APICS BSCM Chapter 1 notes

Session 1 - Intro Color Key APICS Definition Material Management Book

Session Book

Manufacturing  

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Adding value created wealth Value to the customer o What the customer is willing to pay for Operations Management  Government  Economy  Competition  Customers  Quality Order Quantifier/Winner o Order Quantifier o Those competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace. For example, a firm may seek to compete on characteristics other than price, but in order to "qualify" to compete, its costs and the related price must be within a certain range to be considered by its customers. Syn: qualifiers. See: order losers, order winners. o Order Winner o Those competitive characteristics that cause a firm's customers to choose that firm's goods and services over those of its competitors. Order winners can be considered to be competitive advantages for the firm. Order winners usually focus on one (rarely more than two) of the following strategic initiatives: price/cost, quality, delivery speed, delivery reliability, product design, flexibility, after-market service, and image. See: order losers, order qualifiers.

United Nations Global Compact 

Policy of social justice and sustainable development

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Membership  Voluntary, any company’s CEO signature and board of directors is required Alignment with Global Compact principles (4 areas, 10 principles)  Human Rights  Labor Practices  Environment  Anti-corruption

Manufacturing Business Model 

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Defining products and customers o Defining products  Product positioning (quality versus price)  Breadth of product line  Price  Quality  Functionality, features, overall quality  Brand name or generic  Design  Packaging  Returns allowed o Defining Customers  Types of customers  Industrial, consumer, institutional, government  Market segments  Sales and distribution channels  Market share and profitability o Defining products and customers: influence on production decisions  Choice of manufacturing environment  MTO, MTS, ATO, ETO  Choice of manufacturing process  Project, intermittent, repetitive, flow, continuous flow Designing products and processes o Designed to:  Meet customer needs  Voice of the customer – customer input  Be cost effective  Provide quality  Be provided efficiently  Accommodate planning parameters  MOQs, LT, SS, buffers/capacity Managing material flow o Procure o produce o distribute

Remanufacturing  An industrial process in which worn-out products are restored to like-new condition.  In contrast, a repaired product normally retains its identity, and only those parts that have failed or are badly worn are replaced or serviced. Providing customer service and support o Meeting customer needs o Communication with customer o Resolving design/production problems with customer input 

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Global Environment   

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Global competition Economic, government, and regulatory influences Customer expectations o Providing value to the customer  Cost/price  Quality  Speed (order lead time)  Dependability  Flexibility in product and volume Corporate Social Responsibility o Human rights o Labor practices o Environment o Anti-corruption

Manufacturing Environments and Process Choices 

Manufacturing Environments  Engineer to order (ETO) o Products whose customer specifications require unique engineering design, significant customization, or new purchased materials. Each customer order results in a unique set of part numbers, bills of material, and routings. Syn: design-to-order.  Low volume, high variety  Product Life Cycle – introduction only  Longest delivery lead time required (includes purchase and design lead time)  Make to order (MTO) o A production environment where a good or service can be made after receipt of a customer's order. The final product is usually a combination of standard items and items custom-designed to meet the special needs of the customer. Where options or accessories are stocked before customer orders arrive, the term assemble-to-order is frequently used. Syn: produce-to-order.

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 Low-medium volume, medium-high variety  Product Life Cycle – all stages Assemble to order (ATO) o Assembled after receipt of a customer's order. The key components used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. o Useful where a large number of end products can be assembled from common/standard components. o Syn: finish-to-order  Medium/high volume and low/medium variety  Product Life Cycle – Growth, maturity and decline o Postponement  A product design strategy that shifts product differentiation closer to the consumer by postponing identity changes, such as assembly or packaging, to the last possible supply chain location. Make to Stock (MTS) o A production environment where products can be and usually are finished before receipt of a customer order. Customer orders are typically filled from existing stocks, and production orders are used to replenish those stocks. Syn: produceto-stock.  High volume, low variety  Product Life Cycle – growth and maturity  Lowest delivery lead time Mass customization o The creation of a high-volume product with large variety so that a customer may specify his or her exact model out of a large volume of possible end items while manufacturing cost is low because of the large volume. An example is a personal computer order in which the customer may specify processor speed, memory size, hard disk size and speed, removable storage device characteristics, and many other options when PCs are assembled on one line and at low cost.  High volume, high variety  Product Life Cycle – growth and maturity

Determinants of Manufacturing Environments

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Lead time expectations Product design input from customers o The degree of product design needed after receipt of an order Product volume and variety Product life cycle

Product Life Cycle   

1) The stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) The time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) The period of time during which a product can be produced and marketed profitably. Product Life Cycle and Manufacturing Environments Introduction Growth Maturity Decline Phaseout ETO X MTO X X X X X ATO X X X MTS X X

Mass Customization

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Choice of Processes and Layouts o

Intermittent o A form of manufacturing in which the jobs pass through the functional departments in lots, and each lot may have a different routing. o Syn: job shop, process, functional layout

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o Flow o

Workstations used  General purpose equipment used for various products Used when volume isn’t high enough to justify dedicated equipment Repetitive (or Line)  The repeated production of the same discrete products or families of products.  Repetitive methodology minimizes setups, inventory, and manufacturing lead times by using production lines, assembly lines, or cells.  Work orders are no longer necessary; production scheduling and control are based on production rates.

Products may be standard or assembled from modules. Repetitive is not a function of speed or volume.  Syn: repetitive process, repetitive production.  Machinery is dedicated to limited range of products  High volume, low variety Continuous – chemical manuf.  A production system in which the productive equipment is organized and sequenced according to the steps involved to produce the product.  This term denotes that material flow is continuous during the production process. The routing of the jobs is fixed and setups are seldom changed.  Syn: continuous flow (production), continuous process, continuous manufacturing. Flow Manuf. Advantages over Intermittent Manuf.  Low WIP inventory  Short throughput and manufacturing lead times  Low unit costs 

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Project o Made at one site, usually specially designed products like ships o ETO

The Manufacturing Supply Chain Supply Chain 

The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.

