Supply chain management ch 2
Supply Chain management between
Focus on: - building strategic partnerships - corporate Social Responsibility (CSR) - Supply chain sustainability - Risk and opportunity management - accelerated pace of driven by the explosion of e-commerce
Types of quantitative data
time series and cause and effect. it is generally recommended to use a combination of quantitative and qualitative techniques
Simple linear regression
tries to model the relationship between a single independent variable and a dependent variable (demand) by fitting a linear equation to the observed data
time bucket
unit of time/ time period used in MRP (days, weeks, months
Simple moving average
uses a calculated average of historical demand during a specified number of the most recent time periods to generate the forecast
quantitative forecasting
uses mathematical models and historical data to make forecasts
Exponential Smoothing is well accepted for the following reasons
- VERY ACCURATE - relatively easy to formulate - the user can understand how the model works - little computation is required to use the model - computer storage requirements are small - tests for accuracy are easy to compute
time series forecasting model types
- naive forecast - moving average - weighted moving average - exponential smoothing - linear trend forecast
Advantages of Historical analogy
- potential to provide a significant amount of information that can be used, at least initially, to create a forecast for a new product - can be a relatively inexpensive way to create a forecast
disadvantages of customer survey
-poorly formed questions may lead to unreliable information - customers fo not always answer the questionnaire - it is time consuming and costly to survey a large population
two main reasons that companies implement supply chain management:
1. Achieve cost savings 2. better coordinate resources
the five qualitative models used are
1. personal insight 2. jury of executive opinion 3. Delphi Method 4. Historical Analogy 5. Customer Survey
Scheduled receipt
A committed order awaiting delivery for a specific period
Materials requirements planning (MRP)
A computer- based materials management tool that calculates the exact quantities, need dates, and planning order releases for all the components parts and materials required to manufacture a product
Total Quality Management (TQM)
A management approach to long-term success through customer satisfaction based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work . Everyone in the organization has to take ownership for quality.
production planning
A process to determine the overall level of manufacturing output to best satisfy the planned level of sales while meeting the company's profitability objectives
Which supply chain planning process is defined as a hierarchical planning process that translates annual business plans, marketing plans, and demand forecasts into a production plan for a product family in a plant or facility?
Aggregate Production Planning (APP)
Companies will continue to concern themselves with ongoing trends in the areas of
Artificial intelligence, internet of things, and blockchain
with the __ things are moving at internet speed in both the B2C and B2B markets
Explosion of e-commerce
All Cause-and-Effect Models focus on the impact of one independent variable.
False
Costs which cannot be trace directly to the volume of units being produced are known as variable costs (TF)
False
If you choose to pick your desired Enterprise Resource Planning (ERP) applications from the top vendor of each individual application, you are using the single integrator approach to selecting your ERP system. (TF)
False
The Chase Production Strategy sets a baseline production rate based on a stable core workforce, and then uses other short-term means, such as overtime, subcontracting and part-time labor to manage short-term fluctuations in demand.
False
The inventory turnover ratio shows how many times a firm turns over its inventory in an accountin period, and higher (i.e. more) inventory turnover is generally viewed as negative.
False
Supply Chain flow: Manufacturer
Finished product manufacturer in sourced and/or outsourced)
Inventory cost which are independent of the output quantity are called?
Fixed cost
Which of the following is NOT one of the basic types of forecasting
Force Field Analysis
Which one of the following is a type of qualitative forecasting?
Historical analogy
Supply Chain management between 1990 and 2000s
Introduction of new concepts, methodologies, and processes to enhance planning and control of the supply chain. Just in time, and Total quality management, Business process Reengineering (BPR), Collaborative Planning, Forecasting and Replenishment (CPFR), sales and operations planning (S&OP)
The process of converting a parent item's planned order releases into component gross requirements, is called?
MRP Explosion
Logistics Management
Managing all of the movement and storage of products and materials within the supply chain, whether the flow is forward or reverse - warehousing and distribution - transportation - international trade management - customer relationship management - service response logistics
Supply Management
Managing all of the supplies and suppliers that are needed to run the business - purchasing management - strategic sourcing - supplier relationship management
Operations Management
Managing internal ressources - forecasting and demand planning - planning systems - inventory management - Process Management
Companies establish Time Fences in order to?
