Define: Supply Chain Management (CH11)
Management of activities that obtain materials and services, transform them into intermediate goods (input goods of production) and final products, and deliver them through a distribution system.
What does SCM determine? (8)
1. Transportation vendos
2. credit and cash transfers
3. suppliers
4. distributors
5. account payable and recieved
6. warehousing and inventory
7. order fullfillment
8. sharing customer, forcasting, and production information
What is the objective of SCM?
to build a chain of suppliers that focuses on maximizing to the ultimate customer.
To reduce risk in this increasingly global environment suggests that management must be able to mitigate and react to disruptions in:
1. Processes (raw material and component availability)
2. Controls (management metrics and reliable communication)
3. Environment (customs duties, tariffs, security screening, etc)
Define: Vertical integration
Developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.
~Backward suggests a firm purchases its suppliers
~Forward integration suggests that a manufacture of components makes the finished product.
VI can offer a strategic opportunity: cost reduction, quality adherence, timely delivery, inventory reduction, and scheduling.
Inventory Management objective?
to strike a balance between inventory investment and customer service.
~Can never achieve a low-cost strategy without good inventory management
To separate various parts of the production process. (ex. firm's supply fluctiate, extra inv may be necessary to seperate the production process from supplirs)
2. To decouple(seperate) the firm from fluctiations in demand and provide a stock of goods that will provide a selection for customers. (Such inventories are typical in retail establishments)
3. To take advantage of quantity discounts because purchases in larger quantities may reduce the cost of goods or their delivery.
4. TO hedge against inflation and upward price change.
Products or components that are no longer raw materials but have yet to become finished products
Define: Raw material inventory
Materials that are usually purchased but have yet to enter the manufacturing process.
the cost to keep or carry inventory in stock
Te cost of the ordering process
The cost to prepare a machine or process for production
The time required to prepair a machine or process for production
Economic order quantity (EOQ)
An inventory-control technique that minimizes the total of ordering andholding costs.
Assumptions:
1. Demand is known
2. Lead time (time between placement and receipt of the order) is known constant
3. REceipt of inventory is complete on time.
4. Quantity discount not possible
5. The only variable cost are the cost of setting up or placing an order (setup or ordering cost) and the cost of holding or storing inventory over time (holding
or carrying cost_.
6. Stockouts (shortages) can be completely avoided if orders are placed at the right time.
Variables:
Q, Q*, D, S, H =?
Q=Number of units per order
Q*= EOQ, optimum number of units per order
D= Annual demand in units for the inventory item
S= Setup or ordering cost for each order
H= Holding or carrying cost per unit per year
(Number of orders placed per year) x (Setup or order cost per order)
= (D/S)(S)
(Average inventory level) x (holding cost per unit per year)
=(Q/2)(H)
3. Optimum order quantity is found when:
annual setup (order) cost = holding cost
(D/S)(S)=(Q/2)(H)
Expected number of orders (or N)=
Expected time between orders (or T)=
T= Number of working days per year/N
Total annual cost (or TC)=
Setup (order) cost + Holding cost
TC=(D/S)(S)+ (Q/2)(H)
Min of TC= (D/S)(S)+ (Q/2)(H) +PD
Giving satisfactory answers even with substantial variation in the parameters
In purchasing systems, the time between placing an order and receiving it; in production systems, the wait, movie, queue, setup, and run times for each component procedure.
The inventory level(point) at which action is taken to replenish the stocked item.
ROP= (demand per day) x (Lead time for new order in days)
= d x L
d= D/number of working days in a year
An approach to determine the quantity and timing of production for the intermediate future (usually 3-18 months). Aggregate plan means cobining appropriate resources into general, or overall terms.
Objective of aggregate planning
is to meet forecasted demand while minimizing cost over the planned period.
the process of breaking an aggregate plan into greater detail
Master Production Schedule
A timetable that specifies what is to be made and when.
When generating an aggregate plan, the operations manager must answer several questions, they are?:
1. Should inventories be used to avsorb changes in demand during the planned period?
2. Should changes be accomodated by varying the size of the workforce?
3. Should part-timers be used, or should overtime and idle time absorb fluctuations?
4. Should subcontractors be used on fluctuating orders so a stable workforce can be maintained?
5. Should prices or other factors be changed to influence demand?
Aggregate planning: Demand Options?
1. Influencing demand
2. Back ordering during high-demand periods
3. Counter seasonal product and service calling