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SUPPLY CHAIN MANAGEMENT:Logistics, Distribution Requirements Planning

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Production and Operations Management ­MGT613
VU
Lesson 39
SUPPLY CHAIN MANAGEMENT
Supply Chain: The sequence of organization's facilities, functions, and activities that are involved in
producing and delivering a product or service.
Need for Supply Chain Management
1.
Improve operations
2.
Increasing levels of outsourcing
3.
Increasing transportation costs
4.
Competitive pressures
5.
Increasing globalization
6.
Increasing importance of e-commerce
7.
Complexity of supply chains
8.
Manage inventories
Benefits of Supply Chain Management
1.
Lower inventories
2.
Higher productivity
3.
Greater agility
4.
Shorter lead times
5.
Higher profits
6.
Greater customer loyalty
Elements of Supply Chain Management
Element
Typical Issues
Customers
Determining what customers want
Forecasting
Predicting quantity and timing of demand
Incorporating customer wants, mfg., and time
Design
Processing
Controlling quality, scheduling work
Inventory
Meeting demand while managing inventory costs
Purchasing
Evaluating suppliers and supporting operations
Suppliers
Monitoring supplier quality, delivery, and relations
Location
Determining location of facilities
Logistics
Deciding how to best move and store materials
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Production and Operations Management ­MGT613
VU
Logistics
The goal of logistic work is to manage the completion of project life cycles, supply chains and
resultant efficiencies. Often Logistics is termed as the art and science of managing and controlling
the flow of goods, energy, information and other resources like products, services, and people, from
the source of production to the marketplace.
It also refers to the movement of materials and information within a facility and to incoming and
outgoing shipments of goods and materials in a supply chain.
Logistics is the time related positioning of resources and is commonly seen as a branch of
engineering which creates "people systems" rather than "machine systems. It involves the
integration of information, transportation, inventory, warehousing, material handling, and
packaging.
.
Important Characteristics of Logistics
1.
Movement within the facility
2.
Bar coding
3.
Incoming and outgoing shipments
4.
EDI (Electronic Data Interchange)
5.
Distribution
6.
JIT Deliveries
Logistics: Evaluating Shipping Alternatives
A situation that arises frequently in some businesses in making a choice between quicker(
expensive) shipping alternatives such as overnight or 2 day air and slower but cheaper
alternatives. The decision in such cases often focuses on the cost savings of alternatives
versus the increased holding cost that result from using slower alternative.
Often the supplier gets paid on delivery of the product through EDI the very same time the
order reaches its destination.
The Incremental Holding cost incurred by using the slower alternative is computed as
follows:
Incremental Holding Cost= H ( d/365)
Where H=Annual Holding cost for the item.
d = Time savings in days and d/365 is fraction of year saved.
Logistics Example
Determine the shipping alternative ( with in Pakistan) for a Karachi based Montessori toy
manufacturer,1 days or 5 days are best when the holding cost of the item is Rs. 100,000 per year and
the 1 day shipping cost is Rs 1500. and 3 day shipping cost is
Rs. 600
Rs. 500
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Production and Operations Management ­MGT613
VU
Solution
H= Rs. 100,000 per year
Time savings = 2 days using 1 day alternative
Holding cost for additional 2 days
= 100,000 X ( 2/365)
= Rs. 547.95=548.
Or Holding cost per day = Rs. 274
Alternative A
Cost savings = Rs. (1500-600)= Rs. 900, because the actual cost of savings of Rs 900 is more than
the holding cost of Rs. 548, use the 3 day option.
Cost savings = Rs. (1500-500)= Rs. 1000, because the actual cost of savings of Rs 1000 is greater
than the holding cost of Rs.548, use the 3 day option.
Distribution Requirements Planning
Distribution requirements planning (DRP) is a system for inventory management and distribution
planning. Extends the concepts of MRPII.
Uses of DRP
Management uses DRP to plan and coordinate:
1.
Transportation
2.
Warehousing
3.
Workers
4.
Equipment
5.
Financial flows
Electronic Data Interchange
EDI is the direct transmission of inter-organizational transactions, computer-to-computer, including
purchase orders, shipping notices, and debit or credit memos.
Electronic Data Interchange gives an organization the following benefits and advantages.
1.
Increased productivity
2.
Reduction of paperwork
3.
Lead time and inventory reduction
4.
Facilitation of just-in-time systems
5.
Electronic transfer of funds
6.
Improved control of operations
7.
Reduction in clerical labor
8.
Increased accuracy
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Production and Operations Management ­MGT613
VU
Efficient Consumer Response
Efficient consumer response (ECR) is a supply chain management initiative specific to the food
industry. ECR reflects companies' efforts to achieve quick response using EDI and bar codes.
