Global Supply Chain Management
Exam
Summary part 2/2
Chapter 6, 10, 12, 13, 14
Production processes
- High-level view of what is required to make something can be divided:
Source step: where parts are procured from one or more suppliers.
Make step: where manufacturing takes place.
Deliver step: where the product is shipped to the customer.
- Lead time: the time needed to respond to a customer order.
- Customer order decoupling point (CODP): where inventory is positioned in the supply chain.
- Inventory: acts as a buffer to separate the customer from the manufacturing process.
- Selection of CODPs is a strategic decision that determines customer lead times and can
greatly impact inventory investment. The closer to the customer, the quicker the customer
can be served.
- Trade-off where quicker response to customer comes at expense of greater inventory
investment, because finished goods inventory is more expensive than raw material
inventory.
- Make-to-stock: the customer is served ‘on-demand’ from finished goods inventory. Trade-
off between costs of inventory and level of customer service must be made by knowledge of
customer demand. Invest in lean manufacturing. Focus is on providing finished goods where
and when the customers want them.
- Assemble-to-order: pre-assembled components, subassemblies and modules are put
together in response to a specific customer order. Task is to define an order in terms of
alternative components and options since it is these components that are carried in
inventory. Engineering design that enables flexibility in combining components, options and
modules into finished products. Lean manufacturing. CODP moved from finished goods to
components.
- Make-to-order: the product is built directly from raw materials and components in response
to a specific customer order. CODP in raw materials or supplier inventory.
- Engineer-to-order: the firm works with the customer to design the product, which is then
made from purchased material, parts and components. CODP in raw materials or supplier
inventory. Emphasis may be towards managing the capacity of critical resources.
- Many firms serve a combination of these environments and few will have all.
- Lean manufacturing: to achieve high customer service with minimum levels of inventory
investment.
Production process mapping and Little’s law
- It is useful to analyze how the Make-step operates using performance measures that relate
to the inventory investment and how quickly material flows.
- Simplified: material in a process is in one of two states:
1. Material is moving or ‘in-transit’. Work-in-process.
2. Material sitting in inventory as ‘buffer’, waiting to be used.
- Total average value of inventory: the total investment in inventory at the firm, which
includes raw material, work-in-process and finished goods.
- Inventory turn: an efficiency measure where the cost of goods sold is divided by the total
average value of inventory.
- Days-of-supply: a measure of the number of days of supply of an item.
- Little’s law: inventory = throughput rate x flow time.
- Throughput: the average rate that items flow through a process.
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, - Flow time: the time it takes on unit to completely flow through a process.
- Throughput rate of the process is equal to average demand. Not producing excess or
shortage.
- Little’s law: relationship between units and time.
- Flow time = inventory / throughput.
- Throughput = inventory / flow time.
- Little’s law can be applied to single workstations, multistep production lines, factories,
supply chains, processes with variability in arrival rate and processing time, single or multiple
product systems or nonproduction systems.
How production processes are organized
- Process selection: strategic decision of selecting which kind of production processes to use
to produce a product or provide a service.
- Process types: the way products are approached in an organisation. Information about
volume and variety is necessary to make observations about what would be a sensible
choice of process type.
Project process: unique, large-scale work effort directed at one or a few end-items. Each
end-item is one-of-a-kind and tailored to fit unique requirements. Example: large
structures, machines, ships.
Jobbing process: used for small-scale work effort, where the output is one or a few –
often customized – identical items, to fit an order. Instead of being dedicated to one
product, resources are shared by many low volume/high variety products. The work is
performed in a small plant or shop (job shop), by a group of professionals or
craftspeople. Example: prothese.
Batch process: work effort involves producing several or many identical end-items.
Focus more on standardized products than in job shops. By producing larger quantities
of fewer kind of end-items, producers can take advantage of economies of scale
resulting from fewer machine changeovers.
Mass/line process: similar or identical items are produced in high volumes. Material
moves through the process somewhat smoothly with few interruptions.
Continuous process: similar to line, but with products that can only be counted in
kilos/liters/meters/etc. Similar or identical products, which actually flow through the
process. Produced in large volume. In a continuous production process, the product
seldom changes. Often, not until after packaging is the product identifiable as a discrete
unit.
- Layout types: the physical arrangement or grouping of production resources, such as the
placement of departments, workgroups within departments, workstations, machines and
stock-holding points within a facility. Physical manifestation of the process type, but there is
often some overlap between process types and layouts. Must be observed or inferred from
the available information. Often deduced from information about volume and variety.
Fixed position layout: end-item remains in a fixed position while it is being produced.
Example: ships, aircrafts.
Functional layout: similar types and operations (similar equipment & tools) are clustered
into functional work areas or departments. Each job is routed through the areas
according to its routing sequence of operations. Example: patients in a hospital.
Cellular layout (group layout): dissimilar machines are grouped into manufacturing cells,
to process parts with similar shapes or processing requirements. Objective is to reduce
throughput time (e.g. by creating small lines with a product layout) and to optimize
movement of materials.
Product layout: arrangement of resources follows the steps in which the end-item is
produced. Sequence of operations is designed specifically around one kind of product.
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, Example: in a tobacco factory where all products are produced through the same
sequential steps, it is logical to also arrange the equipment and tools in this sequence.
Assembly-line design
- Workstation cycle time: time between successive units coming off the end of an assembly
line. At each workstation, work is performed on a product either by adding parts or by
completing assembly operations. Work at each station is made up of tasks.
- Assembly-line balancing: problem of assigning tasks to a series of workstations so that the
required cycle time is met and idle time is minimized.
- Precedence relationship: the required order in which tasks must be performed in an
assembly process.
- Steps in balancing an assembly line:
1. Specify the sequential relationships among tasks using a precedence diagram. Circles
represent individual tasks, arrows indicate the order of task performance.
2. Determine the required workstation cycle time (C).
Production time per day
C=
Required output per day ( ¿units)
3. Determine the theoretical minimum number of workstations (N t) required to satisfy the
workstation cycle time constraint using the formula.
Nt =
∑ of task×(T )
Cycle time(C)
4. Select a primary rule by which tasks are to be assigned to workstations and a secondary rule
to break ties. For the tasks that can be assigned, pick the one with the longest task time. If
there is a tie, pick the one that has the greatest number of following tasks.
5. Assign tasks, one at a time, to the first workstation until the sum of the task times is equal to
the workstation cycle time or no other tasks are feasible because of time or sequence
restrictions. Every time a task is assigned, re-create the list of tasks that are feasible to assign
and then pick one based on the rule defined in 4. Repeat the process for all workstation until
all tasks are assigned.
6. Evaluate the efficiency of the balance derived using the formula.
Efficiency =
∑ of task×(T )
Actual number of workstations ( Na ) x Workstation cycletime(C)
We assume there is one worker per workstation. When the number of workstations does
not equal the number of workers, we would usually substitute the number of workers for
the number of workstations.
If efficiency is unsatisfactory, rebalance using a different decision rule.
Splitting Tasks
- Often, the longest required task time defines the shortest possible workstation cycle time for
the production time. This task time is the lower time bound unless it is possible to split the
task into two or more workstations.
- There are several ways to accommodate a 40-second task in a 36-second cycle:
Split the task: complete units processed in two workstations.
Share the task: adjacent workstation can do the work. It assists, but does not do some
units containing the entire task.
Use parallel workstations: assign the task to two workstations that operate in parallel.
Use a more skilled worker: a faster worker may be able to meet the shorter time.
Work overtime: the amount of overtime required may be acceptable.
Redesign: it may be possible to redesign the product to reduce the task time.
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