Supply Chain Management
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Purchasing: The acquisition of goods and services needed to support the various activities of an organization, at the best possible cost and from reliable suppliers. Supply Chain Management
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Supply Chain Management. Purchasing: The acquisition of goods and services needed to support the various activities of an organization, at the best possible cost and from reliable suppliers. . Supply Chain Management. Purchasing professional's goal to a company should be to provide: - PowerPoint PPT Presentation
Transcript of Supply Chain Management
Purchasing:
The acquisition of goods and services needed to support the various activities of an organization, at the best possible cost and from reliable suppliers.
Supply Chain Management
Purchasing professional's goal to a company
should be to provide:
The best pricing Communication Research in finding sources Supplier performance Evaluation Service level agreements (SLA’s)
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Importance of purchasing:• Competition • Material cost• Lead time• Customer Demand• Quality
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Logistics “The process of planning, implementing and
controlling theefficient, effective flow and storage of goods,
services andrelated information from point of origin to point of
consumption for the purpose of customer Satisfaction”
(council of logistics management)
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Basic modes of transport By Air
By Road ◦ By Train
By Sea
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Considerations in Transportation Cost / Rates Reliability Safety / Damages Insurance Speed / Time Mode of Transportation Routes / sectors Vehicles type Urgency / Priority In-house / Outsource
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3rd Party Logistic Service providers“Third-party Logistics is simply the use of an
outside company to perform all or part of the firm’s materials management and product distribution function.”
-- Simchi-Levi (2000)
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Advantages• Cost reduction• Focus on core competency• Improved efficiency, service and flexibility
Disadvantages• Loss of control• Impact on in-house workforce
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Current use of 3PL by industry
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75.9
71.1
61.4
56.2
53.8
82.2
Percentage of 3PL use in different industries Industry
Computer
Consumer
Retail
Chemical
Medical
AutoSource "What's ahead for 3PLs“ Modern Materials Handling, April, 2000
Warehousing
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Warehousing Functionality Consolidation and Break-Bulk Assortment (Cross Docking, Mixing) Postponement (Packaging, Labelling) Stockpiling (Seasonal, Bulk-Buy) Reverse Logistics
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CROSS-DOCK =
No storage(?)Cross-dock (from multiple suppliers):● goods sorted as they arrive,● goods moved across dock and loaded onto trailers,● benefits - optimal vehicle use and low handling
costs,● requires sophisticated planning techniques.
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Warehouse Planning: Site selection Design Product mix Future expansion
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Safety and Maintenance Health and safety Incidents Environment
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Manufacturing
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Manufacturing is all about converting rawmaterial into consumer or industrial products.
A firms manufacturing competency is basedon Brand power, Volume, Variety and Lead
time.
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JIT and Lean Manufacturing
“A philosophy of manufacturing based on planned elimination of waste and continuous improvement of productivity ……”
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Lean Manufacturing “A philosophy of production that emphasizes the
minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves:◦ … identifying and eliminating non-value-adding activities,◦ … employing teams of multi-skilled workers,◦ … using highly flexible, automated machines” (APICS)
American Production and Inventory Control Society (APICS) is an organization for professionals working in the field of Operations Management
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Elements of JIT Manufacturing Eliminating waste Enforced problem solving and continuous
improvement People make JIT work Total Quality Management (TQM) Parallel processing Kanban production control JIT purchasing Reducing inventories
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Benefits of JIT Inventory levels are drastically reduced:
◦ frees up working capital for other projects◦ less space is needed◦ customer responsiveness increases
Total product cycle time drops Product quality is improved Scrap and rework costs go down Forces managers to fix problems and
eliminate waste .... or it won’t work!
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Production Planning
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Production Planning What to produce When to produce How to produce
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Overview of Operational Planning Activities
Long-Range Planning◦ Focuses on strategic issues relation to capacity,
products, processes and plant location. Intermediate-Range Planning
◦ Focuses on tactical issues pertaining to aggregate workforce and material requirements for the coming year (Aggregate Planning).
Short-Range Planning◦ Addresses day-to-day issues of scheduling
workers on jobs at assigned work stations.
