Chapter 15 Supply Chain Management © McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. 1 Learning Objectives (1 of 3) You should be able to: 15.1 Explain the terms supply chain and logistics 15.2 Name the key aspects of supply chain management 15.3 List, and briefly explain, current trends in supply chain management 15.4 Outline the benefits and risks related to outsourcing 15.5 Explain what the main supply chain risks are, and what businesses can do to minimize those risks 15.6 Describe some of the complexities related to global supply chains 15-‹#› © McGraw-Hill Education. Learning Objectives (2 of 3) 15.7 Briefly describe the ethical issues in supply chains and the key steps companies can take to avoid ethical problems 15.8 Describe the three concerns of small businesses related to the supply chain and suggest ways to manage those concerns 15.9 List several strategic, tactical, and operational responsibilities related to managing the supply chain 15.10 Discuss procurement in terms of the purchasing interfaces, the purchasing cycle, ethics, and centralized versus decentralized decision making 15-‹#› © McGraw-Hill Education. Learning Objectives (3 of 3) 15.11 Briefly describe the key aspects of supplier management 15.12 Discuss the logistics aspects of supply chain management, including RFID technology 15.13 Discuss the issues involved in managing returns 15.14 Describe some of the challenges in creating an effective supply chain and some of the trade-offs involved 15-‹#› © McGraw-Hill Education. Learning Objective 15.1 Supply Chain Supply chain: The sequence of organizations — their facilities, functions, and activities — that are involved in producing and delivering a product or service Logistics: The part of a supply chain involved with the forward and reverse flow of goods, services, cash, and information 15-‹#› © McGraw-Hill Education. Learning Objective 15.1 Typical Supply Chains 15-‹#› © McGraw-Hill Education. Learning Objective 15.1 Facilities The sequence of the supply chain begins with basic suppliers and extends all the way to the final customer Warehouses Factories Processing centers Distribution centers Retail outlets Offices 15-‹#› © McGraw-Hill Education. Learning Objective 15.1 Functions and Activities Supply chain functions and activities Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production and delivery Customer service 15-‹#› © McGraw-Hill Education. Learning Objective 15.2 Supply Chain Management Supply Chain Management (SCM) The strategic coordination of business functions within a business organization and throughout its supply chain for the purpose of integrating supply and demand management 15-‹#› © McGraw-Hill Education. Learning Objective 15.2 SCM Managers SCM managers P ...

1. Chapter 15
Supply Chain Management
© McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
1
Learning Objectives (1 of 3)
You should be able to:
15.1 Explain the terms supply chain and logistics
15.2 Name the key aspects of supply chain management
15.3 List, and briefly explain, current trends in supply chain
management
15.4 Outline the benefits and risks related to outsourcing
15.5 Explain what the main supply chain risks are, and what
businesses can do to minimize those risks
15.6 Describe some of the complexities related to global supply
chains
15-‹#›
© McGraw-Hill Education.
Learning Objectives (2 of 3)
15.7 Briefly describe the ethical issues in supply chains and the

2. key steps companies can take to avoid ethical problems
15.8 Describe the three concerns of small businesses related to
the supply chain and suggest ways to manage those concerns
15.9 List several strategic, tactical, and operational
responsibilities related to managing the supply chain
15.10 Discuss procurement in terms of the purchasing
interfaces, the purchasing cycle, ethics, and centralized versus
decentralized decision making
15-‹#›
© McGraw-Hill Education.
Learning Objectives (3 of 3)
15.11 Briefly describe the key aspects of supplier
management
15.12 Discuss the logistics aspects of supply chain
management, including RFID technology
15.13 Discuss the issues involved in managing returns
15.14 Describe some of the challenges in creating an
effective supply chain and some of the trade-offs involved
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.1
Supply Chain
Supply chain:
The sequence of organizations — their facilities, functions, and
activities — that are involved in producing and delivering a
product or service
Logistics:
The part of a supply chain involved with the forward and

3. reverse flow of goods, services, cash, and information
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.1
Typical Supply Chains
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.1
Facilities
The sequence of the supply chain begins with basic suppliers
and extends all the way to the final customer
Warehouses
Factories
Processing centers
Distribution centers
Retail outlets
Offices
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.1
Functions and Activities
Supply chain functions and activities
Forecasting

