OBA 335 FINAL
Supplier Relationship Process
(1) sourcing, (2) design collaboration, (3) negotiation, (4) buying, and (5) information exchange.
(Forbes article) How many different types of product do we have? What is the best supply chain for each of them?
(a) Functional products / efficient supply chains, (b) Incrementally new products / mixture of efficient and responsive supply chain, (c) Really new products / both efficient and responsive supply chain, (d) Niche products / responsive supply chains.
Appraisal costs
(after products are made) • Assess the level of quality or performance (inspection) • Diagnose the root causes
• External failure costs
(after products are sold) Correcting (e.g., recall) and warranty • Loss of market share and brand value • Loss of share value (public firm) • Litigation
Prevention costs
(before products are made) • Redesign product/service, • Redesign process, • Training of workers
Internal failure costs
(before products are sold) Defects fall into two main categories: • Rework • Scrap
Two Types of Functions of Supply Chains
1) Physical function 2) Market mediation function
Reasons for Large Inventories
1. Customer service - fast delivery, on-time delivery • Less stockout and backorder 2. Take advantage of Economy of Scale • In procurement: quantity discounts in supply cost • In transportation: larger load into one truck 3. Reduce ordering cost (in procurement) or Reduce setup cost (in manufacturing). 4. Increase resource utilization
Two types of quality
1. Design - inherent value of a product or service to customers by its design 2. Conformance quality - the degree to which a product or service design quality (i.e., design specifications) are implemented by the processes of production or service delivery
5 Sources of power in relationships with suppliers
1. Referent power—the supplier values identification with the buyer. For example, the fact that a firm is supplying IBM may open the door for business with other customers. 2) Expert power—the buyer has access to knowledge, information, and skills desired by the supplier. For example, a supplier to UPS may get access to logistics planning skills possessed by UPS. 3) Reward power—the buyer has the ability to give rewards to the supplier. Often, the rewards may involve the promise for future business or the opportunity to become a partner sometime in the future. 4) Legal power—the buyer has the legal right to prescribe behavior for the supplier. For example, the buyer may demand strict compliance to the negotiated contract or else the matter will be taken to court. 5 Coercive power—the buyer has the ability to punish the supplier. For example, the buyer may threaten to cancel future business with the supplier unless the supplier adheres to the buyer's demands.
Theory of constraints - Key concepts
1. The focus should be on balancing flow, not on balancing capacity. 2. Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system. 3. An hour lost at a bottleneck or a constrained resource is an hour lost for the whole system. In contrast, an hour saved at a nonbottleneck resource is a mirage because it does not make the whole system more productive. 4. Inventory is needed only in front of the bottlenecks in order to prevent them from sitting idle, and in front of assembly and shipping points in order to protect customer schedules. Building inventories elsewhere should be avoided. 5. Work, which can be materials, information to be processed, documents, or customers, should be released into the system only as frequently as the bottlenecks need it. Bottleneck flows should be equal to the market demand. Pacing everything to the slowest resource minimizes inventory and operating expenses. 6. Activating a nonbottleneck resource (using it for improved efficiency that does not increase throughput) is not the same as utilizing a bottleneck resource (that does lead to increased throughput). Activation of nonbottleneck resources cannot increase throughput, nor promote better performance on financial measures outlined in Table 7.1. 7. Every capital investment must be viewed from the perspective of its global impact on overall throughput (T), inventory (I), and operating expense (OE).
Assumptions of EOQ Model:
1.Demand rate is constant over time 2.No constraint on the order size (lot size) 3.No backorder allowed 4.Order/production lead time is constant •In the basic model, we assume lead time is zero. 5.The inventory decisions for multiple items are independent
Back Office
A back-office process has low customer contact and little service customization. The work is standardized and routine, with line flows from one service provider to the next until the service is completed. Preparing the monthly client fund balance reports in the financial services industry is a good example. It has low customer contact, low divergence, and a line flow.
Front Office
A front- office process has high customer contact where the service provider interacts directly with the internal or external customer. Because of the customization of the service and variety of service options, many of the steps in it have considerable divergence. Work flows are flexible, and they vary from one customer to the next. The high-contact service process tends to be adapted or tailored to each customer.
Hybrid Office
A hybrid office tends to be in the middle of the five dimensions in Table 3.3, or perhaps high on some contact measures and low on others. A hybrid-office process has moderate levels of customer contact and standard services, with some options available from which the customer chooses. The work flow progresses from one workstation to the next, with some dominant paths apparent
Total Quality Management:
A philosophy that stresses three principles (customer satisfaction, employee involvement and continuous improvement) for achieving high level of process performance and quality.
The ISO 9001:2008 Documentation Standards
A set of standards governing documentation of a quality program.
