lOMoARcPSD Summary: book "operations and supply chain management the core," f robert jacobs, richard b chase, with notes of the lecture (s) Global Supply Chain Management (Rijksuniversiteit Groningen) Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Summary logistics Week 1 (chapter 1 &2) Supply chain: purchasing/procurement (inbound logistics) production physical distribution (outbound logistics) Transformation process transforms raw materials, data and customers into products, data and served customers (by using facilities, machines, staff, energy and information) Operations and supply chain processes - Planning: anticipate demand - Sourcing: selection of suppliers - Making: production - Delivering: move products to warehouses and customers, coordinate and schedule movement of goods and information through the supply network - Returning: receiving worn-out, defective and excess products back from customers Differences between products and services Goods Tangible Produced separate from customer Goods can be produced with without variability Can be stored Goods-service continuum Pure goods Core goods Low margin Service component as commodity businesses part of businesses (e.g. offering maintenance for a sold car) Services Intangible Requires interaction with customer Vary from day to day, unpredictable outcomes Perishable and time dependent Core services Integrate tangible goods (e.g. cable companies need an actual cable to provide the service of TV) Pure services Need little facilitating goods, but what they use is critical to their performance Product-service bundling: when a firm builds service activities into its product to create additional value for the customer Measures of performance/process management Effective = do the right job (right products, customers, time and quality) does it contribute to wellbeing of the larger system? (sustainability of the organization, shareholder/stakeholder interests) Efficient = do the job right (at minimal/reasonable costs) environmental costs, human wellbeing etc. Efficacy = intended output produced? Meets requirements? Triple bottom line: evaluating the firm against social, economic and environmental criteria Boundary decisions What are considered inputs & changed inputs (output), which costs taken into account Appreciation = quality / price Dimensions of ‘quality’: - Traditional SCM issues dependability product & service, speed of delivery, flexibility of product/service, Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD - New SCM issues good sustainability (environmental, sociological dimensions), branding, feel- Functional silo’s (different departments in the organization), for example: marketing department (price), operations department (cost) and finance (cash-flow) Organizational strategy: - What does the organization produce? (product/service characteristics) - How does production compare to alternatives? (product/service characteristics, price) - What are the costs involved in producing the product/service? (what should the at least price be) - Are the activities viable? (do they contribute to the survival or demise of the organization) Business processes - process management (efficacy, efficiency, effectiveness) Essential process = primary process - Production process: norms of rationality - Process that maintains the organization Other business processes: - Product development - Order handling - Complaint handling - Budgeting - Decision making Growing interest in SC operations Adam smith: specialization of labour leads to improved performance at each stage - Core competence: outsourcing, global sourcing - Supply chains get longer, more complex, more international - Processes need to be managed across firms: SCM Optimal decision making at each stage does not lead to optimal supply chain decisions - Traditional solution; centralized decision making vertical integration - Complexity is too large; coordination of decisions is needed Supply chain strategies Thompson: domain consensus: - Organizational domain; claim range of products, population served, services rendered - Organizational claim accepted by environment? Complication Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD - Strategy according to Urwick Strategy according to Habermas Why is strategy needed? - Create consistent pattern in strategic decisions (sales emphasizes freshness of products, operations tries to cut costs by maximizing utilization) - Create sense of direction - Priorities: where to put money/efforts, how to make trade-offs (innovative company should not use dedicated equipment like robots, have a highly skilled and flexible workforce) Issues in strategy: - corporate strategy (what business to be in, what to acquire/divest, how to allocate cash) - Business strategy (what are strategic objectives, how to compete) - Operations strategy (how to contribute to strategic objectives, how to manage resources) 5 key performance measures/ 7 competitive dimensions: Cost Quality Speed Dependability Flexibility Coping with change in demand “Support it” utilization = used time / available time productivity = items produced / labour usage inventory turns = items sold / average inventory % defective produced nr of complaints order lead time time-to-market of new product time to volume fill rate = % customers that is satisfied/ can be satisfied with the inventory at hand lost sales % deliveries in time absorb significant fluctuations in demand, change-over times nr SKU’s (level of customization) adaptability to new technologies Responding