SCM 3301 Exam 2

Phases of Product Development: Planning phase

Addressing the feasibility of a product or service Planning for interaction of the product/service with suppliers, the organization, customers

The nature of the Service Package

All the physical and intangible activities that a service organization provides Physical: Requires capital expenditures, material costs, tangible assets Intangible: Requires training, skill development, knowledge assets

Reasons to Make or Insource

Better control over quality Better visibility of process Better control over social and environmental impact To protect intellectual property For Core Competencies To utilize excess capacity To reduce handling/storage costs When product life-cycles are stable

Supply Management

Broad set of activities carried out by organizations: Analyze sourcing opportunities Develop sourcing strategies Select suppliers Procure goods and services Measure and manage suppliers

When customization occurs early in the supply chain:

Flexibility in response to unique customer needs will be greater. Lead times to the customer will tend to be longer. Products will tend to be more costly.

When customization occurs late in the supply chain:

Flexibility in response to unique customer needs will be limited. Lead times to the customer will tend to be shorter. Products will tend to be less costly.

Phases of Product Development: Launch phase

For products: this means "filling up" the supply chain with products. For services: this means making the services broadly available to the target marketplace. Monitoring Performance: quality, cost, delivery

Six Sigma People

Champion - Senior-level executive responsible for driving Six Sigma efforts Master Black Belt - Full-time Six Sigma expert responsible for managing Six Sigma events Black Belt - Fully trained Six Sigma expert Green, Yellow, White Belt - Individuals with basic Six Sigma training

Phases of Product Development

Concept development phase Planning phase Design and development phase Commercial preparation phase Launch phase

Strategic Sourcing Step 5:

Conduct Supplier Selection: Weighted-point evaluation system

Booked orders

Confirmed customer orders for shipment

Profit Leverage Effect: Sales must increase by

[COGS Savings] / [Pretax Profit Margin] to have the same effect EXAMPLE: Pretax Profit Margin = 10%, Purchasing/Procurement save $10 Sales must increase by $10 / 0.1 = $100 to have the same effect on Profit

Structural Layout

an important factor in designing a manufacturing or service process Layouts will contribute to manufacturing and service performance: Designed to: Minimize movement of Materials & People Maximize utilization of Machines & People Maximize productivity & quality of Machines & People Manage complexity - improve management of processes Manage interactions between Machines, People, Customers, Stakeholders

The level of customer contact

Front Room - Direct customer interface, high customer contact. Activities designed to guide the customer through the process - "Onstage Activities" Back Room - Activities done away from the customer, low customer contact. Activities carried out much like a manufacturing process - "Backstage Activities" and "Support Processes" Mapped using "Service Blueprinting"

Negotiating

Interactive and iterative process for determining purchase conditions Involves: Multiple communications to arrive at an agreement USE WHEN: Exact specification and performance is unknown (new product development) and the buyer needs input or guidance or collaboration from the supplier.

Phases of Product Development: Commercial preparation phase

Investment in operations and supply chain resources needed to support the new product or service

Where is the physical location of the producer/provider of products or services?

Off-shoring - Location of an Insourced or Outsourced Firm in a foreign country Near-shoring - Offshoring in an adjacent country On-shoring - Location of an Insourced or Outsourced Firm in the firm's country

Conformance Perspective

Quality is how closely a product or service was made or performs as measured against a preestablished standard.

Value Perspective

Quality is how well the characteristics of a product or service align with the needs of a specific customer.

Measures of Process Performance - Related to Customer Needs & Desires

Quality- Performance, Features, Reliability, Conformance, Durability, Serviceability, Perceived Quality Cost - Labor, Material, Quality-related costs Time - Delivery speed, Delivery reliability Flexibility- Mix flexibility, Changeover flexibility, Volume flexibility

Performance Impact

Quality: Performance, Features, Reliability, Conformance, Durability, Serviceability, Perceived Quality Delivery: Right Quantity - Right Time - Right Place Price

The Routine or Arms-Length Quadrant

Readily available products or services representing a relatively small portion of a firm's purchasing expenditures. Low Risk/Complexity & Low Cost/Value Potential Examples: office supplies, fasteners, common tools Simplify the acquisition process by increasing the role of systems and reducing the effort to purchase Supplier Rationalization - minimize suppliers used Automate the purchase process - electronic data Vendor managed inventory Minimal negotiation

Lean Perspective on Overproduction

Source of most waste. Lean systems strive to SLOWLY reduce inventory levels. Reducing inventory will eventually expose a problem (waste) that can be systematically evaluated and eliminated.

