SCM630 American International College Week 4 Supply Chain Paper please see the 3 different powerpoint slides attached alone with the video to answer the fo

SCM630 American International College Week 4 Supply Chain Paper please see the 3 different powerpoint slides attached alone with the video to answer the following questions:

Toyota Production System — Elements of Just-in-Time (JIT): https://www.youtube.com/watch?v=nFu4FFgbMY4

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If for example there are 18 critical members of my 1st and 2nd tier supply chain (customers and suppliers and me) and another 1,218 other companies on my extended supply chain map (e.g. the complete map), how many S&OPs are there?
How often do I create a new S&OP?
Who approves the final Supply Chain Plan?
What are the steps that I should take AFTER the S&OP is complete?
Why is the reverse of outsourcing so much more difficult, time consuming and expensive than outsourcing? SALES AND OPERATIONS PLANNING/
AGGREGATE PRODUCTION PLANNING
Chapter 3
1
Changes in the Manufacturing
Environment
• Current evolutionary trends




Outsourcing of supply
Globalization of demand
Complexity and speed of product innovation
Demand volatility and uncertainty
• To compete
– More frequent Sales and operations planning
(S&OP) cycles
– Continuous plan performance monitoring
– Collaborative analysis
– Effective decision making at all levels
2
Sales and Operations Planning (S&OP)
• Review of all functional areas of the
company process
– Top management
– Typically monthly
• Objectives
– Allow decision makers to visualize and
understand the tactical plans necessary to
satisfy meet sales and marketing objectives
• Coordinate supply and demand
• Improve revenue, decrease costs
• Increase customer satisfaction
3
Sales and Operations Planning
(S&OP) and Output
• Output
– Synchronization of high-level plans of
management with




Detailed sales
Manufacturing
Purchasing
Capacity planning systems
– Optimize resources to support the
company’s business objectives
– Generate a precise forecast of financial
output for the next 6 to 18 months
4
The Key S&OP Processes
1. New product analysis
2. Demand analysis
3. Supply analysis
4. Financial analysis
5. Management analysis
5
S&OP Integrated Framework for
Production Management
Input
Output
Business Planning
Demand
Management
Sales and
Operations
Planning (S&OP)
Aggregate
Planning
Marketing
Planning
Financial
Planning
Resource
requirements
planning
Feasibility
Check
6
SCOR Model Framework
• Supply chain operations reference (SCOR) model
– Framework for integrating
• business planning function
• production function (S&OP)
– Supply chain management function focus
– Operational process perspective
• Includes
– customer interactions
– physical transactions
– market interactions
• Benefits
– Faster cycle times, less inventory
– Improved visibility of the supply chain
– Timely access to important customer information
7
The SCOR S&OP Framework
Business
Plan
Plan
Source
(Buyer–
Supplier
Relationship)
Make
(Transformat
ion Process)
Delivery
(Outbound
Logistics)
Supply Chain
8
A Typical S&OP Cycle
9
Aggregate Production Planning
• Satisfying demand while minimize total
production costs
• Manage Aggregate resources including
production, workforce, inventory, and
other resources
– the total number of workers, hours of
machine time, or tons of raw materials
• Intermediate planning
– Cover a period of 6 to 18 months
10
Capacity and Demand
• Capacity
– Total number of units per time period that
can be produced.
• Demand
– Total number of units needed per period of
time
• If capacity and demand are not equal
– Change capacity to meet demand
– Change demand to meet capacity
11
Aggregate Planning Strategies
• Pure planning strategies
– Pure level strategy
– Pure chase strategy
• Hybrid strategy
12
Pure Level Strategy
• Seeks to maintains a steady production
rate and/or a steady employment level
– Inventory Buffering
– Use of backlog or backorder
• Advantage
– Reduced costs associated with changing
production capacity
• hiring/firing costs
• Disadvantage
– Cost of excess inventory
– Cost of subcontracting or overtime costs
– Backorder costs
13
Pure Chase Strategy
• Matching demand and capacity period by
period
– Dynamic modification of available resource
capacity
• Advantage
– The lowest inventory level possible
• Disadvantage
– High cost associated with changing production
capacity
• hiring/firing costs
14
Hybrid Aggregate Planning
• Combination of the level and chase
strategies
– Stable workforce
– Overtime used to handle Demand
fluctuations
– Back orders
• Advantage of a both chasing and
leveling
• Disadvantages
– Large amounts of overtime
15
Solution Methods
(Aggregate Planning)
1.
2.
3.
4.
Linear Programing (LP)
Pure level
Pure chase
Hybrid (trial and error)
• The Choice of methods
– Dependent on the cost figures and
constraints of reality
– The hybrid strategy is most likely to be
used in practice
16
1. Linear Programming (LP)
• Optimization Technique
– Finds a solution to obtain the
maximum profit or revenue or a
minimum cost
– Based on constraints
• the availability of limited resources and
limitations
17
2. Pure Level Strategy
• Step 1
– Determine what the monthly
production needs
• Step 2
– Determine whether the initial work
force size is sufficient
18
3. Pure Chase Strategy
• Produce exactly what is demanded
each month
– Adjust capacity by hiring and firing
workers at the beginning of each
month
19
4. Hybrid Strategy
• Chase Strategy with Overtime and Idle
Time
• Compare the cost of back orders with
the cost of holding inventory
• Develop the optimal levels of back
orders and inventory
– trial and error
20
Questions?
21
JUST-IN-TIME/LEAN
PRODUCTION
Chapter 7
1
The Two Rival Production systems
1. MRP production systems
2. Just-in-time (JIT) manufacturing
• Popularity of JIT
– JIT conversion success testimonials
• Harley-Davidson and Hewlett-Packard
2
Just-in-time (JIT) Philosophy
• Just-in-time (JIT) is not just a set of
tools but rather a philosophy
• The JIT philosophy is based on
– Elimination of waste
– Continuous improvement
• Example of the JIT philosophy applied
to a firm
– Just-in-time (JIT) Production
– Just-in-time (JIT) Purchasing
3
Just-in-time (JIT) Production
• A powerful management tool
– Based on planned elimination of all waste and on
continuous improvement
– Also referred to as lean production
– Applied to repetitive manufacturing processes
• Reduces





