MBA 6221 Supply Chain (1)

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University of Minnesota-Twin Cities *

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Oct 30, 2023

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Module I what is supply chain Typical supply chain 2 d i centers Tier 1 Furriers Trier Essemay wide EYED Operations management the Process of doing the work Supply chain management how the different parts connect Operations manager roles oversee internal operations w in an org Depending on size managing day to day operations for an entire business or for a specific part of a man u factoring or service process key areas process design capacity planning staffing managing flow of inputs and outputs quality management and associated finance and budgeting
Supply chain manager roles Coordinate sourcing of inputs t logistics of moving inputs and final products across orgs to meet customer demand More career opportunities because increased complexity of global supply chain Specialized areas Sourcing inventory mgmt warehouse mgmt first middle last mile logistics Strategy what countries how should we innovate Supply Chains Ops Strategy Corp Strat Defines industries configures business units Acquires b allocate resources combative Strat eg cost leader differentiation Profitable a sustainable position against the forces that determine industry competion ways to make value 1 Choose attractive industry 2 Choose attractive competitive position with in that industry Unique wave prop Functional Strategy as financial b Marketing c supply chain operations strategy what resources needed How will they be used
Formulating Sco strategy What must Industryframewort SCO do well d to support competitiveat name I Strat µ me gunny g which resources and srocesses best support s ffegy m t Fg ÉÉt Resource View of Sco strategy Resources CASsetpora scaffolding sizing timing How much K IT I or reduce resources are resources be west in
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Process view y blood flow Processes CActivitynetwork onowmanaset.pro cuss favalandemnd IIIETI DE to innovate O Tomtits a Whatistrange É E total response quality of operating time Cost Costiferating COGS time throughput time customer lead time Quality on time in compliance Flexibility ability to respond to external influences the ability to respond to marketplace changes to gain or maintain competitive advantage What where the competencies decisions that were made were they the right ones Are ALL competencies equally important o Order Qualifiers Minimum requirements needed to compete in a market o Order winners Differentiating capabilities that set
I i ng apa company apart from the competition with in a market Ojo Qualifying criteria is constantly changing what was once an order winner is now an order qualifier Questions for non supply chain careers what are the key process analysis tools and how can I leverage their super powers in contexts that are important to me How can i think like a supply chain manager in terms of managing demand inventory and resource allocation decisions in my chosen industry What trends will influence supply chain and operations capabilities and their associated markets what companies will succeed how will ESG impact Sco SCO Strategy in Action IR Qs for this week ygtoforzara's business model fashion forward at the right time affordable prices Order qualifier Cost 6 Quality Order winners time o flexibility SCO Strategy Response time speed to trends Product mix variety processes Optimize supply chain new designs in stones in stores in less than 3 weeks Small patch a lot of u arity
Zara's Order to delivery process Store manager communicates w kava HQ using custom handheld device to RF id tags transmit info on well selling items Place new orders Suggestions for new designs Designers o product managers match this information with suggestions from other stones Designers draw up new style o patterns to Zara factories in Spain Vertically integrate 9T Centralized distribution air freight to stones Zara controls both retail and most of production In zois outsourced production 70 Europe 3006 Asia Design raw fabrics passes finished fabrics Cutting Sewing Ughh distribution Retail Design feedback key Considerations How do Zara's SCO competencies help support corporate strategy How has the growth of ecommerce changed its SCO competency needs Stone formats Re allocation of resource
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Zara Buis ness Model Video Market oriented differentiated products lots of feedback Often withdraws unpopular items Demand based production cost effective production low inventory owns its warehouses Designers are in touch with customers 80 900 to takes place in Europe sourced from nearby countries Logistical excellence technology integration Premium store location perception of Win win Module 2 a Supply chain management Fftsupplief friginsmanagement feign tiers tier lignite Idmariat Process Analysis a bird's eye view TransformationalDraff Its É value creation inputs a the task output Inputs labor capital material energy Tasks activities Parallel or sequential pie felt Decoupled or coupled CE cadence is important unit or batch
Outputs traitor tant Products services internal transactions Mapping process flow 1 Quickly document now process is doing underlying process dynamics 2 Uncovers relationships and structure of flows Iggy waiting activities 3 Other benefits General communication tool Visualization to support deeper process development Inspiration for process improvement Process Flow Diagrams Ex Coffee shop process lasted Estates soso.me sqIatng ge G EteD EI info unit flow 1 these T i stemaaiastate Decision node