The Leverage or Preferred Quadrant

Standardized and readily available products or services representing a significant portion of spend. Low Risk/Complexity & High Cost/Value Potential Examples: standard parts, raw materials Maximize commercial advantage by maintaining pressure on suppliers to improve Relationships with several preferred suppliers Long-term contracts with conditions for improvement Expectation of lower costs over time Coordination of procurement with market cycles

Bill Of Materials

The "recipe" for an Independent Demand Item - a list of all the Dependent Demand Items used to create the Finished Product.

Master Production Schedule (MPS)

The amount of product that will be finished and available for sale at the beginning of each week. The MPS drives more detailed planning activities, such as Material Requirements Planning (MRP)

Planning Horizon

The amount of time the master schedule record or MRP record extends into the future. The longer the production and supplier lead times, the longer the planning horizon must be.

Project Management

The application of knowledge, skills, tools, and techniques to project activities to meet project requirements.

Spend Analysis

The application of quantitative techniques to purchasing data in an effort to better understand spending patterns and identify opportunities for improvement.

Single sourcing

The buying firm depends on a single company for all or nearly all of a particular item or service. Advantages: Volume Discounts, Reduction in Variability, Enables Strong Relationships Disadvantages: Increased Supply Risk, Supplier Dependence, Must Monitor Best Practices

Multiple sourcing

The buying firm shares its business across multiple suppliers. Advantages: Creates Competition, Shares Risk, Promotes Improvements Disadvantages: Decreases Dedication of Suppliers, Increases Variability

Cross sourcing

The buying firm uses a single supplier for one particular part or service and another supplier with the same capabilities for a different part or service. Balances risk while allowing for strong relationships with suppliers

Product Design

The characteristics or features of a product or service that determine its ability to meet the needs of the user.

Competitive Benchmarking

The comparison of an organization's processes with those of competing organizations - from publically available data.

Process Benchmarking

The comparison of an organization's processes with those of noncompetitors that have been identified as having superior processes.

Internal Benchmarking

The comparison of one function within your organization to another function within your organization.

Design for Environment (DFE)

consideration of the impact of the product or service on environment, health & safety

When Purchasing/Procurement reduces COGS by a quantity or percentage, the money saved increases Pretax Profit by ________

the same amount EXAMPLE: Reducing COGS by $10 increases Pretax Profit by $10 EXAMPLE: COGS = $100. Reducing COGS by 10%, reduces COGS by: $100 x 0.1 = $10, which increases Pretax Profit by $10

Design For Manufacturability (DFM)

designing products and services to be easier to implement

Design For Maintainability (DFMt)

designing products to be easier to service and maintain

Design for Six Sigma (DFSS)

designing products to reduce variability in production and quality

"Pure" Services

Intangible Product Output cannot be Stored (no inventory) High Customer Contact and Involvement Typically Small Markets Quality is Perceived Subjectively

Independent Demand

Typically for Finished Goods - products made up of purchased or produced components and materials.

Dependent Demand

Typically for Raw Materials and Work-In-Progress - components and materials used to create Independent Demand Items.

[Internal] Category profile

Understanding all aspects of a particular sourcing category that could ultimately have an impact on the sourcing strategy. Breaking down categories of purchasing into more detail Identifying where problems are occurring internally

Visual Management

Using simple visual controls to make: Normal and abnormal conditions visible Make waste and problems obvious Make processes simple, straightforward, obvious Make it easier to do the right thing and harder to do the wrong thing Common Visual Controls: Outlining, shadowboards, color coding

Match with Existing Capabilities

Utilizing existing parts and manufacturing facilities is usually easier to support. Service that exploit existing capabilities.

Questions to ask when selecting a manufacturing process:

What are the physical requirements of the company's product? How similar to one another are the products the company makes? What are the company's production volumes? Where in the value chain does customization take place (if at all)?

Global Sourcing

competing against World-Class organizations Global competition requires ______ Considerations Where and when are goods and services needed? What suppliers have the best mix of performance characteristics? Advances in information systems have enabled _______ efforts. _______ applies to services and business processes, as well as manufactured goods - Invoice processing, financial analysis, call centers, IT processing

Development process

A process that seeks to improve the performance of primary and support processes (Process Improvement)

DMADV

(Define - Measure - Analyze - Design - Verify) A Six-Sigma process that outlines the steps needed to create completely new business processes or products

Quality Function Deployment (QFD)

(House of Quality) Graphical tool used to help organizations translate customer desires into specific engineering and operational requirements.

