Module 2 Topic A
inventory
Those stocks or items used to support production (raw materials and work-in-process items), supporting activities (maintenance, repair, and operating supplies) and customer service (finished goods and spare parts).
Piggyback service
(truck trailer or container placed on railroad flatcar. Trailer on Flatcar( TOFC) or Container on Flatcar. (COFC) Roadrailers: trailers that ride on tires/wheels or steel wheels- cost effective when compared with simple over the road hauling
Safety stock (fluctuation inventory)
1) in general, a quantity of stock planned to be inventory to protect against fluctuations in demand or supply. 2) in the context of master production scheduling, teh additional inventory and capacity planned as protection against forecast errors and short-term changes in the backlog. overplanning can be used to create safety stock. Held as a buffer against miscalculations of timing or quantity.
Logistics
1)subset of supply chain management that controls the forward and reverse movement, handling, and storage of goods between origin and distribution points.
4th party logistics
4PL org is often a separate entity formed by a joint venture or other long term contract between one or more partners. the 4PL organization is an interface between the client and multiple logistics service providers. Ideally, all aspects of the client's supply chain are managed by the 4PL organization. It is possible for major 3PL organization to form a 4PL organization within its existing structure. *Removes all logistics functions from client company and putting them under integrated management by a general contractor
EOQ
=((2*A*S)/(i*c))^.5 A=annual usage in units S=ordering costs in $/order i=annual carrying cost rate s a percentage c=unit cost in dollars
Pareto of ABC Classification
A 80% cost, 20% part numbers B 15% cost, 30% part numbers C 5% cost, 50% part numbers
Master Planning
A group of business processes that includes: demand management; production and resource planning; and master scheduling
Using fixed location storage
A method of storage in which a relatively permanent location is assigned for the storage of each item in a storeroom or warehouse. more space is needed than in a random location storage system, but may not need a locator file. Acceptable for warehouses that do not need dense cube utilization, throughput is low, or not many SKUs. often used for slow moving items or where order pickers do not get a pick list.
Interplant Demand
A plant's need for a part or product that is produced by another plant or division within the same organization
Trainship or containership service
AKA fishyback. loaded onto truck trailer, a railcar (trainship) or container that also spends part of its shipment time on board ship or barge.
Balance Sheet
Assets=Liabilities + owner's equities
rated capacity
Available time*Utilization*Efficiency
Motor Carriers (trucking) transportation
Can be more direct than water or rail. relatively low fixed costs. Truckload (TL) Less than truckload (LTL) and Specialty segments. TL: no stopping, >15000 lb loads. faster LTL: stopping to fill truck with more goods. <10000 lbs. more cost than TL Specialty: UPS and Fedex Low fixed cost, high variable costs. More labor intensive and more sensitive to labor rates. Higher value, or less durable goods are transported with les damage than rail
Promotions
Can represent 50-80%of sales variation
Using ABC Classification
Can use secure or fast moving storage areas
Resource Planning
Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or levels of long-range capacity. Normally based on production plan, may be driven by higher level plans beyond the time horizon for the production plan (ie the business plan). It addresses resources that take a long time to acquire. Always require top management approval.
Rail transportation
Carries heavy loads of lowvalue goods over long distances at relatively low rates. Rougher ride, causes 3% of tonnage damage. minimal disruption by weather. Diversity of destinations. Considerable safety. concentrated focus on raw materials mined or harvested far from waterway. Most us rail business is from carrying coal. High fixed cost. Low variable costs. limiting expansion capability.
ABC Classification AKA ABC Analysis
Classification for a group of items in decreasing order of annual dollar volume (price multiplied by project volume) or other criteria. This array is then split into three classes called A, B, and C. A: 10%-20% by number, 50-70% by dollar volume B: 20% items, 20% Dollar volume C: 60-70% items, 10-30% volume Effort and money can be saved through applying looser controls on the low dollar volume class items than will be applied to high dollar volume class items
Contract warehousing
Conbination of public and private facility benefits Potential for cost reduction, tailored services, flexiblity, expanded geographic market
Warehouse functions
Consolidation of materials for shipping breakbulk and cross dock facilities postponement stockpiling seasonal inventory spot stocking advanced shipments assortment (similar to spot stocking) mixing (similar to break bulk)
ATA Carnet
Containers can cross several boundaries duty and tax free without customs inspection
Private warehouses
Control, no markup, market presence. Loss of budgetary flexiblity, depreciating asset. Fixed cost persists even if business turns down.