Competitive orientation:
A supplier relation that views negotiations between buyer and seller as a zero-sum game: Whatever one side loses, the other side gains, and short-term advantages are prized over long-term commitments.
• Next-Shoring
A supply chain strategy that involves locating processes in close proximity to customer demand or product R&D
Balance Delay
Amount of which efficinecy falls short of 100%
Responsive Supply Chains
Assemble-to-order, make-to-order customized service or products; emphasize "variety" High Capacity Cushion WIP inventory to enable fast delivery; avoid expensive finished goods inventory Shorten lead time aggressively With suppliers, Emphasize fast delivery time, customization, variety, volume flexibility, top quality
Throughput Rate
Average number of units actually produced per unit of time (in a system, resource or machine).
Utilization
Average output rate/ Capacity rate * 100%
Relieving Bottleneck
Buy new machines (and hire more workers) •Invest in new facility (a long-term decision) •Longer hours (and more workers) for overtime (after hours and/or weekend) •Redesign the process
How can Twitter's inability in developing a new product be explained in management level?
Changing many product managers, "When you have a new head of product every year," says one, "you're re-making the same mistakes over and over again."
Capacity Constraint
Constraint limits a process's ability to meet its performance and output goal •Decrease throughput (output rate) •Decrease utilization of critical resources
DMAIC Proccess Improvement Model
Developed by General Electric as a means of focusing effort on quality using a methodological approach . Define (D) Measure Analyze Improve Control
ISO 140001:2004 Environmental Management System
Documentation standards that require participating companies to keep track of their raw materials use and their generation, treatment, and disposal of hazardous wastes.
Two Types of Supply Chains
Efficient Supply Chains. Responsive Supply Chains
Two Types of Products
Functional and innovative
Matching supply chain design to product design
Functional goes with efficient supply chain Innovative goes with responsive Common Mistake: Physically Efficient Supply Chain for an innovative product
Please give couple of Blockchain applications in supply chain:
In the food industry, it's imperative to have solid records to trace each product to its source. So, Walmart uses blockchain to keep track of its pork it sources from China and the blockchain records where each piece of meat came from, processed, stored and its sell-by-date BHP Billiton, the world's largest mining firm, announced it will use blockchain to better track and record data throughout the mining process with its vendors. Not only will it increase efficiency internally, but it allows the company to have more effective communication with its partners
Why is Model 3 important for Tesla?
It helps Tesla to show transitioning from a small startup to a mainstream car company
How does Qkr improve the restaurant experience?
It's a classic example of process re-engineering. Breaking that linearity, and either make tasks parallel or take something that used to exist in this context and put it up front
Design Collaboration:
Jointly designing new services or products with key suppliers; it facilitates concurrent engineering by drawing key suppliers into the new service/product development process, particularly in the design and development stages.
Efficient Supply Chains
Make-to-stock standardized services or products; emphasize "high volume" Low capacity cushion Low inventory investment Shorten lead time if not increasing costs With suppliers, em
How does the mastercard companyy see the future of the digital payment?
More integration between retail and commerce in their daily lives, drawing on aspects of the internet of things (IoT). For example, Samsung Smart Fridge.
Negotiation:
Obtaining an effective contract that meets the price, quality, and delivery requirements of the supplier relationship process's internal customers.
Bottleneck Method
Order the best product mix by the contribution margin per minute of processing time at the bottleneck.
How can we translate overproduction in healthcare industry?
Overproduction - reference being to keep patients unnecessary for observation, very high speed laboratory equipment with less specimens. On the inventory, he sees waste as overstock and redundant of medicines, medical supply in section or store.
4 Costs of quality
Prevention costs - (before products are made) Appraisal costs - (after products are made) Internal failure costs - (before products are sold) External failure costs - (after products are sold)
What is the main problem with Twitter and new ideas?
Since its founding, Twitter has made a religion of listening to users. After all, they came up with some of the company's best ideas —including the hashtag, reply and retweet. After the flow of good ideas from users stopped, Twitter was hard-pressed to come up with its own
(Forbes article) Today, How many types of innovation do we have?
Sustaining innovations: aim to improve the performance of existing products (b) disruptive innovations: aim to develop a new product that helps companies enter a new market.
What is the current status of Model 3 production?
Tesla has manufactured fewer than 500 Model 3s in a specific period of time.
What was the effect of Kaizen implementation in the Hospitals in Tanzania?
The KAIZEN concept has enabled the hospital to attend many clients at short time, save lives of patients, because staffs get records of the same fast. The project has also made working environment conducive, workers becoming more friendly and working in union as opposed to the situation before implementation of the project, whereby there were seemingly classes between doctors and nurses.
Line Balanceing
The assignment of work to stations in a line process so as to achieve the desired output rate with the smallest number of workstations.