Minimize the impact of changes and costly distributions
Foundations of supply chain management
Operations management, supply management, Logistics management, integration
The ___ in the supply chain continues to accelerate, and it's only going to get faster
Pace of change
Jury of Executive Opinion
People who know the most about the product and the marketplace would likely form a jury to discuss and determine the forecast - generally the panel conducts a series of forecasting meetings to discuss the forecast until the panel reaches a consensus agreement
Which inventory stock level is inventory that is already out in the market being held by wholesalers, distributors, retailers, and even consumers. The ownership of this inventory has been transferred to the trading partners, but may still influence decisions the company makes regarding how they manage and control their internal inventory.
Pipeline
Three types of supply chain flows
Product and Service glow, information flow, Payment flow, returns flow (not primary but in there)
Projected Available Inventory
Projected closing inventory at end of a period. Beginning inventory minus gross requirements, plus scheduled receipts plus planned receipts from planned order releases.
Which forecasting technique uses mathematical models and historical data to make forecasts?
Quantitative
What technology stores information on a small electronic device which van be attached to an object and read from up to several feet away, without the need for direct line of site?
Radio Frequency Identification
Supply Chain flow: Supplier
Raw materials suppliers, intermediate suppliers, finished material or service suppliers (external source of supply)
The lowest inventory level at which a new order must be places to avoid a stockout is known as?
Reorder Point
A type of inventory system in which inventory is only ordered for a one-time stocking is known as?
Single period inventory model
Supply Chain between 1970 and 1980
Starts to use production planning, materials requirements planning, manufacturing resource planning
Supply Chain flow:
Suppliers, Manufacturer, Customers
Personal insight
The forecast is based on the insight of the most experienced, most knowledgeable, or most senior person available - methods that include more people are more reliable
Enterprise Resource Planning (ERP) Systems allow supply chain members to share information so that scarce resources can be fully utilized to meet demand, while also minimizing supply chain inventories. (TF)
True
Sales and Operations Planning (S&OP) is a process that brings all the demand and supply plans for the business (sales, marketing, development, production, sourcing, and finance) together to provide management with the ability to strategically direct the business to achieve a competitive advantage.
True
The Master Production Schedule (MPS) represents what the company plans to produce expressed in specific product configurations, quantities, and dates. (TF)
True
The economic order quantity (EOQ) is the optimal order size because it minimizes the annual total inventory cost (TF)
True
The four broad categories of inventory are raw materials, work-in- process, MRO, and finished goods
True
The goal of supply chain planning is to balance supply and demand in a way that realizes the financial and service objective of the company. (TF)
True
The master production schedule represents?
What the company plans to produce
Supply chain between 1970 and 1980
When beyond their four walls and incorporate their supply chain partners into their planning activities (external collaboration) Intense global competition led U.S. manufactures to adopt supply chain management.
Supply Chain flow: Customers:
Wholesaler and distributer customers, retail customers, consumers
First tier
With whom you have a direct relationship
Collaborative Planning, forecasting and replenishment (CPFR)
a process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final product to end customers
safety stock
a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. over planning supply versus demand can be used to create safety stock
Planed order release
a specific order for a specific item and quantity to be released to the shop or to the supplier
Materials requirements planning
a time-phased method of determining what materials are needed and when they are needed to support the production plan
gross requirement
a time-phased requirement prior to netting out on- hand inventory and lead-time
As the supply chain continues to evolve, it is critical for companies to
adapt to emerging technologies and strategies
chase production strategy
adjusts the production rate and capacity to exactly match demand
cause and effect
assumes that one or more factors (independent variables) predict future demand (e.g. seasonality in retail markets)
Aggregate Production Plan (APP)
at least one year and is usually rolled forward by three moth every quarter - strategic plans, business planning, financial plans all go into this -at PRODUCT FAMILY LEVEL
multiple linear regression
attempts to model the relationship between two or more independent variables and a dependent variable (demand) by fitting a lear equation to the observed data
indirect
cannot be traced directly to the unit produced
ABC system
classifies inventory based the degree of importance
Supply chain management has transformed from an often-overlooked cost center into a vital segment of operations that can be turned into a
competitive advantage
carrying
costs for physically having inventory on-site and for maintaining the infrastructure needed to store the inventory and o secure and insure it over time
Dependent demand
demand for an items that is directly related to other items or finished products, such as a component or materials used in making a finished product (demand for these items is CALCULATED)
variable
dependent on the unit volume produced vary with output level
short-range
detailed planning process for components and parts to support the master production schedule
Direct costs
directly traceable to unit produced
Forecasting
first step, developed through data analysis and judgement - organizations must have a formal forecasting process to develop an agreed upon set of numbers that becomes the driver for demand planning
Safety stock (buffer stock)
fluctuations in demand or supply
Every entity within the supply chain (suppliers, manufacturer, customers) ...
