Designing process that keeps customer happiness while keeping costs low, must decide if customer gets to decide what steps they want or if company is going to regulate it
Value Stream Mapping
Shows how long items take in production and how much money/time is wasted to make company better
Needle manufacturing who redesigned manufacturing process to produce multiple products in high volume
Alamo, National car rental-making car return faster by having device that scans all necessary data, reduces human errors
Process Mapping Pay offs
Motorola reduced manufacture time for pagers from 40 days to less than an hour
Citi Bank reduced internal callbacks from 80% and credit 50% faster,
Boise Timber eliminated 70% of steps to save cost
3 major types of goods and services
Custom-One of a kind, small quantities
Option Orientated-Configurations of standard pars, subassemblies, or services that customers can choose from in selected sets
Standard-are made according to fixed design
4 Principle types of Processes
Projects-large scale and customizable
Job Shop Processes-organized around particular types that are flexible and capable of customer work for individual customer
Low Shop Processes- organized around fixed sequence of activities and process steps
Continuous Flow Processes-Create highly standardized goods/services around the clock in high volumes
Product Process Matrix
Model that describes alignment of process choice with characteristics of manufactured goods goal to stay on diagonal path so all categories line up; Rolls Royce
Service Positioning Matrix
Pathway-Unique route through service system
Customer Routed Service- Offer customers freedom to select best suited path for immediate needs/wants (shipping options)
Provider Routed Service-only gives customers few options to choose from in predefined pathways (ATM)
Four Levels of Work
Task- Specific unit of work required to create an output (EX. put circuit bard in Ipod)
Activity- Group of tasks needed to create and deliver an intermediate or final output (all steps to produce Ipod)
Process- consists of a group of activities
Value Chain- is a network of processes (website for iPod)
describes sequence of all process activities and tasks necessary to create and deliver desired output or outcome, documents how work should be accomplished
Beginning or end of a process
Advantages- makes it easier to obtain senior mgt support
Line of Visibility
Flowcharts that include front/back house steps
fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed
What is a process? Why are processes important to big businesses? What is their tie to the supply chain?
Process- Any activity or group of activities that takes an input, add value to it, and provide an output to an internal or external customer
They are important to get the job done and in more creative ways.
They are tied to supply chain because everything has steps to get product/service to customer, allows company to scale up $
What are some of the primary considerations that should go into designing a good process?
Managers- What do you want to manage?
Accountability- Someone accounting for everything
Stakeholders-What are they looking for?
Develop Metrics- to motivate good behavior
Capture, record, and store measurements- Is it possible, easy, how much data, what is the value of data
Consequences of Metrics- What happens with successes and failures?
What do the buyer and seller want
What are some of the key steps important in building a good process?
Objectives, Block Diagram, Scope, Define the service, consider performance metrics, primary steps detailed, develop flow chart, and Test/Evaluate
What is the difference between a process map and a block diagram?
Block Diagram- shows step by step process without determent and only with one shape, nothing in layout allows to anything to change, important because can show how many things can go wrong at previous steps that eventually hurts the production
Process Map- has different shapes that mean different things, allows process to be customized depending on specific questions from client/order
What is Scope and Scope inflations?
Scope-define process requirements and boundaries
Scope inflation- trying to tackle entire process instead of focusing on one element only
Clothing Catalog example from class
Ho to answer phone: Would you like to place an order, yes continue, no reroute… multiple steps that can repeat if customer wants to order another thing
It is a type of bar chart, developed by Henry Gantt in the 1910s, that illustrates a project schedule.
Critical Path Method, Project Evaluation and Review Technique
Visually easier to see precedence relationships
Ideal for large projects with many activities
They consist of a network of branches and nodes.
NC painter business
Needed processes for all elements to try and franchise stores but found difficult to document how to find customers and writing up jobs
Hewlett-Packard (HP) Example
They began outsourcing manufacturing facilities, in order to make sure the products quality met requirements was by defining the metrics for measurements
Office Depot Example
Chain has array of programs in place related to green buying and selling objectives from buying paper from certified well managed forests and buying greener office products for internal use to selling green products to contract and retail customers
And some other shit
Changed the way they track performance metrics so they could have instant access
Also more shit that i didnt feel like typing
What makes for a good performance measurement system? Why is performance measurement so complicated in a supply chain? What are some of the challenges?
