MOPS Slides

Click to edit Master subtitle style
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Suppliers
Manufacturers
Warehouses & Distribution Centers
Customers
Material Costs
Transportation Costs Manufacturing Costs
Transportation Costs Inventory Costs
Transportation Costs
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The Supply Chain Another View

Plan Source Make Deliver Buy
Suppliers
Manufacturers
Warehouses & Distribution Centers
Customers
Material Costs
Transportation Transportation Costs Transportation Costs Manufacturing Costs Inventory Costs Costs
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What Is Supply Chain Management (SCM)?

Plan Make Buy Source Deliver
A set of approaches used to efficiently integrate
Suppliers Manufacturers Warehouses Distribution centers
So that the product is produced and distributed
In the right quantities To the right locations And at the right time
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System-wide costs are minimized and
Why Is SCM Difficult?

Plan Source Make Deliver Buy
Uncertainty is inherent to every supply chain
Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues
The complexity of the problem to globally optimize a supply chain is significant
Minimize internal costs Minimize uncertainty Deal with remaining uncertainty
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The Objective of a Supply Chain

Maximize overall value created Supply chain value: difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customers request Value is correlated to supply chain profitability (difference between revenue generated from the 12/29/12 customer and the overall cost across
Supply chain incurs costs (information, storage, transportation, components, assembly, etc.) Supply chain profitability is total profit to be shared across all stages of the supply chain Supply chain success should be measured by total supply chain profitability, not profits at an 12/29/12 individual stage
Sources of supply chain revenue: the
customer
Sources of supply chain cost: flows of information, products, or funds between stages of the supply chain Supply chain management is the management of flows between and among supply chain stages to maximize total supply chain 12/29/12 profitability
Decision Phases of a Supply Chain

Supply chain strategy or design Supply chain planning Supply chain operation
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Supply Chain Strategy or Design
Decisions about the structure of the supply chain and what processes each stage will perform Strategic supply chain decisions
Locations and capacities of facilities Products to be made or stored at various locations Modes of transportation Information systems
Supply chain design must support strategic objectives

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Supply chain design decisions are long-term and expensive to reverse must take into account
Supply Chain Planning
Definition of a set of policies that govern short-term operations Fixed by the supply configuration from previous phase Starts with a forecast of demand in the coming year
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Supply Chain Planning
Planning decisions:
Which markets will be supplied from which locations Planned buildup of inventories Subcontracting, backup locations Inventory policies Timing and size of market promotions
Must consider in planning decisions demand uncertainty, exchange rates, 12/29/12
Supply Chain Operation

Time horizon is weekly or daily Decisions regarding individual customer orders Supply chain configuration is fixed and operating policies are determined Goal is to implement the operating policies as effectively as possible Allocate orders to inventory or production, set order due dates, generate pick lists at a warehouse, allocate an order to a particular shipment, set delivery schedules, place replenishment orders 12/29/12
Process View of a Supply Chain
Cycle view: processes in a supply chain are divided into a series of cycles, each performed at the interfaces between two successive supply chain stages Push/pull view: processes in a supply chain are divided into two categories depending on whether they are executed in response to a customer order (pull) or in 12/29/12
Cycle View of Supply Chains

Customer Order Cycle Replenishment Cycle
Custom er Retail er Distribut or Manufactur er Suppli er
Manufacturing Cycle Procurement Cycle

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Each cycle occurs at the interface between two successive stages Customer order cycle (customer-retailer) Replenishment cycle (retailer-distributor) Manufacturing cycle (distributormanufacturer) Procurement cycle (manufacturer-supplier) Cycle view clearly defines processes involved and the owners of each process. Specifies the roles and responsibilities of 12/29/12 each member and the desired outcome of
Cycle View of a Supply Chain
Customer Order Cycle
Involves all processes directly involved in receiving and filling the customers order Customer arrival Customer order entry Customer order fulfillment Customer order receiving
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Replenishment Cycle
All processes involved in replenishing retailer inventories (retailer is now the customer) Retail order trigger Retail order entry Retail order fulfillment Retail order receiving
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Manufacturing Cycle
All processes involved in replenishing distributor (or retailer) inventory Order arrival from the distributor, retailer, or customer Production scheduling Manufacturing and shipping Receiving at the distributor, retailer, or customer
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Procurement Cycle
All processes necessary to ensure that materials are available for manufacturing to occur according to schedule Manufacturer orders components from suppliers to replenish component inventories However, component orders can be determined precisely from production schedules (different from retailer/distributor orders that are based on uncertain customer demand) Important that suppliers be linked to the manufacturers production schedule 12/29/12
Push/Pull View of Supply Chains

Procureme Manufacturing nt, and Replenishment cycles
Customer Order Cyc le
PUSH PROCESSES Custom er Order Arrives
PULL PROCESSES
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Push/Pull View of Supply Chain Processes
Supply chain processes fall into one of two categories depending on the timing of their execution relative to customer demand Pull: execution is initiated in response to a customer order (reactive) Push: execution is initiated in anticipation of customer orders (speculative)
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Push/pull boundary separates push
Push/Pull View of Supply Chain Processes
Useful in considering strategic decisions relating to supply chain design more global view of how supply chain processes relate to customer orders Can combine the push/pull and cycle views
L.L. Bean (Figure 1.6) Dell (Figure 1.7)
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The relative proportion of push and pull processes can have an impact on supply chain performance
Summary of Learning Objectives
What are the cycle and push/pull views of a supply chain? How can supply chain macro processes be classified? What are the three key supply chain decision phases and what is the significance of each? What is the goal of a supply chain and what is the impact of supply 12/29/12 chain decisions on the success of the
Element
Traditional management Supply chain management
(1)Inventory management approach (2)Total cost approach (3)Time horizon
Independent efforts inventories Minimize firm costs
Joint reduction of channel Channel-wide cost efficiencies
Short term
Long term
(4)Amount of information sharing and monitoring (5)Amount of coordination between levels in of multiple levels in the channel (6)Joint planning (7)Compatibility of corporate philosophies
Limited to needs of current As required for planning and transaction monitoring processes Multiple contacts
Single contact for the transaction between channel pairs
firms and levels of channel
Transaction-based Not relevant
Ongoing Compatibility at least for key relationships Small to increase
12/29/12 (8)Breadth of supplier base Large to increase competition coordination
Achieving a strategic fit
Strategic fit means that both the competitive and supply chain strategy must fit together. i.e. both the competitive and supply chain strategies have aligned goals. It refers to consistency between the customer priorities that the competitive strategy hopes of satisfy and the supply chain capabilities that 12/29/12 supply chain aims to build the
How strategic fit is achieved
Understanding the customer and supply chain uncertainty
The quantity of the product needed in each lot The response time that customers are willing to tolerate The variety of products needed The service level required The price of the product
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Drivers of Supply Chain

Facilities Inventory Transportation Information Sourcing Pricing

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Decision areas of SCM
There are four major decision areas in 1) location, 2) production, 3) inventory, and 4) transportation (distribution),
and There are both strategic and 12/29/12 operational elements in each of these
Facility Planning
Module edit Click to III Master subtitle style Session 17
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Facility Location
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Location and Costs
Location decisions based on low cost require careful consideration Once in place, locationrelated costs are fixed in place and difficult to reduce Determining optimal facility location is a good investment
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Location Decisions

Long-term decisions Decisions made infrequently Decision greatly affects both fixed and variable costs Once committed to a location, many resource and cost issues are difficult to change
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Location Decisions
Country Decision Critical Success Factors
Political risks, government rules, attitudes, incentives Cultural and economic issues Location of markets Labor talent, attitudes, productivity, costs Availability of supplies, communications, energy
1.
2.
3. 4.
5.
Figure 8.1 12/29/12
Location Decisions
Region/ Communit y Decision
M N
1. 2. 3.
Critical Success Factors Corporate desires

Attractiveness of region Labor availability, costs, attitudes towards unions Costs and availability of utilities Environmental regulations Government incentives and fiscal policies Proximity to raw materials and customers Land/construction costs
W I
4.
M I I L I N OH
5. 6.
7.
Figure 8.1 12/29/12
8.
Location Decisions
Site Decision Critical Success Factors
1. 2.
3. 4.
5.
Site size and cost Air, rail, highway, and waterway systems Zoning restrictions Proximity of services/ supplies needed Environmental impact issues
Figure 8.1 12/29/12
Factors That Affect Location Decisions
Labor productivity

Wage rates are not the only cost Lower production may increase total cost
Labor cost per day Production (units per day) = Cost per unit
Connecticut $70 60 units = $1.17 per unit

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Juarez $25 20 units = $1.25 per unit
Exchange rates and currency risks

Can have a significant impact on cost structure Rates change over time Tangible - easily measured costs such as utilities, labor, materials, taxes Intangible - less easy to quantify and include education, public transportation, community, quality-of-life
Costs
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Exchange rates and currency risks Location

can create Costs difficult ethical Tangible - easily measured costs such as utilities, situations labor, materials,

Can have a significant impact on decisions based cost structure on costs alone Rates change over time
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taxes Intangible - less easy to quantify and include education, public transportation, community, quality-of-life
Political risk, values, and culture
National, state, local governments attitudes toward private and intellectual property, zoning, pollution, employment stability may be in flux Worker attitudes towards turnover, unions, absenteeism Globally cultures have different attitudes towards punctuality, legal, and ethical issues
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Proximity to markets