Supply Chain Integration
The effective coordination of supply chain processes though the seamless flow of information up and down the supply chain.
Cycle Time
The maximum time allowed for work on a unit at each station
How does the new technology of Mastercard work?
The mobile payment app & Qkr works with the Mastercard Masterpass system to allow users to split the bill or pay in advance for goods and services.
Bullwhip Effect
The phenomenon in supply chains whereby ordering patterns experience increasing variance as you proceed upstream in the chain.
Sourcing
The sourcing process is involved in the selection, certification, and evaluation of suppliers and, in general, the management of supply contracts.
What does 5S-Kaizen stand for?
The word "5S" stands for the Japanese words; Seiri (Sort), Seiton (Set), Seiso (Shine), Seiketsu (Standard) and Sitsuke (Sustain), for improvement of working environment.
What is the main production problem of Tesla Model 3?
Various manufacturing bottlenecks are hampering Tesla Model 3 production. Main constraint is battery production line and body welding process.
Tolerance vs. Control Limits
Who determines? Tolerance: Customers Product designers Control:Process managers Quality Controllers What type of quality does it pertain to? Tolerance: Design Control: Conformance What happens beyond limits? Tolerance:Customer dissatisfaction Control: Actions: diagnosis, correction
What are the principals of 5S-Kaizen?
Zero changeovers leading to product and service diversification; zero defects leading to higher quality; zero waste leading to lower cost; zero delays leading to on-time delivery; zero injuries thus promoting safety; zero breakdowns bringing better maintenance; zero customer complaints such as client satisfaction; zero red ink, for example betterment of organization's image.
Bottleneck
a resource(s)whose capacity limits the firm's ability to meet product volume, product mix, or fluctuating demand required by the market
supply chain
a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.
Upper control limit (UCL) and lower control limit (LCL)
defines the interval such that a sample is considered "acceptable" or "good" if it falls within
Continuous Improvement:
he focus is reduce waste, such as reducing the length of time required to process requests for loans at a bank or the amount of scrap generated at a milling machine. • The people associated with a process are in the best position to identify the changes that should be made. • The idea is not to wait until a massive problem occurs before acting.
Pipeline inventory
items created, shipped, but not yet received.
Supply Chain Management
management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory, and of finished goods from point of origin to point of consumption.
Workload
measured by amount of standard time to perform the work.
Why is blockchain important for managing the supply chain?
o Due to the complexity and lack of transparency of our current supply chains, blockchains might help us. Over a hundred years ago, supply chains were relatively simple because commerce was local, but they have grown incredibly complex. o Since manufacturing has been globalized, and a large portion of it is done in China, our supply chains are heavy with their own complexity. o there is a significant lack of transparency in our current system
• What are advantages of blockchain in supply chain management?
o Since every transaction is recorded on a block and across multiple copies of the ledger that are distributed over many nodes (computers), it is highly transparent. o It's also highly secure since every block links to the one before it and after it. o There is not one central authority over the blockchain, and it's extremely efficient and scalable. o Ultimately, blockchain can increase the efficiency and transparency of supply chains and positively impact everything from warehousing to delivery to payment. o Records on the blockchain cannot be erased which is important for a transparent supply chain.
What is a blockchain?
ockchain is essentially a distributed, digital ledger—has many applications and can be used for any exchange, agreements/contracts, tracking and, of course, payment.
Cycle inventory
portion of inventory that is directly related to the lot size of production or procurement.
Traditional Method
rank the products by their contribution margin.
ower tolerance limit (LTL) and upper tolerance limit (UTL)
spell out the design quality (and hence the customer's needs).
Supplier Selection:
starting point for selecting suppliers is to perform a total cost analysis. There are four key costs to consider for each supplier. • Material costs. • Freight costs • Inventory costs • Administrative costs.
Statistical process control (SPC)
the application of statistical techniques to determine whether a process is delivering what customers want. In SPC, control charts are used primarily to monitor and control a process to ensure that it operates at its full potential to produce conforming product and does not deviate from their design specifications
What is the main challenge in developing new product?
the challenge has always been to balance what its 330 million monthly active users want, versus changes that could entice the rest of the global population to join.
Capacity
the maximum number of jobs that can be completed in a unit time by a resource or a process. 1/Workload per unit
Seasonal inventory (anticipation inventory)
to meet predictable variability in demand.
Safety-stock inventory
to provide a cushion against stockout, under unpredictable variability in demand, production and supply.