Clearly defines what the metrics are for
Suppliers or people being graded understand how success is defined
Complicated because of the size and scope that it entail, tough to identify performance measurements that will work for an entire supply chain
Challenges: Gaining compliance among multiple entities, coming up with metrics that are not just designed to make the firm look good, metrics that measure the right things
How is understanding the customers and supply chain partner’s needs important?
One size does not fit all, you must consider: Variety of products required, quantity delivery frequency needed, service level required, desired product quality, and pricing of products.
What are some problems associated with traditional metrics like cost, profit, and revenues?
Establishing specific production goals may drive managers and employees to do whatever it takes to reach their goals and avoid trouble, even if it means shoddy work or going below standards
Also once goals are reached there is no further incentive, they may choose to save things for the next time frame so they don’t have to work as hard
Problems associated with performance standards and performance variances.
One less quality check on a vehicle inspection line to ensure that they get done on time and once the goals are reached there is not further incentive.
Seven specific supply chain performance measures
-Total Supply Chain Management Costs
-Supply Chain Cash-to-chase cycle time
-Supply chain production flexibility
-Supply chain delivery performance
-Supply chain perfect order fulfillment performance
-Supply chain E-business performance
-Supply Chain environmental performance
SCOR model, 5 process categories, and the 3 levels of process detail
Reference-model is a method for integrating supply chains and measure trading partner performance. Used as a supply chain management diagnostic, benchmarking and process improvement tool by manufacturing and service firms.
5 categories:Plan, Source, Make, Deliver, and Return
3 levels of process detail: Supply chain management diagnostic, benchmarking, and process improvement tool
7 sins: 1. Vanity
Using a measure that will inevitably make the organization, its people, and especially its managers look good.
EX. company measuring themselves on the promised date, which is when they promise to send the package which is a very low bar.
7 sins: 2. Provincialism
Letty organization boundaries or concerns dictate perform metrics which could lead to contradicting metrics across departments.
EX. In insurance the sales department is measured by sales so they will try to sell to anyone who is willing, but Underwriting is measured in quality of risk, so they only want to except the very best
7 sins: 3. Narcissism
This is the unpardonable offense of measuring from ones own point of view not the customers point of view.
7 sins: 4. Laziness
This is a trap that even those who avoid narcissism often fall into, assuming one knows what is important to measure without giving adequate thought or effort
7 sins: 5. Pettiness
Too often, companies measure only a small component of what matters
7 sins: 6. Inanity
Many companies seem to implement metrics without giving any though to consequences of these metrics on human behavior and ultimately on enterprise performance
7 sins: 7. Frivolty
This may be the most serious sin of all, it is the sin of not being serious about measurement in the first place. It is manifested by arguing about metrics instead of taking them to heart, by finding excuses for poor performance instead of tracking root causes.
4 steps to measurement redemption
-Select the right things to measure
-Measure #1 things in right way
-Embed these metrics in a disciplined process for performance improvement
-Create organizational culture and value system that encourages the disciplined use of metrics for ongoing performance improvement rather than regard them
How do you create/foster a measurement friendly culture?
modeling, reward, implementation, commitment, and articulation
Nike’s supply chain
They have many suppliers and outsource most of their goods to low cost manufacturers. These countries have different culture that don’t necessaryily fit or are approved by American Standards
Nike’s requirements of their suppliers
Observe basic labor, environmental, and health and safety standards
Frenkel and Scott’s findings at Adida’s suppliers
They argued that brands develop two distinct types of compliance relationships with their suppliers: a hands on, cooperative relationship with some suppliers and at arm’s length, ore distrustful, compliance relationship with others. these differences can shape the style and substance of compliance programs
Nike’s generation 3 compliance strategey
The company is seeking to supplement monitoring with collaborative initiatives aimed at diffusing workplace and human resource management best practices among its suppliers. It has also updated various audit tools and grading systems in order to make them more accurate and transparent to suppliers an to its own business units
Difference between a single metric and a system of metrics
One vs. multiple data collections
System of metrics cannot be captured with only one metric
-Aligns organizations performance measures with its strategic plans/goals while allowing firm to rely less on mere financial measures, thus improving managerial decision making
4 perspectives of the balanced scorecard
Financial Perspective- measures of revenue, profitability growth, product mix, cost reduction, and productivity. It is based on traditional financial measures.
Internal Business Process Perspective- focusses on performance of most critical internal business process
Customer Perspective- measurements focused on customer requirements, satisfaction, and profitability.
Learning and Growth Perspective- concentrates on organizations people, system, external environment, and including retaining and training employees, enhancing information technology and systems employee safety and health, and environmental sustainability issues.
