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IE 3104: Supply Chain Modeling: Manufacturing & Warehousing Instructor: Spyros Reveliotis Office: Room 316, IE 3104: Supply Chain Modeling: Manufacturing & Warehousing Instructor: Spyros Reveliotis Office: Room 316, ISy. E Bldng tel #: (404) 894 -6608 e-mail: [email protected] gatech. edu homepage: www. isye. gatech. edu/~spyros

“Course Logistics” • TA: Mr. Karin Boonertvanich • Office Hours: 2 -3: 30 pm “Course Logistics” • TA: Mr. Karin Boonertvanich • Office Hours: 2 -3: 30 pm MW (ow, an open-door policy will be generally adopted, but an appointment arranged by e-mail is preferred) • Grading policy: – – – Homework: 25% Midterm I: 20% (Tent. Date: middle of February) Midterm II: 20% (Tent. Date: end of March) Final: 35% Exams closed-book, with 2 pages of notes per exam Make-up exams and Incompletes: Only for very serious reasons, which are officially documented. • Reading Materials: – Course Textbook: “Design and Analysis of Lean Production Systems” R. Askin and J. Goldberg – Material posted at my homepage or the library electronic reserves

Course Objectives (What this course is all about? ) • How to design and Course Objectives (What this course is all about? ) • How to design and operate manufacturing and warehousing facilities (and more…) – A conceptual description and classification of modern production and warehousing environments and their operation – An identification of the major issues to be addressed during the planning and control of the production and warehousing activity – Decomposition of the overall production planning and control problem to a number of sub-problems and the development of quantitative methodologies for addressing the arising sub-problems – Computational implementation of the presented techniques (e. g. , Excel, LP solvers, etc. ) primarily through the homework assignments – Emerging trends, including the implications of a globalized and internet-based economy

Organizational Operations • Organization / Production System: A transformation process (physical, locational, physiological, intellectual, Organizational Operations • Organization / Production System: A transformation process (physical, locational, physiological, intellectual, etc. ) Inputs Outputs • Materials • Prod. Equip. • Labor • Manag. Res. Organization • Goods • Services • Supply or Value Chain / Network: Stage 1 Stage 2 Stage 4 Suppliers Stage 3 Stage 5 Customers

The major functional units of a modern (industrial) firm The major functional units of a modern (industrial) firm

The major functional units of a modern (industrial) firm (cont. ) The major functional units of a modern (industrial) firm (cont. )

Business Processes The set of procedures designed to integrate people, knowledge, materials, equipment, energy, Business Processes The set of procedures designed to integrate people, knowledge, materials, equipment, energy, and information in order to accomplish a specific task; e. g. , • design a product • enter a customer order • fill a customer order • acquire raw materials • etc. Remarks: • Each process has a set of outcomes/products and customers • Processes often cross organizational and functional boundaries • Processes can be interconnected; modern information technology is a primary enabler of such process interaction • Processes require resources and therefore they must be derived from and serve the objectives of the firm

Corporate Mission • The mission of the organization – – defines its purpose, i. Corporate Mission • The mission of the organization – – defines its purpose, i. e. , what it contributes to society states the rationale for its existence provides boundaries and focus defines the concept(s) around which the company can rally • Functional areas and business processes define their missions such that they support the overall corporate mission in a cooperative and synergistic manner.

Corporate Mission Examples (J. Heizer & B. Render, “Operations Management”, Prentice Hall) • Merck: Corporate Mission Examples (J. Heizer & B. Render, “Operations Management”, Prentice Hall) • Merck: The mission of Merck is to provide society with superior products and services-innovations and solutions that improve the quality of life and satisfy customer needs-to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return. • Fed. Ex: Fed. Ex is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing totally reliable, competitively superior, global air-ground transportation of high-priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained utilizing real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional for each other, and the public. We will strive to have a completely satisfied customer at the end of each transaction.

Defining the Corporate Strategy Responsiveness (Reliably faster; Efficiently accommodating innovation and demand fluctuation; e. Defining the Corporate Strategy Responsiveness (Reliably faster; Efficiently accommodating innovation and demand fluctuation; e. g. , Dell, Overnight Delivery Services) Competitive Advantage through which the company market share is attracted Cost Leadership (Cheaper; e. g. , Wal-Mart, Southwest Airlines, Generic Drugs) Differentiation (Better; e. g. , Luxury cars, Fashion Industry, Brand Name Drugs)

The operations frontier, trade-offs, and the operational effectiveness Responsiveness Cost Leadership Differentiation The operations frontier, trade-offs, and the operational effectiveness Responsiveness Cost Leadership Differentiation

Strategy Development Process (J. Heizer & B. Render, “Operations Management”, Prentice Hall) Environmental Analysis Strategy Development Process (J. Heizer & B. Render, “Operations Management”, Prentice Hall) Environmental Analysis Understand the environment, customers, industry, and competitors Identify your strengths, weaknesses, opportunities and threats. Determine Corporate Mission State the reason for the firm’s existence and identify the value it wishes to create Form a Strategy Build and maintain a competitive advantage, such as low price, quick delivery or quality, by identifying and developing the critical success factors

Factors affecting Corporate Strategy • External – Emerging strengths and weaknesses of competitors => Factors affecting Corporate Strategy • External – Emerging strengths and weaknesses of competitors => new threats and opportunities, respectively – New industry entrants – Development of substitute products – Development of new technologies – Legal developments (e. g. , environmental concerns and regulations) – Economic and political developments (e. g. , new international agreements, political crises) • Internal – Company politics and restructuring – Modified relationships with customers and suppliers – Product Life Cycle