Business processes are....

....are Cross-Functional, involving a variety of functions (people)

Strategic Sourcing Steps

1. Asses Opportunities 2. Profile Internally & Externally 3. Develop the Sourcing Strategy 4. Screen Suppliers & Create Selection Criteria 5. Conduct Supplier Selection 6. Negotiate & Implement Agreements

The Seven Basic Quality Improvement Tools

1. Check Sheet- A structured form for collecting and analyzing frequency count data 2. Pareto Chart- A bar graph that visually displays frequency count data from highest to lowest 3. Cause & Effect Diagram (Traditional)- Also known as a fishbone or Ishikawa diagram, A graphical tool that allows one to explore potential causes for a problem 4. Run Chart- Graph of measured data over time, Often graphed with a horizontal line showing the average of the data 5. Scatter Diagram- Graph of pairs of numerical data to determine potential relationships between two variables, Used in conjunction with Regression (a statistical calculation) 6. Histogram- Bar graph showing how often each different value in a set of data occurs 7. Control Charts (Statistical Process Control)- Graphs used as a basic form of Statistical Analysis to determine whether changes are caused or random

Efficiency =

100% (Actual Outputs / Standard Outputs) Because you are dividing equivalent units ($/$, Hours/Hours, Qty/Qty), efficiency is always a %. Efficiency is <100% when the process does not output as much or quickly as expected Efficiency can be >100% when improvements or changes in the process allow output to exceed expectations

Inspection

100% Incoming Inspection (for new suppliers or new purchases) Sample Inspection (for established suppliers and purchases, utilizes statistical principles) No Inspection (for Certified Suppliers)

Lean

A "perspective" that identifies and removes waste from processes and builds a culture where everyone in the organization is involved in improvement.

Merchandise inventory

A balance sheet item that shows the amount a company paid for the inventory it has on hand at a particular point in time.

LeanSigma or Lean Six Sigma

A conscious effort to incorporate both Lean and Six Sigma in the way an organization is managed.

Master Scheduling

A detailed planning process that tracks production output and matches this output to actual customer orders. Makes specific the overall resource levels established by S&OP. States exactly when and in what quantities specific products will be made. Links production with specific customer orders, allowing the firm to tell the customer exactly when an order will be filled. Informs the operations manager what inventory or resources are still available to meet new demand. Purposes: Maximize labor and equipment utilization Minimizing costs Ensure adequate finished goods inventories to fill customer orders on time Match the average production rate with the average sales rate over the planning horizon.

Request for Quotation (RFQ) or Request for Proposal (RFP)

A document sent to suppliers requesting details for a potential purchase. [Resulting in a Quotation or Proposal] Material Description Quality Tolerances Quantities Required Quantity Thresholds for Price Breaks Delivery Capabilities Terms of Payment Contract Length

Purchase Order (PO)

A document that authorizes a supplier to deliver a product or service and often includes key terms and conditions such as price, delivery, and quality requirements [details taken from the Quotation or Proposal]

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. CALCULATION

Gantt Chart

A graphical tool used to show expected start and end times for project activities and to track actual progress against these time targets. Demonstrate: Task Duration Task Precedence Task Milestones & Deadlines Task Responsibility Critical Tasks/Critical Path Tasks With Slack Project Completion Date

Hybrid Manufacturing Process

A group of processes that seeks to combine the characteristics, and hence advantages, of more than one of the classic processes. Machining centers - machines or series of machines that complete several manufacturing steps Group technology/Cellular Layout - Dedicating equipment and people to producing all the products within a product family Product Family: A set of products that require similar processing Common in companies that utilize "Lean" concepts

Make-or-Buy Decision

A high-level, strategic decision regarding which products or services will be provided internally (Make) and which will be provided by external supply chain partners (Buy). In-sourcing vs Outsourcing

Material Requirements Planning (MRP)

A planning process that translates the master production schedule (Independent Demand Items) into planned orders for the actual parts and components needed (Dependent Demand Items) to produce the master schedule.

Total cost analysis

A process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options.

Primary process

A process that addresses the main value-added activities of an organization: Creating value for external customers.

Support process

A process that performs necessary, albeit not value-added activities: Creating value for internal customers.