has its own supply chain
Bullwhip effect
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
Order
labor costs associated with placing an order for inventory and the cost of receiving the order
single integrator solution
pick all the desired applications from a single vendor
SCOR Model
plan, source, make, deliver, return, enable
pegging
relates the gross requirements for a component part to the planned order releases of the parent item, as as to identify the source (s) of the item's. gross requirements. Pegging can be thought of as active where-used information
Hybrid Production Strategy
sets a baseline production rate based on a stable core workforce, and then uses other short-term means, such as overtime, subcontracting and part-time labor to manage short-term fluctuations in demand
naive forecasting
sets the demand for the next time period to be exactly the same as the demand in the last time period
intermediate range
shows the quantity and timing of end items
weighted moving average forecasting
similar to a simple moving average except that not all time periods are values/ weighted equally
Cause and effect is quantitative from cause and effects goes
simple regression and multiple regression
strategic stock
stock that has a very specific purpose, for a defined period of time
Facilitating goods
tangible elements that are used or consumed by the customer or the service provider along with the service provided, produced and consumed simontaniously
New __ offer the opportunity to reduce this complexity, transforming the supply chain from technology enabled to technology-centric
technical innovations
What is supply chain management?
the coordination of the network of otherwise independent trading partners who are creating a desired product or service, and then moving it through the supply chain out to customers, when and where the customer wants it
Independent demand
the demand for an item that is unrelated to the demand for other items, such as a finished product, aa spare part, or a service part (demand for these items is forecasted VERY IMPORTANT)
reorder point
the lowest inventory level at which a new order must be place to avoid a stockout
demand
the need for a particular product of component. Various sources: customer order, a forecast, manufacturing of another product
Lead time
the time it takes to process and prepare material, produce the product, and transport it to the customer
net requirement
the unsatisfied item requirement for a specific time period. Gross requirement for period minus current on-hand inventory
cyclical variations
wavelike pattern that last longer than 1 year, and can extend over multiple years - not easily predicted - ex: business cycles, GDP, China growth
Supply chain management is the
way business gets done, it is the execution process of any business, active management, maximize customer value and achieve a sustainable competitive advantage.