Very important to services JIT systems or high transportation costs may make it important to manufacturers Perishable goods, high transportation costs, bulky products
Proximity to suppliers
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Factor-Rating Method
Popular because a wide variety of factors can be included in the analysis Six steps in the method
1.
2. 3. 4. 5.
6.
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Develop a list of relevant factors called critical success factors Assign a weight to each factor Develop a scale for each factor Score each location for each factor Multiply score by weights for each factor for each location Recommend the location with the highest point score
Factor-Rating Example
Critical Scores Success (out of 100) Weighted Scores Factor Weight France Denmark France Labor Denmark availability and attitude .25 70 60 (.25)(70) = 17.5 (.25)(60) = 15.0
People-tocar ratio .05 Per capita income .10 Tax structure .39 Education and health .21 Totals 1.00
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50 85 75 60
60 80 70 70
(.05)(50) = 2.5 (.10)(85) = 8.5 (.39)(75) = 29.3 (.21)(60) = 12.6 70.4
(.05)(60) = 3.0 (.10)(80) = 8.0 (.39)(70) = 27.3 (.21)(70) = 14.7 68.0
Locational Break-Even Analysis
Method of cost-volume analysis used for industrial locations Three steps in the method
1.
2. 3.
Determine fixed and variable costs for each location Plot the cost for each location Select location with lowest total cost for expected production volume
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Locational Break-Even Analysis Example

Three locations: Selling price = $120 Expected volume = 2,000 units Fixed Variable Total City Cost Cost Cost Akron $30,000 $75 $180,000 Bowling Green $60,000 $45 $150,000 Chicago $110,000 $25 $160,000 Total Cost = Fixed Cost + (Variable Cost x Volume) 12/29/12
Locational Break-Even Analysis Example

$180,000 $160,000 $150,000 rve st c u $130,000 o co Chicag $110,000 n re e g G ve $80,000 o lint cur w B cos t $60,000 cos on e kr urv A c $30,000 Akron $10,000 lowest cost
| | | |
Annual cost
Bowling Green lowest cost

| |
Chicago lowest cost

|
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0 3,000
500
1,000
1,500
Volume
2,000
2,500
Center-of-Gravity Method
Finds location of distribution center that minimizes distribution costs Considers

Location of markets Volume of goods shipped to those markets Shipping cost (or distance)
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Place existing locations on a coordinate grid
Grid origin and scale is arbitrary Maintain relative distances
Calculate X and Y coordinates for center of gravity
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Assumes cost is directly proportional to distance and volume shipped
dixQ x - coordinate =
i i
Qi i diyQ y - coordinate =
where i i
Qi i
dix = xcoordinate of location i diy = ycoordinate of location i Qi = Quantity
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North-South 120 90
Chicago (30, 120)
New York (130, 130) Pittsburgh (90, 110)
60 30
Atlanta (60, 40)

|
30 Arbitrary origin
60
90
120
150
East-West Figure 8.3
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Store Location Chicago (30, 120) Pittsburgh (90, 110) New York (130, 130) Atlanta (60, 40)
x-coordinate =
Number of Containers Shipped per Month 2,000 1,000 1,000 2,000
(30)(2000) + (90)(1000) + (130)(1000) + (60)(2000) 2000 + 1000 + 1000 + 2000 = 66.7 (120)(2000) + (110)(1000) + (130)(1000) + (40)(2000) 2000 + 1000 + 1000 + 2000 = 93.3
y-coordinate =
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North-South 120 90
Chicago (30, 120)
New York (130, 130)
60 30
Pittsburgh (90, 110) Center of gravity (66.7, 93.3)
Atlanta (60, 40)

|
30 Arbitrary origin
60
90
120
150
East-West
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Assembly Chart
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Documents for Production

Assembly drawing Assembly chart Route sheet Work order Engineering change notices (ECNs)
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Assembly Drawing
Shows exploded view of product Details relative locations to show how to assemble the product
Figure 5.11 (a)
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Assembly Chart
1 2 3 4 5 6 7 8 9 10 11 R 209 Angle R 207 Angle Bolts w/nuts (2) R 209 Angle R 207 Angle Bolts w/nuts (2) Bolt w/nut R 404 Roller Lock washer Part number tag A4 Box w/packing material A5 A3 SA 2 Right bracket assembly A2 SA 1 Left bracket assembly A1
Identifies the point of production where components flow into subassemblies and ultimately Poka-yokeinto the final inspection product
Figure 5.11 (b)
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Route Sheet
Lists the operations and times required to produce a component
Process 1 2 3 4 Machine Auto Insert 2 Manual Insert 1 Wave Solder Test 4 Operations Insert Component Set 56 Insert Component Set 12C Solder all components to board Circuit integrity test 4GY 1.5 .5 1.5 .25
Setup Time
Operation Time/Unit .4 2.3 4.1 .5
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Work Order
Instructions to produce a given quantity of a particular item, usually to a schedule
Work Order Item 157C Quantity 125 Start Date 5/2/08 Delivery Location Dept K11 Due Date 5/4/08
Production Dept F32

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Engineering Change Notice (ECN)
A correction or modification to a products definition or documentation

Engineering drawings Bill of material
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Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies
Operation Process //open the pdf
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Process Chart
Figure 7.9
Scrap estimation
The market estimate specifies the annual volume to be produced for each product. To produce the required amount of product, the number of units scheduled through production must equal the market estimate plus a scrap estimate Let Pk represent the percentage of 12/29/12 scrap produced on the kth operation
Scrap estimation
Thus the expected number of units to start into a production for a part having n operations is
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Example
A product has a market estimate of 97,000 components, and requires three processing steps (turning, milling and drilling) having scrap estimates of P1 = 0.04, P2=0.01, and P3- 0.03 Ans: 105,219
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Equipment fractions
The quantity of equipment fraction required for an operation is called as the equipment fraction. The equipment fraction may be determined for an operation by dividing the total time required to perform the operations by the time available to complete the operation
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Deterministic model
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Where F = number of machines required per shift S = standard time (minutes) per unit produced Q= number of units to be produced per shift E= actual performance, expressed as a percentage of standard time H = amount of time available per machine R = reliability of machine, expressed as percent of uptime
INPUT DATA AND ACTIVITIES 1. Flow Of Materials 2. Activity Relationship
3. String diagram 4. Space Requirement 5. Space Available
6. Space Relationship Diagram 7. Modifying considerations 9. Develop Layout 8. Practical Limitations
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10. Evaluation
Systematic Layout Proceedure
1. Flows in a layout
a) F lujo e n lnea rec ta
d) Flu jo en L
b) F lu jo en U
d ) F lujo circ ular en O
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c) F lu jo en serp en tn
e) F lujo en S
2. REL chart REL diagram
From REL chart, we construct activity relationship diagram (REL diagram). The purpose is to depict spatially the relationships of the activities. The basic premise is that geographic proximity can be used to satisfy particular relationships. For example, when the activity relationships reflect the magnitudes of material flows, pairs of activities having the greatest pair wise flow are located next to each other. Similarly, pairs of activities having an A rating are located adjacently.
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2. REL chart example
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7070
2. Activity relationship diagram
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7171
Relationship diagram process
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7272
Relationship diagram process
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7373
Designing a layout
After the block layout is ready, estimate is made of the space requirements. This includes space required for machines, equipments, products. Estimation of human resources needed is made based on the number of machines operated and production rate. Then, space relationship diagrams are made.
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7474
Capacity Levels - Example 1
What is the average number of patients demanding treatment? What is 150% of average estimated demand? What is the service level for the 150% average demand?
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Mid point X 75 125 175 225 275 325
Probability P(x) 0.10 0.20 0.30 0.20 0.15 0.05
X*P(x) 7.5 25 52.5 45 41.25 16.25 187.5
The average number of patients demanding treatment is 188 b. For 150%, average demand capacity is (1.5) (188)=282 patient treatment capacity is required c. A 95% service level would require a 300 patient 12/29/12 treatment capacity
a.
An organization must install enough automatic processors to provide 800,000 good units per year. Processing time is 30 seconds. But the processors are only 80% efficient. How many automatic processors are required if the firm operates 2000 hours per year?
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Individual processor capacity = 3600 sec/hr 30 sec / unit = 120 units/mac hour
Required capacity = units/year
800,000
(2000 hr/year)(0.8) 500 units / hour

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Sample: Space relationship table
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7979
Example: Alternate block diagram
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8080
Example: Alternate block diagram
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8181
Dell Computer Company

Mass customization provides a competitive advantage
Sell custom-built PCs directly to consumer Lean production processes and good product design allow responsiveness Integrate the Web into every aspect of its business Focus research on software designed to make installation and configuration of its PCs fast and simple
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Process, Volume, and Variety

Figure 7.1
Low Volume
Volume Repetitive Process
High Volume
High Variety one or few units per run, high variety (allows customization) Changes in Modules modest runs, standardized modules Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only 12/29/12
Process Focus projects, job shops (machine, print, carpentry) Standard Register
Mass Customization (difficult to achieve, but huge rewards) Dell Computer
Repetitive (autos, motorcycles) Harley-Davidson Poor Strategy (Both fixed and variable costs are high)
Product Focus (commercial baked goods, steel, glass) Nucor Steel
Process Strategies
How to produce a product or provide a service that

Meets or exceeds customer requirements Meets cost and managerial goals Efficiency and production flexibility Costs and quality
Has long term effects on

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Process Strategies
Four basic strategies Process focus Repetitive focus Product focus Mass customization Within these basic strategies there are many ways they may be implemented 12/29/12
Process Focus
Facilities are organized around specific activities or processes General purpose equipment and skilled personnel High degree of product flexibility Typically high costs and low equipment utilization Product flows may vary considerably making planning and scheduling a challenge
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Process Focus
Job Shop
Many departments and many routings
Many inputs
Many variety of outputs
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Process Flow Diagram

