SCM Exam 1
what is a process?
A system of structured activities that use resources to turn inputs into valuable outputs.
Customer in SCM
refers to customer firms; ends at retail
What is the most expensive part of a supply chain?
last mile delivery
what are the 4 elements of SCM
Supply, operations, logistics, integration
system nervousness
System nervousness - the undesirable situation in a manufacturing or supply chain system where frequent changes in production plans or schedules result in inefficiencies, increased costs, and instability. when the system reacts to minor fluctuations in demand or supply, causing constant adjustments and disruptions.
types of market orientations
Engineer to Order (ETO): unique, customized products house, spaceship... (AFTER) Make to Order (MTO): similar design, but customized during production custom suit... have some in-stock materials/raw materials, but not fully made until after order. (AFTER) Assemble to Order (ATO): produced from standard components and modules pen+cap+ink... assemble together (BEFORE). Make to Stock (MTS): goods made and held in inventory in advance of customer orders everything in a retail store! Just make them and put on shelves, "in-stock" all the time (BEFORE)
product process matrix-- examples
HIGH VARIETY, FLEXIBILITY, COST; LOW VOLUME Project Custom house; software; spaceship; video game Job Shop Salon; barber shop; auto shop Batch Cupcakes; Movies; Lecture Repetitive Process iPhone assembly; Buffet; FoxConn Continuous- pipeline Gas, water, electricity Continuous- some customization Invisalign, NIKEiD HIGH VOLUME; LOW VARIETY, FLEXIBILITY, COST
The Seven Wastes (Muda)
Overproduction Waiting Transportation overprocessing excess inventory excess movement scrap & rework
Cost categories of COQ
Prevention Costs Costs associated with preventing defects and limiting failure and appraisal costs (e.g., training, improvement projects, data gathering, analysis) Appraisal Costs Costs associated with inspection to assess quality levels - some problem already happened, set up a plan (e.g., staff, tools, training, etc.) Internal Failure Costs Costs from defects found before delivery to the customer - something major wrong, the actual costs of icing the issue (e.g., rework, scrap, etc.) External Failure Costs Costs associated with defects found after delivery to customer (e.g., warranty, recall, etc.)
lean management vs six sigma
Six Sigma= focus on eliminating errors/variations , improving quality Lean= focus on eliminating waste or unnecessary products Both- reduce costs!! But from different perspectives Both use - High quality input materials, WIP, and finished goods Continuous Improvement (Kaizen) ***Lean and Six Sigma use complementary tool sets and are not competing philosophies
5 S's of Lean
Sort Set in order Sweep Standardize Sustain/self-discipline
TQM inverted view of management
TQM has a bottom-up view**values employees contributions bc they understand the product best! they can spot mistakes and quality issues in real time. employee feedback then trickles up
Total Quality Management (TQM)
TQM: A "Holistic" View of Quality an integrated business management strategy aimed at embedding awareness of quality. Interconnected relationships between functions! The word total has important connotations: A product's quality is determined by customer's acceptance and use- is the customer satisfied? Quality management is a total, organization-wide activity, rather than a technical task Quality improvement requires a total commitment from all employees and suppliers Prevention Over Inspection- rather prevent than have to fix things
product innovation
creating new or improved products or services that meet customer needs in novel ways. Aims to introduce unique features or designs that differentiate a product from existing offerings. Example: developing a smartphone with advanced features that weren't available in previous models **mostly from launch----maturity
End consumer in SCM
customers like us... individual ppl
market orientation-- align with process structure
determines if a product should be designed, produced, or assembled before a customer order is placed or after the order is placed This is from the manufacturer's perspective... ikea is MTS because customers are assembling, NOT the manufacturers. Inventory is on the shelves!!
bill of materials
document shows an inclusive listing of all component parts & assemblies making up the final product - shown in various levels
Ultimate source of income for firms in a supply chain
end consumers
supply chain management
the management of the process that converts raw material into products on shelf "The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities ... also includes coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers."
end-consumer behavior
the ripple effect of central gov policy to end consumer behavior: consumers in China will not buy seafood rn; retailers/manuf have to find a different source; Ppl in China are rushing to buy SALT bc made in the ocean Increase demand in salt- salt is now more expensive !
Last Mile Delivery
the warehouse or store (distribution hub) to your front door, aka the final part of the supply chain. When you purchase something to be delivered to you, the end consumer... the last final step. From the Amazon fulfillment center to your door.