Acquisition costs
Cost required to obtain one or more units of an item. it is order quantity times unit cost. also referred to as production cost or purchase price
Increased number of warehouses in a system can affect
Customer service, transportation costs, Inventory, Setup and overhead costs
Sales and Operations Planning meetings
Data gathering Demand Planning Supply Planning Premeeting Executive Meeting
Balance sheet items
Do not impact the income statement until the inventory is sold, reduced to fair market value, or written off (when inventory becomes obsolete)
Export management companies (EMC) and Export trading companies (ETCs)
EMC: not the exporter, a consultant to exporters that hire it. provide representation in particular market due to special knowledge and connections. cultivates relationships with host governments, ease goods through customs. may also buy exporter's goods and resell them in foreighn market but generally acts as a long term consulting partner ETC: an exporter.
Receiving
Encompassing the physical receipt of material, the inspection of the shipment for conformance with the purchase order (qty and damage), the identification and delivery to destination, and the preparation of receiving reports
Supplier partnership
Establishment of working relationship with a supplier organization whereby two organizations act as one
Order to cash cycle
Execution activity; involves placing orders, preparing and delivering shipments, receiving an dstocking products at retail site, recording transactions and making payments
Demand plan inputs
Forecasting, product/brand management, marketing, sales, business plan/strategy
Demand time fence
Frozen zone. Capacity and materials committed to orders
WIP inventory
Goods in various stages of completion including all raw material that has been released for initial processing up to completely processed material awaiting final inspection and acceptance as finished goods inventory
Make to stock
High volume low variety. Mass marketing. Risks obsolescence with inventory build up
Utilization
Hours worked/available hours * 100%
Consumption driven replacement
If a customer orders an item, the sale automatically triggers an order for one more of the same item to arrive in the next delivery.
Pegging
In MRP and MPS the capability to identify for a given item the sources of its gross requirements and or allocations. pegging can be thought of as active where-used information
Water transportation
International shipping, most inexpensive method of shipping high bulk low value commodities. Barge can hold >30 fully loaded double trailor trucks worth of cargo. Loading/unloading accomplished mechanically
Manufacturer to DC to retailer
Inventory intensive. DCs and retailers need inventory. bset for mass produced, inexpensive goods with high competition. Strong product availability. Distributors provide break bulk activities and minimize inventory by using fewer more centralized warehouses.
Risk of carrying too much inventory
Inventory is an asset on the balance sheet until it is sold, at which point only its profit margin contributes to net income
Master schedule item
Item deemed critical in its impact on lower level components. planned by the master scheduler. master schedule item may be an end item, a component, a pseudo number, or a planning BOM
Make to order
Large number of products made from smaller number of components. Custom clothing is example. Low volume, high variety. Raw materials may be kept in inventory in anticipation of customer orders
Influencing demand (moderately variable capacity strategy)
Leveling production and carefully managing demand to meet optimal capacity. FOcus on influencing demand so there is little need to change capacity. AKA demand shaping. careful scheduling delivery of products and services and timing prmotions to operational requirements
MRO expenses
MRO is a period expense; expensed on the income sheet during the period in which it is purchased
Time phased order point (TPOP)
MRP-like time planning for independent demand items, where gross requirements come from a forecast not via explosion. can be useful to plan distribution center inventories as well as plan for service (repair) parts because MRP logic can readily handle items with dependent demand, independent demand, or a combination of both. Time phased order point is an approach that uses time periods, thus allowing for lumpy withdrawals instead of average demand. When used in distribution environments the planned order releases are input to the master schedule dependent demands useful for parts maintained in low volumes, slow movers, irregular demand items, and large parts taht cannot be storedin sufficient quantities.
Maximum level inventory
Maximum Level inventory=D(T+L) + SS Order quantity=Maximum level inventory-inventory on hand D=Demand per unit of time T=time interval between ordering periods L=lead time duration SS=safety stock Good for: supermarkets or retailers with many items; keeps inventory tracking costs down and helps fill truckload assortments
Manufacturer storage with direct delivery
Order comes to mnfg from customer. Direct delivery one echelon, complete control over inventory. low carrying costs. shipments are typcally a truckload or container load. logistcs costs may be high and intermediaries may be needed to reduce costs B2B or B2C. appropriate for perishable goods and suppliers that produce large lot size quantities. direct interaction with customer. B2C: low variety, make to order goods customers are willing to wait for (long lead times)
Demonstrated capacity
Output for N periods/N
Cycles
Periodic upwards, neutral, or downward shifts lasting longer than one year.
