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Warehousing

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Companies storing their purchases, work-in progress, and finished goods

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Distribution Center

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A warehouse that is used to receive bulk shipments, break them down, repackage items, and distribute them to a manufacturing center or retail center

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Crossdocking

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Unloading an inbound vehicle and reloading the product onto an outbound vehicle with little to no storage

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Sorting

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Separating products into grades and qualities

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Assorting

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Building up a variety of products

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Risk Pooling

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the relationship between the number of warehouses, system inventories, and customer service. The effect of risk pooling can be estimated by the square root rule.

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More Centralized

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= lower safety stock, lower average inventory, higher lead times

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More Decentralized

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= higher safety stock, higher average inventory, lower lead times

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Consolidation Warehouse

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collect LTL shipments for transport in TL/CL quantities

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Private Warehouse

answer

warehouses that are owned and used by an organization (used by large companies, high volume of products, fixed cost)

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Public (3PL) Warehouse

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warehouses that are rented or leased to an organization by another organization (used by smaller companies, low volume of products, variable cost)

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Cold Chains Warehouse

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- temperate controlled transportation and warehouses

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Benefits of Private Warehouses

answer

• reduces purchasing and transportation cost • more control • tax advantages

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Disadvantages of Private Warehouses

answer

• financial risk, can't spend that money elsewhere • insurance companies prefer to insure public

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Benefits of Public Warehouses

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• Flexibility and investment cost savings • 3PL repackaging, assembling, short & long term storage

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Disadvantage of Public Warehouses

answer

Lack of Control

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Basic Warehouse Operations

answer

• Movement- receiving, putting away, order picking, shipping • Storage- Warehouse management system (where product is store, how much you have)

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Warehouse Productivity Measures

answer

• productivity ratio • orders correctly filled • pounds/units per day

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Warehousing Trends

answer

• More public warehouses (3PL) • sharing information within company and with customers • added value by packaging or assembling products

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Transportation Management Systems

answer

software that allows companies to select the best mix of transportation modes, services, and pricing

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Global Trade Management Systems

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provide global visibility, standardization, and documentation of imports/exports as goods are shipped between countries

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Warehouse Management Systems

answer

Software facilitating the proper storage and movement of inventory

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Bill of Lading

answer

common carrier is responsible for all losses, damages, delays in shipment besides acts of nature. States what supplier is shipping.

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Reverse Logistics

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Movement of goods from the customer back to the supplier

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FOB Destination Pricing

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Supplier is legally responsible for goods until they arrive to the supplier

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FOB Origin Pricing

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Buyer is legally responsible for goods as soon as they purchase them

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Intermodal Transportation

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Using 2 or more modes of transportation • trailer-on-flatcar • container-on-flatcar (piggyback service) • roll-on-roll-off (RORO) vessels- allows vehicles to be directly driven onto cargo ships

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Modes of Transportation

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• truck (most flexible, most popular, low costs) • air carriers (most expensive mode, high security, fast) • water (cheap, inflexible, slow, heavy bulky goods, low security) • train (long, heavy, & bulky shipments)

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Common Carriers

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offer transportation services to all shippers at published rates between designated destinations, must serve the general public. (Southwest Air, Amtrak, Carnival Cruise Lines)

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Contract Carriers

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Serve specific customers under contractual agreements

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Exempt Carriers

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serve specific customers but are exempt from regulation of services and rates. Transport certain products such as produce, livestock, coal.