Representing a process 0 Activity task step Decision node 7 waiting buffer area Process flow Information flow Flow um't Basis unit of analysis Should be set consistent from step to step sometimes have to think about it a few ways to get the unit that makes the most sense swim lanes can be added to delineate how process steps align with different employees work groups or other resources such as machines that perform multiple steps Gantt chart helps visualize sequence dependencies between tasks and resources and how this impacts throughput time total time to completion Commonly used in project management
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Bottleneck Analysis How well does the Operation perform How much can be produced How many customer served 7 Need to identify The bottleneck Make 100 bagels 3 workers Tasks Cutting bagel C S minutes J worker 7 spreading mayonase C2 S cutting veggies 3 mins Putting veggies on 2 mins worker 2 Dressing Ll min wrapping C min J Worker 3 Step 7 Decide how to allocate the tasks to the workers 2 What process type should we use A decoupled worker paced line seems reasonable Nexts draw a Process flow Diagram and compute the capacity of each step Raw Bagels Emin W 2 Sm in w3 2min fig Focutimayat veggies to pretty capacity I bagel 3min bagels min bagel 2mi Capacity refers to the number of units of product or customers that can be produced at a step or across the process as a whole It is expressed as a rate unity one work single resourced step I activity time step parallel 2 multi resourced step of resources activity time
Batch Step batch size setup time batch size activity time unity The capacity of a process is determined by the step with in the process with the lowest capacity ie the Bottenackstep I 8 Process cycle time reciprocal of process capacity I over pc Throughput rate reflects whether the process is further constrained by demand or inputs It is defined as the minimum of the process capacity demand rate and input rate for bagels Bottleneck is at veggies slowest step capacity of process is 11s mins Process cycle time is 51 s Through puti me is equal to process capacity Buffer size usually limited before the bottle nel means blocking E bottleneck blocks the step beforehand After the bottleneck the worker at this step is Stade for work Doesn't have input coming in fast enough Labor utilization ratio of amount of labor used to amount of available in a given time period J is 4nbalanced How do we move work around to balance it
How does product mix complicate bottleneck analysis Bottleneck is different for of product mix breakdown i need to compare I requested capacity implied by the product mix with available capacity to compute implied utilization AEII.tl Activity time Available cap Requested cap what do we have I to tall implied utilization requested cap available cap Summary of Process Analysis Steps 1 Choose process boundaries and The flow unit 2 Understand how the physical process works and draw diagram 3 Determine capacity of each Step 4 Identify capacity bottleneck S Compare the bottleneck capacity w input and demand rate to determine overall bottleneck Calculate different performance measures such as process capacity Labor and machine utilization time based metrics 6 Consider changes to improve system perform a
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time based questions How long does it take on the first day fifer How long does it take once the system is in a steady state throughput time what is the time between products being finished cycle time what would the time between units heeded to be to make a certain number of units in a certain number of hours Tak t time What would the lead time be if a customer ordered X number of units lead time Time based measures Process time total time required to produce a given quantity under defined cond throughput time Average time process needs for one unit lead time time between relieving and completing an order Cy de time reciprocal of process capacity Tak t time pace that the process would have to meet demand Tak t time time available demand Demand is the number of units targeted for time available
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U make to stock lead time 0 if inventory available make to order Lt throughput time for 7 stun it Cycle time x remaining units How to improve the process Add capacity Lei another worker to the bottleneck improve balance by moving some work from bottleneck step to non bottleneck step Equal activity time Reduce activity time for some work through training or task redesign Consider other process designs Little's Law equation that relates inventory throughput rate and throughput time Average inventory I Average throughput time x Average throughput rateer I TR Average throughput time E ftp.erffpke T ER Given two measure you can solve for athettra Helps conceptualize and measure impact of changes in one of the measures Assuming R is held constant a reduction in I can reduce T Remember to keep units consistent ie convert minutes to hours if answer is needed in hours
