CRC Press Taylor &. Francis Croup Boca Raton London New York CRC Press is an imprint of the Taylor & Francis Group, an Informa business

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1 Basics of Supply Chain Management Jayanta Kumar Bandyopadhyay CRC Press Taylor &. Francis Croup Boca Raton London New York CRC Press is an imprint of the Taylor & Francis Group, an Informa business

2 Contents Preface Aiithor xv xvii 1 Introduction Introduction Elements of Supply Chain Operating Environment of Supply Chain Manufacturing Flanning and Control System Flanning Hierarchy in a Manufacturing Flanning and Control System Business Plan Production Plan Master Production Schedule Material Requirements Flanning Purchasing and Production Activity Control Capacity Management Computerized Manufacturing Resource Flanning System Enterprise Resource Flanning Systems Distribution Flanning Systems Pull System Push System Distribution Requirements Flanning System Basic Production Flanning Strategies Demand Malching 17 iii

3 iv Contents Production Leveling Subcontracting Hybrid (Mixed) Strategy 19 2 Transformation of Demand into Supply: Designing Products to Meet Customer Expectations Introduction Designing Products to Meet Customer Needs and Expectations Product Design Determines Product Quality Total Quality Management and Product Design Quality Function Deployment and Product Design Taguchi's Methodology for Product Design Product Design Strategies Distinctive Competence and Product Design Order-Winning Criteria and Order Qualifiers and Product Design 28 3 Transformation Process Choices for Making Products Conforming to Product Design Specifications and Tolerances Introduction Traditional Manufacturing Process Choices Mass-Scale Production Batch Production Unit Production Just-in-Time Manufacturing Objectives of the JIT Approach to Manufacturing Minimizing Defects Minimizing Setup Time Minimizing Level of Inventory Minimizing Lead Time Minimizing Material Handling Time Minimizing Machine Breakdowns Improving Flexibility of the Manufacturing System 38

4 Contents v 3.5 The Key Elements of the JIT Concept Principles of JIT Manufacturing Elimination of Waste and Addition of Value to the Product Waste Caused by Poor Product Specification and Design Waste Caused in Manufacturing Continuous Improvement and Total Quality Management Manufacturing Process Design for JIT Production Group Technology and Flexible Manufacturing Systems Manufacturing Cell Design Using GT Flexible Manufacturing System Characteristics of a JIT Environment Flow-Based Repetitive Manufacturing Manufacturing in Work Cells Process and Machine Flexibility Quick-Change Setup Uninterrupted Flow of Materials Supplier Relations in JIT Environment Employee Involvement and Empowerment in JIT Environment Effects of JIT on Manufacturing Flanning and Control System Effects of JIT on Production Flanning Effects of JIT on Master Production Scheduling Effects of JIT on Material Requirements Flanning Effects of JIT on Capacity Management Effects of JIT on Inventory Management Effects of JIT on Organization Design Effects of JIT on Job Design Total Quality Management and JIT Strategie Role of Quality Quality and Productivity Cost of Quality 66

5 Contents Quality and Market Share Zero-Defect Quality Continuous Improvement Management Flanning Tools for Quality Flanning Benchmarking Taguchi's Methodology for Quality Product Design Mistake Proofing and Automatic On-Line Inspection Statistical Concepts for Quality Management Concept of Variations (Common versus Assignable Causes) Statistical Quality Control Charts Process Capability Analysis 71 Demand Forecasting and Demand Management Introduction Understanding Target Customers Understanding Customer Expectations and Values Customer Relationships Demand Management Demand Forecasting Characteristics and Patterns of Demand Stable versus Dynamic Patterns of Demand Dependent versus Independent Demand Principles of Forecasting Demand Collection and Preparation of Data for Forecasting Forecasting Methods Qualitative Methods Causal Methods Quantitative Methods of Forecasting Using Historical Data 87

6 Contents vii 4.8 Some Quantitative Forecasting Techniques for Forecasting Short-Range Demand Simple Moving Average Method Weighted Average Method Exponential Smoothing Method Forecasting Seasonal Demand Forecasting Seasonal Demand Using the Seasonal Index Method De-Seasonalization of Demand Forecasting Long-Range Trend Forecasting Long-Range Trends Using the Graphical Method Forecasting Long-Range Trend Using Least Squares Regression Analysis Tracking the Forecast for Error Forecast Error Bias Random Variation Mean Absolute Deviation and Tracking Signal MAD and Normal Distribution Master Flanning Introduction Manufacturing Flanning and Control System Priority and Capacity Priority Capacity Flanning Hierarchy Business Plan Production Plan Master Production Schedule Material Requirements Plan Capacity Requirements Flanning Production and Purchasing Activity Control

