OPMG MDTRM
Exponential smoothing forecasts
Take the forecast for the prior period and adds an adjustment to obtain the forecast for the next period This adjustment is a proportion of the forecast error in the prior period
After Sale Focus
"Those activities representing all areas of the business which combine to deliver and bill customers for products in a manner that is satisfactory to those customers and at the same time accomplish our corporate objectives" Order processing, tracing, proof of delivery, or handling customer complaints
SCM at Dell
"classic" direct business model- takes orders directly from consumers via internet and phone (there aren't Dell stores like there are Apple stores), bypasses traditional dealer channel by delivering product directly to customer Makes PCs to order in large volumes (practices mass customization) Bypasses traditional dealer channel by delivering product directly to customer Segments its customer base so that it can offer value-added services to different customers For large (business) customers, configures PCs, load standard software, place asset stickers on machines, provides on-site teams that assist in purchasing and service Dell can be called a manufacturer builds computers based on components (mouse, etc) readily available in the marketplace DOES NOT build components reduces finished goods inventory cost by postponing the final product Dell uses virtual integration rather than vertical integration vertical integration: occurs when a manufacturer owns its suppliers/distributors and results in tight control of the supply chain by the manufacturer at great expenses ex: Henry Ford, Apply stores virtual integration: when a manufacturer practices SCM with its vendors by sharing info (control without cost, involves outsourcing, deep partnerships aka strategic alliances with Intel, Microsoft, Sony, UPS), Dell treats suppliers and service providers as if they were inside the company, sharing real-time information, and makes purchase commitments Example: UPS picks up Sony monitors from Sony's Mexican factory, the computer from Dell's Austin facility, and then matches and delivers them to customers Customized product delivered in a week or two Outsourcing is more popular today though Dell has had a huge impact on the retailing of technology products through its direct model but it has recently made changes to this model In 2007 HP became the leading personal computer and this is when dell added to the way they do things (became partners with retailers, contract manufacturers ownership structure changed: became public but then goes private again)
GDay Beverages
8 sectors multiple forecasting which is a huge problem production: union, changeover (setting up a machine to run and then making it do something else, requires downtown), interacts little with sales sales: have a bit of an attitude, order targets have to be exceeded in order to get commissions (meeting these aren't easy so promotions are used but they aren't thought out and could lead to the bullwhip effect), they don't want to use technology Finance: approves orders Warehousing: management at Tazmania warehouse= third party *outsourcing, cost-plus complex, contains only G'Day products, PRIVATE, layout problems goals: currently takes 14 and they want it to only take 2, currently completeness is only 2/3 solutions: had no incentives to put customers first, they should create incentive system to increase customer service ERP would help decrease the number of forecasts and silo effect would go down sales subprocess should start using computers or an ERP system finance subprocess should look over promotions to make sure promotions are available
Moving average forecasts
A moving average forecast averages some number of the most recent actual data values The number of past periods is called the averaging period (AP) Advantages: smoothes more than the naive forecast, and is easy to compute Disadvantages: must select the averaging period, and all values in the average are weighted equally
Weighted moving average forecasts
A weighted moving average forecast assigns more weight to the most recent values in a time series (with all weights adding up to 1) It generalizes the concept of moving average forecasting Advantage: more reflective of most recent occurrences Disadvantage: choice of weights is somewhat arbitrary - usually depends on trial and error Skip the details!
