Professional Documents
Culture Documents
PowerPoint Slides
by Jeff Heyl
10 1
10 2
Downstream
Tier 3
Tier 2
Tier 1
Tomato
suppliers
Tomato
grading
stations
Tomato
paste
factories
Ketchup
factory
Retail
sales
Consumers
Information flows
Cash flows
10 3
Slightest
External causes
Internal causes
10 4
Order quantity
9,000
Package suppliers
weekly orders to
cardboard supplier
Retailers daily
orders to
manufacturer
7,000
Consumers
daily
demands
5,000
3,000
0
Day 1
Day 30 Day 1
Day 30 Day 1
Day 30 Day 1
Day 30
Month of April
10 5
Integration
SCOR
model
Plan
Source
Make
Deliver
Return
10 6
First-Tier Supplier
Service/Product Provider
Support Processes
Support Processes
New service/
product
development
process
Supplier
relationship
process
Businessto-business
(B2B)
customer
relationship
process
Order
fulfillment
process
New service/
product
development
process
Supplier
relationship
process
Businessto-business
(B2B)
customer
relationship
process
Order
fulfillment
process
External Consumers
External Suppliers
10 7
Analysis
Need to rethink
the new offering
or production
process
Development
Post-launch
review
Full Launch
10 8
selection
Material costs
Annual material costs = pD
Freight costs
Inventory costs
Cycle inventory = Q/2
Pipeline inventory = dL
Annual inventory costs = (Q/2 + dL)H
Administrative costs
10 9
Green purchasing
10 10
10 11
10,000
20,000
30,000
Belfast
$380,000
$260,000
$237,000
Hong Kong
$615,000
$547,000
$470,000
Shreveport
$285,000
$240,000
$200,000
Price/Unit
Carrying Cost/Unit
$100
$20.00
15
$180.000
Hong Kong
$96
$19.20
25
$300.000
Shreveport
$99
$19.80
$150.000
Belfast
Costs
10 12
10 13
= $380,000
= $180,000
$30,000,000
+ $380,000=
Total
Annual Cost
+ $460,000 + $180,000 = $31,020,000
10 14
10,000
20,000
30,000
Belfast
Hong Kong
Shreveport
10 15
10,000
20,000
30,000
Belfast
$31,020,000
$31,000,000
$31,077,000
Hong Kong
$30,387,000
$30,415,000
$30,434,000
Shreveport
$30,352,800
$30,406,800
$30,465,800
10 16
Application 10.1
ABC Electric Repair is a repair facility for several major
electronic appliance manufactures. ABC wants to find a lowcost supplier for an electric relay switch used in many
appliances. The annual requirements for the relay switch (D)
are 100,000 units. ABC operates 250 days a year. The following
data are available for two suppliers. Kramer and Sunrise, for
the part:
Freight Costs
Shipping Quantity (Q)
Carrying
Cost/Unit
(H)
Lead Time
(L)(days)
Administrative
Costs
Supplier
2,000
10,000
Price/Unit
(p)
Kramer
$30,000
$20,000
$5.00
$1.00
$10,000
Sunrise
$28,000
$18,000
$4.90
$0.98
$11,000
10 17
Application 10.1
SOLUTION
The daily requirements for the relay switch are:
d = 100,000/250 = 400 units
We must calculate the total annual costs for each alternative:
Total annual cost = Material costs + Freight costs
+ Inventory costs + Administrative costs
= pD + Freight costs + (Q/2 + dL)H
+ Administrative costs
10 18
Application 10.1
Kramer
Q = 2,000: ($5.00)(100,000) + $30,000
+ (2,000/2 + 400(5))($1) + $10,000 = $543,000
Q = 10,000: ($5.00)(100,000) + $20,000
+ (10,000/2 + 400(5))($1) + $10,000 = $537,000
Sunrise
Q = 2,000: ($4.90)(100,000) + $28,000
+ (2,000/2 + 400(9))($0.98) + $11,000 = $538,508
Q = 10,000: (4.90)(100,000) + $18,000
+ (10,000/2 + 400(9))($0.98) + $11,000 = $527,428
The analysis reveals that using Sunrise and a shipping quantity
of 10,000 units will yield the lowest annual total costs.