to in/decrease of demand is essential to profitability Technical support, meeting launch date, after sale support, environmental impact, other dimensions Natural trade-off curve Regardless of the operations strategy, operations management is always striving for operational excellence, but operational excellence itself is not a strategy Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Decisions and their impact: - Decentralized vs. centralized production; fast delivery, high costs (no economies of scale), high flexibility (customization) - Keeping inventories of end-items vs. zero-inventories; fast delivery, high cost - Stable production vs. following demand; low cost due to high utilization, high (standard) quality, low volume flexibility Importance of the each of the 5 key performance measures determined by: - What do customers want - Stage in product/service life-cycle - Actions of competitors - Capabilities in the company Week 2 (chapter3) Throughput time = total time a job spends in system (arrival to departure) Theoretical throughput time = sum of processing & transportation times Actual throughput time = theoretical + wait time Throughput efficiency = theoretical / actual throughput Design capacity = theoretical max number of jobs that can be handled in given time Effective capacity = design capacity – ‘cushion’ (allowances for planned down-time) Realized capacity = effective minus unplanned downtime (quality problems, machine breakdown) Utilization = actual output / design capacity = time used / time available Efficiency = actual output / effective capacity Set-up time = the action of converting equipment by adjusting the equipment to correspond to the next product Demand Inter Arrival Time (IAT) = time gap between two jobs entering the system Arrival rate = average nr of jobs arriving at system within given time Bottleneck = activity in the system with lowest capacity Work In Progress (WIP) = nr of jobs in the system at any given time = nr of units in a stage x productive utilization in a stage Little’s law: L = arrival rate x throughput time long term avg nr of customers in system Queuing theory = mathematical analysis of waiting lines Trade-off between service level and cost Productivity = output/input (units/costs) Week 3 (chapter 4) Services = activities that typically produce an intangible product Radio-Frequency Identification (RFID): tracking and tracing products and consumers, used locally and in supply chains - Optimization of store layouts - Actual consumer behaviour (deeper understanding of search strategies, decision processes and goals) - More efficient and effective use of resources Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Performance analysis Alternatives to find an estimate for a certain performance measure - Educated guess - Experimentation with the real system - Experiment with physical models - Experimentation (or calculating) with analytical models - Experimentation with simulation models Simulation is a numeral technique of experimentation, attempts to duplicate a system 1) Imitate real world situation mathematically 2) Study its properties and operating characteristics 3) Draw conclusions and make action recommendations based on results of simulation Most important question in simulation: ‘Is the model close enough to reality to draw accurate conclusions?’ Advantages Can be used for complex situations Easy to compare alternatives Perform experiments without investments Perform experiments without disturbances Examine system during long time period Possible to incorporate uncertainty in system Gain insight in system by using animation Possibility to find integrated solutions Disadvantages Optimization not possible Difficult to interpret/analyse results Results are incorrect if input is incorrect (validate) Difficult to make simulation models Computation times are high Education, time and money required Easy to overestimate results Poisson distribution = nr events that occur in an interval of time: - Where λ = mean and P = probability on x events Comparing methods: - Deterministic performance estimation (widely applicable, easy and fast, rough estimate) - Analytical modelling (applicability is limited, complex calculation, limited nr of performance criteria, exact results) - Simulation (widely applicable, complex model, results for almost any performance criterion, no exact results) Queuing Queue = waiting line Arrival = person, machine, part etc that arrives and demands service Queue discipline = rules for determining order arrivals receive service Channel = nr of servers Phase = nr of steps in service Queuing models: 1) Simple (M/M/1) M = Poisson distributed, M = negative exponential, 1 = nr of channels 2) Constant service (M/D/1) M = Poisson distributed, D = deterministic (constant) 1 = nr of channels 3) Multi-channel (M/M/S) 4) Poisson distribution mean nr of arrivals per time period = λ , mean service rate = µ 5) Wq = avg queue time, Lq = avg queue length, Ws = avg time in system, Ls = avg nr in system, P0 = probability of idle service facility, ƿ = utilization (λ/µ), Pn > k = probability of more than k customers in system Flow diagram = schematic drawing of movement of products/people with time on horizontal axis. Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Week 4 (chapter 6) Process type represents the way products are approached in an organization Product perspective: - Is the product unique? (specialty) - Is the product one amongst many? (commodity) - Anything in between Volume and variety are two distinguishing factors in determining how products should be handled There is no causal relationship between volume and variety on the one hand and process type on the other. Norms of rationality for (customized) specialties are often ‘other than price’ customers are willing to pay a premium for customization, special deliveries etc. The process-matrix Organization of the production process - Project: unique product equipment and resources - Jobbing: unique, but similar products, similar equipment or functions are grouped together - Batch: production in small series, less variation (bakery, brewer) - Line: same products in large amounts, work processes are arranged according to the progressive steps by which the product is made (mass production) - Continuous process: like a line only the flow is continuous such as with fluids (one product cannot be distinguished from the next) English manufacturing system - Skilled craftsmen (parts made to a design or example) - One person (master craftsman) producing product - Master craftsman responsible for the quality - Parts seldom identical, but considered of high quality American manufacturing system - Semi-skilled labour - Jigs, patterns - Machine tools - Instructions - Testing to specification Layout can be defined as the physical arrangement or grouping of production resources - Placement of departments - Workgroups within departments - Workstations, machines and stock-holding points within a facility Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Layout is the physical manifestation of the process type, and there is often some overlap between process types and layouts that they could use. Process and layout types are different concepts not expressed clearly in the book. Layout may refer to the organization or to one or more departments Basic layout types - Fixed position layout = product remains on one position and production means are brought to the product (manufacturing of a large ship) - Functional layout – work center/job-shop = production means are grouped according to function/specialization - Cellular layout – manufacturing cell = production means are grouped to optimize movement of materials (group parts into ‘families’ that follow a common sequence of steps) - Product layout = production means are grouped following the steps of the production process (mass production) Layouts depend on demand characteristics and resources Throughput efficiency = theoretical throughput time / actual throughput time = value time / elapsed time Customer order decoupling point (CODP): separates order-driven activities from forecast-driven activities. Upstream of CODP operations/supply chain ‘push’, downstream of CODP customer pull. CODP - Make to stock: serve customers from finished goods inventory - Assemble to order: preassembled modules to meet customers’ specification (dell computers) - Make to order: make customers’ product from raw materials, parts and components - Purchase to order: work with the customer and start buying parts after order is placed - Engineer to order: work with the customer to first design and then make the product (large machines, airplanes) Keep in mind that a CODP too far downstream increases inventory costs and too far upstream increases delivery time/requirements Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Week 5 (chapter 10 &12) Lean philosophy, Toyota production system, lean manufacturing, JIT, Stockless production, Japanese management, Lean six-sigma Lean approach removes ‘waste’ all things that do not add value 7 sources of waste (TIMWOOD): - Transportation - Inventory: work in process inventory waste - Motion: unnecessary motion of producer, worker or equipment - Wait: waiting time for jobs and resources - Over-processing: doing more work than what is required by customer - Over-production: producing too much too early - Defect: rework, rescheduling, repair Lean objective - Produce quality that is needed - Exactly how much is needed - At the right moment - Where it is needed - At lowest possible cost Lean philosophy - Confront problems rather than accommodate them - Be pragmatic: inventories and defects do exist, but the long term goal is to remove them - Labour is concerned with quality and management with productivity - Integration: functions should work together as one organization - Do not rely on automation: simplicity is the key Lean leadership Responsibility Manage the process Boss asks questions Gemba learning Experiments Improvement initiated by staff Go see, ask why, show respect Horizontal management Traditional leadership Authority Manage the objectives Boss knows best Formal education Plans Improvements initiated by managers Remote decisions from analyzing data Vertical management Employee involvement - Everybody is part of the company - Empowered employees (management coaches employees) - Responsibilities on the work floor - Team approach (job rotation, minimize boredom) - Bottom-up suggestions for improvement (appraisal systems) - Extensive training (cross functional, problem solving) Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Tools of Lean manufacturing: - Value mapping - 5S: sorts, stabilize, sustain, shine, standardize - 5 why’s (ask ‘why’ several times in order to really find the source of the problem) - Visual control (Jidoka) - One piece flow (continuous production in small quantities JIT, levelled scheduling etc.) - Pull (Kanban) - Continuous improvement (Kaizen) - Fool-proofing (Poka-Yoke) Process batch (one large batch) vs. Transfer batch (several smaller batches Levelled scheduling (Heijunka): instead of producing one product after another, produce in several series where every series contains a few of every product Pull production (Kanban) – produce only when there is demand 1) At the assembly line parts are needed and a new container is taken from inventory 2) Parts are taken from inventory withdrawal kanban is removed from the container 3) Withdrawal kanban is taken to production centre 4) Withdrawal kanban replaces the production kanban of a container with finished parts at the production center 5) Production kanban is placed on a rack at the production center 6) Container with the withdrawal kanban can be taken to the assembly area 7) Production kanban is taken from the rack and a new container of parts will be produced Visual control (Jidoka) - Immediate problem detection by visual control (U-shaped assembly lines in cells, Andon pulls/Andon board, use photo’s to show the way to put things together) - Allows finding the cause and solving the problem immediately after it occurs - Making problems visible rather than covering them up Kaizen: ongoing improvement - Incremental improvement rather than radical - What is possible today is the standard for tomorrow - There is no ‘finish line’ Lean in services - Uncertainty in task times - Uncertainty in demand - Customer is part of process - Achievable in high repetition environments Quality of design: inherent value of the product in the marketplace Quality of conformance: degree to which the product/service design specifications are met Definitions of quality - Transcendent: quality is neither mind nor matter, but a third entity independent of the two - Product based: differences in quality amount in differences in the quantity of some desired ingredient or attribute - User based: quality is fitness for use - Manufacturing based: quality means conformance to requirements - Value based: quality means best for certain customer conditions Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Quality dimensions: - Performance – primary product/service characteristics - Features – added touches, secondary characteristics - Reliability – consistency of performance over time - Durability – useful life - Serviceability – resolution of problems and complaints - Esthetics – sensory characteristics (sound, feel, looks etc.) - Reputation – past performance and other intangibles Importance of quality - Externally: satisfy customers, reputation of company, product liability - Internally: decrease costs (less scrap, less rework), improved planning, reduce ‘fire-fighting’, better motivated personnel Costs associated with quality: - Prevention costs (process/product design, training, vendor relations, supplier development) non-avoidable - Appraisal costs (quality audits, statistical quality control) non-avoidable - Internal failure costs (yield losses, rework charges, replanning) avoidable - External failure costs (returns/recalls, warranty repairs, lost business) Statistic Process Control (SPC) can be used to detect whether or not a process is ‘in control’ Process capability - Measure of ability to meet specifications (as determined by customer) - Process limits based on normal variation in the process - Specific limits: variation as designed and which is acceptable for customers - Specifications: USL = upper specification limit, LSL = lower specification limit - CP > 1 = good, CP < 1 = bad http://www.youtube.com/watch?v=fo1CT0DZAsE ongelooflijk handig youtube filmpje over process capability) SPC charts do not give the reason why the process is out of control, these techniques do: - Cause and effect diagrams (left) - Pareto charts (right) Six sigma: quality improvement program with a focus on minimizing ‘span’ reliability/dependability increased DMAIC cycle used in six sigma: - define (identify problem, define requirements and set goal) - measure (gather data, refine problem and measure inputs and outputs) - analyse (develop problem hypotheses Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD - identify ‘root causes’ and validate hypothesis) improve (develop improvement ideas, test, establish solution and measure results) Quality assurance systems: describes standards for a quality system, audited by an external authorization organisation, certificate is obtained (but only for a limited amount of time) Total Quality Management (TQM) 1) everything is focused on the consumer (strategy, service, system) 2) empowerment (everybody has responsibilities, has the power to make decisions, teamwork) 3) quality at the source (prevention, quality control by ‘process-owner’, supplier-customer partnership cost of finding defective component increase with stage in production process) 4) ongoing improvement – Kaizen (strive for excellence, there is no finish line, tool: Deming wheel (picture below)) 5) management based on facts (measure performance) Week 6 (chapter 13) Recent developments; - focus on ‘core’ activities - specialization of organisations - more customized products - focus on shorter response times, less costs, increased flexibility - competition between supply chain instead of firms - no more gains within the manufacturing process (lean, TQM) - huge savings through eliminating unnecessary inventory between organizations in a chain - outsourcing does not decrease need for coordination Triple bottom line: - social (pertains to fair and beneficial business practises toward labour, the community and region in which a firm conducts business) - economic (the