supply chain: exam three

what is the primary result of this increase in distance and geographic complexity?

1. increase in lead time 2. security issues 3. potential for delays and disruptions

MRP inputs

1. master schedule 2. bill of materials 3. inventory records

characteristics of an enterprise resource planning (ERP) system

ERP helps companies share data and planning across internal functions. The planning processes across all business functions can be integrated and consistently applied by using ERP. The goal of ERP systems is to allow business processes to function seamlessly and in unison.

malcolm baldrige national quality award

an award given by the President of the United States to organizations judged to be outstanding in specific managerial tasks that lead to improved quality for both products and services

rough-cut capacity planning

an estimation of the availability of the critical resources needed to support the MPS

the BOM is shown as

an indented list, or as a product structure tree-like diagram. - it includes a list of all its raw materials, parts, and subassemblies. - it also shows the sequence of assembly

third-party logistics (3PL) provider

an independent logistics provider that performs any or all of the functions required to get a client's product to market *common term used in the industry to describe ISPs*

materials requirement planning (MRP)

an inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer - computes demand for dependent items

periodic order quantity (POQ)

an order for an amount that covers a fixed period of time

lot-for-lot (L4L)

an order for the exact amount needed

fixed order quantity (FOQ)

an order for the same amount each time

automated storage and retrieval systems

computer-controlled systems that use robots to automatically select, find, retrieve, and convey product items from storage bins to loading docks

conformance quality

degree to which the product or service design specifications are met

perfect order

delivered without failure in any order attribute - complete - on time - damage free - documentation correct

supply managers

description of purchase requirements, selection of suppliers, establishment of contracts and associated incentives/penalties, management of and interactions with suppliers

manufacturing and service operations managers

design and execution of processing procedures, design of work policies, interactions with customers, management of facilities/equipment, scheduling of work

engineer to order (ETO)

design and make to customer specifications

human resources managers

design of hiring criteria and training, setting of compensation schemes and incentives

process engineers

design of manufacturing/service processes, choices of tech and capacity limits, design of quality assurance tests

product engineers

design of product specifications, service elements and dimensional tolerances, design of product prototyping

inventory records

contains information about inventory including amount on hand - identify the type and number of products on hand for sale

economy of distance

cost per unit traveled decreases as distance moved increases - longer distances traveled allow fixed costs to be spread over a larger number of miles

to determine the planned order release for each period

count backward from planned order receipt using the lead time - the amount of an item that is planned to be ordered in a period

private carrier type

firm owns its own equipment

cost-to-cost trade-off

increasing the cost of one logistics activity reduces the cost of another (upgrading a machine i.e.)

MRP inputs and outputs

inputs include forecasts, product data, inventory information, and lead-times. CRITICAL they are current and correct.

customer service

involves specifying the firm's commitment to availability, operational performance and reliability - order winners, qualifiers and losers - meeting or beating competitor levels - link to competitive strategy - link performance to customer satisfaction

transportation service selection

involves: cost related to transportation itself, cost of inventory while in transit, service requirements related to speed, availability and so on

total quality management (TQM)

is an integrated management business strategy aimed at embedding awareness of quality in all organizational processes. - Product's quality is determined by customer's acceptance and use

available inventory

is the quantity of inventory available at the end of a time period available inventory = available inventory at the start of the period +scheduled receipts +planned order receipts -gross requirements

break-bulk

it is the splitting of a large shipment into individual orders and arranging for local delivery to customers.

fill rate

measures the impact of stockouts over time or over multiple orders from customers

customer satisfaction

meet or exceed customer expectations - reliability - responsiveness - access - communication - credibility - security - courtesy - competence - tangibles - knowing the customer

quality management

organization wide quality focus (intensive use of managerial and statistical tools) on quality - affects cost, lead time, customer perceptions and corporate reputation

service reliability

performance of all order related activities error-free - if a firm has 97% reliability on four attributes, the probability of a perfect order is .97x.97x.97x.97 = 88.5% - numbers go down quickly if you have more and more attributes

PCDA

plan - define the problem; do - implement and collect data; check - monitor results; act - if successful, follow the new standard. take corrective action

logistics management

planning, implementing, and controlling the efficient and effective flow and storage of products and information from the point of origin to consumption to meet customers' needs and wants

value-added services

providing additional value to the customer, such as postponement - any work that creates greater value for customers by creating customized features or configurations

final customers

purchase products in their finished form

intermediate customers

purchase raw material or wholesale products before selling them to final customers - who operate as distributors, brokers or dealers between the supplier and the consumer or end user

six sigma

quality improvement through elimination of defects and variation - management program that seeks to improve the quality of process outputs by identifying and removing the causes of defects and variation in the various processes - small standard deviation - six sigma will produce at most only 3.4 product defects per million outputs at 12 standard deviations apart

