Supply Chain Operations: Making and Delivering Chapter – 3

Objectives Exercise an executive level understanding of operations involved in the categories of making products and delivering products. Assess supply operations in your company that may be candidates for outsourcing.

Outsourcing Supply Chain Operations Make Product design Production scheduling Facility management Deliver Order management Delivery scheduling Direct deliveries Milk Run deliveries Delivery sources Return processing Outsourcing Supply Chain Operations

Product Design (Make) Product design and selections of the components needed to build them are based on the technology available and product performance requirements. When considering product design from supply chain perspective the aim is to design products with fewer parts, simple designs, and modular construction from generic sub-assemblies. The supply chain required to support a product is molded by the product’s design.

Product Design (Make) Product design defines the shape of the supply chain and this has a great impact on the cost and availability of the product. There is a natural tendency for design, procurement, and manufacturing people to have different agendas unless their actions are coordinated. A cross functional team can evaluate existing preferred suppliers and manufacturing facilities.

Product Scheduling (Make) Production scheduling allocates available capacity to the work that needs to be done. The goal is to use available capacity in the most efficient and profitable manner. Product scheduling operation is a process of finding the right balance between high utilization rate, low inventory levels, and high levels of customer service.

Product Scheduling When a single product is to be made in a dedicated facility, scheduling means organizing operations as efficiently as possible and running the facility at the level required to meet demand for the product. When several different products are to be made in a single facility; each product will need to be produced for some period of time and then time will be needed to switch over to production of the next product.

Production Scheduling The first step in scheduling multi-product production is to determine economic lot size. Second step is to set the right sequence of production runs for each product.

Facility Management (Make) Facility management decision happen within the constraints set by decisions about facility locations. Ongoing facility management takes location as a given and focuses on how best to use the available capacity. Role of each facility will play How capacity is allocated in each facility Allocation of supplies and markets to each facility

Order Management (Deliver) Order management is the process of passing order information from customers back through the supply chain from retailers to distributors to service providers and producers. This process also includes passing information about order delivery dates, product substitutions, and back orders forwards through the supply chain to customers.

Principles of Order Management Enter the order data once and only once Automate the order handling Make order status visible to customers and service agents Integrate order management systems with other related systems to maintain data integrity

Delivery Scheduling (Deliver) The delivery scheduling process works within the constraints set by transportation decisions. There are two types of delivery methods: direct deliveries and milk run deliveries.

Direct Deliveries Direct Deliveries: are made from one originating location to one receiving location. In this methods, the routing is simply a matter of selecting the shortest path between the two locations. They are efficient if the receiving location generates economic order quantities that are the same size as the shipment quantities.

Milk Run Deliveries Milk Run Deliveries: are deliveries that are routed to either bring products from a single originating location to multiple receiving locations or deliveries that bring products from multiple originating locations to single receiving location. There are two main techniques for routing milk run deliveries: savings matrix and generalized assignment techniques.

Delivery Sources Deliveries can be made to customers from two sources: Single Product Locations: are facilities such as factories or warehouses where a single product or a narrow range of related items are available for shipment. Distribution centers: are facilities where bulk shipments of products arrive from single product locations.

Return Processing (Deliver) This process is also know as reverse logistics. Return is often difficult and inefficient process. Companies and supply chains as a whole need to keep track of kinds of returns that happen.