Operations Management: A supply chain · PDF file · 2017-06-26Operations...

Department of Business Administration

3/12/2012

Operations Management: A

supply chain approach

Dr. Patricia Deflorin


3/12/2012

Overview

1. Operation Strategy: Origins and New Directions

2. Supply Chain Management

3. Creating an Edge through New Process Development

4. Sharpening the Edge: Driving Operations Improvement

5. Designing and Managing Operating Networks


Todays topics

• The Supply Chain: Introduction

• Supply Chain Management (SCM)

• Supply Chain Management Enablers

• Process Control and SCOR

• Green Supply Chain

• Managing Disintegrated Supply Chains: An Example

• Summary

3/12/2012


The Supply Chain: Introduction

• All facilities, functions, and activities associated with flow and

transformation of goods and services from raw materials to

customer, as well as the associated information flows

• An integrated group of processes to “source,” “make,” and “deliver”

products

4


The Supply Chain: Introduction

Copyright 2011 John Wiley & Sons, Inc. 5


The Supply Chain: Introduction Processes



The Supply Chain: Introduction Processes and Interfaces

Operations and supply

chain activities

Purpose Key Interfunctional

Participants

Key Interorganizational

Participants

Process selections Design and implement the transformation

processes that best meet the needs of the

customer and the firm.

Engineering,

Marketing, Finance,

Human resources, IT

Customers

Forecasting Develop the planning numbers needed for

effective decision making.

Marketing, Finance,

Accounting

Suppliers, Customers

Capacity planning Establish strategic capacity levels (bricks

and mortar) and tactical capacity levels

(workforce, inventory).

Finance, Accounting,

Marketing, Human

resources

Suppliers, Customers

Inventory management Manage the amount and placement of

inventory within the company and the

supply chain.

IT, Finance Suppliers, Customers

Planning and control Schedule and manage the flow of work

through an organization and the supply

chain; match customer demand to supply

chain activities.

Marketing, IT Suppliers, Customers

Purchasing Identify and qualify suppliers of goods and

services; manage the ongoing buyer-

supplier relationships.

Engineering, Finance,

Marketing

Suppliers

Logistics Manage the movement of physical goods

throughout the supply chain.

Marketing, Engineering Suppliers, Customers

3/12/2012 (Bozarth and Handfield, 2005)


The Supply Chain: Introduction Job descriptions


Analyst Uses analytical and quantitative methods to understand , predict, and improve processes within the

supply chain.

Commodity manager Acquires knowledge in a specific market in which the organization purchases significant quantities

of materials and services. Helps formulate long-term commodity stragies and manage long-term

relationships with selected suppliers.

Customer service manager Plans and directs customer service teams to meet the needs of customers and support company

operations. Works closely with marketing and sales, logistic, and transportation departments.

International logistics manager Works closely with manufacturing, marketing, and purchasing to create timely, cost-effective

import/export supply chains.

Logistics services salesperson Markets transportation, warehousing, and specialized services to other companies.

Production manager Supervises production in a manufacturing setting. Responsible for a wide range of personnel.

Sourcing analyst Identifies global sources of materials, selects suppliers, arranges supplier’s contracts, and manages

ongoing supplier’s relationships.

Sourcing manager Measures supplier performance, identifies suppliers requiring improvement, and facilitates efforts to

imporve supplier’s processes.

Logistics and Material Planner Reviews existing procedures and examines opportunities to streamline production, purchasing,

warehousing, distribution, and financial forecasting to meet product distribution needs.

Systems support manager

(Management Information Systems)

Provides analytical support in the management of logistics information, supplier performance data,

materials requirements, and scheduling processes.

Transportation manager Manages private, third-party, and contract carriage systems to assure timely and cost-efficient

transportation of all incoming and outgoing shipments.


