Exam 1 Study Guide
MODULE ONE: What is Supply Chain Management? (9 TOAL QUESTIONS)
●Supply Chain Management: effective and efficient integration of suppliers, manufacturers, transportation
organizations and other parties responsible for bringing products and services to market (doing the least amount of
work for the best product)
●Procurement (purchasing): responsible for acquiring materials, equipment, products and services
○Finding supplier that offers the best value
○ Negotiate terms of purchase
○ Create long-term relationships with suppliers
●Operations: responsible for making business processes effective and efficient
○ Making highest quality product with the fewest resources possible
Logistics: responsible for developing transportation itinerary (movement and storage) to navigate smooth
flow of materials
●Reverse Logistics: management of products that flow upstream (toward supplier)
●Global SCM: when supply chain partners span across multiple countries/continents
●1st tier suppliers: provides goods and services directly to a company
●2nd tier supplier: provides goods and services to a company’s 1st tier supplier
●SCM flows: Materials, money, and information
-if these three are not continuously flowing, supply chain will fail
●Business model: a company’s plan for how it will purchase items, transform them, deliver them, and sell them to
product profit
○ Business to Consumer ( B2C) - amazon, starbucks, nordstrom
○ Business to Business ( B2B) - boeing, consulting/marketing agencies
○ Both B2B and B2C - IBM, dell, verizon
○ Brick & Mortar - land-based commerce only (ex. Burger King, Circle K)
○ Internet Only Retailer - net commerce only (ex. Amazon.com)
○ Click & Mortar - land-based and internet (ex. Nordstrom, barnes and noble)
Supply Chain visibility: ability to see what is happening with inventory upstream (toward supplier) and
downstream (toward consumer)
●Profit relationship to SCM: if products are poorly manufactured or are delivered later and/or damaged it will affect a
company’s ability to generate revenues
●ROI’s relationship to SCM: supply chain managers seek to maximize ROI so that investment decreases and profit
increases
●Competitive priorities: cost, quality, speed, flexibility
○ Cost: material, production, packaging, customer service, organizational, quality
○ Quality: design, material & production, quality level delivered, consistency, service
○ Time: delivery (lead time), on-time delivery
○ Flexibility: product or customization flexibility (Oregano’s pizza on toppings), volume flexibility (frozen pizza in volume
but not toppings), mass customization
●Core competency: primary advantage over competitors (usually difficult, if not impossible to replicate)
● Productivity vs. Value Perspectives (organization vs. customers)
○ Productivity: maximizing outputs and minimizing inputs (organizational perspective)
○ Value: giving a customer more for the same price or the same amount for a lower price (customer perspective)
●Primary supply chain goals: effectiveness, efficiency, and adaptability
●Seven types of waste: decreasing one may increase another
○ Defects
○ Overproduction: wastes time, money and effort
○ Transportation (increases possibility of theft, damage, and loss)
○ Motion: too much movement wastes time
○ Waiting: items should not be produced too far in advance
○ Inventory: not providing an immediate return
○ Over-processing: wastes time and resources
● Keys to being a Successful Supply Chain Manager:
○ Satisfy needs of the customer: create value by creating competitive priority mix
○ Satisfy needs of the company: maximize productivity, eliminate waste
○ Be prepared for the future: responsive to change
● Supply Chain Strategy:
○ Understanding the product/service and the market’s desires
○ Developing a business model
○ Organizing the right group of supply chain partners
● Supply Chain Tools
○ Supply chain metrics: identifying successes and failures
○ Information technology tools: collect, organize, and report data
○ Relationship management skills
○ Financial resources: companies need to be willing to invest in their supply chain
○ Organizational integration: effective communication between all departments
List of terms likely to be tested from lectures:
Supply Chain Management - What is SCM?
Supply Chain Management:
The Efficient Integration of….
-Suppliers and Manufacturers
-Transporters, Distribution centers, warehouses
-Retailers and all other parties associated tasked with the successful delivery of the final
product and/or service.
-Supply chain is…”only as strong as its weakest link”
-Efficiency is very important…how can you be efficient if you are not integrated?
Operations Management (key component to the supply chain): sign, operation, and improvement of
the production systems that efficiently transform INPUTS into Finished Goods & Services, maximizing
productivity.
Ex of “duties”: Process management, Plant management, capacity planning – resources, speed (How
much, how fast?), scheduling jobs/people, waiting line management, process improvement projects.
