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IE3104: Supply Chain Modeling: Manufacturing & Warehousing. Instructor: Spyros Reveliotis Office: Room 316, ISyE Bldng tel #: (404) 894-6608 e-mail: [email protected] homepage: www.isye.gatech.edu/~spyros. “Course Logistics”. TA: Mr. Karin Boonertvanich - PowerPoint PPT Presentation
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Instructor: Spyros Reveliotis
Office: Room 316, ISyE Bldng
tel #: (404) 894-6608
e-mail: [email protected]
homepage: www.isye.gatech.edu/~spyros
IE3104: Supply Chain Modeling:Manufacturing & Warehousing
“Course Logistics”• TA: Mr. Karin Boonertvanich• Office Hours: 2-3:30pm MW (ow, an open-door policy will be generally
adopted, but an appointment arranged by e-mail is preferred)• Grading policy:
– Homework: 25%– Midterm I: 20% (Tent. Date: middle of February)– Midterm II: 20% (Tent. Date: end of March)– Final: 35%– Exams closed-book, with 2 pages of notes per exam– Make-up exams and Incompletes: Only for very serious reasons, which are officially
documented.
• Reading Materials:– Course Textbook: “Design and Analysis of Lean Production Systems” R. Askin and J.
Goldberg– Material posted at my homepage or the library electronic reserves
Course Objectives(What this course is all about?)
• How to design and operate manufacturing and warehousing facilities (and more…)– A conceptual description and classification of modern production and
warehousing environments and their operation– An identification of the major issues to be addressed during the planning
and control of the production and warehousing activity– Decomposition of the overall production planning and control problem to
a number of sub-problems and the development of quantitative methodologies for addressing the arising sub-problems
– Computational implementation of the presented techniques (e.g., Excel, LP solvers, etc.) primarily through the homework assignments
– Emerging trends, including the implications of a globalized and internet-based economy
Organizational Operations
• Organization / Production System: A transformation process (physical, locational, physiological, intellectual, etc.)
Organization
Inputs Outputs•Materials•Prod. Equip.•Labor•Manag. Res.
•Goods•Services
• Supply or Value Chain / Network:
Stage 5
Stage 4
Stage 3
Stage 2Stage 1
Suppliers Customers
The major functional units of a modern (industrial) firm
Functional Unit Activities
Executive Committee Strategic Planning
Design Engineering Product Design
Product Engineering Process PlanningTest Design
Manufacturing Production PlanningSchedulingMaterials ManagementMaterial Handling & ShippingTooling
Facilities Building/Site LayoutMaintenanceEquipment InstallationUtilities
Product Assurance Quality Assurance
Research and Development Product DevelopmentNew Technology Evaluationand Implementation
The major functional units of a modern (industrial) firm (cont.)
Functional Unit Activities
Management InformationSystems
Data ProcessingReport Generation
Procurement Vendor CertificationPurchasing
Finance BudgetingCash Flow Management
Accounting Financial ReportingManagerial or Cost AccountingAccounts PayableAccounts Receivable
Marketing SalesOrder EntryForecastingCustomer RelationsAdvertising
Human Resources RecruitmentLabor RelationsWage AdministrationEmployee ProtectionTraining
Business ProcessesThe set of procedures designed to integrate people, knowledge, materials, equipment, energy, and information in order to accomplish a specific task; e.g.,
• design a product• enter a customer order• fill a customer order• acquire raw materials• etc.
Remarks:• Each process has a set of outcomes/products and customers• Processes often cross organizational and functional boundaries• Processes can be interconnected; modern information technology is a primary enabler of such process interaction• Processes require resources and therefore they must be derived from and serve the objectives of the firm
Corporate Mission
• The mission of the organization– defines its purpose, i.e., what it contributes to society
– states the rationale for its existence
– provides boundaries and focus
– defines the concept(s) around which the company can rally
• Functional areas and business processes define their missions such that they support the overall corporate mission in a cooperative and synergistic manner.
Corporate Mission Examples(J. Heizer & B. Render, “Operations Management”, Prentice Hall)
• Merck: The mission of Merck is to provide society with superior products and services-innovations and solutions that improve the quality of life and satisfy customer needs-to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return.
• FedEx: FedEx is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing totally reliable, competitively superior, global air-ground transportation of high-priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained utilizing real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional for each other, and the public. We will strive to have a completely satisfied customer at the end of each transaction.
Defining the Corporate Strategy
Differentiation (Better; e.g., Luxury cars, Fashion Industry, Brand Name Drugs)
Cost Leadership (Cheaper; e.g., Wal-Mart, Southwest Airlines, Generic Drugs)
Responsiveness (Reliably faster; Efficiently accommodating innovation and demand fluctuation; e.g., Dell, Overnight Delivery Services)
Competitive Advantage through whichthe company market share is attracted
The operations frontier, trade-offs, and the operational effectiveness
Differentiation
Cost Leadership
Responsiveness
Strategy Development Process (J. Heizer & B. Render, “Operations Management”, Prentice Hall)
Environmental AnalysisUnderstand the environment, customers, industry, and competitors
Identify your strengths, weaknesses, opportunities and threats.
