Introduction to operation and supply chain management 4e global edition by bozarth

Global Edition Fourth Edition Introduction to Operations and Supply Chain Management Cecil C Bozarth North Carolina State University Robert B Handfield North Carolina State University Boston Columbus Indianapolis New York San Francisco Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Vice President, Product Management: Donna Battista Acquisitions Editor: Dan Tylman Editorial Assistant: Linda Siebert Albelli Vice President, Marketing: Maggie Moylan Director of Marketing, Digital Services and Products:   Jeanette Koskinas Senior Product Marketing Manager: Alison Haskins Executive Field Marketing Manager: Lori DeShazo Senior Strategic Marketing Manager: Erin Gardner Team Lead, Program Management: Ashley Santora Program Manager: Kathryn Dinovo Team Lead, Project Management: Jeff Holcomb Project Manager: Heather Pagano Acquisitions Editor, Global Edition: Vrinda Malik Associate Project 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Education © 2016 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC 1N 8TS All trademarks used herein are the property of their respective owners The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners ISBN-10: 1-292-09342-0 ISBN-13: 978-1-292-09342-0 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 Typeset by Courier Westford Printed and bound by Courier Westford To Andrea, James, and Philip C.B To the Memory of My Brother, Carl Handfield R.H About the Authors Cecil Bozarth is Professor of Operations and Supply Chain Management at the Poole College of Management at N.C State University, where he has received awards for teaching excellence at both the undergraduate and graduate levels He is a former chair of the Operations Management Division of the Academy of Management, and in 1999 was recognized by APICS as a subject matter expert (SME) in the area of supply chain management His particular areas of interest are operations and supply chain strategy and supply chain information systems Cecil’s consulting experience cuts across a wide range of industries, including such companies as BlueCross BlueShield of North Carolina, Daimler-Benz, John Deere, Duke Energy, Eisai, Ford Motor Company, GKN, IBM, GlaxoSmithKline, Milliken, Patheon, Sonoco, and others For thirteen years, Cecil was an associate editor for the Journal of Operations Management; he now serves on the journal’s editorial advisory board Cecil has also served as a guest editor for the Academy of Management Journal, as well as the J­ ournal of Operations Management Robert Handfield is the Bank of America Professor and a Distinguished University Professor at N.C State University Handfield has consulted with over 25 Fortune 500 companies, including Biogen Idec, Caterpillar, John Deere, GlaxoSmithKline, Boston Scientific, Delphi, Chevron, British Petroleum, Chevron Phillips, Bank of America, Sensata, Honda of America, KPMG, Conoco Phillips, Federal Express, SAP, and ­others, and is a world-renowned expert in the areas of purchasing and logistics Rob is the former editor-in-chief of the Journal of Operations Management and has written several books on SCM topics, including Introduction to Supply Chain Management (Prentice Hall, with Ernest L Nichols; translated into Japanese, Korean, Chinese, and Indonesian), Supply Chain Redesign (Prentice Hall Financial Times), and Purchasing and Supply Chain Management, 5th edition (South-Western College Publishing, with Robert M Monczka, Larry C Giunipero, and James L Patterson) Brief Contents Preface 11 Part I Creating Value Through Operations and Supply Chains  17 Introduction to Operations and Supply Chain Management  17 Operations and Supply Chain Strategies  34 Part II Establishing the Operations Environment  53 Process Choice and Layout Decisions in Manufacturing and Services  53 Business Processes  87 Managing Quality  121 Managing Capacity  155 6S Advanced Waiting Line Theory and Simulation Modeling  189 Part III Establishing Supply Chain Linkages  203 Supply Management  203 Logistics 233 Part IV Planning and Controlling Operations and Supply Chains  265 Forecasting 265 10 Sales and Operations Planning (Aggregate Planning)  310 11 Managing Inventory throughout the Supply Chain  342 12 Managing Production across the Supply Chain  374 12S Supply Chain Information Systems  409 13 JIT/Lean Production  418 Part V Project Management and Product/Service Development 439 14 Managing Projects  439 15 Developing Products and Services  461 Appendices 479 Glossary 485 Index 497 Contents Part II  Preface 11 Part I Creating Value through Operations and Supply Chains  17 1 Introduction to Operations and Supply Chain Management  17 Introduction 18 1.1  Why Study Operations and Supply Chain Management? 19 Operations Management  20 Supply Chain Management  22 1.2  Important Trends  25 Electronic Commerce  26 Increasing Competition and Globalization  26 Relationship Management  26 1.3  Operations and Supply Chain Management and You  27 Professional Organizations  27 Cross-Functional and Interorganizational Linkages 28 1.4  Purpose and Organization of This Book  29 Chapter Summary  30 Key Terms  30 Discussion Questions  31 Problems 31 Case Study  31 References 32 2 Operations and Supply Chain Strategies 34 Introduction 36 2.1  Elements of the Business  36 2.2 Strategy  36 2.3  Operations and Supply Chain Strategies  39 Customer Value  40 Four Performance Dimensions  41 Trade-Offs among Performance Dimensions  43 Order Winners and Order Qualifiers  43 Stages of Alignment with the Business Strategy  44 Core Competencies in Operations and Supply Chains  45 Chapter Summary  47 Key Formula  47 Key Terms  48 Solved Problem  48 Discussion Questions  49 Problems 50 Case Study  51 References 52 Establishing the Operations Environment 53 Process Choice and Layout Decisions in Manufacturing and Services  53 Introduction 54 3.1  Manufacturing Processes  55 Production Lines and Continuous Flow Manufacturing 56 Job Shops  57 Batch Manufacturing  58 Fixed-Position Layout  58 Hybrid Manufacturing Processes  58 Linking Manufacturing Processes across the Supply Chain  59 Selecting a Manufacturing Process  60 The Product-Process Matrix  60 3.2  Product Customization within the Supply Chain  60 Four Levels of Customization  61 The Customization Point  61 3.3  Service Processes  63 Service Packages  64 Service Customization  65 Customer Contact  66 Service Positioning  69 Services within the Supply Chain  70 3.4  Layout Decision Models  71 Line Balancing  71 Assigning Department Locations in Functional Layouts  75 Chapter Summary  78 Key Formulas  79 Key Terms  79 Solved Problem  79 Discussion Questions  82 Problems 82 Case Study  85 References 86 Business Processes  87 Introduction 88 4.1  Business Processes  89 Improving Business Processes  89 4.2  Mapping Business Processes  92 Process Maps  92 Swim Lane Process Maps  95 4.3  Managing and Improving Business Processes  97 Measuring Business Process Performance  97 Productivity 97 Efficiency 99 Cycle Time  100 Contents  Benchmarking 101 The Six Sigma Methodology  102 Continuous Improvement Tools  103 4.4  Business Process Challenges and the SCOR Model  111 How Standardized Should Processes Be?  111 Business Process Reengineering  112 Coordinating Process Management Efforts across the Supply Chain  112 The SCOR Model  112 Chapter Summary  114 Key Formulas  114 Key Terms  115 Solved Problem  115 Discussion Questions  117 Problems 117 Case Study  119 References 120 5 Managing Quality  121 Introduction 123 5.1  Quality Defined  123 5.2  Total Cost of Quality  126 5.3  Total Quality Management  128 TQM and the Six Sigma Methodology  130 5.4  Statistical Quality Control  131 Process Capability  131 Six Sigma Quality  133 Control Charts  134 Acceptance Sampling  140 Taguchi’s Quality Loss Function  142 5.5  Managing Quality across the Supply Chain  143 ISO 9000 Family  143 External Failures in the Supply Chain  144 Chapter Summary  144 Key Formulas  144 Key Terms  146 Using Excel in Quality Management  147 Solved Problem  147 Discussion Questions  148 Problems 149 Case Study  153 References 154 6 Managing Capacity  155 Introduction 156 6.1  Capacity 156 Measures of Capacity  157 Factors That Affect Capacity  158 Supply Chain Considerations  158 6.2  Three Common Capacity Strategies  158 6.3  Methods of Evaluating Capacity Alternatives  160 Cost 160 Demand Considerations  163 Expected Value  163 Decision Trees  164 Break-Even Analysis  166 Learning Curves  167 Other Considerations  170 6.4  Understanding and Analyzing Process Capacity  171 The Theory of Constraints  171 Waiting Line Theory  174 Little’s Law  178 Chapter Summary  180 Key Formulas  180 Key Terms  182 Using Excel in Capacity Management  182 Solved Problem  183 Discussion Questions  184 Problems 184 Case Study  188 References 188 6S Advanced Waiting Line Theory and Simulation Modeling  189 Introduction 190 6S.1  Alternative Waiting Lines  190 Assumptions behind Waiting Line Theory  191 Waiting Line Formulas for Three Different Environments 191 6S.1  Simulation Modeling  195 Monte Carlo Simulation  196 Building and Evaluating Simulation Models with SimQuick 198 Supplement Summary  201 Discussion Questions  202 Problems 202 References 202 Part III  Establishing Supply Chain Linkages  203 7 Supply Management  203 Introduction 204 7.1  Why Supply Management Is Critical  205 Global Sourcing  205 Financial Impact  205 Performance Impact  208 7.2  The Strategic Sourcing Process  209 Step 1: Assess Opportunities  209 Step 2: Profile Internally and Externally  210 Step 3: Develop the Sourcing Strategy  213 Step 4: Screen Suppliers and Create Selection Criteria 219 Step 5: Conduct Supplier Selection  220 Step 6: Negotiate and Implement Agreements  222 7.3  The Procure-to-Pay Cycle  224 Ordering 224 Follow-Up and Expediting  224 Receipt and Inspection  224 Settlement and Payment  225 Records Maintenance  225 7.4  Trends in Supply Management  225 Sustainable Supply  225 Supply Chain Disruptions  226 8  Contents Chapter Summary  227 Key Formulas  227 Key Terms  227 Solved Problem  228 Discussion Questions  229 Problems 229 Case Study  231 References 232 8 Logistics  233 Introduction 235 8.1  Why Logistics is Critical  235 8.2  Logistics Decision Areas  236 Transportation 236 Selecting a Transportation Mode  237 Multimodal Solutions  238 Warehousing 239 Logistics Information Systems  242 Material Handling and Packaging  244 Inventory Management  245 8.3  Logistics Strategy  245 Owning versus Outsourcing  245 Measuring Logistics Performance  247 Landed Costs  248 Reverse Logistics Systems  249 8.4  Logistics Decision Models  250 Weighted Center of Gravity Method  250 Optimization Models  252 The Assignment Problem  252 Chapter Summary  257 Key Formulas  258 Key Terms  258 Solved Problem  259 Discussion Questions  260 Problems 260 Case Study  263 References 264 Part IV  Planning and Controlling Operations and Supply Chains  265 9 Forecasting  265 Introduction 266 9.1  Forecast Types  267 Demand Forecasts  267 Supply Forecasts  267 Price Forecasts  267 9.2  Laws of Forecasting  268 Law 1: Forecasts Are Almost Always Wrong (But They Are Still Useful)  269 Law 2: Forecasts for the Near Term Tend to Be More Accurate  269 Law 3: Forecasts for Groups of Products or Services Tend to Be More Accurate  269 Law 4: Forecasts Are No Substitute for Calculated Values 269 9.3  Selecting a Forecasting Method  269 9.4  Qualitative Forecasting Methods  270 9.5  Time Series Forecasting Models  271 Last Period  272 Moving Average  273 Weighted Moving