The Supply Chain: Introduction Value Chain versus Supply Chain

Value chain

– every step from raw materials to the eventual end user

– ultimate goal is delivery of maximum value to the end user

Supply chain

– activities that get raw materials and subassemblies into manufacturing operation

– ultimate goal is same as that of value chain

Terms are used interchangeably

Value: creation of value for customer is important aspect of supply chain management

9


Supply Chain Management (SCM)

Managing flow of information through supply chain in order to

attain the level of synchronization that will make it more

responsive to customer needs while lowering costs

Keys to effective SCM

– information

– communication

– cooperation

– trust

10


Supply Chain Management (SCM) Supply Chain Uncertainty and Inventory

Inventory

– insurance against supply chain uncertainty

A major objective of SCM:

– respond to uncertainty in customer demand without creating costly excess inventory

Factors that contribute to uncertainty

– ……

11


Supply Chain Management (SCM) Bullwhip Effect

Occurs when slight demand variability is magnified as information moves

back upstream

(Copyright 2011 John Wiley & Sons, Inc.) 12

http://www.youtube.com/watch?v=wLNdDSYqhNw&feature=results_main&playnext=1&list=PL42E49E0FED914E13


Supply Chain Management (SCM) Effective SCM

Keys to effective SCM

– Information

– Communication

– Cooperation

– Trust

Enablers to effective SCM:

- Risk pooling

- Information Technology

- Supply Chain integration and collaboration

3/12/2012


Supply Chain Enabler Risk Pooling

Risks are aggregated to reduce the impact of individual risks

– Combine inventories from multiple locations into one

– Reduce parts and product variability, thereby reducing the number of product components

– Create flexible capacity

14


Supply Chain Enablers Information Technology



Supply Chain Enablers E-Business

• Savings due to lower transaction costs

• Reduction of intermediary roles

• Shorter supply chain response times

• Wider presence and increased visibility

• Greater choices & more info for customers

• Improved service

• Collection & analysis of huge amounts of customer data &

preferences

• Access to global markets, suppliers & distribution channels



Supply Chain Enablers Electronic Data Interchange (EDI)

• Computer-to-computer exchange of documents in a standard

format

• Purchasing, shipping and receiving

• Improve customer service

• Reduce paperwork

• Increase productivity

• Improve billing and cost efficiency

• Reduce bullwhip effect through information sharing



Supply Chain Enablers Bar Codes

• Automated data collection system

• Bar code contains identifying information

• Provide instantaneous tracking information

• Checkout scanners create point-of-sale data

– Update inventory records

– Identify trends

– Order material

– Schedule orders

– Plan deliveries



Supply Chain Enablers Radio Frequency Identification (RFID)

• Use radio waves to transfer data from chip to a reader

• Provides complete visibility of product location

• Continuous inventory monitoring

• Reduce labor to manage inventory

• Reduce inventory costs

• ….

• RFID is not standardized yet

• Data protection issues



3/12/2012

Supply Chain Enablers RFID


Supply Chain Enablers Supply Chain Integration

Share information among supply chain members

– Reduced bullwhip effect

– Early problem detection

– Faster response

– Builds trust and confidence

Collaborative planning, forecasting, replenishment, and design

– Reduced bullwhip effect

– Lower costs (material, logistics, operating, etc.)

– Higher capacity utilization

– Improved customer service levels

23


Supply Chain Enablers Collaborative Planning, Forecasting, and Replenishment (CPFR)

• Two or more companies in a supply chain to synchronize their demand forecasts into a single plan to meet customer demand

• Parties electronically exchange

– past sales trends

– point-of-sale data

– on-hand inventory

– scheduled promotions

– forecasts

(Bozarth and Handfield, 2005) 24


Process Control and SCOR

Process Control

– not only for manufacturing operations

– can be used in any processes of supply chain

Supply Chain Operations Reference (SCOR)