Resource management
Planning and validation of all organizational resources; effective identification, planning, scheduling, execution, and control of all resources to meet organization's goals; an emerging field of study emphasizing the systems perspective, encompassing both the product an process life cycles and focusing on the integration of organizational resources toward the effective realization of organizational goals
Time Fence
Policy or guideline established to note where various erstrictions or changes in operating procedures take place
Seasonality
Predictable repetitive pattern of demand measured within a year where demand grows and declines. Calendar related
Package to order
Production environment in which a good or service can be packaged after receipt of a customer order. package to order can be used to accommodate customer language differences and so on.
Storing
Putting items under warehouse control in a storage point upstream of a workstation
Buffer
Quantity of materiasl awaiting further processing. it can refer to raw materials, semi finished stores or hold points, or a work backlog that is purposely maintained behind a work center
Tracking signal
Ratio of the cumulative algebraic sum of the deviations between forecasts and teh actual values to the mean absolute deviation Sum forecast error/MAD Used to trigger forecast review. -4 to +4 is working correctly
Written down to fair market value
Reducing the cost to what the market will currently pay
Inventory management KPIs
Reduction of inventory cost related to holding, ordering, and transporting materials, supplies, and finished goods at various points along the supply chain. Achievement of customer service targets related to the quality, availability, and on-time delivery of products and services (which may depend upon availability of supplies)
Continuous replenishment (CR) or Rapid replenishment
Relies on sharing of POS data; process by which a supplier is notified daily of actual sales or warehouse shipments and commitments to replenish these sales without stock outs and without receiving replenishment orders.
Engineer to order
Require unique engineering design, significant customization, or new purchased materials, depending on customer specifications. Each customer order results in a unique set of part numbers, bom, and routings
S&OP Process
Reviewing performance Evaluating Demand Levels Evaluating Supply Capability Reconciling demand, supply , and financial plans
Public warehouses
Services for a fee. Refrigerated, bonded, general merchandise, household goods, other specialties. Flexiblity and potential cost reduction due to economies of scale and lower labor costs
MSE vs MAD
Squaring gives a wider range and more sensitivity measuring error rate
Efficiency
Standard hours of work/Hours actually worked * 100%
Pipeline transportation
Stationary carriers, cargo moves. highest fixed cost, lowest variable costs. Only liquids or liquefiable products can move through the pipe. construction is costly. pipes are inflexible delivery vehicles and access is limited to those with facilities adjacent to it. vulnerable to political disputes between countries whose borders they cross.
Collaborative planning, forecasting, and replenishment (CPFR) activitites
Strategy and planning demand and supply management execution analysis
Quick response program (WRP)
System of linking final sales with production and shipping schedules back through the chain of supply; uses POS and electronic data interchange. may use direct shipment from factory to retailer. Customer typically submits individual orders.
inventory planning
The activities and techniques of determining desired levels of items, whether raw materials, work in process, or finished products including order quantities and safety stock levels
Warehousing
The activities related to receiving, storing, and shipping materials to and from production or distribution locations
ORder processing
The activity required to administratively process a customer's order and make it ready for shipment or production
Planning horizon
The amount of time a plan extends into the fugure. should be at least equal to the cumulative lead time for the product
Forecast error
The difference between actual and forecast demand
Capacity management
The function of establishing, measuring, monitoring, adjusting limits or levels of capacity in order to execute all manufacturing schedules. Executed at 4 levels: Resource planning rough cut capacity planning capacity requirements planning input/output control
Consignment
The process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold.
Rough cut capacity planning (RCCP)
The process of converting the master production schedule into requirements for key resources often including labor; machinery; warehouse space; supplier' capabilities; and in some cases money. comparison to available or demonstrated capacity is usually done for each key resource. comparison assists the master scheduler in establishing feasible master production schedule
Capacity planning
The process of determining the amount of capacity required to produce in the future. May be performed at an aggregate or product line level (resources available), master schedule level (Rough Cut), and material requirements planning level (Capacity requirements)
Capacity control
The process of measuring production output and comparing it with the capacity plan, determining if the variance exceeds preestablished limits and taking corrective action to get back on plan if limits are exceeded. Takes place at the level of every day activity.