Average  275 Exponential Smoothing  275 Adjusted Exponential Smoothing  278 Linear Regression  279 Seasonal Adjustments  283 9.6  Causal Forecasting Models  287 Linear Regression  287 Multiple Regression  289 9.7  Measures of Forecast Accuracy  292 9.8  Computer-Based Forecasting Packages  294 9.9  Collaborative Planning, Forecasting, and Replenishment (CPFR)  294 Chapter Summary  299 Key Formulas  299 Key Terms  301 Solved Problem  301 Discussion Questions  304 Problems 304 Case Study  308 References 309 10 Sales and Operations Planning (Aggregate Planning)  310 Introduction 311 10.1  S&OP in the Planning Cycle  311 10.2  Major Approaches to S&OP  313 Top-Down Planning  314 Level, Chase, and Mixed Production Plans  316 Bottom-Up Planning  320 Cash Flow Analysis  322 10.3  Organizing for and Implementing S&OP  324 Choosing between Alternative Plans  324 Rolling Planning Horizons  325 Implementing S&OP in an Organization  326 10.4  Services Considerations  327 Making Sales Match Capacity  327 Making Capacity Match Sales  328 10.5  Linking S&OP throughout the Supply Chain  329 10.6  Applying Optimization Modeling to S&OP  330 Chapter Summary  333 Key Formulas  333 Key Terms  334 Solved Problem  334 Discussion Questions  335 Problems 335 Case Study  340 References 341 11 Managing Inventory throughout the Supply Chain  342 Introduction 344 11.1  The Role of Inventory  345 Inventory Types  345 Inventory Drivers  347 Contents  Independent versus Dependent Demand  Inventory  349 11.2  Periodic Review Systems  349 Restocking Levels  350 11.3  Continuous Review Systems  351 The Economic Order Quantity (EOQ) 352 Reorder Points and Safety Stock  354 Quantity Discounts  356 11.4  Single-Period Inventory Systems  358 Target Service Level  359 Target Stocking Point  360 11.5  Inventory in the Supply Chain  362 The Bullwhip Effect  362 Inventory Positioning  363 Transportation, Packaging, and Material   Handling Considerations  364 Chapter Summary  365 Key Formulas  366 Key Terms  367 Using Excel in Inventory Management  367 Solved Problems  368 Discussion Questions  368 Problems 369 Case Study  372 References 373 12S.2  Supply Chain Information Systems  412 12S.3  Trends to Watch  414 BPM Tools  415 Cloud Computing  415 Supplement Summary  416 Key Terms  416 Discussion Questions  416 References 417 13 JIT/Lean Production  418 Introduction 420 13.1  The Lean Perspective on Waste  421 13.2  The Lean Perspective on Inventory  422 13.3  Recent Developments in Lean Thinking  423 13.4  Kanban Systems  424 Controlling Inventory Levels Using Kanbans  429 Synchronizing the Supply Chain   Using Kanbans  431 Using MRP and Kanban Together  432 Chapter Summary  433 Key Formula  433 Key Terms  434 Solved Problem  434 Discussion Questions  435 Problems 435 Case Study  436 References 438 12 Managing Production across the Supply Chain  374 Introduction 375 12.1  Master Scheduling  376 The Master Schedule Record  377 Using the Master Schedule  382 12.2  Material Requirements Planning  383 The MRP Record  385 The Advantages of MRP  390 Special Considerations in MRP  390 12.3  Production Activity Control and Vendor Order   Management Systems  392 Job Sequencing  392 Monitoring and Tracking Technologies  393 12.4  Synchronizing Planning and Control across   the Supply Chain  394 Distribution Requirements Planning  394 Chapter Summary  397 Key Formulas  399 Key Terms  399 Solved Problem  400 Discussion Questions  400 Problems 401 Case Study  408 References 408 12S Supply Chain Information Systems 409 Introduction 410 12S.1  Understanding Supply Chain Information  Needs 410 Differences across Organizational Levels  410 Direction of Linkages  412 Part V  Project Management and Product/Service Development 439 14 Managing Projects  439 Introduction 440 14.1  The Growing Importance of Project  Management  441 14.2  Project Phases  442 Concept Phase  442 Project Definition Phase  442 Planning Phase  443 Performance Phase  443 Postcompletion Phase  443 14.3  Project Management Tools  444 Gantt Charts  444 Network Diagrams  446 Constructing a Network Diagram  446 Crashing a Project  450 14.4  Project Management Software  452 14.5  PMI and the Project Management Body   of Knowledge (PMBOK®)  455 Chapter Summary  455 Key Formulas  455 Key Terms  456 Solved Problem  456 Discussion Questions  457 www.downloadslide.net Glossary  Five Whys  An approach used during the narrow phase of root cause analysis, in which teams brainstorm successive answers to the question “Why is this a cause of the original problem?” The name comes from the general observation that the questioning process can require up to five rounds Fixed costs  The expenses an organization incurs regardless of the level of business activity Fixed-position layout  A type of manufacturing process in which the position of the product is fixed Materials, equipment, and workers are transported to and from the product Fixed-price contract  A type of purchasing contract in which the stated price does not change, regardless of fluctuations in general overall economic conditions, industry competition, levels of supply, market prices, or other environmental changes Flexibility  A performance dimension that considers how quickly operations and supply chains can respond to the unique needs of customers Flexible manufacturing systems (FMSs)  Highly automated batch processes that can reduce the cost of making groups of similar products Forecast  An estimate of the future level of some variable Common variables that are forecasted include demand levels, supply levels, and prices Forecasted demand  In the context of master scheduling, a company’s best estimate of the demand in any period Forward pass  The determination of the earliest start and finish times for each project activity Freight forwarder  An agent who serves as an intermediary between an organization shipping a product and the actual carrier, typically on international shipments Front room  The physical or virtual point where the customer interfaces directly with the service organization Functional layout  A type of layout where resources are physically grouped by function Functional strategy  A strategy that translates a business strategy into specific actions for functional areas such as marketing, human resources, and finance Functional strategies should align with the overall business strategy and with each other Gantt chart  A graphical tool used to show expected start and end times for project activities and to track actual progress against these time targets Gray box design  A situation in which a supplier works with a customer to jointly design the product Green belt  An individual who has some basic training in Six Sigma methodologies and tools and is assigned to a project on a part-time basis Group technology  A type of manufacturing process that seeks to achieve the efficiencies of a line process in a batch environment by dedicating equipment and personnel to the manufacture of products with similar manufacturing characteristics 489 Hedge inventory  According to APICS, a “form of inventory buildup to buffer against some event that may not happen Hedge inventory planning involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impair the company’s strategic initiatives.” Histogram  A special form of bar chart that tracks the number of observations that fall within a certain interval Hub-and-spoke system  A form of warehousing in which strategically placed hubs are used as sorting or transfer facilities The hubs are typically located at convenient, hightraffic locations The “spokes” refer to the routes serving the destinations associated with the hubs Hybrid manufacturing process  A general term referring to a manufacturing process that seeks to combine the characteristics, and hence advantages, of more than one of the classic processes Examples include flexible manufacturing systems, machining centers, and group technology Independent demand inventory  Inventory items whose demand levels are beyond a company’s complete control Indifference point  The output level at which two capacity alternatives generate equal costs Indirect costs  Costs that are not tied directly to the level of operations or supply chain activity Industry analysis  Profiles the major forces and trends that are impacting an industry, including pricing, competition, regulatory forces, substitution, technology changes, and supply/demand trends Information system (IS)  According to Laudon and Laudon, “a set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making, coordination, and control in an organization.” Infrastructural element  One of two major decision categories addressed by a strategy Includes the policies, people, decision rules, and organizational structure choices made by a firm Insourcing  The use of resources within the firm to provide products or services Internal failure costs  Costs caused by defects that occur prior to delivery to the customer, including money spent on repairing or reworking defective products, as well as time wasted on these activities Internal supply chain management  A term that refers to the information flows between higher and lower levels of planning and control systems within an organization Inventory  According to APICS, “those stocks or items used to support production (raw materials and work-inprocess items), supporting activities (maintenance, repair, and operating supplies) and customer service (finished goods and spare parts).” Inventory drivers  Business conditions that force companies to hold inventory www.downloadslide.net 490  Glossary Inventory pooling  Holding safety stock in a single location instead of multiple locations Several locations then share safety stock inventories to lower overall holding costs by reducing overall safety stock levels ISO 9000  A family of standards, supported by the International Organization for Standardization, representing an international consensus on good quality management practices ISO 9000 addresses business processes rather than specific outcomes Job sequencing rules  Rules used to determine the order in which jobs should be processed when resources are limited and multiple jobs are waiting to be done Job shop  A type of manufacturing process used to make a wide variety of highly customized products in quantities as small as one Job shops are characterized by general-purpose equipment and workers who are broadly skilled Just-in-time (JIT)  A philosophy of manufacturing based on planned elimination of all waste and on continuous improvement of productivity In a broad sense, it applies to all forms of manufacturing and to many service industries as well Used synonymously with Lean Kanban system  A production control approach that uses containers, cards, or visual cues to control the production and movement of goods through the supply chain Lag capacity strategy  A capacity strategy in which capacity is added only after demand has materialized Landed cost  The cost of a product plus all costs driven by logistics activities, such as transportation, warehousing, handling, customs fees, and the like Latest finish time (LF)  The latest an activity can be finished and still finish the project on time, as determined by the latest start time for all immediate successors Latest start time (LS)  The latest an activity can be started and still finish the project on time, calculated by subtracting the activity’s duration from its latest finish time Launch phase  The final phase of a product development effort For physical products, this usually means “filling up” the supply chain with products