Chapter 1: Intro to Supply Chain ManagementOperations Management – The planning, scheduling, and control of the activities that transform inputs into finished goods and services. Supply Chain Management – The active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. Supply Chain – A network of manufacturers and service providers that work together to create products or services needed by end users. These manufacturers are linked together through physical flows, information flows, and monetary flows. Upstream – Activities or firms positioned earlier in the supply chain.Downstream – Activities or firms positioned later in the supply chain.First-tier supplier – A supplier that provides products or services directly to a firm.Second-tier supplier – A supplier that provides products or services to a firm’s first-tier supplier.Supply Chain Operations Reference (SCOR) Model - Planning activities, which seek to balance demand requirements against resources and communicate these plans to the various participants

Sourcing activities, which include identifying, developing, and contracting with suppliers and scheduling the delivery of incoming goods and services.“Make,” or production, activities, which cover the actual production of a good or service.Delivery activities, which include everything from entering customer orders and determining delivery dates to storing and moving goods to their final destination.Return activities, which include the activities necessary to return and process defective or excess products or materials.

Electronic commerce - The use of computer and telecommunications technologies to conduct business via electronic transfer of data and documents. Increasing competition and globalization - Customer demands are changing and new competitors are entering the markets. Relationship management - Organizations must manage the relationships with their upstream suppliers as well aMajor Operations and Supply Chain Activities: Process selection, Forecasting, Capacity planning, Inventory management, Planning and control, Purchasing, Logistics

Chapter 2: Operations and Supply Chain StrategiesStructural element - Includes tangible resources such as buildings, equipment, and computer systems.Infrastructural element - Includes the policies, people, decision rules, and organizational structure choices made by a firm.Strategy - A mechanism by which a business’s coordinates its decisions regarding structural and infrastructural elements.

Mission Statement - A statement that explains why an organization exists. It describes what is important to the organization, called its core values, and identifies the organization’s domain.

Business Strategy - The strategy that identifies a firm’s targeted customers and sets time frames and performance objectives for the business.Core Competency - An organizational strength or ability, developed over a long period, that customers find valuable and competitors find difficult or even impossible to copy.Functional Strategy - A strategy that translates a business strategy into specific actions for functional areas such as marketing, human resources, and finance.

Operations and supply chain strategy - A functional strategy that indicates how structural and infrastructural elements with the operations and

supply chain areas will be acquired and developed to support the overall business strategy. Help management choose the right mix of structural and infrastructural elements based on a clear understanding of the performance dimensions valued by customers and the trade-offs involved. Ensure that the firm’s structural and infrastructural choices are strategically aligned with the firm’s business strategy.Support the development of core competencies in the firm’s operations and supply chains.

Structural Decision Categories Capacity-Amount, Type, Timing of capacity changes. Facilities- Services/Manufacturing, Warehouses, Distribution hubs.Size, location, degree of specialization. Technology - Services/Manufacturing processes, Material handling equipment, Transportation equipment, Information systems

Customer Value - Value Index - A measure that uses the performance and importance scores for various dimensions of performance for an item or a service to calculate a score that indicates the overall value of an item or a service to a customer.

Four Performance Dimensions – Quality, Time, Flexibility, Cost

Quality - Performance Quality – Addresses the basic operating characteristics of a product or service. Conformance Quality – Addresses whether a product was made or a service performed to specifications. Reliability Quality – Addresses whether a product will work for a long time without failing or requiring maintenance.

Time - Delivery Speed - How quickly the operations or supply chain function can fulfill a need once it has been identified. Delivery Reliability – The ability to deliver products or services when promised.

n

n

inPIV

1

Where:

V = Value index for product or service

Flexibility - Mix Flexibility – The ability to produce a wide range of products or services. Changeover Flexibility – The ability to produce a new product with minimal delay. Volume Flexibility – The ability to produce whatever volume the customer needs.

Cost - Labor costs, Material costs, Engineering costs, Quality-related costs

Order Winners -A performance dimension that differentiates a company’s products and services from its competitors.Order Qualifiers- A performance dimension on which customers expect a minimum level of performance.

Chapter 3: Process Choice and Layout Decisions in Manufacturing and ServicesQuestions to ask when selecting a manufacturing process: What are the physical requirements of the company’s product? How similar to one another are the products the company makes? What are the company’s production volumes? Where in the value chain does customization take place (if at all)?

Product-based layout- A type of layout where resources are arranged sequentially, according to the steps required to make a product. Functional layout- A type of layout where resources are physically grouped by function.

