lecture 5 supply chain network analysis and design
DESCRIPTION
Lecture 5 Supply Chain Network Analysis and Design. Introduction As firms continue their searches for new ways to lower costs and improve service to their customers, the issue of where to locate logistics and manufacturing facilities has never been more complex or critical. - PowerPoint PPT PresentationTRANSCRIPT
Introduction
As firms continue their searches for new ways to lower costs and improve service to their customers, the issue of where to locate logistics and manufacturing facilities has never been more complex or critical.
In addition to enhancing the efficiency and effectiveness of a logistics/supply chain operation, the redesign of a firm’s overall network can help to differentiate a firm in the marketplace.
The Need for Long-Range Planning
In the short run, a firm’s logistics/supply chain network and the locations of its key facilities are fixed.
Site availability, leases, contracts, and investments make changing facility locations impractical in the short run.
In the long run, however, the design of the overall network must be thought of as variable.
Strategic Importance of Logistics/Supply Chain Network Design
All businesses operate in a very dynamic environment in which change is the only constant.
It is questionable whether any existing logistics/supply chain network can be truly up to date.
Changing Customer Service Requirements
Logistical requirements of customers are changing in numerous ways.
Some customers have intensified their demands for more efficient and more effective logistics services.
Others are seeking relationships with suppliers who can take logistical capabilities and performance to new, unprecedented levels.
As a result, the need to reevaluate and redesign logistics/supply chain networks is of great contemporary interest.
While customer service requirements may experience change, the types of customers served may also evolve over time.
Shifting Locations of Customer and/or Supply Markets
U.S. population shifts
service and cost requirements of move to JIT-based manufacturing
the European Union
continuing searches for lower-cost manufacturing
growing economic importance of China and the Asia-Pacific
sourcing of raw materials from offshore suppliers
Other factors driving design change
Change in Corporate Ownership
Cost Pressures
Competitive Capabilities
Corporate Organizational Change
Optimization Models
precise mathematical procedures that are guaranteed to find the “best,” or optimum, solution
optimization approaches essentially select an optimal course of action from a number of feasible alternatives
Simulation Models:
Simulation is defined as “the process of designing a model of a real system and conducting experiments with this model for the purpose either of understanding the behavior of the system or of evaluating various strategies within the limits imposed by a criterion or set of criteria for the operation of the system
Heuristic Models
Heuristic models are able to accommodate broad problem definitions, but they do not provide an optimum solution.
The use of a heuristic approach can help to reduce a problem to a manageable size and search automatically through various alternatives in an attempt to find a better solution.
To reduce the number of location alternatives, the decision maker should incorporate into the heuristic program site characteristics considered to be optimal.
Other Transportation Factors:
Commercial Zone is a specific blanket area, the transportation definition of a particular city or town.
Foreign Trade Zone (FTZ) is a geographic area into which importers can enter a product and hold it without paying duties—and only paying duties or customs when is it shipped into U.S. customs territory.
Transit Privilege permits the shipper to stop a shipment in transit and to perform some function that physically changes the product’s characteristic.
Types and Importance of Items and Service Purchased:
Generics are low-risk, low-value items and services that typically do not enter the final product.
Commodities are items or services that are low in risk but high in value. Basic production materials (bolts), basic packaging (exterior box), and transportation services are examples of commodities that enhance the profitability of the company but pose a low risk.
Distinctives are high-risk, low-value items and services such as engineered items, parts that are available from only a limited number of suppliers, or items that have a long lead time.
Criticals are high-risk, high-value items that give the final product a competitive advantage in the marketplace
Strategic Sourcing MethodologyFive core principles are recognized as key drivers to achieve the
desired levels of value: Assess the total Develop individual sourcing strategies Evaluate internal requirements Focus on supplier economics Drive continuous improvement
Seven key steps are included in the overall strategic sourcing methodology:
Step 1: Project Planning and Kickoff, which suggests that a formal start to the strategic sourcing process is warranted.
Step 2: Profile Spend, to develop an accurate understanding of requirements.
Identify or reevaluate needs Define and evaluate user requirements Decide whether to make or buy
Seven key steps are included in the overall strategic sourcing methodology Step 3: Assess Supply Market
very critical step in the strategic sourcing process all potential sources of supply are identified
a thorough assessment of a supply market identify all possible suppliers prescreen all possible sources
Step 4: Develop Sourcing Strategy develop a sourcing strategy
establish whether a supplier has the capabilities RFP provides specific information as to what the buying
company
Seven key steps are included in the overall strategic sourcing methodology Step 5: Execute Sourcing Strategy
begins with an evaluation of the suppliers that remain following the RFI and RFP processes and culminates in the award of a contract.
