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Supply Chain

Chapter 1: What is MOSC? Introduction. Operations and SCM organizes all activities to allow the final client to receive a product or service. When he wants it; as often as he wants it; with the requested functionalities; for an acceptable price.

A. Streams. Flow of production.

e Four types of streams. - Products or services - Added value - Information - Finance. Stakeholders. - All companies in the Supply Chain. - The different departments inside the company. “””

B. The dilemma of MOSC. Error in the SCM. - Order inaccurate - Product shipped with damage - Warehouse pick was inaccurate Consequence. - Customer cancelling the order. - Customer OK to wait. 30% of the price is related to the SC.

How to measure the costs? - Supply chain management costs (€) - Total inventory days of supply (days) - Cash-to-cash cycle time (days) Service level. Ratio between the number of clients coming out of the supermarket with the product they wanted and the number of clients that entered the supermarket with the need for this same product. Satisfaction level. Ratio between the number of clients satisfied and the total number of clients having bought the product.

C. The decision areas of MOSC. -

Service level (seen before) Transportation Network configuration Production and design Information management Inventory management

Chapter 2: Sourcing and managing relationships to suppliers. Introduction. In all industries purchased parts and services is a big part of the final cost price. A global vision of the upstream value chain has become indispensable for every purchasing strategy.

A. The contribution of purchasing. -

Keeping costs down Securing the chain Access to new technology Ensuring product quality

The leverage effects. 1€ in cost savings  1€ saved in pretax profits. 1€ increase in sales  1€ multiplied by the pretax profit margin (less than before). Ensuring product quality. A rubber ring of comparatively low costs led to the complete failure of the Shuttle disaster in 1986, or the Horsemeat scandal. Ensuring Ethics is capital as well (Foxconn for Apple).

The purchasing department is responsible for: - Participating to the profitability of the company - Assures the quality of products and services (brand image) - Secures the chain of supply - Identifies innovations coming from outside the company.

B. What costs to include? TCO (Total Cost of Ownership). The sum of all costs impacted by a supplier management decision.

C. The categories. Matrix of Kraljic.

Routine. - Many alternative products. - Low value, small individual transactions. - Everyday use. - Anyone could buy it. Simplify acquisition process. Paper for printers. Bottleneck. - Complex specifications. - Few alternate sources of supply. - Big impact on operations. - New tech or untested processes. Ensure supply continuity. Washer for Peugeot (only in Japan). Leverage. - High expenditures.

- Large marketplace capacity. - Many alternate products/ sources. - Market/price sensitive. Maximize commercial advantage. Fuel for airplanes. Critical. - Critical to profitability and operations. - Few qualified sources. - Large expenditures. - Design and quality critical. - Complex/ rigid specification. Form partnerships with suppliers. Microprocessors.

Chapter 3.1: The client in sight. Lead time. Time between command and delivery of a product. Three strategies. - Be ready to produce? - Wait for the order? - Already have it in store and send it directly?

A. Push & Pull.

Demand uncertainty. When a business is unable to accurately predict consumer demand for its products or service.

Cycle time. Time necessary to fully produce an object. Economy of scale. Saving made by a company when increasing production and therefore reducing costs. Push. Strategy where businesses attempt to take their products to the customers Pull. To get the customers to come to you. Continuous replenishment. Method of replenishing products in real time as needed only for the sold amount.

B. The strategy. In practice there is hardly any situation where a firm applies a “pure” or pull or push strategy. The key question is clearly more where it wants to set the push-pull boundary. “Delayed differentiation” or “Postponement”. To pull operations costs down, firms try to standardize as much of the process as possible for different products and customize the products as late as possible. Modular product. Made by combining different modules. Modular process. Each product undergoes a discrete set of operations making it possible to store inventory in semi-finished form.

Chapter 3.3: Managing inventories along the supply chain. A. Types and sources of inventory. Anticipation inventory. Held in anticipation of customer demand. Allows instant availability of items for customers. Transportation inventory. Inventory moving from one link in the SP to another. Hedge inventory. Buildup to buffer against some event that may not happen.

Dead stock. Non-moving inventory that is unlikely to be any further use. Value-adding storage. Non-moving inventory that gain added value while being stored. Safety stocks (buffer inventory). Extra inventory that companies hold to protect themselves against uncertainties in either demand or replenishment time. Smoothing inventories. Inventory used to smooth out differences between upstream production levels and downstream demand.

B. Inventory costs. What factors drive up the inventory holding cost of a product? Volume, Value, Fragility. Dimensions of inventory costs. - Storage costs - Handling costs - Inventory risk - Financing costs.

C. ROP & Economic Order Quantity. Optimizing the cycle in inventory management. - Quantity Q to order - Reorder point The EOQ model tells us what the optimal value for Q. is It works with assumptions. - Demand is relatively constant over time - Demand is known with certainty - Lead time is constant - Order quantity is received all at once. Ch = H * (Q/2) H = Holding cost per unit Q = Order quantity Ch = Holding Cost

Co = S * D/Q S = Ordering Cost D = Annual Demand Q = Order Quantity C total = Ch + Co = S * (D/Q) + H * (Q/2) Q* = Racine(2DS/H) Calculating Reorder Point. R = d.L + Safety Stock L = Lead Time D = Average demand rate during lead time Safety stock = .z.VL Z= Value depending on target service rate  = Standard deviation of demand VL = Racine * Lead time

D. Management approaches. Periodic review - Fixed order intervals - Variable order sizes - Inventory position required only at review - Convenient to administer - Orders may be combined Continuous review - Varying order intervals - Fixed order sizes (Q) - Requires constant review of inventory position - Requires less safety stocks.

Chapter 4.1: Analyzing and improving processes. A. Understanding processes.

The three pillars of the company. Satisfying the clients, while creating financial income for the owners and providing jobs to employees.

B. Mapping processes. Definition. A set of logically related tasks or activities performed to achieve a defined business outcome. -

Primary process (main value-added activities) Support process (Performs necessary) Development process (Improving the performance of primary and support processes)

C. Indicators. Productivity = Outputs/ Inputs. Efficiency. A comparison of an actual performance to some standard. Cycle time. Total time required to complete a process from start to finish.

D. Continuous improvement. -

Attack each delay Examine each decision point Look for loops Assess process steps.

Chapter 4.2: Continuous improvement in the Supply Chain. A. Make or buy? Outsourcing. - High strategic flexibility and low investment risk - Possibly more cost-effective - Access to state-of-the-art products and services Insourcing. - Control over the process and core technologies - Lower supply chain risk - Avoid communication and coordination challenges - Integrate margins. The in vs out decision requires to understand all the costs associated to each option. Outsourcing tends to generate very measurable cost reduction and not so easily measurable increases.

B. Buying or cooperating. Partnerships require specific conditions. - Reducing the supplier base - Some shared investments and usually some geographical co-location - Transfer know-how and share information - Involve purchasers and suppliers in design phases. - Develop the appropriate purchasing culture.

C. Quality. Definition. The totality of features and characteristics of a product or service that bears its ability to satisfy stated or implied needs.

D. Continuous improvement. The DMAIC Improvement Wheel. 1. Define goals for improvement of activity 2. Measure the existing process 3. Analyze the process 4. Improve the process 5. Contro```l the new process The fishbone diagram = Root-cause diagram = Ishikawa diagram...