– a cross industry supply chain diagnostic tool maintained by the

Supply Chain Council



Return

Return products, post-delivery customer

support

Process Control and SCOR SCOR Model Processes

Plan

Develop a course of action that best meets sourcing, production

and delivery requirements

Source

Procure goods and services to meet planned or actual

demand

Make

Transform product to a finished state to meet

planned or actual demand

Deliver

Provide finished goods and services to meet

planned or actual demand, including

order management, transportation and

distribution



Process Control and SCOR SCOR Performance Metrics


Performance

Attribute

Performance Metric Definition

Customer Facing Supply chain

delivery reliability

Delivery performance Percentage of orders delivered on time

and in full to the customer

Fill rate Percentage of orders shipped within 24

hours of order receipt

Perfect order fulfillment Percentage of orders delivered on time

and in full, perfectly matched with order

with no errors

Supply chain

responsiveness

Order fulfillment lead

time

Number of days from order receipt to

customer delivery

Supply chain

flexibility

Supply chain response

time

Number of days for the supply chain to

respond to an unplanned significant

change in demand without a cost penalty

Production flexibility Number of says to achieve an unplanned

20% change in orders without a cost

penalty


Process Control and SCOR SCOR Performance Metrics

3/12/2012 (Bozarth and Handfield, 2005) 28

Performance

Attribute

Performance Metric Definition

Internal Facing Supply chain cost Supply chain

management cost

The direct and indirect cost to plan,

source and deliver products and services

Cost of goods sold The direct cost of material and labor to

produce a product or service

Value-added

productivity

Direct material cost subtracted from

revenue and divided by the number of

employees, similar to sales per

employee

Warranty/returns

processing cost

Direct and indirect costs associated with

returns including defective, planned

maintenace and excess inventory

Supply Chain Asset

Management

Efficiency

Cash-to-cash cycle time The number of days that cash is tied up

as working capital

Inventory days of supply The number of days that cash is tied up

us inventory

Asset turns Revenue divided by total assets

including working capital and fixed

assets


“Green” Supply Chains

• Sustainability

• Meeting present needs without compromising the ability of

future generations to meet their needs

• Sustaining human and social resources

• It can be cost effective and profitable

• Can provide impetus for product and process innovations

• Impulse comes from downstream in the supply chain and

moves upstream to suppliers

29


“Green” Supply Chains Early success using Green SCM principles

3/12/2012 (LMI, Supply Chain World Conference, 2005)

Texas Instruments: Saves $8

million each year by reducing its

transit packaging budget for its

semiconductor business through

source reduction, recycling, and

use of reusable packaging

systems (20% annual savings).

Commonwealth Edison: Produced

$50 million in financial benefits

from managing materials and

equipment with a life-cycle

management approach.

Pepsi-Cola: Saved $44 million by

switching from corrugated to

reusable plastic shipping

containers for one liter and 20-

ounce bottles conserving 196

million pounds of corrugated

material.

Dow Corning: Saved $2.3 million

by using reconditioned steel

drums in 1995. Also conserved

7.8 million pounds of steel.


Green Supply Chain Potential for cost savings

3/12/2012 (LMI, Supply Chain World Conference, 2005)


Green Supply Chain Classification based on problem context

3/12/2012 Source: Srivastava, S.K. (2007), Green supply-chain management: A state-of the-

art literature review, International Journal of Management Reviews, p.53-80.


Managing Disintegrated Supply Chains An Example

• Powertrain Cooling

• Engine Cooling

Modules

• Radiators

• Condensers

• Charge-Air-Coolers

• …

• Passenger Thermal Management

(HVAC-Heating, Ventilating and Air-

Conditioning)

• HVAC Modules (Underdash)

• Center Stack HVAC Module

• Evaporators

• Heater Cores

• ….

/v2portal/page/portal/modine/pageHome


Managing Disintegrated Supply Chains Supply Chain Collaboration

Key Facts:

• Number of key suppliers: 25

• Area: Europe

• Supply frequency: from multiple times per day to monthly


Managing Disintegrated Supply Chains Supplier Distribution


Managing Disintegrated Supply Chains Supply Chain Collaboration-Tools

Logistics Quality Variation-Management

Daily Delay monitoring for each product Analysis of PPM* monitoring Analysis of problems of the variation

management

If discrepancies occur:

• Entry into respective database

• Analysis of impact

• Initiation of special deliveries

• Request of an action plan



• Product-Leader meeting

• Initiation of special actions




• Initiation of special actions


Monthly • Evaluation of volume-dependability

(Red-Light Monitoring)

• Initiation of the escalation

procedure

• Charging of costs (additional

expenses)

• ppm analysis (top 3)