Inventory levels
Variability
Delivery lead times
Setup costs
Thus, improving product quality
4
Just-in-time (JIT) Production
(cont.)
• Originated as Toyota’s manufacturing
philosophy
– More than a set of techniques or procedures
– Requires the change of the entire organization’s
culture
• Kotter’s eight steps of change
• Different Views of JIT
– Lean production
– Conventional reorder-point system with
extremely small lot sizes
– Pull system
5
Conceptual Framework of JIT
Production Practices
Uniform
Production
Kanban
Production
Control
Supplier
Development
Quick Set-up
Concurrent
1. 1.
Concurrent
Problem
Problem
Solving
Solving
2.
2.
Performance
Measuring
Performance
Small Lots
Measuring
Multifaceted
Work Force
Preventive
Maintenance
Shorten Lead
Time
6
Kotter’s 8 Steps of Change
Step 8: Create a new culture
Step 7: Don’t let up
Step 6: Produce short-term wins
Step 5: Empower others to act
Step 4: Communicate for understanding and buy-in
Step 3: Develop the change visions and strategy
Step 2: Put together the guiding team
Step 1: Create a sense of urgency
7
Definition of Lean Production System
• A set of several manufacturing practices
including




worker empowerment
process focus
pull production
continuous improvement
• The main objective
– Satisfy customer needs on the highest
possible level through the elimination of
waste
8
Lean as a Set of Bundles
• A set of several manufacturing
practices bundles including
– Just-in-time (JIT)
– Total quality management (TQM)
– Total productive maintenance (TPM)
– Human resource management (HRM)
9
Lean Waste (Muda)
• Eliminate these 8 types of waste
(muda)
10
Lean Production and kaizen
• Continuously improve the value of the
products and services
• Kaizen Event
– Focusing on specific areas for improvement
– Identify and eliminate waste that is otherwise
hidden
• Paper kaizen
– By design, eliminate waste from the process
– Always brake down work into work elements
11
Paper kaizen guidelines
Do not include
– any walking as a work element.
– any out-of-cycle work for operators as
work elements.
– operators waiting for machines to cycle
as a work element.
– time for removing finished parts from
machines wherever you automation
could be used.
12
Value-stream mapping (VSM)
• Creates a visual map of every work
element involved in the flows
throughout the supply chain
– the current state
– the future state
– implementation plan
• A Lean tool used to eliminate waste as a
first step during the kaizen event
13
Critical elements of JIT Purchasing
• Reduced order quantities
– Small lot sizes for production
• Reduction in Order Costs
Traditional Approach
JIT Approach
Negotiation
Open-Order
Status
Paperwork
Expediting
Receiving
Count
Receiving
Inspection
Transportation
14
Critical elements of JIT Purchasing
(cont.)
• Reduced lead times
Traditional Approach
JIT Approach
Paperwork
Lead Time
Manufacturing
Lead Time
Transportation
Lead Time
Receiving
and
Inspection
15
Critical elements of JIT
Purchasing (cont.)
• Frequent and “on-time” delivery
schedules
– Small lot sizes and low ordering costs
– Very narrow delivery windows
• High quality of incoming materials
– Responsibility of supplier
• Reliable suppliers
– Considerably smaller supplier base
16
JIT Purchasing Advantages
Reduced inventory levels
Improved lead-time reliability
Scheduling flexibility
Improved quality and customer
satisfaction
• Reduced costs of parts
• Constructive synergies with
suppliers




