt
Fully trained Six Sigma expert
Job or Batch Shop Feature: Layout & Equipment Type
Functional layout with general purpose equipment
Define: (DMAIC)
Goals of the process and customer requirements
Product Tree Structure:
Graphical or "outline" representation off all the components involved in building the Independent Demand Item
I nventory
Having to provide space/resources to store materials
Job or Batch Shop Feature: Product Variety
High
Job or Batch Shop Feature: Worker Skills
High
Production Line/ Continuous Feature: Costs & cost system
High overhead & depreciation, product cost system
Job or Batch Shop Feature: Costs & cost system
High unit cost, job cost system
Strategic Sourcing
Identifying ways to improve long-term business performance by better understanding sourcing needs, developing long-term sourcing strategies, selecting suppliers, and managing the supply base
Production Line/ Continuous Feature: Forecasting
Individual item
Green, Yellow, White Belt
Individuals with basic Six Sigma training
Cost
Labor, Material, Quality-related costs
Job or Batch Shop Feature: Product
Large variety & low volume
Calculate Slack:
Late Start - Early Start OR Late Finish - Early Finish
Agile:
Lean Startups/Entrepreneurism/Software Development - Applying lean to removing waste from the process of starting a business from the ground-up.
Contracting
Legal formalization of the buyer-supplier relationship and agreements
Off-shoring
Location of an Insourced or Outsourced Firm in a foreign country
On-shoring
Location of an Insourced or Outsourced Firm in the firm's country
Production Line/ Continuous Feature: Worker Skills
Low
Production Line/ Continuous Feature: Product
Low variety & high volume
W aiting
MATERIAL/PRODUCTS that are motionless and not being worked
Backward Scheduling:
MRP calculates when Dependent Demand items must be ordered and when sub-assembly components must be produced in order to complete the Independent Demand item on schedule.
Job or Batch Shop Feature: Material Handling
Manual (By hand, forklift)
Flexibility
Mix flexibility, Changeover flexibility, Volume flexibility
T ransportation
Moving materials/tools from place to place
Dual sourcing
Multiple sourcing across only two suppliers -Enables stronger relationships while reducing risk
Step 6:
Negotiate and Implement Agreements
Simplified Material Requirements Planning Calculations POnew =
New Purchase Orders for Raw Materials that will be needed
Near-shoring
Offshoring in an adjacent country
Kanban system Common Type: Two (or Multi) Bin
One container contains parts being used Empty container signals production/replenishment EXAMPLE: Kitchen - keep 2 boxes of snack-bars
Kanban system Common Type: Card
Only one container of parts on hand A card or signal midway through the container signals production/replenishment EXAMPLE: Tissue boxes with different color tissues when box is almost empty
Green Purchasing
Overall reduction in packaging, materials, waste, byproducts with a goal of environmental sustainability
Determine the "Critical Path"
Path with 0-slack activities
Fair Trade Products
Paying fair prices for products manufactured or grown by a disadvantaged producer in a developing country
Milestones
Performance , Time, & Budget targets scheduled throughout the project timeframe used to track whether the project is progressing as planned
Quality
Performance, Features, Reliability, Conformance, Durability, Serviceability, Perceived Quality
Quality:
Performance, Features, Reliability, Conformance, Durability, Serviceability, Perceived Quality
O verprocessing
Performing work .... when the work was already done previously
Simplified Material Requirements Planning Calculations PP =
Planned Production Orders *Requests for additional finished goods to be produced
Production quantities: Master Production Schedule (MPS):
Planned quantity of products to be produced
Pretax Profit Margin
Pretax Profit / Sales Revenue
Cost-based contract
Price of the good or service is tied to the cost of some other key input(s) or other economic factors
O verproduction
Producing more than the customer needs before the customer needs it
Job or Batch Shop Feature: Forecasting
Product family
Production Line/ Continuous Feature: Layout & Equipment Type
Product layout of specialized equipment
Engineer-to-order (ETO)
Products are designed and produced from the start to meet unusual customer needs or requirements. Completely Customized.
The Critical Quadrant
Products or service with unique or complex requirements coupled with a limited supply base
The Bottleneck Quadrant
Products or services with unique or complex requirements that can be met only by a few potential suppliers
Assemble-to-order (ATO)
Products that are customized only at the very end of the manufacturing process.
Make-to-stock (MTS)
Products that require no customization
Make-to-order (MTO)
Products that use standard components but the final configuration of those components is customer-specific. Customized from a Standard "Menu" of options.
Step 2:
Profile Internally and Externally
[External] Industry Analysis
Profiling the major forces and trends that are impacting an industry, including pricing, competition, regulatory forces, substitution, technology changes, and supply/demand trends. -Maintaining visibility of global political and regulatory policy -Tracking trends in commodity and supply pricing -Monitoring market, customer, and competitor trends
Measures of Process Performance - Related to Customer Needs & Desires
Quality Cost Time Flexibility
3 Performance Impacts
Quality, Delivery, and Price
Simplified Material Requirements Planning Calculations RMavailable =
Raw Materials that are not currently dedicated to Released Production Orders
The Routine Quadrant
Readily available products or services representing a relatively small portion of a firm's purchasing expenditures
Production Line/ Continuous Feature: Product Variety
Relatively Low
Simplified Material Requirements Planning Calculations RP =
Released Production *Production orders that have been released to the production process
Layouts will contribute to manufacturing and service performance
Reliability Responsiveness Comfort Quality Productivity Safety Convenience Speed Accuracy Aesthetics
Sustainability
Replenishment of natural resources
Competitive Bidding
Requesting bids from potential suppliers with a formal RFQ
Delivery:
Right Quantity - Right Time - Right Place
Simplified Material Requirements Planning Calculations SR =
Scheduled Receipts Orders for raw materials that have been ordered, but have not yet arrived
Step 4:
Screen Suppliers and Create Selection Criteria
Champion
Senior-level executive responsible for driving Six Sigma efforts
Production Line/ Continuous Feature: Product Documentation & Specifications
Stable
Production Line/ Continuous Feature: Work Load
Stable
The Leverage Quadrant
Standardized and readily available products or services representing a significant portion of spend
Fixed-price contract
Stated price does not change
Analyze: (DMAIC)
Statistical analysis of data to determine causes of variation
Layout Decisions
Structural Layout is an important factor in designing a manufacturing or service process
Records Maintenance
Supplier Relationship Management (SRM) Software
Statement of work (or scope of work)
Terms and conditions for a purchased service that indicate, among other things, what services will be performed and how the service provider will be evaluated
Bill Of Materials:
The "recipe" for an Independent Demand Item - a list of all the Dependent Demand Items used to create the Finished Product.
