Logistical applications and optimizations

1. Logistical applications and optimizations Logistical applications and optimizations

2. overview Introduction October 28 - definition of business processes November 11 - overview of logistical business processes November 18 - functionality of purchase and supply processes December 02 - functionality of production processes December 16 - functionality of sales and distribution processes January 20 - special problems within the supply chain handling Logistical applications and optimizations

3. Review on the last session • You have learned about the structure of supply chain processes • Sales and distribution • Production planning and sceduling • purchasing You have seen an overview on supply chain planning You have developed a supply chain planning model You have learned about sequential and network supply chains • You have learned about the main business support processes • Controlling • Budgeting • Reporting You have seen QM as an example for an logistical crossover process You have learned about tools to integrate and control process, such as supply chain event manager You have discussed reactions on disturbences within the supply chain Logistical applications and optimizations

4. About this lecture All sessions are split into 2 blocks: from 08:30 to 10:00 and from 10:15 to 11:45 Each session starts with a short review of the last lectures subjects Next I will give you a short theoretical overview of the days subject Next you probably will develop 3 different subjects in a brainstorming sessionin 3 groups Each group will then present the results of their discussions I will present theoretical explanations for the discussed subjects Then I will show a example solution for a potential written test question Finally I will give a summary of the key messages for this session Logistical applications and optimizations

5. overview Introduction October 28 - definition of business processes November 11 - overview of logistical business processes November 18 - functionality of purchase and supply processes December 02 - functionality of production processes December 16 - functionality of sales and distribution processes January 20 - special problems within the supply chain handling Logistical applications and optimizations

6. Functionality of purchase and supply processes Part 1 Purchase support Purchase execution Short break Part 2 Disposition processes Supply optimization Logistical applications and optimizations

7. Functionality of purchase and supply processes Part 1 Purchase support Purchase execution Short break Part 2 Disposition processes Supply optimization Logistical applications and optimizations

8. Functionality of purchase and supply processes, Part 1 Problems and potentials Integration of purchase processes into the supply chain results in lower costs by reducing stocks and delivery time Delivery „just in time“ is one major demand for an optimal supply chain. This is only possible with the integration of purchase processes into the total supply chain process in order to provide appropriate informations Logistical applications and optimizations

9. Functionality of purchase and supply processes, Part 1 Learning targets Understand the main functionality of purchase applications system Understand the difference between purchase support processes and purchase execution processes Understand the calculation of purchase quantities Understand the important inputs and outputs of each component Understand the involved acting logical business units Logistical applications and optimizations

10. Store Transport Customer Supplier Plant Supply chain processes Supply chain processes represent all main logistical activities for creation of value according to the business definition Logistical applications and optimizations

11. Supply chain processes Business support processes Logistical crossover processes Production planning and scheduling Shipment and distribution Sales Purchasing Logistical applications and optimizations

12. Functionality of purchase and supply processes Part 1 Purchase support Purchase execution Short break Part 2 Disposition processes Supply optimization Logistical applications and optimizations

13. Catalog Supplier A Purchase support processes WEB-Browser Supplier A Supplier B ERP System Customer X Catalog Supplier B Supplier C Catalog Supplier C ERP System Customer Y Purchase order Order Management Business Connector Logistical applications and optimizations

14. Purchase support processes Supplier relationship management Vendor evaluation Market places and e-procurement Logistical applications and optimizations

15. Functionality of purchase and supply processes Part 1 Purchase support Purchase execution Short break Part 2 Disposition processes Supply optimization Logistical applications and optimizations

16. Purchase execution processes Materials requirements planning (MRP) MRPlists Material & Quantity Purchase requirements Delivery schedule Purchase order Bidding Delivery Goods Receipt QM on delivered material Release Certificate Supplier Invoices Payment Logistical applications and optimizations

17. Purchase execution processes Purchase requirements Generated automatically by the MRP Internal planned purchase according to disposition needs Material, due date and quantities are known Supplier is still not named at this phase Quantities are calculated according to the given demand and the lot sizes in the master data Lot sizes can be customized by giving a fixed size or by calculating a dynamic lot according to defined rules Purchase requirements are transfered to purchase orders by decision of the purchase department Logistical applications and optimizations