Production Line – A type of manufacturing process used to produce a narrow range of standard items with identical or highly similar designs. Follows a product-based layout. Steps are usually linked by some system that moves the items from one step to the next. Suitable for high-volume production of product(s) characterized by similar design attributes. Need high volumes to justify the required investment in specialized equipment and labor. Are inflexible with regard to items that do not fit the design characteristics of the production line.

Continuous Flow Processes - A type of manufacturing process that produces highly standardized products using a tightly linked, paced sequence of steps. Closely resembles the production line process Form of product usually cannot be broken into discrete units. Examples include yarns and fabric, food products, and chemical products such as oil and gas

Job Shops – A type of manufacturing process used to make a wide variety of highly customized products in quantities as small as one. Characterized by general-purpose equipment and broadly skilled workers. Main emphasis is meeting a customer’s unique requirements. Product design is not standardized. Typically follow a functional layout. Examples include custom furniture, specialized machine tools used by manufacturers, and restoration and refurbishing work.

Batch Manufacturing – A type of manufacturing process where items are moved through the different manufacturing steps in groups or batches. Fits between job shops and lines in terms of production volumes and flexibility and strikes a balance between the flexibility of a job shop and the efficiency of a line. Are the most common type of manufacturing process. The sequence of steps is not as tightly linked as a production line. Flexible Manufacturing Systems – Highly automated batch processes that can reduce the cost of making groups of similar products.

Fixed-Position Layout – A type of manufacturing process in which the position of the product is fixed. Materials, equipment, and workers are transported to and from the product. Used in industries where the products are very bulky, massive, or heavy and movement is problematic. Examples include shipbuilding, construction projects, and traditional home building.

Hybrid Manufacturing Process – A term referring to a manufacturing process that seeks to combine the characteristics, and hence advantages, of more than one of the classic processes. Machining centers, Group technology, Flexible manufacturing systems

Four Levels of Customization- Make-to-stock (MTS) – Products that require no customization. Assemble-to-order (ATO) – Products that are customized only at the very end of the manufacturing process. Make-to-order (MTO) – Products that use standard components but the final configuration of those components is customer specific. Engineer-to-order (ETO) – Products are designed and produced from the start to meet unusual customer needs or requirements.

Law of Variability - The greater the random variability either demanded of the process or inherent in the process itself or in the items processed, the less productive the process is.

When customization occurs early in the supply chain: Flexibility in response to unique customer needs will be greater. Lead times to the customer will tend to be longer. Products will tend to be more costly.

When customization occurs late in the supply chain: Flexibility in response to unique customer needs will be limited. Lead times to the customer will tend to be shorter. Products will tend to be less costly.

Three dimensions on which services can differ: the nature of the service package.The degree of customization. The level of customer contact

Where:

V = Value index for product or service

Service Package – A package that includes all the value-added physical and intangible activities that a service organization provides to the customer.

Service Customization - Ranges from highly customized to standardized. As the degree of customization decreases, the service package becomes more standardized. As the degree of customization increases, the service package becomes less predictable and more variable.

Customer Contact – The degree of customer contact determines the relative importance of front room and back room operations in a service process. Front Room – The physical or virtual point where the customer interfaces directly with the service organization. Examples: Sales floor in a retail store, Help desk for a software provider, Web page for a company. Back Room – The part of a service operation that is completed without direct customer contact. Examples: Package sorting at FedEx or UPS, Testing medical samples

Service Blueprinting - A specialized form of business process mapping that lays out the service process from the viewpoint of the customer and parses out the organization’s service actions based on: The extent to which an action involves direct interaction with the customer. Whether an action takes place as a direct response to a customer’s needs.

Service Positioning- Service operations compete and position themselves in the marketplace based on the three dimensions: Nature of the Service Package.Degree of Customization.. Degree of Customer Contact

Fixed position layout – Productive resources have to be moved to where the product is being made or the service is being provided.Product-based layout – Arranges resources sequentially, according to the steps required to make a product or provide a service.Functional layout – Physically groups resources by function.Cellular layout – Production resources are dedicated to a subset of products with similar requirements known as a product family.Line balancing – A technique used in developing product-based layouts that works by assigning tasks to a series of linked workstations in a manner that minimizes the number of workstations and minimizes the total amount of idle time at all stations for a given output level.Takt Time = Available production time/ Required output rateThe six basic steps of line balancing: Identify all the process steps required, their times, immediate predecessors and the total time for all tasks. Draw a precedence diagram. Determine takt time for the line. compute the theoretical minimum number of workstations needed . Use a decision rule to assign tasks to workstations. Evaluate the performance of the proposed line by calculating some basic performance measures. Assigning Department Locations in Functional Layouts - Arrange the different functional areas or departments in such a way that departments that should be close to one another are, while departments that don’t need to be or shouldn’t be near one another aren’t. Minimize the total distance traveled

Chapter 4: Business ProcessesProcess – A set of logically related tasks or activities performed to achieve a defined business outcome.

