Chapter 11:

• Supply Chain Management: definition

○ The strategic coordination of the supply chain for the purpose of integrating
supply and demand management.
• Bullwhip effect
○ The small changes in customer demand ripple through to create larger and
larger changes as orders move upward through the supply chain. (SEE BOOK
FOR MORE!)
• Phenomenon (BOOK?)
• Causes
○ Demand signaling
 While forecasting demand based upon direct order, a surge of demand
will be interpreted as a signal of high future demand.
• No visibility of end demand
• Multiple forecasting methods
• Long Lead time
○ Order batching
 Company batches or accumulates demands before issuing an order
• Correlated ordering
• Full truckload (FTL) economics
• High order cost
○ Fluctuating prices
 Attractive price offer, such as discounts, coupons and rebates, will result
in “forward buy” arrangement. Customers by in bigger quantities and
stock up for future. Buying pattern does not reflect consumption pattern.
• Price fluctuations
○ Supply shortages (rationing game)
 Manufactureer rations is product to customers in case of shortage.
Incentive to exaggerate their real needs.
• Proportional rationing scheme
• Ignorance of supply conditions
• Unrestricted orders and free return policy
• Remedies
○ Demand signaling
○ Information sharing; point of sale data (POS); Electronict
data interchange (EDI); Computer assisted ordering
(CAO)
○ Single control of replenishment; Vender managed
inventory
○ Improve operations efficiency to reduce lead time
○ Order Batching
 Regularly delivery appointments
 Discount for truckload assortment; 3rd party logistics
 EDI; CAO
○ Fluctuating prices
 Reduce both frequency and level of wholesale price discounting;
everyday low price (EDLP); special purchase contract
○ Supply shortages
 Allocate based on past sales
  Share slaes, capacity, and inventory data
 Restrict buyers flexibility; more stringent cancellation policies; capacity
reservation
• Outsourcing
○ Based on core competencies – what a company does best
 Reduced material or labor costs, insufficient capacity, lacking experience,
high demand variability, etc
• Vertical integration
○ A measure of how much of the supply chain is controlled by the manufacturer
 Backward intergration
• Acquiring control of key suppliers
 Forward intergration
• Acquiring control of distribution channels
• SCM elements(BOOK)
• Purchasing
○ Obtaining the materials, parts, and supplies and services neeed to produce a
product or provide a service
 Centralized purchasing
• Purchasing is handled by one special department
• Possibly quantity discounts
• Better service due to specialization
 Decentralized purchasing
• Individual departments or separate locations handle their own
purchasing requirements.
• Quicker response
• Save transportation costs
• Supplier management
○ Choosing suppliers
 Evaluating sources of supplye
 Factors in choosing a supplier
• Price: quality and quality assurance; flexibility; location;
reputation and financial stability; lead times and on time deliver;
etx
 Vendor analysis
• Evaluating the sources of supply in terms of price, quality,
reputation, service, etc
 Supplier audits
• Keep current on supplier’s production capabilities, quality, and
delivery performance
 Supplier certification
• Verify whether supplier meets requirements
• Standard industry certs; ISO 9000
• Logistics
○ The movement of materials and information within a facility as well as incoming
and outgoing shipments of goods and materials in a supply chain
○ Issues
 Movement with facitilty
 Incoming and outgoing shipments
 RFID—Radio frequency identification technology
• Used to track goods
  Third party logistics
• Outsourcing of the logistics management
 Reverse logistics
• The backward flow of goods returned to the supply chain from
their final destination
• SCM benefits
○ Lower inventories
○ Higher productivity
○ Greater agility
○ Shorter lead times
○ Higher profits
○ Greater customer loyalty
○ Integrates separate organizations into a cohesive operating system
• SCM challenges
○ Barriers to integration of organizations
○ Getting top management on board
○ Reluctance of small businesses
○ Variablity and uncertainty
○ Long lead times
○ Dealing with trade offs
Chapter 12:
• Inventory
○ A stock or store of goods, can be raw materials, WIPS, finished goods, or
replacement parts
• Purposes
○ To meet antcipiate demand
○ Smooth production requirements
○ Protect against stock outs
○ Decouple operations
 Inventory buffers
○ Take advantage of order cycles, quantity discounts
○ Hedge against price increases
○ Permit operations
• Objectives of inventory management
○ To achieve satisfactory levels of customer service while keeping inventory costs
reasonable
 Customer satisfaction
 Inventory turnover
 Days of inventory on hand
 etc
• Periodic System
○ Physically count items at periodic intervals
 Pros
• Economies in processing and shipping
 Cons
• Lack of control between reviews
• Possible shortages
• Perpetual review systems
 ○ Continuously keep track of arrivals and removals of items
 Pros
• Control over inventory
 Cons
• Cost of record keeping
 Universal product code and RFID
• Inventory costs
○ Ordering or setup cost
 Paperwork, transportation, receiving costs, etc
 Setting up machines
○ Carrying or holding costs
 Cost of capital
 Cost of storage
 Cost of obsolences, deterioration, and loss
○ Shortages or stockout cost
 Cost of lost business, goodwill lost, etc
• A-B-C approach
○ Based on Pareto concepts—80/20 rule
○ Classify items according to some measure of importance, and allocate control
efforts accordingly
 Classify inventory items as A, B, or C
• A small number of major items / major dollars
• B next class of items / fewer dollars
• C large number of minor items / small dollars
• Dependent vs. independent demand inventory
○ Independent demand
 Demand is set by market conditions
 Demand is independent of operations
