supply chain: exam three
what is the primary result of this increase in distance and geographic complexity?
1. increase in lead time 2. security issues 3. potential for delays and disruptions
MRP inputs
1. master schedule 2. bill of materials 3. inventory records
characteristics of an enterprise resource planning (ERP) system
ERP helps companies share data and planning across internal functions. The planning processes across all business functions can be integrated and consistently applied by using ERP. The goal of ERP systems is to allow business processes to function seamlessly and in unison.
malcolm baldrige national quality award
an award given by the President of the United States to organizations judged to be outstanding in specific managerial tasks that lead to improved quality for both products and services
rough-cut capacity planning
an estimation of the availability of the critical resources needed to support the MPS
the BOM is shown as
an indented list, or as a product structure tree-like diagram. - it includes a list of all its raw materials, parts, and subassemblies. - it also shows the sequence of assembly
third-party logistics (3PL) provider
an independent logistics provider that performs any or all of the functions required to get a client's product to market *common term used in the industry to describe ISPs*
materials requirement planning (MRP)
an inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer - computes demand for dependent items
periodic order quantity (POQ)
an order for an amount that covers a fixed period of time
lot-for-lot (L4L)
an order for the exact amount needed
fixed order quantity (FOQ)
an order for the same amount each time
automated storage and retrieval systems
computer-controlled systems that use robots to automatically select, find, retrieve, and convey product items from storage bins to loading docks
conformance quality
degree to which the product or service design specifications are met
perfect order
delivered without failure in any order attribute - complete - on time - damage free - documentation correct
supply managers
description of purchase requirements, selection of suppliers, establishment of contracts and associated incentives/penalties, management of and interactions with suppliers
manufacturing and service operations managers
design and execution of processing procedures, design of work policies, interactions with customers, management of facilities/equipment, scheduling of work
engineer to order (ETO)
design and make to customer specifications
human resources managers
design of hiring criteria and training, setting of compensation schemes and incentives
process engineers
design of manufacturing/service processes, choices of tech and capacity limits, design of quality assurance tests
product engineers
design of product specifications, service elements and dimensional tolerances, design of product prototyping
inventory records
contains information about inventory including amount on hand - identify the type and number of products on hand for sale
economy of distance
cost per unit traveled decreases as distance moved increases - longer distances traveled allow fixed costs to be spread over a larger number of miles
to determine the planned order release for each period
count backward from planned order receipt using the lead time - the amount of an item that is planned to be ordered in a period
private carrier type
firm owns its own equipment
cost-to-cost trade-off
increasing the cost of one logistics activity reduces the cost of another (upgrading a machine i.e.)
MRP inputs and outputs
inputs include forecasts, product data, inventory information, and lead-times. CRITICAL they are current and correct.
customer service
involves specifying the firm's commitment to availability, operational performance and reliability - order winners, qualifiers and losers - meeting or beating competitor levels - link to competitive strategy - link performance to customer satisfaction
transportation service selection
involves: cost related to transportation itself, cost of inventory while in transit, service requirements related to speed, availability and so on
total quality management (TQM)
is an integrated management business strategy aimed at embedding awareness of quality in all organizational processes. - Product's quality is determined by customer's acceptance and use
available inventory
is the quantity of inventory available at the end of a time period available inventory = available inventory at the start of the period +scheduled receipts +planned order receipts -gross requirements
break-bulk
it is the splitting of a large shipment into individual orders and arranging for local delivery to customers.