4. Purchasing
Inventory management
Information management
Quality assurance
Scheduling
Production and delivery
Customer service
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.2
Supply Chain Management
Supply Chain Management (SCM)
The strategic coordination of business functions within a
business organization and throughout its supply chain for the
purpose of integrating supply and demand management
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.2
SCM Managers
SCM managers
People at various levels of the organization who are responsible
for managing supply and demand both within and across
business organizations
Involved with planning and coordinating activities
Sourcing and procurement of materials and services
Transformation activities
Logistics

5. 15-‹#›
© McGraw-Hill Education.
Learning Objective 15.2
Key Aspects of SCM
The goal of SCM is to match supply to demand as effectively
and efficiently as possible
Key issues:
Determining appropriate levels of outsourcing
Managing procurement
Managing suppliers
Managing customer relationships
Being able to quickly identify problems and respond to them
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.2
Flow Management
Three types of flow management
Product and service flow
Involves movement of goods and services from suppliers to
customers as well as handling customer service needs and
product returns
Information flow
Involves sharing forecasts and sales data, transmitting orders,
tracking shipments, and updating order status
Financial flow
involves credit terms, payments, and consignment and title
ownership arrangements

6. 15-‹#›
© McGraw-Hill Education.
Learning Objective 15.3
Trends in SCM
Trends affecting supply chain design and management:
Measuring supply chain ROI
“Greening” the supply chain
Re-evaluating outsourcing
Integrating IT
Adopting lean principles
Managing risks
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.4
Benefits & Risks of Outsourcing (1 of 2)
Benefits:
Lower prices may result from lower labor costs
The ability of the organization to focus on its core strengths
Permits the conversion of some fixed costs to variable costs
It can free up capital to address other needs
Some risks can be shifted to the supplier
The ability to take advantage of a supplier’s expertise
Makes it easier to expand outside of the home country
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.4

7. Benefits & Risks of Outsourcing (2 of 2)
Risks
Inflexibility due to longer lead times
Increased transportation costs
Language and cultural differences
Loss of jobs
Loss of control
Lower productivity
Loss of business knowledge
Knowledge transfer and intellectual property concerns
Increased effort required to manage the supply chain
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.5
Supply Chain Risks
Supply chain risks
Supply chain disruption
Natural disasters
Supplier problems
Quality issues
Another form of disruption that may disrupt supplies and lead to
product recalls, liability claims, and negative publicity
Loss of control of sensitive information
If suppliers divulge sensitive information to competitors, it can
weaken a firm’s competitive position
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.5

8. Risk Management
Risk management
Involves identifying risks, assessing their likelihood of
occurring and their potential impact and then developing
strategies for addressing those risks
Strategies for addressing risk include:
Risk avoidance
Risk reduction
Risk sharing
Key elements of successful risk management include:
Know your suppliers
Provide supply chain visibility
Develop event-response capability
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.6
Global Supply Chains
Global supply chains
Product design often uses inputs from around the world
Some manufacturing and service activities are outsourced to
countries where labor and/or materials costs are lower
Products are sold globally
Complexities
Language and cultural differences
Currency fluctuations
Political instability
Increasing transportation costs and lead times
Increased need for trust amongst supply chain partners
15-‹#›

9. © McGraw-Hill Education.
Learning Objective 15.7
SCM Ethical Issues (1 of 2)
Examples:
Bribing government or company officials to secure permits or
favorable status
“Exporting smokestacks” to developing countries
Claiming a “green” supply chain when the level of “green” is
only minimal
Ignoring health, safety, and environmental standards
Violating basic worker rights
Mislabeling the country of origin
Selling products abroad that are banned at home
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.7
SCM Ethical Issues (2 of 2)
Dealing with ethical issues:
Develop an ethical supply chain code of behavior
Monitor supply chain activities
Choose suppliers that have a reputation for good ethical
behavior
Incorporate compliance with labor standards in supplier
contracts
Address any ethical problems that arise swiftly
15-‹#›
© McGraw-Hill Education.