Business Process Improvement Game
ACME=manufacturer (they make kazoos), this product has to be packaged United Box Company= packages the kazoos this process isn't going well, it's taking too long, customers are complaining, unhappy with ACME, sales people aren't getting their checks because they have to wait until the end of the process Stations: 1. ordering department 2. and 3. purchasing departments (parallels) 4. purchasing manager approval 5. supplier picks the stock 6. supplier completes bill of lading and ships boxes 7. supplier accounts receivable invoice 8. receiving boxes (ACME) 9. and 10. accounts payable matches documents and issues check 11. A/P manager checks for errors Problems: batching (2 PO's were put together, slowed things down a lot for people being batched and for those waiting), confusion at each level, lack of efficiency (do we need more people or less?), lack of training, accuracy (# ordered does not equal # shipped), communication gap, poor customer service, redundancy (station #5 and #6, station #1 could be self-service), compensation impacts behavior, lines forming because of bottlenecks Solutions: process (reduce redundancy, use parallels at bottlenecks), organization (increase training, give managers more productive/overseeing work and strategic decision making NOT micro-managing), technology (paper was used but a more advanced technology would have helped, ACME and UBC info saved in databases) motivation: customers are finding the process is taking too long strategic alliance: businesses work together closely, vertical integration=ACME buys UBC, outsourcing=choosing a partner after business process re-engineering/improvement it went from taking 14 weeks to 4 days but ACME didn't follow through
Air
Accounts for less than 1% of ton-mile traffic Premium, emergency service Commercial airlines carry freight on a space-available basis Handles high-value products Highest cost Rapid time-in-transit Terminal and delivery delays and congestion can reduce total transit time advantage Frequency and reliability are good
Tootsie Toy
An example of operations management (OM was responsible for every aspect of toy manufacturing) America's oldest toy company Toy blocks made out of wood (not enough nearby trees so suppliers are needed), blocks arrived at the plant pre-cut into shapes (triangles, cylinders, squares, rectangles, etc.) from suppliers in Washington and Oregon, Tootsietoy painted the blocks, and then packaged them into different size boxes of assorted-shaped blocks Operations management had to anticipate the customer orders because it took over a week to get a shipment of blocks from the West coast, and that was too long for a customer (Walmart, Toys R Us) to wait Blocks were painted in batches inside big tumbling containers The blocks were put into boxes by workers, each box with a certain number of every kind of assorted-shape block (there could be one person putting every kind of block in each box, or a group of people where each person put just one kind of block in the box), people made mistakes, and sometimes the boxes had too many or too few blocks Operations management had to figure out how to reduce the number of mistakes Eventually merged, failed, liquidated BUT was a successful company because it lasted over 100 years
Category Captain
As part of CM, retailers often name one vendor as "category captain" (CC) for a particular category of products such as laundry products or salty snacks CC manages entire category on behalf of chain If Clorox is CC for household cleaning category, they get to decide how much of which products from Johnson & Johnson and other competitors get onto the shelves Why? Assuming the profit margins are same, it makes no difference to supermarket what brand of soap you buy Supermarkets have very low margins and are always looking for ways to get services for free from suppliers Product manufacturers compete to be CC Manufacturer can distinguish itself from its competitors is by showing it can make effective use of POS data to make category as whole more profitable for retailer (data-mining)
Pipeline
Available for only a limited number of products: Natural gas Petroleum products Water Chemicals
Bar coding and RFID
Bar coding and scanning electronically Technologies that facilitate logistics information collection and exchange Typical applications include tracking receipts at the warehouse and sales at the grocery store problem: produce has to be weighed RFID (Radio Frequency Identification) Since WWII, RFID tags are an old technology that are likely to eventually replace bar codes IPass, Marathon, Babies problem: expensive ex: Zara
Quantitative Forecasting Methods
Based on historical data Assume that past data are relevant to the future Evaluation of these models is based on their forecast accuracy: How close forecasts are to actual, but after-the-fact, data Linear regression analysis: establishes a relationship between a dependent variable (what is being forecasted) and one or more independent variables (other variables that provide a basis for the forecast) Causal forecasting method: Assumes cause-and-effect relationship between the dependent and the independent variables
Customer Service
Before-sales focus: Marketing Addresses marketing issues through customer and product Customer describes the common characteristics of the target market being served Product describes how the product/service satisfies customer needs Business process describes how resources (like participants, information, and technology) are aligned to deliver the product to the customer (looking at the customer/product/business process = integrative framework)
