Term
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Definition
| a measure of a worker, machine, work center, plant or organization to produce goods and services in a given time period. |
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Term
| Factors affecting Capacity |
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Definition
-Number of shifts running, production lines
-Product complexity, mix and design stability
-Component and assembly conformance quality(lower quality = more disruptions = lower capacity)
-Supplier capacity and delivery reliability
-Process and equipment reliability
(more breakdowns = more disruptions = lower capacity) |
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Term
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Definition
| The maximum output capability, allowing for no adjustments for preventative maintenance, unplanned downtime, etc... |
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Term
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Definition
| The long term expected output capability of a resource or system. |
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Term
| What will capacity shortage lead to? |
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Definition
| Lost sales and potentially lost customers |
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Term
| What will too much capacity lead to? |
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Definition
| high costs (too much inventory, warehousing) |
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Term
| Special requirements for making good Capacity Decisions |
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Definition
-Forecast demand accurately
-understand the technology and capacity increments
-find the optimal operating level (volume)
-Flexibility can be an advantage |
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Term
| When there is excess demand, what steps do you take? |
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Definition
1)Improve process efficieny (best)
2)Improve product productivity (better)
3)Add equipment and personal (good)
4)Backorder (meh, okay)
5)Raise prices (bad)
6)Turn away business (worst) |
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Term
| Common Capacity Strategy - Leader |
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Definition
| Forecast demand - add capacity in single step ahead of anticipated demand. |
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Term
| Common Capacity Strategy - Lagged |
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Definition
| Add capacity in single step that lags anticipated demand, company may lose customers. |
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Term
| Common Capacity Strategy - Match |
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Definition
| Try to match anticipated demand exactly. Costs higher than one large increase. |
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Term
| When there is excess capacity, what steps do you take? |
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Definition
1)Lower prices (best)
2)Advertise (better)
3)Idle equipment and/or personnel (okay)
4)Make product changes to attract the market (meh)
5)Build to stock (poor asset utilization) |
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Term
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Definition
| Technique for evaluating process, location and equipment alternatives. |
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Term
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Definition
| Find the point ($$ or units) at which total cost equals total revenue. |
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Term
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Definition
-Revenue and costs are related
-all information is known with certainty
-No time value of money (annualized analysis) |
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Term
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Definition
| To determine at what volume of production a process will become profitable (sets minimum capacity requirements) |
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Term
| BEP Requires knowledge of ... |
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Definition
| Fixed costs and variable costs |
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Term
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Definition
| Costs that continue even if no units are produced: depreciation, taxes, debt, mortgage payments. |
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Term
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Definition
| costs that vary with the volume of units produced, labor, materials, portion of utilities. |
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Term
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Definition
Profit = total revenue - total cost
Profit = (price) (volume) -((fixed cost + (variable cost per unit)(volume))
Profit = (Price - variable cost per unit) (volume) - Fixed cost |
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Term
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Definition
| Volume = Fixed Cost/(price-variable cost per unit) |
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Term
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Definition
| the sourcing decisions and purchasing activity of the firm. |
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Term
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Definition
| The broad set of activities carved out by organizations to analyze sourcing opportunities, develop sourcing, strategies, select suppliers and carry out all the activities required to procure goods and services. |
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Term
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Definition
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Term
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Definition
| asks how much are we spending, on what and with whom? |
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Term
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Definition
| The use of resources within the firm to provide products or services. |
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Term
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Definition
| The use of supply chain partners to provide products or services. |
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Term
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Definition
-High Degree of control
-Ability to oversee the entire program
-Economies of scale and/or scope. |
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Term
| Disadvantages of Insourcing |
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Definition
-Required strategic flexibility
-Required high investment
-Loss of access to superior products and services offered by potential suppliers |
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Term
| Advantages of Outsourcing |
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Definition
-High strategic flexibility
-Low investment risk
-Improved cash flow
-access to state-of-the-art products and services |
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Term
| Disadvantages of Outsourcing |
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Definition
-Possibility of choosing a bad supplier.