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Private Carriers

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Transports goods for the company that owns the carrier

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Challenges to Claims in Transportation

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Determining who is at fault for loss and value of loss or damage

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Cost-of- Service Pricing

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Used when carriers establish prices based on their fixed and variable costs of transportation

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Value-of-Service Pricing

answer

carriers set price and highest realistic price based on demand and level of competition

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Inventory Management

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The stock of an item or resource used in an organization and how it is managed

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Cycling Counting

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A physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year

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Four Categories of Inventory

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o Finished Goods o Raw Materials o WIP o Maintenance, repair, and operating (MRO)

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Buffer Uncertainty in the Marketplace

answer

• Satisfy customer demand, meet independent demand • Set by market conditions, Independent of operations, Replenishment philosophy

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Decouple Dependencies in the Supply Chain

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• Facilitate Production, Meet dependent demand • Components and assemblies for creating good or service • Demand is dependent on the factory or service schedule, Demand comes in clumps, Requirement philosophy

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Item Cost

answer

Direct costs traceable to each unit for material and labor

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Ordering (setup) Cost

answer

Cost of placing an order

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Carrying Cost

answer

everything related to the investment, the interests on working capital and the opportunity cost of the money invested in the inventory

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Stock-out Cost

answer

the cost of not having enough inventory on hand

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Inventory Accuracy

answer

how well the inventory records agree with physical count

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Two Bin System

answer

Maintain two bins of item in stock. Use one until it is gone. Start using the second and order an new one. Size of bins should be equal to the renderer point. This is a fixed order quantity system Advantage: simple and requires no monitoring. Good for cheap, common items Critical Decision: what should be the bin-size?

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One Bin System

answer

Reorder point or periodic check to refill one bin

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EOQ

answer

o EOQ answers the question "how much do I order?" o Used for independent demand items o Objective is to find order quantity that minimizes the total cost of managing inventory o Widely used and robust • Seeks to determine an optimal order quantity, where the sum of the annual order cost and the annual inventory holding cost is minimized

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Simple EOQ Model

answer

Demand is known and constant, order lead time is known and constant, full replenishment, price is constant—no discounts, no stock-outs, no limits on capital availability

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Reorder Point (ROP)

answer

o ROP=dxLT • D= average demand (constant) • LT+ leadtime (constant) • The average demand during leadtime + Safety stock • When d and LT has uncertainty o Uncertainty is a normal condition o Demand is often affected by exogenous factors- weather, forgetfulness o Leadtimes often vary regardless of carrier intentions

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Average Inventory

answer

o Average level of inventory=Q/2+SS o Average inventory impacts Total Average Inventory Cost

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Continuous Review System

answer

Event triggered, allows for random demand, stock position is monitored continuously, orders the same quantity when you reach your reorder point, gets you back to the inventory level you want to be at

question

Periodic Review System

answer

Fixed-term period model, time triggered, assume demand is random, order up to "target" level at specific time, requires more SS because you're more likely to run out

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ABC Method of Inventory

answer

• Determine annual $ usage • Groups inventory as A, B, and C items • A items- highest priority with larger SS. Approximately 20% of the items but 80% of total sales and total inventory cost • B Items- Account for about 40% of total items and 15% of total sales and inventory costs • C Items- Lowest value, about 40% of total items and 5% of sales and inventory cost

question

Inventory Turnover Ratio

answer

= Cost of Revenue/ Average Inventory

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Resource Planning

answer

The process of determining the production capacity required to meet demand • Capacity—the max workload that an organization is capable of completing in a given period of time • Problem—missed due date or stock-out may cascade downstream and cause the bullwhip effect • Operations managers are continuously balancing capacity and output

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Two Types of Resource Planning

answer

Capacity Plan Materials Plan

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Aggregate Production Plan

answer

• Hierarchical Planning- process that translates annual business plans and demand forecasts into a production plan for a product family in a plant or facility leading to the aggregate production plan • Goal: to specify the optimal combo of production rate, workforce level, and inventory on hand

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Aggregate Scheduling Goals

answer

Meet demand, use capacity efficiently, meet inventory policy, minimize cost

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Chase Strategy

answer

Match production to customer order rate by hiring and laying off employees • Produce only what you sell, produce products or services just-in-time, If there are no sales—no product, typical for services

question

Level Strategy

answer

Stable workforce with constant output, inventory, and backlogs absorb fluctuations in demand o Some combo of the two= stable workforce, variable hours, variable output though overtime or flex hour schedules