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Inventory turns Enfeftory higher inventory turns healthier company money invested in inventory can quickly turns to cash less need for financing inventory cost talculation per unit inventory costs thnntedniffffutgsten of customers L TW X arrival rate W time spent by customers Process types characteristics I worker paced line sequential u Parallel 2 Machine paced line coupled Decoupled Coupled unit based 3 Three parallel work cells wider range of tasks Parallel don't need to balance More skilled workers broad competency faster throughput not expert 4 Continuous process S Batch process Bakery 6 Job shop High variety of products low product volume White collar workers
Product Process matrix chafes less customization 0 higher volume s
l
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Module 3 Process types 6 Characteristics Batch Processes An activity or sequence of activities performed on a set of products cutting transfer trucking Painting capacity batch time setup time t batch size activity time per unit Process time total time required for batch step this may also include set up time between batches and waiting to batch time Painting example Painting process 2 mins house time between 12 mins Capacity CIO houses C 72min 10 houses tous x 60 mint how 18.75 houses per hour What if batch size is 3housest Cap EC 3 houses 012min t 3 houses x 2min house X 60min lur 10 houses her smaller batch size lower capacity because set up time is not spread out enough
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Batch size 10 Process time for red house It depends where we are in process Are we currently use that color Then activity time for painting If a different color is being used need to add set up time if not a priority could take longer Common issues for batch processes What is appropriate batch size Larger often means higher process capacity Cas set up time per item reduced BUT comes at a cost of increased flow time How should batches be scheduled across product tippes Are there ways to reduce set up time between batches to reduce flow time and allow more flexibility in scheduling Ski Lift Process Design Options Bifilar Falun S min set up a min set up Batch size 10 batch size 2 Need to consider Price Variability of demand customer preference
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Key sources of Process variability where does variability arise inputs Shipping delays Quality issues tasks inside process worker specific experience training machine specific age tech maintenance time of day fatigue learning Disruptions breakdowns absenteeism Demand Product ay I time of day effects season volume uncertainty variability in activity time leads to buildup variability in arrival rate additionally increases buildup Littles Law How many customers on average will be served Quantifying waiting time time in queue Aztec't Eaton Cret factor e factor
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Service time factor CVE coefficient of arrival time CUI coefficient of process time How variability o utilization influence wait time Average flow time i Tying Process Choice to corporate Strateg What must Industryframework SCO do well I support competition Eg name I Strat Competencies 8 catspaw which resources and processes best support s ffegy our competency resources Processes prioritization yy.gg GfgItyhYX
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Competing on cost fulfilling customer needs at a lower price relative competitors Key focus Examples Continually reduce costs in Aldi flextronic materials Labor inventory transportation Energy competing on time reliably filling customer needs faster than competitors key focus Examples continually reduce time in Fedex Zara Processing time wait time Coordination time travel time Non value added time competing on flexibility being better able to adapt to changes in customer needs Key focus Continually increase flexibility in Product variety Production volume Adaption to external changes in competition Supply chain partners customer expectations
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Trade offs for many companies Time us Cost Cost us flexibility there is not significant trade offs unless on Time us flexibility Operations frontier of efficiency if you are not on the efficient frontier you can increase on dimension without depleting another Buisnessmodeloptionsrr Make to order us Make to stock Make to order MTO Customer 2T Production time key metrics Lt delivery performance against promised hate Produce to actual demand and invest in raw materials inventory Assemble to Order Ato customer LT Assembly time key metrics LT promises Produce to actual demand and invest in final assembly component inventory Make to stock Mts Customer Lt 2 Production time key metrics Service wed restock LT Produce to a forecast of demand and invest in finished goods inventory
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Design to Order DTD Customer Lt Design process time key metrics can we do it How long will it take produce to actual demand and perhaps only investment beforehand is in knowledge expertise and process equipment 1 inventory IT Cost of Variety Process Type MTS High finished day s larges continuous goods inventory flow ATO High sub assemblies weeks medium line flow MTO low months small batch flow STO None year s very little job shop