What is BPI and what are tools to improve business processes?
BPI= the analysis, review, and improvement of existing business processes TOOLS: Cross-functional team- join together ppl from diff departments Flow charts Value stream mapping Current state Future state
EVERY PROCESS HAS A CONSTRAINTi internal bottleneck serial/sequential vs parallel structure
Bottleneck: any place where demand ≥ capacity; this limits the ability of the process to generate output Constraint defines the maximum capacity you can do as a manager A constraint or "scarce resource" ---A facility (too small), a department, a machine (that breaks down), a skill type, etc. ---Defines the maximum capacity of a system Serial/Sequential Structure: processes occur one after another Parallel Structure: two or more processes occur simultaneously
CONTINUOUS IMPROVEMENT OF PROCESSES
Can use BPI and do not stop... you will always have constraiast to deal with. Leverage your BPI tools!!
PROCESSES MANAGED AS SYSTEMS
Changing one element of a process may affect other elements, sometimes in unexpected ways. Process elements are interdependent Activities Inputs/outputs/flows Process structures Management policies *** Processes are interconnected!! Hiring - join your team- impact your team's operations
what are the hierarchy of strategies?
Corporate level - goal & type of business (which industry- food manuf) Business unit level - products & services (what product- cat food) Functional level - department-focused (accounting, marketing, finance strategy,)
current trends TODAY in scm
Emphasis is being placed on the environmental and social impacts of supply chains Sustainability - ability to meet the needs of current supply chain members without hindering the ability to meet the needs of future generations; leverage interfirm activities to ensure we have a long-lasting business and societal impact Triple bottom line - taking care of people, planet and profits (social, environmental, governance/financial)
planned order releases
(most important output of MRP) - when and how much of a particular item should be produced or purchased to meet the demand or replenish inventory levels Release date of your product
what are the problems with traditional organizations?
***Dont usually think about processes- they think about budgets/inputs ---Inventory builds up at functional boundaries ---Pipeline costs are not transparent ---Functional boundaries impede process management Traditional organizations present many faces to the customer Lack of process thinking!!! Process management ≠ budget-driven and input-focused operations Most managers DO not use process management
Material and Resource planning
- process of determining the production capacity required to meet demand; tries to balance company's capacity with demand
product process matrix-- with technology, we get 2 other categories:
1. Cellular Manufacturing: the production of products with similar process characteristics on small assembly lines called cells; used to increase flexibility --Low flex, variety, volume, and cost. --Does not produce a lot, but pretty standard. EX: Produce healthcare products: sometimes you produce needles, sometimes medical plastics, sometimes gowns, etc. Use for products that are new and not really used yet **If demand is high enough, can become a repetitive process 2. Mass Customization: Advances in technology like 3D printing, robotics, or flexible manufacturing systems (FMS) allow for mass customization at a lower cost Can 3D print a pair of frog earrings! You can totally customzie them, but produce however much you want
what is OM
= is the administration of business practices to create the highest level of efficiency possible within an organization. It is concerned with changing materials and labor into goods and services as efficiently as possible to enhance the profit of an organization -A part of SCM; 1 sub-element of SCM (there are 4!) -OM is the middle part of the supply chain where the end product is created from supplies -Get supplies- turn into products OM is how you make the product... SCM is about how you get the materials, make the product, and get it to consumers Focus: your own internal performance considering your KEY suppliers & customers OM is the focal firm and center circle. Consider your own performance, your supply, and your demand. About how the focal firm supplies and competes ***OM focuses on a set of processes of converting resources into products and services
Cost of Quality Analysis (COQ)
A systematic approach used by organizations to assess the financial impact of quality-related activities and issues within their operations Breaks down quality management into categories of costs The primary purpose of CoQ analysis is to understand the total cost associated with achieving and maintaining product or service quality. It involves categorizing quality-related costs into specific areas to identify opportunities for improvement and cost reduction :::
describe the three business level strategies according to Porter
Cost leadership strategy Requires an organization to pursue activities that will enable it to become the low-cost producer in an industry for a given level of quality. ----Walmart (low cost) Differentiation strategy Entails an organization developing a product and/or service that offers unique attributes that are valued by customers and that the customers perceive to be distinct from competitor offerings ---Apple (compete by innovation) Focus strategy Concentrates an organization's effort on a narrowly defined market to achieve either a cost leadership or differentiation advantage. Does not target all industry ----IKEA (young professionals recently having own home)
key reasons to employ SCM
Cost savings, better coordination of resources, and alleviate bull whip effect
ERP
ERP Systems- what we call MRP now Enterprise Resource Planning Systems (ERP) - integrates internal operations with a common software platform & centralized database system Integrated MRP system, when we have different MRP systems in different departments; we integrate and share information from them Use sales records to predict how many orders to prepare for Log into ERP syytem to find out immediatley Sales people can log in and check how many prouct will be avaliable at a certain time
high quality innovators-- product
Fewer issues launching products and fewer failures Effectively satisfy customers for higher brand loyalty Slower more gradual innovation E.g.: Toyota is renowned for its emphasis on quality. The Toyota Production System has allowed the company to consistently produce reliable vehicles with fewer defects.