fill rate
measures the impact of stockouts over time or over multiple orders from customers
customer satisfaction
meet or exceed customer expectations - reliability - responsiveness - access - communication - credibility - security - courtesy - competence - tangibles - knowing the customer
quality management
organization wide quality focus (intensive use of managerial and statistical tools) on quality - affects cost, lead time, customer perceptions and corporate reputation
service reliability
performance of all order related activities error-free - if a firm has 97% reliability on four attributes, the probability of a perfect order is .97x.97x.97x.97 = 88.5% - numbers go down quickly if you have more and more attributes
PCDA
plan - define the problem; do - implement and collect data; check - monitor results; act - if successful, follow the new standard. take corrective action
logistics management
planning, implementing, and controlling the efficient and effective flow and storage of products and information from the point of origin to consumption to meet customers' needs and wants
value-added services
providing additional value to the customer, such as postponement - any work that creates greater value for customers by creating customized features or configurations
final customers
purchase products in their finished form
intermediate customers
purchase raw material or wholesale products before selling them to final customers - who operate as distributors, brokers or dealers between the supplier and the consumer or end user
six sigma
quality improvement through elimination of defects and variation - management program that seeks to improve the quality of process outputs by identifying and removing the causes of defects and variation in the various processes - small standard deviation - six sigma will produce at most only 3.4 product defects per million outputs at 12 standard deviations apart
RFID
radio frequency identification, similar to barcodes - electronic tracking of material
reverse logistics
the area of logistics that involves bringing goods back to the manufacturer because of defects or for recycling materials. - materials move upstream
infinite loading
the assumption that there is an infinite amount of capacity available
product availability
the capacity to have a product or service present when and where it is desired by a customer
materials handling
the physical handling and movement of products in warehousing and transportation - increases cost and risk of damage
network design
the process of gathering together and planning the layout for the equipment needed to create a network. - most impact on supply chain operations - determines the number and location of facilities *number of locations is determined by balancing inbound and outbound transportation costs*
MRP determines
the quantity and timing of requirements for all components needed to make related products
scheduled receipts
the quantity that has been ordered but not yet received - total quantity of items from when the orders are placed in the past and due to be delivered by the beginning of the period. "What and when we expect delivery"
value density
the ratio of a product's value to its weight
total landed cost
the sum of all product and logistics related costs
design lead time
the time interval needed to conceptualize, design, and test a new product
order-to-delivery (OTD) lead time
the time that passes from the instant the customer places an order until the instant that the customer receives the product
gross requirements
the total amount of an end item that is required
lead time
time between start and end of an activity
time bucket
time periods for planning
order lead time
time required to place an order for a product plus the time to schedule the order so that operations can begin working on it
procurement lead time
time required to source and arrive
what happens to the total transportation cost if the number of facilities is increased?
total transportation cost initially decreases and then increases again
transportation management
tradeoff decisions between cost & timing of delivery/customer service via trucks, rail, water & air *potential for long lead times/delays/security issues*
knowledge gap
understanding of customer needs
delivery lead time
warehousing and transportation to customer
materials packaging
decrease handling costs and risk of damage
contract carrier type
provide service only to select, contracted customers - UPS
common carrier type
provide service to the public with published rates - USPS
appraisal costs
result from inspections used to assess products' quality levels
prevention costs
results from efforts to prevent product defects and from efforts needed to limit both failure and appraisal costs
safety regulations (transportation)
safe for carriers and public, including increased emphasis on security from terrorist activity, ensures that transportation services are safe and sustainable
unit fill rate
% of ordered units delivered = total units delivered / total units ordered
values that characterize TQM
- holistic view of product quality and its impacts - emphasis on customer requirements - extended process view of operations - emphasis on prevention rather than inspection - disdain for variability
network design factors
- labor - proximity to suppliers and customers - cost of land and construction - taxes, incentives and regulations - infrastructure - quality of life for employees
factors affecting the success of TQM
-strong, charismatic leadership -trust between labor and management - crisis situation or compelling reason for change - adequate resourcing of training and improvement projects -clear well communicated uncomplicated change process -unquestionable success of early efforts
dimensions of quality for goods and services
1. *perceived quality* (subjective assessment of things indirectly associated with the product's attributes and knowledge of employee), 2. *performance* (the degree to which the product meets or exceeds certain operating characteristics), 3. *reliability* (length of time a product performs before it must be repaired / ability to perform the promised service dependably and accurately), 4. *aesthetics* (subjective assessment of a product's look / appearance), 5. *support* (competence of product support / willingness to help customers) , 6. *durability* (length of product life or the amount of use one gets before a product deteriorates), 7. *features* (presence of unique product characteristics that supplement basic functions), 8. *conformance* (the degree to which a product meets its design specifications) - have huge effects on customer perceptions of quality
MRP process
1. gross requirements 2. requirements explosion 3. net requirements 4. planned order receipt 5. planned order release
which of the following are the critical inventory decisions made by logistics managers?
1. how much inventory of each material item to hold 2. where in the supply chain to hold each item 3. how often to replenish each item
total view of quality
1. process-oriented focus on prevention and problem solving - prevention is cheaper than correction - problem solving is most effective when decisions are based on the analysis of actual data (rather than opinions) - variability is often the major source of problems in operations processes (causes unpredictability) → want to eliminate 2. viewing quality management as a NEVER ENDING QUEST - products and processes are continually changing and perfection is always a goal... process improvements are always appropriate 3. building an organizational culture around quality - values and behavioral norms that guide decisions
Warehouses must perform a variety of operations on a daily basis:
1. receiving and unloading 2. in-storage handling → goods must be moved to the desired destination within facility 3. storage 4. order picking → products removed from storage and assembled 5. staging → assembled orders moved to an area in readiness and loading into transportation 6. shipping
which of the following customer benefits does logistics fulfill?