Bullwhip Effect
Bullwhip Effect (first noticed by P&G with Pampers, HP with LaserJets, Barilla with pasta) Demand information in a supply chain is often distorted as it passes from one part of the chain to the other parts Order variability is amplified up the supply chain Upstream members (closer to the suppliers) face higher variability than downstream members (closer to the customers) Causes: Demand forecast updating (the use of immediate downstream order data as a signal about the trend of the market demand by each entity in the supply chain - as in Telephone) Order batching: the common practice where companies order on a periodic basis (e.g., weekly, monthly, quarterly, annually) from suppliers because of: Fixed order costs, Economic advantages of TL (truckload) vs. LTL (less-than-truckload) transportation rates, Quarterly or annual sales incentives like promotions used to measure salesperson performance Price fluctuations resulting from quantity discounts offered by suppliers Long lead times Consequences: more inventory, reduced service levels, inefficient allocation of resources
Catalog businesses
Catalog businesses have been among the most successful B2C e-commerce businesses - Why? Bc there are no radical changes! No need for brick and mortar, it's a natural extension (ex: Sears) Walmart doesn't have this they had to do things differently
Positioning
Coined to signify the use of advertising and promotion to establish a place in, and a share of, a customer's mind "Avis tries harder" (because it was not No. 1) Positioning establishes one firm's competitive advantage against others' Choice of customer and product must reflect positioning Cost: What the customer must give up to obtain, use, and maintain the product/service Quality: Customer's perception that the product/service has desired features, is reliable to use, and adheres to standards and regulations Service: Taking timely action based on what the customer wants Flexibility: Adaptability to change with little effort, time, or penalty
Achieving Strategic Focus
Companies that attempt to be all things to all people rarely succeed for long Focus involves clear understanding of customer and product Offering a wide range of products/services to a targeted group of customers: ServiceMaster (www.servicemaster.com) built its business on management of custodial service performed for hospitals, but expanded service package to include food service, transportation, purchasing, and equipment maintenance Offering a "limited menu" product/service to a wide range of customers: UPS will transport anyone's package between any two points as long as the package does not exceed length and size limits Offering a limited range of products/services to a highly targeted set of customers: Exclusive restaurants typically offer a limited menu to an affluent set of customers ex: ServiceMaster (SM) broadened its target market to provide a similar package of support services to schools and industrial firms as well as hospitals, and then began offering additional services provided in the home like house cleaning (Merry Maids) and extermination (Terminix) In 2001, SM sold its "legacy" business to concentrate on "home" services
Electronic data interchange
Computers communicating directly with other computers Verbal and written communications are replaced with electronic ones WM does not want to do business with suppliers unless they have EDI capability Traditionally done with dedicated network connections, but more firms are using the Internet to exchange information *before EDI you needed two people (one on both sides) now you just need one!
Contrary positioning
Contrary positioning: provides an alternative to the "sacred cow" of an industry ex: WM originally located its stores close to smaller and middle-sized markets largely populated by consumers with moderate incomes seeking good value in their purchases, markets that it can dominate, and away from large metropolitan areas populated by KMart and Sears Established by choice of customer ex: BK's "Have It Your Way" was a conscious effort to provide an alternative to McD's mass-produced, standardized hamburger to more discriminating diners wishing to add their own favorite condiments to a sandwich with meat that is grilled rather than fried (BK=customized, MCD=standardized) Established by choice of product
cost vs accuracy
Cost and accuracy must typically be traded-off in selecting forecasting methods: More forecast accuracy sometimes can be obtained at a cost High-accuracy approaches typically use more data, the data are usually more difficult to obtain, and the models are more costly to design, implement, and operate Example: In production and inventory control, increased accuracy is likely to lead to lower safety stocks (inventory buffers against demand uncertainty) Manager and forecaster must weigh the cost of a more sophisticated and more expensive forecasting approach against potential savings in inventory costs
current trends affecting forecasting
Current emphasis on lead time reduction and increasing production flexibility makes the producer better able to respond to customer demands more quickly Makes forecasting easier because it makes planning time horizons shorter, as well as forecasting less important
customers
Customers use or receive direct benefit from the product Internal customers are people within the same firm who create additional value before the firm's product goes to the external customer External customers are people outside the firm who receive and use the firm's product
E-commerce