Continuous Flow Processes

A process that produces highly standardized products using a tightly-linked, paced sequence of steps. Example products: oil, gas, oils, beverages, fluids, yarn and fabric Product usually cannot be broken into discrete units Processes are organized according to use Capital-Intensive processes - designed by engineers and difficult to alter Production runs continually. Changing product configuration involves extensive setups (cleaning out piping, draining lines, etc.) Often dedicated to a small number of unique products made in high volumes Product-based layout

Job Shops

A process used to make a wide variety of highly customized products in quantities as small as one. Examples include custom furniture, specialized machine tools used by manufacturers, restoration work, custom clothing, emergency room Characterized by general-purpose equipment and broadly skilled workers Main emphasis is meeting a customer's unique requirements. Product design and production process is not standardized Typically follows a functional equipment layout

Production Line

A process used to produce a narrow range of standard items with identical or highly similar designs. Examples: high-volume standardized products such as automobiles, candy bars, paper, pens Follows a product-based layout: sequential steps for completing the process are arranged next to one another Steps are usually linked by a material handling system that moves the items from one step to the next at a predetermined pace Can be suitable for high-volume production, especially when automation is utilized Utilizes specialized equipment and labor (people and machines do a small (specialized) task within the large process Are inflexible with regard to items that do not fit the design characteristics of the ______ - customization is difficult to achieve Product-based layout

Batch Process

A process where items are moved through the different manufacturing steps in groups or batches. Examples: mass-market consumer products such as hand tools, computers, clothing, shoes, books, packaged food items, office furniture, etc. Batch processes set up a process to make many of one particular item. The process makes many of these identical products (often running continuously for days) before being stopped and changed to produce a different product. Fits between job shops and production lines in terms of product volume Flexible Manufacturing Systems - Highly automated batch processes that can quickly change from making one item to the next when making groups of similar products using computerized technology. Functional Layout

Critical Path

A sequence of tasks for which there is no extra time available. Delays on the Critical Path will delay the entire project. Critical Task: A task along the critical path

Process

A set of logically related tasks or activities performed to achieve a defined business outcome...to create value for a customer.

Planning and control

A set of tactical and execution-level business activities that includes: master scheduling material requirements planning production activity control vendor order management

Kraljic's Portfolio analysis

A structured approach used by decision makers to develop a sourcing strategy for a product or service, based on the value potential and the relative complexity or risk represented by a sourcing opportunity.

Project

A temporary endeavor undertaken to create a unique product, service, or result. Non-routine, making planning difficult Complex, involving a variety of skills and capabilities Require significant levels of cross-functional and inter-organizational coordination. Clear starting and ending points after which the people and resources dedicated are reassigned.

Product-based layout (continuous flow & production lines)

A type of layout where resources are arranged sequentially, according to the steps required to make a product Used for products with identical or highly similar designs Think about the process used to make sandwiches at Quiznos or Subway

Functional layout (job shop & batch manufacturing)

A type of layout where resources are physically grouped by function Used for products with high degrees of customization or expertise required Think about the process you must go through to sign up for and pay for classes

Fixed-Position Layout

A type of manufacturing process in which the position of the product is fixed. Examples: shipbuilding, construction projects, and traditional home building. Materials, equipment, and workers are transported to and from the product. Used in industries where the products are very bulky, massive, or heavy and movement is problematic

Six Sigma

An improvement framework that targets problem-solving and consistency using a well-defined set of analytical tools - many of which are based on statistics. Focuses on: Understanding and managing customer requirements Aligning key business processes to achieve those requirements Utilizing rigorous data analysis (statistics) to understand and ultimately minimize variation in those processes Driving rapid and sustainable improvement to the business processes.

Material Requisition or Purchase Requisition

An internal document that identifies characteristics about materials or supplies that are needed.

Agile: Lean Startups/Entrepreneurism/Software Development

Applying lean to removing waste from the process of starting a business from the ground-up. (HOT application area right now)

Strategic Sourcing Step 1:

Asses Opportunities: Spend Analysis PURPOSE: Determine where efforts to change purchasing practices will have the most influence. What categories of products or services make up the bulk of company spending? How much are we spending with various suppliers? Who are our suppliers? How much are we spending with each? What are our spending patterns like across different locations? What divisions, departments, plants, business units are responsible for the most spending?

%COGS

COGS / Sales Revenue

Projected inventory levels

Calculation of future inventory levels

Supply Chain Disruptions

Caused by natural disasters, economic or political events.

