Chapter 0 – Scientific Foundations
0.1 Defining a Supply Chain
- Supply chain
o A goal-oriented network of processes and stockpoints used to
deliver goods and services to customers
Processes
The individual activities involved in producing and
distributing goods and services
The flow of goods and services
Stockpoints
Locations in the supply chain where inventories are
held
The result of policy decisions or problems in the system
Network
The various paths by which goods and services can
flow through a supply chain
Goal oriented
Supply chains exist to support business activities
Contribution to long term profitability
o Supply chain science is a description of the
strategic objectives a system should support
- Supply chains and production operations are structurally similar
o Production operations also consist of a network of processes and
stockpoints
0.2 Starting with Strategy
- A business unit is evaluated in term of;
o Cost
o Quality
Quality versus Cost
o Speed
Speed versus Cost
Buying directly from the manufacturer might be
cheaper but lead times might be longer
o Service
Service versus Cost
o Flexibility
Flexibility versus Cost
Frequent changeovers
- Supply chain design consists of two parts;
o Ensuring operational fit with strategic objectives
o Achieving maximal efficiency within the constraints established by
strategy
- Benchmarking
o Copying best practices
, o Only partially ensures that an operations system fits its strategic
goals
0.3 Setting Our Goals
- By describing how a system works, a supply chain science offers the
potential to;
o Identify the areas of greatest leverage (hefboomwerking van
strategieën)
o Determine which policies are likely to be effective in a given system
o Enable practices and insights developed for one type of environment
to be generalized to another environment
o Make quantitative trade-offs between the costs and benefits of a
particular action
o Synthesize the various perspectives of a manufacturing or service
system, including those of logistics, product design, human
resources, accounting and management strategy
0.4 Structuring Our Study
- Station Science
o Station
The single process fed by a single station
o The operational behaviour of an individual process and the
stockpoint from which it receives material
o The factors that serve to delay the flow of entities and hence causes
a buildup of inventory in the inbound stockpoints
- Line Science
o Line/Routing
A sequence of stations used to generate a product or service
o The operational behaviour of process flows consisting of logically
connected processes separated by stockpoints
o The issues that arise due to the coupling effects between processes
in a flow
- Supply Chain Science
o Operational issues that cut across supply chains consisting of
multiple products, lines and levels
o The coordination of supply chains that are controlled by multiple
parties
, Chapter 1 – Station Science – Capacity
1.1 – Introduction
- The fundamental activity of any operations system centers around the flow
of entities through processes
o Flows follow routings that define the sequences of processes visited
by the entities
- Performance measures
o Throughput
The rate at which entities are processed by the system
Cost of goods sold in a year
Over the long run, average throughput of a process is always
strictly less than capacity
o Work in Process (WIP)
The number of entities in the system
Physical units or financial units
The dollar value of the average amount of inventory held in
the system
o Cycle time
The time it takes an entity to traverse the system
Including rework, restarts due to yield loss or other
disruptions
- Efficiency
o Inventory turns = throughput/WIP
ROI
How efficiently an operation converts inventory into
output
1.2 – Measuring Capacity
- Capacity determines the throughput, WIP, cycle time and inventory turns
o Process capacity = base capacity – detractors
Base capacity = the rate of the process under ideal conditions
Detractors = represent anything that slows the output of the
process
- Bottleneck
o The process that constraints the capacity of the overall system
o Measured by utilization
Utilization = rate into station / capacity of station
Capacity of station = 1/processing time
o Definition
The bottleneck of a routing is the process with the highest
utilization
1.3 – Limits on Capacity
- Capacity
0.1 Defining a Supply Chain
- Supply chain
o A goal-oriented network of processes and stockpoints used to
deliver goods and services to customers
Processes
The individual activities involved in producing and
distributing goods and services
The flow of goods and services
Stockpoints
Locations in the supply chain where inventories are
held
The result of policy decisions or problems in the system
Network
The various paths by which goods and services can
flow through a supply chain
Goal oriented
Supply chains exist to support business activities
Contribution to long term profitability
o Supply chain science is a description of the
strategic objectives a system should support
- Supply chains and production operations are structurally similar
o Production operations also consist of a network of processes and
stockpoints
0.2 Starting with Strategy
- A business unit is evaluated in term of;
o Cost
o Quality
Quality versus Cost
o Speed
Speed versus Cost
Buying directly from the manufacturer might be
cheaper but lead times might be longer
o Service
Service versus Cost
o Flexibility
Flexibility versus Cost
Frequent changeovers
- Supply chain design consists of two parts;
o Ensuring operational fit with strategic objectives
o Achieving maximal efficiency within the constraints established by
strategy
- Benchmarking
o Copying best practices
, o Only partially ensures that an operations system fits its strategic
goals
0.3 Setting Our Goals
- By describing how a system works, a supply chain science offers the
potential to;
o Identify the areas of greatest leverage (hefboomwerking van
strategieën)
o Determine which policies are likely to be effective in a given system
o Enable practices and insights developed for one type of environment
to be generalized to another environment
o Make quantitative trade-offs between the costs and benefits of a
particular action
o Synthesize the various perspectives of a manufacturing or service
system, including those of logistics, product design, human
resources, accounting and management strategy
0.4 Structuring Our Study
- Station Science
o Station
The single process fed by a single station
o The operational behaviour of an individual process and the
stockpoint from which it receives material
o The factors that serve to delay the flow of entities and hence causes
a buildup of inventory in the inbound stockpoints
- Line Science
o Line/Routing
A sequence of stations used to generate a product or service
o The operational behaviour of process flows consisting of logically
connected processes separated by stockpoints
o The issues that arise due to the coupling effects between processes
in a flow
- Supply Chain Science
o Operational issues that cut across supply chains consisting of
multiple products, lines and levels
o The coordination of supply chains that are controlled by multiple
parties
, Chapter 1 – Station Science – Capacity
1.1 – Introduction
- The fundamental activity of any operations system centers around the flow
of entities through processes
o Flows follow routings that define the sequences of processes visited
by the entities
- Performance measures
o Throughput
The rate at which entities are processed by the system
Cost of goods sold in a year
Over the long run, average throughput of a process is always
strictly less than capacity
o Work in Process (WIP)
The number of entities in the system
Physical units or financial units
The dollar value of the average amount of inventory held in
the system
o Cycle time
The time it takes an entity to traverse the system
Including rework, restarts due to yield loss or other
disruptions
- Efficiency
o Inventory turns = throughput/WIP
ROI
How efficiently an operation converts inventory into
output
1.2 – Measuring Capacity
- Capacity determines the throughput, WIP, cycle time and inventory turns
o Process capacity = base capacity – detractors
Base capacity = the rate of the process under ideal conditions
Detractors = represent anything that slows the output of the
process
- Bottleneck
o The process that constraints the capacity of the overall system
o Measured by utilization
Utilization = rate into station / capacity of station
Capacity of station = 1/processing time
o Definition
The bottleneck of a routing is the process with the highest
utilization
1.3 – Limits on Capacity
- Capacity