Supply Chain management 

The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.

Views of Supply Chain External View 

Components o Suppliers o Manufacturers o Distributors o Retailers o Consumers o Flow of information, cash, and goods and services

Internal View 

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Traditional internal supply chain view o Departments that are functional silos with conflicting/uncoordinated performance factors  Results in higher inventory  Purchasing o Drive for lower purchasing costs through volume discounts  Production o Maximize machine utilization, produce more than needed  Distribution o Aim for high service levels and no stockouts  Support services – HR/Finance  DO NOT ADD VALUE TO SUPPLY CHAIN Supply Chain Organizational Issues o Inherent Conflicts  Production efficiency in manufacturing/finance  High levels of customer service in marketing/finance  Low inventory investment within finance o When Marketing tries to increase revenue  Higher customer service  Lower production efficiency  Higher inventories o Production to reduce manuf. Costs  High production efficiency  Less flexibility for other products  Lower customer service  Higher inventory

Finance to increase profit  Higher customer service  Higher production efficiency  Low inventory Performance Standard – sets the goal Performance Measures – how close you came to attaining the goal o Strategic – long term  Profitability, market share, growth, and productivity o Tactical – intermediate term  % on time delivery, inventory turns o Operational – daily work routines  Cycle times, utilization, efficiency o

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Materials Management 

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Materials Management o The grouping of management functions supporting the complete cycle of material flow, from the purchase and internal control of production materials to the planning and control of work in process to the warehousing, shipping, and distribution of the finished product. Two Areas o MPC  MRP II and ERP systems o Physical Supply and Distribution  Physical supply - The transportation of goods from supplier to buyer.  Distribution  1) The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer.  These activities encompass the functions of transportation, warehousing, inventory control, material handling, order administration, site and location analysis, industrial packaging, data processing, and the communications network necessary for effective management.  It includes all activities related to physical distribution, as well as the return of goods to the manufacturer. In many cases, this movement is made through one or more levels of field warehouses. Syn: physical distribution. o Manufacturing Planning and Control (MPC)  Right Products  Right Quantity  Right Time  Right Price  Priority and Capacity Planning  The process of balancing resources and demand  Priority planning

The function of determining what material is needed and when. Master production scheduling and material requirements planning are the elements used for the planning and replanning process to maintain proper due dates on required materials  Capacity planning o The process of determining the amount of capacity required to produce in the future. This process may be performed at an aggregate or product-line level (resource requirements planning), at the master-scheduling level (rough-cut capacity planning), and at the material requirements planning level (capacity requirements planning). See: capacity requirements planning, resource planning, rough-cut capacity planning.  Determining the resources required to meet the priority plan and the methods needed to make that capacity available  MPC Hierarchy  MPC uses a top-down planning approach o Planning/Execution related to organizations strategic and business plans  Similar to lean manufacturing/hoshin planning  MPC’s layered approach to planning o Business planning – long term (2-10yr, reviewed every 6mo) in currency o S&OP planning – medium term at the product family level  Reviewed each month or quarter o Master scheduling/master production schedule (MPS)  Short/medium planning at the end-item product level o MRP – short term planning at end item or product component level o Purchasing and Production Activity Control  MPC closed loop system continually plans to account for events occurring before or during production o Internal events – production delays, material shortages, and quality issues o External events – demand changes, late supplier deliveries, or economic conditions  MPC cross function coordination o Primarily manufacturing, marketing and finance o Secondary engineering, R&D, HR, distribution, quality, supply chain or material management MRP to MRP II  MRP  Uses the due dates for end items from the master schedule o

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Establishes the priority plan for the due dates and order quantities for the components of end items  Closed Loop MRP  Links production plan to MPS in early stage of MPC process  Links production planning/master scheduling/MRP to capacity planning  Closed loop – enables changes to priority plans/production schedule by MRP and production activity control (PAC)  Helps report cost data MRP II to ERP  MRP II Manufacturing Resource Planning  More emphasis on cross functional coordination o Production, finance & marketing coordination to develop sales/production plans during S&OP o Constant production & marketing coordination to adjust MPS due dates/order quantities in response to demand changes o Priority plan adjustments to align with capacity o Financial data reporting  ERP – it’s the best, blah blah blah New Systems/Philosophies  Goals  Reduce lead times  Reduce inventory  Improve worker productivity  Improve product quality  Cost reductions  Increase profitability  Lean manufacturing  Eliminating non-value added activities (syn waste)  Continuous flow of manufacturing based on pull of customer  Empowering employees  Continuous improvement  Total Quality Management (TQM)  Long term management approach to success through customer satisfaction o Customer focus, identifying costs of quality, taking action to solve problems, continuous improvement  Six Sigma  Reducing defects by decreasing process and product variation o Variation causes defects o < 3.4 defects per million opportunities (six sigma level performance) o Continuous improvement  Theory of Constraints (TOC)

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Systems have constraints limiting their ability to meet goals. Achieving throughput goals by identifying and managing a few leverage points

Chapter 14 MM Product Life Cycle – Intro, Growth, Maturity, Decline Product Development Principles 

Manage the amount of product lines o Ensure savings by  Simplification  Standardization  Modularization – using standard component parts  Specialization – reduce product line offering to allow specialization in current products

Product Design o o o o

Functional Low-cost Environmental/green Simultaneous Engineering – product design and process design working together  Time to market is reduced  Cost is reduced  Better quality  Lower total system cost

Process Design  

Nesting – small processes are linked to form a larger process Mass customization