SupplyChain Design

1
Supply-Chain Design
Chapter 9
2
Creation of Inventory
Figure 9.3
3
Inventory at Different Stocking Points
Figure 9.4
4
Supply Chain
Figure 9.5
5
Supply Chain Dynamics for Facial Tissue
Figure 9.6
6
Materials Management
Figure 9.7
7
Inventory Measures
Average inventory 2 million Cost of goods sold
10 million 52 business weeks per year
Example 9.1
8
Supply-Chain Process Measures
9
Supply-Chain Environments
Factor Efficient Supply Chains Responsive
Supply Chains Demand Predictable, low
Unpredictable, high forecast errors
forecast errors Competitive Low cost,
consistent Development speed, fast priorities q
uality, on-time delivery times, delivery
customization, volume flexibility,
variety, top quality New-service/ Infrequent
Frequent product introduction Contribution Low H
igh margins Product variety Low High
10
Supply-Chain Design
Factor Efficient Supply Chains Responsive Supply
Chains
Operation Make-to-stock or Assemble-to-order,
make- strategy standardized
services to-order, or customized emphasize
high services emphasize volume,
standardized service or product services or
products variety
Capacity Low High cushion
Inventory Low, enable high As needed to enable
fast investment inventory turns delivery time
Lead time Shorten, but do not Shorten
aggressively increase costs
Supplier Emphasize low prices, Emphasize fast
delivery selection consistent quality,
on- time, customization, time
delivery variety, volume flexibility, top
quality
11
Location
Chapter 10
12
Reasons for Globalization

• Improved transportation and communication
  technologies
• Loosened regulations on financial institutions
• Increased demand for imported services and goods
• Reduced import quotas and other international
  trade barriers

13
Managing Global Operations

• Other Languages
• Different Norms and Customs
• Workforce Management
• Unfamiliar Laws and Regulations
• Unexpected Cost Mix

14
Location Decisions - Manufacturing

• Favorable Labor Climate
• Proximity to Markets
• Quality of Life
• Proximity to Suppliers
• Proximity to Parent Company
• Utilities, Taxes, and Real Estate Costs

15
Location Decisions - Services

• Proximity to Customers
• Transportation Costs and Proximity to Markets
• Location of Competitors
• Site-Specific Factors

16
Location
Health-Watch
Example 10.1
17
Location
Health-Watch
North
Location Factor Weight Score Total patient
miles per month 25 4 Facility utilization 20 3 Ave
rage time per emergency trip 20 3 Expressway
accessibility 15 4 Land and construction
costs 10 1 Employee preference 10 5
Example 10.1
18
Location
Health-Watch
North
Weighted Score
Location Factor Weight Score Total patient
miles per month 25 4 Facility utilization 20 3 Ave
rage time per emergency trip 20 3 Expressway
accessibility 15 4 Land and construction
costs 10 1 Employee preference 10 5
WS (25 x 4)
Example 10.1
19
Location
Health-Watch
North
Weighted Score
Location Factor Weight Score Total patient
miles per month 25 4 Facility utilization 20 3 Ave
rage time per emergency trip 20 3 Expressway
accessibility 15 4 Land and construction
costs 10 1 Employee preference 10 5
WS (25 x 4) (20 x 3) (20 x 3) (15 x 4)
(10 x 1) (10 x 5)
Example 10.1
20
Location
Health-Watch
North
Weighted Score
Location Factor Weight Score Total patient
miles per month 25 4 Facility utilization 20 3 Ave
rage time per emergency trip 20 3 Expressway
accessibility 15 4 Land and construction
costs 10 1 Employee preference 10 5
WS 340
Example 10.1
21
LocationCenter of Gravity Approach
Example 10.2
22
LocationCenter of Gravity Approach
Example 10.2
23
Location
Break-Even Analysis
for 20,000 units
Fixed Costs Variable Costs Total
Costs Community per Year per Unit (Fixed
Variable) A 150,000 62 B 300,000 38 C 500
,000 24 D 600,000 30
Total Variable Costs
62 (20,000)
Example 10.3
24
Location
Break-Even Analysis
for 20,000 units
Fixed Costs Variable Costs Total
Costs Community per Year per Unit (Fixed
Variable) A 150,000 62 B 300,000 38 C 500
,000 24 D 600,000 30
Total Variable Costs
62 (20,000) 1,240,000
Example 10.3
25
Location
Break-Even Analysis
for 20,000 units
Fixed Costs Variable Costs Total
Costs Community per Year per Unit (Fixed
Variable) A 150,000 62 1,390,000 B 300,000
38 C 500,000 24 D 600,000 30
Total Variable Costs
62 (20,000) 1,240,000
Example 10.3
26
Location
Break-Even Analysis
for 20,000 units
Fixed Costs Variable Costs Total
Costs Community per Year per Unit (Fixed
Variable) A 150,000 62 1,390,000 B 300,000
38 C 500,000 24 D 600,000 30
Total Variable Costs
62 (20,000) 1,240,000
Example 10.3
27
Location
Break-Even Analysis
for 20,000 units
Fixed Costs Variable Costs Total
Costs Community per Year per Unit (Fixed
Variable) A 150,000 62 1,390,000 B 300,000
38 1,060,000 C 500,000 24
980,000 D 600,000 30 1,200,000
Example 10.3
28
Location
Break-Even Analysis
Example 10.3
29
Lean Systems
Chapter 11
30
Characteristics of Lean Systems

• Pull method of materials flow
• Consistent quality
• Small lot sizes
• Uniform workstation loads
• Standardized components and work methods
• Close supplier ties
• Flexible workforce
• Line flows
• Automation
• Preventive maintenance

31
Continuous Improvement with Lean Systems
Figure 11.1
32
Single-Card Kanban System

• Each container must have a card
• Assembly always withdraws from fabrication (pull
  system)
• Containers cannot be moved without a kanban
• Containers should contain the same number of
  parts
• Only good parts are passed along
• Production should not exceed authorization

Part Number 1234567Z Location Aisle 5 Bin
47 Lot Quantity 6 Supplier WS
83 Customer WS 116
KANBAN
33
Number of Containers
Westerville Auto Parts
Example 11.1
34
Number of Containers
Westerville Auto Parts
2000( 0.08 0.02 )( 1 0.10 ) 22
k
Example 11.1
35
Number of Containers
Westerville Auto Parts
k 10 containers
Example 11.1
36
Operational Benefits

• Reduce space requirements
• Reduce inventory investment
• Reduce lead times
• Increase labor productivity
• Increase equipment utilization
• Reduce paperwork and simplify planning systems
• Valid priorities for scheduling
• Workforce participation
• Increase service/product quality