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Aggregate production planning is done in an organization to match the demand with the supply on a period by period basis in a cost effective manner
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Aggregate Planning Strategies Pure Mix
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Pure strategies are as follows Building and utilizing inventory through
constant work force Varying the size of work force Overtime utilization Subcontracting
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Steps for Developing the Aggregate Plan
Step 1- Choose strategy: level, chase or hybrid Step 2- Determine the aggregate production rate Step 3- Calculate the size of the workforce Step 4- Test the plan as follows:
Calculate Inventory, expected hiring/firing, overtime needs Calculate total cost of plan
Step 5- Evaluate performance: cost, service, human resources, and operations
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Aggregate plan for services firmsService organizations also use aggregate planning,some in exactly the same way with a
manufacturingfirm. How many accounts we need to open How many membership we need to sale How many patient we need to serve
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Master Production Schedule (MPS)
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Master Production Schedule (MPS) MPS is product wise plan for
manufacturing products Which product will produce at what time till what time
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MPS specifies The sizing and timing of production orders
for specific items The sequencing of individual jobs The short term allocation of resources to
individual activities and operations
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Inventory Management
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Two Fundamental Inventory Decisions
How much to order of each material when orders are placed with either outside suppliers or production departments within organizations
When to place the orders
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Independent Demand Inventory Systems
Demand for an item carried in inventory is independent of the demand for any other item in inventory
Finished goods inventory is an example Demands are estimated from forecasts and/or
customer orders
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Dependent Demand Inventory Systems
Items whose demand depends on the demands for other items
For example, the demand for raw materials and components can be calculated from the demand for finished goods
The systems used to manage these inventories are different from those used to manage independent demand items
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Inventory Costs Costs associated with ordering too much
(represented by carrying costs) Costs associated with ordering too little
(represented by ordering costs) These costs are opposing costs, i.e., as one
increases the other decreases
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Economic Order Quantities (EOQ)
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Economic Order Quantities Typical assumptions made
◦ annual demand (D), carrying cost (C) and ordering cost (S) can be estimated
◦ average inventory level is the fixed order quantity (Q) divided by 2 which implies no safety stock orders are received all at once demand occurs at a uniform rate no inventory when an order arrives
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CDS /2 = EOQ
Example of EOQZartex Co. produces fertilizer to sell to wholesalers.
One raw material – calcium nitrate – is purchased from a nearby supplier at $22.50 per ton. Zartex estimates it will need 5,750,000 tons of calcium nitrate next year.
The annual carrying cost for this material is 40% of the acquisition cost, and the ordering cost is $595. a) What is the most economical order quantity?b) How many orders will be placed per year?
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ABC Classification of Inventory Typical observations
◦ A small percentage of the items (Class A) make up a large percentage of the inventory value
◦ A large percentage of the items (Class C) make up a small percentage of the inventory value
These classifications determine how much attention should be given to controlling the inventory of different items
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Manufacturing Operation Scheduling
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Scheduling:
Allocation of jobs to scarce resourcesOR
Scheduling is the process of rank ordering the jobs in front of each resource to maximize some chosen performance measure
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Need and Basis for Scheduling Availability of additional information (new or
cancelled orders) Occurrence of random events (absents,
breakdowns) Micro Resources (workers, machines)
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Shop Floor Planning and Control A system for controlling the manufacturing
process from raw material to shipping
Shop Floor Control Systems involve collaboration of every aspect of manufacturing to optimize productivity
Basic focus of all approaches - WIP control
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Common shop floor activities Assigns priority to order Issues dispatch list Collect information Track WIP and keep system updated Control input-output between work centers
measure efficiency, utilization and productivity of shop
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Order sequencing rules
First come first served(FCFS) Shortest processing time Earliest due date
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Order Sequencing Rules First-Come First-Served (FCFS)
Next job to process is the one that arrived first among the waiting jobs
Shortest Processing Time (SPT)Next job to process is the one with the shortest processing time among the waiting jobs
Earliest Due Date (EDD)Next job to process is the one with the earliest due (promised finished) date among the waiting jobs
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End of Topic
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