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Table of Contents

Supply chain management process map ........................................................................................................................2 Warehouses:...............................................................................................................................................................3 Inventory: ..................................................................................................................................................................3 Lingo:Inventory, Production and Supply Chain management .......................................................................................6

Supply chain management process map Document: 1. Data flow diagram ( however, here the data is the materials, how it is transformed) 2. Decision matrix at each point 3. Cost at each point 4. Trade off decisions

Questions: 1. What is the ratio between each 2.

Suppliers

Manufacturers

Warehouses/ Distribution Centers

Customers

Warehouses
Three main approaches to using warehouses: 1. 1.Stock keeping unit (SKU) a. All of a given product is stored together ( all of a given product??) b. Efficient and easy way to store product Job lot storage a. All the different products related to a particular job/customer are stored together b. Efficient picking/packing c. Requires more storage Cross Docking a. Sounds like a transit station i. Inbound trucks from suppliers ii. Outbound trucks to customers b. Increase efficiencies

2.

3.

Inventory
Definition: Includes everything from raw materials -> work in process -> finished goods Trade off between responsiveness( servicelevel) and efficiency(occupancy). 1. Cycle inventory a. Amount of inventory needed to satisfy demand for product in the period between purchases of the product i. Large lots gain economies of scale ii. Carrying costs come from cost to store, handle and insure the inventory iii. Tradeoff between 1. Reduced cost of ordering/ better prices offered 2. Increased cost of cycle inventory Safety Inventory a. Held as buffer against uncertainty i. Trade-off between 1. Weigh the holding cost 2. Cost of losing sales Seasonal Inventory a. Inventory built up in anticipation of predictable increases in demand that occur at certain times of the years i. Example: build up demand during low seasons for high seasons, if had fixed production rate 1. Trade off a. Cost of carrying seasonal inventory b. Cost of having more flexible production capabilities

2.

3.

Location ( Important, basic steps)


1. Tradeoffs a. Centralize activities i. Fewer locations to gain economies of scale and efficiency b. Decentralize activities i. Close to customers and suppliers in order for operations to be more responsive Considerations a. Relate to given location i. Cost of facilities

2.

b. c. d.

ii. Cost of labor iii. Skills available in the workforce iv. Infrastructure conditions v. Taxes and tariffs vi. Proximity to suppliers and customers Tend to be very strategic decisions i. Commit large amounts of money to long-term plans Strong impacts on the cost and performance characteristics of supply chain Reflects basic strategy for building and delivering its products to market

Transportation
Six basic modes of transport: 1. Ship a. Very cost efficient b. Slowest mode of transport c. Limited to locations near navigable waterways 2. Rail a. Very cost efficient b. Slow c. Limited to locations 3. Pipelines a. Efficient b. Limited to commodities that can be transported via pipelines 4. Trucks a. Quick b. Flexible c. Cost also flunctuate due to fuel cost and conditions of roads 5. Airplanes a. Fast b. Responsive c. Expensive 6. Electronic Transport Route is the path that products move. Networks are a collection of the paths The higher tha value of the product, the more its transport network should focus on responsiveness The lower value of the product, the more its network should emphasize efficiency

Information
1. 2. Coordinating daily activities Forecasting and planning a. Tactical i. Setting of monthly and quarterly production schedules and timetables b. Strategic i. Build new facilities ii. Enter a new market/ exisiting market

Structure of supply chain 1. Vertical integration a. Own most of the supply chain i. Gain maximum efficiency through economies of scale 2. Now virtual integration

a. 1. 2. 3.

Specialization

Aligning supply chain with business strategy


Understand the markets that your company serves Define the strengths or core competencies of your company Develop the supply chain capabilities to support the roles your company has choses

Lingo:Inventory, Production and Supply Chain management One carriers inventory for: Demand issues a) Protect against uncertainty in demand, Supply issues a) Avoid high overhead costs associated with ordering or producing small quantities frequently ( economy of scales) b) Supply does not occur when demand occurs a. Seasonal products (agricultural products) b. Anti freeze??? c) Safety stock, protect against uncertainty in supply d) Unavoidable pipleline inventories resulting from long transportation times e) Speculative reasons because of an expected price rise

Oner Period News Vendor Problem Rationale behind story: Newspaper vendor needs to figure out how many newspaper to stock up on in the face of uncertain demand. Problem: a) High seasonal product e.g ski parkas b) Needs to make estimate for the upcoming season a. Given mean and standard deviation of the demand c) Short length of the season d) Decision variable how much to produce Data: a) Cost: c = purchase cost/unit b) Revenue: revenue per unit sold c) Holding cost/unit purchased but not sold. It may be negative if leftover have a positive salvage value a. Holding cost could represent opportunitiy cost of holding b. Could also represent if the good depreciates over time, if perishable as well d) Explicit penalty per unit of unsatisfied demand, beyond the lost revenue