 As materials are used, it is replenished based on forecast in order to satisfy
future customer demand
○ Dependent demand
 Dependent on demand for another item
 Demand comes in clumps
 The amount of material ordered is based on requirements of higher level or
end items
• Managing independent inventory
○ Figure out the right amount and frequency to order (or produce) in order to balance
the cost vs. customer service impacts
• Basic EOQ model
○ The fixed order size that minimizes total annual inventory cost
• Assumptions
○ Only one product is involved
○ Annual demand requirements are known
○ Demand is even throughout the year
○ Lead time is constant
○ Each order is received in a single delivery
○ There are no quantity discounts
○ Unit annual carrying cost is constant, so total carrying costs depends linearly on
the average level of inventory
 ○ Ordering cost per order is fixed
• Inventory cycles
• Average on-hand inventory
• Reorder point
• Order frequency & lot size
• Ordering cost & carrying cost
• Economic order quantity
Chapter 15:
• Lean operations system
○ A highly coordinated system that uses minimal resources and produces high quality
goods or services
○ Minimal inventory, waste, space and transaction
• JIT goals
○ Ultimate Goal
 A balanced system. One that achieves a smooth, rapid flow of materials
and or work through the system
○ Supporting goals
 Eliminate disruptions
 Make system flexible
 Eliminate waste
• Building blocks of JIT
○ Product design
○ Process design
○ Personnel/organizational elements
○ Manufacturing planning and control
• Product design
○ Standard parts
○ Modular design
○ Highly capable production systems with built in quality
 A comprehensive approach to quality
○ Concurrent engineering
 Reduce disruptions
• Process design
○ Small lot sizes
 Reduced inventory; less space for inventory; less rework; increase
visiability of probles; increase production flexibility; increased ease of
balancing operations
○ Setup time reduction
 Workers do their own setups
 Multipurpose equipment and group technology
○ Manufacturing cells
 Are based on families of parts with similar processing requirements
 Combine flexibility with efficiency
 Reduce changeover times
○ Quality improvement
 Quality defects can disrupt work flow
• Autonomation
○ Automatic detection of defects during production
○ Production flexibility
  Reduce bottlenecks to increase production flexibility
 Reduce downtime by reducing changeover time
 Use preventive maintaince to reduce breakdown
 Cross train workers to help clear bottlenecks
 Use many small units of capacity
 Use off line buffer
 Reserve capacity for important customers
○ A balanced system
 Distributing the workload evenly among workstations helps achieve a
rapid flow work through the system
○ Fail safe methods
 Building safeguards into a process to reduce or eliminate the potential
for errors during a process.
• Personnel/organizational elements
○ Workers as assets
○ Cross trained workers
○ Continuous improvement
○ Cost accounting
○ Leadership/project management
• Manufacturing planning and control
○ Level loading
 Achieve stable, level daily mix schedules
○ Pull sytems
 A workstation pulls output from the preceding station as needed
 Work moves on in response to demand from the next stage in the process
○ Visual systems
 Signals showing that the previous process should start production
 Authority to pull, or produce, comes from a downstream process
○ Limited WIP
 Lower carrying costs
 Increased flexibility
 Aid scheduling
 Saves cost of rework and scrap
○ Close vendor relationships
 Certify vendors with high quality
 Small lots: vendors become part of the JIT system
○ Reduced transaction processing
 Reduce any transaction processing that does not add value
○ Preventitive maintainance and housekeeping
 Equipment breakdowns are extrememly disruptive due to little WIP
inventory
 Maintaining equipment in good condition and replacing parts that have a
tendency to fail before they actually fail
• JIT system benefits
○ Reduced inventory levels
○ Reduced space requirements
○ High quality
○ Reduced scrap and rework
○ Flexibility
 ○ Reduced lead times
○ Increased productivity
○ Increased equipment utilization
○ Pressure for good vendor relationships
• Conversion to a JIT system: Considerations and obstacles
○ Considerations
 Get top management commitment
 Decided which parts need most effort
 Obtain support of workers
 Start by tring to reduce set up times
 Gradually convert operations, begning at the end of the process and
work backwards
 Convert suppliers to JIT
 Prepare for obstacles to conversion
○ Obstacles
 Management may not be totally committed
 Workers/management may not be cooperative
 Difficult to change organizational culture
 Suppliers may resist
•
Chapter 16:
Scheduling: Content
Scheduling needs in high- and intermediate-volume systems
Scheduling needs in job shops
Loading
Gantt chart
Hungarian method
Sequencing
Priority rules for dispatching jobs
Sequencing jobs in two work centers: Johnson’s rule
Scheduling service systems
3

ISDS3510 Exam 3 Formula Sheet

S
Q
TC = Q H + D
2
H
Q 2DS
0=

Average flow time =

number of jobs
total flow time
Average number of jobs in the system =
makespan
total flow time
Average tardiness =
number of jobs
total tardy days
Hungarian Method:
1. Row reduction and column reduction
2. Draw the minimum number of vertical and horizontal lines necessary to cover all
the zeros in the table. If the number of lines equals either the number of rows or
the number of columns, proceed to step 4. Otherwise proceed to step 3.
3. Subtract the smallest number not covered by a line from all uncovered numbers.
Add the same number to any number at the intersection of two lines. Return to
step 2.
4. Optimal assignments are at zero locations in the table. Begin with rows or
columns with only one zero. Select one, draw lines through the row and column
involved, and continue to the next assignment.