Resource Profile
The standard hours of load placed on a resource by time period. production lead time data are taken into account to provide time phased projections of the capacity requirements for individual production facilities
Total cost of ownership (TCO)
The sum of all teh costs associated with every activity of the supply stream. The main insight that TCO offers to the SCmanager is the understanding that the acquisition cost is often a very small portion of the total cost of ownership Includes: Purchase price/prduction cost, landed cost, and lifetime ownership such a durability, ongoing maintenance costs, and responsible disposal
Air transportation
Well suited to carry valuable, fragile, and perishable cargoes. Military is world's first and best logistics manager. low fixed cost, second only to motor carriers. Variable cost of fuel and labor intensive business are high 3X cost road carriage, 30x cost per ton-mile rail.
Mean absolute percentage error
Useful variant of MAD calculation, showing ratio or percentage of absolute errors to the actual demand for a given forecast
Simple moving average
Useful when demand is relatively constant from period to period. Prevent ovrreation to random or irregular spike or dip bc it smooths.
Functions of logistics
Warehousing transportation import/export packaging materials handling inventory management logistics information systems
Movement of one ton per gallon
Water: 616 miles Rail: 478 miles Truck: 150 miles
Trading bloc
an agreement between countries intended to reduce or remove barriers to trade within member countries. frequently but not always countries are geographically close
3rd party logistics
a buyer and supplier team with a third party that provides product delivery services. this third party may provide added supply chain expertise *long term contractual relationships with providers of integrated services, such as transportation plus storage.
ATR certificate
a certificate that is required for trade between the EU and turkey. it grants zero duty to free circulating goods in the EU which are goods originating in the EU or imported to the EU with all import duties and taxes paid. Agricultural goods, minerals, and steel are excluded and must use EUR1
Inventory adjustments
a change made to an inventory record to correct the balance, to bring it in line with actual physical inventory balances. the adjustment either increases or decreases the item record on hand balance
Product Family
a group of end items whose similarity of design and manufacture facilitates their being planned in aggregate whose sales performance is monitored together, and occasionally, whose cost is aggregated at this level
Bill of resources (bill of capacity)
a listing of the required capacity and key resources needed to mnfg one unit of a selected item. RCCP uses these bills to calculate the approximate capacity requirements of the master production schedule.
Distribution center
a location used to store inventory
Blanket purchase order
a long term commitment to a supplier for material against which short term releases will be generated to satisfy requirements; it often covers only one item with predetermined delivery dates
Lot for lot
a lot sizing technique that generates planned orders in quantities equal to the net requirements in each period. used for JIT mnfg environments and ordering A items of ABC classifications
MRP II
a method for effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what-if questions
Risk pooling
a method often associated with the management of inventory risk. manufacturers and retailers that experience high variability in demand for their products can pool together common inventory components associated with a broad family of products to buffer the overall burden of having to deploy inventory for each discrete product.
carrying cost
a percentage of the dollar value of inventory per unit of time generally one year) it is a variable cost that increases at the level of inventory increases. carrying costs may be as high as 40% of the value of the inventory and are unlikely to be less than 15%. they include all expenses involved in housing the inventory including: Storage costs Capital costs Risk costs
Sales and Operations Planning (S&OP)
a process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer focused marketing plans for new and existing products within the management of the supply chain. brings together plans for business into one set of integrated plans. performed at least once a month. reviewed by management at an aggregate (product family) level. Both a plan and a process that creates, implements, monitors, and continuously improves the plan.
strategic alliance
a relationship formed by two or more organizations that share information (proprietary), participate in joint investments, and develop linked and common processes to increase the performance of both companies. Many organizations form strategic alliances to increase the performance of their common supply chain
Master Schedule
a schedule format that includes time periods (dates) the forecast, customer orders, projected available balance, ATP, and the master production schedule. it takes into account the forecast; the production plan; and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals.