-Loss of control over the process and core technologies
-Communication and coordination challenges
-"Hallowing Out" of the corporation |
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Term
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Definition
| Volume = Fixed Cost/(price-variable cost per unit) |
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Term
| Make or Buy: Total Cost Analysis |
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Definition
| A process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options. |
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Term
| Total Cost Analysis - Direct Costs |
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Definition
| Costs that are tied directly to the level of operation or supply chain activites |
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Term
| Total Cost Analysis - Indirect Costs |
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Definition
| Costs that are not tied directly to the level of operations or supply chain activity |
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Term
| Direct Costs of Insourcing |
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Definition
-Direct material
-Direct labor
-Freight Costs
-Variable overhead |
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Term
| Direct Costs of Outsourcing |
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Definition
-Price (from invoice)
-Freight Costs |
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Term
| Indirect costs of Insourcing |
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Definition
-supervision
-administrative support
-supplies
-maintenance costs
-equipment depreciation
-utilities
-building lease
-fixed overhead |
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Term
| Indirect costs of Outsourcing |
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Definition
-purchasing
-receiving
-quality control |
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Term
| Sourcing Strategies - Critical Quadrant |
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Definition
-Critical to profitability
-Few qualified sources of supply
-Large expenditures
-Design and quality critical
-complex and/or rigid specification
Forms partnerships with suppliers
ex: Axle systems of truck, iPod hard drive |
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Term
| Sourcing Strategies - Bottleneck Quadrant |
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Definition
-Complex specifications requiring complex manufacturing or service process.
-Few alternate productions/sources of supply
-Big impact on operations/maintenance
-New Technology or untested processes
Ensure Continuous supply
ex: car audio systems |
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Term
| Sourcing Strategies - Leverage Quadrant |
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Definition
-High Expenditures, commodity items
-large marketplace capacity, ample inventories
-many alternative products and services
-many qualified sources of supply
-market/price senstive
Maximize commercial advantage
ex: cables, tiles |
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Term
| Sourcing Strategies - Routine Quadrant |
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Definition
-many alternative products and services
-many sources of supply
-low value, small individual transactions
-Everyday use, unspecified items
-anyone could buy it
Simplify Acquisition Process
ex: office supplies |
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Term
| Weighted Point Evaluation System |
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Definition
Purpose:
-Evaluating potential suppliers
-tracking suppliers performance over time or ranking current suppliers |
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Term
| Weighted Point Evaluation System Process |
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Definition
-List relevant performance dimensions
-assign importance weight to each dimensions (0-1)
-Develop scale for each dimension
(1-5,1-10 or 1-100)
-Score each supplier using dimension scale
-Multiply scores by weights for each dimension and total
-Select supplier with max total score |
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Term
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Definition
| The 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. |
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Term
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Definition
-Transporation
-Warehousing
-Packaging
-Material handling
-Logistics information systems
-Inventory management
Logistics service providers (3PL-Third Party logistics) |
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Term
| Major Transportation Modes |
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Definition
-Highway (Truck)
-Water (International Trade - 81%)
-Rail
-Air
-Pipeline (limited use) |
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Term
| Why the interest in Logistics? |
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Definition
-Government policy and deregulations of transportation industries.
-Globilization (Shrinking World) Increasing ability to do business at a distance
-Technological Breakthroughs
-Financial and performance impacts |
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Term
| Multi-Modal Transporation |
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Definition
| involves using several of the different modes of transportation to deliver product. |
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Term
| Multi-Modal Transportation Examples |
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Definition
-Product shipped from west coast to east coast
-loaded onto rail cars for Midwest
-at distribution center in Midwest, loaded onto trucks for East Coast distribution center. |
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Term
| Economic factors when pricing transportation services. |
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Definition
-Pricing vs. Distance
-Price/Pound vs. Density
-Stow-ability, handling and liability
-market factors |
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Term
| Warehousing (Distribution Center) |
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Definition
| Any operation that stores, repackages, stages, sorts or centralizes goods or materials. |
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Term
| Importance of Warehousing |
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Definition
-Item consolidation
*reduce transportation and broaden's product mix available to customers.
