*Operations ManagementTopic 4 Supply Chain Management, JIT, Kanban and Lean Manufacturing

*Learning ObjectivesWhen you complete this chapter you should be able to:Explain the strategic importance of the supply chain or what is the supply chain managementAble to discuss the need and benefits of Supply Chain Management

Example of Supply Chain in Darden Restaurants

*Darden RestaurantsLargest publicly traded casual dining company in the worldServes over 300 million meals annually in more than 1,400 restaurants in the US and CanadaAnnual sales of $2.4 billionOperations is the strategy

*Darden RestaurantsSources food from five continents and thousands of suppliersFour distinct supply chainsOver $1.5 billion spent annually in supply chainsCompetitive advantage achieved through superior supply chain

*The Supply Chains Strategic Importance (What is Supply Chain Management)Supply chain management is the integration of the activities that procure materials and services, transform them into intermediate goods and the final product, and deliver them to customersCompetition is no longer between companies; it is between supply chains

*Supply Chain ManagementTransportation vendorsCredit and cash transfersSuppliersDistributors Accounts payable and receivableWarehousing and inventoryOrder fulfillmentSharing customer, forecasting, and production informationImportant activities include determining

*Supply Chain Requirements in Global EnvironmentReact to sudden changes in parts availability, distribution, or shipping channels, import duties, and currency ratesUse the latest computer and transmission technologies to schedule and manage the shipment of parts in and finished products outStaff with local specialists who handle duties, freight, customs and political issuesSupply chains in a global environment must be able to

*Need for Supply Chain ManagementImprove operationsIncreasing level of outsourcingIncreasing transportation costsCompetitive pressuresIncreasing globalizationIncreasing importance of e-commercesComplexity of Supply ChainsManage InventoriesTable 11.5

*Benefits of Supply Chain ManagementLower inventoriesHigher productivityGreater alertnessShorter lead timesHigher profitsGreater customer loyalty

*Creating an Effective Supply ChainDevelop strategic objectives and tacticsIntegrate and coordinate activities in the internal supply chainCoordinate activities with suppliers and customersCoordinate planning and execution across the supply chainForm strategic partnership

*Managing the Supply ChainMutual agreement on goalsTrustCompatible organizational culturesThere are significant management issues in controlling a supply chain involving many independent organizations

*Factors in Choosing a SupplierQuality and quality assuranceFlexibilityLocationPriceProduct or service changesReputation and financial stabilityLead times and on-time delivery

*OutsourcingTransfers traditional internal activities and resources of a firm to outside vendorsUtilizes the efficiency that comes with specializationFirms outsource information technology, accounting, legal, logistics, and production

*E-ProcurementUses the internet to facilitate purchasingElectronic ordering and funds transferElectronic data interchange (EDI)Advanced shipping notice

*E-ProcurementOnline catalogsCatalogs provided by vendorsCatalogs published by intermediariesExchanges provided by buyers

*Internet Trading ExchangesHealth care products ghx.comRetail goods gnx.comDefense and aerospace products exostar.comFood, beverage, consumer products transora.comSteel and metal products metalsite.comHotels avendra.com

*E-ProcurementAuctionsMaintained by buyers, sellers, or intermediariesLow barriers to entryIncrease in the potential number of buyers

*E-ProcurementRFQsCan make requests for quotes (RFQs) less costlyImproves supplier selectionReal-time inventory tracking

*Learning Objectives for JITBe able to understand the concept of JIT,TPS and Lean ProductionAble to discuss the elements and benefits of JITAble to link the application of Kanban in JIT systemsAble to discuss the steps in transition into JIT systems

*Just - in -Time (JIT)A highly coordinated processing system in which goods moving through the system, and services are performed, just as they are needed.JIT is a pull demand systemThe ultimate goal of JIT is a balanced systemAchieves a smooth, rapid flow of materials through the system

*Just-In-Time (JIT)Powerful strategy for improving operationsMaterials arrive where they are needed when they are neededIdentifying problems and driving out waste reduces costs and variability and improves throughputRequires a meaningful buyer-supplier relationship

*Just-In-Time, TPS, and Lean OperationsJIT is a philosophy of continuous and forced problem solving via a focus on throughput and reduced inventoryTPS emphasizes continuous improvement, respect for people, and standard work practicesLean production supplies the customer with their exact wants when the customer wants it without waste

*Benefits of Just-In-Time SystemsReduced inventory levelsHigh qualityFlexibilityReduced lead timesIncreased productivityIncreased equipment utilizationReduced scrap and reworkReduced space requirementsReduced setup costsPressure for good vendor relationships

*Elements of JITProduct DesignProcess DesignPersonnel/organizational elementsManufacturing planning and control

*Product DesignStandard partsModular DesignHighly capable production systemsConcurrent engineering

*Process DesignSmall lot sizesSetup time reductionManufacturing cellsLimited work in processQuality ImprovementProduction flexibilityLittle inventory storage

*Personnel/organizational elementsWorkers as assetsCross-trained workersContinuous improvementCost accountingLeadership/project management

*Manufacturing planning and controlLevel loadingPull SystemVisual Systems KanbanClose vendor relationshipsReduced transaction processingPreventive maintenance

*KanbanKanban is the Japanese word for card (signal or visible record)The card is an authorization for the next container of material to be producedA sequence of kanbans pulls material through the processMany different sorts of signals are used, but the system is still called a kanban

*KanbanUser removes a standard sized containerSignal is seen by the producing department as authorization to replenishFigure 16.8

*Advantages of KanbanAllow only limited number of faulty or delayed materialProblems are immediately evidentPuts downward pressure on bad aspects of inventoryStandardized containers reduce weight, disposal costs, wasted space and labor

*Transitioning to a JIT SystemGet top management commitmentDecide which parts need most effortObtain support of workersStart by trying to reduce setup times @ costsGradually convert operationsConvert supplier to JITPrepare for obstacles commitment supplier resistant

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