Customer Customer sales representative Purchasing
PREPRESS DEPT
Vendors Accounting Receiving Warehouse

COLLATING DEPT PRINTING DEPT
GLUING, BINDING, STAPLING, LABELING
Information flow Material flow
POLYWRAP DEPT SHIPPING
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Customer
Figure 7.2
Repetitive Focus
Facilities often organized as assembly lines Characterized by modules with parts and assemblies made previously Modules may be combined for many output options Less flexibility than processfocused facilities but more efficient 12/29/12
Repetitive Focus
Automobile Assembly Line
Raw materials and module inputs Modules combined for many output options
Few modules 12/29/12
Process Flow Diagram

Frame tube bending
TESTING 28 tests
Frame-building work cells
Frame machining THE ASSEMBLY LINE

Incoming parts
Hot-paint frame painting Engines and transmissions

From Milwaukee on a JIT arrival schedule
Air cleaners Fluids and mufflers Fuel tank work cell Wheel work cell Roller testing
Oil tank work cell Shocks and forks Handlebars Fender work cell
Crating
Figure 7.3 12/29/12
Product Focus
Facilities are organized by product High volume but low variety of products Long, continuous production runs enable efficient processes Typically high fixed cost but low variable cost Generally less skilled labor
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Product Focus
Continuous Work Flow
Output variations in size, shape, and packaging
Few inputs
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Product Focus
D
Nucor Steel Plant

B
Scrap steel
Continuous caster
Ladle of molten steel
Electric furnace
Continuous cast steel sheared into 24-ton slabs Hot tunnel furnace - 300 ft
Hot mill for finishing, cooling, and coiling
H I
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Mass Customization
The rapid, low-cost production of goods and service to satisfy increasingly unique customer desires Combines the flexibility of a process focus with the efficiency of a product focus
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Mass Customization
Table 7.1
Item Vehicle models Vehicle types18 Bicycle types8 Software titles Web sites Movie releases New book titles Houston TV channels Breakfast cereals Items (SKUs) in supermarkets LCD TVs
Number of Choices 1970s 21st Century 140 286 1,212 19 0 400,000 0 98,116,993 267 458 40,530 77,446 5 185 160 340 14,000 150,000 0 102
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Mass Customization
Figure 7.5
Repetitive Focus
Flexible people and equipment
Supportive supply chains
Modular techniques
Mass Customization Effective scheduling techniques Process-Focused Rapid throughput techniques Product-Focused
High variety, low volume Low utilization (5% to 25%) General-purpose equipment 12/29/12
Low variety, high volume High utilization (70% to 90%) Specialized equipment
Comparison of Processes
Process Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Small quantity, large variety of products General purpose equipment Long runs, Large quantity, standardized small variety of product made from products modules Special equipment Special purpose aids in use of equipment assembly line Large quantity, large variety of products Rapid changeover on flexible equipment
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Table 7.2
Process Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Operators are broadly skilled Employees are modestly trained Operators are less Flexible operators broadly skilled are trained for the necessary customization Few work orders and job instructions because jobs standardized Custom orders require many job instructions
Many job Repetition reduces instructions as training and each job changes changes in job instructions
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Table 7.2
Process Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Raw material inventories high JIT procurement techniques used Raw material Raw material inventories are low inventories are low
Work-in-process is JIT inventory high techniques used
Work-in-process inventory is low
Work-in-process inventory driven down by JIT, lean production
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Table 7.2
Process Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Units move slowly Movement is Swift movement of Goods move through the plant measured in hours unit through the swiftly through the and days facility is typical facility
Finished goods made to order
Finished goods made to frequent forecast
Finished goods made to forecast and stored
Finished goods often build-to-order (BTO)
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Table 7.2
Process Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Scheduling is complex, tradeoffs between inventory, availability, customer service Scheduling based on building various models from a variety of modules to forecasts Relatively simple scheduling, establishing output rate to meet forecasts Sophisticated scheduling required to accommodate custom orders
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Table 7.2
Process Focus Repetitive Focus Product Focus Mass Customization (Low volume, high (Modular) (High-volume, lowvariety) variety) (High-volume, highvariety) Fixed costs low, Fixed costs variable costs high dependent on flexibility of the facility Costing estimated Costs usually before job, known known due to only after the job extensive experience Fixed costs high, Fixed costs high, variable costs low variable costs must be low High fixed costs mean costs dependent on utilization of capacity High fixed costs and dynamic variable costs make costing a challenge
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Table 7.2
Crossover Charts
Variable costs
Variable costs Fixed costs

Low volume, high variety Process A

Repetitive Process B
ost lc ta cost otal To T
$
Fixed costs
High volume, low variety Process C
400,000 300,000 200,000

Fixed cost Process A Fixed cost Process B
Figure 7.612/29/12
To tal co st
(2,857)
V 1
V 2
(6,666)
Fixed cost Volume Process C
Focused Processes

Focus brings efficiency Focus on depth of product line rather than breadth Focus can be

Customers Products Service Technology
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Changing Processes

Difficult and expensive May mean starting over Process strategy determines transformation strategy for an extended period Important to get it right
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Process Analysis and Design

Flow Diagrams - Shows the movement of materials Time-Function Mapping - Shows flows and time frame Value-Stream Mapping - Shows flows and time and value added beyond the immediate organization Process Charts - Uses symbols to show key activities Service Blueprinting - focuses on customer/provider interaction
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Baseline Time-Function Map

Customer Order product Process order Wait Receive product Sales Production control Plant A
Print
Warehouse
Wait
Wait
Wait
Plant B
Extrude
Transport 12 days Figure 7.7 12/29/12 13 days 1 day 4 days
Move 1 day 52 days 10 days 1 day 0 day
Move 1 day
Target Time-Function Map

Customer Order product Process order Receive product
Sales Production control Plant
Wait
Print
Extrude
Warehouse
Wait
Transport 1 day Figure 7.7 12/29/12 2 days 6 days 1 day 1 day
Move 1 day
Value-Stream Mapping
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Figure 7.8
Service Blueprint
Focuses on the customer and provider interaction Defines three levels of interaction Each level has different management issues Identifies potential failure points
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Service Blueprint
Personal Greeting Level #1
Customer arrives for service
Service Diagnosis
Perform Service
Friendly Close
Customer departs Customer pays bill
F
Warm greeting and obtain service request No Standard request Direct customer to waiting room Determine specifics Notify customer and recommend an alternative provider No
F F
Notify customer the car is ready
Level #2
Can service be done and does customer approve?
F Leve l #3
F
Yes
F
Yes Perform required work
F
Prepare invoice
Figure 12/29/12 7.10
Process Analysis Tools
Flowcharts provide a view of the big picture Time-function mapping adds rigor and a time element Value-stream analysis extends to customers and suppliers Process charts show detail Service blueprint focuses on customer interaction
Service Process Matrix

Degree of Customization Lo Massw Service
Commercial banking Full-service stockbroker Boutiques Retailing
Hig h Professional Service

Private banking
Hig h Degree of Labor
Generalpurpose law firms
Service Factory
Warehouse and catalog stores Airlines No-frills airlines
Service Law clinics Specialized Limited-service hospitals stockbroker

Fast-food restaurants Fine-dining restaurants
Shop
Lo w
Hospitals
Figure 12/29/12 7.11
Service Process Matrix

Mass Service and Professional Service

Labor involvement is high Selection and training highly important Focus on human resources Personalized services
Service Factory and Service Shop

Automation of standardized services Low labor intensity responds well to process technology and scheduling Tight control required to maintain standards
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Improving Service Productivity

Strategy Separation Technique Example Structure service so Bank customers go to a customers must go manager to open a new where service is offered account, to loan officers for loans, and to tellers for deposits Self-service so Supermarkets and customers examine, department stores, compare, and evaluate Internet ordering at their own pace
Self-service
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Table 7.3

Strategy Postponement Technique Example Customizing at delivery Customizing vans at delivery rather than at production Restricting the offerings Modular selection of service, modular production Limited-menu restaurant Investment and insurance selection, prepackaged food modules in restaurants
Focus Modules
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Table 7.3

Strategy Automation Technique Separating services that may lend themselves to automation Precise personnel scheduling Example Automatic teller machines
Scheduling
Scheduling ticket counter personnel at 15minute intervals at airlines
Training
Clarifying the service Investment counselor, options, explaining how funeral directors, afterto avoid problems sale maintenance personnel
Table 7.3
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Improving Service Processes
Layout
Product exposure, customer education, product enhancement Recruiting and training Impact of flexibility
Human Resources

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Equipment and Technology

Often complex decisions Possible competitive advantage

Flexibility Stable processes
May allow enlarging the scope of the processes
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Production Technology

Machine technology Automatic identification systems (AISs) Process control Vision system Robot Automated storage and retrieval systems (ASRSs) Automated guided vehicles (AGVs) Flexible manufacturing systems (FMSs) Computer-integrated manufacturing (CIM)
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Machine Technology

Increased precision Increased productivity Increased flexibility Improved environmental impact Reduced changeover time Decreased size Reduced power requirements
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Automatic Identification Systems (AISs)

Improved data acquisition Reduced data entry errors Increased speed Increased scope of process automation
Example Bar codes and RFID
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Process Control

Increased process stability Increased process precision Real-time provision of information for process evaluation Data available in many forms
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Process Control Software
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Vision Systems