Intercoms (international commercial terms)
a set of rules established by the international chamber of commerce that provides internationally recognized rules for interpretation of the most commonly used trade terms in foreign trade and are routinely incorporated in the contracts for the sale of goods worldwide to provide guidance to all parties involved in the transaction
Material requirements planning
a set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials
Anticipation inventory
additional inventory above basic pipeline stock to cover projected trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant shutdowns and vacations. Intended to cover demand projection in tthe demand plan.
Truck-plane service
air transport requires some intermediary surface travel (birdyback).
Grouping reserve stock separately
can include bulk storage of items when working stock is considered a partial pallet for picking; can also refer to defective or obsolete items and returns. can be stored out of way. working stock can be replenished reserve stock.
foreign freight forwarder
an entity that picks u goods at the production site and coordinates transport to the foreign customer's location
ship broker
an independent contractor that brings exporters together with ship operators that have appropriate vessels available to carry the shipper's freight.
Harmonized system classification codes
an internationally standardized description of goods that uses a system of numbers to provide increasingly detailed clasification and descriptions
Cycle counting
an inventory accuracy audit technique where inventory is counted on a cyclical schedule rather than once a year. Key purpose: identify items in error, thus triggering research, identification, and elimination of the cause of the errors
Scheduled receipt
an open order that has an assigned due date
Customs house broker
assist importers by moving shipment through customs. pays all import duties under power of attorney from importer. Liability of unpaid duties lies with importer, not broker
Mean absolute deviation (MAD)
average of abs values of the deviation of observed values from the expected value. =(Sum |A-F|)/n absolute value of actual-forecast/number of periods
line haul costs
basic costs of carrier operation to move a container of freight, including driver's wages and usage depreciation. these vary with the cost per mile, the distance shipped, and the weight moved
Min-max system
both ordering timing and order amount are allowed to vary. Orders are submitted after inventory has fallen below the minimum point, but inventory isn't allowed to go over a maximum.
Forecasting
business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance
Nonvessal operating common carrier (NVOCC)
buys space on inland carriers and resells it to shippers at a markedup price. only handle the part of the shipment traveling from a port to the importer's dock or form an exporter's dock to a port performs physical work of consolidating, loading, and unloading cargo. buy and resell spae on carriers. can handle freight in many cases. regulated in the US by Federal maritime commission. required to publish rates and not discriminate in hiring.
Independent Distributor with omni channel network
channel master; buys goods from multiple mnfg or distributors in bulk and aggregates for a one stop shop for retailers, local DCs, wholesalers, or direct customers. Hold high inventory for fast moving items. can provide value added services and bulk shipping. large number of suppliers to coordinate and partner with
Nonbonded logistics parks
cheaper than BLPs rates and are increasingly being developed on expanding road network in China
Hybrid strategy
combines elements of level and chase production. Plant runs near full capacity for part of the cycle to build up inventory, slows or shuts down to let inventory to shrink. Ex: Lego runs one shift first half of the year, adds another shift second half of the year for holiday season demand
Payment terms
conditions surrounding payment for a sale, providing a time frame in which a customer can pay without late penalties or additional fees
Managing and prioritizing demand (fixed average capacity strategy)
controlling demand to the maximum extend through scheduling, promotions, queues, and rationing. focus on managing and prioritizing demand because fixed average capacity will results in periods of insufficient supply. Beneficial for products or services that require development and retention of expert personnel or other expensive resources. Example: Airline seats.
Joint replenishment
coordinating the lot sizing and order release decision for related items and treating them as a family of items. objective is to lower costs because of ordering, setup, shipping, and quantity discount economies. applies equally to joint ordering and composite part (group technology) fabrication scheduling
Decoupling
creating independence between supply and use of material. commonly denotes providing inventory between operations so that fluctuations in the production rate of the supplying operation do not constrain production or use rates of the next operation
Dependent demand
demand taht is directly related to or derived from the BOM structure for other items or end products. such demands re thesefore calculated and eed not and should not be forecasted
Order point system
determines the inventory level, or point, at which a reorder must be placed. =Demand during lead time+safety stock
Economic Order Quantity (EOQ)
determines the most cost effective number of items to order when replenishing inventory using a fixed order quantity model. The order size that gives you the lowest total cost for carrying and ordering (setup) costs.
Independent aggregator with ebusiness network.
direct marketing to indiiduals through its own heavily banded website. IE amazon and alibaba. direct shipment is common, may also sell or ship through local DCs they own. Move slow moving goods directly from mnfg through local DC rather than carry the inventory. often use loyalty programs for free shipping for an annual membership fee. high levels of customer service. many retailers adopting some form of this model, selling online and in retail stores.