Logistics: is the COORDINATED Planning and Execution of the following:
oPreparation of Packaged Product
oMovement Itinerary (Transport)
oStorage Itinerary (Warehousing)
oProduct Distribution throughout the Supply Chain –
-Who gets what? When? How?
Ex. of “duties”: Distribution/Warehousing, Infrastructure Management, Packaging, containerization,
transportation, documentation, Third party management and communication
Reverse logistics
Procurement (a key component to the supply chain): The process of obtaining services, supplies,
and equipment in in conformance with corporate regulations.
Ex. of “duties”: supplier selection, purchasing negotiations, managing supplier relationships as well as
materials/ inventory
*You are in purchasing if your job is in procurement
3 flows of the Supply Chain:
1. MATERIALS
2. INFORMATION
3. MONEY
Supply chain visibility
Corporations – Goals and Terminology
The Corportation-Stakeholders
-Owners, investors, stockholders
-Managers, employees and business partners
-Customers
-“Corporate level”
-Without these three the company will not be successful
-Company is there to make money, but as the manager you have to be thinking about owners, managers and
customers constantly
-Every decision as a manager has to do with money, but obviously you have to make all these people happy.
Primary goals of a business and Ties to SCM: Sustainable and long term profits AND maximize return on
investment (ROI).
Supply chain is about revenue and cost. Better products= more revenuedelivered on timemore revenue. Doing it
on time=less cost.
Find a way to different so you can survive for a long period of time.
How can this be achieved?
1. MAKE MONEY: Profit= Revenue- Cost
2. BE EFFICIENT AND AVOID WASTE: ROI Formula=Profit/ Investment
3. BE DIFFERENT/ BE BETTER: Develop core competencies….
Core competencies
Competitive Priorities (4): The four things that companies compete on
1. Cost- very versatile:
Ex: Water bottles
-When you buy a bottle of water don’t just consider the water. There are also…(5)
-Material costs
-Production costs
-Packaging, transportation, warranties, repairs, rework, errors, time
-Customer service cost
` -Other organizational costs-marketing, finance, technology, waste disposal, rent, insurance, legal,
human resources
“CONTROL ACROSS ENTIRE SUPPLY CHAIN*
2. Quality: (5 different types)
Design quality: Product or service. Good workers and materials can’t make up for a bad design.
Ex: Apple
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Material and Production quality : This requires well designed production system, good materials,
labor, high performance, aesthetics, durability
Quality level delivered : How does it look when the end user finally gets it? What it look slike off the
assembly line is NOT the only thing that is important.
Ex: Food deliveries
Consistent quality : Same every time? Perfect every time? Having the ability to be consistent is
challenge for any company that wants a massive customer base.
Ex: McDonalds?
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Service quality: Sales, support, repairs, maintenance, assembly, delievery
Quality is a very versatile word
People have different meanings when it comes to quality
Diff. companies give different types of “high quality”
Ex: Apple focuses on design quality. They do not always work very well with material and production quality
issues
Ex: McDonald’s= “consistent quality”
Ex: Quantity level delivered-pizza was hot and yummy when it came out of the oven, but after it was transported
and delivered-not so much
3. Speed/Time
DELIVERY TIME-Lead Time (Pizza Delivery)
-From order placementorder fulfillment
-Includes…
-Supplier delivery times
-Manufacturing time
-Transport times across the supply chain
-Waiting time
ON-TIME DELIVERY- (Airline Industry)
-% Of time delivered when promised
- Developing schedules, and staying on schedule
-Who dictates promised date/time?
Fast, accurate or both?
-Some companies focus on being more reliable than being on time
*CONTROL ACROSS THE ENTIRE SUPPLY CHAIN
4. Flexibility-companies typically offer large quantities OR a large range of customizable features.
Both are considered a form of flexibility. Consider the planning required to offer a customer
each (or both.) 3 different types:
1. PRODUCT OR CUSTOMIZATION FLEXIBILITY:
-Options offered
-Built to your specifications
2. VOLUME FLEXIBILITY
-Coping with demand changes
-Large and/or small orders (timely)
*Sometimes companies through the use of good planning, design and technology can provide both forms of
flexibility. This is called….
