Thomas Olin Luther College Supply Chain Management Briefing Process improvement- process evaluations leading to improvements in product

cost, quality and/or service. Supply chain management- integration of key business processes regarding the flow of materials from raw material suppliers to the final customer. Three-dimensional concurrent engineering- a new development in improving new product design, it is the simultaneous design of product, process, and supply chain. Total Quality Management (TQM)- a philosophy encompassing a collection of processes that seek to assess and improve quality continuously to please customers, reduce costs, and create competitive advantage for the firm. Business process integration- the sharing of ideas and info, coordination of process activities, and collaboration on process design and implementation between supply chain members such that products and services are provided at the desired levels of quality, speed, and cost along the supply chain-from raw material suppliers to end-product consumers. Allows each participant within the supply chain to learn the actual purchase plans of their customers, to share new product design and development plans with suppliers, and to jointly develop better ways to purchase, build, and deliver products. Processes- a network of activities performed by resources that transform inputs into outputs. Eight Key Supply Chain Processes
Process Description Associated Activities

Customer relationship Creating and maintaining management customer relationships

Identify and categorize key customers; tailor products and services to meet the needs of customer groups. Customer service Interacting with customers to Manage product and service agreements with management maintain customer satisfaction customers; design and implement customer response procedures. Demand management Balancing customer demand Forecast demand; plan or adjust capacity to meet with supply capabilities demand; develop contingency plans for imbalances. Order fulfillment Manufacturing flow management Satisfying customer orders Making products to satisfy target markets Design logistics network to deliver products on time. Design manufacturing and service processes to create products customers want; determine process flexibility.

Supplier relationship Creating and maintaining management supplier relationships Product development Develop new products and commercialization frequently and get them to market effectively Returns management Manage product returns and disposal effectively

Identify key suppliers; establish formal relationships with key suppliers; further develop key suppliers. Develop sources for new ideas; develop crossfunctional product teams; including customers and suppliers Understand legal issues; develop guidelines for returns and disposal; develop returns network.

5S system- system of preventative maintenance developed in japan that includes sorting, setting in order, shining, standardizing, and sustaining. Batch and queue- each part that goes into a finished product is made in large lot sizes (or batches). The batch of items is then moved on to the next operation before actually needed there. Cellular layout- a self-contained, physical arrangement of machines and people so that processing steps are placed next to each other in sequential order. Lean producers use these manufacturing cells to build components that are fed into an assembly line or to build an entire product. Cycle time- calculation of how frequently a unit will be produced on an assembly line. Group technology cells- the cells of machines that work closely together or work on the same product. Kanban- Japanese word for “card” it is a visual tool – often a card in a rectangular vinyl envelop – used to authorize production of a specified kind and quantity for a downstream customer, or the withdrawal of parts from an upstream supplier. Lean supply chain- lean principles are applied cooperatively across the supply chain. Value and target costs for each product or product family are defined jointly among supply chain members. Together, they work to eliminate waste to meet joint target cost and return-on-investment goals. Once target costs are met, supply chain members jointly continue to identify new forms of waste and set new targets. Key processes are aligned across the supply chain, focusing on delivering an uninterrupted flow of goods and services and coordinating inventory policies. Operational information also flows in both directions to ensure transparency of all activity within the supply chain. Lean thinking- a philosophy of breakthrough improvement with roots in continuous improvement programs. The goal is to be more productive by doing more, but with less equipment, human effort, time, and space, while at the same time satisfying customers. Level capacity loading- a technique for balancing production throughput at each work station to meet expected cycle times.

Mass production- high volume production of products using automated equipment. Muda- a Japanese word meaning waste or anything that does not add value. Overproduction- an org produces more products than demanded, or sooner or faster than needed, resulting in excess inventory. Poka yoke- Japanese word for mistake-proofing. Pull system- an operating system where synchronized work only takes place upon authorization from another downstream user in the system rather than strictly to a forecast. Setup- changeover or modification of equipment in preparation for manufacturing a different part or product. Total productive maintenance (TPM)- a plant-floor based system to prevent equipment related accidents, defects, and breakdowns. Aka total preventive maintenance. Toyota production system- a methodology created by Toyota Motor Co. in the 1950’s. the idea is to make best use of an org’s time, assets, and people in all processes in order to optimize productivity. Continuous improvement- review, analysis, and rework directed at improving practices and processes. External failure costs- money spent to fix poor-quality problems once the product or service is purchased. Internal failure costs- money orgs spend to repair, replace, or discard poor-quality work prior to a customer’s purchase. International Org for Standardization (ISO)- a set of international management and quality assurance standards for design, development, production, installation, and service, developed in 1987 by International org for standardization. Malcolm Baldridge award- a US government award created in 1987 to motivate US companies to improve the quality of their products. Poor quality costs- costs attached to problems in production or service delivery. Can be broken down into three categories: (1) appraisal costs, (2) internal failure costs, (3) external failure costs.

Prevention costs- money orgs spend to prevent quality problems from occurring in the first place. Quality niche strategy- a positioning strategy that ids those dimensions of quality most important to an org’s customers. ABC inventory-an approach used to help companies manage their independent demand inventories. The idea is to pay closer attention to items accounting for a larger percentage of the firm’s annual sales. Typically the class A items represent approximately 75 to 80% of annual sales and about 20% of inventory SKUs, class B items account for approximately 15 to 20% of annual sales and represent 25 to 30% of inventory SKUs, class C are least important and are 50 to 60% of SKUs and 5% of sales. Bullwhip affect- refers to ineffective communication between buyers and suppliers and infrequent delivery of materials, combined with production based on poor forecasts along a supply chain that results in either too little or too much inventory at various points of storage and consumption. Finished goods- completed products ready for delivery to business customers or consumers. Inventory carrying costs- costs of holding inventory for periods of time, including the cost of warehousing, material handling, shrinkage, obsolescence, labor and capital costs. Maintenance, repair and operating supplies (MRO)- items that are consumed by the business or used to support manufacturing and service processes. Material requirements planning (MRP)- a software application that has been available since the 1970s; it performs an analysis of the firm’s existing internal conditions and reports back what the production and purchase requirements are for a given finished product manufacturing schedule. Raw materials- purchased assemblies, parts and materials that are delivered by suppliers and used in the manufacture of finished products or services. Safety stock- extra inventory required to minimize the probability of running out during the order fulfillment cycle. Stockout cost- when customers cant buy an item, this results in a lost sale, lost goodwill, or damage the firm’s reputation, lost future sales, and possibly a cost to process a backorder.

Vendor managed inventory- a progressive partner-based approach to controlling inventory and reducing supply chain costs. Work-in-process (WIP)- items in an intermediate processing stage.