For services, it can mean making the service broadly available to the target marketplace Law of variability  According to Roger Schmenner and Morgan Swink, “the greater the random variability either demanded of the process or inherent in the process itself or in the items processed, the less productive the process is.” This law is relevant to customization because completing upstream activities offline helps isolate these activities from the variability caused by either the timing or the unique requirements of individual customers Lead capacity strategy  A capacity strategy in which capacity is added in anticipation of demand Lean  A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of an enterprise It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with customers Used synonymously with JIT Lean Six Sigma  A methodology that combines the organizational elements and tools of Six Sigma with Lean’s focus on waste reduction Lean supply chain management  An extension of the Lean philosophy to supply chain efforts beyond production Lean supply chain management seeks to minimize the level of resources required to carry out all supply chain activities Learning curve theory  A body of theory based on applied statistics which suggests that productivity levels can improve at a predictable rate as people and even systems “learn” to tasks more efficiently In formal terms, learning curve theory states that for every doubling of cumulative output, there is a set percentage reduction in the amount of inputs required Less than truckload (LTL) shipment  A smaller shipment, often combined with other loads to reduce costs and improve truck efficiencies Level production plan  A sales and operations plan in which production is held constant and inventory is used to absorb differences between production and the sales forecast Life cycle analogy method  A qualitative forecasting technique that attempts to identify the time frames and demand levels for the introduction, growth, maturity, and decline life cycle stages of a new product or service Linear regression  A statistical technique that expresses a forecast variable as a linear function of some independent variable Linear regression can be used to develop both time series and causal forecasting models Load profile  A display of future capacity requirements based on released and/or planned orders over a given span of time Logistics management  According to the Council of Supply Chain Management Professionals (CSCMP), “that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.” Logistics strategy  A functional strategy which ensures that an organization’s logistics choices—transportation, warehousing, information systems, and even form of ownership—are consistent with its overall business strategy and support the performance dimensions that targeted customers most value Lot tolerance percent defective (LTPD)  A term used in acceptance sampling to indicate the highest defect level a consumer is willing to “tolerate.” Lower tolerance limit (LTL)  The lowest acceptable value for some measure of interest www.downloadslide.net Glossary  Machining center  A type of manufacturing process that completes several manufacturing steps without removing an item from the process Make-or-buy decision  A high-level, often strategic, decision regarding which products or services will be provided internally and which will be provided by external supply chain partners Make-to-order (MTO) products  Products that use standard components but have customer-specific final configuration of those components Make-to-stock (MTS) products  Products that require no customization They are typically generic products and are produced in large enough volumes to justify keeping a finished goods inventory Mapping  The process of developing graphic representations of the organizational relationships and/or activities that make up a business process Market survey  A structured questionnaire submitted to potential customers, often to gauge potential demand Master black belt  A full-time Six Sigma expert who is “responsible for Six Sigma strategy, training, mentory, deployment and results.” Master production schedule (MPS)  The amount of product that will be finished and available for sale at the beginning of each week The master production schedule drives more detailed planning activities, such as material requirements planning Master scheduling  A detailed planning process that tracks production output and matches this output to actual customer orders Match capacity strategy  A capacity strategy that strikes a balance between the lead and lag capacity strategies by avoiding periods of high under- or overutilization Material handling system  A system that includes the equipment and procedures needed to move goods within a facility, between a facility and a transportation mode, and between different transportation modes (e.g., ship-to-truck transfers) Material requirements planning (MRP)  A planning process that translates the master production schedule into planned orders for the actual parts and components needed to produce the master schedule items Maverick spending  Spending that occurs when internal customers purchase directly from nonqualified suppliers and bypass established purchasing procedures Merchandise inventory  A balance sheet item that shows the amount a company paid for the inventory it has on hand at a particular point in time Milestone  A performance or time target for each major group of activities in a project Mission statement  A statement that explains why an organization exists It describes what is important to the organization, called its core values, and identifies the organization’s domain 491 Mix flexibility  The ability to produce a wide range of products or services Mixed production plan  A sales and operations plan that varies both production and inventory levels in an effort to develop the most effective plan Modular architecture  A product architecture in which each functional element maps into its own physical chunk Different chunks perform different functions; the interactions between the chunks are minimal, and they are generally well defined Move card  A kanban card that is used to indicate when a container of parts should be moved to the next process step Moving average model  A time series forecasting model that derives a forecast by taking an average of recent demand values MRP nervousness  A term used to refer to the observation that any change, even a small one, in the requirements for items at the top of the bill of material can have drastic effects on items further down the bill of material Muda  A Japanese term meaning waste Multicriteria decision models  Models that allow decision makers to evaluate various alternatives across multiple decision criteria Multifactor productivity  A productivity score that measures output levels relative to more than one input Multimodal solution  A transportation solution that seeks to exploit the strengths of multiple transportation modes through physical, information, and monetary flows that are as seamless as possible Multiple regression  A generalized form of linear regression that allows for more than one independent variable Multiple sourcing  A sourcing strategy in which the buying firm shares its business across multiple suppliers Net cash flow  The net flow of dollars into or out of a business over some time period Network design applications  Logistics information systems that address such long-term strategic questions as facility location and sizing, as well as transportation networks These applications often make use of simulation and optimization modeling Network diagram  A graphical tool that shows the logical linkages between activities in a project Network path  A logically linked sequence of activities in a network diagram Objective function  A quantitative function that an optimization model seeks to optimize (i.e., maximize or minimize) Offloading  A strategy for reducing and smoothing out workforce requirements that involves having customers perform part of the work themselves Operating characteristics (OC) curve  A curve used in acceptance sampling to show the probability of accepting a lot, given the actual fraction defective in the entire lot and www.downloadslide.net 492  Glossary the sampling plan being used Different sampling plans will result in different OC curves Operations and supply chain strategy  A functional strategy that indicates how structural and infrastructural elements within the operations and supply chain areas will be acquired and developed to support the overall business strategy Operations function  Also called operations The collection of people, technology, and systems within an organization that has primary responsibility for providing the organization’s products or services Operations management  “The planning, scheduling, and control of the activities that transform inputs into finished goods and services.” Optimization model  A class of mathematical models used when the user seeks to optimize some objective function subject to some constraints Order qualifier  A performance dimension on which customers expect a minimum level of performance Superior performance on an order qualifier will not, by itself, give a company a competitive advantage Order winner  A performance dimension that differentiates a company’s products and services from its competitors Firms win a customer’s business by providing superior levels of performance on order winners Outsourcing  The use of supply chain partners to provide products or services p chart  A specific type of control chart for attributes that is used to track sample proportions Packaging  From a logistics perspective, the way goods and materials are packed in order to facilitate physical, informational, and monetary flows through the supply chain Panel consensus forecasting  A qualitative forecasting technique that brings experts together to discuss and develop a forecast Parent/child relationship  The logical linkage between higher- and lower-level items in the BOM Pareto chart  A special form of bar chart that shows frequency counts from highest to lowest Parts standardization  The planned elimination of superficial, accidental, and deliberate differences between similar parts, in the interest of reducing part and supplier proliferation Percent value-added time  A measure of process performance; the percentage of total cycle time that is spent on activities that actually provide value Perfect order  A term used to refer to the timely, errorfree provision of a product or service in good condition Performance phase  The fourth of five phases of a project In this phase, the organization actually starts to execute the project plan Performance quality  A subdimension of quality that addresses the basic operating characteristics of a product or service Periodic review system  An inventory system that is used to manage independent demand inventory The inventory level for an item is checked at regular intervals and restocked to some predetermined level Planning and control  A set of tactical and e­ xecution-level business activities that includes master scheduling, material requirements planning, and some form of production activity control and vendor order management Planning horizon  The amount of time the master schedule record or MRP record extends into the future In general, the longer the production and supplier lead times, the longer the planning horizon must be Planning lead time  In the context of MRP, the time from when a component is ordered