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Focused Operation splitting operations to focused on one business model per focus Do less per process Reduce inventory costs Reduce lead times may agony on Be Her pulse on demand A limited consisent set of operational goals that originate from its products processes and customers enabling operations to effectively support the business strategy The key is to focus the goals placed on operations by limiting the number of processes and customers as well as the number of products Feenstra what is assessment of the performance of Sorel's underwriting department what recommendations would I make What competencies matter most Cost Labor utilization invested in tech to automate decrease cost manage staff Time completion time with clear correlation between time and yield rate completion ratio d
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correlation between time and sales conversion rate Quality underwriting decisions on price and risk acceptance Flexibility response to variations in application volume and product mix simple and complex what is the order winner Probably times because of the correlation to sales completions the others are also important Is Sorel on the efficient frontier likely not they can do better on multiple dimensions process analysis for Sorel case 1 Process analysis and process diagram Representing a process 0 Activity task step Decision node 7 waiting buffer area Process flow 7 Information flow ons
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Submitted app saffptiations PaperT scantema Monty y 60010 I got are treated accept 5days t radical EtMÉIssm 9506 OR 90 95 1 85.5 Printing Paper apps Tests 7 dented if e apps I 7 H syeitieag yggap tund.enon.tn 95 I no 100 NO no 5 470501 15 4.5010 17.101 termination Additional forms of variability Product mix simple complex Multiple pathways Experience of staff junior senior Assignment of staff to activity and product type
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Variable input rate and process time What is standard deviation for staff level capacity simple complex Assisting people capacity Junior 3 2.5 senior 3 3.75 2 75 Initial Review senior senior Cap people 2 SappsfurtCBpeoplex3 Sappy 8ns day SO apps day Cape people 1.75 apps x 8hr day 12apps day Average Capacity Process Step Simple Complex Data Entry 144 16 Initial Review 150 12 Underwriting 174 15.2 Print a mail 176 is where is the bottleneck Depends on requested capacity of each step which is determined by product unit
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Computing average input rate Q2 of 2018 assuming B weeks in Q S days wk Apps 12 592 simple From Exhibit I 829 Complex simple 12,592 apps q C 13 weeks q x Sdays Luk 194 apps Complex 829 apps q CB weeks q x CS days wk 13 apps day Example requested capacity for initial Review is simple 194 apps day x 95 184.3 apps day complex 13 apps 7 day 1000 to get through
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Module 4 Defining Quality 8 Dimensions Pac A product's primary operating characteristics Leafs Not essential but add commercial appeal Dabity Attributes related to chances of failure CIA products conformance to specifications Durabi time l amount of performance before deterioration Diceabity speed courtesy competene and ease of repair Aest How a product affects our Perciened senses 1g gym of quality important to Process quality Determining specifications final product based measures Dimensions weight Temperature process time Availability percentage in compliance Defining specifications requires translating voice of the customer voc to voice of the process UOP
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Quality Questions from a process perspective once specifications are defined How and when should we test for quality Are our processes under control do They deliver consistent results Do our processes deliver the quality customers expect How can quality be further improved what is a quality process key metric is capability ability of process to meet design and or customer specification But because there is variability in most processes also interested in tracking whether the process is incl ELF Assignablecause variation variation All processes have some variation But not all variation may be typical Common cause Random variation inherent in the cement process design Possible to reduce through redesign or other interventions but unlikely to be eliminated completely Assignable cause New variation not inherent to the process Due to a specific cause which may be identified through root cause analysis once assignable cause is determined can use this knowledgege to move process
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I I dgage I prop back in control New variation can be positive but are signaling a shift and we want to be in control of the process Statistical Process Control Is PC Important truth Process variability is inevitable SPC is used to check if a process is in control what does in control mean variation is random due to common cause variation outputs have a stable mean and level of variation Doesn't imply that a process meets customer specifications lie is capable SPC is implanted by sampling performance measures and tracking these measures over time Gathering data Starting point simple men chart E C average across the mean samples a Histogram normal distribution central tendency mean in themiddle a bit higher two tails that are pretty similar lilah LEE m 20 95.45 4 central limit Theorum t of areas under a normal curve