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Master Production Schedule (MPS)

answer

A detailed disaggregation of the aggregate production plan, listing the exact end items to be produced by a specific period • More detailed than APP and easier to plan under stable demand • Planning horizon is shorter than APP, but longer than the lead time to produce the item • For service industry, may just be the appointment book, where capacity is balanced with demand

question

Material Requirements Planning (MRP)

answer

Breaks end product requirements into a materials plan for component parts o Logic for determining the number of parts, components, and materials needed to produce a product o MRP provides time scheduling info specifying when each of the materials, parts, and components should be ordered or produced o Depend demand drives MRP

question

Bill of Material (BOM)

answer

Document that shows an inclusive listing of all component parts and assemblies making up the final product

question

Dependent Demand

answer

the internal demand for parts based on the demand of the final product in which the parts are used

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Independent Demand

answer

Demand for final products affected by trends, seasonal patterns, and general market conditions

question

Indented Bill of Materials

answer

Multilevel BOM which show the parent-component relationships and the specific units of components known as the planning factor

question

Super Bill of Materials

answer

Enables the firm to forecast the total demand end products

question

Enterprise Resource Planning Systems (ERP)

answer

Info system connecting all functional areas and operations of an organization and in some cases, suppliers and customers via common software infrastructure and database • Provides means for supply chain members to share info so that resources can be fully utilized to meet demand, while minimizing supply chain inventories

question

Advantages and Disadvantages of ERP

answer

• Advantages- Help visibility reduce supply chain inventories, Standardize manufacturing processes, measure performance and communicate via standardized method • Disadvantages- Substantial time and capital investment, complexity, firms adapt processes to meet ERP system

question

Sales and Operations Planning (S&OP)

answer

process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantages by staying consumer-focused. Brings together all the plans for the business into one integrated set of plans. Performed at least once a month

question

S&OP 5 Step Process

answer

• Data Gathering • Demand Planning • Supply Planning • Pre-Executive S&OP Meeting • Executive S&OP Meeting

question

Benefits of S&OP

answer

Benefits of S&OP- Brings accountability across organization, enables business to all drive to the same plan, updating production- financial- and sales plan, enables improved service to customer, improves planning of financial investments

question

Supply Chain Management

answer

The flow of products and services

question

Upstream Supply Chain

answer

Moves right along the supply chain

question

Downstream Supply Chain

answer

Moves left along the supply chain

question

Four Foundations of Supply Chain

answer

Supply Management, Operations Management, Distribution, Integration

question

Supply Management

answer

Supplier management, supplier evaluation, supplier certification, strategic partners, green sourcing

question

Operations Management

answer

Demand management, linking buyers and suppliers via MRP and ERP systems, using lean systems to improve the flow of materials to reduce inventory levels

question

Distribution

answer

Logistics, transportation management, storage of products, allocation, sorting, global logistics

question

Integration

answer

Supply chain process integration, work for common goals, supply chain performance measurement

question

Bullwhip Effect

answer

Small changes in customer demand ripple through to create larger and larger changes as orders move though. Forecasts and orders becoming amplified and accumulate. o Causes: Price fluctuations o How to reduce- Collaborative planning, forecasting, and replenishment activities reduce the effect, use frequent, smaller order sizes.. Allocate short supplier based on demand histories

question

Current Trends in the New Supply Chain

answer

o Back-shoring (moving foreign production back home) o Managing supply chain risk o Reducing supply chain costs o Increasing supply chain visibility o Green supply chains

question

Purchase Order

answer

the buyer's offer and becomes a binding contract when accepted by supplier

question

Supply Base

answer

List of supplier that a firm uses to acquire its materials, series, supplies, and equipment

question

Forward Integration

answer

Acquiring customer's operations

question

Backward Integration

answer

Acquiring sources of supply

question

Merchant Buyers

answer

Wholesalers and retailers who purchase for resale

question

Industrial Buyers

answer

-Purchase raw materials for conversion, services, capital equipment's, and MRO suppliers