until it arrives and is ready to use Planning phase  In the context of new product development, the second phase of a product development effort Here the company begins to address the feasibility of a product or service In the context of project management, the third of five phases of a project Here, project planners prepare detailed plans that identify activities, time and budget targets, and the resources needed to complete each task Planning values  Values that decision makers use to translate a sales forecast into resource requirements and to determine the feasibility and costs of alternative sales and operations plans Portfolio analysis  A structured approach used by ­decision makers to develop a sourcing strategy for a product or service, based on the value potential and the relative complexity or risk represented by a sourcing opportunity Postcompletion phase  The fifth of five phases of a project This is the phase in which the project manager or team confirms the final outcome, conducts a postimplementation meeting to critique the project and personnel, and reassigns project personnel Postponement warehousing  A form of warehousing that combines classic warehouse operations with light manufacturing and packaging duties to allow firms to put off final assembly or packaging of goods until the last possible moment Preferred supplier  A supplier that has demonstrated its performance capabilities through previous purchase contracts and therefore receives preference during the supplier selection process Presourcing  The process of preapproving suppliers for specific commodities or parts Prevention costs  The costs an organization incurs to actually prevent defects from occurring to begin with Primary process  A process that addresses the main valueadded activities of an organization Priority rules  Rules for determining which customer, job, or product is processed next in a waiting line environment www.downloadslide.net Glossary  Process  According to APICS, “a set of logically related tasks or activities performed to achieve a defined business outcome.” Product-based layout  A type of layout where resources are arranged sequentially, according to the steps required to make a product Process benchmarking  The comparison of an organization’s processes with those of noncompetitors that have been identified as superior processes Process capability index (Cpk)  A mathematical determination of the capability of a process to meet certain tolerance limits Process capability ratio (Cp)  A mathematical determination of the capability of a process to meet certain quality standards A Cp Ú means the process is capable of meeting the standard being measured Process map  A detailed map that identifies the specific activities that make up the informational, physical, and/or monetary flow of a process Procure-to-pay cycle  The set of activities required to first identify a need, assign a supplier to meet that need, approve the specification or scope, acknowledge receipt, and submit payment to the supplier Producer’s risk  A term used in acceptance sampling to indicate the probability of rejecting a lot with quality better than the AQL level Product design  The characteristics or features of a product or service that determine its ability to meet the needs of the user Product development process  According to the PDMA, “the overall process of strategy, organization, concept generation, product and marketing plan creation and evaluation, and commercialization of a new product.” Product family  In group technology, a set of products with very similar manufacturing requirements Product structure tree  A record or graphical rendering that shows how the components in the BOM are put together to make the level item Production card  A kanban card that is used to indicate when another container of parts should be produced Production line  A type of manufacturing process used to produce a narrow range of standard items with identical or highly similar designs Productivity  A measure of process performance; the ratio of outputs to inputs Profit leverage effect  A term used to describe the effect that a dollar in cost savings increases pre-tax profits by one dollar, while a dollar increase in sales only increases pretax profits by the dollar multiplied by the pre-tax profit margin Profit margin  The ratio of earnings to sales for a given time period 493 Program evaluation and review technique (PERT)  A network-based technique in which there are multiple time estimates for each activity An alternative approach is CPM, which has a single time estimate for each activity Project  According to PMI, “a temporary endeavor undertaken to create a unique product, service, or result.” Unlike other business activities, a project has a clear starting point and ending point, after which the people and resources dedicated to the project are reassigned Project definition phase  The second of five phases in a project Here, project planners identify how to accomplish the work, how to organize for the project, the key personnel and resources required to support the project, tentative schedules, and tentative budget requirements Project management  According to the Project Management Institute (PMI), “the application of knowledge, skills, tools and techniques to project activities to meet project requirements.” Projected ending inventory  A field in the master schedule record that indicates an estimate of what inventory levels will look like at the end of each week, based on current information Proportion  A measure that refers to the presence or absence of a particular characteristic Pull system  A production system in which actual downstream demand sets off a chain of events that pulls material through the various process steps Pup trailer  A type of truck trailer that is half the size of a regular truck trailer Purchase consolidation  The pooling of purchasing requirements across multiple areas in an effort to lower costs Purchase order (PO)  A document that authorizes a supplier to deliver a product or service and often includes key terms and conditions, such as price, delivery, and quality requirements Qualitative forecasting techniques  Forecasting techniques based on intuition or informed opinion These techniques are used when data are scarce, not available, or irrelevant Quality  (a) The characteristics of a product or service that bear on its ability to satisfy stated or implied needs (b) A product or service that is free of deficiencies Quality  The characteristics of a product or service that bear on its ability to satisfy stated or implied needs Quality assurance  The specific actions firms take to ensure that their products, services, and processes meet the quality requirements of their customers Quality function deployment (QFD)  A graphical tool used to help organizations move from vague notions of what customers want to specific engineering and operational requirements Also called the “house of quality.” Quality function development (QFD)  A technique used to translate customer requirements into technical requirements for each stage of product development and production www.downloadslide.net 494  Glossary Quantitative forecasting models  Forecasting models that use measurable, historical data to generate forecasts Quantitative forecasting models can be divided into two major types: time series models and causal models R chart  A specific type of control chart for a continuous variable that is used to track how much the individual observations within each sample vary Randomness  In the context of forecasting, unpredictable movement from one time period to the next Range (R)  A key measure that represents the variation of a specific sample group, used in conjunction with sample average (X) Rated capacity  The long-term, expected output capability of a resource or system Reliability quality  A subdimension of quality that addresses whether a product will work for a long time without failing or requiring maintenance Request for information (RFI)  An inquiry to a potential supplier about that supplier’s products or services for ­potential use in the business The inquiry can provide certain business requirements or be of a more exploratory nature Request for quotation (RFQ)  A formal request for the suppliers to prepare bids, based on the terms and conditions set by the buyer Return on assets (ROA)  A measure of financial performance, generally defined as earnings/total assets Higher ROA values are preferred because they indicate that the firm is able to generate higher earnings from the same asset base Reverse logistics system  According to APICS, “a complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.” Roadrailer  A specialized rail car the size of a standard truck trailer that can be quickly switched from rail to ground transportation by changing the wheels Robust design  According to the PDMA, “the design of products to be less sensitive to variations, including manufacturing variation and misuse, increasing the probability that they will perform as intended.” Rolling planning horizon  A planning approach in which an organization updates its sales and operations plan regularly, such as on a monthly or quarterly basis Root cause analysis  A process by which organizations brainstorm about possible causes of problems (referred to as “effects”) and then, through structured analyses and data-gathering efforts, gradually narrow the focus to a few root causes Rough-cut capacity planning  A capacity planning technique that uses the master production schedule to monitor key resource requirements Run chart  A graphical representation that tracks changes in a key measure over time Safety stock  Extra inventory that a company holds to protect itself against uncertainties in either demand or replenishment time Sales and operations planning (S&OP)  A process to develop tactical plans by integrating marketing plans for new and existing products with the management of the supply chain The process brings together all the plans for the business into one integrated set of plans Also called aggregate planning Sample average (X)  A key measure that represents the central tendency of a group of samples used in conjunction with range (R) Scatter plot  A graphical representation of the relationship between two variables Seasonality  A repeated pattern of spikes or drops in a time series associated with certain times of the year Second-tier supplier  A supplier that provides products or services to a firm’s first-tier supplier Sequential development process  A process in which a product or service idea must clear specific hurdles before it can go on to the next development phase Service level  A term used to indicate the amount of demand to be met under conditions of demand and supply uncertainty Service package  A package that includes all the valueadded physical and intangible activities that a service organization provides to the customer Serviceability  The ease with which parts can be replaced, serviced, or evaluated Single-factor productivity  A productivity score that measures output levels relative to single input Single-period inventory system  A system used when demand occurs in only a single point in time Single sourcing  A sourcing strategy in which the buying firm depends on a single company for all or nearly all of a particular item or service Six Sigma methodology  According to Motorola, “a business improvement methodology that focuses an organization on understanding and managing customer requirements, aligning key business processes to