ISQA 407 Introduction to Global Supply & Logistics Management Winter 2012

1. ISQA 407 Introduction to Global Supply & Logistics Management Winter 2012 Portland State University

2. Agenda • Quick review of last class • Production • Inventory • Systems • MRP / ERP • EOQ • Presentation on Kropf • Q&A

3. Production: • Product focus: • Customer centric • Flexible • Integrated • Functional focus: • Few operations • Efficiency oriented • Postponement • DFx

4. Definitions in production • Routing: • The operations to be performed, their sequence, the work centers visited, & the time standards • Bottleneck: • A resource whose capacity is less than the demand placed on it • Due date: • When the job is supposed to be finished • Slack: • The time that a job can be delayed & still finish by its due date • Queue: • A waiting line

5. Definitions in production • Stock keeping Unit: a product given a part number and productized • Job Lot: All parts stored and pulled by product • Cross-docking: Distribution centers / spoke & wheel.

6. High Volume / Low Mix Operations • High volume flow operations generally have fixed routings • Bottlenecks are easily identified • Commonly use line-balancing to design the process around the required tasks • Examples?

7. Low Volume / High Mix Operations • Low volume job shop operations are designed for flexibility. • Each product or service may have its own routing (scheduling is much more difficult) • Bottlenecks move around depending upon the products being produced at any given time • Examples?

8. Inventory • Is it an asset or a liability? • Why?

9. Inventory: • Cycle inventory: Turns – How much is needed? • Carry costs • Obsolescence • flexibility • Safety Stock: • Buffer against risk • Costs? • Seasonal Inventory • Smoothing • Examples?

10. Location & Transport • Infrastructure, customers, costs • Water: Low cost, lengthy • Rail: Low cost, lengthy • Trucks: quick, flexible, costly with fuel • Air: High cost, quick • General Rule: Higher cost of product, emphasize flexibility over costs. Also consider life cycles.

11. Information • Daily – MRP that coordinates production, inventory, & transport • Forecasting & Planning – ERP that includes forecast, capacity, customer orders, etc

12. Material Requirements Planning • Materials requirements planning (MRP) is the logic for determining the number of parts, components, and materials needed to produce a product. • MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced. • Dependent demand drives MRP. • MRP is a software system.

13. System wide ERP ERP software applications used to manage product planning, parts purchasing, inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources aspects of a business

14. Four + One Categories of SCM Operations (p. 45) Plan P1 Plan Supply Chain P4 Plan Deliver P5 Plan Returns P3 Plan Make P2 Plan Source Source Make Deliver M1 Make-to-Stock or order S1 Source Stocked Products D1 Deliver Products Suppliers S2 Procurement M2 DFx D2 Order Management Customers M3 production schedule S3 Credit / LOI / LOC D3 Mode of transport Return do to Warranty Return do to sustainability Enable Closed Loop Supply Chain

15. Plan – Demand Forecasting Methods • Sales and Operating Plan process • Qualitative – Personal feelings • Casual – One effect has outcome on another • Time series – Historical data • Simulation – causal + time (elasticity) • Four major variables: supply, demand, Product type, competition

16. Objectives – Aggregate Planning Minimize Costs/Maximize Profits Maximize Customer Service Minimize Inventory Investment Minimize Changes in Production Rates Minimize Changes in Work-force Levels Maximize Utilization of Plant and Equipment

17. Methods of Aggregate Planning • Production capacity = demand; highly efficient 85% utilization • Various levels of capacity = demand; incremental approach • Inventory & Backlog = Demand; used when long lead-times or need for linear output • Postponement – part of DFx; cost structure and life cycles high and short.

18. Inventory - EOQCycle, safety, or seasonal?Strategy with Aggregate Plan?Order costs and inventory cost can be highLot size efficiency (LTL vs: FT, set-up times, JIT, etc…

19. Basic EOQ Model Important assumptions Demand is known, constant, and independent Lead time is known and constant Receipt of inventory is instantaneous and complete Quantity discounts are not possible Only variable costs are setup and holding Stockouts can be completely avoided

20. 2DS H Q* = 2(27)(100) 1.00 Q* = = 5,400 = 73.48 units An EOQ Example Determine optimal number of items to order D = 27 units per week S = $100 per order H = $1.00 per unit per week

21. Procurement • Purchasing: two types • MRO – Maintenance, repair, and operations • Direct – strategic procurement of components • Sourcing: Selection of a supplier including:TQRDCE • Contracts: For long term relationships • AR/AP: credit policies (LOI, LOC, MOU, PO)

22. Responsibilities of Sourcing Professionals • Beyond just continuity of supply.. • Labor rights • Child labor • Working conditions • Benefits and hours • Employee safety considerations • Environmental considerations • Pollution/emissions/utilization of scare or protected resources • Recycling/Reclaim • Utilization of hazardous materials (IE: ozone depleting substances, lead, etc.) • Who is responsible? What is produced via mfg process? What is included in the finished product? Have we disclosed to end customer? • What is the impact to the company? (CSRs, tracking. Expensive)