Particular aid to inspection Consistently accurate Never bored Modest cost Superior to individuals performing the same tasks
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Robots
Perform monotonous or dangerous tasks Perform tasks requiring significant strength or endurance Generally enhanced consistency and accuracy
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Automated Storage and Retrieval Systems (ASRSs)
Automated placement and withdrawal of parts and products Reduced errors and labor Particularly useful in inventory and test areas of manufacturing firms
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Automated Guided Vehicle (AGVs)
Electronically guided and controlled carts Used for movement of products and/or individuals
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Flexible Manufacturing Systems (FMSs)

Computer controls both the workstation and the material handling equipment Enhance flexibility and reduced waste Can economically produce low volume at high quality Reduced changeover time and increased utilization Stringent communication requirement between components
12/29/12
Computer-Integrated Manufacturing (CIM)
Extension of flexible manufacturing systems

Backwards to engineering and inventory control Forward into warehousing and shipping Can also include financial and customer service areas
Reducing the distinction between low-volume/high-variety, and highvolume/low-variety production
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ComputerIntegrated Manufacturing (CIM)
12/29/12
Figure 7.12
Technology in Services
Service Industry Example Financial Services Debit cards, electronic funds transfer, ATMs, Internet stock trading Education Utilities and government Restaurants and foods Electronic bulletin boards, on-line journals, WebCT and Blackboard Automated one-man garbage trucks, optical mail and bomb scanners, flood warning systems Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs
Communications Electronic publishing, interactive TV

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Table
Technology in Services
Service Industry Hotels Wholesale/retail trade Example Electronic check-in/check-out, electronic key/lock system ATM-like kiosks, point-of-sale (POS) terminals, e-commerce, electronic communication between store and supplier, bar coded data Automatic toll booths, satellite-directed navigation systems Online patient-monitoring, online medical information systems, robotic surgery Ticketless travel, scheduling, Internet purchases
Table
Transportation Health care Airlines
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Process Redesign
The fundamental rethinking of business processes to bring about dramatic improvements in performance Relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions Requires reexamination of the basic process and its objectives Focuses on activities that cross functional lines Any process is a candidate for redesign 12/29/12
Ethics and Environmentally Friendly Processes

Reduce the negative impact on the environment

Encourage recycling Efficient use of resources Reduction of waste byproducts Use less harmful ingredients Use less energy
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Quality Management
Introduction Click to edit Master subtitle style Session 31
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137137
Defining Quality
The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs
American Society for Quality
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138138
Different Views
User-based better performance, more features Manufacturing-based conformance to standards, making it right the first time Product-based specific and measurable attributes of the product
139139
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Further Definitions

Quality is customer satisfaction "fitness for use (the product should be suitable for the intended purpose) and "right first time" (mistakes should be eliminated). Unfolding the above definition, defining the word customer: A customer is anyone who is impacted by the product or process:
External customers customers

140140
Internal 12/29/12
What is Product?
A product is the output of any process. Three categories Goods Software Service
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141141
Customer Satisfaction
Customer Satisfaction is achieved through two components
Product features and Freedom from deficiencies
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142142
Product features
Refers to the quality of design The customer population can be segmented by the level or grade of quality desired It refers to quality of conformance It is stated in different units, e.g. errors, defects, failures
143143
Freedom from deficiencies

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Product features Performance Freedom from deficiencies Product free of defects and errors at delivery, during usage, and during servicing Sales, billing, and other business free of errors
Reliability Durability Ease of use Serviceability Aesthetics Accuracy Timeliness Perceived quality Value
12/29/12 Reputation
144144
JURANS TRILOGY AND QUALITY COSTS

Session 32 Click to edit Master subtitle style
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145145
Universal Process of Managing Quality

Quality Planning Quality control Quality Improvement Prove the need Identify projects Organize project teams Establish quality goals Identify customers Discover customer needs Develop product features Develop process features Establish process controls, transfer to operations
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Choose control subjects Choose unit of measure Set goals
Create a sensor Diagnose the causes Measure actual performance Interpret the difference Take action on the difference Provide remedies, prove that remedies are effective Deal with resistance to change Control to hold the 146146 gains
Freedom From Deficiencies
An emphasis on quality can be supportive by identifying and eliminating
the causes of errors and rework, thereby reducing costs and making more units of product Not overavailable emphasis or
misguided quality!
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147147
Freedom From Deficiencies
Warrant y
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148148
Quality Costs

Internal failure costs External failure costs Appraisal costs Prevention costs
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149149
Internal failure costs
These are costs associated with defects (errors, nonconformance, etc.) that are found prior to transfer of the product to the customer
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150150
Scrap : the labour, material, and overhead on productive products that cannot be economically repaired Rework: the cost of correcting defectives to make them conform to specifications Failure analysis: cost of analysing nonconforming 12/29/12 151151 product to determine causes
Scrap and rework supplies: costs of scrap and rework due to nonconforming product received from suppliers One hundred per cent sorting inspection: costs of finding defective units in product lots which contain unacceptably high levels of defectives
152152 Reinspection and retesting: costs
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Avoidable process losses: costs of losses that occur even with conforming product Downgrading : the difference between the normal selling price and the reduced produce due to quality reasons
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153153
External Failure Costs

These are costs associated with defects that are found after product is shipped to the customer.
Warranty charges: Costs involved in replacing or making repairs to products that are still within the warranty period Complaint adjustment: costs of investigation and adjustment of 12/29/12 154154
Appraisal costs
These are costs incurred in determining the degree of conformance to quality requirements

Incoming inspection and testing In-process inspection and testing Final inspection and testing Product quality audits Maintaining accuracy of testing 12/29/12 155155 equipments
Prevention costs
These are costs incurred in keeping failure and appraisal costs to a minimum
Quality planning : the activities that create overall quality plan New product review: cost of reliability engineering and other quality related activities associated with the launching of new designs Process control: costs of in-process inspection and testing the status of the process
156156
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Prevention costs
Quality audits: costs of evaluating the execution of activities Supplier quality evaluation: costs of evaluating a supplier prior to supplier selection, auditing the activities during the contract Training: costs of preparing and conducting the training 157157 12/29/12
Quality Costs
Head Cost of quality failures Defective stock Repairs to product Collect scrap Waste scrap Consumer adjustments Downgrading products Customer ill will Customer policy adjustment
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Amount
3,276 73,329 2,288 1,87,428 4,08,200 22,838 Not counted Not counted 6,97,259
158158
0.37% 8.31 0.26 21.26 46.31 2.59
79.10%
Quality Costs
Cost of appraisal Incoming inspection Inspection 1 Inspection 2 Spot-check inspection Cost of Prevention Local plant quality Control engineering, corporate quality Grand Total
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32,655 32,582 25,200 65,910 1,47,347 7,848 30,000 37,848 8,82,454
2.68 3.70 2.86 7.37 16.61% 0.89 3.40 4.29% 100.00%
159159
Optimum segment of quality cost model
Zone of improvement projects Failure costs >70%

12/29/12
Zone of indifference Failure costs ~ 50% Emphasize is on Quality control
Zone of indifference Failure costs <40% Appraisal cost >50%

160160
Gurus of Quality
Name Shewart Contribution Control chart theory with control limits, assignable and chance causes of variation and rational subgroups Deming 14 point theory provides the management to improve quality, productivity and competitive position Juran Jurans Trilogy for managing quality being carried out by quality planning, control and improvement Feiganbaum Customer satisfaction, genuine management involvement, employee involvement, first-line supervision leadership, and company-wide quality control 12/29/12 161161
Gurus of Quality
Ishikawa Crosby Taguchi Cause and effect diagram Quality is free doing it right the first time Developed loss function concept that combines cost, target and variation in to one metric. Because the lost function is reactive, he developed the signal to noise ratio as a proactive equivalent
162162
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STATISTICAL PROCESS CONTROL

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163163
Statistical Process Control (SPC)
Variability is inherent in every process

Natural or common causes Special or assignable causes
Provides a statistical signal when assignable causes are present Detect and eliminate assignable causes of variation
164164
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Variation
Three categories of variation
Within piece variation Piece to piece variation that occurs among pieces produced at the same time Time-to-time variation that occurs in product produced at different times of the day
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Variation
Variation is present due to a combination of factors

Men Material Machine Environment Inspection
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STATISTICAL PROCESS CONTROL

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167167
Natural Variations
Also called common causes Affect virtually all production processes Expected amount of variation Output measures follow a probability distribution For any distribution there is a measure of central tendency and dispersion If the distribution of outputs falls within acceptable limits, the process is said to be in control 12/29/12 168168
Assignable Variations
Also called special causes of variation
Generally this is some change in the process
Variations that can be traced to a specific reason The objective is to discover when assignable causes are present

Eliminate the bad causes Incorporate the good causes

169169
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Samples
To measure the process, we take samples and analyze the sample statistics following these steps
(a) Samples of the product, say five boxes of cereal taken off the filling machine line, vary from each other in weight
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Each of these represents one sample of five boxes of cereal
Frequenc y
# # # # # # # # # # # # # # # # # # # # # #
# # Weigh# t
170170
Samples
(b) After enough samples are taken from a stable process, they form a pattern called a distribution
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The solid line represents the distribution
Frequenc y Weigh t
171171
Samples
(c) There are many types of distributions, including the normal (bellshaped) distribution, but distributions do differ in terms of central tendency (mean), standard deviation or variance, and shape Central Variati Shap tendency on e Weig ht Weig ht Weig ht
172172
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F re q u e n c y
Samples
(d) If only natural causes of variation are present, the output of a process forms a distribution that is stable over time and is 12/29/12predictable
Freque ncy
Predicti on
Ti me
173173
Weig ht
Samples
(e) If assignable causes are present, the process output is not stable over time and is not predicable
? ?? ?? ? ? ? ? ? ? ? ? ? ? ?? ??
Freque ncy
Predicti on
Ti me
174174
Weig ht
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Control Charts
Constructed from historical data, the purpose of control charts is to help distinguish between natural variations and variations due to assignable causes
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175175
Process Control
(a) In statistical control and capable of producing within control limits
Frequen cy Lower control limit
Upper control limit (b) In statistical control
but not capable of producing within control limits
(c) Out of control
Siz (weight, length, speed, etc.) e