17
Is the performance of Just-in-time
(JIT) Universal?
• Reasons for JIT adoption failures
– Cultural differences
– Geographical dispersion of suppliers
– Supplier power
– Different management styles
18
Just-in-time (JIT) and Environment
• Cultural Fit
– Need a culture that facilitates
cooperation and harmony between
organizations
– Difference between cooperate cultures
of Japan and USA
• Low Variability in Demand
19
Elements of Successful JIT
Organization
Process Elements
1. Elimination of waste
2. Continuous improvement
3. World-class customer service
4. Set-up time reduction
20
Elements of Successful JIT
Organization (cont.)
Conceptual Elements
1. The passion for operational
efficiency
2. Treating people as valuable assets
3. Designing quality into culture
4. World-class supply chain
partnerships
21
Elements of Successful JIT
Organization (cont.)
Strategic Elements
1. A well-conceived plant and
equipment strategy
2. A lean manufacturing strategy
3. A level production strategy
22
JIT Implementation Steps
1. Complete commitment from
top management is needed
2. Involve the work force
3. Reduce set-up time
4. Implement level production
23
JIT Implementation Steps (cont.)
5. Reduce lot sizes throughout the
production process
6. Make capacity adjustments in each
department
7. Remove WIP inventories from the
storage room to the production floor
8. Extend JIT philosophy to suppliers
24
JIT Implementation Steps (cont.)
9. Assist suppliers with quality
assurance
10. Negotiate long-term supplier
contracts
11. Remove purchased inventory
from store-room and place it on the
shop floor
25
Questions?
26
SUPPLY CHAIN–FOCUSED
OUTSOURCING
Chapter 11
1
Outsourcing
• Complete transfer of a business process
to an independent external organization
• Once the process is outsourced, assets
are no longer maintained
– people, facilities
– equipment, technology
– Etc.
• A departure from subcontracting, joint
venturing, and contract manufacturing
2
Current Outsourcing Trends
• Popularity of Outsourcing
– By 2005, Global business process
outsourcing surpassed the US$6 trillion
– 25~34 % of a typical executive’s budget is
outsourced
• Composition of outsourcing contracts
– 76% of announced outsourcing contracts
represented new deals
– 24% represent a combination of contract
extensions, expansions, or renewals
3
Categories of Outsourced Activities
Logistics
Business
services
Call center
process 6%
4%
accounting or
Business
finance
process 4%
human
resources
Other 6%
manufacturing
6%
Manufacturing
of component
parts
12%
Manufacturing
of end items
17%
Business
process Information
technology/syst
ems
26%
Other business
process
19%
4
The Shadow of Outsourcing
• Increased trend of bring outsourced services
back in-house (Deloitte Consulting study)
• 20~25% of all outsourcing relationships fail
within two years and approximately 50
percent fail within five years
• Reasons
– Hidden costs
– Unrealized cost savings
5
Business Process Outsourcing
• Expected strategic benefits
– Cost minimization
• Reduce and control operating costs
• Turn fixed costs into variable costs
– Refocus on core competencies
• Refocus scarce resources
• Acquire external capabilities
6
Business Process Outsourcing
(cont.)
• Expected strategic benefits
– Operating performance improvements
• Reduce cycle time
• Gain flexibility
• Improve quality
– Increased market share and revenue
• Reduce risks
7
Realizing Outsourcing Benefits
• 20~25% of all outsourcing relationships
fail within two years
• Nearly half fail within five years
• Conditions needed to realize expected
outsourcing benefits
– Extensive strategic assessment of the case
– True commitment to a cooperative relationship
– Training and recruitment within outsourcing
organizations focused on relationship building
and management
8
Hidden Costs of Outsourcing
1.
2.
3.
4.
5.
6.
7.
Quality Costs
Supplier Vendor Relationship Management
Internal Coordination
Implementation of External Sourcing Model
Government and Politics-Related Expenses
Supply Chain Risk Management
Miscellaneous Financial Considerations
9
1. Quality Costs
• The costs associated with ensuring
quality
• Categories of Quality Costs
1. Preventative cost