10 19
Weight
Belfast
Hong Kong
Shreveport
Total Cost
25
On-Time Delivery
30
Consistent Quality
30
Environment
15
10 20
Score
Weight
Belfast
Hong
Kong
Shreveport
Total Cost
25
On-Time
Delivery
30
Consistent
Quality
30
Environment
15
Criterion
10 21
Application 10.2
ABC Electric Repair wants to select a supplier based on total
annual cost, consistent quality, and delivery speed. The
following table shows the weights management assigned to
each criterion (total of 100 points) and the scores assigned to
each supplier (Excellent = 5, Poor = 1).
Scores
Criterion
Weight
Kramer
Sunrise
30
Consistent quality
40
Delivery speed
30
Application 10.2
SOLUTION
Using the preference matrix
approach, the weighted scores
for each supplier are:
Scores
Criterion
Weight
Kramer
Sunrise
Total annual
cost
30
Consistent
quality
40
Delivery
speed
30
10 23
supplier involvement
Presourcing
Value
analysis
Negotiation
Obtain
Competitive
orientation
Cooperative
orientation
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e-purchasing
Loss of control
Information exchange
10 25
Facilitates collaboration
Demand forecasts
Supply planning
Inventory management
Operations planning and scheduling
Resource planning
Production
Logistics
Ownership
Facility location
Mode selection
Capacity
Cross-docking
10 26
2
JIT Inventory
1 (b)
Voice-to-voice
1 (d) Direct
relationship sales
1 (c)
Face-to-face
3
Traveler Sheet
4
Kitting
5 Assemble
to order
6 Testing and
system integration
7 Boxing
and shipping
8
Delivery
10 28
Requirements (miles/month)
100,000
150,000
200,000
250,000
10
15
20
25
Probability
0.2
0.3
0.4
0.1
Notice that the sum of the probabilities must equal 1.0. If Tower
Distributors wants to minimize the expected cost of operations,
how many trucks should it have?
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10 30
10 32
Application 10.3
Schneider Logistics Company has built a new warehouse in
Columbus, Ohio, to facilitate the consolidation of freight
shipments to customers in the region. How many teams of
dock workers he should hire to handle the cross docking
operations and the other warehouse activities? Each team
costs $5,000 a week in wages and overhead. Extra capacity can
be subcontracted at a cost of $8,000 a team per week. Each
team can satisfy 200 labor hours of work a week. Management
has estimated the following probabilities for the requirements:
Requirements (hours/wk)
Number of teams
Probability
200
400
600
0.20
0.50
0.30
10 33
Application 10.3
SOLUTION
We use the expected value decision rule by first computing the
cost for each option for each possible level of requirements
and then using the probabilities to determine the expected
value for each option. The option with the lowest expected cost
is the one Schneider will implement. We demonstrate the
approach using the one team in-house option.
One Team In-House
C(200) = $5,000
C(400) = $5,000 + $8,000 = $13,000
C(600) = $5,000 + $8,000 + $8,000 = $21,000
Expected Value
(One Team) = 0.20($5,000) + 0.50($13,000) + 0.30($21,000) = $13,800
10 34
Application 10.3
A table of the complete results is below.
200 hrs
400 hrs
600 hrs
Expected Value
One team
Two teams
Three teams
10 35
Application 10.3
A table of the complete results is below.
200 hrs
400 hrs
600 hrs
Expected Value
One team
$5,000
$13,000
$21,000
$13,800
Two teams
$10,000
$10,000
$18,000
$12,400
Three teams
$15,000
$15,000
$15,000
$15,000
10 36
10 37
Customer service
Call centers
10 38
Sharing data
Collaborative activities
10 39
Costs
Time
Quality
Environmental impact
10 40
Performance Measures
TABLE 10.1
Customer Relationship
Order Fulfillment
Supplier Relationship
Percent of incomplete
orders shipped
Percent of orders shipped
on-time
Time to fulfill the order
Percent of suppliers
deliveries on-time
Suppliers lead times
Percent of botched
services or returned items
Cost to produce the
service or item
Customer satisfaction
with the order fulfillment
process
Inventory levels of workin-process and finished
goods
Amount of greenhouse
gasses emitted into the air
Percent defects in
services and purchased
materials
Cost of services and
purchased materials
Inventory levels of
supplies and purchased
components
Evaluation of suppliers
collaboration on
streamlining and waste
conversion
Amount of transfer of
environmental
technologies to suppliers
10 41
Environmental stewardship
Environmental protection
Productivity improvement
Risk minimization
Innovation
Reverse logistics
New service/product
development process
Distribution/Retailers
Customers
Direct reuse
Remanufacture
Repair
Returns
processor
Recycle parts
and materials
Product information
Waste
disposal
10 43
10 44