Intro to Supply Chains

📚 Intro to Supply Chains Created @September 11, 2023 5:54 PM Class BUSI2301 Type Lecture Chapter 1:. {Introduction to operations management} BUSI2301A What is operations management? Operational management is the management of activities and resources that create goods and provide services. What is so important about OM? There is a large percentage of the company's expenses that occur in the OM area ( improvements = more profits). What companies use OM (Operational management) and why? They use it for efficiency to minimize cost and time along with effectiveness to achieve intended goals: quality and timelines. There are 3 basic functions for OM: intro to supply chains 1 -What is the difference between goods and service industries? Goods and services industries have different operational characteristics that require different management approaches. Some of the key differences are: Tangibility: Goods are tangible products that can be seen, touched, and measured, while services are intangible and cannot be measured in the same way. Production: Goods are produced and stored before they are sold, while services are produced and consumed simultaneously. Quality control: It is easier to ensure consistent quality in goods production, while service quality depends on factors like customer service skills and process consistency. Inventory management: Goods can be inventoried and managed in terms of stock levels and lead times, while services cannot be stored in the same way. Customer involvement: Customers are more involved in the service delivery process than in the goods production process. These operational differences require different strategies and approaches to manage effectively. Give examples of industries that are a blend of both goods and services: Industries with a blend of goods and services include: intro to supply chains 2 Healthcare (providing both physical goods like medical supplies and intangible services like patient care) Hospitality (providing both tangible goods like hotel rooms and intangible services like customer service) Education (providing both physical goods like textbooks and intangible services like instruction). Chapter 2:. {Competitiveness, strategic planning, and productivity} what is competitiveness? This is the ability and performance of an organization in the marketplace compared to other organizations that offer similar goods or services. What are the strategies for a competitive advantage? 👉🏼 👉🏼 Cost leadership - Cheaper Differentiation - Better, or at least different. What are examples of competitive priorities used by companies? Examples of competitive priorities used by companies include cost, quality, speed, flexibility, and delivery. Tradeoffs and complementaries: Operation strategies manage tradeoffs and complementaries between the competitive priorities to achieve organizational strategies. Hierarchical strategic planning: intro to supply chains 3 What is productivity? This is a measure of the effective use of resources, usually expressed as the ratio of output to input Productivity ratios can be computed for: A worker A department A country P roductivity = output/input Chapter 4: {Product and service design} Chapter outline: 👉🏼 intro to supply chains Product and design process in designing services The difference Key issues in product design 4 What is the importance of product design? 1. Value creations: New products and services that help humans with : Problem-solving Enhancing human activities 2. Cost and time reduction 80% of product and service cost is determined in the design stage. what is the product design process? The following are the phases that oviduct design goes through: Now how do you manage idea generation? By using an innovation funnel. *Most innovative ideas do not become new successful products. intro to supply chains 5 How does the stage gate model work? What is the stage gate model: The stage-gate model is a technique used in product development to manage the movement from one phase to the next. Each phase, or "stage", of the project, is separated by a figurative "gate" that prevents you from progressing onto the next milestone without sufficient pause for thought. 1. Here is a typical stage-gate model: intro to supply chains 6 Let's analyze the source of ideas for products: 1. Employees { Role model: Google } Marketing Research and development (R &D) 2. Customers Survey or focus groups (Customer reviews ) 1. Competition {Role model: Samsung} Reverse engineering ( the dismantling and inspecting of a competitor’s product to discover product improvements.) 2. Suppliers Supplier selection. Early suppliers' involvement. close integration with suppliers. How can you search for new product ideas: 1. Listening to the Market Complaints 2. Gaps in the Market 3. Exploring Niche Markets 4. Using New Technology 5. Creating New Market Space Here are some issues when it comes to product design: intro to supply chains 7 Life Cycles Legal and Ethical Issues Standardization Design for Environment Mass Customization Concurrent Engineering Reliability Computer-Aided Design Design for Manufacturing The life cycle of products and services: They need to run multiple products a continuing cycle of innovation but you are still in the growth stage of another product. It would look something like this: intro to supply chains 8 What is standardization? This is the extent to which there is an absence of variety in a product service or process. The following are some examples of advantages and disadvantages Keywords: Mass customization? This is the marketing and manufacturing technique that combines the flexibility and personalization of custom-made products with the low unit costs associated with mass production. Delayed differentiation: Producing but not quite completing a product or service until customer preferences are known. Modular design: A form of standardization, with parts that are subdivided into modules with modules that can be easily replaced or interchanged. Component commonality: intro to supply chains 9 Multiple products or product families that have a high degree of similarity can share components. Some examples are: Shared platforms Engines { Other parts across different car models within the same manufacturer} What are the key differences between goods and services? 