achieve those requirements, utilizing rigorous data analysis to understand and ultimately minimize variation in those processes, and driving rapid and sustainable improvement to business processes.” Six Sigma quality  A level of quality that indicates that a process is well controlled (i.e., tolerance limits are ±6 sigma from the center line in a control chart) The term is usually associated with Motorola, which named one of its key operational initiatives Six Sigma Quality Slack time  The difference between an activity’s latest start time (LS) and earliest start time (ES) Slack time indicates the amount of allowable delay Critical activities have a slack time of www.downloadslide.net Glossary  Smoothing inventory  Inventory that is used to smooth out differences between upstream production levels and downstream demand Smoothing model  Another name for a moving average model The name refers to the fact that using averages to generate forecasts results in forecasts that are less susceptible to random fluctuations in demand Spend analysis  The application of quantitative techniques to purchasing data in an effort to better understand spending patterns and identify opportunities for improvement Spot stock warehousing  A form of warehousing that attempts to position seasonal goods close to the marketplace At the end of each season, the goods are either liquidated or moved back to a more centralized location Standard output  An estimate of what should be produced, given a certain level of resources Statement of work, or scope of work (SOW)  Terms and conditions for a purchased service that indicate, among other things, what services will be performed and how the service provider will be evaluated Statistical quality control (SQC)  The application of statistical techniques to quality control Strategic planning  Planning that takes place at the highest levels of the firm, addressing needs that might not arise for years into the future Strategic quality plan  An organizational plan that provides the vision, guidance, and measurements to drive the quality effort forward and shift the organization’s course when necessary Strategy  A mechanism by which a business coordinates its decisions regarding structural and infrastructural elements Structural element  One of two major decision categories addressed by a strategy Includes tangible resources, such as buildings, equipment, and computer systems Supplier relationship management (SRM)  A term that broadly refers to planning and control activities and information systems that link a firm with its upstream suppliers Supply chain  A network of manufacturers and service providers that work together to create products or services needed by end users These manufacturers and service providers are linked together through physical flows, information flows, and monetary flows Supply chain management  The active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient ways possible Supply Chain Operations Reference (SCOR) model  A framework developed and supported by the Supply Chain Council that seeks to provide standard descriptions of the processes, relationships, and metrics that define supply chain management 495 Supply management  The broad set of activities carried out by organizations to analyze sourcing opportunities, develop sourcing strategies, select suppliers, and carry out all the activities required to procure goods and services Supply uncertainty  The risk of interruptions in the flow of components from upstream suppliers Support process  A process that performs necessary, albeit not value-added, activities Sustainability  Performing activities in a manner that meet the needs of the present without compromising the ability of future generations to meet their needs Swim lane process map  A process map that graphically arranges the process steps so that the user can see who is responsible for each step Tactical planning  Planning that covers a shorter period, usually 12 to 24 months out, although the planning horizon may be longer in industries with very long lead times (e.g., engineer-to-order firms) Takt time  In a production line setting, the available production time divided by the required output rate Takt time sets the maximum allowable cycle time for a line Target costing  The process of designing a product to meet a specific cost objective Target costing involves setting the planned selling price and subtracting the desired profit, as well as marketing and distribution costs, thus leaving the required target cost Also known as design to cost Target service level  For a single-period inventory system, the service level at which the expected cost of a shortage equals the expected cost of having excess units Target stocking point  For a single-period inventory system, the stocking point at which the expected cost of a shortage equals the expected cost of having excess units Team members  Individuals who are not trained in Six Sigma but are included on a Six Sigma project team due to their knowledge or direct interest in a process Testability  The ease with which critical components or functions can be tested during production Theoretical capacity  The maximum output capability, allowing for no adjustments for preventive maintenance, unplanned downtime, or the like Theory of Constraints (TOC)  An approach to visualizing and managing capacity which recognizes that nearly all products and services are created through a series of linked processes, and in every case, there is at least one process step that limits throughput for the entire chain Third-party logistics provider (3PL)  A service firm that handles all of the logistics requirements for other companies Tiered workforce  A strategy used to vary workforce levels, in which additional full-time or part-time employees are hired during peak demand periods, while a smaller permanent staff is maintained year-round www.downloadslide.net 496  Glossary Time series  A series of observations arranged in chronological order Time series forecasting model  A quantitative forecasting model that uses a time series to develop forecasts With a time series model, the chronology of the observations and their values are important in developing forecasts Top-down planning  An approach to S&OP in which a single, aggregated sales forecast drives the planning process For top-down planning to work, the mix of products or services must be essentially the same from one time period to the next or the products or services to be provided must have very similar resource requirements Total cost analysis  A process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options Total cost of quality curve  A curve that suggests that there is some optimal quality level, Q* The curve is calculated by adding costs of internal and external failures, prevention costs, and appraisal costs Total quality management (TQM)  A managerial approach in which an entire organization is managed so that it excels in all quality dimensions that are important to customers Trade-off  A decision by a firm to emphasize one performance dimension over another, based on the recognition that excellence on some dimensions may conflict with excellence on others Transportation inventory  Inventory that is moving from one link in the supply chain to another Trend  Long-term movement up or down in a time series Two-card kanban system  A special form of the kanban system that uses one card to control production and another card to control movement of materials Upper tolerance limit (UTL)  The highest acceptable value for some measure of interest Upstream  A term used to describe activities or firms that are positioned earlier in the supply chain relative to some other activity or firm of interest For example, corn harvesting takes place upstream of cereal processing, while cereal processing takes place upstream of cereal packaging Upstream activities  In the context of manufacturing customization, activities that occur prior to the point of customization Value analysis (VA)  A process that involves examining all elements of a component, an assembly, an end product, or a service to make sure it fulfills its intended function at the lowest total cost Value index  A measure that uses the performance and importance scores for various dimensions of performance for an item or a service to calculate a score that indicates the overall value of an item or a service to a customer Value perspective  A quality perspective that holds that quality must be judged, in part, by how well the characteristics of a particular product or service align with the needs of a specific user Variable costs  Expenses directly tied to the level of business activity Virtual supply chain  A collection of firms that typically exists for only a short period Virtual supply chains are more flexible than traditional supply chains, but they are also less efficient Volume flexibility  The ability to produce whatever volume the customer needs Waiting line theory  A body of theory based on applied statistics that helps managers evaluate the relationship between capacity decisions and important performance issues such as waiting times and line lengths Warehouse and transportation planning systems  Logistics information systems that support tactical planning efforts by allocating “fixed” logistics capacity in the best possible way, given business requirements Warehouse management and transportation execution systems  Logistics information systems that initiate and control the movement of materials between supply chain partners Warehousing  Any operation that stores, repackages, stages, sorts, or centralizes goods or materials Organizations use warehousing to reduce transportation costs, improve operational flexibility, shorten customer lead times, and lower inventory costs Waste  According to APICS, in the JIT/Lean philosophy, “any activity that does not add value to the good or service in the eyes of the consumer.” Weighted center of gravity method  A logistics decision modeling technique that attempts to identify the “best” location for a single warehouse, store, or plant, given multiple demand points that differ in location and importance Weighted moving average model  A form of the moving average model that allows the actual weights applied to past observations to differ X chart  A specific type of control chart for a continuous variable that is used to track the average value for future samples Yield management  An approach that services commonly use with highly perishable “products,” in which prices are regularly adjusted to maximize total profit www.downloadslide.net Index A Acceptance quality level (AQL), 141 Acceptance sampling, 140 Activity on node (AON), 446 Adjusted exponential smoothing forecasting model, 276–278 Adjusted exponential smoothing model, 279 Advantage of MRP, 390 Aggregate planning, 311 See also Sales and Operation Planning (S&OP) Alcoa, 23 Alignment stages with business strategy, 44–45 Alternative waiting lines, 190 Amazon.com, 343–344 American Society for Quality (ASQ), 28 Anheuser-Busch, 23 Anticipation inventory, 346 APICS, 27, 89, 112,140, 249, 311, 344, 346, 420 Appendices, 480–484 Apple, 38 Appraisal costs, 126 Approaches to improving product and service designs, 472–476 computer-aided design (CAD), 474–475 computer-aided design/computer-aided manufacturing (CAD-CAM), 474–475 design for approaches, 474 DMADV (Define-Measure-Analyze-DesignVerify), 472 quality function deployment (QFD),473–474 Arrival variability, 64 Artistic processes, 112 Assemble-or finish-to-order (ATO) products, 61, 62 