firm’s obligation to compensate shareholders who provide capital via competitive returns on investment - environmental (firms’ impact on the environment and society at large) Outsourcing: the act of moving a firms’ internal activities and decision responsibility to external providers Reasons to integrate: - reduction of uncertainty - reduction of dependency - increase flexibility - opportunities to take over a supplier at a bargain price - lower costs because excess capacity is available - variable costs become fixed costs - improve quality and productivity - acquire or retain expertise, skills and technologies that are otherwise not available to the organisation - improve image by being associated with being able to do everything ‘in house’ Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Reasons to outsource: - focus on core capability - increase flexibility - selling assets, specifically low-return assets - access to new markets by locally producing - lower costs - fixed costs become variable costs - improve quality and productivity - obtain expertise, skills and technologies that are otherwise not obtainable - improve image by being associated with reputed suppliers Factors of evaluation (strategic or core) 1) (strategic) control 2) Coordination effort 3) Intellectual property Vertical integration 1) Specific investments, high risk of loss of reputation, knowledge, brand 2) Mutual dependency, high degree of information, task interdependence 3) Interrelated technology, hard to protect Outsource 1) Low specific investment, many alternatives 2) Standardized tasks, codified information 3) Clear protection, hard to imitate Strategic sourcing: development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of the business. Used to be ‘make or buy’ (sourcing meant buying) Choice between market relationship vs. Partnership: 1) Specificity of product (how common the item is and how many substitutes might be available) 2) Transaction costs (costs associated with making a purchase: ordering, selecting, billing etc) 3) Duration of the contract (length of relationship) Types of relationships (sourcing): Strategic alliance = close relationship Spot purchase = no relationship, market based Request for proposal = requirements are formulated and potential vendors prepare a detailed proposal how they intend to meet requirements, including a price Reverse auction = sellers compete to obtain business, and prices typically decrease over time, buyer specifies the item Request for bid = specification of item is given and price is the main or only factor in selecting Vendor managed inventory = the supplier manages an item or group of items for a customer Electronic catalog = online purchasing Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Bullwhip effect: demand variability increases as you move up the supply chain from customers towards supply Consequences of the Bullwhip effect: - Inefficient production or excessive inventory - Low utilization of the distribution channel - Necessity to have capacity far exceeding average demand - High transportation costs - Poor customer service due to stock outs Causes of the Bullwhip effect: - Wrong forecast - Late deliveries - Wrong deliveries - Erroneous feedback - Time lags/delays - Order synchronisation (customers order on the same order cycle) - Order batching (retailers may be required to order integer multiples of some batch size) - Trade promotions and forward buying (supplier gives retailer a temporary discount, called a trade promotion; retailer purchases enough to satisfy demand until next trade promotion) - Reactive and over-reactive ordering (each location forecasts demand to determine shifts in the demand process, overreaction to ‘high’ demand observation - Shortage gaming (if supplier production is less than orders, orders are rationed, to secure better allocation, retailers inflate their orders order more than they need Functional products: long product life cycle, low margin, little product variations, stable demand Innovative products: newness (unpredictable demand), short life cycle Four types of supply chain strategies 1) Efficient supply chains: utilize strategies aimed at creating the highest cost efficiency 2) Risk-hedging supply chains: utilize strategies aimed at pooling and sharing resources in a supply chain to share risk, e.g. shared inventories 3) Responsive supply chains: utilize strategies aimed at being responsive and flexible by mass customization and make-to-order 4) Agile supply chains: utilize strategies aimed at being responsive and flexible to customer needs, using pooled capacities and inventory Green sourcing: reduce waste in packaging, transport and production; collecting waste/obsolete products and develop new businesses around it (remanufacturing) Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com) lOMoARcPSD Total Cost of Ownership (TCO): estimate of the costs of an item that includes all the costs related to the procurement and use of an item, including any related costs in disposing of the item. Can be applied to internal costs or more broadly to costs throughout the supply chain - Acquisition costs (purchase planning costs, quality costs, taxes, purchase price, financing costs) - Ownership costs (energy costs, maintenance/repair, financing, supply chain/supply network costs) - Post-ownership costs (disposal, environmental costs, warranty costs, product liability costs, customer dissatisfaction costs) Distributing prohibited | Downloaded by raghava raju (skycaptain1989@gmail.com)