1. Services are intangible Ambiance, convenience, image 2. Services created and delivered at the same time Cannot be inventoried or “fixed” beforehand Training, process design, and customer relations important 3. Services are customized and vary in length 4. Services have low barriers to entry and exit 5. Location important to service design Chapter 6: Process design and facility layout. Chapter outline: Introduction and process types Types of layout intro to supply chains 10 Assembly line balance Why should someone study process design and facility layout? 👉🏼 Process design and facility layout both play an important role in organizational behavior. Should you rather make or buy? This all depends on: Cost Available capacity Expertise The nature of demand What are the strategies of production/ inventory? Make-to-stock strategy is defined as predicting and holding items in inventory for fast-delivery customers. Reduces purchase lead times for customers intro to supply chains 11 Standardized products to have high predictable demand Make-to-order strategies are to produce a variety of products depending on the customer's specifications. This involves low-demand customized products with complex but flexible processes resulting in long production lead time. Assemble-to-order strategies mean producing a large variety of products after customer orders are received. Fast delivery as weak as a high variety Final assembly is postponed until an actual order for the final products is received. What are the different process types? In-depth of the types: Job shop: Low volume, high variety, small runs, intermittent processing, high flexibility of equipment, skilled workers, high variable cost per unit, low fixed costs, complex scheduling, high Work-In-Process inventory Batch: Moderate volume, moderate variety, less flexible equipment and less skillful workers than in a job shop intro to supply chains 12 environment. Repetitive: Semi-continuous, slight flexibility of the equipment, the skill of workers is low, routine scheduling, low WIP inventory Continuous: High volume, highly standardized equipment, high fixed costs, low variable costs, low WIP inventory What is facility layout? This is the arrangement of departments, and work. Wanting to have smooth movement through the system. Why is facility layout so important? Efficiency>> Cost, flexibility, timeliness. What are the advantages and disadvantages of product layout The advantages are that it is easy to use: A high degree of labor and equipment utilization = lower cost per unit Minimal work in process inventory Easier training and supervision The disadvantage is that it is inflexible: Higher equipment cost Dull, repetitive jobs: stress, low morale The work stoppage at any point ties up to the whole operation. intro to supply chains 13 What are other layout types? Warehouse layouts Retail layouts Office layouts Restaurant layouts Hospital layouts What is line balancing? Line balancing is a concept commonly used in production and manufacturing to optimize the efficiency and productivity of assembly or production lines. The primary goal of line balancing is to distribute tasks or work elements evenly among the various workstations or operators in a production line to minimize bottlenecks, reduce idle time, and increase overall throughput. The number of workstations needed is determined by: Cycle times The sum of task time The ability to combine tasks into workstations Line balancing formulas: intro to supply chains 14 Example 1: ( Assembly line balancing) 👉🏼 Arrange tasks into three workstations. - - Use a cycle time of 1.0 minute Assign tasks in order of the most number of followers Example 1 solution: intro to supply chains 15 Chapter 5: Strategic planning (Quiz next week) Chapter outline: What is capacity? Evaluating alternatives Measuring capacity What is capacity? This is the upper limit on the load that an operating unit can handle. The basic questions in capacity handling are: What kind of capacity is needed? How much is needed? When is it needed? What is the importance of capacity? The capacity of any system or organization plays a pivotal role in determining its ability to meet future demands effectively. This is primarily due to its far-reaching impacts on various aspects of operations. Firstly, capacity directly influences operating costs; an inadequate capacity might lead to inefficiencies, increased expenses, and hindered productivity. Secondly, it stands as a major determinant of initial costs, affecting the investments required in setting up infrastructures and resources. Moreover, capacity planning involves a long-term commitment, requiring careful strategic planning and resource allocation. Failing to meet future demands due to insufficient capacity can severely affect a company's competitiveness in the market. In essence, understanding the importance of capacity is crucial for businesses to intro to supply chains 16 thrive, ensuring they can adapt and scale according to the dynamic needs of the market, thereby sustaining their growth and competitiveness over time. How can someone measure capacity? There is design capacity, Effective capacity, and Actual output. - Design output is the maximum obtainable output under ideal conditions. - Effective capacity is the maximum capacity given delays, product mix, scheduling difficulties, and other realities. - Actual output is the rate of output actually achieved which cannot exceed effective capacity. Efficiency and utilization: An example using this formula would be: Design capacity: 50 trucks/day Effective capacity: 40 trucks/day Actual output: 36 units/day Answer: intro to supply chains 17 What are the factors that influence capacity?  