Step 6: Transition and Integrate Important elements of this step are the finalization of the
contractual agreement, planning the transition process, and receipt or delivery of the product or service.
Step 7: Measure and Improve Performance very important, involves making a post purchase
performance evaluation.
Managing Sourcing and Procurement Processes
Determine the type of purchase
Determine the necessary levels of investment
Perform the procurement process
Evaluate the effectiveness of the strategic sourcing process Were the user’s needs satisfied? Was the investment necessary?
Supplier/Vendor Evaluation and Relationships
supplier/vendor relationships are a vital part of successful procurement strategies
partnership/alliance concept
competitive advantage of the company
Certifications and Registrations
TQM a strategy in which entire organization focused on an examination of
process variability and continuous improvement
Six Sigma is similar to TQM its approach involves training experts
ISO 9000 making sure that companies have standard processes in place that
they follow
e-Sourcing and e-Procurement
the use of electronic capabilities to conduct activities and processes relating to procurement and sourcing
Advantages
Disadvantages
e-Commerce Models Sell-side system:
Online businesses selling to individual companies or consumers
Electronic marketplace: Represents a seller-operated service that consists of a number of
electronic catalogs from vendors within a market Buy-side system
This buyer-controlled e-procurement or e-commerce service
Online trading community: maintained by a third-party technology vendor where multiple
buyers and multiple sellers in a given market can conduct business
Production Tradeoffs
Processes that can produce a range of products are said to have economies of scope.
Low-volume production runs of a wide variety of products are required to meet changing customer demand.
Tradeoffs between production processes for goods and the costs involved in manufacturing them must also be understood.
Production and supply chain costs vary for make-to-stock, assemble-to-order, and build-to-order products.
Production Challenges
Intensified competition, more demanding customers, and relentless pressure for efficiency as well as adaptability
Competitive pressures for many established manufacturers and service providers
Customers’ demand for choice and rapidly changing tastes
Production Strategies Machine flexibility
general purpose machines and equipment staffed by cross-trained workers provide the ability to produce different types of products
Routing flexibility provides managers with a choice between machines for a part’s
next operation Offshoring
activity be relocated to a contract manufacturer in another country Adaptive manufacturing
provides companies with the ability to replace planning and replanning with execution based on real-time demand
Production Planning Three planning timeframes:
Long-range plans covering a year or more, focus on major decisions regarding
capacity and aggregate production plans Medium-range plans
span 6 to 18 months and involve tactical decisions regarding employment levels and similar issues
Short-range plans ranging from a few days to a few weeks
Production Process Layout facility layout
involves the arrangement of machines, storage areas, and other resources within the four walls of a manufacturing or an assembly facility.
successful layout is one that does the following: Reduces bottlenecks in moving people or materials Minimizes materials-handling costs Reduces hazards to personnel Utilizes labor efficiently Increases morale and ease of supervision Utilizes available space effectively and efficiently Provides flexibility Facilitates coordination and face-to-face communication
Production Process Layouts Project layout
fixed location layout where the product remains in place for the duration of production
Workcenter process-focused layout that groups together similar equipment or
functions Manufacturing cell
process-focused layout that dedicates production areas to a narrow range of products that are similar in processing requirements
Assembly line product-focused layout in which machines and workers are
arranged according to the progressive sequence of operations Continuous process facilities
similar to assembly lines, with product flowing through a predetermined sequence of stops.
Packaging
design issues can affect labor and facility efficiency
can provide another level of product differentiation
design impacts ability to use space and equipment
ease of handling during materials handling and transportation
protecting the goods in the package
Production Metrics
use of measurements and key performance indicators (KPIs)
Using KPIs that are too narrow
Encouraging wrong outcomes
Focusing on issues that are not key priorities
should be properly aligned with corporate objectives
Production Metrics Total cost
all money spent on manufacturing must be summarized and the
total compared to the previous period
Total Cycle Time total cycle time is a measure of manufacturing performance that is
calculated by studying major purchased components and determining the total days on hand of each one
Delivery performance is the percentage of customer orders shipped when the customer
requested them to be shipped
Production Metrics
Quality This may vary by company but it must focus on quality from the
perspective of the customer. Safety
The standard metrics of accident/incident frequency, severity, and cost are important to monitor, with continuous improvement (i.e., reduction) as the goal.