GPA bad for education
Because of Scheduling, attitudes, lack of alignment, easily identifies strength/weaknesses, corrective actions
Difference between a 3.6 and 4.0
does company want, robots, parrots and yes men, or fun, creative, and well rounded people
TQM Total Quality Management
Is a philosophy that stresses 3 principles for achieving high levels of processes performance and quality: customer satisfaction, employee involvement, and continuous improvement in performance
Verizon Wireless Example
dropped calls can occur because of the phone, not just because of the signal
So they have people drive around to test network performance of their network and extensively test phones
Costs of Quality
When a process fails to satisfy a customer, the failure is considered a defect
There are prevention, appraisal, internal failure, and external failure costs
Costs associated with preventing defects before they happen
Costs incurred when the firm assesses the performance level of its processes
Costs resulting from defects that are discovered during the production of a service or product
Arise when a defects that are discovered during the production of a service of product
A written guarantee that the producer will replace or repair defective parts or perform the service to the customers satisfaction
A program in employee involvement includes changing organizational culture and encouraging teamwork
Continuous improvement and Plan-do-check-act cycle
Continuous= Philosophy of continually seeking ways to improve processes based on a Japanese concept called kaizen
Plan= A cycle, also called the Deming Wheel, used by firms actively engaged in continuos improvement to train their work teams in problem solving
Six Sigma- Motorola and GE
A comprehensive and flexible system for achieving, sustaining, and maximizing business success by minimizing defects and variability in processes
Define, Measure, Analyze, Improve and Control (DMAIC)
Define-determining the characteristics of a process’s output that are critical to customer satisfaction and reducing any gaps between current state and desired state
Analyze-Use the data on measures to perform process analysis; apply tools such as Pareto charts, scatter diagrams, or other tools
Improve- Modify or redesign methods to achieve new goal
Control- Monitor the process to make sure high performance levels are maintained
Quality at the Source
Philosophy whereby defects are caught where they were created
A set of standards governing documentation of a quality program
Documentation standards that require participating companies to keep track of their raw materials use and their generation, treatment, and disposal of hazardous waste
Benefits of ISO certification
Offers sales advantages and generates increased profits internally by reducing wastes which cut costs
Malcom Baldrige National Quality Award
The award promotes, recognizes, and publicizes quality strategies and achievements. It is Based on leadership, strategic planning, customer and market focus, measurement, analysis, knowledge management, workforce focus, process management, and Results
Potential ingredients in a customer’s quality definition
Performance, reliability, durability, features, and aesthetics
How does the number of components in a product affect our ability to control the reliability?
The larger the amount of components the greater the chance of defects.
If a product has many components, there are many more opportunities for failure
Customer satisfaction- Needs of today, desires for tomorrow, dimensions of quality
Involvement: external/internal- communication, learning, teams, training, mentoring, rewards, and incentives
Continuous improvement culture- across the supply chain, quality tools, improvement programs, knowledge management, benchmarking
External failure occurs when:
Customers are exposed to poor quality
The cost of quality concept refers to:
Internal failure, external failure, prevention, and appraisal costs
is a specific type of run chart used to ploy measurements or test outcomes against time and distinguish between variability caused by random fluctuation and variability that has an assigned cause
Three distinctive flows of the supply chain
Information, goods, and financial
Customer Relationship Management (CRM)
Identifying key customer segments, tailoring product and service agreements to meet their needs, measuring customer profitability and firms impact on customers, customer satisfaction levels SRM
Decision Support Systems (DSS)
computer based information systems that allow users to analyze, manipulate, and present data in a manner that aids higher level decision making
Network design aplications
Logistics information systems that address such long term strategic questions as facility location and sizing, as well as transportation network
The single largest player in the SCM software arena, with an install base of more than 60,000 sites and a market share of more than 50%
Dallas based software provider that got its start offering applications that allowed manufacturers to develop production schedules that optimized some variable of interest
offers a set of applications that use sophisticated statistical tools and techniques to support higher-level planning and decision making
Seeks to replace certain physical processes with virtual ones
What is supply chain compression?
Being able to look at a process and seeing how it can be developed better to make faster for customer and save money for company
Enterprise Resource Planning (ERP)
primary reason- integrate financial data, integrate inventory data, standardize human resource data, manufacturing and business process data, integrate customer order information
Negatives= single computer that runs entier system, if computer crashes, whole system is at risk
Buys single vendor ERP because everything compatible, price bundle, one IT system for all problems
Told all suppliers they had to upgrade their systems otherwise they would discontinue using them
According to the textbook, why is it important to reward managers for using metrics?