1. service reliability 2. availability 3. lead-time performance
center of gravity assumptions
1. straight-line distances between all locations (in reality roads are not straight lines) 2. amount of demand is a good proxy measure of transportation cost, not always true 3. qualitative factors such a supply chain risk and labor availability are not considered
true statements about materials and requirements planning (MRP) outputs and their use
An exception report is generated if a major difference between actual performance and the MRP plan occurs. MRP assumes that parts produced or received from suppliers are defect-free and delivered as scheduled. MRP outputs include primary and secondary reports.
true statements about distribution requirements planning (DRP)
DRP is typically a module in enterprise resource planning system software. In DRP, inventory replenishment decisions are based on a time-phased schedule considering forecasts and actual orders. The output of DRP is used as input in operations and logistics planning processes.
primary activities of logistics management
Inventory management (How much, what form to hold each, how often to replenish, where in the supply chain to hold) Order processing (Reduce costs by ordering online) Transportation management distribution/fulfillment management Materials handling and packaging Logistics network design
true statements about materials requirements planning
It is used widely, especially in manufacturing. It is considered a push system. It uses a time-phased schedule that is based on lead time.
load profile
a comparison of production needs to actual capacity
bill of materials (BOM)
a detailed description of an "end item" and list of all of its raw materials, parts, and subassemblies
available to promise (ATP)
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. - planned production not already committed to a customer
inventory status file
a file that contains detailed inventory and procurement records (including scheduled receipts)
cross-docking
a form of warehousing in which large incoming shipments are received and then broken down into smaller outgoing shipments to demand points in a geographic area - combines break-bulk and consolidation activities
cost of quality (COQ)
a framework for quantifying the total cost of quality-related efforts and deficiencies - helps clarify the cost impacts of poor conformance quality - defect found in later stage is much more costly because more resources have been invested in the product
design quality
a measure of how well a product's designed features match up to the requirements of a given customer group
DMAIC
a six-sigma process: define, measure, analyze, improve, and control.
standard deviation
a statistical measure of variation/variability - low standard deviation = data points tend to be very close to the same value
basic service
a supplier's ability to provide product availability, lead-time performance, and service reliability - The right amount - The right product - The right place - The right time - The right condition - The right information
communication gap
actual performance and communications about performance
cost-to-service trade-off
as service levels increase, typically so do costs
assemble to order (ATO)
assemble to customer demand from generic subassemblies
customer success
assist customers in meeting their objectives
center of gravity method
attempts to find the lowest-cost location for a facility based on demand and distance
make to stock (MTS)
build and stock in anticipation of customer demand
marketing managers
choices of markets to pursue and product features to offer, design of advertising that communicate product to customers, development of new product testing programs
consolidation by market area
combine small shipments from one shipper going to the same area
advanced planning and scheduling (APS)
combines materials and capacity planning into one system - produces better plans, faster by avoiding disjointed iterative planning processes - helps managers to identify and avoid problems - allows managers to quickly evaluate alternatives and generate contingency plans
pooled delivery consolidation
combines small shipments from different shippers that are going to the same market area
consolidation
combining small orders or shipments into one larger shipment to take advantage of transportation economies - take advantage of economies of scale or distance
integrated service providers
companies that provide a range of logistics services
identify the two attributes of transportation economy of scale and economy of distance
cost & efficiency
internal customers
customer who is directly connected to an organization, and is usually (but not necessarily) internal to the organization - usually stakeholders, employees, or shareholders
satisfaction gap
customer's perceptions and expectations of performance
perception gap
customer's view of performance and actual performance
distribution requirements planning (DRP)
determination of replenishment and positioning of finished goods in the distribution network - when and how to supply finished goods at the right time to the right places in the distribution system - calculates the positioning and replenishment of finished goods inventories throughout the distribution network using logic similar to MRP - output of DRP is used as a primary input into operations and logistics planning processes
requirements explosion
determines how many additional units are needed
capacity requirements planning (CRP)
determines if sufficient resources are available (labor, equipment, space, suppliers, ...) - uses planned order releases and scheduled receipts to estimate work loads. Having too much or too little capacity can be problematic. Extra capacity increases holding and materials costs. Not enough need overtime or outsourcing.