3. MASS CUSTOMIZATION
-Both customization and volume flexibility
Other types of flexibility modern organizations require:
-Design flexibility
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-Materials/ Parts flexibility
-Facility flexibility
-Tools/Machinery flexibility
-Employee flexibility
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-Service flexibility
*All companies differ in these priorities
Some examples….
McDonalds burgers vs. Red Robin burgers: how can these both coexist and be profitable for each company? Look at
these main points-
Who makes it cheaper?
Who makes it faster?
Who makes better quality?
THIS is how companies coexist.
Productivity (Corporate goal)- “ Organizational Perspective”
oWhat did I make? (outputs)
oWhat was the cost? (inputs)
o“Boss wants productivity”
oAKA making more for less money or less for more money?
VS…
Value (Corporate goal)- “Customer Perspective”
oWhat do I get? (quantity, quality, size…)
oWhat is the price? (money, waiting time,warrenty…)
oAKA what I get in comparison to how much I paid…(size and price)
Different people want different things
Supply chain manager is responsible for making people feel better about the product (they can make it cheaper for
the customers, deliver it faster, etc.)
Business Models: The plan for purchasing, transforming, delivering, and selling products/services with the
intent of making a profit.
Consider: Amazon vs Barnes&Noble, SeaGate HD vs. DropBox
-B2C
-B2B
Both B2B an B2C
-Brick and Mortar (land-based commerce)
-Internet only retailer (net commerce only)
-Click and Mortar (land based and internet)
In supply chain we want to provide supply chain visibility: being able to see where the inventory is in the supply chain
Do you have enough inventory?
How can you be sure?
Can you count on your supply chain tomorrow, next week, next month?
*ILLUSTRATIONS THAT MAY BE INCLUDED:
Simple Supply Chain illustration:
MARKETING/ DESIGN/ STRATEGY makes up the “brain of the company.”
IT= information (how many did we sell, how many manufactured today, etc.)
IT/ MARKETING/ ACCOUNTING all work together
MODULE TWO: Managing Supply (18 TOTAL QUESTIONS-9 FROM TEXTBOOK/8 MATH RELATED)
●Inventory: items owned by a company for present sale, future sale and day-to-day operations
●Lead time: period of time between when an order is placed and when it is received
●Lot size: an accepted order size (ex. Buying S,M,L,XL per unit or buying equal amount of each size in each package)
●Demand forecasting: predictive analysis of consumer demand in future period
○ Story in class: USS naval officer questions experts separately to avoid group think and finds missing submarine 220
yards away from where they guessed
○ Putting together the right team: diversity of opinion, independence, decentralization
●SKU: identification code used to track inventory or catalog sales (ex. Seeing if store has white shirt in medium size)
●Independent demand: demand levels are not directly impacted by demand of related item (ex. Cars)
●Dependent demand: demand levels are directly impacted by demand of related item (ex. Tires because more cars
sold cases greater demand for tires)
● All 8 Inventory Classifications:
○ Raw materials
○ Work-in-process
○ Finished goods
○ Maintenance, repair and operations (MRO): items important for daily operations (ex. Desks, computers, cleaning
supplies)
○ Market inventory: inventory readily available on the shelf at a store
○ Safety stock: inventory kept for variation/uncertainty of demand (decrease amount of safety stock by having better
suppliers)
○ Anticipation inventory: created and stored for future use (ex. Shovels/snowblowers for winter, candy for halloween)
○ Pipeline inventory: inventory “on its way” to the customer (DOESN’T INCLUDE SAFETY STOCK)
■ Pipeline inventory = periodic demand (d) * lead time (L) = dL
● Shrinkage: happens more often when there’s too much inventory (ex. Shampoo principle)
● High vs. Low inventory
○ High inventory: higher levels of customer service, quality discounts possible, lower ordering and transportation costs,
greater security against unexpected demand variability
○
■ Short lead times may require high inventory
○ Low inventory: less storage space required, lower chance of inventory shrinkage, less materials handling
requirements, less money invested in inventory for use elsewhere
○
● All 4 costs of inventory
○ Cost to purchase
○ Holding cost: warehouse rent, security systems, insurance, etc.