Primary process – A process that addresses the main value-added activities of an organization.Support process – A process that performs necessary, albeit not value-added activitiesDevelopment process – A process that seeks to improve the performance of primary and support processes.

Mapping – The process of developing graphic representations of the organizational relationships and/or activities that make up a business process.Purposes of Mapping: It creates a common understanding of the content of the process: its activities, its results, and who performs the various steps. It defines the boundaries of the process. It provides a baseline against which to measure the impact of improvement effortsProcess Map – A detailed map that identifies the specific activities that make up the informational, physical, and/or monetary flow of a process.Process Mapping Rules: Identify the entity that will serve as the focal point. Identify clear boundaries and starting and ending points. Keep it simpleSwim lane process map - A process map that graphically arranges the process steps so that the user can see who is responsible for each step.Measures of Process Performance: Quality- Performance quality, Conformance quality, Reliability, Cost- Labor, Material, Quality-related costs, Time - Delivery speed, Delivery reliability, Flexibility- Mix flexibility, Changeover flexibility, Volume flexibilityProductivity = A measure of process performance= outputs/inputsSingle-factor productivity – A productivity score that measures output levels relative to single input. = example : Number of Customer Calls handled/ Support Staff Hours = Single-factor productivity ratioMultifactor productivity – A productivity score that measures output levels relative to more than one input. Exa: Sales dollars generated/ Labor, Material, and Machine costs = Multifactor Productivity ratio.Efficiency – A measure of process performance; the ratio of actual outputs to standard outputs. Usually expressed in percentage terms. Efficiency = 100% (actual outputs / standard outputs)Standard output – An estimate of what should be produced, given a certain level of resources.Cycle Time – The total elapsed time needed to complete a business process. Also called throughput time.Percent Value-Added Time – The percentage of total cycle time that is spent on activities that actually provide value. Percent Value-Added Time = 100% (value-added time)/(total cycle time)Benchmarking – The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance. Competitive Benchmarking – The comparison of an organization’s processes with those of competing organizations. Process Benchmarking – The comparison of an organization’s processes with those of noncompetitors that have been identified as having superior processes.Six Sigma – A business improvement methodology that focuses an organization on:Understanding and managing customer requirements,Aligning key business processes to achieve those requirements, Utilizing rigorous data analysis to understand and ultimately minimize variation in those processes, Driving rapid and sustainable improvement to the business processes.

Six Sigma Methodology – DMAIC - Define the goals of the improvement activity, Measure the existing process, Analyze the process, Improve the process, Control the new processContinuous Improvement - The philosophy that small, incremental improvements can add up to significant performance improvements over time.Root cause analysis – A process by which organizations brainstorm about possible causes of problems (referred to as “effects”) and, through structured analyses and data gathering efforts, gradually narrow the focus to a few root causes. Open Phase - Brainstorm root causes, Narrow Phase - Pare down list of possible causes to a manageable number, Closed Phase - Validate the suspected root cause(s) through the analysis of available data.Tools used in Root Cause Analysis - Cause-and-Effect Diagram – A graphical tool used to categorize the possible causes for a particular results. Also known as a fishbone diagram or Ishikawa diagram. Five Whys - An approach used during the narrow in root cause analysis to brainstorm successive answers to the question “Why is this a cause of the original problem?” The name comes from the general observation that the questioning process can require up to five rounds. Scatter Plot - A graphical representation of the relationship between two variables. Check Sheet - A sheet use to record how frequently a certain event occurs. Pareto Chart – A special form of bar chart that shows frequency counts from highest to lowest.Bar graph – A graphical representation of data that places observations into specific categories. Histogram – A special form of bar chart that tracks that number of observations that fall within a certain interval. Run chart - A graphical representation that tracks changes in a key measure over time.Some processes are not reasonably well-understood processes that can be analyzed, improved, and controlled due to: Some processes are artistic in nature. That is, they require flexibility in carrying out the various steps. Furthermore, customers actually value variability in the outcomes. Some processes may be so broken or so mismatched to the organization’s strategy that only a total redesign of the process will do. Some processes cross organizational boundaries, which introduces additional challenges.Four Types of Processes Mass processes – Output is the same every time, Mass customization – Variation is controlled, Artistic processes – Variability in process and outputs are valued. Nascent (broken) process – Mismatch between what the customer wants and what the process is currently capable of providing. Business Process Reengineering – A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed.