Kanban system

Containers, cards, or visual limits that signal when work needs to be done or replenishment needs to be initiated. Limits inventory levels Used within an organization to signal production Used with suppliers to signal replenishment Common Type: Two (or Multi) Bin One container contains parts being used Empty container signals production/replenishment EXAMPLE: Kitchen - keep 2 boxes of snack-bars Common Type: Card Only one container of parts on hand A card or signal midway through the container signals production/replenishment EXAMPLE: Tissue boxes with different color tissues when box is almost empty Manually signals production needs without complex scheduling software Recent popular topic - Personal Kanban for personal scheduling of tasks

Process Types

Continuous Flow Processes Production Line Batch Manufacturing Job Shop Fixed Position Layout

Incremental Direct Costs

Costs that are incurred only after a certain number of products are produced. "Each time you produce X, a cost of $Y is incurred." Examples: Direct Labor, Transport Cost, Direct Maintenance Cost, Setup Cost Divide "Number of Units Needed" by the threshold "X" and multiply by _________ $Y to calculate "Total Costs"

One-Time Costs

Costs that are incurred only when a product or service is first produced. Examples: Product Design, Fixture Purchase, Mold/Die Purchase ______ are added directly to "Total Costs"

Indirect Costs

Costs that are not tied directly to the level of operations or supply chain activities. "If you make/do more, the unit cost does not change." Examples: Administrative Costs, Overhead, Depreciation, Basic Utilities Difficult to calculate accurately. For this class, ______ will be given as an allocated Direct Cost ($/unit)

Direct Costs

Costs tied directly to the level of operations or supply chain activities. "If you make/do more, the unit cost increases directly." incurred." Examples: Part-Time Labor, Direct Material Costs, Direct Energy Costs Multiply "________" by the "Number of Units Needed" to calculate "Total Costs"

Total Quality Management (TQM) Core Principles

Customer focus Leadership involvement Continuous improvement Employee empowerment Quality assurance Supplier partnerships Strategic quality plan

Profit Leverage Effect

Decreasing the money spent on purchasing functions increases profit FASTER than increasing revenue as a result of marketing and sales. Every $1 saved in purchasing, lowers COGS by $1 and directly contributes $1 to bottom line profits.

The Six Sigma Improvement Methodology (DMAIC)

Define: Goals of the process and customer requirements Measure: Collecting data on the process, variation, defects Analyze: Statistical analysis of data to determine causes of variation Improve: Designing and testing process improvements designed to meet goals Control: Training, Monitoring, Creating Procedures, Process Documentation

Target Costing, Design to Cost

Designing a product to meet a specific cost objective.

Phases of Product Development: Design and development phase

Designing, building and evaluating prototypes/simulations

Strategic Sourcing Step 3:

Develop the Sourcing Strategy: Make or Buy, Total Cost Analysis, Portfolio Analysis

Value Stream Process Map

Diagrams the entire creation of value through a company. Each product category is mapped separately. Arranged left to right, starting at raw materials and tracking the creation of value through to the customer. Describes who does the work, in what quantities, the time it takes to do the work, and delays encountered. The top of the ________describes how information from the customer influences the process. Used to decrease process delays and waste and to make sure the process can meet the customer requirements.

Crashing

Efforts to shorten the duration of a project or to make up delays that have occurred.

Projected Ending Inventory

Ending Inventory in time period t = Ending inventory in time period t - 1 + MPS in time period t - max(forecasted demand for time period t, order booked for time period t)

Organizational Roles

Engineering - Provide the expertise. Marketing - Understand the marketplace. Accounting - Play the role of "scorekeeper." Finance - Judge the financial impact and determine how to acquire the needed capital. Designers - Handle product design and create "identities" for companies, environments, and service experiences. Purchasing - Identify the best suppliers and sign them up early in the process and act as a consultant for material supply markets. Operations - Designing processes to produce the products and services Suppliers - Bring opportunities for improvement, reduce financial risks, help in the development process.

Forecasted demand

Estimate of future demand during the planning period

Ethical Sourcing

Ethical Treatment of Workers, Fair Trade Products, Requires Verification and Management

Develop Risk Management Strategies

Evaluating relationships with diverse suppliers Holding higher inventory at various locations within the supply chain Developing alternative sources of supply

Value Analysis

Evaluating the relative benefits of a product or service in relation to the cost Often utilized as part of QFD

Lean Supply Chain Management

Extending Lean principles throughout the supply chain - to suppliers and customers.

Slack

Extra time that is available for task completion. Tasks with available slack may be delayed without delaying the entire project.