• Offshoring
• A supply chain strategy that involves moving processes to another country
• Responsive supply chains strategy
• Assemble-to-order (ATO) • Make-to-order (MTO) • Design-to-order (DTO)
• Outsourcing Decision Factors:
• Comparative Labor Costs • Rework and Product Returns • Logistics Costs • Tariffs and Taxes • Market Effects • Labor Laws and Unions
Customer Satisfaction (TQM)
• Conformance to Specifications: • Consistent quality • On-time delivery • Delivery speed • Value: How well the service or product serves its purpose at a price customers are willing to pay. • Fitness for Use: appearance, durability, and serviceability • Support • Psychological Impression
Inventory holding (carrying) cost
• Cost of capital • Storage & handling costs • Tax, insurance and shrinkage • Shrinkage • Theft of inventory • Obsolescence (e.g., due to overstock) • Deterioration (spoilage, damage)
• Employee Involvement (TQM)
• Cultural Change (Internal & External customers ) • Quality at the Source: • Errors or defects should be caught and corrected at the source, not passed along to an internal or external customer. • Encouraging Teamwork • Employee Empowerment • Problem-solving teams • Special-purpose teams • Self-managed team
Causes for Bullwhip Effect
• Demand Forecasting • Order Batching • Price variations due to supplier's sales incentive • Supply shortage and rationing
Operations Challenges of Innovative Products
• Demand is unpredictable • Product has short lifecycle • High risk of obsolescence • How to deliver products • To right customers • At the right time • In right quantities Solution: match product characteristics with supply chain design
2) What is the order winner for the Domino's Pizza?
• Dominos does technology like a real tech company. The time it takes to order a pizza is measured in seconds, not minutes. • It can be done with precision through their website or through their app. They introduced voice recognition to their ordering platform to add another layer of convenience.
Supply Chain Disruptions External
• Environmental Disruptions • Supply Chain Complexity • Loss of Major Accounts • Loss of Supply • Customer-Induced Volume Changes • Service and Product Mix Changes • Late Deliveries • Underfilled Shipments
Creating an Effective Supply Chain:
• Identifying external and internal pressures • Dynamic sales volumes • Customer service and quality expectations • Service/product proliferation • Emerging markets
Internal Causes:
• Internally Generated Shortages • Quality Failures • Poor Supply Chain Visibility • Engineering Changes • Order Batching • New Service or Production Introductions • Service or Product Promotions • Information Errors
Measuring Supply Chain Performance
• Inventories across supply chain • Value of inventories in different parts of supply chain Financial measures • Total revenue • Cost of goods sold • Operating expenses • Cash flow • Working capital • Return on assets (ROA)
Adapting to Kaizen Concept On Health Delivery
• Kaizen (Japanese concept): the philosophy of continually seeking ways to improve processes.
Efficient supply chains Strategy
• Make-to-stock (MTS)
• Outsourcing
• Paying suppliers and distributors to perform processes and provide needed services and materials
Innovative products
• Products that often receive new features • Examples: fashion apparels, technology products, consumer electronics, ...
Functional products
• Products that satisfy basic needs • Examples: Campbell's Soups, staples, tires, printer papers, dairy products ...
• Outsourcing Potential Pitfalls:
• Pulling the Plug too Quickly • Technology Transfer • Process Integration
Six Sigma (𝟔𝝈)
• Six Sigma is about perfection of process: minimizing defects and variability in the process. • Tools: data and measurement; statistic analysis; process improvement • Applied to both manufacturing and service processes
Statistic Concepts Behind Six Sigma
• Take random samples of a key quality spec of the process • The samples follow normal distribution. is the standard deviation of the sample distribution • (Mean 6) contains about 99.99966% of all possible samples • That is, 3.4 defects per million samples (literally zero defects)
Why Do Companies Innovate?
• To differentiate from competition, for higher profit margin • To grow demand in an existing market • To break into completely new market
Global Supply Chain
• When a company expands from a local or regional presence to a more global one, supply chain strategy often needs to be adjusted. • These supply chains are typically more complex and are exposed to both domestic and international disruptions.
What is the secret behind the Domino's Pizza success?
• While improving the quality of the pizza was critical, it is not the high quality pizza that makes Domino's into a strong competitor. • Domino's Pizza may be unique in understanding that their pizza quality is only a qualifier, not an order winner.
Physical function Supply Chain
• emphasizes low costs Transformation: converting raw materials to finished goods and moving them along the supply chain • Transportation: from one location to another • Physical costs • Production costs • Transportation costs • Inventory storage costs • A supply chain is "efficient", if it emphasizes minimizes physical costs.
Market mediation function
•emphasizes "flexibility" and "time" Ensuring that the right variety of products are available at the right place, at the right time, in the right quantities • Market mediation costs: mismatching demand & supply • If supply > demand: mark-down; sold at a loss • If supply < demand: lost sales; dissatisfied customers • A supply chain is "responsive", if it emphasizes the ability of minimizing demand-supply mismatching.