RFID

radio frequency identification, similar to barcodes - electronic tracking of material

reverse logistics

the area of logistics that involves bringing goods back to the manufacturer because of defects or for recycling materials. - materials move upstream

infinite loading

the assumption that there is an infinite amount of capacity available

product availability

the capacity to have a product or service present when and where it is desired by a customer

materials handling

the physical handling and movement of products in warehousing and transportation - increases cost and risk of damage

network design

the process of gathering together and planning the layout for the equipment needed to create a network. - most impact on supply chain operations - determines the number and location of facilities *number of locations is determined by balancing inbound and outbound transportation costs*

MRP determines

the quantity and timing of requirements for all components needed to make related products

scheduled receipts

the quantity that has been ordered but not yet received - total quantity of items from when the orders are placed in the past and due to be delivered by the beginning of the period. "What and when we expect delivery"

value density

the ratio of a product's value to its weight

total landed cost

the sum of all product and logistics related costs

design lead time

the time interval needed to conceptualize, design, and test a new product

order-to-delivery (OTD) lead time

the time that passes from the instant the customer places an order until the instant that the customer receives the product

gross requirements

the total amount of an end item that is required

lead time

time between start and end of an activity

time bucket

time periods for planning

order lead time

time required to place an order for a product plus the time to schedule the order so that operations can begin working on it

procurement lead time

time required to source and arrive

what happens to the total transportation cost if the number of facilities is increased?

total transportation cost initially decreases and then increases again

transportation management

tradeoff decisions between cost & timing of delivery/customer service via trucks, rail, water & air *potential for long lead times/delays/security issues*

knowledge gap

understanding of customer needs

delivery lead time

warehousing and transportation to customer

materials packaging

decrease handling costs and risk of damage

contract carrier type

provide service only to select, contracted customers - UPS

common carrier type

provide service to the public with published rates - USPS

appraisal costs

result from inspections used to assess products' quality levels

prevention costs

results from efforts to prevent product defects and from efforts needed to limit both failure and appraisal costs

safety regulations (transportation)

safe for carriers and public, including increased emphasis on security from terrorist activity, ensures that transportation services are safe and sustainable

unit fill rate

% of ordered units delivered = total units delivered / total units ordered

values that characterize TQM

- holistic view of product quality and its impacts - emphasis on customer requirements - extended process view of operations - emphasis on prevention rather than inspection - disdain for variability

network design factors

- labor - proximity to suppliers and customers - cost of land and construction - taxes, incentives and regulations - infrastructure - quality of life for employees

factors affecting the success of TQM

-strong, charismatic leadership -trust between labor and management - crisis situation or compelling reason for change - adequate resourcing of training and improvement projects -clear well communicated uncomplicated change process -unquestionable success of early efforts

dimensions of quality for goods and services

1. *perceived quality* (subjective assessment of things indirectly associated with the product's attributes and knowledge of employee), 2. *performance* (the degree to which the product meets or exceeds certain operating characteristics), 3. *reliability* (length of time a product performs before it must be repaired / ability to perform the promised service dependably and accurately), 4. *aesthetics* (subjective assessment of a product's look / appearance), 5. *support* (competence of product support / willingness to help customers) , 6. *durability* (length of product life or the amount of use one gets before a product deteriorates), 7. *features* (presence of unique product characteristics that supplement basic functions), 8. *conformance* (the degree to which a product meets its design specifications) - have huge effects on customer perceptions of quality

MRP process

1. gross requirements 2. requirements explosion 3. net requirements 4. planned order receipt 5. planned order release

which of the following are the critical inventory decisions made by logistics managers?

1. how much inventory of each material item to hold 2. where in the supply chain to hold each item 3. how often to replenish each item

total view of quality

1. process-oriented focus on prevention and problem solving - prevention is cheaper than correction - problem solving is most effective when decisions are based on the analysis of actual data (rather than opinions) - variability is often the major source of problems in operations processes (causes unpredictability) → want to eliminate 2. viewing quality management as a NEVER ENDING QUEST - products and processes are continually changing and perfection is always a goal... process improvements are always appropriate 3. building an organizational culture around quality - values and behavioral norms that guide decisions

Warehouses must perform a variety of operations on a daily basis:

1. receiving and unloading 2. in-storage handling → goods must be moved to the desired destination within facility 3. storage 4. order picking → products removed from storage and assembled 5. staging → assembled orders moved to an area in readiness and loading into transportation 6. shipping

which of the following customer benefits does logistics fulfill?