question

Supplier Relationship Management Systems

answer

streamlining the processes and communication between buyer and supplier using software applications

question

E-Procurement Process

answer

o Material user inputs a materials requisition o Materials requisition submitted to buyer o Buyer assigns qualified suppliers to bid o Buyer reviews closed bids and selects a supplier

question

Single vs. Multi-sourcing

answer

o Single- risky, current trends favor fewer sources but not just one o Multiple- better prices but must upkeep relationships with each

question

Centralized Purchasing Structure

answer

Purchasing dept located at the firm's corporate office and makes all purchasing decisions • Advantages- concentrated volume, leveraging purchasing volume, avoid duplication, lower transportation cost

question

Decentralized purchasing structure

answer

Individual, local purchasing dept. such as plant level, make their own purchasing decisions • Advantages- closer to knowledge of requirements, local sourcing, less bureaucracy

question

Supplier Relationship Management (5 Key Points)

answer

• Automation handles routine transactions • Integration spans multiple depts., processes, and software • Visibility of info and process flows • Collaboration through info sharing • Optimization of processes and decision making

question

Independent Demand

answer

Finished Goods

question

Dependent Demand

answer

Raw Materials

question

Delphi Method

answer

Survey experts

question

Sales Force Composite

answer

Forecast is based on the sales force's knowledge of the market and estimates of customer needs

question

Qualitative Forecasting

answer

(judgmental)- Bases on opinion and intuition. Generally used when data are limited, unavailable, or not currently relevant

question

Quantitive Forecasting

answer

uses mathematical models and historical data.. Historical data is used to predict future demand • Time series analysis, casual relationships, simulation

question

Forecast Models

answer

o Naïve Forecast- estimate of the next period is equal to the demand in past period o Simple Moving Average- assumes an average is a good estimator of future behavior o Weighted Moving Average- permits an unequal weighting on prior time periods o Exponential Smoothing Model- if smoothing constant is one- works just like naïve

question

Forecast Error

answer

tells us how far above or below the actual demand is from the forecast • If error is negative, we forecasted more than we sold

question

RSFE

answer

indicates bias in the forecasts with the tendency of a forecast to be constantly higher or lower than actual demand

question

MAD

answer

Mean Absolute Deviation- Indicated the average forecast error in absolute terms • MAD=0 is perfect • Lower better

question

MAPE

answer

Provides a perspective of the true average magnitude of the forecast error in relative terms • MAPE=0 is ideal • Lower Better

question

MSE

answer

Mean Squared Error- analogous to variance, large forecast errors and heavily penalized

question

Process Management

answer

The application of knowledge, skills, tools, techniques, and systems to define, visualize, measure, control, report, and improve processes with the goal to meet customer requirements efficiently

question

Lean Production

answer

Operating philosophy of waste reduction and value enhancement

question

Lean Layouts

answer

Visual- Inventory and setup time reductions, small batch scheduling, continuous improvement, workforce empowerment

question

Wastes Lean Productions Seeks to Eliminate

answer

• Overproduction • Waiting time • transportation • excess inventory • over processing • excess motion • defects/ rework

question

5S of Waste Production

answer

Sort, Set in Order, Shine, Standardize, Sustain

question

Inventory and Setup Time Reduction

answer

o Excess inventory is a waste o Reducing inventory levels causes production problems o Once problems are detected, they can be solved o End result- a smoother running organization with less inventory investment

question

Kanban

answer

a "pull" production system, a physical control system, composed of cards and containers

question

Workforce Commitment

answer

managers must support Lean production by providing subordinates with the skills, tools, time, and other necessary resources to identify problems and implement solutions

question

Continuous Improvement (Kaizen)

answer

Continuous approach to reduce process, delivery, and quality problems, such as machine breakdown problems, setup problems, and internal quality problems

question

PDCA Cycle

answer

• Plan: a change aimed at improvement • Do: Execute the change • Check: Study the results; did it work? • Act: Institutionalize the change or abandon REPEAT