Breakbulk
dividing truckloads, railcars, or containers of homogenous items into smaller, more appropriate quantities for use
Lagging indicators
economic and financial factors that reflect the changes that have already occurred in the economy
warehouses
facilities used to store inventory. decisions driving warehouse management includes site selection, umber of facilities in the system, layout, and methods of receiving, storing, and retrieving goods.
finished goods inventory
finished, ready to use products waiting to be purchased by the customer
Mix forecast
forecast of the proportion of products that will be sold in a given product family
Free trade zones
foreign trade zone in the US where some normal trade barriers such as tariffs and quotas are eliminated and bureaucratic requirements are lowered.
Export processing zone (EPZ)
goods may be landed, handled, manufactured, or reconfigured and reexported w/o the intervention of customs authorities.
Assemble to order
goods or services assembled after receipt of order. mass customization without long lead times. large number of end items, components may be limited.
grouping items by similar physial characteristics
hazardous materials stored with security measures; frozen or refrigerated items. Bulky or odd shaped items such as couches
Bonded logistics parks (BLPs)
in china, located near ports and serve as cost effective holding areas where shipping orders can be consolidated from various locations before being exported
planning factors
include safety stock concerns and lead times
Intermodal transport
includes package delivery and container services. integrates different modes of transportation in various combinations to take advantage of specific capabilities. Piggyback service Tranship or containership service truck-plane services freight truck on railcar Container provides maximum flexibility as it can be loaded onto trucks, trains, barges, or oceangoing chips.
Raw materials inventory
includes purchased parts, materials or subassemblies to a production process that have been acquired but have not yet entered production
Projected available balance (PAB)
inventory balance projected into the future
In-transit (distribution or pipeline) inventory
inventory in the transportation network and teh distribution system, including the flow through intermediate stocking points. In transit inventory is measured by the average annual inventory in transit, which is a function of transit time in days and annual demand. Reducing this cost requires finding ways to reduce transit time, because less volume needs to be in transit at a given time. Includes raw material, WIP, finished goods, or MRO inventory
inventory ordering systems
inventory models for replenishment of inventory
Cycle stock
inventory that depletes gradually as customer orders are received and is replenished cyclically when supplier orders are received
grouping high velocity items together
items arrive and leave quickly, but not quickly enough for crossdocking, can be plaed in locations near the outbound staging area
echelon
level of supply chain nodes. Each echelon adds operating expense, holds inventory, and adds to the cycle time, and expects to make a profit
Master production schedule (MPS)
line on the master schedule grid. reflects the anticipated build schedule for those items assigned to the master scheduler. Master schedule maintains this schedule and it becomes a set of planning numbers that drives material requirements planning. it represents what the company plans to produce expressed in specific configurations, quantitates, and dates
Cumulative lead time
longest planning length of time to accomplish the activty in question. review lead time for each BOM path below the item
Fixed order quantity
lot sizing technique in MRP or inventory management that will always cause planned or actual orders to be generated for a predetermined fixed quantity or multiples thereof if net requirements for the period exceed the fixed order quantity.
Mean squared error (MSE)
magifies errors by squaring before adding and dividing by number of forecast periods (sum(errors for each period)^2)/Number of forecast periods
Communicating demand (highly variable capacity strategy)
matching supply to demand as closely as possible by being flexible enough to increase or reduce capacity spontaneously. May employ contract work, outsourcing, and flexible work schedule to support.
Harmonized tarrif schedule
mechanism by which international tariffs are standardized. importers and exporters classify all goods moved across international boarders using the harmonized system of teh country of import.
Planning demand (fixed high capacity strategy)
meeting demand to maximum extent possible by providing capacity necessary to meet peek demand. Pursued if cost of maintaining excess capacity considered less than those of losing business
Kanban
method of JIT production uses standard containers or lot sizes with a single card attached to each. Pull system in which work centers signal with a card they wish to withdraw parts from feeding operations or suppliers
Demand
need for a particular product or component. could be from customer order, forecast, interplant requirement, branch warehouse request, etc.