efficient innovators- process
Fund more new design and development projects Sell at lower prices, or have lower break-even quantities E.g., Amazon is a prime example of an efficient innovator. The company is known for its continuous stream of product and service introductions, from Amazon Prime to Amazon Web Services (AWS) and Kindle devices. By optimizing its supply chain, warehousing, and delivery processes, Amazon is able to offer competitive prices and rapid delivery, while also funding new projects and ventures.
fast innovators-- product
Get to market quickly React quickly to competitors' actions More continuous stream of product introductions E.g.: Apple is known for its rapid product launches. When the company introduced the iPhone, it quickly became a market leader, capitalizing on being one of the first to offer a touch-screen smartphone. EX: Zara, a fast-fashion retailer, is known for its quick turnaround time from design to store shelves. They react swiftly to new fashion trends and changes in consumer preferences.
what is the background of lean management? what is the goal/components involved?
In 1990s, supply chain management combined: Quick response (QR) - speed and flexibility within a supply chain Just-in-Time (JIT) - Continuous reduction of waste; continuous flow of product Keiretsu Relationships - partnership arrangements These approaches have emerged as philosophies and practices known as Lean Production (or Lean Manufacturing)
extended supply chain
Includes second or third tier suppliers/customers... looking more broad and outside the scope of just your business and its direct suppliers
Theory of constraints benefits
Increased profit; fast improvement in operations; improved operational capacity; smoother/faster product flow; reduced inventory
process related competitive priorities
Innovation: radical and incremental changes in products and processes Flexibility: ability to respond efficiently to changes in products, processes, and competitive environment Sustainability: maintaining operations that are profitable and nondamaging to society or the environment
uber eats scam-- what does this tell us about process/constraints?
Innovative process, but has a constraint/bottleneck Humans naturally are selfish and take risks **A process can be as innovative as possible, but if there is a constraint, it will not perform well constraint= human labor
what is an asset light business model and why is it important?
Intangible assets are 90% of SP500 total assets... this is the direction that companies are going in! Companies do not want to hold onto many tangible products themselves Easier to manage, transfer, and provide intangible assets --Pay less taxes --Less costs --Lots of inventory costs! Depreciation...Until a product is purchased, it is a cost Leverage suppliers and customers- spread out your assets. You can have your suppliers deliver your products. You as a business should save money on warehouse costs and outsource the managing of products/warehouses to a diff company
WHat do QR codes and barcodes help with? Where did they come from?
Japan invented QR/barcode --island= limited resources= found a way to be efficient and make lots of products with little waste/space Textile Industry: (core that popularized QR) large volume sizes; SKUs (stock keeping unit)-- each item and size represents a SKU, a unique identifier of a distinct product. Can be hard to keep track of! QR helps solve this seasonality-- change in fabric needs quality: high vs low end ***helps reduce labor input bc you do not need to keep track of inventory by hand! Can scan items in via SKUs
Juran's Law
Juran once observed that 15 percent of operational problems are the result of human errors; the other 85 percent are due to systemic process errors. To improve operations, we should focus our attention on processes first. Human Error (15%) + Systematic Process Error (85%) = Problems (100%)
what are the three keys to developing an operations strategy?
Key Customer: key revenue source for a business (functional) Capabilities: what a firm does well; defines types of problems a firm can proficiently address (business unit) Value Proposition: tangible and intangible "benefits" that a business offers (corporate strategy) ----A statement of product or service features- a slogan/motto Demonstrates competitive priorities (product related; process related) ----E.g., Save Money. Live better.
how does lean management impact the envrionment?