• Analysis of external quality occurrences

• Analysis of quality problems based on

distinctive categories

• Check of action plan and its effectiveness

• Initiation of the escalation procedure

Top 3 List – worst supplier

Quarterly Analysis of supplier performance

Supplier evaluation

Definition of further escalation procedures:

• Request of an 8D Report

• Supplier site visit

• Invitation of the supplier for the performance discussion

• Supplier audit

*(problems identified/delivered goods)*parts per million


Managing Disintegrated Supply Chains Elements of the collaboration management

Logistic Quality Variation

Database

Supplier Management

Escalation procedure

Special audit

Charge of costs

Workshops

Supplier meetings

Supplier audits

Input

Monitoring and analysis

Plan

Implementation


Managing Disintegrated Supply Chains Claim management – Problem list

• Data transfer from SAP

• Actions are effective if problem isn’t repeated within 90 days

• Summary of the problems and graphical display

• Monthly notification of the data of the supplier creating problems

• Worst suppliers in terms of quality are displayed monthly within the plant

Problem suppliers (max. 100%)

First Quarter 2006

• Modine Pliezhausen GmbH 40%

• Gate S.r.l. 41%

• Modine Austria GmbH 81%


Managing Disintegrated Supply Chains Supply Chain Coordination: Supplier Day

• Review of the last year

• Discussion of future activities and strategy

• Workshops on various topics for the joint process optimization

• Award of the supplier of the year

• Informal discussions and get together


Managing Disintegrated Supply Chain Study of “Successful practice”

Measuring the strategic value of sourcing:

• 44% of customers and 42% of service providers do not undertake formal

strategic reviews of the benefits to their business or sourcing contracts.

• 72% of the customers report that they do not have, or do not share with

their service providers, criteria for measuring the success or failure of

their sourcing arrangement.

Source: KPMG 2007 (sample = 650 companies in 32 countries)


Managing Disintegrated Supply Chains Study of “Successful practice”

Success in meeting expectations:

0 20 40 60 80

47%

66%

64%

61%

Bringing experience to the business

it did not have previously

Ensuring SLAs are met

Ensuring end users/user

departments are satisfied with the

service provided

Cost targets and financial success

criteria

Percentage of respondents

Source: KPMG 2007 (sample = 650 companies in 32 countries)


Summary

• Supply Chain Management is an important factor within international

markets

• Supply Chain Management Enablers reduce risks and support value

generation

• Effective Supply Chain Management is based upon:

– Information

– Communication

– Cooperation

– Trust

3/12/2012


Next Assignments

Date Topic Literature

19.3. R&D Ellram et al (2008)

Zirger and Maidique (1990)

Please send the handouts until

[email protected] until March 19th, 2012

mailto:[email protected]


Definitions

Operations function

Also called operations. The collection of people, technology, and systems within an organization that has primary responsibility for providing the organization’s products or services.

Supply chain

A network of manufacturers and service providers that work together to convert and move goods from the raw materials stage through to the end user. These manufacturers and service providers are linked together through physical flows, information flows, and monetary flows.

Operations management

The planning, scheduling, and control of the activities that transform inputs into finished goods and services.



Definitions

Upstream

A term used to describe activities or firms that are positioned earlier in the supply chain relative to some other activity or firm of interest. For example, corn harvesting takes place upstream of cereal processing, while cereal processing takes place upstream of cereal packaging.

Downstream

A term used of describe activities or firms that are positioned later in the supply chain relative to some other activity or firm of interest. For example, sewing a shirt takes place downstream of weaving the fabric, while weaving the fabric takes place downstream of harvesting the cotton

First-tier supplier

A supplier that provides products or services directly to a particular firm.



Definitions

Second-tier supplier

A supplier that provides products or services to a firm’s first-tier supplier.

Supply chain management

The active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient ways possible.

Supply-Chain Operations Reference (SCOR) model

A framework developed and supported by the Supply-Chain Council that seeks to provide standard descriptions of the processes, relationships, and metrics that define supply chain management.


Operations Management: A supply chain · PDF file · 2017-06-26Operations...

Documents

Transcript of Operations Management: A supply chain · PDF file · 2017-06-26Operations...