i.e. designing quality into products and
processes
2. Appraisal cost

e.g. inspections, audits, monitoring mechanisms
3. Internal failure cost

e.g., scrap, rework, internal downtime
4. External failure cost

i.e. failure perceived by the external customer
10
2. Supplier Vendor Relationship
Management
• The high cost of relationship building and
coordination
– External sourcing of strategic products and
services
• Costs of relationship
– At least 3~10% of the annual contract value
– High labor and Travel expenses of purchasing
personnel
– IT infrastructure and management costs
– Supplier development programs costs
11
3. Internal Coordination
• The overhead expenses incurred solely due
to the decision to internally source a
product or service.
– Payroll, benefits management
– Utility, IT
• Thus, external sourcing is expected to
eliminate this cost
• However, external sourcing does not
equate to significant reduction in Internal
Coordination costs
– In many cases, outsourcing is unable to free up
the anticipated level of internal resources
12
4. Implementation of External
Sourcing Model
• Activities associated with switching
sources
– Supplier search, evaluation and
contracting
– The transfer of physical assets
– Domestic and international travel
during startup,
– Training of the new source
13
4. Implementation of External
Sourcing Model (cont.)
• The costs of switching sources
– Supplier search, evaluation and contracting
costs
• an average of 3 % of the annual contract value
– Typical transitions took more than 10
months to complete
– Need for internal staff providing additional
support and duplicate resources
– Lower efficiency and effectiveness at the
beginning of the contract
– Training internal employees to become
relationship managers
14
5. Product Service Design and
Development
• The intertwined relationship between
– Product or service architecture
– Cost of coordination
• Tightly coupled or integrated product designs
are associated with
– Tacit and less easily codified knowledge
– Higher knowledge sharing requirements
– Higher coordination cost
• Therefore, may not be appropriate for external
sourcing
15
6. Government and Politics Related
Expenses
• Costs involved with ensuring compliance
with governmental laws, regulations, and
even local business customs
• Includes
– Legal expenses incurred to learn about a
foreign location’s laws and regulations
– Lobbying efforts and travel
– Taxation, tariffs, quota systems
– Local content obligations
16
7. Supply Chain Risk Management
• Outsourcing as one of the key
factors driving increased levels of
supply chain risk
• 4 iterative phases of risk
management
1)
2)
3)
4)
Risk assessment
Risk mitigation
Risk monitoring
Contingency planning
17
8. Miscellaneous Financial
Considerations
• Cost improvement from the learning curve
associated with cumulative volume
– External suppliers can aggregate the demands
of their multiple customers
• Cost improvement by outsourcing firm is
determined by
– Competitive conditions in the supply market
– Power structures
– Threat of opportunistic behavior by the external
supplier
18
Focus on Core Competencies
• Organization’s collective learning of
how to coordinate diverse production
skills and integrate multiple streams of
technology
– Can only be built and learned over the long
term
– Must have a set of core capabilities that
ensure survival in a competitive market
• Organizations should concentrate on
– Development of a few core competencies
– Strategically outsourcing non-core activities
19
Process of Outsourcing
Strategic
Evaluation
Financial
Evaluation
Implementation & Management
Vendor Search
and
Contracting
Evaluating the Business Case
Transition to
the External
Sourcing Model
Activity and
Relationship
Management
20
Evaluating the Business Case
1. Strategic Evaluation
– Understand the strategic value of the
activity or system
2. Financial Evaluation
– Short- and long-term financial
evaluation
– Evaluation of conditional factors
21
Supplier Selection and Contract
Development
3. Supplier Selection
– Supplier profiles
– Clearly establish expectations
4. Contract Development
– Key governance tool of the
relationship
– Risk of suppliers acting counter to the
objectives of the buyer
22
Supplier’s Opportunistic Behaviors
• Examples
– Opportunistic renegotiation
– Shirking
– Breaches in intellectual property
• Contributing factors
– Contractual incompleteness
– Incentive misalignment
– Difficulties in supplier monitoring
23
Buyers’ Outsourcing Risks (BOR)
BOR=PA × NC
– PA : the probability that an adverse
event will occur
– NC : negative consequences if the
adverse event occurs
24
Outsourcing Forms Alliances, Not
Partnerships!
• Preventing of opportunistic behaviors
– Precisely developed the contract up front
• Clear, easy-to-understand roles and
responsibilities
• Shorter contract lengths
• Clearly outline a dispute resolution process
• Clauses that protect transferred employees
– Building a partnership using a crossfunctional team
• External experts, experienced employees, and
members of senior management
25
4. Transition to External Sourcing
Model
• The transition process
– begins with the contract execution to
the transfer of the agreed-upon
activities and resources
• The consensus transition plan
– Communication criteria
– Personnel criteria
– Transition criteria
26
5. Relationship Management
• Control and management of
Relationship
– The contract establishes the performance
measures, deliverables, due dates, and
expected supplier requirements
– Develop and execute the reporting system
for monitoring and evaluating performance
and solving problems
27
5. Relationship Management (cont.)
• Mutually beneficial long-term
relationships with service providers
require
– Strong commitment from both parties’
leaders
– Sharing of rich Information
– Equitable distribution of pain and gain
– Constructive and f…
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