Assignment problem, 252–257 Assortment warehouses, 242 Association for Operations Management, 27 Assumptions behind waiting line theory, 191–195 Attributes, 134 Automotive Industry Action Group (AIAG), 24 Available to promise, 379–382 B Back room, 66 Backward pass, 451 Ball Corporation, 22 Bar graph, 107 Batch manufacturing, 55, 58 Benchmarking, 101 BigDawg Customs, 375 Bill of material (BOM) 384 Black belts, 103 Black box design, 472 Booked orders, 377–378 “Bottleneck” quadrant, 218 BMP tools, 414–415 Bottom-up planning, 313 Break-bulk warehousing, 240 Break-even analysis, 166–167 Break-even point, 166–167 Broad network access, cloud computing and, 415 Build-up forecasts, 268 Bullwhip effect, 362–363 Business process modeling tools, 415 Business process reengineering (BPR), 112 Business processes, 87–120 bar graph, 107 benchmarking, 101–102 business process reengineering (BPR), 112 cause-and-effect diagram, 104, 105 challenges, 111–114 check sheets, 106–107 closed phase, 105 competitive benchmarking, 101 continuous improvement, 103–111 cycle time, 100–101 definition, 89 development processes, 89 efficiency, 99 example of, 89 fishbone diagram, 104 Five Ms, 104 Five Whys, 105 guidelines for improvement, 96 histogram, 107 improving, 89–90 Ishikawa diagram, 104 mapping business processes, 92–96 measuring business process performance, 97 multifactor productivity, 98 narrow phase, 105 open phase, 104 pareto charts, 106–107 percent value-added time, 101 primary process, 89 process benchmarking, 101 process maps, 92–95 productivity, 97–98 root cause analysis, 104 fun chart, 107 scatter plot, 105, 110 single-factor productivity, 98 Six Sigma methodology, 102–103 standard output, 99 support processes, 68, 89 swim lane process maps, 95–96 Business strategy, 37 Business Process Reengineering (BPR), 112 C Capability variable, 64 Capacity, 155–188 analyzing, 171–184 average number of customers in the system, 176 balk, 176 break-even analysis, 166–167 constraints, 171–174 core activities, 170 decision point, 164 decision tree, 164–166 definition, 156–157 demand considerations, 163, 499 evaluating capacity alternatives, 160–171 expected value, 163–164 factors that affect capacity, 158 first-come, first-served basis (FCFS), 176 fixed costs, 160 indifference point, 162 lag capacity strategy, 160 lead capacity strategy, 159 learning curve theory, 167–170 Little’s Law, 178–180 match capacity strategy, 160 measure of capacity, 157–158 outcome points, 164 priority rules, 176 renege, 176 service times, 175–178 supply chain considerations, 158 theoretical capacity, 157 Theory of Constraints (TOC), 171–174 variable costs, 160 virtual supply chain, 160 waiting line theory, 174–178 Capacity planning, 28 Case Studies Design for supply chain programs, 477–478 Forecasting, Top-Slice drivers, 308–309 Logistics in electronics industry, 263 Managing capacity, Forster’s Market, 188 Managing inventory throughout the supply chain, 372–373 Managing production across the supply chain, 408 Managing projects, Viva Roma, 460 Manufacturing and service processes, 85 Netflix, 51–52 Quality issues, 153–154 Sales and operations planning, (aggregate planning), Covolo Diving Gear, 311, 340–341 Supply chain challenges, 31–32 Supply chain challenges in post-earthquake Japan, 436–438 Supply management, 231 Swim lane process map for medical procedure, 119 Cash flow analysis, 322–324 Casual forecasting models, 287–291 Catherine’s Confectionaries, 52 Cause-and-effect diagram, 104, 105 Cellular layout, 59 Champions, 103 Changeover flexibility, 42 Chase production plan, 316–317, 319 Check sheets, 106–107 Cheeznak Snack Foods, 266, 296–299 Clark, Kim, 469 Closed phase, 105 Closing the loop, 47 Cloud computing, 415 Collaborative planning, forecasting and replenishment (CPFR), 295 Commercial preparation phase, 469 Common carriers, 246 Common process mapping symbols, 93 497 www.downloadslide.net 498  Index Competition, role of increase, 26 Competitive benchmarking, 101 Competitive bidding, 223 Computer-aided design (CAD) systems, 474 Computer-aided design/computer-aided manufacturing (CAD/CAM) systems, 474–475 Computer based forecasting packages, 294 Concept development phase, 468 Concept phase, 442 Concurrent engineering, 469 Conformance quality, 41 Conformance perspective, 124 Consolidation warehousing, 239 Constraint, 171 management and, 29 optimization modeling and, 252, 330 Constructing network diagrams, 446–449 Consumer’s risk, 141 Continuous flow processes, 56 Continuous improvement, 130 Continuous improvement tools, 103–111 Continuous review system, 351–352 Continuous variables, 134 Contract carriers, 246 Control charts, 134–140 attributes, 134 continuous variables, 134 definition, 134 Control limits, 135 Coordinating process management efforts, 112 Core competencies, 37, 45–47, 213 values and, 37 Corporate social responsibility (CSR), 214 Cost, measuring business process performance, 97 Cost of goods sold (COGS), 206 Cost of quality, 126–127 Cost-based contract, 223 Costs, 43 Council of Supply Chain Management Professionals (CSCMP), 28, 235 Covolo Diving Gear, 311, 340–341 CPFR, 294–299 Crashing, 450 Crashing a project, 450–452 Critical activities, 447 Critical path, 447 Critical path method (CPM), 446 “Critical” quadrant, 218 Cross docking, 46, 240 Cross-functional and international linkages, 28 Cross sourcing, 219 Customer actions, 67 Customer contact, 66–68 Customer relationship management (CRM), 412 Customer value, 40–41 Customization, downstream activities, 61 four levels of: assemble-to-order (ATO) or finish-to-order, 61 engineer-to-order (ETO) products, 61 make-to-order (MTO) products, 61 make-to-stock (MTS) products, 61 law of variability, 62 point, 61–63 service process, 63 upstream activities, 61, 62 Customs broker, 248 Cycle stock, 345 Cycle time, 56, 100–101 for a production line, 71 D Decision point, 164 Decision support systems (DSSs), 413 Decision tree, 164–166 Decision variables, 252 Degree of customer contact, 66–68 Delivery activities, 23 Delivery reliability, 41 Delivery speed, 40, 41 Delivery window, 41 Delphi method, 270 Delta Airlines, quality, baggage control, 122–123 Demand consideration, 163 Demand forecasts, 267 Demand uncertainty, 348 Deming, W Edwards, 129 Dependent demand inventory, 349 Description by brand, 222 Description by market grade or industry standard, 222 Description by performance characteristics, 223 Description by specification, 223 Design and development phase, 469 Design for environment (DFE), 475 Design for maintainability (DFMt), 475 Design for manufacturability (DMF), 474 Design for Six Sigma (DFSS), 475 Design to cost, 475 Detailed planning and control, 312 Deutsche Bank, 225 Developing products and services, 461–478 black box design, 472 commercial preparation phase, 469 computer-aided design (CAD), 474 computer-aided design/computer-aided manufacturing (CAD/CAM), 474 concept development phase, 467 concurrent engineering, 469 design and development phase, 469 design for environment (DFE), 475 design for maintainability (DFMt), 475 design for manufacturability (DFM), 474 design for Six Sigma (DFSS), 475 design to cost, 475–476 development funnel, 469 development process, 467 DMADV (Define-Measure-Analyze-DesignVerify), 472 engineering change, 466 four reason for developing new products and services, 463–464 gray box design, 472 improving product and service designs, 472 launch phase, 469 match with existing capabilities, 467 modular architecture, 474 model of development process, 468 organizational rules in product and service development, 469–472 parts standardization, 475 planning phase, 465 presourcing, 471 product costs, 466 product designs, 463 product development, 463 production volumes, 465 quality function deployment (QFD), 473–474 repeatability, 465 robust design, 465 sequential development process, 469 serviceability, 465 target costing, 475–476 testability, 465 value analysis, 475–476 Development process, 89 Differences across organizational levels, 410–511 Direct costs, 215 Direct truck shipment, 238 Direction of linkages, 412 Distribution requirements planning (DRP), 394–396 DMADV (Define-Measure-Analyze-DesignVerify), 103 improving product and service designs, 472 TQM and, 131 DMAIC (Define-Measure-Analyze-ImproveControl) 89, 103, 104, 108, 472 TQM and, 131 Downstream, 22 Downstream activities, 22, 61 Drivers, inventory and, 347 Dual sourcing, 219 E Earliest finish time (EF), 448 Earliest start time (ES), 448 E-auction, 223 E-commerce, 26–27 Economic order quantity (EOQ), 352–354 Efficiency, 99 Effort variability, 64 Electronic commerce, role of, 26–27 Electronic data interchange (EDI), 218 Electronic funds transfer (EFT), 225 Elements of business, 36 Employee empowerment, 130 Engineering change, 466 Engineer-to-order (ETO), 61, 62 Enterprise resource planning (ERP) systems, 413 Evaluating capacity alternatives, 160–171 break-even analysis, 166–167 cost, 160–163 decision trees, 164–166 demand considerations, 163 expected value, 163–164 learning curves, 167–170 other considerations, 170–171 Expected value, 163–164 Expediting, 224 Exploding the BOM, 385 Exponential smoothing forecasting model, 276–278 Exponential smoothing model, 275–278 External failure costs, 126 Externally neutral, 45 Externally supportive, 45 F Face-to-face interaction, 67 Factors that affect capacity, 158 www.downloadslide.net Index  Federal Express, 18, 70 Fidelity Investments, 328 Financial impact of supply management, 205–208 First-tier supplier, 22 Fishbone diagram, 104 Five Ms, 104 Five Whys, 105 Fixed costs, 160 Fixed-position layout, 58 Fixed-price contract, 223 Flexibility, 42–43 business process performance and, 97 Flexible manufacturing systems (FMSs), 55 Flextronics, 18, 70 Follow-up, 224 Forecasted demand, 377–378 Forecasting, 265–309 adjusted exponential smoothing model, 278–279 build-up forecasts, 271 casual forecasting models, 287–292 Cheeznak Snack Foods, 266 collaborative planning, forecasting, and replenishment (CPFR), 294–299 computer-based forecasting packages, 294 defined, 266–267 Delphi method, 270 demand forecasts, 267 exponential smoothing model, 275–278 last period, 272 laws of forecasting, 268–269 life cycle analogy method, 271 linear regression, 279–283, 287–289 measure of forecast accuracy, 292–294 moving average models, 273–274 multiple regression, 289–291 panel consensus forecasting, 270 price forecasts, 267 qualitative forecasting techniques, 269 quantitative forecasting models, 269 randomness, 271 regression forecast model, 285–286 seasonal adjustments, 283–287 seasonality, 272 selecting a forecasting method, 269–270 smoothing models, 274 supply forecasts, 267 time series forecasting models, 271–291 trend, 272 weighted moving average model, 275 Forward pass, 448 Four performance dimensions, 41–43 Four reasons for developing new products and services, 463–464 Fourteen Points for Management, 129 Freight forwarder, 248 Front room, 66 Functional layout, 57, 75 Functional strategies, 37 G Gantt charts, 444–446 Garvin, David, 124 Gillette, 464 Global sourcing, supply management and, 205 Globalization, role of, 26 Goldratt, Eliyahu, 171 Gray box design, 472 Green belts, 103 Grocery Manufacturers of America/Food Products Association, 24 Group technology, 59 Guide to the Project Management Body of Knowledge (PMBOK), 455 H Harnessing New Zealand winds, 440 Hedge inventory, 346 Histogram, 107 Honda, 464 H&R Block, 463 Hub-and-spoke systems, 241 Hybrid manufacturing processes, 58–59 I IBM, 37 IKEA, 328 Improving business processes, 89–90 Improving operational flexibility, 242 Independent demand Inventory, 