10. Learning Objective 15.8
Small Business Concerns (1 of 2)
Three small business SCM concerns:
Inventory management
Carry extra inventory as a way to avoid shortages due to supply
chain interruption
Have backups for delivery from suppliers and to customers
Reducing risks
Use only reliable suppliers
Determine which suppliers are critical and get to know them and
any challenges they have
Measure supplier performance
Recognize warning signs of supplier issues
Have plans in place to manage supply chain problems
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.8
Small Business Concerns (2 of 2)
International trade
Work with someone who has expertise to help oversee foreign
suppliers
Set expectations for demand and timing
Do not rely on a single supplier
Build goodwill to help in negotiations and resolving any
problem that arise
Consider using domestic suppliers if the risks of working with
foreign suppliers are prohibitive
15-‹#›
© McGraw-Hill Education.

11. Learning Objective 15.9
Management Responsibilities
Aspects of management responsibility:
Legal
Being knowledgeable about laws and regulations of the
countries where supply chains exist
Obeying laws and operating to conform to regulations
Economic
Supplying products and services to meet demand as efficiently
as possible
Ethical
Conducting business in ways that are consistent with the moral
standards of society
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.9
Management Responsibility: Strategic
Certain strategic responsibilities have a major impact on the
success of both supply chain management and the business
itself:
Supply chain strategy alignment
Network configuration
Information technology
Products and services
Capacity planning
Strategic partnerships
Distribution strategy
Uncertainty and risk reduction

12. 15-‹#›
© McGraw-Hill Education.
Learning Objective 15.9
Management Responsibility: Tactical and Operational (1 of 2)
Tactical
Forecasting
Sourcing
Operations planning
Managing inventory
Transportation planning
Collaborating
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.9
Management Responsibility: Tactical and Operational (2 of 2)
Operational
Scheduling
Receiving
Transforming
Order fulfilling
Managing inventory
Shipping
Information sharing
Controlling
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.10

13. Procurement
The purchasing department is responsible for obtaining the
materials, parts, and supplies and services needed to produce a
product or provide a service.
The goal of procurement
Develop and implement purchasing plans for products and
services that support operations strategies
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.10
Purchasing Interfaces
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.10
Duties of Purchasing
Identifying sources of supply
Negotiating contracts
Maintaining a database of suppliers
Obtaining goods and services
Managing suppliers
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.10

14. The Purchasing Cycle
The main steps:
Purchasing receives the requisition
Purchasing selects a supplier
Purchasing places the order with a vendor
Monitoring orders
Receiving orders
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.11
Supplier Management
Choosing suppliers
Supplier audits
Supplier certification
Supplier relationship management
Supplier partnerships
CPFR (collaborative planning, forecasting, and replenishment)
Strategic partnering
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.11
Vendor Analysis, Supplier Audits, and Supplier Certification
Vendor analysis
Evaluating the sources of supply in terms of price, quality,
reputation, and service
Supplier audit
A means of keeping current on suppliers’ production (or
service) capabilities, quality and delivery problems and

15. resolutions, and performance on other criteria
Supplier certification
Involves a detailed examination of a supplier’s policies and
capabilities
The process verifies the supplier meets or exceeds the
requirements of a buyer
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.11
Supplier Relationship Management
Type of relationship is often governed by the duration of the
trading relationship
Short-term
Oftentimes involves competitive bidding
Minimal interaction
Medium-term
Often involves an ongoing relationship
Long-term
Often involves greater cooperation that evolves into a
partnership
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.11
Strategic Partnering
Two or more business organizations that have complementary
products or services join so that each may realize a strategic
benefit
Example:

16. When a supplier agrees to hold inventory for a customer in
return for a long-term commitment
The customer’s inventory holding cost is reduced and the
supplier is relieved of the costs that would be needed to
continually find new customers
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.11
Contrasting Supplier
RelationshipsAspectAdversaryPartnerNumber of suppliersMany;
play one off against the othersOne or a fewLength of
relationshipMay be briefLong-termLow priceMajor
considerationModerately importantReliabilityMay not be
highHighOpennessLowHighQualityMay be unreliable; buyer
inspectsAt the source; vendor certifiedVolume of businessMay
be low due to many suppliersHighFlexibilityRelatively
lowRelatively highLocationWidely dispersedNearness is
important for short lead times and quick service
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.12
Logistics
Logistics
Refers to the movement of materials, services, cash, and
information in a supply chain
Movements within a facility
Incoming shipments
Outgoing shipments