Master production scheduling
what the company plans to PRODUCE in terms of finished goods expressed in specific product configurations, quantities, and dates -THE PLAN THAT DRIVES THE BUSINESS -a detailed disaggregation of the aggregate production plan - a set of planning numbers that provides the major input for materials requirements planning -CAN BE FINISHED AHEAD OF TIME, MAKE TO STOCK
Costs related to inventory
- direct - indirect - variable - fixed - carrying
Disadvantages of Delphi method
- experts may introduce some bias - companies must spend time & resources collecting data by survey - if external experts are used there is a risk of loss of confidential information - the Delphi Method can be time consuming and is therefore best for long term forecasts
Disadvantages of Jury of Executive opinion
- experts may introduce some bias - experts may become bias by their colleagues or a strongly opinionated leader
Advantages of personal insight
- it is the fastest and cheapest forecasting technique - it can provide a good forecast
Time series forecasting
- main purpose of a time series model is to collect and study the past data of a given time series in order to generate probable future values for the series - forecasts for future demand rely on understanding past demand - the act of predicting the future by understanding the past
Seasonal variations
- repeating patterns of demand - pattern of variations within one single year - the pattern can be repeated from year to year, with some period of considerably higher demand than others - examples: holiday shopping, snow shovel sales
Disadvantages of personal insight
-it relies on one person's judgement and opinions but also on their prejudices and ignorance - the major weakness is unreliability, someone who is familiar with the situation often provides. a worse forecast than someone who knows nothing
Basic production strategies
1. Level Production Strategy 2. Chase Production Strategy 3. Hybrid Production Strategy
Goals of supply chain management
1. increase customer service 2. reducing inventory and operating expenses
cause and effect forecasting
2 basic models : - simple linear regression - multiple linear regression - a statistical measure that determines the strength of the relationship between one dependent variable and a series of independent variables - regression uses the historical relationship between an independent and a dependent variable to predict the future values of the dependent variable, i.e., demand
Business Process Reengineering (BPR)
A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed
Which inventory system classifies inventory based on the degree of importance in order to determine which inventories should be counted and managed more closely?
ABC System
Supply Chain between 1950 and 1960
Limited to materials management and logistics. Didnt take into considerations like plan, internally focused
Supply chain flow is facilitated through the use of
Logistics
Sales and Operations Planning (S&OP)
a process to develop tactical plan that provide management the ability to strategically direct the business to achieve a competitive advantage by integrating customer forced marketing plans with the management of the supply chain
Distribution requirements planning (DRP)
a time-phased finished good inventory replenishment plan in a distribution network - forecast demands by distribution center (DC) - current inventory levels by DC - Target safety stock by DC - recommended replenishment quantities - replenishment lead times
Service inventory
activities carried out in advance o the customer's arrivals - companies in the service industry do not maintain inventory of services since services are basically produced and consumer immediately upon demand - companies can maintain inventory of facilitating goods, the items that are used to help facilitate the service being provided
bill of materials
all components required to make a parent item
Delphi Method
almost the same as the jury of executive opinion except that the input of each of the participants is collected separately so that people are not influenced by one another - this is done in several rounds until a consensus forecast is achieved
Qualitative forecasting
based on opinion and intuition, generally used when data are limited, unavailable, or not currently relevant (ex: New product, new market segment) - best use if for long range forecasts and for new products - forecast depends on skill and experience of forecaster(s) and available information
time series
based on the assumption that the future is an extension of the past. Historical data is used to predict future demand - the most frequently used among all the forecasting models
two types of implementation
best of breed, and single integrator solution
carrying costs
costs that are incurred for holding inventory in storage - cost of capital, taxes, insurance, obsolescence, storage
Supply Chain Management is based on two ideas
cumulative effort of multiple organizations (aka supply chain), Importance of collaborations
customer survey
customer are directly approached and asked to give their opinions about the particular product - customer surveys can be done in person (e.g. one-on-one, focus group) over the phone, by mail, email, or online
Random variations
instability in the data caused by random occurrences - generally very short term, can be caused by unexpected or unpredictable events such as wether emergencies, natural disasters, labor strikes, war, etc. - frequently considered abnormal demand and sometimes removed from the data set before the data set is used to generate new forecasts
planned factor
the number/ quantity of each component or material needed to produce a single unit of the parent item
RFID
DOES not Require a direct line of sight to read the tag
advantages of customer survey
- a direct method of assessing information from the primary sources - simple to administer and comprehend - it does not introduce any bias or value judgment particularly in the census method if the questions are constructed carefully
Advantages of Jury of executive opinion
- decisions are enriched by the experience of competent experts - companies don't have to spend time and resources collecting data by survey
Advantages of Delphi Method
- decisions are enriched by the experience of competent experts - decisions are not likely a product of groupthink - very useful for new products
Disadvantages of historical analogy
- there simply may not be a historical comparison available - no two historical situations are exactly identical in all respects, so it may prove to be ineffective
Variation in quantitative forecasting
- trend variations - random variations - seasonal variations - cyclical variations
selecting weights is based on
-experience and/or trial and error - the recent past is often the best indicator of the future, so weights are generally higher for more recent data - challenging part of using weighted moving average
mean absolute deviation
measures the size of the forecast error in units. It is calculated as the average of the unsigned, i.e., absolute, error over a specified period of time
Key building blocks from which all supply chain planning activities are derived and are crucial components of customer satisfaction.
