OSCM Final Exam

SC Logistics SC Elements Inventory

-Marketing: Full product line, display stock, inventory pipeline -Buffering: Protects against uncertainty, adjust safety stock not order quantity

Order point inventory Economic Order equation and ROP

EOQ influenced by -Annual demand -Order preparation costs -Carrying costs ROP influenced by -Customer service level desired -Forecast error -Demand within the lead time

Supply Chain Logistical Elements Inventory

For the customer perspective -Warehouses offer benefit of time and place utility -Warehouses locate the product closer to the customer in both distance and time Other include -Mix products -Finish products -Bulk Break

Customer Service Management Make-to-Stock Companies

-Ability to meet the promised delivery date is key to good customer service -Requires good master production scheduling and execution

Capacity Planning and Control Techniques

-CPOF: Simple. Based on planning factors derived from standards or historical data. Rough Cut technique Simple -Capacity Bills: Rough cut provides more direct linkage between individual end products and work centers. Must prepare a bill of capacity (which include the BOM, routing data, direct labor and machine hour data) -Resource Profile: Rough cut time phased capacity plan -Capacity Requirements planning (CRP): Component level time phased capacity plans that used MRP information

Economic Order Equation (2 questions)

-Cp=Ordering Costs -A=Annual Demand -CH=Inventory Carrying costs -Need to understand what happens to EOQ if Cp changes or Ch changes. That is if Cp goes up the EOQ goes up.

Demand Management and the MPC Environment

-Demand management must conform to the different firm strategies, capabilities and customer needs -Key to classification is the customer decoupling point -The decoupling point is the point at which the firm becomes responsible for determining the timing and quantity of material to be purchased, components made, and products finished.

What is ERP? How ERP Connects the Functional Units

-ERP systems allow for integrated planning across a firms functional areas such as finance, marketing, and HR as well as MPC and SC. -Manufacturing and Supply Chain Management -Manufacturing Planning and Control (MPC) -Sales and Operations Planning (front-end): coordinates the various planning efforts including financial, operations, and HR planning -Materials Management (engine): Covers tasks including purchasing, vendor evaluation, warehouse, and inventory management. -Production planning and control (back-end): supports all phases of manufacturing, including capacity leveling, MRP, JIT, product costing, BOM processing, and database management. -Supply chain management -Logistics, warehousing and transportation

Demand Management in MPC Systems

-Gateway module, providing link to marketplace -Helps gather information from and about the market doing forecasting, entering orders, determining product requirements -Communicates with its customers by promising delivery dates, confirming order status, communicating changes -Identifies all sources of demand for manufacturing capacity including service parts demand, intracompany requirements, and promotional inventory buildup

Basic Concepts: Independent Demand Decisions vs Dependent demand

-Independent Demand: Demand that is influenced by factors outside the company decisions -Dependent Demand: Demand that is derived from internal factors such as the final assembly schedule or master production schedule

Order point inventory control methods: Management Issues, Determining Inventory System Performance

-Investment in inventory makes it a visible performance measure -A common measure of inventory performance is: Inventory Turnover=Annual Sales/Average Inventory Investment

Key Elements of Warehouse Location Analysis

-Key elements: How many warehouses, and Where they should be located -3 Approaches: Simulation, Heuristic Procedures, Programming

SOP in firm payoffs

-Least understood aspect of MPC -Objectives are to develop overall business plan, which integrates with various functional planning effort -SOP goals is to link strategic goals to marketing, planning, finance, operations, HR -SOP is top managements handle on the business: Provides important visibility of critical interactions between sales, marketing, production and finance. Better integration between functional areas is one of major payoffs.

The Role of Capacity Planning in MPC Systems: Two Major Activities

-MPC is seen as encompassing two major activities: Planning and control of materials, control of capacities -Capacity planning techniques as primary objectives: Estimate capacity requirements sufficiently far enough in the future to be able to meet those requirements. Execute the capacity plan flawlessly

Typical MPC Activities

-Manufacturing planning and control is concerned with all aspects of manufacturing from managing materials and scheduling machines and people to coordinating suppliers and planning shipments to customers. -Front end establishes the overall company direction for MPC. -The engine encompasses the set of MPC systems for detailed material and capacity planning. *This encompasses materials management* -The back end show the execution of three systems, coordinating suppliers, managing shop-floor orders and the quality system.

How ERP Connects the Functional Units

-Manufacturing planning and control: SOP, Material and capacity planning, shop floor and purchasing systems -Supply chain management: Logistics, warehousing, transportation -Enterprise resource planning: Enterprise planning models, enterprise performance measures, data warehousing, report generation, transaction processing -Human resource management, Finance, Sales and marketing -Manufacturing planning and control -Supply chain logistics -HR -Finance -Sales and Marketing

What is ERP? System Imperatives

-Multifunctional in scope: Ability to track financial in monetary term, procurement in unites, and sales in product units -Integrated: Integration ensures common vision -Modular-Can be combined into single expansive system -Facilite MPC activities

Order Point Inventory Control Methods Inventory Related Costs

-Order Preparation Costs: Variable costs associated with issuing paperwork. One-time costs involved in transporting goods between plants. Time studies on how long it takes to cut a purchase order -Inventory Carrying Costs: The cost of capital (25% the product cost). Taxes. Insurance. Obsolescence. -Shortage and Customer Service Costs: Lost profit margin. Lost of customer goodwill. Expedite costs

MRP Technical Issues

-Processing frequency: Regeneration run with low computer demand -Pegging: can be used to find the specific source of demand -Firm Planned Orders: An order that doesn't not change when conditions change -Service Parts: Must be included in the MRP record -Scheduled vs Planned Receipts: Schedule receipts have a formal commitment, planned receipts are computer generated with no commitments

Using Forecasts Pyramid Forecasts

-Pyramid forecasting provides a means of coordinating, integrating, and ensuring consistency between sources of forecasts and company constraints -Roll Up: Begins with forecast of individual products, these are rolled up into product lines, and then into total business -Force Down: The next step is to constrain the product line and individual item forecasts.