Lean green practices have a societal impact- Reduce waste!! Reduce the cost of environmental management Lead to improved environmental performance Increase the possibility that firms will adopt more advanced environmental management systems
japanese terms of lean production... the goal & ways to achieve it
Muda - waste in all aspects of production **REDUCE 7 MUDA TO HELP REDUCE MUDA: Kanban - signals to youR upstream supplier how much product you will need at what time; how you keep your JIT inventory flowing in properly; Poka-Yoke - error or mistake-proofing/prevention; PREVENT > INSPECTION; ***Yokoten - "across everywhere", sharing of best practices with suppliers and customers to make a supply chain leaner; bring your suppliers and customers in!
3 tiers of operations planning
Long-range - Aggregate Production Plan (APP) usually covers a year or more, involves the construction of facilities & major equipment purchase/where should we source Intermediate - plan spans six to eighteen months. Shows the quantity & timing of end items (i.e., Master Production Schedule - MPS) Short-range - plan covers few days to few weeks. Detailed planning process for components & parts to support the master production schedule (i.e., Materials Requirement Planning - MRP)
benefits of SCM
Lower purchasing & carrying costs Better product quality Higher customer service levels Increased sales and profits
what makes SCM successful
MANAGERIAL UNDERSTANDING OF THE INTERDEPENDENCE AMONG FIRMS Successful supply chain management requires high levels of trust, cooperation, collaboration, and honest, accurate communications All participants in the supply chain benefit. Boundaries are dynamic and extend from "the firm's suppliers' suppliers to its customers' customers (i.e., extended-tier suppliers and customers)." Supply chains also include reverse logistics activities to handle returned products, warranty repairs, and recycling; aka 3PL Need a broad supply chain view bc it encompasses many other realms of business. Misaligned supply chains? Better communication; integrated and interconnected technology; find a backup supplier; use a closer supplier- nearshore. (bring suppliers to closer countries/regions)
Which of the following statements accurately describes the role and scope of Operations Management (OM)?
OM involves designing, executing, and enhancing processes to create value.
ATP QUANTITY FORMULA
ON-HAND INVENTORY + SCHEDULED RECEIPTS - CUSTOMER ORDERS
PROCESS STRUCTURE competitive priorities? competitive advantage?
Process structure determines how inputs, activities, and outputs of a process are organized Within a supply chain, each organization must select the process structures that fit its unique competitive priorities! Should get get materials first? Speak to suppliers, give instructions? Etc. Competitive priorities refer to the strategic objectives and areas of focus that an organization identifies and emphasizes in order to achieve a competitive advantage in the market- PRIORITIZE COMP ADVG... WHICH TO FOCUS ON Competitive advantage refers to the unique strengths, attributes, or capabilities that set a business or organization apart from its competitors in a way that allows it to outperform them consistently
supply chain
Process that converts raw material into products on shelf (in a retail store available for your purchase)
service process matrix
Professional services: lawyers, doctors, consultants, accountants Service factory: trucking companies, airlines, hotels- massive, standardized services Service shops: automobile repair shops and hospitals, hair salons- smaller, more customized services Mass services: retail banks, gas stations, and other retail outlets- retail, offer inventories that are already there in hand
Six Sigma
Quality improvement through elimination of defects and variation aims to achieve near-perfect quality by targeting a defect rate of fewer than 3.4 defects per million opportunities (DPMO) Companies set this as their quality standard!! Standard Deviation: statistical measure of variation As the standard deviation decreases, the process becomes more stable and predictable, which leads to fewer defects and higher quality.
product related competitive priorities
Quality: fitness for consumption in terms of meeting customer needs and desires Timeliness: delivery or availability when customer wants Cost: expenses incurred in acquiring or using the product
A supply chain is the flow of products and services from...