○ Ordering cost: order clerk salary, delivery fees
○ Stockout cost - cost for not having enough inventory on hand
● Inventory calculations:
○ Average amount of inventory = Lot Size (Q) / 2
○ Number of Orders per year = Annual Demand (D) / Lot Size (Q)
○ Time between orders (in weeks) = (Q/D) * 52
● Total Annual Cost formula
○ TC = [Annual Demand(D)* cost to purchase on unit(C)] + [(Q/2)* cost to hold one unit for a year (H)] + [(D/Q)* cost to
place a single order (S)]
●EOQ: lot size that will minimize TC; the optimal lot size
○ EOQ=sqrt[(2DS)/H)]
○ EOQ is the point where AHC = AOC; intersection point
● Reasons for making
○ Proprietary technology: company does not tell others how to make it
○ No competent suppliers: others cannot make it as good as you can
○ Better quality control: others may not be as detail-oriented
○ Idle capacity: you have machines and people available to make it
○ Control: faster, cheaper, better
VS.
● Reasons for outsourcing (buying)
○ Insufficient capacity: don’t have time or resources
○ Lack of expertise: don’t know how to make it
○ No competent supplier: can’t make it up to the standards you want
○ Better use of resources: outside suppliers can produce it faster and at a lower cost than you can
●Total cost of ownership (TCO): cost to acquire, store, use, handle, transport, maintain, dispose, recycle or refurbish
an item
●Vertical Integration: taking on additional supply chain responsibility that were formerly done by outside parties
○ Forward integration: taking over downstream operations (ex. Bakery opens sandwich shop and use their own bread
for their sandwiches)
○ Backward integration: taking over upstream operations (ex. Bakery purchases a flour company; use their own flour in
bread and sell flour to other companies)
● Steps in purchasing process (ordering costs)
○ Requisition: identify need (use MR-)-material requisition
○ Supplier selections: you may use RFQ- request for quotation
○ Place order: use PO-purchase order
○ Track order: communicate with supplier-
○ Receive order: inspect, record, shelve
● Purchasing documents
○Material requisition (MR): initiate purchasing process by signaling that product/service (lists quantity needed,
product description/specifications)
○Request for quotation (RFQ): if the product requested is not in stock and RFQ is issued asking the supplier to
provide a quote of per unit price, delivery date, etc.
○Purchase order (PO): states the terms and conditions of an order; represents a binding contract between supplier
and buyer
●E-procurement system: aids in submitting requests for materials, orders, negotiating with suppliers, tracking
shipments, receiving shipments; helps analyze procurement actions for improvement
●Centralized purchasing: single purchasing department responsible for all purchasing decisions
○ Avoids duplication
○ Volume discounts by pooling common order from different departments into one large order
○ Consolidated shipping: pen/paper orders from all different departments can be shipped to one location in a single
order
○ Established supply base: allows deeper supplier relationships to form
○ Supply specialization: employees can develop expertise in buying certain categories of products
VS.
●Decentralized purchasing: purchasing department in each department
○ Closer knowledge of requirements: better understanding of the intended use of item
○ Closer knowledge of supplier: local buyers would be able to make better purchasing decisions
○ Speed of purchase: can be bought immediately
●Supplier base: group of suppliers that a company makes most of its purchases
●Choosing a supplier: you need to consider consumer needs; cost, quality, speed, and flexibility; technological
capability; location; information technology system; ability to innovate; capacity potential; 2nd and 3rd tier suppliers;
reliability; service
●Supplier scorecards: forced to quantify your desires, clearly communicate your actual desires/needs, allow for
meaningful discussions on present and future
●Supplier certification: assessment to ensure supplier meets minimum supplier standards
● Single supplier
○ Quantity discount opportunities
○ Lowest total cost
○ Intellectual property advantage: no one else can make it as well
○ Quality control: all items fairly consistent
○ Easier relationship management and collaboration
■ Having too close of a relationships with suppliers can cause them to slack if they think they are not held to as high a
standard anymore
VS.
● Multiple supplier
○ Competition breed innovation
○ Risk is spread out among multiple suppliers: if one fails, others can step in
○ Capacity flexibility: can make more supply if you need it
○ Location advantages: supplier is always relatively close by
*MODULE 2: READ ALL INTRODUCTORY SECTIONS: STUFF, CAR, ETC.
READING ASSIGNMENT-CASE: BUILDING DEEP SUPPLIER RELATIONSHIPS
Below is a list of items most likely to be tested from this case:
1. How do American suppliers feel about Japanese and American car manufacturers?
They like them because they drastically improve their production system, order parts from
U.S companies.
