Production Planning and Control - University of the Thai Chamber of
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Production Planning and Control School of Engineering The University of the Thai Chamber of Commerce Production Planning and Control UTCC Supply Chain Management School of Engineering The University of the Thai Chamber of Commerce Production Planning and Control UTCC Agenda • • • • What a supply chain is Why there is a need for supply chain management The key elements in managing a supply chain are What steps are necessary in creating an effective supply chain, and • What some of the challenges are in SCM Production Planning and Control UTCC Supply Chain Management • Supply Chain: the sequence of organizations - their facilities, functions, and activities - that are involved in producing and delivering a product or service. Sometimes referred to as value chains Production Planning and Control UTCC Facilities • • • • • • Warehouses Factories Processing centers Distribution centers Retail outlets Offices Production Planning and Control UTCC ซั พ พ ล าย เชน คื อ อ ะไร • ป ระก อ บ ด วย ก จก รรม ท างต รงแล ะท างอ อ ม ต างๆ ท เก ย วข้อ งก บ ก ารต อ บ ส น อ งคื วาม ต อ งก ารข้อ ง ล ก คื า • โซั อ ป ท าน ไม ได ห ม าย ถ งผ ผ ล ต ห รอ ผ จด จาห น าย เท าน น แต รวม ถ ง ผ ข้น ส ง, คื ล งส น คื า, ผ ข้าย ป ล ก แล ะล ก คื า • ซั งภ าย ใน แต ล ะอ งคื ก รใน โซั อ ป ท าน ม ห น าท ส น อ ง คื วาม ต อ งก ารล ก คื า เชน ก ารพ ฒ น าผ ล ต ภ ณ ฑ์ ให ม , ก ารต ล าด , ก ารก ระจาย ส น คื า, ก ารเงน , ก ารบ รก ารล ก คื าส ม พ น ธ Production Planning and Control UTCC Functions and Activities • • • • • • • • Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production and delivery Customer service Production Planning and Control UTCC Typical Supply Chains Production Distribution Purchasing Receiving Storage Operations Storage Production Planning and Control UTCC Typical Supply Chain for a Manufacturer Supplier Supplier Supplier } Storage Mfg. Production Planning and Control Storage Dist. Retailer Customer UTCC Typical Supply Chain for a Service Supplier } Storage Service Customer Supplier Production Planning and Control UTCC Need for Supply Chain Management 1. Improve operations 2. Increasing levels of outsourcing 3. Increasing transportation costs 4. Competitive pressures 5. Increasing globalization 6. Increasing importance of e-commerce 7. Complexity of supply chains 8. Manage inventories Production Planning and Control UTCC Bullwhip Effect Figure 16.3 Amount of = inventory Tier 2 Suppliers Tier 1 Suppliers Production Planning and Control Producer Distributor Retailer Final Customer UTCC Benefits of Supply Chain Management Organization Benefit Campbell Soup Doubled inventory turnover rate Hewlett-Packard Cut supply costs 75% Sport Obermeyer Doubled profits and increased sales 60% National Bicycle Increased market share from 5% to 29% Wal-Mart Largest and most profitable retailer in the world Production Planning and Control UTCC Benefits of Supply Chain Management • • • • • • Lower inventories Higher productivity Greater agility Shorter lead times Higher profits Greater customer loyalty Production Planning and Control UTCC Elements of Supply Chain Management Element Typical Issues Customers Determining what customers want Forecasting Predicting quantity and timing of demand Design Incorporating customer wants, mfg., and time Processing Controlling quality, scheduling work Inventory Meeting demand while managing inventory costs Purchasing Evaluating suppliers and supporting operations Suppliers Monitoring supplier quality, delivery, and relations Location Determining location of facilities Logistics Deciding how to best move and store materials Production Planning and Control UTCC Logistics • Logistics – Refers to the movement of materials and information within a facility and to incoming and outgoing shipments of goods and materials in a supply chain Production Planning and Control UTCC Logistics • Movement within the facility • Incoming and outgoing shipments • Bar coding • EDI • Distribution • JIT Deliveries Production Planning and Control 0 214800 232087768 UTCC Materials Movement Work center Work center Work center Storage Work center Storage RECEIVING Storage Production Planning and Control Shipping UTCC ค วาม แต ก ต างระห วางซั พ พ ล ายเช น แล ะโล จิส ต ก ส ค วาม แ ต ก ต างระห วางก ารจัด ก ารโซ่ อุ ป ท าน แ ล ะโล จัส ต ก ส น น ก ารจัด ก ารโซ่ อุ ป ท าน (SCM) ไม เพี ยงแ ต ม งเน น ค วาม ส น ใจัไป ท ก ารจัด ก ารระบ บ โล จัส ต ก ส ใน ก ารไห ล ข อุ ง ผ ล ต ภั ณ ฑ์ แ ล ะบ รก าร, อุ ป ส งค แ ล ะอุ ป ท าน , ข อุ ม ล ข าวส าร, ก ารชำ าระเงน อุ ยางม ป ระส ท ธิ ภั าพี เท าน น แ ต ยงเน น ค วาม ส น ใจัไป ท ก ารไห ล อุ ยางม ป ระส ท ธิ ภั าพี ข อุ งก าร วางแ ผ น ก ารอุ ยางรวม ม อุ ก น รวม ท งก ารไห ล ใน ก ารจัด ก ารอุ งค ค วาม ร (ท รพี ยาก ร บ ค ค ล ) ใน บ รรด าห น ส วน ท างธิ รก จัท งห ล าย เพี อุ ให ได ล ก ค าป ล ายท างท เก ด จัาก ก าร เชำ อุ ม ป ระส าน ส ายงาน ต างๆ อุ ยางม ป ระส ท ธิ ภั าพี ม ก ารจัด ส งแ ล ะบ รก ารท ด ข น ด วย ค าใชำ จัายแ ล ะรอุ บ เวล าท ต าล ง ม ก ารใชำ ข อุ ม ล ข าวส ารรวม ก น , ก ารรวม ม อุ ก น ใน ก าร วางแ ผ น แ ล ะก ารส อุ ส าร, ก ารเชำ อุ ม ป ระส าน ก น ข อุ งก ระบ วน ก ารท างโล จัส ต ก ส , ค วาม เป น พี น ธิ ม ต ร, แ ล ะก ารจัด ก ารอุ งค ค วาม รใน แ น วน อุ น (แ ล ะแ น วต ง) Production Planning and Control UTCC Distribution Requirements Planning • Distribution requirements planning (DRP) is a system for inventory management and distribution planning • Extends the concepts of MRPII Production Planning and Control UTCC Uses of DRP • Management uses DRP to plan and coordinate: – – – – – Transportation Warehousing Workers Equipment Financial flows Production Planning and Control UTCC Electronic Data Interchange • EDI – the direct transmission of interorganizational transactions, computer-tocomputer, including purchase orders, shipping notices, and debit or credit memos. Production Planning and Control UTCC EDI คื อ ก ารส่ งข้ อ มู ล ท างธุ รก จ จ าก คื อ มู พิ วเต อ ร เคื รอ งห นึ่ ง ไป ยั งคื อ มู พิ วเต อ รอ ก เคื รอ งห นึ่ ง ในึ่ รป ข้ อ ง ส่ ญ ญ าณ อ เล ก ท รอ นึ่ ก ส่ โด ยั ข้ อ มู ล ท ส่ งผ่ านึ่ มู โคื รงส่ ราง ท แ นึ่ นึ่ อ นึ่ แ ล ะใช้ มู าต รฐานึ่ ข้ อ มู ล เด ยั วก นึ่ โด ยั มู นึ่ ษ ยั เราเข้ าไป ยั งเก ยั วนึ่ อ ยั ท ส่ ด EDI Communication Network Production Planning and Control UTCC ก ารร บ ส งEDI ผ่ าน EDI Software EDI software ผ่ ซื้ อ EDI Message In-House Application data Data for In-House Application EDI software ผ่ ข้ ายั Production Planning and Control UTCC Page 24 ก ารรบ ส ง EDI บ น Internet Production Planning and Control UTCC Production Planning and Control UTCC Production Planning and Control UTCC Production Planning and Control UTCC Production Planning and Control UTCC Production Planning and Control UTCC Production Planning and Control UTCC Production Planning and Control UTCC Production Planning and Control UTCC ก ารเชื่ อม โยงข้ อม ลระห ว่างเค รอข้ าย ใน ก ลม ก ารค าป ลก Tiffa EDI GEC Production Planning and Control TTN AI UTCC การรบ-ส่ง EDI ของกรมศุ ลกากร Customs EximNet TTN TG TIFFA NYK PAT TradeSiam National EDI Gateway DFT P-Sq. OMPC GEC SIKOR - DHL Production Planning and Control NMB BBL KTB = Operation = Testing UTCC Electronic Data Interchange • • • • • • • • Increased productivity Reduction of paperwork Lead time and inventory reduction Facilitation of just-in-time systems Electronic transfer of funds Improved control of operations Reduction in clerical labor Increased accuracy Production Planning and Control UTCC Efficient Consumer Response • Efficient consumer response (ECR) is a supply chain management initiative specific to the retail industry – R eflects com panies’ efforts to achieve quick response using EDI and bar codes Production Planning and Control UTCC ECR www.globalscorecard.net Production Planning and Control UTCC E-Commerce • E-Commerce: the use of electronic technology to facilitate business transactions • Applications include – – – – Internet buying and selling E-mail Order and shipment tracking Electronic data interchange Production Planning and Control UTCC Advantages E-Commerce • Companies can: – – – – – – – – Have a global presence Improve competitiveness and quality Analyze customer interests Collect detailed information Shorten supply chain response times Realize substantial cost savings Create virtual companies Level the playing field for small companies Production Planning and Control UTCC Disadvantages of E-Commerce • Customer expectations – Order quickly -> fast delivery • Order fulfillment – Order rate often exceeds ability to fulfill it • Inventory holding – Outsourcing loss of control – Internal holding costs Production Planning and Control UTCC Successful Supply Chain • Trust among trading partners • Effective communications • Supply chain visibility • Event-management capability – The ability to detect and respond to unplanned events • Performance metrics Production Planning and Control UTCC SCOR Metrics Perspective Metrics Reliability