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176176
Types of Data
Variabl es Attribut es Defect-related
Characteristics that can take any real value May be in whole or in fractional numbers Continuous random variables
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characteristics Classify products as either good or bad or count defects Categorical or discrete random variables
177177
Central Limit Theorem

Regardless of the distribution of the population, the distribution of sample means drawn from the population will tend to follow a normal curve
1.
The mean of the sampling distribution (x) will be the same as the population x = mean
2.
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The standard deviation of the sampling distribution ( ) () = , 178178
Population and Sampling Distributions

Three population distributions
Beta
Distribution of sample means
Normal Uniform
| -3 | | |
Mean of sample means = x Standard deviation = of the = sample means

| | |
+ 1
+ 2
+ 3
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95.45% fall within 2 99.73% of all x fall within
179179
Sampling Distribution
Sampling distribution of means Process distribution of means
x= ()
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Control charts for Variables

X bar and Master Click to editR chart subtitle style
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181181
Control Charts for Variables
For variables that have continuous dimensions
Weight, speed, length, strength, etc.
x-charts are to control the central tendency of the process R-charts are to control the dispersion of the process These two charts must be used together
182182
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Variable control charts
Quality characteristic
Should be measurable and can be expressed in numbers A rational subgroup is one in which the variations within the group is only Within group variation is used to determine the control limits between subgroups is
Subgroup size and Method
12/29/12 Variation
Setting Chart Limits

For x-Charts when we know
Upper control limit (UCL) = x + z Lower control limit (LCL) = x - z
where
12/29/12
x =mean of the sample means or a target value set for the process z =number of normal standard deviations = = / = 184184
Setting Control Limits

Hour 1 Sample Weight of Number Oat Flakes 1 17 2 13 3 16 4 18 5 17 n=9 6 16 7 15 8 17 9 16 Mean 16.1 = 1
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Hour Mean 1 16.1 2 16.8 3 15.5 4 16.5 5 16.5 6 16.4
Hour Mean 7 15.2 8 16.4 9 16.3 10 14.8 11 14.2 12 17.3
For 99.73% control limits, z = 3 UCLx = x + z = 16 + 3(1/3) = 17 LCLx = x - z = 16 3(1/3) = 15

185185

Control Chart for sample of 9 boxes
Out of control
17 = UCL 16 = Mean 15 = LCL

| | | | | | | | | | | | 1 2 3 4 5 6 7 8 9 10 11 12
Variation due to assignable causes Variation due to natural causes Variation due to Out of assignable control causes
186186
Sample number
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For x-Charts when we dont know
Upper control limit (UCL) = A2R Lower control limit (LCL) = A2R
where Table
x+ x-
R =average range of the samples A2 =control chart factor found in x =mean of the sample means
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187187
Control Chart Factors

Sample Size n 2 3 4 5 6 7 8 9 10 12
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Mean Factor A2 1.880 1.023 .729 .577 .483 .419 .373 .337 .308 .266
Upper Range D4 3.268 2.574 2.282 2.115 2.004 1.924 1.864 1.816 1.777 1.716
Lower Range D3 0 0 0 0 0 0.076 0.136 0.184 0.223 0.284

188188

Process average x = 12 ounces Average range R = .25 Sample size n = 5
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189189

Process average x = 12 ounces Average range R = .25 Sample size n = 5 UCLx = x + A2R = 12 + (.577)(.25) = 12 + .144 = 12.144 ounces From previous Table
12/29/12 190190

Process average x = 12 ounces Average range R = .25 Sample size n = 5 UCLx = x + A2R = 12 + (.577)(.25) = 12 + .144 = 12.144 ounces LCLx = x - A2R = 12 - .144 = 11.857 ounces
12/29/12
UCL = 12.144 Mean = 12 LCL = 11.857

191191
R Chart
Type of variables control chart Shows sample ranges over time
Difference between smallest and largest values in sample
Monitors process variability Independent from process mean

192192
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Setting Chart Limits

For RCharts
Upper control limit (UCLR) = D4R Lower control limit (LCLR) = D3R
where R =average range of the samples D3 and D4 =control chart factors from Table
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193193

Average range R = 5.3 pounds Sample size n = 5 From Table S6.1 D4 = 2.115, D3 = 0 UCLR = D4R = (2.115)(5.3) = 11.2 pounds UCL = 11.2 Mean = 5.3 LCL =0
194194
LCLR = D3R = (0)(5.3) = 0 pounds

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Mean and Range Charts

(a) These sampling distributio ns result in the charts below xchart Rchart
12/29/12
(Sampling mean is shifting upward but range is consistent)

UC L
LC L UC L
LC L
(x-chart detects shift in central tendency) (R-chart does not detect change in mean)
195195
Mean and Range Charts

(b) These sampling distributio ns result in the charts below xchart Rchart
12/29/12
UC L
LC L UC L
LC L
(Sampling mean is constant but dispersion is increasing) (x-chart does not detect the increase in dispersion) (R-chart detects increase in dispersion)
196196
CONTROL CHARTS FOR ATTRIBUTES

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Construction of X and R charts
When setting up X and R charts, first set the R chart Because the control limits on the X chart depend on the process variability Unless process variability is in control, there is no meaning in the control limits
12/29/12 198198
Process capability
Specification Limits Ri is given as 8.1302
X = 37.64 And sample size is 5

are: 1.500.50
Sample Number is 25 Hence R = 8.1302/25 = 0.32521 LCLR=R*D3= 0.32521*0=0 UCLR = R*D4=0.3252*(2.114) The process standard deviation may 199199
12/29/12
Process Capability
X (double bar) = 1.5056; UCL = 1.69325; LCL=1.31795 The process capability can be measured as, estimating the fraction of non-conforming products produced as
12/29/12
That is, 0.035% of the product will be outside of the specification 200200
Steps In Creating Control Charts

1.
2.
3.
4.
5.
12/29/12
Take samples from the population and compute the appropriate sample statistic Use the sample statistic to calculate control limits and draw the control chart Plot sample results on the control chart and determine the state of the process (in or out of control) Investigate possible assignable causes and take any indicated actions Continue sampling from the process and reset the control limits when necessary
201201
Types of Attribute Charts
Control chart for fraction non conforming fraction of nonconforming or defective product produced (p chart) Control chart for nonconformities is used to deal with the number of defects or nonconformities ( c chart) Control chart for non12/29/12 conformities per unit
The Control chart for fraction nonconforming
The fraction non conforming is defined as the ratio of the number of non conforming items in a population to the total number of items in that population The statistics principles for fraction nonconforming is
binomial distribution
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The Control chart for fraction nonconforming
The sample fraction non conforming is defined as the ratio of the number of non conforming units in the sample D to the sample size n; that is P
The distribution of can be obtained from the binomial
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Fraction non conforming control chart
12/29/12
Problem
Frozen orange juice concentrate is packed in 6-oz cardboard cans. These cans are formed on a machine by spinning them from cardboard stock and attaching a metal bottom panel. By inspection of a can, we may determine whether, when filled it could possibly leak either on the side seam or around the bottom joint. Such a non conforming can has an improper seal on either the side seam or the bottom panel. Set up a control to improve the fraction of non conforming cans produced by this machine To establish the control chart, 30 samples of n=50 cans each were selected at hour intervals over a 3-shift period in which the machine was in continuous operations. The data are shown in the table. We construct a preliminary control chart to see whether the process was in control when this data was collected.
12/29/12
Sample Number
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Number of Sample nonfraction conforming noncans Di conforming Pi 12 0.24 15 0.30 8 0.16 10 0.20 4 0.08 7 0.14 16 0.32 9 0.18 14 0.28 10 0.20 5 0.10 6 0.12 17 0.34 12 0.24 22 0.44
Sample Number
16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
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Number of Sample nonfraction conforming noncans Di conforming Pi 8 0.16 10 0.20 5 0.10 13 0.26 11 0.22 20 0.40 18 0.36 24 0.48 15 0.30 9 0.18 12 0.24 7 0.14 13 0.26 9 0.18 6 0.12 347 P(bar)=0.23 13
Solution
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Sample Number
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Number of nonconforming cans Di 12 15 8 10 4 7 16 9 14 10 5 6 17 12 22
Sample fraction nonconforming Pi 0.24 0.30 0.16 0.20 0.08 0.14 0.32 0.18 0.28 0.20 0.10 0.12 0.34 0.24 0.44
Sample Number
16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Number of Sample nonfraction nonconforming conforming Pi cans Di 8 0.16 10 5 13 11 20 18 24 15 9 12 7 13 9 6 347 0.20 0.10 0.26 0.22 0.40 0.36 0.48 0.30 0.18 0.24 0.14 0.26 0.18 0.12 P(bar)=0.231 3
12/29/12
Revised Center Line
The new center line is calculated as
12/29/12
The process is under control But the fraction
Sample Number of Sample Sample Number of Numbe nonfraction non- Number nonr conforming conforming conforming cans Di Pi cans Di 31 32 33 34 35 36 37 38 39 40 41 42 9 6 12 5 6 4 6 3 7 6 2 4 0.18 0.12 0.24 0.10 0.12 0.08 0.12 0.06 0.14 0.12 0.04 0.08 43 44 45 46 47 48 49 50 51 52 53 54 3 6 5 4 8 5 6 7 5 6 3 5 133
Sample fraction nonconforming Pi
0.06 0.12 0.10 0.08 0.16 0.10 0.12 0.14 0.10 0.12 0.06 0.10 P(bar)=0.1108
12/29/12
Revised Control Limits
12/29/12
A hypothesis test that the process fraction nonconforming in the current process differs from the fraction nonconforming of the previous process H0: p1=p2 H1: p1>p2
The test statistic is
12/29/12
12/29/12
Zo = 7.10 > Z0.05= 1.645 So we reject the Null hypothesis Hence, it is concluded that there is a significant decrease in the process fallout
CONTROL CHARTS FOR NON CONFORMITIES PER UNIT
12/29/12
Control charts for non conformities per unit
The average number of non conformities per unit is
U(bar)=x/n
X is a Poisson random variable