Facilities Floor space, layout  Products or services Limited menu in a restaurant  Human Training, skills, and experience  Planning and Operational No of shifts per day, inventory, quality control  External Pollution standards, paperwork How can one person develop capacity alternatives? Here are a few issues to consider: 1. Design Flexibility into Systems: Incorporate adaptability and flexibility when designing systems. 2. Differentiate Between New and Mature Products: Recognize the distinction between newly introduced products and those that are already established in the market. 3. Take a “Big Picture” Approach to Capacity Changes: Consider the overall perspective when making capacity-related decisions, encompassing long-term implications and broader organizational needs. 4. Prepare to Deal with Capacity “Chunks”: Be ready to handle capacity changes in sizable portions, addressing significant shifts in demand or production requirements. intro to supply chains 18 5. Attempt to Smooth Out Capacity Requirements: Strive to create a balanced and steady workflow by minimizing fluctuations in capacity needs. 6. Use Capacity Cushion: Maintain a buffer or reserve capacity to accommodate unexpected surges in demand or unforeseen challenges. 7. Identify the Optimal Operating Level: Determine the most efficient and effective level of operation that maximizes productivity while minimizing costs and resource utilization. What is a bottleneck operation? This is an operation in a sequence of operations whose capacity is lower than that of the other operations. If any stage receives a workload that exceeds its processing capacity, there's likely a bottleneck. Optimal operating level: Economies and diseconomies of scale What makes the cost unit increase? Economies of scale: Fixed costs spread out over more units Diseconomies of scale: worker fatigue, equipment breakdown more room for error, difficulties in coordination. Evaluating alternative's Economic considerations: Cost, useful life, compatibility, revenue Non-economic considerations public opinion, reactions from employees, and community pressure. intro to supply chains 19 What is the break-even analysis? The purpose of break-even analysis is to determine the production quantity at which the investment starts to run a profit. What is a break-even analysis? - Break-even analysis tells you how many units of a product must be sold to cover the fixed and variable costs of production. The break-even point is considered a measure of the margin of safety. Break-even analysis is used broadly, from stock and options trading to corporate budgeting for various projects. Assumptions of break-even analysis? One product is involved Everything produced can be sold Revenue per unit is constant with volume - What is an example of a break-even analysis? intro to supply chains 20 (Check slides for practice questions and answers. ) Chapter 5: (Supplement); Decision analysis Chapter outline Intro Decision tables Decision trees What is the process of decision analysis? Decision analysis involves identifying and assessing all aspects of a decision, and taking actions based on the decision that produces the most favorable outcome. In decision analysis, models are used to evaluate the favorability of various outcomes. ( Check slides for example word problems) Chapter 8: Location planning and analysis Learning objectives: intro to supply chains 21 You will be explaining the nature and importance of location decisions and outline the decision process for making these kinds of decisions. Location decisions in the supply chain: Supplier → Middle → Retail Near the source of production input → Close to the supplier or customer → Traffic patterns Why do you think foreign companies should be located in Canada? Shortened delivery time and reduced delivery cost Good telecommunication infrastructure Lower wage and exchange rates How can one evaluate locations? Location break-even analysis Factor rating The center of gravity method Chapter 11: Inventory Management What is inventory: This is a stock of items kept to meet future demand. What is the objective of inventory control? This is to achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds. How can you manage inventory? There are two major questions: How many to order and when to order intro to supply chains 22 Inventory cost: Ordering cost Setup costs Holding costs Shortage costs What are the elements of effective inventory management? A reliable forecast of demand Knowledge of lead times A classification system What are the assumptions of the EOQ model? (This is the ideal quantity of units a company should purchase to meet demand while minimizing inventory costs such as holding costs, shortage costs, and order costs.) Check the slides of chapter 11 to see some practice examples. Chapter 11: Supply chain management Chapter outline: Intro to supply chain management Logistics Purchases Supplier management Why would someone study operations management? This would help companies accomplish their goals (deliver products and services) more effectively (achieving intend goals) and efficiently (minimize cost and time). Buy or make? intro to supply chains 23 Buying goods or services instead of producing or providing then inhouse. The benefits are: Lower cost Gain expertise and knowledge or patent Gain flexibility Increase capacity The risks would be: Reduction in control and expertise What is supply chain management? This refers to the collaboration and coordination of the facilities and activities both within and outside the organization, that make up a value chain starting from raw material and ending up with the customers liking across supplier-customer companies. Supply chain management refers to collaboration and coordination of the facilities and activities both within and outside the organization that make up the valued chain starting from raw material and ending with the consumers linking across supplier-customer companies. What is supply chain management's role? This is concerned with the efficient integration of suppliers, factories, warehouses, and stores so that merchandise is produced and disturbed. The right product In the right quantities To the right locations At the right time intro to supply chains 24 What does a successful supply chain look like? How can someone create an effective supply chain? 