Product Tree Structure

Graphical or "outline" representation off all the components involved in building the Independent Demand Item

Sustainable Sourcing

Green Purchasing- Overall reduction in packaging, materials, waste, byproducts with a goal of environmental sustainability Sustainability- Replenishment of natural resources

Phases of Product Development: Concept development phase

Identifying new or revised products and services Purpose: marketing, supply chain, engineering

Strategic Sourcing

Identifying ways to improve long-term business performance by better understanding sourcing needs, developing long-term sourcing strategies, selecting suppliers, and managing the supply base.

Reasons to Buy or Outsource

If low volumes increase costs To maintain strategic flexibility To gain access to state-of-the art technology and processes Cost and/or Quality Advantage When suppliers are reliable When relationships have been established When product life-cycles are short

FlowChart Process Map

Involves a well defined start and finish connected by a variety of process steps. Typically arranged top-down (but may be arranged left to right) to describe a process from start to finish. Usually involves both tasks and options. There may be several possible paths to get from the start to the finish. Used to understand and simplify complex processes.

SwimLane Process Map

Involves a well defined start and finish connected by a variety of process steps. Parallel work flows can be clearly seen. Typically arranged left to right to describe a process from start to finish. The _________ is arranged on a timeline. Tasks on the left must occur prior to tasks on the right. The various functions/people/specialties each have a horizontal "_______" within which all of their responsibilities are listed. Often used to describe processes that are managed by software.

Functional Layout

Job Shop and Batch Processes Work areas are arranged by function (identical machines and functions are located in "departments" [Batch Processes may have portions of the process that are arranged in a product line layout] Production pace varies from work area to work area Best suited where a wide range of product configurations or customization is required Highly flexible, but requires extensive coordination between functions to be effective

Contracting

Legal formalization of the buyer-supplier relationship and agreements Fixed-price contract - Stated price does not change. Cost-based contract - Price of the good or service is tied to the cost of some other key input(s) or other economic factors.

Line Balancing Process Map

Lists all the individual tasks of all the functions/people involved in a process. Graphically describes how long each function/person takes to complete a process compared to a target rate for the process. Used to "rebalance" the process by changing the responsibilities of individual functions/people: Allowing overworked functions/people to transfer some of their responsibility to underutilized functions/people.

The degree of customization

Lower customization allow for standardized processes. Primary measurements are related to productivity and cost Higher customization requires flexible processes. Primary measurement becomes customer satisfaction.

Production quantities

MPS: Planned quantity of products to be produced

Backward Scheduling

MRP calculates when Dependent Demand items must be ordered and when sub-assembly components must be produced in order to complete the Independent Demand item on schedule.

Advantages of MRP

MRP is directly tied to the master production schedule and indicates the exact timing and quantity of orders for all components. MRP allows managers to trace every order for lower-level items through all the levels of the BOM, up to the Master Production Schedule. MRP tells a firm and its suppliers precisely what needs to be made when. MRP is automated when using an ERP system When used within an ERP system, requirements can be calculated and communicated across Supply Chain Partners

Special Considerations in MRP

MRP requires organizational discipline and accurate information. MRP must be able to accommodate uncertainty (variability in quantities, timing, quality, schedule) MRP nervousness - A term used to refer to the observation that any change, even a small one, in the requirements for items at the top of the bill of material can have drastic effects on items further down the bill of material.

Settlement and Payment

May be paid through Electric Funds Transfer (EFT) Payment is aligned with Quotation, Receipt, and Inspection

Production Volumes

Meeting _______ by building new facilities, acquiring additional workers and equipment, supplier collaboration.

Dual sourcing

Multiple sourcing across only two suppliers Enables stronger relationships while reducing risk

Strategic Sourcing Step 6:

Negotiate and Implement Agreements: competitive Bidding, Negotiation, Contracting

Four Reasons for Developing New Products and Services

New products or services can give firms a competitive advantage in the marketplace. New products or services provide benefits to the firm. Companies develop new products or services to exploit existing capabilities. Companies can use new product development to block out competitors.

Product Costs

Obvious costs - Costs that are the easiest to see and manage (material, technology, labor). Hidden costs - Costs that are not easy to track but can have a major impact (supplier management, design changes)

The Procure-To-Pay Cycle

Ordering, Follow-Up and Expediting, Receipt and Inspection, Settlement and Payment, Records Maintenance,

Productivity =

Outputs / Inputs [Can be Single-Factor or Multi-Factor Inputs] Units of Productivity can vary ... read as "XX per YY"

Fair Trade Products

Paying fair prices for products manufactured or grown by a disadvantaged producer in a developing country.