question

Six Sigma

answer

All about quality, meeting or exceeding customer requirements new and in the future

question

Total Quality Management (TQM)

answer

managing the entire organization so that it excels on all dimensions of the products and services that are important to the customer

question

Design Quality

answer

Inherent value of the product in the marketplace

question

Conformance Quality

answer

degree to which the product or service design specifications are met

question

Costs of Quality

answer

o Appraisal Costs- inspections, audits o External failure costs- warranty costs, returns, customer complaints, lawsuits and recalls o Internal Failure costs- scrap and rework, re-inspection and re-testing, defects before delivery o Prevention costs- quality planning, supplier capability, quality improvement

question

DPMO

answer

Defects per million opportunities

question

DMAIC Cycle

answer

o Define, Measure, Analyze, Improve, and Control o Developed by GE as a means of focusing effort on quality using a methodological approach o Overall focus of the methodology is to understand and achieve with the customer wants

question

Six Sigma Training Levels

answer

o Masters Black Belt- Champion, oversee/ guide projects o Black Belt- Coach and support, project leader o Green Belt- Lead project success o Yellow Belt- Analyze and implement improvement

question

Statistical Process Control

answer

SPC involves monitoring and eliminating variability using tools, knowledge, and data

question

Causes of Variation

answer

o Assignable Causes- factors that can be clearly identified and possibly managed. Can be eliminated o Natural/ Common Causes- inherent to the production process. In order to reduce variation due to common causes, the process must be changed

question

R Charts

answer

Shows sample ranges over time, monitors variability in process

question

X Charts

answer

Shows sample means over time, monitors process average

question

Project

answer

a series of relation jobs usually directed toward some major output and requiring a significant period of time to perform

question

Project Management

answer

the management of activities of planning, directing, and controlling resources to meet the technical cost and time constraints of a project

question

Pure Project

answer

where a self-contained team works full-time on the project

question

Functional Project

answer

is housed within a functional division

question

Statement of Work

answer

Provides a high level view of the project

question

Network Planning Model

answer

a project that is made up of a sequence of activities that form a network representing a project

question

Supply Chain Performance Measurement

answer

Measure companies you work with. Cost, quality, quantity, service

question

A firm can compete based on their supply chain capabilities if they

answer

Understand the end customer, Leverage partner requirements and trade-offs, and adjust supply chain member capabilities

question

Supply Chain Performance Measures

answer

• Demand Driven Supply Networks- Supply Chain with enough flexibility to quickly respond to changes in the marketplace • Traditional Performance Measures: • Cost and profit based performance measures must be used with caution • Traditional cost-based info does not reflect the underlying performance of an organization's productive system; costs and profits can be hidden

question

New Considerations in Supply Chain Performance

answer

• Environmental sustainability and Green SCM • Carbon footprint- reducing greenhouse gas

question

5 Process Categories on the SCOR Model

answer

Reliability, Responsiveness, Agility, Cost, Asset Management

question

Ultimate Goal of Supply Chain

answer

To create value for the services and products provided to end customers

question

Process Integration

answer

Sharing info and coordination resources to jointly manage a process

question

Supply Chain Integration Model

answer

• Identify Critical SC Trading Partners • Review and establish SC Strategies • Align SC strategies • Develop Internal Performance measures for key processes • Assess and improve internal integration of key SC processes • Extend process integration to 2nd tier SC partners • Reevaluate the integration model annually

question

Obstacles of Supply Chain Integration

answer

• The silo mentality- "I win, you lose" • Lack of SC visibility • Lack of knowledge • Lack of trust • Too much variability

question

Ways to Manage Supply Chain Risk

answer

• Increase safety stocks, identify backup suppliers and logistic services, diversity the supply base, utilize a supply chain IT system, develop a formal risk management program, reducing the risk of intentionally created disruptions

question

Managing Supply Chain Security

answer

• A SC is only as secure as its weakest link • Security management collaboration should include contractual requirements for secure systems

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