1. service reliability 2. availability 3. lead-time performance

center of gravity assumptions

1. straight-line distances between all locations (in reality roads are not straight lines) 2. amount of demand is a good proxy measure of transportation cost, not always true 3. qualitative factors such a supply chain risk and labor availability are not considered

true statements about materials and requirements planning (MRP) outputs and their use

An exception report is generated if a major difference between actual performance and the MRP plan occurs. MRP assumes that parts produced or received from suppliers are defect-free and delivered as scheduled. MRP outputs include primary and secondary reports.

true statements about distribution requirements planning (DRP)

DRP is typically a module in enterprise resource planning system software. In DRP, inventory replenishment decisions are based on a time-phased schedule considering forecasts and actual orders. The output of DRP is used as input in operations and logistics planning processes.

primary activities of logistics management

Inventory management (How much, what form to hold each, how often to replenish, where in the supply chain to hold) Order processing (Reduce costs by ordering online) Transportation management distribution/fulfillment management Materials handling and packaging Logistics network design

true statements about materials requirements planning

It is used widely, especially in manufacturing. It is considered a push system. It uses a time-phased schedule that is based on lead time.

load profile

a comparison of production needs to actual capacity

bill of materials (BOM)

a detailed description of an "end item" and list of all of its raw materials, parts, and subassemblies

available to promise (ATP)

a field in the master schedule record that indicates the number of units that are available for sale each week, given those that have already been promised to customers. - planned production not already committed to a customer

inventory status file

a file that contains detailed inventory and procurement records (including scheduled receipts)

cross-docking

a form of warehousing in which large incoming shipments are received and then broken down into smaller outgoing shipments to demand points in a geographic area - combines break-bulk and consolidation activities

cost of quality (COQ)

a framework for quantifying the total cost of quality-related efforts and deficiencies - helps clarify the cost impacts of poor conformance quality - defect found in later stage is much more costly because more resources have been invested in the product

design quality

a measure of how well a product's designed features match up to the requirements of a given customer group

DMAIC

a six-sigma process: define, measure, analyze, improve, and control.

standard deviation

a statistical measure of variation/variability - low standard deviation = data points tend to be very close to the same value

basic service

a supplier's ability to provide product availability, lead-time performance, and service reliability - The right amount - The right product - The right place - The right time - The right condition - The right information

communication gap

actual performance and communications about performance

cost-to-service trade-off

as service levels increase, typically so do costs

assemble to order (ATO)

assemble to customer demand from generic subassemblies

customer success

assist customers in meeting their objectives

center of gravity method

attempts to find the lowest-cost location for a facility based on demand and distance

make to stock (MTS)

build and stock in anticipation of customer demand

marketing managers

choices of markets to pursue and product features to offer, design of advertising that communicate product to customers, development of new product testing programs

consolidation by market area

combine small shipments from one shipper going to the same area

advanced planning and scheduling (APS)

combines materials and capacity planning into one system - produces better plans, faster by avoiding disjointed iterative planning processes - helps managers to identify and avoid problems - allows managers to quickly evaluate alternatives and generate contingency plans

pooled delivery consolidation

combines small shipments from different shippers that are going to the same market area

consolidation

combining small orders or shipments into one larger shipment to take advantage of transportation economies - take advantage of economies of scale or distance

integrated service providers

companies that provide a range of logistics services

identify the two attributes of transportation economy of scale and economy of distance

cost & efficiency

internal customers

customer who is directly connected to an organization, and is usually (but not necessarily) internal to the organization - usually stakeholders, employees, or shareholders

satisfaction gap

customer's perceptions and expectations of performance

perception gap

customer's view of performance and actual performance

distribution requirements planning (DRP)

determination of replenishment and positioning of finished goods in the distribution network - when and how to supply finished goods at the right time to the right places in the distribution system - calculates the positioning and replenishment of finished goods inventories throughout the distribution network using logic similar to MRP - output of DRP is used as a primary input into operations and logistics planning processes

requirements explosion

determines how many additional units are needed

capacity requirements planning (CRP)

determines if sufficient resources are available (labor, equipment, space, suppliers, ...) - uses planned order releases and scheduled receipts to estimate work loads. Having too much or too little capacity can be problematic. Extra capacity increases holding and materials costs. Not enough need overtime or outsourcing.