Electronic commerce (e-commerce): doing business with electronic means,redefining basic concepts of customer service EDI is a type of e-commerce: B2B e-commerce (between businesses) B2C e-commerce is typically transacted via the World Wide Web (WWW) on the Internet (between businesses and consumers) ex: e-commerce at Dell, Conducts B2C e-commerce by selling directly to consumers over the WWW (direct model) Also practices B2B e-commerce with their suppliers as part of their SCM program
ERP
Enterprise resource planning (ERP) systems integrate data from EDI and planning activities for the flow of product across the supply chain - from raw materials procurement, through manufacturing and distribution, to delivery as finished goods to consumers integration (tying together information, departments naturally being connected by this software) very standard today What ERP system does Loyola use? Locus also helps stop the silo effect (G'Day Beverages)
Forecasting
Estimating the future demand for products and services and the resources necessary to produce these outputs Operations managers must plan in the present what to do in the future First step in planning process Two approaches: Qualitative forecasting methods: use human judgement, opinions, and rating schemes to turn qualitative (non-numerical) information into quantitative estimates Used when data are scarce, as with new-technology Quantitative forecasting methods: use mathematical models
A Pain in the Supply Chain
Exceso= manufacturer, makes clipzipplus (consumer product), publically traded Flemings ValuMart=retailer of consumer products including clipzipplus Problems: Exceso won't know what's going on because Flemings is diverting with Regency Brands and they'll lose money; they are loading to make up for their numbers; lack of visibility and bullwhip effect (there should be a tight line of coordination between all parties); short term focused thinking goes to store and sees no product on the wall Regency Brands tells Exceso one thing and Flemings something else... This could lead to a lawsuit
After sales problem handling
Guarantees Warranties Alterations Repairs Tracing Returns Replacements
counting problem
How did TootsieToy solve this? Packaging solutions, weighing (not the best idea bc not all blocks are the same weight), getting rid of human labor and only using machines? They created a template, this is a simple, low technology solution Simplicity is key!!
Motor
Land-based transport by truck Currently the DOMINANT mode of transport (carry more variable things) While trucks only move about 31% of all freight ton-miles, they move about 70% of freight traffic by value Offers fast, reliable service with little damage or loss in transit Lower loss and damage ratios than for rail, but only slightly higher than for air More flexible and versatile than other modes because of network of about 4 million miles of roads Offers point-to-point service between almost any origin-destination combination Can transport products of varying sizes and weights over any distance Competes with air for small shipments and rail for large shipments Efficient motor carrier can compete with air on point-to-point service for any size shipment if the distance is 500 miles or less Truckload (TL) shipments: utilize the entire vehicle's capacity (typically 15,000 pounds or more) Less-than-truckload (LTL) shipments: utilize a portion of vehicle capacity (typically less than 15,000 pounds) TL shipments cost less per pound than LTL shipments, counteraction to the bullwhip effect, LTL trucking companies consolidate (combine) freight from many customers to fill trucks, thereby achieving economies of scale at the expense of delivery speed
Supply chain management
Leading firms like Dell and Wal-Mart (WM) understand that entire supply chains compete for customers Investment in information technology and willingness to share information among supply chain partners can improve the speed and quality of information flow throughout the supply chain, reduce supply chain inventory costs, and allow supply chains to compete more effectively Goal: minimize the total cost over the entire supply chain, rather than the cost of each member or function Involves coordinating the activities of all members of the supply chain as an integrated, or centralized, system Forces cost trade-offs to be made among the various supply chain members and their functions Without SCM, supply chains can suffer from the Bullwhip Effect
Rail
MOST IMPORTANT Once dominant mode (before WWII) Currently has about 43% of all freight ton-miles Still dominant for shipments in excess of 100,000 pounds Track network totals about 150,000 miles Costs less on a weight basis than air and motor Higher loss and damage ratios than air and motor Longer transit times and less frequent service than air and motor Costs less on a weight basis than air and motor Higher loss and damage ratios than air and motor Longer transit times and less frequent service than air and motor Recent trend towards consolidation of railroads to gain economies of scale - currently only 4 major U.S. rail lines: BNSF, CSX, Norfolk Southern, Union Pacific Economics are very healthy for railroads Barriers to enter
Managing the warehouse
Managing the warehouse resource: efficiently moving inventory into, and specific customer orders out of, the warehouse Receiving Transfer Order-selection or order-picking Shipping Pallets Forklift trucks Conveyors (often overhead) Carousels: mechanical devices that house and rotate items for order-picking (horizontal and vertical) AGVS (automated-guided vehicle systems): do not require operators Robots Gravity flow storage racks: rear loading, FIFO inventory management ASRS (automatic storage retrieval systems): automated handling using high-rise storage Bar coding and scanning RFID