U bar represents the observed average number of non conformities per unit in a preliminary set of data
12/29/12
Problem
A personal computer manufacturer wishes to establish a control chart for nonconformities per unit on the final assembly line in 20 samples or 5 computers each are shown in the table
12/29/12
Sample Sample size, n Total number of Average number No. i Non conformities, of Non xi conformities per unit, ui=xi/n 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 10 12 8 14 10 16 11 7 10 15 9 5 7 11 12 6 8 10 7 5 193 2.0 2.4 1.6 2.8 2.0 3.2 2.2 1.4 2.0 3.0 1.8 1.0 1.4 2.2 2.4 1.2 1.6 2.0 1.4 1.0 38.6
12/29/12
Calculation of Control Limits
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Construction of the u Control Chart

12 10 8 6 4 2 0
12/29/12
Linear Regressio n for
CONTROL CHART FOR ATTRIBUTES

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221221
Procedures with Variable Sample Size Roll No. of Total no. Number No. of non
No. Square of of conformiti meters nonconf inspectio es per ormities n units in inspection roll, n unit ui 500 400 650 500 475 500 600 525 600 625 14 12 20 11 7 10 21 16 19 23 153 10.0 8.0 13.0 10.0 9.5 10.0 12.0 10.5 12.0 12.5 107.50 1.40 1.50 1.54 1.10 0.74 1.00 1.75 1.52 1.58 1.84
1 2 3 4 5 6 7 8 9 10
12/29/12
Calculation of Upper and Lower Control Limits

Roll No. ni No. of non conformities per inspection unit ui 1.40 1.50 1.54 1.10 0.74 1.00 1.75 1.52 1.58 1.84 2.55 2.68 2.41 2.55 2.58 2.55 2.45 2.52 2.45 2.43 0.29 0.16 0.43 0.29 0.26 0.29 0.39 0.32 0.39 0.41
1 2 3 4 5 6 7 8 9 10
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10.0 8.0 13.0 10.0 9.5 10.0 12.0 10.5 12.0 12.5
Construction of the u Control Chart

12 10 8 6 4 2 0
12/29/12
Choice between Attributes and Variable Control Charts
Attributes control charts
Several quality characteristics can be considered jointly and the unit classified as nonconforming if it fails to meet the specification on any one characteristic Expensive and time consuming measurements can be avoided
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225225
Choice between Attributes and Variable control charts

Variable control charts
Provides more useful information about process performance Specific information about the process mean and variability can be obtained They often provide leading indicators of impending trouble
12/29/12
The attribute charts will react only 226226
12/29/12
Manufacturing Execution Systems

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Manufacturing Execution System
Operations scheduling is at the heart of what is currently referred to as Manufacturing Execution systems (MES) An MES is an information system that schedules, dispatches, tracks, monitors and controls production on the factory floor
12/29/12
Work Center
It is an area in a business in which productive resources are organized and work is completed A work center may be a single machine, a group of machines, or an area where a particular type of work is done These work centers are grouped according to function in a
12/29/12
job-shop environment; or
Scheduling
Scheduling involves determining the order for running the jobs, and also assigning a machine for each job Scheduling systems can use either infinite or finite loading Scheduling systems are distinguished in how they consider the capacity, in determining the schedule Another distinguishing feature is 12/29/12 whether the schedule is generated
Infinite and Finite Loading
Infinite loading when work is assigned to a work center simply based on what is needed over time. No consideration is given directly regarding the capacity, except for a rough cut capacity check Finite loading: Schedules in detail each resource using the setup time and run time required for each order. Theoretically, all schedules are 12/29/12
Forward and Backward Scheduling
Forward Scheduling: refers the method in which the system takes an order and then schedules each operation that must be completed forward in time Backward scheduling: Starts from some date in the future (possibly due date) and schedules the required operations in reverse sequence MRP system is an example of an
12/29/12
Machine/Labour limited
Processes are referred to as either machine limited or labour limited Machine Limited: Equipment is the critical resources to be scheduled Labour Limited: People are the key resource to schedule
12/29/12
Type Continuous process
Product
Typical scheduling approach
Chemicals, steel, wires Finite forward scheduling and cables, liquids, of the process; machine canned goods limited Finite forward scheduling of the line; machine limited; parts are pulled to the line using just-in-time system
High-volume Automobiles, manufacturing telephones, fasteners, textiles, motors, household fixtures
Mid-volume Industrial Parts, High- Infinite forward scheduling manufacturing end consumer of the line; labour limited products and machine limited as well; parts are pulled to the line using just-in-time system Low-volume job shops
12/29/12
Custom or prototype Infinite, forward scheduling equipment, specialized of jobs: usually labour instruments, lowlimited, but certain volume industrial functions may be machine
Job sequencing
The process of determining the job order on some machine or in some work center is known as sequencing Priority rules are the rules used in obtaining a sequence
12/29/12
Measures of schedule performance
Meeting due dates of customers or downstream operations Minimizing the flow times Minimizing work-in-process inventory Minimizing idle time of machines or workers
12/29/12
Example Single machine scheduling
A firm received five orders. Specific scheduling data are provided in the table. There is only one machine. The firm must decide the sequence for the five orders. The evaluation criteria is minimum flow time. Use FCFS and SPT priority rule to decide the sequence
Job (in order of arrival) A B C D E 12/29/12 Processing time (days) 3 4 2 6 1 Due date (days hence) 5 6 7 9 2
First Come First Served (FCFS) Rule

Job sequence A B C D E Processing time (days) 3 4 2 6 1 Due date (days hence) 5 6 7 9 2 Flow time (days) 0+3 = 3 3 + 4=7 7+2=9 9+6=15 15+1=16
TOTAL FLOW TIME = 3+7+9+15+16=50 DAYS MEAN FLOW TIME = 50/5 = 10 DAYS Comparing the due date of each job, with its flow time, we observe that only job A will be on time Jobs B, C, D and E will be late by 1, 2,6 and 14 days respectively On average, a job will be late by 12/29/12 (0+1+2+6+14)/5=4.6 days
Shortest Processing Time (SPT Rule)

Job sequence E C A B D Processing time (days) 1 2 3 4 6 Due date (days hence) 2 7 5 6 9 Flow time (days) 0+1 = 1 1 +2 =3 3 + 3=6 6+4 = 10 10+6=16
TOTAL FLOW TIME = 1+3+6+10+16 =36 DAYS MEAN FLOW TIME = 36/5 = 7.2 DAYS SPT results in a lower average flow time than FCFS rule, in addition, Job C and E will be ready before the due date, and job A is late by only one day. On average a job will be late by (0+0+1+4+7)/5=2.4 days 12/29/12
Scheduling n jobs on two machines

Referred to as Johnsons rule Objective is to minimize the flow time from the beginning of the first job until the finish of the last It consists of the following steps:
List the operation time for each job on both the machines Select the shortest operation time If the shortest time is for the first
12/29/12
Scheduling n jobs on two machines - Example

Job A B C D Operation time on machine 1 3 6 5 7 Operation time on machine 2 2 8 6 4
Step 2 and 3: Select the shortest operation Job A is shortest on Machine 2 Ist Hence job A is assigned first and scheduled last Assig Once assigned it is not available further nmen t 1 2 3 4 A
12/29/12

Job A B C D Operation time on machine 1 3 6 5 7 Operation time on machine 2 2 8 6 4
Step 4: Select the shortest operation among the remaining jobs Job D is shortest and again on Machine 2 Hence job D is assigned second to last Once assigned it is not available further 1 2 3 D 12/29/12 4 A
Step 4: Job C is shortest on machine 1, among the remaining jobs, hence performed first 1 2 3 4
C D A
The remaining job is B, with the 1 2 3 4 shortest operationDtime in machine 1 C B A

12/29/12 All the jobs are sequenced . The flow time is 25 days

Machine 1 Job C Job B Job D Job A Idle but available for other work Job A 25
Machine 2 Idle 0
Job C 5
Job B
Job D
11 19 Cumulative time in days
12/29/12
Production Activity Control (PAC)