Warehouse Replenishment Systems: Three Systems

-ROP/EOQ: Dominant method for determining the amount to be shipped. Takes into consideration the cost of placing the order, the purchase price, the shipping costs, and the cost of holding inventory. The timing of the order is based on a fixed inventory amount called the reorder point. Set to cover cycle stock and safety stock. The actual inventory balance is used to determine the reorder point. The expected demand is assumed to be constant. The quantity determination can incorporate quantity discounts. -Base Stock Systems: Uses a direct replacement system. That is the exact amount sold by a warehouse during a fixed time cycle is replenished at the next shipment. Base stock quantities for each warehouse are set to cover the maximum demand for each item during the lead time. -Distribution Requirement Planning: Use of DRP is time phased projected future usage. Determination of when to ship is based on the projected inventory level.

Choosing ERP software

-Requirements of the firm's processes -System Costs -Business complexity -Available resources -Business size -Customer expectations

SC Logistics Warehouse Replenish Systems Base Stock System

-Shipped on schedule ship dates -Quantity shipped is actual usage is the maximum amount set to cover demand during lead time

Communicating with other MPC Modules

-Supply chain and operations must determine the MPC environment as it will impact the need to communicate with the customer. -Management must consider the resources needed to communicate in each environment -ETO: Has the highest level of communication needs -MTO: Has the second highest level of communication needs -ATO: Has the third highest level of communication needs -MTS: Has the least

MPS Activity: The MPS is a Statement of Future Output

-The MPS is a statement of future output. -It specifies the products to be completed, the time of completion, and quantities -The MPS is not a forecast and takes into account: Capacity limitations, Cost of Production, Sales and Operations plans, other resources considerations

Demand Management and the MPC Environment (2)

-The different locations of the customer order decoupling point give rise to different manufacturing environments -Make-to-stock customer served from finished goods inventory, decoupling point is finished goods, key issues is finished good inventory management -Assemble-to-order combine a number of options, key task is maintaining configuration management, demand management communicates with customers, decoupling point at component level -Make-to-order focus is on engineering management, decoupling point is at raw material level -Engineer-to-order firm will work with customer to design the product and then make it from purchased materials, decoupling point at the suppliers, focus on engineering management.

The MPC System Defined

-The essential task of the MPC system is to -manage efficiently the flow of material -to utilize effectively people and equipment -to respond to customer requirements by using the capacity of suppliers -The MPC system provides the information upon which managers make effective decisions. -The MPC does not make or evaluate decisions nor manage the operations rather it is support for them to do so wisely.

Providing Appropriate Forecasting Information

-The general principle is that the nature of the forecast must be matched with the nature of the decision. -Length of forecast: For Strategic Business planning years by years or quarters. For sales and operations planning several months to a year by months. For master production scheduling and control a few days to weeks

The Role of Capacity Planning Hierarchy of Capacity Planning Decisions: 5 Levels

1. Resourcing Planning: Plans for new capital, buildings, machines, warehouse space 2. Rough cut capacity plans that deal with resources for products 3. Is concerned with capacity needs for both key machine centers and labor 4. Components and capacity are scheduled together 5. Focus on capacity management ins hick capacity plans are compared to acetals

Order Point Inventory Control Methods Multi-item management ABC analysis

3 groups -A parts generally 20% of parts and 80% of value -B parts are generally 30% of items and 15% of value -C parts are generally 50% of items and 5% of value

Information Use in Demand Management Data Capture and Monitoring

Data capture and monitoring fall into two categories -Overall market: This data is most appropriate for sales and operations planning. The intent is to determine on an ongoing basis any changes in the general levels of actual business for input into the SOP process. -Detailed product mix: Product mix data is most appropriate in master production scheduling (MPS)

Order Point Inventory COntrol Methods: Independent vs Dependent Demand

Independent demand -Demand is forecasted -EOQ determines order quantity -ROP determines inventory level that triggers order Dependent -Call derived demand -Calculated from final assembly schedule or MPS

Customer Service Management Make-to-Order Companies

Ships from inventory to customers 1. Major concern is delivery timing 2. Presumptions is that stock will be available for shipment 3. Setting fixed delivery time and meeting that commitment is critical

Supply Chain Logistical Elements Transportation

Speed slowest to fastest -Rail -Highway -Pipeline -Air

Economic Order Equation (Warehouse Replenish Systems)

The EOQ calculates the order quantity that will minimize the costs of ordering and holding the inventory -Expected Demand is constant -Order quantities are determined at the warehouse level -Quantity determination can incorporate quantity discounts and transportation economics

Sales and Operations Planning in the Firm. Sales and Operations Planning Fundamentals

The purpose of the only planning cycle is to facilitate cross-functional communication. Ensure that critical supply and demand issues are considered -Run forecasting reports -Demand planning phase: Review statistical forecasts and provide new information about new product instructions -Supply planning phase: here capacity planning activities takes place -Pre SOP meeting: Make decisions about balance of demand and supply, areas that cannot be resolved, develop alternatives, and set agenda for executive SOP meeting -Make decisions on SOP for each product family, authorize spending, breaks ties and reviews customer service performance.