7 viii Contents 5.5 Computerized Manufacturing Flanning and Control System Production Flanning Strategies Basic Production Flanning Strategies Demand Matching Production Leveling Subcontracting Hybrid (Mixed) Strategy Developing a Production Plan Developing a Production Plan Using Level Production Developing Production Plan Using Demand Matching Developing a Production Plan Using Make-to-Order Plan Developing an Assemble-to-Order Plan Developing a Make-to-Order Plan Using Level Production Resource Requirements Flanning Master Production Scheduling Introduction Master Production Schedule Master Production Schedule and Production Plan Preparing a Master Production Schedule Preparing a Preliminary Master Production Schedule Rough-Cut Capacity Flanning Resource Bill Resolution of Differences Master Scheduling Decisions MPS and Delivery Promises Available to Promise Flanning Horizon for an MPS 147

8 Contents ix 6.7 Time Fences Time Fence Zones Summary and Conclusion Material Requirements Flanning Introduction Material Requirements Flanning Objectives of MRP MRP System Inputs to the MRP System Master Production Schedule Bill of Materials Where-Used Report and Pegging Report Inventory Records MRP Process Exploding and Offsetting Planned Order Receipt and Release Gross and Net Requirements Capacity Flanning Flanning Levels Resource Flanning Rough-Cut Capacity Flanning Capacity Requirements Flanning Available Capacity Unit of Measurement l6l Levels of Capacity Determining Available Capacity (Time) Work Center Utilization Rate Work Center Efhciency Work Center Rated Capacity Work Center Demonstrated Capacity Work Center Required Capacity Inputs to Capacity Requirements Flanning Open Shop Order File Planned Order Releases from MRP 165

9 x Contents Routing File Work Center Capacity File Shop Calendar Scheduling Orders Load Profile Production and Purchasing Activity Control Flanning Activities Implementation Activities Controlling Activities PAC in Different Types of Manufacturing Systems PAC in Line (Continuous-Flow) Manufacturing PAC in Intermittent (Batch) Manufacturing PAC in Project Manufacturing Data Requirements for Processing PAC Flanning Files Data Requirements for Intermittent Manufacturing Order Preparation Scheduling Manufacturing Lead Time Scheduling Techniques Inventory Management Introduction Aggregate Inventory Management Physical Classification of Inventory Supply and Demand Patterns of Inventory Functions of Inventories in Batch Production Systems Objectives of Inventory Management Customer Service Operating Efficiency Inventory Costs 189

10 Contents xi 8.8 ABC Inventory Control Steps in Making an ABC Analysis Control Based on ABC Classification Inventory Ordering System Models Lot Size Decision Rules Basic Economic Order Quantity Model Development of the Basic EOQ Model (Formula) Trial-and-Error Solution Variations of the EOQ Model Monetäry Unit Lot Size Model Noninstantaneous Receipt Model Quantity Discount Model EOQ Model When Costs Are Not Known Purchasing Management Introduction Purchasing Management Purchasing Cycle Purchase Requisition Selecting the Vendor Quotation Purchase Order Following Up on Delivery Receiving and Accepting Goods Approving Vendor's Invoice for Payment Developing Specification Description of the Product Quantity and Quality Requirements Miscellaneous Other Specifications Selecting Suppliers Checking Technical and Manufacturing Capability of Suppliers Ensuring Reliability of Supply Supplier Location Price 222

11 xii Contents Price Determination Final Selection of the Vendor Supplier Development Supplier Relationship Management Supplier Relationship Management Software Physical Distribution Management Introduction Physical Supply Management Physical Distribution Management An Integrated Physical Distribution System Modes of Transportation Types of Carriers Concept of Total System Cost Example Problems Distribution Inventory Management Introduction Distribution Inventories Distribution Inventory Management Systems Pull System Push System Distribution Requirements Flanning Warehousing Processing Activities in a Warehouse Warehouse Management Effective Use of Warehouse Space Effective Stock Location in a Warehouse Effective Order Picking and Assembly Effective Packaging Material Handling in a Warehouse Multiwarehouse System Cost Characteristics in Multiwarehouse System Total Cost Curve of a Multiwarehouse System 243

12 Contents xiii 12 Global and Other Issues in SCM Introduction Total Quality Management in the Global Supply Chain Top Management Commitment to Quality Total Customer Satisfaction in the Global Supply Chain Quality Product Design in the Global Supply Chain Quality Control for Ensuring Product Quality in a Global Supply Chain Respecting Human Resources and Human Rights in the Global Supply Chain Supplier Relationship Management in the Global Supply Chain Supplier Development Supplier Relationship Management Software Customer Relationship Management in the Global Supply Chain 255 Appendix A: Cases in Supply Chain Management 257 Appendix B: Self-Study Practice Questions for Basic Supply Chain Management 283 Bibliography 349 Index 353

FUNDAMENTALS OF INVENTORY MANAGEMENT AND CONTROL

FUNDAMENTALS OF INVENTORY MANAGEMENT AND CONTROL FUNDAMENTALS OF INVENTORY MANAGEMENT AND CONTROL SECOND EDITION RICHARD E. WARD CONTENTS ABOUT THIS COURSE xi HOW TO TAKE THIS COURSE xiii PART I CONTROL