SCO 3001 – Supply Chain and Operations | Midterm 2 | University of Minnesota | Process
Design, Inventory, Quality & Lean Concepts with Q&A
System Dynamics in Supply Chains (10.4) • Supply chain is a highly interactive system.
Decisions in each part of the chain affect the other parts.
• There is an accelerator (bullwhip) effect
• Even with perfect information, replenishment lead times lead to an accelerator effect.
• The best way to improve a supply chain is to reduce the total replenishment time and to
feedback actual demand information to all levels.
Improving Supply Chain Performance (10.5)
• Change structure
o Capacity, Facilities, Process technology, Vertical integration
• Change infrastructure
o People, Information systems, Organization, Production and inventory control, Quality control
systems
Supply Chain Structural Improvements (10.6) • Forward and Backward integration
• Major process simplification
• Changing the configuration of factories, warehouses, or retail locations
• Major product redesign
• Working with third-party logistics providers
Third Party Logistics (3PL) (10.6) • Benefits:
o Specialist knowledge
o Well-developed information system
o More favorable shipping rates
o Ability to focus more on
"core" business
,Supply Chain Infrastructure Improvements (10.7) • Cross-functional teams
• Partnerships with suppliers and customers
• Set-up time reduction to reduce lot sizes
• Integrated information systems
• Cross-docking—keeps goods out of warehouses
Technology and SCM • Growth of e-commerce
o B2B (business-to-business)
o B2C (business-to-consumer)
• Fundamental processes in supply chains:
o Order placement
Information before order is entered
Actual order entry
o Order fulfillment
Direct link to internal operations & suppliers
Capacity, Capacity Utilization (Pages 285-287 from the book) • Capacity is defined as the
maximum output that can be produced over a given period of time.
• Theoretical capacity primarily determined by
o Physical assets
o Labor availability
• Actual Output
o Subtracts downtime, shift breaks, etc.
o Is the capacity that should be used in planning
• Capacity utilization is defined relative to actual output and capacity:
, • Utilization = actual output/ capacity
• Capacity is seldom at 100 percent utilization.
Planning Horizon (Slide 5) • Long Range: more than 1 years
• Intermediate Range: 2 months to 1 year (Aggregate Planning)
• Short Range: less than 2 months
Planning Sequence (Slide 6) • Business Plan (long range): establishes operations and
capacity strategies
• Aggregate Plan (Intermediate Range): Establishes operations capacity
• Master Schedule (Short Range): Establishes schedules for specific products
Sales & Operations Planning Definition (12.3) • Matching supply & demand over a medium
time frame
• A time horizon of about 12 months
• An aggregated level of demand for one or few categories of product. Demand fluctuates or is
uncertain.
• The possibility of changing both supply and demand
• A variety of management objectives
• Facilities that are considered fixed (cannot be expanded or reduced)
Concept of Aggregation (Slide 11) • To identify a meaningful measure of output.
• Examples:
o A steel producer - tons of steel
o A paint producer - gallons of paint
o In service organizations
Urban transit systems - passenger miles
Design, Inventory, Quality & Lean Concepts with Q&A
System Dynamics in Supply Chains (10.4) • Supply chain is a highly interactive system.
Decisions in each part of the chain affect the other parts.
• There is an accelerator (bullwhip) effect
• Even with perfect information, replenishment lead times lead to an accelerator effect.
• The best way to improve a supply chain is to reduce the total replenishment time and to
feedback actual demand information to all levels.
Improving Supply Chain Performance (10.5)
• Change structure
o Capacity, Facilities, Process technology, Vertical integration
• Change infrastructure
o People, Information systems, Organization, Production and inventory control, Quality control
systems
Supply Chain Structural Improvements (10.6) • Forward and Backward integration
• Major process simplification
• Changing the configuration of factories, warehouses, or retail locations
• Major product redesign
• Working with third-party logistics providers
Third Party Logistics (3PL) (10.6) • Benefits:
o Specialist knowledge
o Well-developed information system
o More favorable shipping rates
o Ability to focus more on
"core" business
,Supply Chain Infrastructure Improvements (10.7) • Cross-functional teams
• Partnerships with suppliers and customers
• Set-up time reduction to reduce lot sizes
• Integrated information systems
• Cross-docking—keeps goods out of warehouses
Technology and SCM • Growth of e-commerce
o B2B (business-to-business)
o B2C (business-to-consumer)
• Fundamental processes in supply chains:
o Order placement
Information before order is entered
Actual order entry
o Order fulfillment
Direct link to internal operations & suppliers
Capacity, Capacity Utilization (Pages 285-287 from the book) • Capacity is defined as the
maximum output that can be produced over a given period of time.
• Theoretical capacity primarily determined by
o Physical assets
o Labor availability
• Actual Output
o Subtracts downtime, shift breaks, etc.
o Is the capacity that should be used in planning
• Capacity utilization is defined relative to actual output and capacity:
, • Utilization = actual output/ capacity
• Capacity is seldom at 100 percent utilization.
Planning Horizon (Slide 5) • Long Range: more than 1 years
• Intermediate Range: 2 months to 1 year (Aggregate Planning)
• Short Range: less than 2 months
Planning Sequence (Slide 6) • Business Plan (long range): establishes operations and
capacity strategies
• Aggregate Plan (Intermediate Range): Establishes operations capacity
• Master Schedule (Short Range): Establishes schedules for specific products
Sales & Operations Planning Definition (12.3) • Matching supply & demand over a medium
time frame
• A time horizon of about 12 months
• An aggregated level of demand for one or few categories of product. Demand fluctuates or is
uncertain.
• The possibility of changing both supply and demand
• A variety of management objectives
• Facilities that are considered fixed (cannot be expanded or reduced)
Concept of Aggregation (Slide 11) • To identify a meaningful measure of output.
• Examples:
o A steel producer - tons of steel
o A paint producer - gallons of paint
o In service organizations
Urban transit systems - passenger miles