349 Indifference point, 162 Indirect costs, 215–216 Industry analysis, 211 Industry analysts, 211 Information systems, logistics and, 242–243 Infrastructural elements, 36 Institute for Supply Management (ISM), 28 Insourcing, 213 Internal failure costs, 126 Internal supply chain management, 412 Internally neutral, 45 Internally supportive, 45 Inventory, 344 Inventory drivers, 347 Inventory pooling, 364 Inventory management through the supply chain, 342–373 anticipation inventory, 346 bullwhip effect, 362–363 continuous review system, 351–358 cycle stock, 345 defined, 344 demand uncertainty, 346 dependent demand inventory, 349 drivers, inventory, 347 economic order quantity (EOQ), 352–354 hedge inventory, 346 independent demand inventory, 349 inventory pooling, 364 inventory positioning, 363–364 inventory types, 345–347 periodic review system, 349–351 quantity discounts, 356–358 reorder points, 354–356 restocking levels, 350–351 role of, 344 safety stock, 345, 354–356 service level, 350 single-period inventory systems, 358–362 smoothing inventories, 346 supply chain and, 362–365 supply uncertainty, 347 target service level, 359 target stocking point, 359, 360–362 transportation, packing, and material handling considerations, 364 499 transportation inventory, 346 types, inventory, 345–347 Intermountain Healthcare, 88 ISO 9000, 143 J J B Hunt, 241 Job sequencing rules, 392 Job shop, 57 Juran, Joseph, 126–127 Just-in-time, 420–421 See also Kanban systems, 424, 427–433 See also Lean production, 418–424, 425–427 K Kanban systems, 424, 427–433 defined, 424 inventory levels, controlling, 429–431 move card, 428 MRP and kanban together, 432–433 production card, 428 pull system, 429 synchronizing the supply chain, 431–432 two-card kanban system, 424 Kellogg company, 247 Kraft Foods, 234 L Lag capacity strategy, 160 Landed costs, 248 Last-period forecasting model, 272 Latest finish time (LF), 448 Latest start time (LS), 448 Launch phase, 469 Law of variability, 62 Laws of forecasting, 268–269 Layout decision models assigning department locations in functional layouts, 71 line balancing, 71–75 takt time, 71 Lead capacity strategy, 159 Lean, 420–421 Lean production, 418–424, 425–427 See also just-in-time, 420–421 See also kanban, 424, 427–433 definition, 420 developments in thinking, 423–424 improving the process, 426 inventory and, 422–423 lean Six Sigma, 424 lean supply chain management, 424 mapping the process, 425 perspective on waste, maintaining improvement, 426–427 waste, 421 waste variation, 426 Lean Six Sigma, 424, 425–427 Lean supply chain management, 424 Learning curve theory, 167–170 Less than truckload (LTL) shipment, 238 Level production plan, 316–318 Levels of customization, 61 “Leverage” quadrant, 218 Life cycle analogy method, 271 Line balancing, 71–75 Line of interaction, 67 Line of internal interaction, 68 Line of visibility, 67 www.downloadslide.net 500  Index Linear regression, 279–283 Linking S&OP throughout the supply chain, 329–330 Little’s Law, 178–180 Load profile, 321 Logistics, 233–264 assignment problem, 252–257 assortment warehouses, 242 break-bulk warehousing, 240 common carriers, 246 consolidation warehousing, 239 constraints, 252 contract carriers, 246 critical in supply chain management, 235–236 cross-docking, 240 customs broker, 248 decision areas, 236–245 decision support tools, 242 decision variables, 252 defined, 235 direct truck shipment, 238 execution systems, 243 freight forwarder, 248 hub-and-spoke systems, 241 information systems and, 242–243 inventory management, 245 inventory-related costs, 242 landed costs, 248–249 LTL (less than truckload), 238 management, 235 material handling systems, 244–245 multimodal solutions, 238–239 objective function, 252 optimization models, 252 packaging, 244 perfect order, 247 postponement warehousing, 242 pup trailer, 241 Radio-Frequency Identification (RFID), 243 reverse logistics system, 249–250 roadrailers, 239 role of, 235 selecting a transportation mode, 237–238 shortening customer lead time, 242 spot stock warehouses, 242 strategy and, 245–250 sustainability, 235 third-party logistics providers, (3PLs), 246 transportation, 236–238 warehousing, 239–242 weighted center of gravity method, 250–251 Logistics and strategy, 245–250 landed costs, 248–249 measuring logistics performance, 247–248 owning versus outsourcing, 245–246 reverse logistics systems, 249–250 Logistics decision models, 250–257 assignment problem, 252–257 optimization models, 252 weight center of gravity method, 250–251 Logistics management, 235 Logistics strategy, 245 Lot tolerance percent defective (LTPD), 141 Lower tolerance limit (LTL), 131 Lowe’s, 45–47 M Machining centers, 59 M&M, 23 Major approaches to S&OP, 313–316 “Make” or production activities, 23 Make-or-buy decision, 213 Make-to-order (MTO) products, 61 Make-to-stock (MTS) products, 61 Making capacity match sales, 328–329 Making sales match capacity, 327–328 Malcolm Baldridge National Quality Award, 128 Manufacturing processes, 55–60 batch manufacturing, 55, 58 cellular layout, 59 continuous flow processes, 56 cycle time, 56 fixed-position layout, 58 flexible manufacturing systems (FMSs), 55 functional layout, 57 group technology, 59 hybrid manufacturing processes, 58–59 job shop, 57 linking manufacturing processes across the supply chain, 59 machining centers, 59 product-based layout, 56 product family, 59 product-process matrix, 60 production line, 56 selecting a manufacturing process, 60 Mapping, 92 Market survey, 270 Mass customization, 112 Mass processes, 112 Master black belt, 103 Master production schedule, 378 Master Schedule Record, 377–383 available to promise (ATP), 379 booked orders, 377–378 forcasted demand, 377–378 master production schedule (MPS), 378 planning horizon, 384 projected ending inventory, 378 using the master schedule, 382–383 Master scheduling, 376 Match capacity strategy, 160 Match design with existing capabilities, 465–467 Material handling systems, 244–245 Material requirements planning (MRP), 383–385 advantages of, 390 bill of material, 384 defined, 383 dependent demand inventory, 383 exploiting the BOM, 385 gross requirements, 385 MRP nervousness, 391 MRP record, 385 net requirements, 386 parent/child relationship, 390 planned receipts, 386 planning lead time, 384 product structure tree, 384 rough-cut capacity planning, 383 scheduled receipts, 386 special considerations, 390–392 Maverick spending, 213 Measure of capacity, 157–158 Measured service, cloud computing and, 415 Measures of forecast accuracy, 292–294 Measuring business process performance, 97 Measuring logistics performance, 247–248 Merchandise inventory, 206 Milestones, 443 Mission statement, 37 Mix flexibility, 42 Mixed production plan, 316–317, 320 Modular architecture, 474 Monitoring and tracking technologies, 393–394 Monte Carlo simulation, 196–198 Motorola, 102, 464 Move card, 428 Moving average models, 273–274 MPP, 383–385 MRP, Kanban and, 432–433 MRP nervousness, 391 MRP record, 385 Muda, 421 Multicriteria decision, 220 Multifactor decision models, 220 Multifactor productivity, 98 Multimodal solutions, 239 Multiple regression, 289–291 Multiple sourcing, 219 N Nabisco, 467 Narrow phase, 105 Nascent process, 112 Net cash flow, 322 Netflix, 26 Network design applications, 414 Network diagrams, 446 Network paths, 447 Normal curves areas, 480–481 O Objective function, 252, 330 Offloading, 328 On-demand self-service, cloud computing and, 415 Open phase, 104 Operating characteristics curve (OC curve), 141–142 Operations, function of, 19 management, 20–22 supply chain perspective on design and, 464–465 Operations and Supply Chain management, 17–33 competition, 26 core competencies, 37, 45–47 cross-functional and interorganizational linkages, 28–30 definition, 19 downstream, 22 e-commerce (electronic commerce), 26 first-tier supplier, 22 globalization, 26 operations function, 19 operations management, 20–22 professional organizations, 27–28 relationship management, 26–27 SCOR (Supply Chain Operations Reference) model, 18, 23 www.downloadslide.net Index  second tier supplier, 22 supply chain, 19 transformation process, 20 upstream, 22 Operations and supply chain strategy, 39 Operations management, defined, 22 Optimization modeling, applying, 330–333 Optimization models, 252–257, 330 Order qualifiers, 43–44 Order winners, 43 Ordering, 224 Organization of this book, 29–30 Organization roles in product and service development, 469–472 Outcome points, 164 Outsourcing, 213 P p charts, 139 Packaging, 244–245 Panel consensus forecasting, 270 Panera Bread, 25 Parent/child relationship, 390 Pareto charts, 106–107 Parts standardization, 475 Percent value-added time, 101 Perfect order, 247 Performance impact, 208 Performance phase, 436–438 Performance quality, 41 Periodic review system, 349–350 Planning activities, 23 Planning and control, 375 Planning horizon, 382 Planning lead time, 384 Planning phase, 443, 468 Planning values, 313 PMI and the Project Management Body of Knowledge (PMBOK), 294–299 Poisson distribution values, 482–484 Porsche, 419 Portfolio analysis, 217–218 Postcompletion phase, 443–444 Postponement warehousing, 242 Prakson Carriers, 241 Preferred supplier, 218 Presourcing, 471 Prevention costs, 126 Primary processes, 89 Priority rules, 176 Process art or science, 112 defined, 89 Process benchmarking, 101 Process capability, 131–132 index, 132 lower tolerance level (LTL), 131 ratio, 131 upper tolerance limit (UTL), 131–132 Process capability ratio (Cp), 131 Process capability index (Cpk), 132 Process challenge, business, 111–114 Process management efforts, 112 Process maps, 92–95 guideline for improving, 96 rules for, 92–93 symbols for, 93 Procure-to-pay cycle, 224–226 Procter & Gamble, 158 Produce–process matrix, 60 Producer’s risk, 141 Product costs, 466 Product design, 463 Product development and services, 461–478 approaches to improvement of, 472–476 concurrent engineering, 469 costs, 466 design, 463 development, 463 development process, 467–469 engineering change, 466 four reasons for, 463–464 match with existing capabilities, 466–467 model development process, 467–469 operations and supply chain perspectives on design, 464–465 organizational roles and, 469–472 product volumes, 466 repeatability, 465 robust design, 465 serviceability, 465 sequential development versus concurrent engineering, 469 target costing, 475–476 testability, 465 value analysis, 475–476 volumes, 466 Product development process, 467–469 commercial preparation phase, 469 concept development, 468 design and development phase, 468–469 model of, 468–469 launch phase, 469 planning phase, 468 Product family, 59 Product structure tree, 384 Product-based layout, 56 Production activity control and vendor order management systems, 392–394 job sequencing rules, 392 monitoring and tracking technologies, 393 Production card, 428 Production line, 56 Productivity, 97–98 Products volumes, 466 Professional organizations, 27–28 Profit leverage effect, 205–207 Profit margin, 207 Program evaluation and review technique (PERT), 446 Project definition phase, 442 Project management, 439–460 activity on node (AON) diagram, 446 backward pass, 448 concept phase, 442 constructing network diagrams, 446–449 crashing, 450 crashing a project, 450–452 critical activities, 447 critical path, 447 critical path method (CPM), 446 defined, 440–441 earliest finish time (EF), 448 earliest start time (ES), 448 forward pass, 448 growing importance of, 441–442 501 Gantt charts, 444–446 latest finish time (LF), 448 latest start time (LS), 448 milestone, 443 network diagrams, 446–447 