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1 Managerial decision how sensitive should the detection be of whether the mean has shifted Three standard deviations is the most common practice for setting the upper control limit Lucy and lower control limit LOL This means that if the process is stable we expect a sample mean to fall outside these control limits only C 100010 99 73010 2 70 to of the time Mean control chart x chart Check if data points are within UCL and LCL if outside UCL and LCL should check for assignable cause Also important to track potential changes in variation with in the sample distribution R chart when variability increases but the mean remains the same R chart is helpful X chart when the mean changes but the variability remains the same X chart is helpful look for changes in both dispersion and central tendency
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Computing control limits fora mean Cx Chart the limits UCLA chart Et3O E 3F I AzR UCLA Chart E 3s JEFF ALR Fora Range R chart the limits are computed by vcherchart RD4 LOL Crohart RD Important these parameters vary with the number of measures within each sample n Not the number of samples Numa pservatoonsin Factor for factor for factor for factor to 4 barchartlainR UCLink estimate SD subgroup n Az chart CDs chart Du Cda B 1.88 1 02 8 3.727 2 57 1 128 1 693 4 0.73 0 2.28 2.059 5 0.58 0 2.11 2.326 6 0.48 0 2.00 2.534 7 0.42 0.08 1.92 2.704 8 0.37 0.14 1.86 2.847 9 0.34 0.18 1.82 2.470 10 0.31 0.22 1.78 3.078 Note that we can use Az EFn so Control limits for X Barcharteanbemonesimply calculated as CLEAR
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I mean of all the means of the sample F mean of all the ranges in the sample n measurements with in sample Caculate X chart center line UCL and LCL Cemetery Az is based on parameter table based on of measure men EDL D It A R D E AzR R Chart UCL and LCL Calculations number of observations within a sample n find Dy and D from parameter table UP D UCL DIE D LCL Dz R Important Reminder Control limits should always be caluted based on samples collected from a process that is known to be under control IE Tggontgg.fi hnYroIss7it
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Process Control P Chart some process outputs are reported as Discrete Attributes rather than continuous measures Continuous Measures Discrete Attributes Continuous responses Discrete Cbianary response Height non defective us width defective weight Like or not like concentration What color do you time prefer T track using track using P chart and R chart P Chart steps For each sample I count the number of defective outputs Xi le count the number of outputs that failed the attribute test For each sample i calculate the proportion of defective outputs ie the number of defective outputs divided by the samples Pi Estimate for the average proportion of defects based on the results from N samples p bar equals the average proportion of defects p
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Estimate the standard deviation of the average proportion of defects Op TEN Set control limits as UCL pI3É LOL p 3 LOLO set it equal too Process capability Control limits specification Limits Derived tolerance based Desired intended on process data tolerance internally determined Externally imposed statistical results based informed by VOC on samples Evaluated at item level with items not meeting specs viewed as defect Is the process capable if specification limits equal to the control limits The goal is to have a lot of tolerance for process errors and adjustments within the limits of specification
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Computing Cp process capability getting lower specification limit op U É poass standard deviation Cp I process borderline capable 199.7 w in spec Cp 51 process not capable Cp 1 Process cab able higher is better Cpd epic min EF 3 1 similar Guidelines Cpk 1 process capable Cpas 1 process not capable Cpz 1 Process borderline capable Cpk Cp a L LY t t t t t t t if
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not hot soo process performance 1600 enough data uop too hot e s coffee temp DMAIC Improvement Process 1 Define the problem improvement activity opportunity for improvement the project goals and the customer internal and external requirements 2 Measure process performance 3 Analyze the process to determine root causes of variation a poor performance defects 4 Improve process performance by addressing and eliminating root causes S Control the improved process and the future promise performance Define analyzed redesign d E INO contd
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Module 6 Characterizing innovative products Aspects of Demand functional Innovative predictable demand unpredictable demo Prodlest lifecycle more than Zers 3m Iyr Contribution 5 20 20010 margin 60010 Average margin of error in forcast 10 40 501 Average forcast markdown as of of 10 to 251 full price lead time required lemos 7 yr 7 day weeks
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which SCO strategies best support innovative products Fast Make to stock Zara Idea to market Custom configured Configurel Assemble to order Room and board several customized features among a set of limited options Agile Hybrid make to order make to stock industrial suppliers Responsiveness to unpredictable demand exclusive life cycle short products Flexible strategy Configure design processes to order Emergency services solving problems products with high levels of added services price isn't usually a consideration because of urgency of situation For casting demand for innovative Products dAma.tw
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