scheduled delivery consolidation

establishing specific times when deliveries to customers will be made

containerization or unitization (packaging)

filling or creating a larger container from smaller ones

economic regulations (transportation)

government controls of the entry of new carriers, rates and services provided by transportation carriers

customer satisfaction limitations

happy customer does not equal satisfied/loyal customer

customer success requires a supplier to

have a long-term relationship focus gain comprehensive knowledge of customer needs consider the customer's customers adapt manufacturing and distribution

customer management

intense focus on understanding and providing customers with products/services they desire - customer success, satisfaction and basic service

standards gap

internal performance and customer expectations

types of customers

internal, intermediate, final

TQM organizational view

inverted view of management - employees, low-level management, middle, top management

customer service management

it requires an intense focus on understanding customer's desires and requirements, and translating this under specific operational capabilities and processes.

customer satisfaction model gaps

knowledge, standards, performance, communication, perception, satisfaction - gaps occur at differences between: (want to minimize the gaps)

make to order (MTO)

make to customer demand from raw materials and components

line fill rate

order lines filled in total = # if order lines delivered complete / total order lines

order fill rate

orders shipped complete = total complete orders delivered / total orders

quality dimensions

product quality, design quality, conformance quality, quality management

secondary reports

provide cost, inventory, and schedule attainment information that helps managers judge how well the operation is performing

internal failure costs

result from defects that are found in products prior to their shipment to customers (i.e. scrapped or excess material)

external failure costs

result from defects that are found only after products reach customers (i.e. complaints and loss of future sales)

primary reports

schedules of the planned order releases that trigger purchases and production of items in the proper time frame.

logistics managers

selection of transportation providers, development of tracking and other info systems, design of packing/storage/material handling processes, management of and interactions with transportation providers

finance and accounting managers

setting of restrictions for equipment purchases, establishing goals for utilization of facilities and capital

sales managers

setting of sales targets, interactions with customers, interpretations of customer needs and desires

enterprise resource planning (ERP)

software that consolidates all business planning systems and data - replaced old legacy systems - has multi-function capabilities - facilitates cross-functional coordination - saves time - reduces errors - enables better business decisions

MRP calculations are done using

software. - Supply Chain Managers need to know the mechanics in order to make good decisions using MRP outputs

master production schedule (MPS)

specifies how much of each product is to be produced during the planning period and when that production should occur (i.e. how many hair dryers of each type must be completed each week for the next quarter)

transportation mode info

speed → air is fastest availability → trucks dependability → pipes (running 24 hours) capability → boats frequency → pipes

transportation mode selection

speed, availability, dependability (variance in expected delivery times), capability (ability to handle any type of product and/or size of load), frequency (number of scheduled movements that can be arranged by a shipper)

performance gap

standard and actual performance

production lead time

start to end of production

customer relationship management (CRM)

technology-enabled data gathering about customers to develop strategic relationships - marketing - sales - support - orders

planned order receipt

the amount of an item that is planned to arrive at the beginning of a time period - These arrivals come from orders that are planned to be placed at the designated time in the future. "What we are actually going to receive in this time bucket."

planned order release

the amount of an item that is planned to be ordered in a period - when to place the order?

ISO 9000

the common name given to quality management and assurance standards - purpose is to ensure that operating processes are well documented, consistently executed, monitored and improved - fulfilling the customer's quality requirements, and meeting applicable regulatory requirements, while aiming to enhancing customer satisfaction, and achieving continuous improvement of its performance in pursuit of these objectives.

economy of scale

the cost per unit of weight decreases as the size of the shipment increases - less costly to move 10,000 pounds of product than 5,000 to the same given distance - due to fixed costs associated → spread over larger weight

independent demand

the demands for various items are unrelated to each other - demand created by customers

planning horizon

the entire time period covered by the MPS

net requirements

the minimum amount needed in the period - based on gross requirements minus the sum of scheduled receipts and available inventory at the beginning of the period.

dependent demand

the need for any one item is a direct result of the need for some other item, usually an item of which it is a part - demand is driven by demand of another item

product quality

the overall ability of the product to satisfy customer expectations - fitness for consumption in meeting customers needs and desires

trucks

virtually all goods are moved by these - 2nd place is rail then air then water then pipes