Transportation
Moves a firm's products to markets Creates value through how quickly, consistently, and economically products move from place to place Chicago is the transportation hub of U.S. (trains, lake, roads) Major driver in today's logistics revolution because it represents the single biggest component in a firm's logistics costs Transportation 39% Warehousing 27% Inventory Carrying 24% Customer Service/Order Processing In the days of regulated transportation (through late 1970s and early 1980s), transportation services were a commodity, with little differentiation among transportation suppliers in terms of either quality or price Deregulation (and the resulting competition) changed all that There are many different transportation alternatives and services Transportation prices are subject to negotiation Transportation management has become more and more the job for a specialist, either in-house or third party (e.g., C.H. Robinson - www.chrobinson.com) Transportation cost per unit of weight decreases when the size of the shipment increases Larger capacity transportation vehicles such as rail or water are generally less expensive per unit of weight than smaller capacity vehicles such as motor or air Exists because fixed expenses associated with moving a load (that do not vary with shipment volume) allow costs to be "spread out" Fixed expenses include administrative costs of taking the transportation order, time to position the vehicle for loading or unloading, invoicing, driver salary, and equipment cost
Water
OLDEST mode of transportation Uses: Inland waterways such as canals (like Panama Canal) and rivers (like Mississippi River) See Sakai References: "Panama Adding a Wider Shortcut for Shipping", "Panama Canal's Growth Prompts U.S. Ports to Expand", "Keeping the Boats Moving Along a Mississippi Dwindled by Drought", "Will Wider Canal Alter Trade?", and "The Panama Canal Gets Grander" Lakes (particularly the Great Lakes) Ocean Supertankers play major role in the transportation of oil Carries bulky semi-processed or raw materials like coal and iron-ore Where are many steel mills located in U.S.? Most inexpensive way of shipping high-bulk, low-value commodities Motor- or rail-compatible containers are often used as shipment units
VMI
Pioneered by WM and P&G Partnership, begun in 1985, dramatically improved P&G's on-time deliveries to WM, while increasing inventory turns Supplier receives, electronically, daily transmission of the retailer's warehouse shipments to its stores Supplier assumes responsibility for replenishing inventory at the retailer's warehouses Supplier then plans the most effective and efficient way to satisfy requirements Retailer agrees to honor replenishment of warehouse shipments as a purchase commitment, and the supplier commits to keeping the retailer in stock Driven by retailer's warehouse data because forecasts based on demand data aggregated at the warehouse level tend to be more accurate than those based on store data (POS data) Typically the retailer owns the goods when received from the vendor Some VMI relationships with "mass retailers" are consignment arrangements, where the vendor owns the goods until they are sold (which results in lower inventory costs for the retailer, and gives the vendor a strong incentive to manage inventory as effectively as possible) ex: Guinness ran a VMI program, called Co-Managed Inventory, with UK supermarkets
ECR
Pioneered by grocery industry because of fear of WM Efficient Consumer Response (ECR) combines VMI with Category Management (CM) CM: supplier works with the retailer, typically a supermarket, on demand management issues like where and how products are displayed and promoted within a store Driven by POS data As part of CM, retailers often name one vendor as "category captain" (CC) for a particular category of products such as laundry products or salty snacks CC manages entire category on behalf of chain
Types of warehousing
Private: all of the materials handled and stored at the facility belong to one party Operated either by the owner of the materials or an independent third party Public: materials handled and stored at the facility belong to multiple parties Operated by an independent third party
products
Products are often bundles of physical things, as well as services performed for internal or external customers
Modes of Transportation
Rail Motor Water Pipeline Air
Retailing
Retailers are members of the supply chain from whom consumers buy products and services directly "Brick-and-mortar" (WM) or online (Amazon.com) or both "bricks-and-clicks" (WM) supplier=vendor VMI (vendor management inventory): supplier receives, electronically, daily transmission of the retailer's warehouse when does the retailer own it? Consignment SCM Strategies for Suppliers and Retailers: Vendor managed inventory (VMI) Efficient consumer response (ECR)
Walmart
SCM and logistics Growth Strategies Domestically, moved into food retailing in the mid-1990s with its Supercenters (complete WM discount stores with a supermarket added under the same roof), became the top selling supermarket chain in U.S., and also pursued urban America (especially Chicago) Internationally, operates in Mexico, South America, Europe, and Asia (China and India in particular) What should a traditional "brick-and-mortar" retailer like WM offer online? See Sakai References: "Discount Giants Learn Online Lessons: Film, Yes; Shampoo, No" WM's "traditional" SCM program is based on B2B e-commerce (EDI) and bulk shipments Does WM's SCM expertise based on B2B e-commerce position them to be successful with B2C e-commerce?