network paths, 447 performance phase, 443 phases, 442–452 planning phase, 443 PMI and the Project Management Body of Knowledge (PMBOK), 294, 455 postcompletion phase, 443–444 program evaluation and review technique (PERT), 446 project, 440 project definition phase, 442 project management, 441 Project Management Institute, 294 slack time, 449 software, 452–455 Projected ending inventory, 378 Projects, 440–441 Proportion for a sample, 135 Public carriers, 246 Pull system, 429 Pup trailer, 241 Purchase order (PO), 224 Purpose of this book, 29–30 Q Qualitative forecasting techniques, 269 Quality, 121–142 acceptance sampling, 141–142 acceptance quality level (AQL), 141 acceptance quality sampling, 141 aesthetics, 124 appraisal costs, 126 assurance, 130 attribute, 134 conformance and, 41 conformance perspective, 124 consumer’s risk, 141 continuous improvement, 130 continuous variable, 134 control charts, 134–140 defined, 123–126 Delta Air Lines, and, 122–123 durability, 124 employee empowerment, 130 external failure costs, 126 external failure costs in supply chain, 144 features, 123 function deployment, 130 ISO 9000 family, 143 lot tolerance percent defective (LTPD), 141 lower tolerance, 131 managing, 41, 121–154 managing across the supply chain, 143–144 measuring business process performance, 97 operating characteristics (OC) curve, 141 performance, 124 prevention costs, 126 process capability, 131–132 producer’s risk, 141 reliability, 124 serviceable Six Sigma quality, 133–134 statistical quality control, 130, 131–143 www.downloadslide.net 502  Index Quality (continued) strategic quality plan, 130 Taguchi’s quality loss function, 143 total cost of, 126–127 total cost of quality curve, 127 total quality management (TQM) and Six Sigma Methodology, 128–130 upper tolerance, 131 Quality assurance, 130 Quality function development (QFD), 130 Quantitative forecasting models, 269 Quantity discounts, 356–358 R R charts, 136–139 Radio-Frequency Identification (RFID), 243 Randomness, 271 Range, 135 Rapid elasticity, cloud computing and, 415 Rated capacity, 157 Receipt and inspection, 224 Records maintenance, 225 Relationship management, 26–27 Reliability quality, 41 Reorder point (ROP), 354–356 Repeatability, 465 Request for information (RFI), 220 Request for quotation (RFQ), 222 Request variability, 64 Resource pooling, cloud computing, 415 Restocking levels, 350–351 Return activities, 23 Return on assets (ROA), 207 Reverse auction, 223 Reverse logistics system, 249–250 Roadrailers, 239 Robust design, 465 Rolling planning horizon, 325–326 Root cause analysis, 104 Rough-cut capacity planning, 383 “Routine” quadrant, 218 Run chart, 107 S Safety stock, 242, 345, 354–356 Sales and operation planning (S&OP), 311–341 bottom-up planning, 313, 320–322 cash flow analysis, 322–324 chase production plan, 316–317, 319 chosing between alternative plans, 324–325 constraints, 330 defined, 311 detailed planning and control, 312 implementing in an organization, 326–327 level production plan, 316 linking S&OP throughout the supply chain, 329–330 load profile, 321 mixed production plan, 316–317, 320 net cash flow, 322 objective function, 330 offloading, 328 optimization modeling, applying, 330–333 planning values, 313–314 rolling planning horizons, 325–326 services considerations, 327–329 strategic planning, 311 tactical planning, 312 tiered workforce, 328 top-down planning, 313, 314–316 yield management, 327–328 Sample average for a continuous variable, 135 SAP, 18, 70 Scatter plot, 105, 110 Scharffen Berger chocolates, 54 SCOR (Supply Chain Operations Reference) model, 18, 89, 112–114 Seasonal adjustments, 283–287 Seasonality, 272 Second-tier supplier, 22 Selecting a forecasting method, 269 Selecting a manufacturing process, 60 Sequential development process, 469 Serviceability, 465 Service blueprinting, 66 Service customization, 65–66 Service level, 350 Service package, 64–65 Service positioning, 69–70 Service processes, 63–71 back room, 66 backstage actions, 67 customer actions, 67 customer contact, 66–68 degree of customer contact, 69 degree of customization, 65–66 front room, 66 line of interaction, 67 line of internal interaction, 68 nature of the service package, 64–65 onstage actions, 67, 68 service blueprinting, 67 service customization, 65–66 service package, 64–65 service positioning, 69–70 services within the supply chain, 70 Services within the supply chain, 70–71 Settlement and payment, 225 SimQuick, evaluating simulation models, 198–201 Simulation modeling, 195–198 advantages of, 195 disadvantages of, 195 Monte Carlo simulation, 196–198 Single sourcing, 219 Single-channel, single-phase system, 174 Single-factor productivity, 98 Single-period inventory systems, 358–360 Six Sigma approach, 89 Six Sigma Methodology, 102–103, 130–131 black belts, 103 champions, 103 DMADV (Define-Measure-Analyze-DesignVerify), 103 DMAIC (Define-Measure-Analyze-ImproveControl), 103 green belts, 103 master black belts, 103 Six Sigma lean hospital discharge process, 425 Six Sigma quality, 133–134 Slack time, 449 Smoothing inventories, 346 Software, project management, 454 Sourcing, strategic process, 209–224 access opportunities, 209–210 advantages and disadvantages, 219 “bottleneck” quadrant, 218 conduct supplier selection, 220–222 core competencies, 213 create selection criteria, 219–220 “critical” quadrant, 218–219 cross sourcing, 219 cost-based contract, 223 defined, 219 description by brand, 222 description by market, 222 description by performance characteristics, 223 description by specification, 223 developing strategy, 213–219 direct costs, 215 dual sourcing, 219 electronic data interchange (EDI), 218 fixed price contract, 223 indirect costs, 215–216 industry standard, 222 insourcing, 213 “leverage” quadrant, 218 make-or-buy decision, 213 market grade, 222 multicriteria decision models, 220 negotiate and implement agreements, 222–224 outsourcing, 213 portfolio analysis, 217 preferred supplier, 217 profile internally and externally, 210–213 request for information (RFI), 220 “routine” quadrant, 218 screen suppliers, 219 single sourcing, 219 strategic process, 209–213 strategy development, 213–220 spend analysis, 209 total cost analysis, 215–216 Sourcing activities, 23 Spend analysis, 209 Spot stock warehouses, 242 Standard output, 99 Statement of work or scope of work (SOW), 224 Statistical quality control (SQC), 130, 131–143 acceptability quality level (AQL), 141 acceptance sampling, 140–143 consumer’s risk, 141 control charts, 134–140 lower tolerance, 131 operating characteristics (OC) curve, 141–142 p chart, 139 process capability, 131–134 process capability index, 132 producer’s risk, 141 Taguchi’s quality loss function, 143 upper tolerance, 131 Six Sigma Quality, 133–134 Smoothing inventory, 346 Strategic planning, 311 Strategic quality plan, 130 Strategic sourcing process, 209–213 Strategies, 36 Strategy logistics, 245–250 Structural elements, 36 Subjective preference, 64 Supplier partnerships, 130 Supplier relationship management (SRM), 412 www.downloadslide.net Index  Supply chain, 19 See also Managing Inventory throughout the Supply Chain considerations, 158 Council, 24 disruptions, 226 management and, 19–32 quality and, 143 synchronizing using Kanbans, 432–433 Supply chain information systems, 409–417 BPM tools, 414–415 cloud computing, 415 definition, 410 differences across organizational levels, 411–412 direction of linkages, 412 information needs, 410–412 information systems, 412–414 understanding information needs of, 410–411 trends to watch, 414 Supply Chain Connections capacity, servers and, 159 developing products and service, Nabisco’s cake and snack products, 467 forecasting, Black & Decker HHI puts CPFR into action, 295–296 forecasting, price of jet fuel and, 268 inventory Management, automotive pooling groups and, 365 Lean Six Sigma, creating for hospital discharge process, 424, 425–427 logistics, Kellogg Co and, 247 logistics, radio frequency and identification and, 243 operations and strategies, Panera and, 25 product development and services, Nabisco Biscuit Co., 467 quality, removing mislabeled drugs from supply chain and, 144 strategies, Apple IPod and, 38 services, customer introduced variability in, 64 Supply chain management, defined, 23 Supply management, 203–232 critical need for, 205–208 definition, 204 financial impact, 205–208 performance impact, 208–209 procure-to-pay cycle, 224–225 strategic sourcing process, 209–210 trends in, 225 Supply uncertainty, 347 Support processes, 68, 89 Sustainability, 235 Sustainable supply, 225 Swim lane process maps, 95–96 T Table of random numbers, 484 Tactical planning, 312 Taguchi’s quality loss function, 143 Takt time, 71 Target costing, 475–476 Target service level, 359 under a single-period inventory system, 359–360 Target stocking point, 359, 360–362 Team members, 103 Tesla Motors, 35 Testability, 465 Theoretical capacity, 157 Theory of constraints (TOC), 171–174 Third-party logistics providers (3PLs), 246 Tiered workforce, 328 Time, business process performance and, 97 Time characteristics delivery reliability, 41 delivery speed, 41 delivery window, 41 Time series forecasting models, 271–291 Top-down planning, 313 Total cost analysis, 215 Total cost of quality curve, 127 Total quality management (TQM), 128–131 assurance, 130 customer focus, 128 definition, 128 employee empowerment, 128, 130 Malcolm Baldridge National Quality Award, 128 quality function deployment (QFD), 130 Six Sigma Methodology, 130–131 statistical quality control (SQC), 130, 131–143 strategic quality plan, 128, 130 supplier partnerships, 128, 130 Toyota Motor Corp, 432 Trade-offs, 43 Transformation process, 20 Transportation, logistics and air, 237, 238 highway, 237, 238 rail, 237, 238 water, 237, 238 mode and, 237–238 multimodal solutions, 238–239 503 warehousing, 239–242 Transportation inventory, 346 Trend, 272 Trends in supply management, 225–226 Two-card kanban system, 424 Types of forcasts, 267 U Upper tolerance limit (UTL), 131–132 Upstream, 22 Upstream activities, 61 Using the master schedule, 382–383 V Value analysis (VA), 475–476 Value index, 40–41 Value perspective, 123 Values for use in the poisson distribution, 484 Variabilities in services, 64 Variable costs, 160 Vestergaard Frandsen, bed nets, 462–463 Virtual supply chain, 160 Volume flexibility, 42 W Waiting line theory, 174–180 assumptions behind, 191 formulas for three environments, 191–195 Waiting lines, alternative, 190 Walmart, 18, 23, 24, 70, 156 Warehouse management and transportation execution systems, 414 Warehousing, 239–242 consolidated, 239 Waste, lean perspective, 421–422 defects, 422 inappropriate process, 422 muda, 421 overproduction, 421 underutilization of employees, 422 unnecessary/excess motion, 422 unnecessary transportation, 421 Weighted center of gravity method, 250–251 Weighted moving average, 275 Weighted-point evaluation system, 220–221 Wheelwright, Steven, 468–469 X X charts, 136 Y Yield management, 327–328 ... through Operations and Supply Chains  17 1 Introduction to Operations and Supply Chain Management 17 Introduction 18 1.1  Why Study Operations and Supply Chain Management?  19 Operations Management ... Value through Operations and Supply Chains Chapter 1: Introduction to Operations and Supply Chain Management Chapter 2: Operations and Supply Chain Strategies II Establishing the Operations Environment... Study Operations and Supply Chain Management? 1.2 Important Trends 1.3 Operations and Supply Chain Management and You 1.4 Purpose and Organization of This Book Chapter Summary Introduction to Operations