Also referred as shop-floor control A system for utilizing data from the shop floor as well as data processing files to maintain and communicate status information on shop orders and work centers
12/29/12
Functions
The major functions of PAC are:
Assigning priority of each shop order Maintaining work-in-process quantity information Providing actual output data for capacity control purpose Providing quantity by location by shop order for WIP inventory and accounting purpose efficiency, utilization, and
Measuring 12/29/12
Gantt Charts
Smaller job shops and individual departments of large ones employ the Gantt chart to help plan and tract jobs It is a type of bar chart that plot tasks against time
12/29/12
Gantt chart representation
Job A B C D
Monday Tuesday Wed
Thurs
Fri
12/29/12
Tools of PAC
1.
The daily dispatch list which jobs are to be run, there priority and how long each will take Various status and exception reports including
a.
2.
Anticipated delay report made out by the shop planner Scrap reports Rework reports
b.
c.
12/29/12
Input output control
It is a major feature of a manufacturing planning and control system Its major percept is that the planned work input to a work center should never exceed the planned work output When the input exceeds the output, back logs builds at the work center, 12/29/12 which in turn increases the lead time
Input output control report

Work ending 505 Planned input 210 Actual input Cumulative deviation Planned output 110 - 100 210 512 210 150 - 160 210 120 - 160 519 210 140 - 230 210 160 - 210 526 210 130 -310 210 120 -300
Actual output 140 Cumulative deviation - 70
12/29/12
Looking first at the output part of the report, output is far below plan It would seem that the serious capacity problem exists for this work center. However, a look at the input part of the plan, makes it the serious capacity problem exists at an upstream work center, feeding this 12/29/12 work center

The basic solution is simple Either increase capacity at the bottleneck station or reduce the input to it (input reduction at bottleneck work center)
12/29/12
Product Design
Process of Product subtitle Click to edit MasterDesign style Session 23
12/29/12
255255
Organizing for Product Development
Historically distinct departments
Duties and responsibilities are defined Difficult to foster forward thinking Product manager drives the product through the product development system and related organizations
256256
A Champion
12/29/12
Product Design & Process Selection

Product design the process of defining all of the companies product characteristics
Product design must support product manufacturability (the ease with which a product can be made)
12/29/12
Product design defines a products appearan tolerance characteristics of: ce, s, and materials performa , nce dimensio standard Process Selection the development of the ns, s. process necessary to produce the designed product.
257257
Organizing for Product Development
Team approach
Cross functional representatives from all disciplines or functions Product development teams, design for manufacturability teams, value engineering teams
Japanese whole organization approach
No organizational divisions
258258
12/29/12
Concurrent Engineering
12/29/12
259259
The Product Design Process

Idea development: all products begin with an idea whether from:

customers, competitors or suppliers
Reverse engineering: buying a competitors product

12/29/12 260260

Step 1 - Idea Development - Someone thinks of a need and a product/service design to satisfy it: customers, marketing, engineering, competitors, benchmarking, reverse engineering Step 2 - Product Screening - Every business needs a formal/structured evaluation process: fit with facility and labor skills, size of market, contribution margin, break-even analysis, return on sales Step 3 Preliminary Design and Testing Technical specifications are developed, prototypes built, testing starts Step 4 Final Design - Final design based on test 12/29/12 261261 results, facility, equipment, material, & labor skills
Idea developments selection affects
Product quality Product cost Customer satisfaction Overall manufacturability the ease with which the product can be made
12/29/12
262262
Research-DevelopmentEngineering
(Idea Generation)
RESEARCH
DEVELOPME NT
(Product Screening & Testing)
(Final Design )
PRODUCT ENGINEERI NG
PLANT ENGINEERIN G
(Product continuity)
MANUFACTUR ING ENGINEERING

(Product Manufacture )
12/29/12
263263
Phase 0 : Planning
Phase 1: Phase 2: Phase 3: Phase 4: Phase 5: Concept System level Detail Design Testing and Production development design refinement Rampup
Marketing Design Investigate Generate Define part Reliability Consider feasibility of alternative geometry testing Product product product Choose Life testing platform concepts architecture materials Performanc and Develop s Assign e testing architectur industrial Define major tolerances Obtain e design subsystems Compete regulatory Assess new concepts and industrial approvals technologie Build and testinterfaces design Implement s experimental Refine documentatio design prototypes industrial n changes design Evaluate early production outputs
Manufacturi ng Other 12/29/12 functions
Product Decisions

Preliminary Design Detailed Design
Functional Design Form Design Production Design
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265265
Preliminary Design

Transition from concept to reality Prototypes are developed Prototypes are tested for performance characteristics The process of finding the best design is called optimization
12/29/12
266266
DETAILED DESIGN
1. Functional Design
Market quality level Materials Selection Reliability Maintainability Packaging

267267
2. Form Design
3. Production Design
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1. Functional Design
Concerned with how the product works ( its performance) Management must be concerned with the relationships among market quality level, reliability and cost in deciding the technical specifications
12/29/12
268268
1 a. Market Quality Level
Is related to the market segments the product will serve High, moderate or low quality markets The market quality will determine the material selection, reliability and thereby the cost There is a point of diminishing returns where costs increased 12/29/12 269269 beyond a value
1 b. Materials Selection

For a given market quality level The quality and reliability of the materials should meet specifications as prescribed by the standards
12/29/12
270270
1 c. Reliability
The life of a product is dependent on its design, the manufacturing quality, the conditions under which it is used Reliability refers to a product performing its intended function for a specified period of time (consistency of operation) under given conditions satisfactorily (without failure) It is expressed as a number that indicates as a measure of probability
12/29/12 271271
1 d. Maintainability
Refers to the ability of a product or system to stay in operating condition with a reasonable amount of effort It is expressed as a number that indicates the probability, that when specified maintenance is taken, a failed device will be restored to operable condition in a specified downtime Maintainability relates to 12/29/12 272272 maintenance costs, frequency of
1 d. Maintainability
Average availability =
MTBF
MTBF + MTTR MRBF = Operating time / number of failures MTTR = nonoperating time / number of failures MTBF = Mean time between failures, 12/29/12 273273 or how long on the average the
FORM DESIGN
Relates to the physical appearance or shape of the product It is important for consumer goods
12/29/12
274274
2 a. Packaging
Package may be a box, can, bag, tube etc Packaging is the use of containers, wrapping materials, decorations and labelling to protect, promote, secure, preserve to increase the utility of the product
12/29/12
275275
3. PRODUCTION DESIGN
Product design take care of function, form and producibility. The producibility aspect is looked in to during the production design
12/29/12
276276
3 a. Product Simplification
Determination of optimum number of variety Too much variety raises costs, too less retard sales Elimination of marginal product lines, types and models Simplification will reduce design complexity, and the range of purchased products
12/29/12
277277
3 b. Product Diversification

Opposite to simplification Increased product lines and modes Horizontal diversification Vertical diversification Lateral diversification
12/29/12
278278
Product Design
Design edit Master subtitle Click to for Manufacturabilitystyle Session 24
12/29/12
279279
3 c. Standardization
To gain uniformity in the characteristics of a product such as shape, size, colour, quantity and performance Uniformity in work methods, equipment, machine parts, procedures and processes Permits interchangeability of parts and simplifies maintainability of the 12/29/12 280280 product
3 d. Modular Design
Products designed in easily segmented components Adds flexibility to both production and marketing Improved ability to satisfy customer requirements
12/29/12
281281
3 d. Modularity
Modularity develops building blocks The modularity designs, develops and produce parts in multitude of ways
12/29/12
282282
3 e. Value Analysis
Focuses on design improvement during production Seeks improvements leading either to a better product or a product which can be produced more economically
12/29/12
283283
Cost Reduction of a Bracket via Value Engineering
12/29/12
284284
Issues for Product Development
Computer-aided design (CAD) Computer-aided manufacturing (CAM) Virtual reality technology Environmentally friendly design
12/29/12
285285
Robust Design
Product is designed so that small variations in production or assembly do not adversely affect the product Typically results in lower cost and higher quality
12/29/12
286286
Computer Aided Design (CAD)
Using computers to design products and prepare engineering documentation Shorter development cycles, improved accuracy, lower cost Information and designs can be deployed worldwide
12/29/12
287287
Computer-Aided Manufacturing (CAM)
Utilizing specialized computers and program to control manufacturing equipment Often driven by the CAD system (CAD/CAM)
12/29/12
288288
Benefits of CAD/CAM
Product quality Shorter design time Production cost reductions Database availability New range of capabilities
1. 2. 3. 4. 5.
12/29/12
289289
Virtual Reality Technology
Computer technology used to develop an interactive, 3-D model of a product from the basic CAD data Allows people to see the finished design before a physical model is built Very effective in large-scale designs such as plant layout
290290
12/29/12
Time-Based Competition
Product life cycles are becoming shorter and the rate of technological change is increasing Developing new products faster can result in a competitive advantage
12/29/12
291291
Product-by-Value Analysis
Lists products in descending order of their individual dollar contribution to the firm Lists the total annual dollar contribution of the product Helps management evaluate alternative strategies
12/29/12
292292
Product-by-Value Analysis
A Furniture Factory
Love Seat Arm Chair Foot Stool Recliner
Individual Contribution ($) $102 $87 $12 $136
Total Annual Contribution ($) $36,720 $51,765 $6,240 $51,000
12/29/12
293293
Documents for Production

