TU-C2020 OPERATIONS MANAGEMENT (5 cr) Inbound Logistics Planning and Materials Management 25 Sept, 2015

Transcription

1 TU-C2020 OPERATIONS MANAGEMENT (5 cr) Inbound Logistics Planning and Materials Management 25 Sept, 2015 Doctoral candidate, researcher Jari Laine Department of Industrial Engineering and Management

2 A Fast Moving Consumer Goods Supply Chain and its information flows Demand and Supply information Flow Money Flow Goods Flow 2

3 Demand Picture Demand Forecasts Statistical Heuristic Market sentiment Customer collaboration Order backlog/coverage Sell-through Channel stock POS deliveries Returns Campaigns Competitor info Marketing activities Pricing Tender coverage RFIs, RFQs 3

4 Supply Picture Availability Order status New products/versions Capacity loading Order backlog Re-scheduling Production lead times Production bottlenecks Special work arrangements Allocations Overstock info Contingency plans Quality issues Supplier bottlenecks Supplier lead times Transportation bottlenecks 4

5 Incoming Materials Planning and Execution Process Material deliveries Material call-off signals ( Order ) Demand visibility info 5

6 Key points Sufficient Demand Visibility info is the key to keep the whole supply chain aware of the situation big picture Automated information (S2S) sharing with key suppliers is (still) dominating in volume operations Supplier web, Extranets, Excel spreadsheets and are used in more compact operations 6

7 Triggering the demand Execution i.e. triggering the materials replenishment can have multiple ways, e.g.: Deliveries against rolling forecast Automated signal generated by inventory re-order point Visual order (e.g. Kanban) VMI signal A order sheet Phone call (beware) 7

8 The life of an inventory, in theory Average Inventory 8

9 Types of Inventories Buffer (Safety) inventory Precaution for unpredictable demand increase/availability challenge Cycle inventory Batch production, between work phases (WIP) De-coupling inventory Between operations with different cycle times Anticipation inventory Build ahead in aticipation of predictable demand peak (e.g. seasonal Pipeline Inventory Goods in transit, not available immediately 9

10 How much to order? 10

11 The effect of order quantity to level of inventory 11

12 Economic Order Quantity (EOQ) Figure: Wikipedia as per : Economic order quantity (EOQ) is the order quantity that minimizes the total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model, Wilson Formula or Andler Formula. The model was developed by Ford W. Harris in 1913, [1] but R. H. Wilson, a consultant who applied it extensively, and K. Andler are given credit for their in-depth analysis. [2] 12

13 What are the costs related Holding Cost Cost of capital employed (working capital) Storage & handling costs Risk of obsolecence Ordering Cost Cost of placing the order (office costs) Transportation cost Price (volume) discount costs 13

14 Criticism to EOQ Rather descriptive than precriptive use Static, reactive model Assumes that costs and conditions related are fixed Only cost view Lean/JIT philosophy are opposing due to missing improvement of processes 14

15 When to order? 15

16 Inventory Re-Order Level (ROL) Drivers: Delivery Lead Time Consumption over time 16

17 Re-Order Point (ROP) Figure: 17

18 Summary of ROL, ROP Typically inbuilt in ERP/MRP sw as relehisment options. Can be used simultaneously Simplifications of real life: Assume constant demand Assume known delivery lead time Useful as in non-complicated environments Statistcal planning tools are replacing those ins complicated environments 18

19 From Inventory Control to ERP Cloud 19

20 A Small Piece of MRP History Wikipedia : Prior to MRP, and before computers dominated industry, Reorder point (ROP) / reorder-quantity (ROQ) type methods like EOQ (Economic Order Quantity) had been used in manufacturing and inventory management. [1] In 1964, as a response to the Toyota Manufacturing Program, Joseph Orlicky developed Material Requirements Planning (MRP). The first company to use MRP was Black & Decker in 1964, with Dick Alban as project leader. Orlicky's 1975 book Material Requirements Planning has the subtitle The New Way of Life in Production and Inventory Management. [2] By 1975, MRP was implemented in 700 companies. This number had grown to about 8,000 by In 1983 Oliver Wight developed MRP into manufacturing resource planning (MRP II). [3] In the 1980s, Joe Orlicky's MRP evolved into Oliver Wight's manufacturing resource planning (MRP II) which brings master scheduling, rough-cut capacity planning, capacity requirements planning, S&OP in 1983 and other concepts to classical MRP. By 1989, about one third of the software industry was MRP II software sold to American industry ($1.2 billion worth of software). [4] 20

21 Materials Requirement Planning (MRP), why? Ensure materials are available for production Ensure products are available for delivery to customers. Maintain the lowest possible material and product levels in store Plan manufacturing activities, delivery schedules and purchasing activities 21

22 Product Summary and Product Structure Product Summary 10-30% Product Structure 22

23 Product Master Data, example "Schneckengetriebe" by Thorsten Hartmann - Own work. Licensed under CC BY-SA 3.0 via Commons

24 Towards Open, Digital and Modular BOM? Std. Module C Customized parts Std Module A Std Module B Common parts (product platform) Picture source: Kentaro Nobeoka, RIETI: 24

25 Net MRP in nutshell Master data Calculator X + - / % Working calendar and annual calendar BOM Sales volume/inventory schedule Inventories and open orders at hand X - = Net demand in time buckets 25

26 Role of the inventories (discussion) Speed (Quick Response) Flexibility Cost optimization Safety Synchronization of demand and supply or different operations Planning/Scheduling of operations phases and logistics 26

27 Disadvantages of Holding Inventory (Discussion) Lack of speed & flexibility Why? Cost Cost of capital employed Storage and handling Especially risk of obsolesence, price erosion 27

28 Central Issues In Management, recap Right materials Right time Right Place Optimum (?) between availability (service level) and total cost (ICC) 28

29 Typical metrics Total capital employed Inventory Rotation Days of Supply (DOS) Landed cost Price development Transportation & fwd cost Liability Slow movers% Obsolete% Work efficiency (receiving, picking lines/person/day Space utilization rate Quality reclaims & returns etc 29

30 ABC principle (Pareto analysis) Classification of value of consumption Value of inventory Number of items 30

31 LEAN and JIT, implications to inventory management, discussion Leveled, steady flow Elimination of all waste Continuos improvement Customer value Pull-principle Visual control Kanban 31

32 Central Issues in Inbound Logistics, discussion Responsiveness Delivery time Flexibility Rísk management Means of transportation Sustainability 32

33 Thank you 33