Garvin's Classic "8 Dimensions of Quality"

Performance: Primary operating characteristics of a product or service Features: Secondary, supplementary characteristics or benefits of a product or service Reliability: Probability of malfunctioning within a period of time Durability: How long the product is expected to last, especially under extreme conditions Conformance: Traditional view of quality - Is the product or service the same as specifications? Aesthetics: How a product or service looks, feels, sounds, tastes, smells Serviceability: Speed, courtesy, competence, and ease of repair Perceived Quality: How a customer perceives quality when these cannot be determined readily, directly, or empirically

Pretax Profit Margin

Pretax Profit / Sales Revenue

Product-based layout

Production Line and Continuous Flow Processes Equipment and people are highly specialized and arranged sequentially according to the steps required to make a product or product family, often paced, best suited to high-volume production of standardized products

Engineer-to-order (ETO)

Products are designed and produced from the start to meet unusual customer needs or requirements. Completely Customized.

The Critical or Strategic Quadrant

Products or service with unique or complex requirements coupled with a limited supply base. High Risk/Complexity & High Cost/Value Potential Examples: fashion clothing/jewelry, custom electronics Form partnerships and communication with selected suppliers Persistent negotiation tactics Monitor and manage supplier processes Create contingency plans Analyze marketplace and competition trends

The Bottleneck Quadrant

Products or services with unique or complex requirements that can be met only by a few potential suppliers. High Risk/Complexity & Low Cost/Value Potential Examples: Custom product accessories, custom machine parts Ensure supply continuity by decreasing the uniqueness of the suppliers & managing the supply Widen the specifications where possible Increase competition by developing new suppliers Set medium-term contracts Utilize competitive bidding

Assemble-to-order (ATO)

Products that are customized only at the very end of the manufacturing process.

Make-to-stock (MTS)

Products that require no customization.

Make-to-order (MTO)

Products that use standard components but the final configuration of those components is customer-specific. Customized from a Standard "Menu" of options.

Strategic Sourcing Step 2:

Profile Internally and Externally: [Internal] Category profile & [External] Industry Analysis

[External] Industry Analysis

Profiling the major forces and trends that are impacting an industry, including pricing, competition, regulatory forces, substitution, technology changes, and supply/demand trends. Maintaining visibility of global political and regulatory policy Tracking trends in commodity and supply pricing Monitoring market, customer, and competitor trends

Competitive Bidding

Requesting bids from potential suppliers with a formal RFQ RFQ-Request for Quotation: Includes all the characteristics required or desired Includes: descriptions, specifications, quantities, delivery, timelines USE WHEN: Price is a dominant criteria, requirements are straightforward

Qualitative criteria from Bauer SCM Recruiting Companies: SSQDC

Safety: Internal and External Sustainability: Green and Ethics Quality: Consistency, Conformance, Service Delivery: Reliability, Speed, Capacity Cost: Total Cost of Ownership Also... Process and design capabilities and technologies Management capability Financial condition and cost structure Longer-term relationship potential, willingness to share knowledge

Weighted-point evaluation system

Score of x = sum of (Performance of xy times W of y) where: x= supplier x y= performance dimension y Performance xy = rated performance of supplier x with regard to performance dimension y Wy= assign weight for performance dimension y, where the sum of Wy = 1

Strategic Sourcing Step 4:

Screen Suppliers and Create Selection Criteria: SSQDC

Records Maintenance

Supplier Relationship Management (SRM) Software

Risk Assessment and Strategy

Take a Broad View of Potential Risks, Prioritize Risk Potential, Develop Risk Management Strategies

"Pure" Manufacturing

Tangible Product Output can be Stored (inventory) Low Customer Contact and Involvement Typically Large Markets Quality Can be Measured Objectively

Computer Aided Design & Computer Aided Manufacturing (CAD/CAM)

Technology to allow sharing and editing of product and process designs Can be integrated with rapid prototyping & 3D printing technologies

Statement of work (or scope of work)

Terms and conditions for a purchased service that indicate, among other things, what services will be performed and how the service provider will be evaluated.

Repeatability

The design of products to be less sensitive to variations, increasing the probability that they will perform as intended.

Testability

The ease with which critical components or functions can be tested during production

Serviceability

The ease with which parts can be replaced, serviced, or evaluated.