Supply Chain Operations Reference (SCOR) model – A comprehensive model of the core management processes and individual process types that, together, define the domain of supply chain managementFive core processes for Level 1: Source, Make, Deliver, Return, PlanLevel 2 Processes – Break down Level 1 processes into more detail. For example: For “make” processes – make-to-stock, make-to-order and engineer-to-orderLevel 3 Processes – Describe in detail the actual steps required to execute level 2 processes

Chapter 8 – LogisticsLogistics management – That part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.

Logistics Management Activities: Transportation, Warehousing, Material handling, Packaging, Inventory management, Logistics information systems

Challenges and opportunities in managing logistics- Advances in information systems, Globalization of markets, Push toward sustainability, Sustainability – Performing activities in a manner that meets the needs of the present without compromising the ability of future generations to meet their needs. Significant impact on delivery speed and reliability.

Five Transportation Modes: Highway, Water, Air, Rail, Pipeline

Multimodal solution – A transportation solution that seeks to exploit the strengths of multiple transportation modes through physical, information, and monetary flows that are as seamless as possible

Roadrailer – A specialized rail car the size of a standard truck trailer that can be quickly switched from rail to ground transportation without changing the wheels.

Reducing Transportation Costs: Consolidation warehousing – A form of warehousing that pulls together shipments from a number of sources in the same geographic area and combines them into larger and more economical loads. Cross-docking – A form of warehousing in which large incoming shipments are received and then broken down into smaller outgoing shipments to demand points in a geographic area. Break-bulk warehousing – Incoming sources are from a single source or manufacturer. Hub-and-spoke system – A form of warehousing in which strategically placed hubs are used as sorting or transfer facilities.

Postponement warehousing – A form of warehousing that combines classic warehouse operations with light manufacturing and packaging duties to allow firms to put off final assembly or packaging of goods until the last possible moment.

Shortening Customer Lead Times: Assortment warehouses – A form of warehousing in which a wide array of goods is held close to the source of demand in order to assure short customer lead times. Spot stock warehouses – A form of warehousing that attempts to position seasonal goods close to the marketplace.

Lowering Inventory-Related Costs - Using inventory pooling can enable firms to reduce inventory-related costs. Involves consolidating safety stock for stores into one centralized location to provide same-day service to all the stores.

Material handling system – A system that includes the equipment and procedures needed to move goods within a facility, between a facility and a transportation mode, and between different transportation modes.

Packaging – The way goods and materials are packed in order to facilitate physical, informational, and monetary flows through the supply chain

Inventory Management- Implications for transportation: Using slower and cheaper transportation modes will cause inventory levels within the supply chain to rise. Using faster and more expensive transportation modes will enable firms to lower inventory levels. Implication for warehousing: Warehousing and inventory managers must work closely to achieve the desired business outcome.

Logistics strategy – A functional strategy which ensures that an organization’s logistics choices are consistent with its overall business strategy and support the performance dimensions that targeted customers most value.

Measuring Logistics Performance The perfect order represents the timely, error-free provision of a product or service in good condition that is Delivered on time (according to buyer’s delivery dates),Shipped complete, Invoiced correctly, Undamaged in transit

Landed cost – The cost of a product plus all costs driven by logistics activities, such as transportation, warehousing, handling, customs fees, etc.

Reverse logistics system – A complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling. Challenges: Firms have less control over the timing, transportation modes used, and packaging for goods flowing back up the supply chain. Goods can flow back up the supply chain for a variety of reasons and a reverse logistics system needs to be able to sort and handle these different flows. Forward logistics systems typically aren’t set up to handle reverse logistics flows.

Weighted center of gravity method – A logistics decision modeling technique that attempts to identify the “best” location for a single warehouse, store, or plant given multiple demand points that differ in location and importance.

Optimization model – A type of mathematical model used when the decision maker seeks to optimize some objective function subject to some constraints. Objective function – A quantitative function that an optimization model seeks to optimize (minimize or maximize). Constraint – A quantifiable condition that places limitations on the set of possible solutions. The solution to an optimization model is acceptable only if it does not break any of the constraints.