1. You would need to first develop strategic objectives and tactics 2. Integrate and coordinate internal activities 3. Coordinate with suppliers and customers 4. Coordinate planning and execution across the supply chain 5. Form strategic partnership Supplement 6: Linear Programming Chapter outline: Intro And Linear Programming Model Graphical solution method You will learn to: Form a linear programming model firm the description of a problem intro to supply chains 25 Solve two variable linear programming problems using the graphic method Do sensitivity analysis on the solution of a linear programming problem What is a learning programming model? This is a mathematical representation of a constrained optimization problem What are some examples of linear programming applications? Optimal mix of products in a factory Optima diet plans Financial plans Shopping plans that will minimize shipping cost (Check slides for examples) What is a graphical solution method? ⬛ This involves drawing the feasible solution and contours of the objective function and finding the optimal solution to two variable problems by observation. Plotting constraints: intro to supply chains 26 1. Replace the inequality sign with (=) { Repeat steps 1-4 for each constraint } 2. Determining where the line intersects each axis 3. Mark axes intersections, connect with a straight line 4. Indicate by shading whether inequality is > or < What is a Slack Resource? This variable typically represents an unused resource A slack variable contributes nothing to the objective function value. What is a surplus variable? This represents an excess above a constraint requirement level. This variable contributes nothing to the calculated value of the objective function What are the linear programming assumptions? Linearity: The impact of decision variables is linear in constraints and objective function. Divisibility: Non-integer values of decision variables are acceptable Certainty: Values of parameters are known and constant Non-negativity: Negative values of decision variables are unacceptable Sensitivity analysis There are 3 types of changes : 1. Objective function coefficient; Range of optimality intro to supply chains 27 2. Right-hand side values of constraints; Shadow price 3. Constraint coefficient; Range of feasibility Chapter 3: Demand forecasting What is forecasting? A demand forecast is an estimate of demand expected over a future time period. What are the features of forecasts? Assumes casual system past → and future what are time series? A time-ordered sequence of observations taken at regular intervals of time. what does it look like? intro to supply chains 28 What is a time series model? naive methods averaging methods trend models A time series model is a set of data points ordered in time, where time is the independent variable. Naive methods next period = last period Moving average this is when u take the average of the last few actual data values updated each period This is easy to calculate and understand what is forecast accuracy? Forecast accuracy is the measure of how accurately a given forecast matches actual sales. intro to supply chains 29 How can one choose a? *when demand is fairly stable use a lower value for a. when demand is increasing or decreasing use a higher value for a. Exponential smoothing alternate formula: forecast= previous forecast plus a percentage of the forecast error. The forecast is a weighted combination of all previous values where more recent observation receives the heaviest weight, and weights decrease exponentially thereafter. Forecast = the previous forecast plus an adjustment for the error made in predicting the previous period’s value. - Actual - Forecast is the error term  a is the % feedback Exponential soothing formula: subjectively choose smoothing constant a. ranges from 0 to 1 intro to supply chains 30 What is the moving average? This is the average of the last few actual data values updated each period What are the approaches to forecasting? There are two general approaches to forecasting, just as there are two ways to tackle all decision modeling. One is a quantitative analysis; the other is a qualitative approach. Judgemental Non-quantitive analysis of subjective inputs Consider soft information such as Human factors experience, gut instinct Mean Absolute Deviation (MAD) Easy to compute Weights errors linearly Mean Squared Error (MSE) Squares error More weight to large errors intro to supply chains 31 Mean Absolute Percent Error (MAPE) Puts errors in perspective above 70% satisfactory Practice questions: Simple exponential smoothing is being used to forecast demand. The previous forecast of 66 turned out to be four units less than the actual demand. The next forecast is 66.6, implying a smoothing constant, alpha, equal to: a.) .01 b.) .10 c.) →.15 d.) .20 e.) .60 2. A smoothing constant of .1 will cause an exponential smoothing forecast to react more quickly to a sudden change than a value of .3 will. True →False 3. Moving average forecasting techniques: a.) immediately reflect changing patterns in the data. b.) lead changes in the data. c.) →smooth variations in the data. d.) all of the choices are true. e.) none of the choices are true. 4. 1. A manager uses the following equation to predict monthly receipts: Yt = 40,000 + 150t. intro to supply chains 32 What is the forecast for July of next year if t = 0 in April of this year? A) 40,450 B) 40,600 C) 42,100 D) 42,250 E) 42,400 Week 12; Chapter 14: Materials requirement planning What is independent and dependent demand? Demand is independent if it is unrelated to demand for any other product or service. Demand is dependent on it is derived from the demand for another product or service. Independent demand needs to be forecast; however, requirements for dependent demand are calculated from the independent items. Once independent demand is known the dependent demand can be determined ( Check slides for examples) intro to supply chains 33