Postcompletion Phase

The fifth of five phases of a project where the project manager or team confirms the final outcome, conducts a postimplementation meeting to critique the project and personnel, and reassigns project personnel.

Concept Phase

The first of five phases of a project where project planners develop a broad definition of what the project is and what its scope will be. Primary Performance of a Project: Time, Scope, Money Scope - description of the desired outcomes of a project Scope Creep - the tendency for the scope to change throughout the duration of a project

Performance Phase

The fourth of five phases of a project where the organization actually starts to execute the plan. Costs, Quality, and Speed of this portion of the project is a function of how well managers have completed the first three phases of the project.

Taguchi's Quality Loss Function

The higher the deviation from the design specifications, the higher the cost. Processes with lower variation will reduce costs

Total Cost of Quality Curve

The lower the defect rate, the lower the costs.

Three dimensions on which services can differ and compete:

The nature of the Service Package The degree of customization The level of customer contact Challenge: communicating customer needs throughout the service process

Product Development Process

The overall process of strategy, organization, concept generation, product and marketing plan creation and evaluation, and commercialization of a new product. Sequential Development Concurrent Engineering

Continuous Improvement

The philosophy that small, incremental improvements can add up to significant performance improvements over time. Kaizen: practice of making small, incremental process improvements over time using Lean principles Define - Measure - Analyze - Improve - Control (DMAIC) Two Second Lean: intentionally making a small change in your process at the beginning of each day. Deming Cycle: Plan - Do - Check - Act (PDCA) Observe - Plan - Do - Check - Act (APDCA) Plan - Do - Study - Adjust (PDSA) Find - Organize - Clarify - Understand - Select (FOCUS) "The journey of a thousand miles begins with a single step." - Lao Tzu

Mapping

The process of developing graphic representations of the organizational relationships and/or activities within a business process. Purposes: It creates a common understanding of the content of the process: its activities, its results, and who performs the various steps. It defines the boundaries of the process. It provides a baseline against which to measure the impact of improvement efforts. It makes the process visible so that people can discuss it, trouble-shoot it, improve it. It forces people to address what is actually happening in the organization. The mapping activity itself often highlights problems that can be addressed & improved.

Benchmarking

The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance.

Cost Of Goods Sold (COGS)

The purchased cost of goods from outside suppliers.

Profit margin

The ratio of earnings (profit) to sales (revenue) for a given time period.

Project Definition Phase

The second of five phases of a project where project planners identify how to accomplish the work, how to organize for the project, the key personnel and resources required to support the project, tentative schedules, and tentative budget requirements. Budget estimates become more accurate.

Planning Phase

The third of five phases of a project where project planners prepare detailed plans that identify activities, time and budgets targets, and the resources needed to complete each task, while also putting into place the organization that will carry out the project. Milestones - Performance , Time, & Budget targets scheduled throughout the project timeframe used to track whether the project is progressing as planned Acquisition and scheduling of resources

Planning Lead Time

The time from when a component is ordered (or produced) until it arrives and is ready to use.

Insourcing

The use of resources within the firm to provide products or services. "Do it Myself" [_______ the Supply Chain is "Vertical Integration"]

Outsourcing

The use of supply chain partners to provide products or services. "Pay Someone to Do It"

7 Wastes TYPICALLY recognized by Lean Professionals:

Transportation - Moving materials/tools from place to place Inventory - Having to provide space/resources to store materials Motion - Workers or machines that are moving, but not getting any work done Waiting - MATERIAL/PRODUCTS that are motionless and not being worked Overproduction - Producing more than the customer needs before the customer needs it Overprocessing - Performing work .... when the work was already done previously Defects - Errors in production Unused Employee Ingenuity - Not using the creative minds of ALL workers in Problem-Solving

Financial Impact

direct influence on bottom-line profits

Ethical Treatment of Workers

diversity & minorities, child labor, worker abuse, human rights, animal rights, safety, pay scales

Pareto Chart

graphically orders categories of numerical data in descending order so that the most important categories are easily recognized.

Juran's Costs of Quality

small Prevention Costs avoid large Failure Costs External failure costs - Costs associated with defects in a product or service that reaches the customer. Loss of sales, product returns, warranty claims, liability claims Internal failure costs - Costs caused by defects that occur prior to delivery to the customer. Scrap, rework, downtime, price reductions Appraisal costs - Costs a company incurs for assessing its quality levels. Inspection, testing, data analysis Prevention costs - Costs an organization incurs to prevent defects from occurring. Planning, management, product/process design, training