It helps create a measurement friendly culture
According to the NIKE case, what is currently the principle way that both global corporations and labor rights organizations address poor working conditions in global supply chain factories?
Monitoring for compliance with codes of conduct
According to the PCH case, where did PCH locate its postponement processing facilities, to take advantage of their relatively low labor costs and the availability of favorable tax-free trade zones?
Singapore and the southern Chinese city of Shenzhen
What are the three distinctive flows that PCH tries to help customers’ supply chain with
Information, goods and financial
According to the PCH case, PCH was a…
According to the PCH case, what was the source of the downside to the EMS business model?
Reliance on economies of scale to reduce costs
According to the PCH case, for many technology companies, finding adequate component suppliers in Shenzen (southern China) could be cumbersome because:
Procurement officers had to filter through numerous vendors to find ones that optimized cost, speed to market, and quality
According to the PCH case, what was one of the challenges facing the supply chain in the electronics industry in the 90’s?
The supply chain was new and needed further development
According to the PCH case, PCH International Limited was designed to:
Address the needs of a complex global technology landscape for its client companies
Design, operations and improvement of product systems that efficiently transform inputs into finished goods and services, maximizing productivity
The optimal order size
Using eoq you will get the lowest total cost for the given cost structure and demand forecast
What does it mean if AHC>AOC? AOC
AHC>AOC = above the EOQ
Forward and Backward integration (types of vertical integration)
Backward Integration – Taking over the role of your supplier. Example: We’re not going to buy bread for our sandwiches, we’ll make the bread ourselves from now on.
Forward Integration – Taking over the role of companies closer to the customer. Example: We will no longer sell Coca-Cola through our distributors, from now on, we’ll only sell Coke out of Coca-Cola stores.
Low per unit Cost(long-term)
Fast Production Rates
Minimal Customization Opportunities, Product Lines very consistent
Start -up costs may be very high
High per unit cost
High performance and design
Slow production rates
Customization opportunities likely, difference between products may be great
Start-up costs relatively low
Start-up costs moderate
Labor, machines, tools: mix
Lead times dictated by both processing rates and delivery
Changeovers – depends
Inventory – depends
Define: maximum time allowed for work on one uint at each station – time it takes for one unit to come off assembly line
What does it dictate?
What is effective cycle time? How fast could we go? You are only as strong as your weakest link
One station taking more time required than the rest of the stations and creating a back up in unfinished goods
Bulk Cargo, which is free flowing cargo stored loose and is usually loaded
by shovel. EX: coal, rice
Break-bulk Cargo which is general or packaged cargo often containerized.
Neo-bulk Cargo, which is cargo with characteristics of both bulk and break-bulk
cargo. EX: cars, logs
Cargo ship classifications
Bulk Carriers- oil tankers, ore carriers
Container ships- break-bulk cargo, container vessals, barges
Neo-bulk Ships- roll on roll off carriers, log carriers
Planogram: a drawing that illustrates product placement.
Used by retail stores chains to make all stores identical and to maximize the utilization of shelf space.
A Planogram affects the entire supply chain because companies have to package their product in a way that they will be able to get it on the shelves of stores.
Basic terminology that goes with Containerization.
TL- full truckload
CL- full container load
LTL- Less than a truck lad
LCL- Less than a container load
Pro’s and Con’s associated with four modes of transport?
Pros- accessibility, flexibility, versatility, reliability, 2nd fastest mode of transport, much cheaper than air, vital to intermodalism
Cons- long trips, excessive regulations when you cross state borders, vulnerable to gas prices tolls taxes, driver and truck insurance, sometimes have to make many stops
Pros- ability to carry heavier loads than trucks, fewer in transit regulations, better for long distance, not susceptible to energy/fuel costs, more affordable than road transport, capable in poor weather conditions
Cons- susceptible to lass/damage due to vibrations, poor on time reliability, average trip speed is less than 30 mph, access to infrastructure required
Pros- low costs compared to air transport, high cube cargo, high weight cargo, can transport any form of cargo, large shipments, easier to lad and move bulk shipments, accessible to odd shaped shipments
Cons- much slower than air, must have port capabilities, channel depth challenges
Pros- speed fastest growing transport mode, becoming more affordable, overnight capabilities, can be used for items with short shelf life
Cons- extremely expensive, incompatible containers for intermodal transportation
– fast mixing centers, more inventory quickly, zero invertory in distribution center
3rd Party Logistics Company
• an organization that executes a particular logistics function using its own resources
US side of exports, get the product out of the country, find most cost effective itinerary
Customs House Brokers
lawyer in other country to help clear foreign customs, arrange local itinerary
Goals and trade-offs for a queuing system
Goals: Find the proper balance between long lines/unhappy customers and idle staff/high cost.