Information Technology for SCM
SCM represents a process improvement enabled by IT: Electronic data interchange (EDI) Bar coding and electronic scanning Radio frequency identification (RFID) Enterprise resource planning (ERP) systems
Linear Regression Models
Simple linear regression analysis has only one independent variable: In time series forecasting, the independent variable is time In time series forecasting, the regression model is a line that represents the trend in the data (if there is one) Forecasting is accomplished by extending the trend line into the future Forecasting using regression trend lines is typically regarded as being long-range Regression line is the best-fitting line that minimizes the sum of squared deviations of the data points from the line Regression equation or line: Y = a + b X, where: Y is the dependent variable X is the independent variable a is the Y intercept b is the slope Formulas exist for computing a and b, but Excel can be used to generate them Regression analysis comes with its own natural measure of forecast accuracy, r2 For the (short-range) averaging methods, there is an alternative measure of forecast accuracy Does the regression line provide a good fit to the data? If not, then the forecasts obtained from it are probably not useful Correlation measures the strength of the linear relationship between Y and X with the coefficient of determination, r2 Excel computes r2 as part of the regression spreadsheet output 100%= perfect fit higher r squared= better line
Suppliers of Transportation Services
Single-mode operators: Commercial airlines Trucking companies Package service (both basic and premium) operators for small shipments: USPS UPS FedEx Intermodal services: Use multiple transport modes to take advantage of economies of scale in each Arrange for "one-stop" shipping, but completely independent organizations may actually provide all of the transportation Non-operating (does not own equipment like C.H. Robinson) or operating (like UPS) Piggyback service: Trailer-on-flatcar Container-on-flatcar Development and use of containers are especially important Most containers are about the size of a truck trailer and can be carried by truck, rail, or ship
after sale performance measures
Stockout frequency: probability that stockout will occur (when demand exceeds product availability) Measures percentage of time orders are shipped complete Views full availability as the standard of acceptable performance Fill rate: percentage of units that can be filled when requested from available inventory ex: Scenario 1 Part Ordered Received A 1,000 990 B 2,000 1,990 C 4,000 3,990 D 2,000 1,990 E 1,000 990 Total 10,000 9,950 Stockout frequency = 100% Fill rate = 99.5% ex: Scenario 2 Part Ordered Received A 1,000 1,000 B 2,000 2,000 C 4,000 0 D 2,000 2,000 E 1,000 1,000 Total 10,000 6,000 Stockout frequency = 20% Fill rate = 60% Performance-cycle speed: elapsed time from when an order is placed until shipment arrival Consistency: ability to meet the expected delivery time over a large number of performance cycles Usually more important than speed for the customer
Positioning examples
UPS vs. FedEx? UPS was not very fast at first (eventually steals FedEx's idea of overnight del) and was a trucking company with planes, FedEx comes later with the idea of being FAST (overnight delivery) and is a plane company with trucks Enterprise vs. Avis? Enterprise picks you up, Avis does not Bud vs. Miller? these products are pretty much the exact same so positioning just depends on marketing! American vs. Japanese Automakers? American quality goes down in the 70s and Japanese quality goes up and continues to go up Traditional Supermarkets vs. Aldi and Trader Joe's? Traditional supermarkets are pretty much all the same price/product/quality and there is often a perception with national brands (but you always pay more) Aldi and Trader Joe's have private label goods (not name and national brand) usually a LOT cheaper but really lower in quality and stores make more $$ off of these, Aldi competes with supermarkets and TJ competes with Whole Foods
Guarantees
Usually on a physical/tangible product Carry a powerful marketing message and become a powerful source of competitive advantage Push the provider to focus on the customer's definition of good product performance or service Set clear performance standards that boost employee performance and morale Generate reliable feedback data (through payouts) when performance is poor Without a guarantee, customers won't complain, or return ex: Domino's 30 mins or less or it's free
Grocery Industry
Who are the leading North American retail grocery chains? What are traditional supermarkets doing?