Forecasting and demand planning
Which type of forecast variation involves a pattern of variation within one that can be repeated from year-to-year? Typically has some period of considerably higher demand
Seasonal Variation
Demand Planning
The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services is known as?
Collaborative planning, forecasting, and replenishment (CPFR)
a business practice that combines the intelligence of multiple trading partners who share their plans, forecast, and delivery schedules with one another in an effort to ensure a smooth flow of goods and services across a supply chain - can significantly reduce the Bullwhip effect and provide a plethora of benefits - value comes from the sharing of forecasts among firms rather than firms relying on sophisticated algorithms and forecasting models to estimate demand
Economic Order Quantity (EOQ)
a fixed order quantity model - a quantitative decision model based on the trade-off between annual inventory order costs and annual inventory carrying costs - where the sum of the annual order costs and the annual inventory carrying costs is minimized
Historical analogy
a judgement forecasting technique based on identifying a sales history that is comparable to a present situation, such as the sales history of a similar product - an approach to sales forecasting in which the past sales results of a similar product are used to predict the likely sales of a similar new product
Manufacturing resource planning
a method for the effective planning of all resources of a manufacturing company through business planning, production planning, master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems all linked together.
Just-in-time
a philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement
Firmed planned order
a planned order that can be frozen in quantity and time so that the MRP computer logic cannot automatically change when conditions change. Established by the planner or supply chain manager to prevent system nervousness. this can aid planner working with mrp systems to respond to material and capacity problems by firming up selected planned orders
Order costs
costs that are incurred each time an order is placed -order preparation, transportation, receipt, materials handling costs
Mean Absolute deviation
measures the size of the forecast error in units. It is calculated as the average of the unsigned errors over a specified period of time.
fixed
independent of the unit volume produced
Service firms offer
intangible products, what customers are paying for is labor and the intellectual property of the service provider , frequently involved work on a tangible item (car service, dry cleaning)
Long range
involves planning for actions such as the construction of facilities and major equipment purchase
exponential smoothing
is a more sophisticated version of the weighted moving average. - requires 3 basic elements: last period's actual demand, last periods forecast, and a smoothing factor, which is a number greater than 0 and less than 1 - weights decline exponentially, most recent data weighted most
linear trend forecasting
is imposing a best fit line across the demand data of an entire time series. Used as the basis for forecasting future values by extending the line past the existing data and out into the future while maintaining the slope of the line
parent
item generating demand for lower-level components
level production strategy
maintains a CONSTANT production rate and allows inventory and backlog to vary according to fluctuating demand
Integration
managing all of the enabling systems necessary to facilitate the complete integration of the operations, supply, and logistics functions - enabling systems - supply chain risk and security management - Performance measurement - project management
The service supply chain is more about
managing relationship between the trading partners than it is about managing the chain of supply
mean absolute percentage error (MAPE)
measures the size of the error in percentage terms. It is calculated as the average of the unsigned percentage error - most widely used
customers are _ in the service industry
more directly involved
trend variations
movement of a variable over time. - identification of trends is a common starting point when developing a forecast - more easily observed by plotting actual demand on a graph over time to see whether there is a pattern in the data - common trend types include linear, s-curve, asymptotic(downward facing curve), and exponential (upward facing curve)
Cycle stock
normal stock to meet regular demand
Single period inventory model
only ordered for one-time stocking
Lot Size
order size for MRP logic
components
parts demanded by a parent
best of breed
pick the best application for each individual function. Disadvantage- software may not integrate well but this may not be a major issue in future
MRP Explosion
the process of converting a parent item's planned order releases into components gross requirements