Engineering drawing Bill of Material Assembly drawing Assembly chart Route sheet Work order Engineering change notices (ECNs)
294294
12/29/12
Engineering Drawings
12/29/12
295295
Bills of Material
BOM for Panel Weldment NUMBER DESCRIPTION QTY A 60-71 A 60-7 R 60-17 R 60-428 P 60-2 A 60-72 R 60-57-1 A 60-4 PANEL WELDMT 1
LOWER ROLLER ASSM. 1 ROLLER 1 PIN 1 LOCKNUT 1 GUIDE ASSM. REAR 1 SUPPORT ANGLE 1 ROLLER ASSM. 1 296296
12/29/12
Assembly Drawing
Shows exploded view of product Details relative locations to show how to assemble the product
297297
12/29/12
Assembly Chart
R 209 Angle R 207 Angle Bolts w/nuts (2) R 209 Angle R 207 Angle Bolts w/nuts (2) Bolt w/nut R 404 Roller Lock washer Part number tag A4 Box w/packing material 11 A5 A3 SA 2 Right bracket assembly A2 SA 1 Left bracket assembly A1
1 2 3 4 5 6 7 8 9 10
Identifies the point of production where components flow into subassemblies and ultimately Poka-yokeinto the final inspection product
298298
12/29/12
Route Sheet
Lists the operations and times required to produce a component
Process 1 2 3 4 Machine Auto Insert 2 Manual Insert 1 Wave Solder Test 4 Operations Insert Component Set 56 Insert Component Set 12C Solder all components to board Circuit integrity test 4GY 1.5 .5 1.5 .25
Setup Time
Operation Time/Unit .4 2.3 4.1 .5
12/29/12
299299
Work Order
Instructions to produce a given quantity of a particular item, usually to a schedule
Work Order Item 157C Quantity 125 Start Date 5/2/08 Delivery Location Dept K11
300300
Due Date 5/4/08
Production Dept F32

12/29/12
Engineering Change Notice (ECN)
A correction or modification to a products definition or documentation

Engineering drawings Bill of material
Quite common with long product life cycles, long manufacturing lead times, or rapidly changing technologies
12/29/12 301301
Transition to Production
Responsibility must also transition as the product moves through its life cycle
Line management takes over from design
Three common approaches to managing transition
Project managers Product development teams Integrate product development and manufacturing organizations
302302
12/29/12
Introduction
Product decisions determine what will be produced Process decisions establish how the product will be produced Process decisions are concerned with the transformation of inputs to outputs The basic factors that affect the selection of a process are:
12/29/12
303s303
Process Strategies
How to produce a product or provide a service that

Meets or exceeds customer requirements Meets cost and managerial goals Efficiency and production flexibility Costs and quality
Has long term effects on

12/29/12
304304
Process Selection Strategies

Four basic strategies Process focus Repetitive focus Product focus Mass customization Within these basic strategies there are many ways they may be implemented 12/29/12 305305
Process Selection
Product design considerations must include the process Intermittent processes:
Processes used to produce a variety of products with different processing requirements in lower volumes. (such as healthcare facility) Processes used to produce one or a few standardized products in high volume. (such as a cafeteria, or car wash)
306306
Repetitive processes:
12/29/12
Product-Process Grid
12/29/12
307307
Process Types
Process types can be:
Project process make a one-at-a-time product exactly to customer specifications Batch process small quantities of product in groups or batches based on customer orders or specifications Line process large quantities of a standard product Continuous process very high volumes of a fully standard product
308308
Process types exist on a continuum

12/29/12
Process Selection
Continuo us
PROCESS
Intermitte nt
Specia l Project One of a kind 12/29/12 Off-the Custo shelf m PRODUCT Commodi ty 309309
Linking Product Design & Process Selection
Impact of Competitive Priorities: Intermittent operations are typically less competitive on cost than repetitive operations.
12/29/12
310310
Linking Product Design & Process Selection: Summary
Organizational Decisions appropriate for different types of operations
12/29/12
311311
Flowchart for Different Product Strategies at Pizzaria
12/29/12
312312
Process Decisions-Vertical Integration & Make or Buy
A firms Make-or-Buy choices should be based on the following considerations:

Strategic impact Available capacity Expertise Quality considerations Speed
Cost (fixed cost + variable cost)make = Cost

(fixed cost + Variable cost)buy
313313
12/29/12
Example 1
Quantity needed Total material Rs.600 Rs.10,000 Rs.9000 cost Total direct 200 1500 2000 labour hours Lowest Rs.0.80 Rs.50.00 Rs.2.00 supplier bid (price per unit) Should you make or buy the following components? The direct labour cost is estimated as Rs.8.00 per hour The fixed overhead rate per direct labour hour is 12/29/12 314314 Rs.6.00 . Item A 4000 Item B 700 Item C 12000
Item A
Total cost to buy = (Rs.0.80 x 4000) =Rs.3200 Total cost to make =Rs.600+ (Rs.8.00)200+(Rs.6.00)200 =Rs.3400 Variable cost to make = Rs.600+(Rs.8.00)200=Rs.2200 If unused capacity is available it is desirable to make the item, 315315 the since 12/29/12
Item B
Total cost to buy = (Rs.50 x 700) =Rs.35,000 Total cost to make =Rs.10,000+ (Rs.8.00)1500+(Rs.6.00)1500 =Rs.31,000 Variable cost to make = Rs.10,000+(Rs.8.00)1500 = Make 22,000 alternative is cheaper
than buying
12/29/12 316316
Item C
Total cost to buy = (Rs.2 x 12000) =Rs.24,000 Total cost to make =Rs.9,000+ (Rs.8.00)2000+(Rs.6.00)2000 =Rs.37,000 Variable cost to make = Rs.9,000+ Buy alternative is cheaper (Rs.8.00)2000=Rs.25,000 than
making
12/29/12 317317
Process Performance Metrics

Process performance metrics defined: Measurement of different process characteristics that tell us how a process is performing
Determining if a process is functioning properly is required Determination requires measuring performance
12/29/12
318318
Process Performance Metrics
12/29/12
319319
Metrics Example: At Zelles Dry Cleaning, it takes an average of 3 hours to dry clean & press a shirt, with value-added time estimated at 110 min. Workers are paid for a 7-hour workday but work 5 hr/day, accounting for breaks and lunch. Zelles completes 25 shirts per day, while the industry standard is 28 for a comparable facility. Process Velocity = (Throughput Time)/(Value-added time) (210 minutes/shirt)/(110 minutes/shirt) = = 1.90 Labor Utilization = (Time in Use)/(Time Available) = (5 hr)/(7 hr) = .786 or 78.6% Efficiency = (Actual Output)/(Standard Output) = (25 shirts/day)/(28 shirts/day) = .89 or 89%
12/29/12 320320
Throughput Time
A basic process performance metric is throughput time. A lower throughput time means that more products can move through the system. One goal of process improvement is to 12/29/12 reduce throughput
321321
Changing Processes
Difficult and expensive May mean starting over Process strategy determines transformation strategy for an extended period Important to get it right
12/29/12
322322
Crossover Charts
Variable costs

Low volume, high variety Process A

Repetitive Process B
ost lc ta cost otal To T
$
Fixed costs
High volume, low variety Process C
400,000 300,000 200,000

Fixed cost Process A Fixed cost Process B
To tal co st
12/29/12
(2,857)
V 1
V 2
(6,666)
Fixed cost Volume Process C
323323

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Warehouses & Distribution Centers

Transportation Costs Manufacturing Costs

Transportation Costs Inventory Costs

The Supply Chain Another View

Warehouses & Distribution Centers

What Is Supply Chain Management (SCM)?

A set of approaches used to efficiently integrate

Suppliers Manufacturers Warehouses Distribution centers

So that the product is produced and distributed

System-wide costs are minimized and

Why Is SCM Difficult?

Uncertainty is inherent to every supply chain

The complexity of the problem to globally optimize a supply chain is significant

Minimize internal costs Minimize uncertainty Deal with remaining uncertainty

The Objective of a Supply Chain

The Objective of a Supply Chain

The Objective of a Supply Chain

Sources of supply chain revenue: the

Decision Phases of a Supply Chain

Supply Chain Strategy or Design

Supply chain design must support strategic objectives

Supply Chain Planning

Supply Chain Planning

Must consider in planning decisions demand uncertainty, exchange rates, 12/29/12

Supply Chain Operation

Process View of a Supply Chain

Cycle View of Supply Chains

Custom er Retail er Distribut or Manufactur er Suppli er

Manufacturing Cycle Procurement Cycle

Cycle View of a Supply Chain

Customer Order Cycle

Push/Pull View of Supply Chains

PUSH PROCESSES Custom er Order Arrives

Push/Pull View of Supply Chain Processes

Push/pull boundary separates push

Push/Pull View of Supply Chain Processes

L.L. Bean (Figure 1.6) Dell (Figure 1.7)

Summary of Learning Objectives

Traditional management Supply chain management

(1)Inventory management approach (2)Total cost approach (3)Time horizon

Independent efforts inventories Minimize firm costs

Joint reduction of channel Channel-wide cost efficiencies

Single contact for the transaction between channel pairs

firms and levels of channel

Transaction-based Not relevant

Ongoing Compatibility at least for key relationships Small to increase

12/29/12 (8)Breadth of supplier base Large to increase competition coordination

Achieving a strategic fit

How strategic fit is achieved

Understanding the customer and supply chain uncertainty

Drivers of Supply Chain

Facilities Inventory Transportation Information Sourcing Pricing

Decision areas of SCM

Location and Costs

Figure 8.1 12/29/12

Critical Success Factors Corporate desires

Figure 8.1 12/29/12

Figure 8.1 12/29/12

Factors That Affect Location Decisions

Connecticut $70 60 units = $1.17 per unit

Juarez $25 20 units = $1.25 per unit

Factors That Affect Location Decisions