2. What is kieretsu?
Close knit network of vendors that continuously learn, improve, and prosper along with their
parent companies.
3. What did American companies do to copy the Japanese partnering model? Despite the
efforts of American car manufacturers, why did cost resurface as the key criterion?
Tried to make close connections to suppliers, did not do it and only brought parts. Ran suppliers
out of business trying to cut costs, which in turn cost more to find more suppliers.
4. How long does it take American and Japanese automakers to design a new car? Why are
the Japanese faster?
U. S automakers 2-3 years, Japanese 12-18 months. Has to do with supplier partnering model.
They give their vendors small orders to begin with and as they improve they give them larger
orders.
5. Japanese cars are seen as durable, reliable and high in quality. Do they struggle in
decreasing manufacturing costs?
They have not struggled. All companies are improving in supply chain management.
6. What are the general steps outlined in the supplier-partnering hierarchy? How should
companies go about fulfilling each step?
1. Understanding how your suppliers work
2. Turn supplier rivalry into opportunity
3. Supervise your suppliers
4. Develop suppliers technical capabilities
5. Share info intensively but selectively
6. Conduct joint improvement and activities
7. How did the relationship between Honda and Atlantic Tool and Die develop?
Honda sent engineer to the other company to observe operations practices and manufacturing.
They have a great relationship.
8. How has Johnson Controls benefited from its’ relationship with Toyota?
Johnson was going to make a new factory so Toyota redesigned the factory getting what was
desired without spending all that capital.
9. How does Honda use report cards?
Every month top management resolves issues immediately finding out how they can fix whatever
problem arises. They put positive comments if supplier is doing well.
10. Despite the low cost wage opportunities presented by Chinese and Indian suppliers
Toyota and Honda have not switched suppliers. Why?
Innovation capabilities are more important than wage costs.
11. Why does Toyota divide components into two categories?
Some parts aren’t specialized so they can get them cheaper, other parts need proprietary
technology so Toyota closely monitors and works with them to design parts.
12. Explain the benefits of Honda’s Best Practices program to both Honda Suppliers and
Honda.
Has increased suppliers productivity by 50%, quality by 30%, reduced costs by 7%
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Below is a list of the items most likely to be tested from the lectures. This list is not necessarily complete,
but it is a helpful guide.
Introduction to Inventory
Lead time
Lot size
SKU
Shrinkage
Inventory and types of inventory
Relationship between risk and inventory
Purchasing considerations
Costs associated with inventory
Inventory Classifications - long-term, seasonal, safety stock, market, pipeline, anticipation
Basic Forecasting Models
Qualitative and Quantitative forecasting
On your own material: Simple moving average and Weighted moving average
Total Cost of Inventory and EOQ
High vs Low inventory – Benefits, downsides, tradeoffs
Cycle stock
Costs of inventory
Be able to discuss, explain, and use the Total Cost Formula.
- Formulas, calculations, graphs, etc.
The lab exercise and problems are good indications of what the exam might contain.
Total cost formula – Know all parts of the formula:
TC= DC+ (Q/2) H + (D/Q) S
TC= Total Annual Cost of Inventory
D= Annual Demand for item- how many sold in a year
C= Cost per unit (for company keeping inventory)-what we pay supplier to buy inventory
H= Annual holding cost per unit-cost to hold one unit of inventory for one year (a lot of cots
that come along with this) Ex: tomato perishes over the course of the year=high annual
holding cost and lose entire value of tomato-costs more
S=Cost to place a single-order-diff. types of orders
DC=Annual cost to purchase inventory-buy it (Ex: $10,000 water bottles, $1 per bottle, $10,000
for the year)
(Q/2) H= Annual holding cost (AHC)- Hold it
(average inventory)* annual per unit holding cost
(Ex: If I buy 500 at a time, 250 is the average and if it costs 0.25 cents to hold each bottle the
holding costs for all the bottles the entire year is found this way.
-The bigger the quanitity the bigger the holding cost (order as little as you can to keep down
the holding cost)
(D/Q)S= Annual ordering cost (AOC)-Order it.
(orders placed per year)* cost to place each order
(Ex: 1,000 at a time, 10 orders in the year “S” cost each gives me the ordering cost.
-The bigger your lot size, the lower the number of orders per year, and thus the lower the
annual ordering costs.
*I have to pay to buy, order and hold items.