Determine Corporate MissionState the reason for the firm’s existence and
identify the value it wishes to create
Form a StrategyBuild and maintain a competitive advantage, such as low price,
quick delivery or quality, by identifying and developing the critical success factors
Factors affecting Corporate Strategy• External
– Emerging strengths and weaknesses of competitors => new threats and opportunities, respectively
– New industry entrants– Development of substitute products– Development of new technologies– Legal developments (e.g., environmental concerns and regulations)– Economic and political developments (e.g., new international agreements,
political crises)
• Internal– Company politics and restructuring
– Modified relationships with customers and suppliers
– Product Life Cycle
Strategy and Issues during a Product’s Life(J. Heizer & B. Render, “Operations Management”, Prentice Hall)
Introduction Growth Maturity Decline
Time
Sales
• Best period to increase market share
•R&D engineering critical
• Frequent product and process changes•Short production runs•High production costs•Limited models•Attention to quality
•Practical to change price or quality image•Strengthen niche
•Forecasting critical•Products and process reliability•Increase capacity•Shift towards product focus•Enhance distribution
•Poor time to change image, price or quality•Competitive costs become critical•Defend market position
•Standardization - minor product changes•Optimum capacity•Process stability•Long production runs
•Cost control critical
•Little product differentiation•Overcapacity in the industry•Reduce capacity and eventually prune line to eliminate items not returning good margin
Implementing Corporate Strategy through Operations Management (OM)
• Strategic fit: The consistency between the competitive advantage sought by a firm and the process capabilities and managerial policies that it uses to achieve this advantage.– Cost leadership => efficient and lean production processes
– Quality of product and service => well-designed and well-maintained production and business processes, highly trained workforce, high-precision equipment
– Product variety => flexible production processes, ability to support product customization through design for postponement
– Responsiveness => build-up of excess production capacity and/or inventories (safety stock)
Vir
tual
Inte
gra
tio
n
Customer
Dell
Suppliers
Dell Supply Chain
PUSH
PULL
PC SUPPLY CHAINS
Typical PC Supply Chain(Compaq, HP, IBM, etc.)
Customer
DistributionChannels
Manufacturer
Suppliers
PUSH
PULL
Dell model• Suppliers maintain nearby ship points; delivery time 15 minutes
to 1 hour
• Suppliers own inventory until used in production
• Demand forecasting is critical – changes are shared immediately within Dell and with supply base
• Customers frequently steered to “recommended configurations” with high availability to balance supply and demand
• Demand pull throughout value chain – “information for inventory” substitution
• Focused on strategic partnerships: suppliers down from 200 to 47
• External logistics supplier used to manage inbound supply chain
Dell Model Benefits
• No production launch until customer order booked (pure pull!)
• Very high product (configurable) variety – mass customization!
• Direct fulfillment - no intermediaries• Very low finished goods inventory (costs) – high inventory
turns (raw material inventory influenced by “recommended configurations”)
• High velocity material flows & fulfillment
Dell performance
External and Internal Performance Measures
• External performance measures estimate the firm’s ability to build and maintain its market share, by attracting and maintaining a happy customer, through the provided goods and services (e.g., customer retention, defection, turnover, the American Customer Satisfaction Index (ACSI) - a weighted score computed through customer surveys)
• Internal performance measures translate the sought competitive advantage with respect o the product attributes of cost, differentiation and responsiveness to target process performance that must be achieved in order to support this advantage; e.g.,– responsiveness to meet customer demand => fill rate, i.e., percentage of orders that are
filled immediately from stock
– process flexibility => time or cost needed to switch production from one item to another
– product reliability => failure rate and mean time between failures
BOM Levels•Level 0: End Items (SKU’s)•Level 1: Items that constitute components (are children) of level-0 item(s) only•Level 2: Items that are children of level 1, and, potentially, some level 0 items only•Level i: Items that are children of level i-1, and, potentially, some level 0 to i-2 item(s) only
C
B
E F
GE C
F HDD
C GFE
FE
E
A
Level 0: A, B Level 1: D, H Level 2: C, G Level 3: E, F
A typical (logical) Organization of the Production Activity
RawMaterial& Comp.Inventory
FinishedItem
Inventory
S1,2S1,1 S1,n
S2,1 S2,2 S2,m
Assembly Line 1: Product Family 1
Assembly Line 2: Product Family 2
Fabrication (or Backend Operations)
Dept. 1 Dept. 2 Dept. k
S1,i
S2,i
Dept. j
Make-to-Stock vs. Make-to-Order
• Make-to-Stock• delivery response times is a key
competitive factor• a limited number of products is
manufactured repetitively• ties investment capital and storage
space• runs the risk of damage and
obsolescence• more appropriate for commoditized
products• also appropriate strategy for
components that are hard to acquire or their shortage would be too costly
• Make-to-order• high degree of customization• short shelf-lives due to
obsolescence or spoilage
• Assemble-to-order
• Store high-level standardized subassemblies
• Perform the final assembly only upon the reception of a customized order
• Enabled by design-for-postponement• Engineer-to-order• Appropriate for highly customized, one-of-a-kind items
Back to the course objectives...
Forecasting
StrategicPlanning
AggregateProductionPlanning
Disaggregation
ProductionScheduling
Shop FloorControl
AdminstrativeFunctions
(Purchasing,Payroll,
Finannce,Accounting)
Marketing
Productdesign
ProcessPlanning
ManufacturingSupport
(FacilitiesPlanning,
ToolManagement,Maintenance,
Quality Control)
Raw material
Fabrication
Assembly
DistributionCenter
Retailer
Customer
Parts
FinishedProducts
Product Flow Prod. Plan. & Control Dec. Hierarchy
SupportingTech. & Admin.Functions
Reading Assignment
• Pages 1-28 from your textbook
• Chapters 1 and 2 from “Managing Business Process Flows” by Anupindi et. al., posted at the library electronic reserves