COntract carriers
not required to make services available to general shipping public. required to have government authorization to do business. governed by economic regulations. enter contracts with terms, receive permits to carry business out defined by contract. Rates generally lower than common carriers. rival privage carrier with regard to flexibility. independent trucker is a special type of contract carrier that subcontracts to other type of carriers (contract, private, exempt or public. )
Exempt carriers
not subjected to economic regulations of their rates and terms of service. responsible for compliance with state laws. must publish their rates if they operate across state lines. most operate locally. granted for specific commodities and certain areas of operations. relied upon for significant amount of business in niche markets such as local transport of agricultural products. lower rates. primary drawback is limited availability for many products and limited range of operations.
Tarriff
official schedule of taxes and fees imposed by a country on imports or exports
Periodic review system
order intervals are fixed (week/month/quarter, etc.) and order quantities are allowed to vary. Warehouse determines a base stock level, or maximum level of inventory. Base stock is the inventory target or "order up to" level. Reviewed each period and the warehouse orders enough to raise inventory position to the base stock (target) level
Manufacturer storage with drop ship
orders go from customer to DC or retailer. manufacturer ships DC or Retailer may have floor model but no inventory. Use transload and crossdock facilities; best for high value, sporadic demand items; may be make to order, customized, or postponed items. shipments may be small lots; transportation costs can be higher and lead times longer.
Offshoring
outsourcing a business function ot another company in a different company than the original company's cuntry
Private carrier
owns fleet, incurs cost of owenership. cannot be in primarily transportation business to be considered private. May carry other company's products during backhaul trips or to fill truck loads.
Firm planned orders (FPOs)
planned orders that can be frozen in time and quantity. computer is not allowed to change them automatically.
4th party v 3rd party
presence of subcontractors. typically charges a fee for its services, not a markup.
Demand planning
process of combining statistical forecasting techniques and judgement to construct demand estimates for products or services across the supply chain.
Demand management process
process that weighs customer demand and firm's output capabilities and balances the two. planning demand, communicating demand, influencing demand, and prioritizing demand
landed cost
product cost plus the cost of logistics such as warehousing, transportation, and handling fees. For purchased inventory, sum of all direct costs including the price paid, transportation to the site, customs, and insurance. Landed costs for internally sourced inventory include direct labor, direct materials, and factory overhead costs.
Chase production method
production planning method that maintains a stable inventory level while varying production to meet demand
Prepackaging
products are receivedin bulk froma supplier an dsubsequently packaged into smaller quantities or combined with other products to form kits or assortments
Periodic counting
prone to inaccuracy because of the low expertise of counters. Retailers and small companies lacking proper technology may still rely on periodic counting
Export packing companies
provide specialized packgaing services for cargo that may have to undergo long journeys and pass customs in another country.
Duty drawback
refund of alll or part of duty paid on goods that were first imported and then reexported. importer pays import duty when goods come in, then applies for drawback after reexporting.
grouping functionally related items together
related storage type called point of use storage
Open order (released order)
released manufacturing order or purchase order
Liquid zone
remaining planning horizon after planning time fence.
Put-away
removing the material from the dock, transporting the material to a storage area, placing tat material in a staging area, and then moving it to a specific location and recording the movement and identification of the location where the material has been placed.
trade credit
sale of goods or services in which payment is not due right away. Encourages sales, effectivly offering free financing over teh payment period.
order picking
selecting or picking the required quantity of a specific product for moving to a packaging area and documenting that the material was moved from one location to shipping
Subcontracting
sending work outside to another manufacturer
Planning time fence
slushy zone. Capacity and materials not as strongly committed. Room to negotiate
MRO (maintenance/repair/operations supplies) inventory
spare parts, lubricants, hand tools, and cleaning supplies needed to maintainproduction but are not in teh final product. because of this, MRO is expensed rather than being an asset like other types of inventory. maintaining reliable production requires keeping an inventory of suppliers for both routine maintenance and emergency repairs. attn to production machinery and MRO forecasting can reduce equipment costs and downtime
leading indicator
specific vusiness activity index that indicates future trends
Using random location storage
storage technique in which parts are placed in any space that is empty when they arrive at the storeroom. although random method requires use of locator file to identify part locations, often requires less storage space than fixed location storage method. also called floating inventory location. maximizes cube utilization and can be rapid if the organization uses warehouse automation systems such as directed pick and put away
Demurrage fees
temporary storage parking for rail freight cars or ships
Detention fees
temporary storage parking for truck trailers
freight forwarders
the 'middle man' between the carrier and the organization shipping the product. often combines smaller shipments to take advantage of lower bulk costs
Inventory control
the activities and techniques of maintaining the desired levels of items, whether raw materials, work in progress, or finished products. Determines: how much to order and when (how often) to order
packaging and marking includes all
the activities of packaging for safe shipping and unitizing one or more items of an order, placing them into an appropriate container, and marking and labeling the container with customer shipping destination data as well as other information that may be required
Inventory management
the branch of business management concerned with planning and controlling inventories. Required at any organization that caries inventory. Role involves planning and controlling inventory from a supply chain perspective and an internal process perspective
allocation
the classification of resources or item quantitites that have been assigned to specific orders but not released from stockroom to productinon. also a process used to distribute materials in short supply
cross docking
the concept of packing products on the incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destination. items are carried from incoming vehicle docking point to the outgoing vehicle docking point without being stored in inventory at the warehouse. crossdocking reduces inventory investment and storage space requirements.