18. Purchase execution processes Bidding Potential suppliers are requested to place an offer for a certain potential purchase order Material, due date and quantities are known (usually equal to the purchase requirement) Potential supplier offer a certain price and certain conditions An offer usually has a period af validity If an offer is accepted by the customer, the supplier is bound to that offer Purchase requirements and offerd conditions are jointly transfered to purchase orders Logistical applications and optimizations

19. Purchase execution processes Purchase orders Generated in the purchasing department by transferring the purchase requirement Material, due date and quantities are clear according to the purchase requirement The actual supplier has to be named according to the best offer or other restrictions ( Availability, „A-Supplier“ or contingents) Material availability at favoured suppliers might lead to splitted purchase orders Supplier‘s lot sizes or delivery schedules might lead to a change in the purchase order Purchase orders are transfered to the choosen supplier by different ways of communication Logistical applications and optimizations

20. Purchase execution processes Delivery The ordered material is physically delivered to the requested point of receipt The received amount - if accepted - is booked into the customers inventory The received amount - if still subject to an incoming goods inspection - is booked into a special check inventory The material will become customers property with the booking into the inventory The purchase order will be closed or partly closed depending on the received amount an the rules to accept variations Logistical applications and optimizations

21. Purchase execution processes Quality checks on delivered material This step is only needed, if no agreements are made with the supplier that quality checks are done at the suppliers plant Normally the customer only receives a certificate together with the delivered material Quality ckecks can be done permantly for each delivery, at random according to a check plan in the master data or only in certain cases (e.g. damaged package) If a quality check is required, the delivered material will only be taken into the customers stock and property, if all requirements are fullfilled according to the customized check plan Logistical applications and optimizations

22. Purchase execution processes Payment After the material was accepted by the customer, the supllier gets a material receipt The supplier than sends his invoice to the customer The invoice is compared with the purchase order data and the results of the quality checks If the invoice is accepted, payment will be activated The purchase process than is completed Material receipts and invoices are transfered to the choosen supplier and to the customer by different ways of communication Logistical applications and optimizations

23. Practical part: developing the subjects Group A: A customer needs 100 pieces of a certain material. 50 pieces today and 50 pieces in 10 days. Supplier A: minimum lot 100 pieces, Price: 50 ct/p. Available immediately. Supplier B: minimum lot 50, steps of 50, Price: 60 ct/p, Available immediately Supplier C: no minimum lot, steps of 10, Price: 50 ct/p, Available in 5 days Each day on stock costs 20 ct/p. Each day delay costs 20 ct/p. What is your supply plan ? What are the overall costs ? Group B: A customer needs 200 pieces of a certain material. 100 pieces today and 100 pieces in 5 days. Supplier A: minimum lot 50, steps of 50, Price: 80 ct/p, Available immediately Supplier B: no minimum lot, steps of 10, Price: 50 ct/p, Available in 5 days Supplier C: minimum lot 200 pieces, Price: 50 ct/p. Available immediately. Each day on stock costs 10 ct/p. Each day delay costs 10 ct/p. What is your supply plan ? What are the overall costs ? • you have 20 minutes for group discussion and writing down your ideas • afterwards each group has 5 minutes for the presentation of your ideas • your are free to use any presentation medium Logistical applications and optimizations

24. Example solution for a potential test task, Part 1 • A customer needs 100 pieces of a certain material. 50 pieces today and 50 pieces in 10 days. • Supplier A: minimum lot 100 pieces, Price: 50 ct/p. Available immediately. • Supplier B: minimum lot 50, steps of 50, Price: 60 ct/p, Available immediately • Supplier C: no minimum lot, steps of 10, Price: 50 ct/p, Available in 5 days • Each day on stock costs 10 ct/p. • Each day delay costs 30 ct/p. • What is your supply plan • What are the overall costs Logistical applications and optimizations

25. Summary and key messages, Part 1 The purchase execution components are purchase requirement, bidding, purchase order, dilivery and payment The entry for purchase demand is the MRP Examples for purchase support functionality are SRM, e-procurement and marketplaces A supply plan is the result of considering all customized suppliers restrictions • Literature • Stadtler, Kilger – Supply chain management and advanced planning, Springer Verlag, Berlin Heidelberg, 2000 • Dangelmaier, Busch (Hrsg.) – (in german) Integriertes Supply Chain Management, Gabler Verlag, Wiesbaden, 5/2004 • Silver, Pyke, Petersen – inventory management and production planning and scheduling, New york et al. Logistical applications and optimizations