Raw materials manufacturers (rubber, metal) Component and intermediate manufacturers (WIP) (glass, doors) Final product manufacturers (center/focal firm- make the car in here) Wholesalers and distributors (warehouse) Retailers
PERFORMANCE MEASURES = CRUCIAL TO PROCESS SUCCESS
You cannot improve anything until you can measure it Use performance measures to improve your process and eliminate constraints STRATEGUC PROFIT MODEL
traditional management vs SCM
Traditional organizational cultures emphasizes short-term, internal company performance. Focus on performance of marketing dept, manuf dept, accounting dept., etc. everyone minds their own business Successful supply chain management requires high levels of trust, cooperation, collaboration, and honest, accurate communications --All participants in the supply chain benefit. --Boundaries are dynamic and extend from "the firm's suppliers' suppliers to its customers' customers (i.e., extended-tier suppliers and customers)." Need a broad supply chain view bc it encompasses many other realms of business.
De Minimis
a rule or exemption made by the US government; rule exempting packages valued at $800 or less from tariffs as long as they are addressed and shipped to individuals in the US Shein found a loophole... ships products directly to end consumers so that no one has to pay the tariff!! If they shipped bulk products to a warehouse or retail store, they would have to pay
ISO 9000
a set of international standards that provide guidelines for quality management systems. Companies can get this as a certification after they apply. ISO 9000 requires: fulfilling the customer's quality requirements, and- meeting applicable regulatory requirements, while enhancing customer satisfaction, and achieving continuous improvement of its performance in pursuit of these objectives
bullwhip effect
a supply chain phenomenon describing how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer and raw material supplier levels. biggest issue for any SC firm
what is lean production & where was it created?
an operating philosophy of waste reduction & value enhancement & was originally created as Toyota Production System (TPS) by key Toyota executives **focus= reduction of wastes to reduce costs
independent/dependent demand items
independent demand is demand for a finished product, such as a computer, a bicycle, or a pizza. D ependent demand, on the other hand, is demand for component parts or subassemblies. For example, this would be the microchips in the computer, the wheels on the bicycle, or the cheese on the pizza. Quantities for dependent demand are derived from independent demand, which we call the "parent."
the key of SCM
interfirm activities integration
process innovation
involves finding new and improved ways of performing tasks, activities, or operations within an organization. Aims to enhance efficiency, reduce costs, streamline workflows, and optimize resource utilization. Example: adopting Six Sigma principles to minimize defects in production ***mostly from maturity----decline
VARIANCE CONSUMES CAPACITY- external
refers to the idea that variations or fluctuations in processes, inputs, or outputs can lead to inefficiencies and decreased utilization of available resources or capacity. External- uncertainties, consumer demand, etc - identify the controllable and uncontrollable variants Bullwhip effect!! Consumers have fluctuating demand, so the operations of SCM companies become inefficient. Further from customers= need to stock up MORE!!!--
quality management
refers to the systematic strategies that organizations use to ensure that their products or services consistently meet or exceed customer expectations in terms of quality, reliability, and performance
lead time + what might it be for different market orientations?
refers to the total time taken for a business to deliver an order after receiving it. The moment you place an order until it is delivered to you. Manuf: when you place a raw material order— delivered to your factory can take MONTHS EX: ETO is a high lead time bc you do not even know what to order for a while!! MTS has zero lead time... no order or delivery gap, since you can just walk in and get a process.
focal / center firm
the company in the middle... the end product manuf (Toyota making the cars) suppliers to the left, customers to the right
what is process thinking?
views activities in an organization as a collection of processes --Operational activities should be viewed as a whole --Operations managers design, document, manage, and change business processes --With a goal of ensuring desired results --If the outcome is not ideal, change the process
Phantom inventory
when something gets stolen, you are not immediately aware of it. Thus, your inventory records still show that they are available; == products that show up on your books/records, but are not actually in your warehouse. You cannot track down these items
Intermodal transportation
when you unload the containers/products from the ocean to a train to be sent across the US. When you use multiple modes of transportation- train, truck, plane, boat
product life cycle
• Launch: introduction into the market • Growth: increasing demand, more data from customers, increasing standardization and streamline supply chain inventory flow • Maturity: demand and product stabilization, increasing importance of cost, process innovation to increase supply chain efficiency- market saturated - iPhones rn • Decline: changing technology or customer needs, declining demand, potential phase-in of a replacement product
list: theory of constraints
• P1: Every process has a constraint • P2: Every process contains variance that consumes capacity • P3: Every process must be managed as a system • P4: Performance measures are crucial to the process's success • P5: Every process must continually improve
managerial issues in OM
• Understanding and implementation of SCM • Process management (structures, innovation, and capacity) • Quality management
