LOG202 - Lecture notes 1-6 PDF

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LOG202 Operating – Productions of goods and provision of services Between any stages in the supply chain, the business transaction involves the exchange of goods and money between a buyer and a seller 3 things that moves in a supply chain - materials - information - money effective management of 3 f...

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LOG202 Operating – Productions of goods and provision of services Between any stages in the supply chain, the business transaction involves the exchange of goods and money between a buyer and a seller 3 things that moves in a supply chain - materials - information - money effective management of 3 flows will benefit the end consumer Sourcing – procurement To anticipate demand and monitor the supply chain so that it is efficient and deliver high quality to customers – planning

5 stages of Operations and SCM -

Planning Sourcing Making Returning Delivery

Degree of interaction with customer is inseparable for services – production and consumption of service is happening at the same time Goods can be inventorised if unused or unsold, hence not perishable. Service perishability depends on capacity management too (can do this by spreading out demand during peak/non peak period) Just in Time (JIT) – saves inventory cost - produces v small amount of goods to meet demand only - suppliers must be reliable bc v little spare inventory as back up, cannot have delays Six-sigma quality – goal is to have 0 defects, but currently want to have less than 3.4 defects per 1 mil. Also is about continuous improvement. TQM – everyone is involved, everything can be improved, and there is no end to improving Sustainability means meeting value goals without compromising the ability of future generations to meet their own needs

Firm’s strategy should focus not only on economic viability of shareholders, but also the environmental and social impact on key stakeholders Major activities of typical strategic planning process 1) Develop/Refine strategy (yearly) 2) Translate strategy to operations and supply chain initiative (quarterly) 3) Major focus points and projects Competitive Dimensions - Price (make product or deliver service cheaply) - Quality (make a great product or deliver a great service) - Delivery Speed (make the product or deliver service quickly) - Delivery Reliability (deliver when promised) - Coping with changes in demand (change its volume) - Flexibility and new product introduction speed (change it) Trade offs - Occur when activities are incompatible and firm needs to decide what to focus on Order Qualifiers - Basic features you must have before customer will even consider the firm - Dimensions that are necessary for a firm’s products to be considered for purchase by customers - Features customers will not forego Order Winners - Features customers use to determine which product to ultimately purchase - Criteria used by customers to differentiate the products/services of one firm from another Risk Mitigation -> High impact high probability are most important priorities KPI of Operations via product development performance - Time to market (from product design, to product launch itself) – frequency of new product, and percentage of sales from new product [capture market faster if you launch faster, advantage against competitor] - Quality – customer satisfaction, number of defects - Productivity – engineering hours per project, cost of materials and tooling per project Long term – infrastructure Medium term –Resources Short – try to optimise current capacity Not enough inventory to meet demand, will have stock out. Match supply and demand: main objective of strategic capacity planning Bottleneck – If you allocate too much tasks to one work station Idle – If you allocate too little tasks to one station, you under utilise

Costwise – one time change is cheaper, because change multiple times will have disruption. But one time change may not be able to meet demand cause huge change. But change minor and multiple times, easier and faster to align with demand, but more costly. So there is a trade off. SU3 Service encounter has the opportunity to build relationships, low efficiency but high sales opportunity Subjective preference variability – aiya you greet me or don’t greet nvm VS hey im bringing you business greet me nicely Strategies for managing customer introduced variability 1. Classic accommodation 2. Low-cost accommodation 3. Classic reduction 4. Uncompromised reduction Any repetitive processes that don’t reqiore tjomkijg - use machines for self service appoahc **variability and strategies for managing are impt for exam Quality at the source – saving time, effort and money, resolving it at moment of identification of the problem -

Manpower (well trained) Equipment (well maintained) Materials ()

Spend more on prevention than on appraisal SU4 When do we add value to our products?  ONLY when we are actually changing the nature/characteristics/functions of the product  Moving goods etc not counted as they do not change value of the item itself Sourcing: First step is to select a supplier! Lean supply chain components -> need to find a supplier that can reduce waste and improve efficiency, because hard to tell suppliers what to do, but what you CAN do is choose which supplier you want  Helps you save money on inspection of materials, will save on delivery time because you know they can do what they promise etc LEAD TIME: important concept

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Has an impact on inventory costs. Shorter lead time = don’t need to hold as much inventory to fulfil orders while waiting for replenishments to come - Use automation to spend up procurement Lean manufacturing - JIT (reduce inventory = reduce storage costs) Lean warehousing - Efficient inbound and outbound, with system to know where everything is aka Warehouse Management System (WMS) Lean logistics - Routing (reduce change of damages, hence reducing waste) - Crossdocking – you have to be able to coordinate inbound and outbound well, because you literally transfer from one inbound van to outbound van at one shot to reduce storage costs - Backhaul minimization (fuel used for delivery when coming back, manpower used etc. Ensure a loaded backhaul by planning so you still have cargo/goods) Lean Layouts  Group technology (will reduce motion and material handling, save $$) KANBAN – is a JIT system with signalling system  Signalling system so you know when to produce and when to deliver  Don’t do things unless you receive the signals (e.g toolcard system) Strategic sourcing: - Supplier development, help them improve Vendor managed inventory (VMI) - Most economical/cost efficient for both parties. Maybe supplier restock just twice instead of five times, while ensuring customer still has enough stock. Take note this cannot cause customer to pay more!! Spot purchase -> buy when item needed, don’t need to plan or think Functional products: Easy forecast level, because it’s a staple that has constant demand. Generic demand so smaller margin. Innovative products: - Shorter life cycle because of technological advancements Hau Lee’s uncertainty framework If demand is fluctuating, order less amount each time, but order more frequently, so have to make sure supplier is responsive and can deliver quickly. (innovative products) If functional product with stable demand, can deliver by ship because even tho slower its ok because you will be prepared because stable!!! Risk hedging supply chain (Functional with high uncertainty)