Loading
a company will boost its sales by creating discounts if you discount a product enough, sales will increase but that's BAD because your profit will decrease and customers will get use to this price
technology
a tool that helps you solve problems, doesn't necessarily have to be complex
airlines (service operations)
another example of OM back-to-front, reverse pyramid system (US Airways), the WILMA (window first, then middle and then aisle, Delta and United) Minimizing time on the ground=the planes can get back in the air faster=generating more revenue airplane boarding with Southwest: buy ticket, depending on when you check in is what group you're put into, their solution is SIMPLE bc the customers do the work for themselves
operations
behind the scenes BUT fundamental, associated with running a factory and making products
Diverting
buying and reselling without telling the original seller, not illegal unless there's a contract against it *can have consequences in S.C. Exceso won't know what's going on and they'll lose money business practices like diverting naturally lead to information distortion and hence the Bullwhip Effect Flemings is diverting with Regency Brands (they're a new customer and they want a big order, 9% discount is what they want) can lead to the bullwhip effect
Coping with the bullwhip effect
centralize and share (point of sale) info to reduce variability and uncertainty a "fix" in telephone strategic alliance with supply chain partners employ channel alignment strategies like vendor managed inventory (VMI) - more later Reduce lead times using EDI (electronic data interchange) and cross-docking like WM - more later Break order batches by reducing ordering costs with EDI, and using LTL service providers for small orders - more later Stabilize prices using ideas like Everyday Low Pricing (EDLP) like WM
integrative framework for Amazon
customers (external): require internet based technology and knowledge, people who purchase books, CDs, etc. online products: Amazon provides both products (Books, CDs, etc. that are eventually delivered) AND services business process: searching, delivery, payment, download participants: employees, suppliers, external customers, People who order products online, Order fulfillment departments of vendors, Order fulfillment departments of Amazon.com information: customer and order data (id #s, addresses, credit card #s) technology: computer used by customers and computer networks used by Amazon
Why ERP
customized, high end furniture low volume, high margin Billy=production manager Reasons to look into ERP: "Lost" desk= lack of communication, loss of visibility Mr. McDougle is considering buying his brother's Ohio plant and wants to integrate the 2- merger Forecasting issues Mr. McDougle has been hearing about this for a while Billy is very skeptical Amanda= consultant, knows a lot about ERP ERP: role of processes, best practices, departmental functions
parallels
exact same stations, should be used at bottlenecks
Zara
fast fashion, locates close to retailers, merchandise is air-shipped to the US (very quick) uses RFID tags for: inventory management (checking front and back, quick, with fewer employees) deactivation of tag is very important so they are attached to security tags so when you take one off at checkout you take both off checkout is much faster, you don't have to be as close to a scanner now
batching
helps increase speed and decrease cost ex: TootsieToy blocks ex: classroom
E-commerce Amazon vs Walmart
is bricks and clicks a good idea? Nordstrom uses it as an advantage (shoe inventory on both for example), Blockbuster saw it as a disadvantage because it was only physical at first and Netflix has online/ dvd operations E-commerce and Walmart: consumers buy small amounts of things shipped to their house, this is expensive and NOT what WM wants, they are use to volume and big in store purchases, WM is not the WM of the internet, WM of the internet is Amazon E-commerce and Amazon: WM can have WM.com products shipped to a store in 24 hours and Amazon can't, peapod vs instacart (just a delivery service)
operations management
management of processes to make and distribute the products and services of a business (simple definition: performing work)
postponement
mass customization performs final production processing like packaging and labeling on generic products Reduces risk by postponing final production until actual demand is known Reduces finished goods inventory Practitioners of postponement: HP: "localization" of power supplies and packaging materials for DeskJet Printers was performed at the DCs in the local markets Dell: completion of customized orders was performed at the assembly facilities Smart Car: addition or exchange of modular color panels was performed at the dealers