On-time delivery Order fulfillment lead time Fill rate (fraction of demand met from stock) Perfect order fulfillment Flexibility Supply chain response time Upside production flexibility Expenses Supply chain management costs Warranty cost as a percent of revenue Value added per employee Assets/utilization Total inventory days of supply Cash-to-cash cycle time Net asset turns Production Planning and Control UTCC CPFR • Collaborative Planning, Forecasting, and Replenishment • Focuses on information sharing among trading partners • Forecasts can be frozen and then converted into a shipping plan • Eliminates typical order processing Production Planning and Control UTCC CPFR Process Step 1 – Front-end agreement Step 2 – Joint business plan Steps 3-5 – Sales forecast Steps 6-8 – Order forecast collaboration Step 9 – Order generation/delivery execution Production Planning and Control UTCC CPFR Results • Nabisco and Wegmans – 50% increase in category sales • Wal-mart and Sara Lee – 14% reduction in store-level inventory – 32% increase in sales • Kimberly-Clark and Kmart – Increased category sales that exceeded market growth Production Planning and Control UTCC Creating an Effective Supply Chain 1. Develop strategic objectives and tactics 2. Integrate and coordinate activities in the internal supply chain 3. Coordinate activities with suppliers with customers 4. Coordinate planning and execution across the supply chain 5. Form strategic partnerships Production Planning and Control UTCC Supply Chain Performance Drivers 1. Quality 2. Cost 3. Flexibility 4. Velocity: inventory velocity, information velocity 5. Customer service Production Planning and Control UTCC Velocity • Inventory velocity – The rate at which inventory(material) goes through the supply chain • Information velocity – The rate at which information is communicated in a supply chain Production Planning and Control UTCC Challenges • Barriers to integration of organizations • Getting top management on board • Dealing with trade-offs • Small businesses • Variability and uncertainty • Long lead times Production Planning and Control UTCC Trade-offs 1. Lot-size-inventory – Bullwhip effect 2. Inventory-transportation costs – Cross-docking 3. Lead time-transportation costs 4. Product variety-inventory – Delayed differentiation 5. Cost-customer service – Disintermediation Production Planning and Control UTCC Trade-offs • Bullwhip effect – Inventories are progressively larger moving backward through the supply chain • Cross-docking – Goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded onto outbound trucks – Avoids warehouse storage Production Planning and Control UTCC Trade-offs • Delayed differentiation – Production of standard components and subassemblies, which are held until late in the process to add differentiating features • Disintermediation – Reducing one or more steps in a supply chain by cutting out one or more intermediaries Production Planning and Control UTCC Cross Docking •...is a distribution system in which merchandise received at the warehouse or distribution centre is not put away, but immediately turned around for shipment to retail stores D i sC t e r n i t br ue t i o n Store vV Store W Store Z Shipping Plant N Receiving Full Palltes Single Product Plant 1 Production Planning and Control Plant 2 UTCC C ross D ocking (C on’t): Store vV Pick by line flow-through Store W Store v Store Z Store w Store y Store x Shipping Store z Mixed pallets Roll-over stock Pallet Breaking & Assembly Full pallets -single product Plant A Plant B Plant 1 Production Planning and Control Plant C Plant 2 Plant D Plant Plant E F Plant N Receiving UTCC C ross D ocking (C on’t) : Store vV Presorted Pallets Store W Store v Store Z Store w Store y Store x Shipping Store z PreSorted pallets Roll-over stock Pallet Sortation Process/System PreSorted pallets Plant A Plant B Plant 1 Production Planning and Control Plant C Plant 2 Plant D Plant Plant E F Plant N Receiving UTCC Supply Chain Issues Strategic Issues Design of the supply chain, partnering Tactical Issues Inventory policies Purchasing policies Production policies Transportation policies Quality policies Production Planning and Control Operating Issues Quality control Production planning and control UTCC Supply Chain Benefits and Drawbacks Problem Potential Improvement Benefits Large inventories Smaller, more frequent deliveries Reduced holding costs Traffic congestion Increased costs Long lead times Delayed