*We want to be at the lowest point on the total cost curve (the intersection)-were holding cost
and ordering cost intersect.
On your own material: Time between orders
-Ideally companies want consistency in purchasing
-Same number of units every X weeks. Suppliers appreciate it too.
-Notice: relationship between # of Orders/Year and Time Between Orders (TBO)
EXAMPLE: ANNUAL DEMAND (D)= 24,000 UNITS PRESENT ORDER SIZE (Q)=3,000 UNITS
NUMBER OF ORDERS/YEAR (D/Q)= 8.00 ORDERS/YEAR
T.B.O= [ ( Q/ D) 52] WEEKS
T.B.O.= (3,000/ 24,000) 52= 6.50 WEEKS
If you place 26 orders this year, how often will I be placing an order?
-Every 2 weeks
How about if I place 13 orders this year?
-Every 4 weeks
How about 10 orders per year?
-Every 5.2 weeks
GRAPHING PROBLEM: if I order a 100 at a time and need 8,000 units I am going to place 80 orders. So that
means ill order every .6 weeks, every four or 5 days. I order 100, half of that is 50, holding cost is….
EOQ - Fully understand this concept, calculations and all associated the graphs.
*EOQ= Economic Order Quantity, when holding cost and ordering cost are equal.
- Annual Holding cost= Annual ordering cost
Lot Size
(Order Size)
Orders/Yr
Time Between
Orders (weeks)
Order Cost
Average
Inventory
Carrying Cost
100
80.0
0.65 $3,200.00
50
$200.00
200
40.0
1.3 $1,600.00
100
$400.00
300
26.7
1.95 $1,066.67
150
$600.00
400
20.0
2.6 $800.00
200
$800.00
500
16.0
3.25 $640.00
250
$1,000.00
600
13.3
3.9 $533.33
300
$1,200.00
700
11.4
4.55 $457.14
350
$1,400.00
800
10.0
5.2 $400.00
400
$1,600.00
(Q/2)H = (D/Q) S
Q=EOQ=SQUARE ROOT (2DS/H)
-The EOQ is the optimal order size
-Using EOQ you will get the lowest TC for the given cost structure and demand forecast.
-Not the required lot size though
-If you set them equal to each other and solve for Q we get the bet possible ordering size.
oWhat does it mean if AHC > AOC? AHC < AOC?
oHow do you know if you are above or below the EOQ?
Procurement Basics
Purchasing process
Make or Buy decision
Centralized and Decentralized purchasing
Key issues to consider in choosing a supplier
Supplier scorecards, Supplier certification
Importance of relationship management between buyers and suppliers
Vertical integration, Forward and backward integration
BEFORE CONTINUING COMPLETE PRACTICE PROBLEMS/ PROBLEM SET FOR
M02 IN NOTEBOOK.
MODULE THREE: Manufacturing and Operations (16 QUESTIONS, 7 FROM TXT, 7 FROM NUMBERS)
● New Product Development Considerations:
○ Marketing research
○ Designing and engineering a new product: make product functional and appealing
○ Supply chain management: product, deliver, satisfy demand (standardization vs customization)
○ Finance: profitability
○ Competition, market growth, market evolution
●Choosing a manufacturing location: labor; facility, infrastructure, utilities; laws; resources availability; local risks;
climate
●Outsourcing considerations: location, infrastructure, reliability, consistency, quality, pricing (standard pricing or
price per ingredient plus labor), equipment available, training, supplier outsources elsewhere, wanting to eventually
switch suppliers ( ex in class. Homemade pizza)
●Established channels of distribution: chain of organizations have an established history of working together and
coordinating supply chain actions
○ Moving to a location that already has an established channel of distribution for your industry is beneficial (ex.