26. Functionality of purchase and supply processes Part 1 purchase support Purchase execution Short break Part 2 Disposition processes Supply optimization Logistical applications and optimizations

27. Functionality of purchase and supply processes Part 1 purchase support Purchase execution Short break Part 2 Disposition processes Supply optimization Logistical applications and optimizations

28. Functionality of purchase and supply processes, Part 2 Problems and potentials Disposition is the main part of supply calculation and timing Disposition in application system is done by the MRP The usage of all SC modules within an application system is mandatory to achieve a reasonable disposition results Distribution of information in case of disturbances is a challenge a high potential Logistical applications and optimizations

29. Functionality of purchase and supply processes, Part 2 Learning targets Understand the needed components for a MRP Understand the importance to customize the actual restrictions Understand the important inputs and outputs of each component Understand the involved acting logical business units Logistical applications and optimizations

30. Functionality of purchase and supply processes Part 1 Purchase support Purchase execution Short break Part 2 Disposition processes Supply optimization Logistical applications and optimizations

31. Disposition processes Materials requirements planning (MRP) MRPlist per material Development of stock on the timeline Stock minus Stock plus Forcast Production orders Sales orders Purchase orders Reservation Logistical applications and optimizations

32. Disposition processes Logistical applications and optimizations

33. Functionality of purchase and supply processes Part 1 Purchase support Purchase execution Short break Part 2 Disposition processes Supply optimization Logistical applications and optimizations

34. Supplier networked Supply Chains. Carrier • Collaboration • One-to-many Communication • Synchronous/asynchronous Communication • Synchronized Planning Cycles • Automated Decisions • Tracking and Tracing 1stSupplier 2 nd Supplier 3 rd Supplier Logistical applications and optimizations

35. A typical vendor managed inventory szenario Collaboration Consignment T = today FP Settlement time t–1 month t+x days t+1 month t+1 year Logistical applications and optimizations

36. Advantages of Collaboration Logistical applications and optimizations

37. Practical part: developing the subjects Group A: Stock today (1.6.) is 50 pieces Forecasts 50 pieces on each first of the month beginning 1.8. ending 1.12. Reservations on 15.8. and 15.9. 50 pieces each for material x Sales orders on 10.6. and 10.7. 20 pieces each Purchase orders take 5 days and have min 50 pieces and max 100 pieces Production orders take 10 days and have fixed 10 pieces Please develop the MRP list !! MRP Period is 4 month Group B: Stock today (1.6.) is 100 pieces Forecasts 200 pieces on each first of the month beginning 1.8. ending 1.12. Reservations on 15.8. and 15.9. 100 pieces each for material x Sales orders on 10.6. and 10.7. 50 pieces each Purchase orders take 5 days and have min 100 pieces and max 200 pieces Production orders take 10 days and have fixed 50 pieces Please develop the MRP list !! • you have 20 minutes for group discussion and writing down your ideas • afterwards each group has 5 minutes for the presentation of your ideas • your are free to use any presentation medium • group A starts the presentation Logistical applications and optimizations

38. Example solution for a potential test task, Part 2 Stock today (1.6.) is 100 pieces Forecasts 100 pieces on each first of the month beginning 1.8. ending 1.12. Reservations on 15.8. and 15.9. 50 pieces each for material x Sales orders on 10.6. and 10.7. 80 pieces each Purchase orders take 5 days and have min 50 pieces and max 100 pieces Production orders take 10 days and have fixed 20 pieces Please develop the MRP list !! MRP period is 4 month Logistical applications and optimizations

39. Example solution for a potential test task, Part 2 Logistical applications and optimizations

40. Summary and key messages, Part 2 MRP Disposition lists are the main elements of SC Planning Collaborative planning optimizes purchase processes Vendor managed inventory is a collaborative planning method • Literature • Stadtler, Kilger – Supply chain management and advanced planning, Springer Verlag, Berlin Heidelberg, 2000 • Dangelmaier, Busch (Hrsg.) – (in german) Integriertes Supply Chain Management, Gabler Verlag, Wiesbaden, 5/2004 Logistical applications and optimizations

41. Thank you very much for your participation …… and see you on Friday, 2nd of December Logistical applications and optimizations