Companies that have shorter lines are perceived to have better service, but shorter lines typically means employees with less work.
What do managers have control over in a queuing system?
1. Number of lines- single line/multiple lines
2. Priority Discipline- first come first serve, shortest processing time, reservations, emergencies
3. Psychological Variables- uncooperative customers, alternative systems such as take a number, give away free stuff
When people fail to enter the line because of hte number of people already present
When people enter the line but then leave because of the wait time
occurs in a multiple server model where people battle between the different lines, Line jumping
VMI Vendor Managed Inventory
Inventory planning and replenishment system where supplier(vendor) accepts negotiated responsibilities that typically include monitoring and restocking.
Value to retailer: fewer responsibilities, decrease cost
Value to vendor: better understanding of demand rates, fewer retailer errors, responsive
A better understanding of partner & their needs
End customer should be the focus
Customer Flow – How do customers typically navigate their way through a retail store? Why? Consider enter/exit points
Product Location – Profit Motivated? Customer Convenience? Planograms – Perimeter vs. Center, Aisles
Target: put most profitable (typically clothing) items in the center b/c don’t shop same as you do @ grocery store – you will “cut across the middle” to get to the items you want & at some point will see the clothing
Ikea: pretty much tell you you have to see every item in the store to get to the end, walk out with things you “didn’t know” you wanted
Amazon: Tell you what people also bought when you check out the item, have to work a little hard b/c constantly need to be changing what is on the front webpage, easy to use/navigate?, need to generate new content (often generated by customers with reviews!)
Buy Goods, push through supply chain
Send to a store for you to buy
Make things without you asking for them
Purchase→ Production→ Distribution→ Retail Sales
Customer never asks for the product – they just make it
When someone asks for a computer, then they buy the parts & put them together
Just in Time (JIT)
Quality at the source- assure quality is built in at every stage of the process instead of waiting for final inspection
High performance quality: must outperform push-competitor offerings in order to remain competitive
Consistent quality: perfection in every facet in order to reduce errors, which create huge problems and delays
Preventative maintenance: reduces downtime. JIT cannot tolerate unplanned downtime. May be scheduled during down times.
Continuous improvement: required to maintain competitive edge
: when you delay the final assembly of the end item
Relationship to push and pull systems:
– PUSH through the standardized portions of manufacturing
– PULL only the customization options offered to customers
– Inventories: WIP (Push Elements) + Components (Pull Elements)
Define: very high and very low supply levels despite fairly constant demand levels.
– Poor forecasting, poor analysis, poor communication
– Order batching- trying to place large orders
– Price fluctuations-promotions, quantity discounts, special pricing/payment options… can cause batching
– Rationing-demand higher than supply. Promotes rationing on part of “distributor”. “Retailers” may get less tan ordered.
– Shortage gaming- retailers inflate order sizes to counteract rationing.
using different companies to produce items
Business process outsourcing: outsourcing of business functions to independent suppliers (Payroll, IT, Customer Service)
Relocation of business process or entire manufacturing facility to foreign country
focal firm contracts with independent supplier to manufacture products to specific specifications
Electronic Manufacturing Services (EMS)
– companies that take on numerous primary supply chains associated with making electronic components assembled end-items
Can hire company that already has knowledge to make product without having to build out and incur costs
Lead paint occurred when product wasn’t tested before it was used to paint, used reliable factory they had used before, but just didn’t safety test. Primary Parties: Mattel, Lee Der (manufacture)
Design, product and deliver new garment and put it on display in 15 days
Close communication loop, stick to a rhythm across entire chain, leverage your capital assets to increase supply chain flexibility
Customs- Trade Partnership against terrorism (C-TAP)
Companies work with Customs at ports to have their items be approved to come into the country
Starbucks: CAFE practices
Coffee and Farmer Equity Practices- ensure sustainable supply of high quality coffee beans, benefit because built relationships with coffee farms and communities, stopped low quality coffee from being produced and sold because suppressed price of good beans
According to SCM 300 a social responsibility program might include: Legal, ethical, and environmentally friendly/sustainable