E-Commerce: is the use of electronic technology to facilitate business transactions.
Successful Supply Chain
1.
Trust among trading partners
2.
Effective communications
3.
Supply chain visibility
4.
Event-management capability
a. The ability to detect and respond to unplanned events
5. Performance metrics
Summary
Supply Chain Management is primarily the flow of information which ensures the effective flow of
materials throughout the value chain. The chain extends from the Suppliers to the organization and from
the organization to the customers. Operations Managers should be able to identify that the strength of
the Supply Chain is the strength of its weakest link. If an organization fails to make use of the customer
feed back it not only looses its customer base but also weakens its supply chain and loses its business to
its customers. Suppliers normally come at the upstream of the organization and customers at the
downstream to complete the Supply Chain. Many Software are available to ensure that Supply chain is
managed effectively by the organization. Supply Chain Management is now gaining popularity in
Pakistan.
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Table of Contents:
  1. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT
  2. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Decision Making
  3. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Strategy
  4. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Service Delivery System
  5. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Productivity
  6. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:The Decision Process
  7. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Demand Management
  8. Roadmap to the Lecture:Fundamental Types of Forecasts, Finer Classification of Forecasts
  9. Time Series Forecasts:Techniques for Averaging, Simple Moving Average Solution
  10. The formula for the moving average is:Exponential Smoothing Model, Common Nonlinear Trends
  11. The formula for the moving average is:Major factors in design strategy
  12. The formula for the moving average is:Standardization, Mass Customization
  13. The formula for the moving average is:DESIGN STRATEGIES
  14. The formula for the moving average is:Measuring Reliability, AVAILABILITY
  15. The formula for the moving average is:Learning Objectives, Capacity Planning
  16. The formula for the moving average is:Efficiency and Utilization, Evaluating Alternatives
  17. The formula for the moving average is:Evaluating Alternatives, Financial Analysis
  18. PROCESS SELECTION:Types of Operation, Intermittent Processing
  19. PROCESS SELECTION:Basic Layout Types, Advantages of Product Layout
  20. PROCESS SELECTION:Cellular Layouts, Facilities Layouts, Importance of Layout Decisions
  21. DESIGN OF WORK SYSTEMS:Job Design, Specialization, Methods Analysis
  22. LOCATION PLANNING AND ANALYSIS:MANAGING GLOBAL OPERATIONS, Regional Factors
  23. MANAGEMENT OF QUALITY:Dimensions of Quality, Examples of Service Quality
  24. SERVICE QUALITY:Moments of Truth, Perceived Service Quality, Service Gap Analysis
  25. TOTAL QUALITY MANAGEMENT:Determinants of Quality, Responsibility for Quality
  26. TQM QUALITY:Six Sigma Team, PROCESS IMPROVEMENT
  27. QUALITY CONTROL & QUALITY ASSURANCE:INSPECTION, Control Chart
  28. ACCEPTANCE SAMPLING:CHOOSING A PLAN, CONSUMER’S AND PRODUCER’S RISK
  29. AGGREGATE PLANNING:Demand and Capacity Options
  30. AGGREGATE PLANNING:Aggregate Planning Relationships, Master Scheduling
  31. INVENTORY MANAGEMENT:Objective of Inventory Control, Inventory Counting Systems
  32. INVENTORY MANAGEMENT:ABC Classification System, Cycle Counting
  33. INVENTORY MANAGEMENT:Economic Production Quantity Assumptions
  34. INVENTORY MANAGEMENT:Independent and Dependent Demand
  35. INVENTORY MANAGEMENT:Capacity Planning, Manufacturing Resource Planning
  36. JUST IN TIME PRODUCTION SYSTEMS:Organizational and Operational Strategies
  37. JUST IN TIME PRODUCTION SYSTEMS:Operational Benefits, Kanban Formula
  38. JUST IN TIME PRODUCTION SYSTEMS:Secondary Goals, Tiered Supplier Network
  39. SUPPLY CHAIN MANAGEMENT:Logistics, Distribution Requirements Planning
  40. SUPPLY CHAIN MANAGEMENT:Supply Chain Benefits and Drawbacks
  41. SCHEDULING:High-Volume Systems, Load Chart, Hungarian Method
  42. SEQUENCING:Assumptions to Priority Rules, Scheduling Service Operations
  43. PROJECT MANAGEMENT:Project Life Cycle, Work Breakdown Structure
  44. PROJECT MANAGEMENT:Computing Algorithm, Project Crashing, Risk Management
  45. Waiting Lines:Queuing Analysis, System Characteristics, Priority Model