Caterers in LA know how to work movie premiere events)
●Established supplier base: collection of companies that an organization presently purchases products/services and
has a developed working relationship with
● Hypercompetitive markets: industry heavily concentrated in a particular region
○ Ex. Las Vegas for gambling, Los Angeles for entertainment industry
● Relationship between Marketing, Design, SCM, Strategic Design, Operating Decisions
○ Paper Airplane Contest: they had to meet the target (aesthetic and effective plane), make a design, figure out how to
make it, manufacture it efficiently in allotted amount of time
●Line flow: manufacturing layout for producing end items with high demand and little customization
○ Assembly line: system can be stopped at any time and WIP won’t spoil (ex. Cars, etc)
○ Continuous flow: system must run to completion once process is started (ex. Baking loaves of bread)
○ Make-to=stock systems
●Flexible flow: manufacturing layout for producing end items with low demand and high level of customization
○ Work centers focus on a single function so that a large degree of variation is possible (ex. Painting work center can
paint differents colors and different types of paint)
○ Make-to-order systems
● Hybrid strategy: manufacturing layout that combines line flow and flexible flow
○ items pass through in a linear fashion but workstations allow for some levels of customization
○ Group technology cells (GT): line flow layout for low-volume processes
■ Custom furniture manufacturer may have different GT cell for couches, tables, chairs, etc. but each work center will
have some levels of customization
○ Assemble-to-order system
●Fixed position layout: for large, hard to move items (ex. Airplanes, ships, buildings, etc.)
● Assembly line challenges
○ Bottleneck: slowest/weakest workstation that limits the overall output of the assembly line
○ Too many employees/workstations: too much idle time and more material hand-offs
○ Employee inequities: employees compare their workload to colleagues and may demand a raise
○ Present needs versus future demands: ability to increase output to meet demand
●Task or work elements: smallest units of work that must be accomplished to complete an end item on the assembly
line
●Total task time (t): sum of all tasks on precedence diagram
● Precedence diagram: shows relationship between work elements to demonstrate order elements go in
●Workstation: collection of one more work elements
●Cycle time (c): pace that item must move through a single workstation to keep up with demand
○ Cycle time = operation time / demand
●Theoretical minimum number of workstations (TM) = total task time / cycle time
●Actual number of workstations (n): managers strive to make this as close to the TM as possible
●Line balancing goal: meet demand, be efficient, consider the future
● Line balancing rules:
○ Total task time of each workstation must be equal or less than the cycle time
○ Tasks in the workstation cannot violate the precedence rule
● Line balancing trade-offs
○ More workstations: lower effective cycle time and higher production levels but more workers required, higher wages
and more slack time
○ Less workstations: fewer workers required, lower wages and less slack time but higher effective cycle time and
possibility to increase speed of line decreased
● Effective cycle time: time of slowest workstation
○ Adding more workstations would increase output and lower cycle time but would increase costs
MO3 LAB!!!!!!!!!!!!!!!
MODULE FOUR: Transportation and Logistics (17 QUESTIONS, 6 FROM TEXTBOOK 0 W/ NUMBERS)
●Logistics: responsible for transportations itinerary and store business partners to successfully navigate flow of
materials to final destination
●Transportation: movement of goods from one location to another
●Reverse logistics: management of ustream operations
○ Ex. returning defective products (will it be sold, recycled, repaired, etc.?)
●Order fulfillment: delivering the right order at the right place at the right time
● Cargo classifications
○ Bulk: cargo that is loose and free flowing (typically loaded and unloaded by being pumped, shoveled, scooped, etc.)
○ Break bulk: cargo that is packaged and/or secured on a pallet (can be placed in a standardized container)
○ Neo bulk: large items such as vehicles, cattle, etc. (usually not moved in standardized containers)
● Cube vs. weight
○ Cube: dimensional space inside a container (“cubed out” means there’s no more space but weight limit isn’t reached)
○ Weight: weight of cargo that can fit in a container (“weighed out” means max weight is reached but there’s still space)
●Intermodal: cargo moved without directly handling it (stored in a standardized container or truck trailer)
○ Common for break bulk shipping because it is fast and secure
●Planograms: schematic drawing that illustrates product placement
○ Considerations: product design/dimensions, packaging design/dimensions, store variety, store demographics,
manufacturer, product location (top or bottom shelf), product variety, shelf space
● 5 modes of transport
○ Road: fast and cheaper than air; high flexibility; competitive market so prices are reasonable and shippers are reliable
■ Weaknesses: weather, traffic, and crime cause dangers and delays; requires a lot of drivers; fuel costs fluctuate
■ Use when you need fast and cheap shipping directly to the hands of the customer
○ Rail: can handle heavier loads; better for longer distances; cheaper than road transport
■ Weaknesses: slow; not easily accessible and available as roads; loss can be higher due to vibration during transport;
reliability can be low because not a competitive industry; hard to get product directly to customer
■ Use for heavy/bulky items that do not need fast shipment and have a low “value/weight” ratio
○ Ocean/water: low cost per mile for large/heavy/bulky items; almost anything can be shipped via water
■ Bulk carriers: oil tankers, dry bulk carriers
■ Container ships: primarily carry break bulk cargo, container vessels, cargo vessels
■ Neo-bulk ships: ships lumber, vehicles, large machinery
■ Weaknesses: very slow; low reliability; more exposure to hazardous conditions and theft; very difficult to get product
directly to customer
■ Use for large/bulky international shipments that require low transportation costs
○ Air: fastest mode of transport; minimal exposure to hazardous conditions and theft; easy direct delivery to customer
■ Weaknesses: very expensive; not easily linked to rail and ocean; can’t accommodate standardized containers; need
to accommodate airports on both ends of shipment
■ Use for items with high “value/weight” ratio that value short lead times and inventory levels and when security and
damage are concerns
● Types of intermodal railcar shipments
○ Trailer on flat car (TOFC)
○ Container on flat car (COFC)
○ Double stack
●Infrastructure: physical structure available for movement (ex. Roads, bridges, rails, etc.)