Master Production Schedule (MPS)
The amount of product that will be finished and available for sale at the beginning of each week.
Planning Horizon
The amount of time the master schedule record or MRP record extends into the future.
Project Management
The application of knowledge, skills, tools, and techniques to project activities to meet project requirements
Spend Analysis
The application of quantitative techniques to purchasing data in an effort to better understand spending patterns and identify opportunities for improvement.
Multiple sourcing
The buying firm shares its business across multiple suppliers. -Advantages: Creates Competition, Shares Risk, Promotes Improvements -Disadvantages: Decreases Dedication of Suppliers, Increases Variability
Cross sourcing
The buying firm uses a single supplier for one particular part or service and another supplier with the same capabilities for a different part or service. -Balances risk while allowing for strong relationships with suppliers
Competitive Benchmarking
The comparison of an organization's processes with those of competing organizations - from publically available data.
Process Benchmarking
The comparison of an organization's processes with those of noncompetitors that have been identified as having superior processes.
Internal Benchmarking
The comparison of one function within your organization to another function within your organization.
Postcompletion Phase
The fifth of five phases of a project where the project manager or team confirms the final outcome, conducts a postimplementation meeting to critique the project and personnel, and reassigns project personnel.
Concept Phase
The first of five phases of a project where project planners develop a broad definition of what the project is and what its scope will be.
Performance Phase
The fourth of five phases of a project where the organization actually starts to execute the plan. -Costs, Quality, and Speed of this portion of the project is a function of how well managers have completed the first three phases of the project.
One-Time Costs
The nonnegotiable costs involved in starting a business, including license fees. Examples: Product Design, Fixture Purchase, Mold/Die Purchase
Mapping
The process of developing graphic representations of the organizational relationships and/or activities within a business process.
Benchmarking
The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance.
Profit margin
The ratio of earnings (profit) to sales (revenue) for a given time period
Project Definition Phase
The second of five phases of a project where project planners identify how to accomplish the work, how to organize for the project, the key personnel and resources required to support the project, tentative schedules, and tentative budget requirements. Budget estimates become more accurate.
Planning Phase
The third of five phases of a project where project planners prepare detailed plans that identify activities, time and budgets targets, and the resources needed to complete each task, while also putting into place the organization that will carry out the project. -Acquisition and scheduling of resources
Planning Lead Time:
The time from when a component is ordered (or produced) until it arrives and is ready to use.
Insourcing
The use of resources within the firm to provide products or services. "Do it Myself"
Outsourcing
The use of supply chain partners to provide products or services. "Pay Someone to Do It"
Primary Performance of a Project:
Time, Scope, Money
The following are all typical reasons to Make or Insource EXCEPT: A. To protect intellectual property B. Better visibility of the process C. Better control over quality D. Better control over environmental impact E. To gain access to state-of-the-art technology
To gain access to state-of-the-art technology
The following are all typical reasons to Make or Insource EXCEPT A. Better control over quality B. Better control over environmental impact C. When product life-cycles are stable D. To utilize excess capacity E. To maintain strategic flexibility
To maintain strategic flexibility
The following are all typical reasons to Buy or Outsource EXCEPT: A. For a cost advantage B. To protect intellectual property C. To gain access to state-of-the-art technology D. When product life-cycles are short E. If low volumes increase costs
To protect intellectual property
The following are all typical reasons to Buy or Outsource EXCEPT: A. If low volumes increase costs B. To gain access to state-of-the-art technology C. To reduce handling/storage costs D. To maintain strategic flexibility E. For a cost advantage
To reduce handling/storage costs
The following are all typical reasons to Buy or Outsource EXCEPT: A. To gain access to state-of-the-art technology B. If low volumes increase costs C. To maintain strategic flexibility D. For a cost advantage E. To utilize excess capacity
To utilize excess capacity
The following are all typical reasons to Buy or Outsource EXCEPT: A. To gain access to state-of-the-art technology B. If low volumes increase costs C. When product life-cycles are short D. To utilize excess capacity E. For a cost advantage
To utilize excess capacity
Control: (DMAIC)
Training, Monitoring, Creating Procedures, Process Documentation
Independent Demand:
Typically for Finished Goods - products made up of purchased or produced components and materials.
Dependent Demand:
Typically for Raw Materials and Work-In-Progress - components and materials used to create Independent Demand Items.
[Internal] Category profile
Understanding all aspects of a particular sourcing category that could ultimately have an impact on the sourcing strategy -Breaking down categories of purchasing into more detail -Identifying where problems are occurring internally