Transcript IE3104: Supply Chain Modeling: Manufacturing & Warehousing

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
• 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:
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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.)
Inputs
Outputs
•Materials
•Prod. Equip.
•Labor
•Manag. Res.
Organization
•Goods
•Services
• Supply or Value Chain / Network:
Stage 1
Stage 2
Stage 4
Suppliers
Stage 3
Stage 5
Customers
The major functional units of a modern
(industrial) firm
Functional Unit
Activities
Executive Committee
Strategic Planning
Design Engineering
Product Design
Product Engineering
Process Planning
Test Design
Production Planning
Scheduling
Materials Management
Material Handling & Shipping
Tooling
Building/Site Layout
Maintenance
Equipment Installation
Utilities
Quality Assurance
Manufacturing
Facilities
Product Assurance
Research and Development
Product Development
New Technology Evaluation
and Implementation
The major functional units of a modern
(industrial) firm (cont.)
Functional Unit
Activities
Management Information
Systems
Procurement
Data Processing
Report Generation
Vendor Certification
Purchasing
Budgeting
Cash Flow Management
Financial Reporting
Managerial or Cost Accounting
Accounts Payable
Accounts Receivable
Sales
Order Entry
Forecasting
Customer Relations
Advertising
Recruitment
Labor Relations
Wage Administration
Employee Protection
Training
Finance
Accounting
Marketing
Human Resources
Business Processes
The 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
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–
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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
Responsiveness (Reliably faster; Efficiently
accommodating innovation and demand fluctuation;
e.g., Dell, Overnight Delivery Services)
Competitive Advantage through which
the company market share is attracted
Cost Leadership (Cheaper;
e.g., Wal-Mart, Southwest
Airlines, Generic Drugs)
Differentiation (Better;
e.g., Luxury cars, Fashion Industry,
Brand Name Drugs)
The operations frontier, trade-offs, and
the operational effectiveness
Responsiveness
Cost Leadership
Differentiation
Strategy Development Process
(J. Heizer & B. Render, “Operations Management”, Prentice Hall)
Environmental Analysis
Understand the environment, customers, industry, and competitors
Identify your strengths, weaknesses, opportunities and threats.
Determine Corporate Mission
State the reason for the firm’s existence and
identify the value it wishes to create
Form a Strategy
Build 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
• Best period to
increase market
share
•R&D engineering
critical
Growth
•Practical to
change price or
quality image
•Strengthen
niche
Maturity
•Poor time to change
image, price or
quality
•Competitive costs
become critical
•Defend market
position
Decline
•Cost control
critical
Sales
Time
• Frequent product
and process
changes
•Short production
runs
•High production
costs
•Limited models
•Attention to
quality
•Forecasting
critical
•Products and
process reliability
•Increase capacity
•Shift towards
product focus
•Enhance
distribution
•Standardization minor product
changes
•Optimum capacity
•Process stability
•Long production
runs
•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 wellmaintained 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)
PC SUPPLY CHAINS
Customer
Customer
Distribution
Channels
PUSH
Manufacturer
Suppliers
Typical PC Supply Chain
(Compaq, HP, IBM, etc.)
Virtual Integration
PULL
PULL
Dell
Suppliers
Dell Supply Chain
PUSH
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
A
B
C
E
D
F
E
C
E
Level 0: A, B
F
G
F
Level 1: D, H
D
E
H
C
E
Level 2: C, G
G
F
Level 3: E, F
A typical (logical) Organization of the
Production Activity
Assembly Line 1: Product Family 1
S1,1
Raw
Material
& Comp.
Inventory
S1,i
S1,2
S1,n
Fabrication (or Backend Operations)
Dept. 1
S2,1
S2,2
Dept. 2
Dept. j
S2,i
Assembly Line 2: Product Family 2
Finished
Item
Inventory
Dept. k
S2,m
Make-to-Stock vs. Make-to-Order
• Make-to-Stock
• Make-to-order
• 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
• 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...
Raw material
Forecasting
Strategic
Planning
Fabrication
Parts
Assembly
Finished
Products
Distribution
Center
Retailer
Customer
Product Flow
Adminstrative
Functions
(Purchasing,
Payroll,
Finannce,
Accounting)
Aggregate
Production
Planning
Marketing
Disaggregation
Process
Planning
Production
Scheduling
Product
design
Manufacturing
Support
(Facilities
Shop Floor
Planning,
Control
Tool
Management,
Maintenance, Supporting
Quality Control) Tech. & Admin.
Prod. Plan. & Control Dec. Hierarchy
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