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If supply is uncertain, have multiple suppliers or back up suppliers OR can hold more inventory

Outsourcing: **Reasons to outsource (often ask in exam): - If you buy warehouses, trucks etc when you are a small manufacturer, cannot enjoy economies of scale. So you collaborate with vendor, outsource supplier/warehousing. -

If you outsource, becomes a variable cost e,g delivery – less orders, less delivery as compared to fixed delivery guy

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If outsource, can focus within organisation on what firm does best

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Don’t outsource core competency, that is what you should focus on while outsourcing the rest

Total cost of ownership (TCO): - Acquistion -> Delivery, set up etc - Using -> Cost of maintenance, upkeep - Post ownership – cost of selling away the item e.g adverts etc or disposing SU 5 Forecasting Strategic forecast (decisions on overall directions) Tactical forecasts (day to day decisions) 4 types of forecasts - Qualitative (based on judgement, use experience etc, no numbers involved) (when you want to launch new product, new market or new technology, have to use this cause no past experience) - Time series analysis (data relating to past demand can be used to predict future demand) - Causal relationships - Simulation Components of demand - Cyclical pattern: will go up and down over long periods e.g recession and improvement it’s a cycle happening over long periods - Seasonal - Random Variation - Autocorrelation

Long term forecast: infrastructure decisions (useful for detecting general trends and identifying major turning points)

Medium term: forecasting 3 months to 2 years (how much production capacity you want in a medium term) used to develop strategy implemented over next 6-18 months Short term: most accurate, tactical. Because short time frame so lesser uncertainty Factors to choose forecasting model 1) Time horizon to be forecast 2) Data availability (Quantitative more expensive because need money to store and collect data) 3) Accuracy required 4) Size of forecasting budget 5) Availability of qualified personnel Different forecast models: 1) Simple moving average: average of fixed number of past periods - Useful when demand is not growing or declining rapidly, no seasonality present 2) Weighted moving average 3) Exponential smoothing model: ∝ D t −1+(1−∝)F t −1 If we place bigger weight on demand, weight on forecast will be smaller. Vice versa applies. If demand is fluctuating, and you put smaller alpha, will have smoother graph. 4) Linear regression analysis Choose method that will give us the smallest forecast error!!! Quantitative forecasting** come out more than once in exam Medium term demand forecasts/medium capacity planning: how much to produce, how much inventory to keep, how much manpower to have Influencing demand: - Pricing - Promotion - Backordering (no more stock, but if can wait, can deliver after) - New demand creation (smooth out demand, and plan capacity easily by shifting peak periods and influencing purchasing pattern) **AGGREGATE PLANNING STRATEGY, BE FAMILIAR! ** inventory management question, ALWAYS COME OUT

SU 6 Inventory Control System 1. Single period model – for 1 time purchase (e.g production of newspaper -> customers only interested in next day newspaper)

a. Ascertain the amount of newspapers to order -> too little, difficult to replenish = stock out. If too much, extra cost and not enough buyers 2. Multi-Period model a. Fixed order quantity (or continuous review), timing to order is not fixed, but how much to order is fixed b. Fixed period (or periodic review) -> time period must be fixed, variable quantity (when to order is fixed, how much to order is not fixed) Periodic review has higher safety stock, because uncertainty is higher. Stocks are not monitored as closely as FOQ. Since checking less frequently, review costs will be lesser (whether manpower or system costs) Assumptions for FOQ Demand for product is constant and uniform throughout period Lead time is constant (supplier is never late) Price per unit of product is constant (no discount given for wholesale or large quantities ordered) - Inventory holding cost is based on average inventory - Ordering or setup costs are constant - All demands for product will be satisfied FOQ model is still useful even if some of the assumptions are not met. -

EOQ: how much to order that will give you the minimum inventory cost – either lowest for setup + ordering costs or setup + holding costs **for formula, D is annual demand, they like to trick you in exams When it comes to inventory, ALWAYS ROUND UP.

COMMON AREA IN EXAM SU1 - Use 5 stage process, planning sourcing making delivering and returning, describe company operations of supply chain - Differences between goods and services i.e intangible, inseparable etc - Risk mitigation framework (came out once) - Productivity SU2 - 6 phases generic product development process - Measuring product development performance - Capacity Planning Concepts - Considerations in changing capacity - Decision tree - Service quality - Production Process Mapping Time + Little’s Law SU3 - Service package - Five types of variability - Strategies for managing variability

SU4 SU5 SU6 -

Costs of quality Six Sigma DMAIC Cycle Functional vs Innovative Products Supply Chain Strategies Haw Lee’s Uncertainty Framework Reasons to outsource (very common question!!!) Total cost of ownership Application of forecasts Production Planning Strategies (that will help minimise cost, and which type of cost we are minimising) Purposes of Inventory Inventory Costs Single Period Inventory Model Multi Period Inventory Model (came out more often) Understand ABC of inventory planning and accuracy...