Demand forecasting
the demand for a particular good or service
Independent demand
the demand for an item that is unrelated to the demand for other items. demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand.
inventory visibility
the extent to which inventory information is shared within a firm and with supply chain partners
Distribution requirements planning (DRP)
the function of determining the need to replenish inventory at branch warehouses, AKA distribution centers
Demand management
the function of recognizing all demands for goods and services to support the market place.
shipping
the function that performs tasks for the outgoing shipment of parts, components, and products. it includes packaging, marking, weighing, and loading for shipment
Total cost concept of ligistics
the idea that all logistical decisions that provide equal service levels should favor the option that minimizes the total of all logistical costs and not be used on cost reduction in one area alone, such as lowering transportation costs
global trade management
the management and optimization of shipments across international borders including: ensuring compliance with all international regulations and documentation, streamlining and accelerating the movement of goods, to improve operating efficiencies and cash flows
packaging
the material surrounding an item to protect it from damage during transportation
moving
the physical transportation of inventory from one location to another within a facility
Executive sales and operations planning
the portion of the sales and operations planning that defines executive decision making processes to balance supply and demand at the volume level in families, fully integrates financial planning and operational planning, and that provides a forum for establishing and linking high level strategic plans with day to day operations
outsourcing
the process of having suppliers provide goods and services that were previously provided internally. outsourcing involves substitution - the replacement of internal capacity and production by that of the supplier
operating exposure
the risk introduced by flexible exchange rates when operating in the global environment including production, storage, and buying and selling prices
Available to Promise
the uncommitted portion of inventory and planned production
Common carrier
transportation available to the public that does not provide special treatment to one party and is regulated to the rates charged, liability assumed, and service provided. must obtain certificate of public convenience nd necessity from Federal Trade Commission for interstate traffic
Freight truck on railcar
truck loaded onto a flatbed railroad car while truck driver sleeps on train to continue moving during prohibited hours
backorder (AKA stockout)
unfulfilled customer order or commitment, an immediate or past due demand against an item whose inventory is insufficient to satisfy the demand. can be difficult to quantify financially but can be measured using various means such as percentage of orders shipped on schedule, which can help quantify the safety stock investment needed for a particular item at a particular location to keep this risk at acceptable levels.
ordering costs
used in calculating order uantities; the cost that increase sas the number of orders placed increases. includes costs related to the clerical work of preparing, releasing, monitoring, and receiving orders, the physical handling of goods, inspections, and setup costs, as applicable
insourcing
using a firm's internal resources to provide goods and services
Associateive forecasting (causal, correlation, explanatory, or extrinsic forecasting)
using data from one or more internal or external sources as a predictor of something that is presumed to be correlated
Shipping associations
usually nonprofit organizations to negotiate with carriers for rate discounts on the same terms as larger shipping companies
Inventory status
what materials are already available for use in manufacturing the finished good sand what finished goods exist now
Inventory accuracy
when the on hand quantity is within an allowed tolerance of the recorded balance. measured as the percent of items with inventory levels that fall within tolerance. Target is usually 95-99 depending on the value of the items. For logistical operations it is sometimes measured as the number of storage locations with errors divided by the total number of storage locations.
Ship agent
works for carrier- arranges for ships arrival, berthing, and clearance. while in port, coordinates unloading, loading, and fee payment.