Strategy and Issues during a Product’s Life (J. Heizer & B. Render, “Operations Management”, Strategy and Issues during a Product’s Life (J. Heizer & B. Render, “Operations Management”, Prentice Hall) Introduction • Best period to increase market share • R&D engineering critical Growth • Practical to change price or quality image • Strengthen niche Maturity • Poor time to change image, price or quality • Competitive costs become critical • Defend market position Decline • Cost control critical Sales Time • Frequent product and process changes • Short production runs • High production costs • Limited models • Attention to quality • Forecasting critical • Products and process reliability • Increase capacity • Shift towards product focus • Enhance distribution • Standardization minor product changes • Optimum capacity • Process stability • Long production runs • Little product differentiation • Overcapacity in the industry • Reduce capacity and eventually prune line to eliminate items not returning good margin

Implementing Corporate Strategy through Operations Management (OM) • Strategic fit: The consistency between the Implementing Corporate Strategy through Operations Management (OM) • Strategic fit: The consistency between the competitive advantage sought by a firm and the process capabilities and managerial policies that it uses to achieve this advantage. – Cost leadership => efficient and lean production processes – Quality of product and service => well-designed and wellmaintained production and business processes, highly trained workforce, high-precision equipment – Product variety => flexible production processes, ability to support product customization through design for postponement – Responsiveness => build-up of excess production capacity and/or inventories (safety stock)

PC SUPPLY CHAINS Customer Distribution Channels PUSH Manufacturer Suppliers Typical PC Supply Chain (Compaq, PC SUPPLY CHAINS Customer Distribution Channels PUSH Manufacturer Suppliers Typical PC Supply Chain (Compaq, HP, IBM, etc. ) Virtual Integration PULL Dell Suppliers Dell Supply Chain PUSH

Dell model • Suppliers maintain nearby ship points; delivery time 15 minutes to 1 Dell model • Suppliers maintain nearby ship points; delivery time 15 minutes to 1 hour • Suppliers own inventory until used in production • Demand forecasting is critical – changes are shared immediately within Dell and with supply base • Customers frequently steered to “recommended configurations” with high availability to balance supply and demand • Demand pull throughout value chain – “information for inventory” substitution • Focused on strategic partnerships: suppliers down from 200 to 47 • External logistics supplier used to manage inbound supply chain

Dell Model Benefits • No production launch until customer order booked (pure pull!) • Dell Model Benefits • No production launch until customer order booked (pure pull!) • Very high product (configurable) variety – mass customization! • Direct fulfillment - no intermediaries • Very low finished goods inventory (costs) – high inventory turns (raw material inventory influenced by “recommended configurations”) • High velocity material flows & fulfillment

Dell performance Dell performance

External and Internal Performance Measures • External performance measures estimate the firm’s ability to External and Internal Performance Measures • External performance measures estimate the firm’s ability to build and maintain its market share, by attracting and maintaining a happy customer, through the provided goods and services (e. g. , customer retention, defection, turnover, the American Customer Satisfaction Index (ACSI) - a weighted score computed through customer surveys) • Internal performance measures translate the sought competitive advantage with respect o the product attributes of cost, differentiation and responsiveness to target process performance that must be achieved in order to support this advantage; e. g. , – responsiveness to meet customer demand => fill rate, i. e. , percentage of orders that are filled immediately from stock – process flexibility => time or cost needed to switch production from one item to another – product reliability => failure rate and mean time between failures

BOM Levels • Level 0: End Items (SKU’s) • Level 1: Items that constitute BOM Levels • Level 0: End Items (SKU’s) • Level 1: Items that constitute components (are children) of level-0 item(s) only • Level 2: Items that are children of level 1, and, potentially, some level 0 items only • Level i: Items that are children of level i-1, and, potentially, some level 0 to i-2 item(s) only A B C E D F E C E Level 0: A, B F G F Level 1: D, H D E H C E Level 2: C, G G F Level 3: E, F

A typical (logical) Organization of the Production Activity Assembly Line 1: Product Family 1 A typical (logical) Organization of the Production Activity Assembly Line 1: Product Family 1 S 1, 1 Raw Material & Comp. Inventory S 1, i S 1, 2 S 1, n Fabrication (or Backend Operations) Dept. 1 S 2, 2 Dept. j S 2, i Assembly Line 2: Product Family 2 Finished Item Inventory Dept. k S 2, m

Make-to-Stock vs. Make-to-Order • Make-to-Stock • Make-to-order • delivery response times is a key Make-to-Stock vs. Make-to-Order • Make-to-Stock • Make-to-order • delivery response times is a key competitive factor • a limited number of products is manufactured repetitively • ties investment capital and storage space • runs the risk of damage and obsolescence • more appropriate for commoditized products • also appropriate strategy for components that are hard to acquire or their shortage would be too costly • high degree of customization • short shelf-lives due to obsolescence or spoilage • Assemble-to-order • Store high-level standardized subassemblies • Perform the final assembly only upon the reception of a customized order • Enabled by design-for-postponement • Engineer-to-order • Appropriate for highly customized, one-of-a-kind items

Back to the course objectives. . . Raw material Forecasting Strategic Planning Fabrication Parts Back to the course objectives. . . Raw material Forecasting Strategic Planning Fabrication Parts Assembly Finished Products Distribution Center Retailer Customer Product Flow Adminstrative Functions (Purchasing, Payroll, Finannce, Accounting) Aggregate Production Planning Marketing Disaggregation Process Planning Production Scheduling Product design Manufacturing Support (Facilities Shop Floor Planning, Control Tool Management, Maintenance, Supporting Quality Control) Tech. & Admin. Prod. Plan. & Control Dec. Hierarchy Functions

Reading Assignment • Pages 1 -28 from your textbook • Chapters 1 and 2 Reading Assignment • Pages 1 -28 from your textbook • Chapters 1 and 2 from “Managing Business Process Flows” by Anupindi et. al. , posted at the library electronic reserves