● Warehouses and DCs
○ Warehouses: store inventory for long periods of time
○ Distribution centers: get large quantities of one or a few goods in-bound and then send small quantities of many
different items outbound
■ Helps supply chain react quickly to any demand
○ Additional services they offer:
■ Picking and packing (ex. Amazon vs. Toys R Us Christmas delivery)
■ Assembly
■ Postponement: receiving unpainted tables and then painting them depending on order request
■ Quality inspections
■ Management of packaging materials: boxes, pallets, etc.
■ Disposal/disassembly of defective products
■ Repair or refurbishing of defective product
●Central Return Center: performs reverse logistics related to returned consumer products
●Product Mixing: slow mixing centers with full trucks, safety stock, and distribution
●Outbound consolidation: used when end item is made up of multiple components produced at separate locations
(ex. Xbox console, game, and power cord made separately and sent to consolidation warehouse to be packaged
together and then is sent to Walmart, Target and Amazon to be distributed to consumers)
●Cross Docking: fast mixing center that moves inventory quickly so same amount that comes in, goes out
●Drop Shipment: retailer never owns or possesses the inventory they are selling
●Last Mile: portion of supply chain between the final inventory holding center and the end consumer
●Packaging: secures item, makes it easy to move, allows the customer to see and make judgements, fulfills legal
requirements in some cases
○ Consumer related reasons: marketing and promotion, provide product information, legal considerations
○ Supply chain related reasons: provides protection and support, preservations, facilitate movement
○ Dunnage: used to fill empty space inside packaging (ex. Inflatable plastic bags, bubble wrap)
○ Primary packaging: in contact with end item (plastic bag, can, bottle, shrink wrap)
○ Secondary packaging: contains end item and primary packaging (box, case, drum, shrink wrap)
○ Tertiary packaging: contains several items in secondary packaging (crate, pallet, metal straps)
●Pallets: platform that large amounts of cargo can be securely placed on for easy movement
●Shipping labels: attached to inventory and contains information about the shipment
○ Having logo on everything can be bad because it lets people know that there is an expensive item in transit
● Standardized containers:
○ Basic 20 and 40 footers
■ External dimensions: 8’ x 8.5’ x 20’ (or 40’)
■ Interior dimensions: 7.7’ x 7.83’ x 19.35’ (or 39.4’)
○ Controlled atmosphere (CA): refrigerated (sometimes called reefer), can control humidity, composition of air and
pressure
■ Longer transit times possible
■ Delay aging/ ripening process
■ Reduce water loss and weight shrinkage
■ Eliminates insects
■ Harmful gases removed
○ Garmentainers: allows for easy movement of clothes on hangers
○ Ventilated: for products that require ventilation (ex. livestock)
○ Open-top: allows for bulk cargo to be poured in or heavy items to be craned in
●TEU: twenty-foot equivalent unit (one forty-foot container equals 2 TEUs)
● Types of loads and shippers:
○ Truckload shippers (TL): moves large amounts of goods, enough to fill an entire truck (or container - CL shipping)
○ Less-than-truckload shippers (LTL): reasonable amount of goods but doesn’t fill entire truck (container - LCL
shipping)
○Small package shipping: anything from an envelope to a single package shipment of less than 150 pounds