differentiation Disintermediation Quick response May not be feasible May need absorb functions Large number of Modular parts Fewer parts Simpler ordering Less variety Cost Quality Outsourcing Reduced cost, higher quality Loss of control Variability Shorter lead times, better forecasts Able to match supply and demand Less variety Production Planning and Control Possible Drawbacks UTCC Purchasing • Purchasing is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service. Production Planning and Control UTCC Goal of Purchasing • Develop and implement purchasing plans for products and services that support operations strategies Production Planning and Control UTCC Duties of Purchasing • Identifying sources of supply • Negotiating contracts • Maintaining a database of suppliers • Obtaining goods and services • Managing supplies Production Planning and Control UTCC Purchasing Interfaces Legal Operations Accounting Purchasing Data processing Design Suppliers Production Planning and Control Receiving UTCC Purchasing Cycle 1. Requisition received Legal Operations Accounting 2. Supplier selected 3. Order is placed Data process-process ing Purchasing 4. Monitor orders 5. Receive orders Design Receiving Suppliers Production Planning and Control UTCC Value Analysis vs. Outsourcing • Value analysis – Examination of the function of purchased parts and materials in an effort to reduce cost and/or improve performance Production Planning and Control UTCC Value analysis • • • • • • • • • • • Is the item necessary; does it have value; can it be eliminated? Are there alternative sources for the item? Can the item be provided internally? What are the advantages of the present arrangement? What are the disadvantages of the present arrangement? Could another material, part, or service be used instead? Can specifications be less stringent to save cost or time? Can two or more parts be combined? Can more/less processing be done on the item to save cost or time? Do suppliers/providers have suggestions for improvements? Can packaging be improved or made less costly? Production Planning and Control UTCC Centralized vs Decentralized Purchasing • Centralized purchasing – Purchasing is handled by one special department • Decentralized purchasing – Individual departments or separate locations handle their own purchasing requirements Production Planning and Control UTCC Suppliers • Choosing suppliers • Evaluating sources of supply • Supplier audits • Supplier certification • Supplier relationships • Supplier partnerships Production Planning and Control UTCC Factors in Choosing a Supplier • • • • Quality and quality assurance Flexibility Location Price Production Planning and Control UTCC F actors in C hoosing a S upplier (cont’d) • • • • Product or service changes Reputation and financial stability Lead times and on-time delivery Other accounts Production Planning and Control UTCC Evaluating Sources of Supply • Vendor analysis: Evaluating the sources of supply in terms of price, quality, reputation, and service Production Planning and Control UTCC Evaluating Sources of Supply • Vendor analysis - evaluating the sources of supply in terms of – – – – – – Price Quality Services Location Inventory policy Flexibility Production Planning and Control UTCC Supplier as a Partner Aspect Adversary Partner Number of suppliers Many One or a few Length of relationship May be brief Long-term Low price Major consideration Moderately important Reliability May not be high High Openness Low High Quality May be unreliable; buyer inspects At the source; vendor certified Volume of business May be low High Flexibility Relatively low Relatively high Location Widely dispersed Nearness is important Production Planning and Control UTCC Supplier Partnerships • Ideas from suppliers could lead to improved competitiveness 1.Reduce cost of making the purchase 2.Reduce transportation costs 3.Reduce production costs 4.Improve product quality 5.Improve product design 6.Reduce time to market 7.Improve customer satisfaction 8.Reduce inventory costs 9.Introduce new products or services Production Planning and Control UTCC Critical Issues • Strategic importance – – – – – Cost Quality Agility Customer service Competitive advantage • Technology management – Benefits – Risks Production Planning and Control UTCC Critical Issues • Purchasing function – – – – Increased outsourcing Increased conversion to lean production Just-in-time deliveries Globalization Production Planning and Control UTCC