Vertical integration
occurs when a manufacturer owns its suppliers and/or distributors, and results in tight control of the supply chain by the manufacturer (at great expense) While no longer popular, some businesses are actually Amazon, Google
bottleneck
occurs when demand is greater than the capacity to serve
Warehouses
p much the same as distribution centers Warehouses are facilities that store inventory Distribution centers are warehouses that perform more complex logistical functions ex: Home Depot cross docking: receives multiple inbound shipments from producers, sorts, and then consolidates (combines) smaller shipments into a higher-volume shipment to a customer Little or no storage of product For which leading retailer is cross-docking a critical feature of its SCM strategy? Walmart WM distribution center= different than GDay, trucks can be borrowed from both sides shipping and receiving at opposite ends= straight through design (GDay) WM uses huge regional distribution centers to receive shipments of merchandise from suppliers, receive orders for merchandise from its stores, make up orders for the stores, and load and ship orders to the stores - reduces the need for warehouse space at stores
participants, information, technology
participants: people who perform work information: data such as facts, images, or sounds whose form/content are appropriate for particular use technology: tools that let someone perform work directly and use info
Beer distribution in the US
politics are involved prohibition in the 20s lead led to the 3 tier system (brewer, distributor who owns the trucks, retailer) which forces brewers of the mass brands to break down, protect consumers of big brewers tide house: Goose Island (Bush owns them now) brewer owns retailer but it's okay because of low volume
business processes
related groups of steps or activities that use people, information, and other resources like materials and facilities to create value for internal or external customers ex: registering for a class internal: employees external: customers
Other quantitative approaches
short-range methods for time series where planning time horizons are so short that trend patterns and seasonality have little effect They "smooth out" random variation (noise) leaving nonrandom (systematic) variations still visible A naive forecast for any period equals the previous period's actual value (simple, pick best option and use it to average) One past data value is averaged Advantages: cheap, and easy to understand. Disadvantages: too simplistic, and can result in large forecast errors
Distribution
sits between manufacturers and retailers (aka intermediary) how are products distributed to grocery stores? direct store delivery (soft drinks, beer) sysco delivers to restaurants Cardinal health delivers medical supplies to hospitals Graybar Electric distributes communications and electrical gear W.W. Grainger distributes maintenance, repair, and operating (MRO) supplies to industrial firms Granger and Amazon Supply (MRO) distribution has to add value or else companies won't use them! Intermediary in the supply chain Responsible for storing products and moving them between the producer and the customer Serves as a buffer to absorb fluctuations from sources of demand Without the distributor, the producer faces demand fluctuations, which can make production more expensive Advances in information technology are changing the role of distribution Dell, enabled by the WWW, sold directly to the customer and eliminated the role of traditional distribution (also known as drop shipping)
process flow diagrams
supplier-->firm-->customer firm consists of: product design-->production<--sales delivery service
supply chain
supplier-->producer-->distributor-->retailer-->customer Collections of organizations that work together to bring products to market to consumers Producers (manufacturers), distributors, and retailers that work together to bring products to market to customers Distributors and retailers typically make the marketing process more efficient by reducing the number of market contacts Manufacturers often assemble parts made by other manufacturers (suppliers) *effectively working together= saving $$$ ex: Dell and Walmart
Mean Absolute Deviation (MAD):
the average distance between each data value and the mean where n is the length of the evaluation period The smaller MAD is, the more accurate the forecasting model is For example, select different APs for moving average forecasts, and then choose the one that results in the smallest MAD
integrative framework for thinking about any business
triangle with participants, information, and technology (the business process) on the bottom, products in the middle, and customers on top *The customers are the most important