-Service customer orders
*on-time, complete, accurate, etc..
-Protection against supply uncertainty
-Build-up point for seasonal demand
-support postponement strategies
*Place for value-added services |
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Term
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Definition
| A complete supply chain dedicated to the reverse flow of products and material for the purpose of returns, repair, re-manufacture and or recycling. |
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Term
| Master Scheduling (Definition) |
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Definition
| a detailed planning process that tracks production output and matches this output to actual customer orders. |
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Term
| Master Scheduling - What? |
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Definition
-Controls the timing and quantity of production for product or product families
-The primary interface point for actual customer orders.
-Indicates the quantity and timing for a product or group of products.
-More detailed than aggregate plan. |
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Term
| MRP - Material Requirements Planning |
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Definition
| a computer based inventory planning and management system for dependent demand inventory. |
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Term
| What is the goal of MRP process? |
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Definition
| How much of each inventory item is needed and when? |
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Term
| Effective use of MRP requires the following: |
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Definition
-Master Scheduling (Derived from the aggregate production plan)
-Bill of Materials (BOM)
-Inventory information (availability, purchase orders, lead time) |
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Term
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Definition
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Term
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Definition
-Management of dependent demand items helps lower inventory levels and improve customer service.
-Managers can quickly assess the impact of lower level item shortages; take action to avoid problems.
-MRP can tell supplier just what they need to make and when. |
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Term
| MRP Special considerations |
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Definition
-Requires accurate information to work properly.
-System must be able to handle uncertainty and seek to reduce it. (time and inventory buffers)
-Manage to avoid bullwhip effect (small changes high in the MRP can have drastic impact on many lower level items) |
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Term
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Definition
Distribution Requirement Planning
DRP is essentially MRP at the distributor level. |
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Term
| How does DRP relate to master scheduling? |
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Definition
| Retail forecasts deman on the distributor is treated as a master schedule. This generates planned order releases, which the manufacturer then treats as a master schedule. |
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Term
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Definition
-starts forecasted demand
-works backwards to create realistic system-wide plan for ordering finished products.
-Develops time-phased plan for distributing product from plants/warehouses to the customer. |
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Term
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Definition
-Helps improve customer service
-Provides a better and faster understand of the impact of shortages and/or promotions
-Helps reduce costs (inventory, freight, production)
-Provides integration between the stages in the supply chain. |
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Term
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Definition
Stocks or items used to support:
*Production - raw materials, work in process items.
*Supporting Activities - Maintenance, repair and operating supplies
*Customer service - finished goods |
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Term
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Definition
Demand or supply uncertainties
-Safety Stock and hedge inventory are used to guard against interruptions in supply or spikes in demand or price.
-Reduce by improving forecasting methods, attach poor supplier quality. |
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Term
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Definition
Downstream demand an upstream capacity mismatches
-smoothing inventory is used to allow more efficient use of capacity in meeting volatile demand.
-Reduce by varying capacity to better meet demand or influence demand to better match capacity or both. |
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Term
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Definition
Downstream Demand and Efficient Production/Shipment volume mismatches
-Cycle stocks may be inflated to enhance production or transportation efficiencies.
-Improve by altering business processes to reduce production lot size or shipment volumes |
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Term
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Definition
Demand and Supply Chain Lead-Time mismatches
-Anticipation inventories are created and placed at strategic points in the chain to allow for quick delivery to customers
-Improve by focusing on reducing product delivery lead time and persuade customers to wait longer |
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Term
| The hidden "rocks" of Inventory |
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Definition
-Volatile Demand
-Inaccurate forecasts
-Unreliable suppliers
-Quality Problems |
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Term
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Definition
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Term
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Definition
-Known and constant demand
-Known and constant lead time
-Instantaneous receipt of material
-No quantity discounts
-Only order (setup) cost and holding cost
-No stockouts |
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