scheduled delivery consolidation
establishing specific times when deliveries to customers will be made
containerization or unitization (packaging)
filling or creating a larger container from smaller ones
economic regulations (transportation)
government controls of the entry of new carriers, rates and services provided by transportation carriers
customer satisfaction limitations
happy customer does not equal satisfied/loyal customer
customer success requires a supplier to
have a long-term relationship focus gain comprehensive knowledge of customer needs consider the customer's customers adapt manufacturing and distribution
customer management
intense focus on understanding and providing customers with products/services they desire - customer success, satisfaction and basic service
standards gap
internal performance and customer expectations
types of customers
internal, intermediate, final
TQM organizational view
inverted view of management - employees, low-level management, middle, top management
customer service management
it requires an intense focus on understanding customer's desires and requirements, and translating this under specific operational capabilities and processes.
customer satisfaction model gaps
knowledge, standards, performance, communication, perception, satisfaction - gaps occur at differences between: (want to minimize the gaps)
make to order (MTO)
make to customer demand from raw materials and components
line fill rate
order lines filled in total = # if order lines delivered complete / total order lines
order fill rate
orders shipped complete = total complete orders delivered / total orders
quality dimensions
product quality, design quality, conformance quality, quality management
secondary reports
provide cost, inventory, and schedule attainment information that helps managers judge how well the operation is performing
internal failure costs
result from defects that are found in products prior to their shipment to customers (i.e. scrapped or excess material)
external failure costs
result from defects that are found only after products reach customers (i.e. complaints and loss of future sales)
primary reports
schedules of the planned order releases that trigger purchases and production of items in the proper time frame.
logistics managers
selection of transportation providers, development of tracking and other info systems, design of packing/storage/material handling processes, management of and interactions with transportation providers
finance and accounting managers
setting of restrictions for equipment purchases, establishing goals for utilization of facilities and capital
sales managers
setting of sales targets, interactions with customers, interpretations of customer needs and desires
enterprise resource planning (ERP)
software that consolidates all business planning systems and data - replaced old legacy systems - has multi-function capabilities - facilitates cross-functional coordination - saves time - reduces errors - enables better business decisions
MRP calculations are done using
software. - Supply Chain Managers need to know the mechanics in order to make good decisions using MRP outputs
master production schedule (MPS)
specifies how much of each product is to be produced during the planning period and when that production should occur (i.e. how many hair dryers of each type must be completed each week for the next quarter)
transportation mode info
speed → air is fastest availability → trucks dependability → pipes (running 24 hours) capability → boats frequency → pipes
transportation mode selection
speed, availability, dependability (variance in expected delivery times), capability (ability to handle any type of product and/or size of load), frequency (number of scheduled movements that can be arranged by a shipper)
performance gap
standard and actual performance
production lead time
start to end of production
customer relationship management (CRM)
technology-enabled data gathering about customers to develop strategic relationships - marketing - sales - support - orders
planned order receipt
the amount of an item that is planned to arrive at the beginning of a time period - These arrivals come from orders that are planned to be placed at the designated time in the future. "What we are actually going to receive in this time bucket."
planned order release
the amount of an item that is planned to be ordered in a period - when to place the order?
ISO 9000
the common name given to quality management and assurance standards - purpose is to ensure that operating processes are well documented, consistently executed, monitored and improved - fulfilling the customer's quality requirements, and meeting applicable regulatory requirements, while aiming to enhancing customer satisfaction, and achieving continuous improvement of its performance in pursuit of these objectives.
economy of scale
the cost per unit of weight decreases as the size of the shipment increases - less costly to move 10,000 pounds of product than 5,000 to the same given distance - due to fixed costs associated → spread over larger weight
independent demand
the demands for various items are unrelated to each other - demand created by customers
planning horizon
the entire time period covered by the MPS
net requirements
the minimum amount needed in the period - based on gross requirements minus the sum of scheduled receipts and available inventory at the beginning of the period.
dependent demand
the need for any one item is a direct result of the need for some other item, usually an item of which it is a part - demand is driven by demand of another item
product quality
the overall ability of the product to satisfy customer expectations - fitness for consumption in meeting customers needs and desires
trucks
virtually all goods are moved by these - 2nd place is rail then air then water then pipes