Chapter 1 Materials Management

Main costs involved in product creation

Labor, materials, and overhead

Marketing, Operations and Finance Objetives

Marketing cares about increasing revenue and satisfy customers. Therefore the customer service here is a must. The main objective of operations is to reduce the manufacturing cost. The focus here is in the production efficiency. The main objective of Finance is to increase profit and cash flow, reduce investment. In other words is doing more with less resources.

Metric

Measurable variable that can be either quantitative or qualitative.

Three majors areas of Supply Chain Management

Procurement (Supply), production, and distribution

Main objective of Supply Chain Management

by efficiently balancing the supply and demand, we can meet customer demand at the lowest cost

production rate

demand - beginning inventory + ending inventory / number of production periods

Supply Chain Management Definition:

design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.

Manufacturing Strategy

involves meeting or exceeding the customer requirements at the minimum cost(usually depends on the product)

assemble to order

manufacturer does not start until the order is received, inventory is standard components, only assembly required to make the product

Make to order

manufacturer does not start until the order is received, inventory usually held as raw materials and longer delivery lead time

make to stock

manufacturer produces goods in anticipation of customer demand(most common), Inventory is held as finished goods, typically shorter delivery lead time

Production Planning

meet demands or marketplace, make long term and short term plans, establish priorities and ensure capacity

Order qualifiers

minimum customer requirements related to the price, features, quality, delivery, etc...

Materials Management

planning and controlling flow of materials, provide required level of customer service, and minimize overall cost of meeting demand

Manufacturing Planning and Control

planning and controlling the flow of materials in a manufacturing environment, provide required level of customer service, minimize overall cost of meeting demand

Inventory Management

provide a buffer against differences in demand rates and the production rates, to support production

Implementation and Control

putting into action and achieving the plans

order winners

those characteristics that persuade the customers to select their product or service

Old Saying about performance measurement.

"What you do not measure, you cannot control."

Postponement

A business strategy that maximizes possible benefit and minimizes risk by delaying further investment into a product or service until the last possible moment

Physical and Supply Distribution

Activities Involved in Moving Goods from the suppliers to the production system and from the production system to the customers.

The principal trade-off

Customer Service x Inventory Levels x Production Efficieny

Objective of Materials Management

Deliver what customers want, when and where they want it and do so at minimum cost.

Bill of Materials

Describes the components used to make the product. Describes subassemblies at various stages of manufacture.

Tiers

Different Layers of Customers/Suppliers

Performance Measure

How close to the performance standard (goal) you are. At least two parameters.