17. 15-‹#›
© McGraw-Hill Education.
Learning Objective 15.12
Movement Within a Facility
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.12
Incoming and Outgoing Shipments
Traffic management
Overseeing the shipment of incoming and outgoing goods
Handles schedules and decisions on shipping method and times,
taking into account:
Costs of shipping alternatives
Government regulations
Needs of the organization
Shipping delays or disruptions
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.12
Tracking Goods: RFID
Radio frequency identification (RFID)
A technology that uses radio waves to identify objects, such as
goods in supply chains

18. Similar to barcodes but
Are able to convey much more information
Do not require line-of-sight for reading
Do not need to be read one at a time
Has the ability to:
Increase supply chain visibility
Improve inventory management
Improve quality control
Enhance relationships with suppliers and customers
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.12
3-PL
Third-party logistics (3-PL)
The outsourcing of logistics management
Includes
Warehousing and distribution
Potential benefits include taking advantage of:
The specialists’ knowledge
Their well-developed information system
Their ability to obtain more favorable shipping rates
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.13
Managing Returns
Reverse logistics
The process of transporting returned items
Products are returned to companies or third party handlers for a

19. variety of reasons and in a variety of conditions
Elements of return management
Gatekeeping
Screening returned goods to prevent incorrect acceptance of
goods
Avoidance
Finding ways to minimize the number of items that are returned
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.14
Creating an Effective Supply Chain
It begins with strategic sourcing
Analyzing the procurement process to lower costs by reducing
waste and non-value-added activities, increase profits, reduce
risks, and improve supplier performance
There must be
Trust
Effective communication
Information velocity
Supply chain visibility
Event management capability
Performance metrics
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.14
Challenges
Barriers to integration of organizations
Getting top management on board

20. Dealing with trade-offs
Small businesses
Variability and uncertainty
Response time
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.14
Trade-Offs (1 of 4)
Lot-size-inventory trade-off
Large lot sizes yield benefits in terms of quantity discounts and
lower annual setup costs, but it increases the amount of safety
stock (and inventory carrying costs) carried by suppliers
Inventory-transportation cost trade-off
Suppliers prefer to ship full truckloads instead of partial loads
to spread shipping costs over as many units as possible. This
leads to greater holding costs for customers
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.14
Trade-Offs (2 of 4)
Cross-docking
A technique whereby goods arriving at a warehouse from a
supplier are unloaded from the suppliers truck and loaded onto
outbound truck, thereby avoiding warehouse storage
Lead time-transportation costs trade-off
Suppliers like to ship in full loads, but waiting for sufficient
orders and/or production to achieve a full load may increase
lead time

21. 15-‹#›
© McGraw-Hill Education.
Learning Objective 15.14
Trade-Offs (3 of 4)
Product variety-inventory trade-off
Greater product variety usually means smaller lot sizes and
higher setup costs, as well as higher transportation and
inventory management costs
Delayed differentiation
Production of standard components and subassemblies which
are held until late in the process to add differentiating features
15-‹#›
© McGraw-Hill Education.
Learning Objective 15.14
Trade-Offs (4 of 4)
Cost-customer service trade-off
Producing and shipping in large lots reduces costs, but increases
lead time
Disintermediation
Reducing one or more steps in a supply chain by cutting out one
or more intermediaries
15-‹#›
© McGraw-Hill Education.
End of Presentation

22. © McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
15-‹#›
Chapter 16
Scheduling
© McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
1
Learning Objectives (1 of 2)
You should be able to:
16.1 Explain what scheduling involves and the importance of
good scheduling
16.2 Compare product and service scheduling hierarchies
16.3 Describe scheduling needs in high-volume systems
16.4 Describe scheduling needs in intermediate-volume systems
16.5 Describe scheduling needs in job shops
16.6 Use and interpret Gantt charts

23. 16-‹#›
© McGraw-Hill Education.
Learning Objectives (2 of 2)
16.7 Use the assignment method for loading
16.8 Give examples of commonly used priority rules
16.9 Discuss the Theory of Constraints and that approach to
scheduling
16.10 Summarize some of the unique problems encountered
in service systems, and describe some of the approaches used
for scheduling service systems
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.1
Scheduling
Scheduling:
Establishing the timing of the use of equipment, facilities and
human activities in an organization
Effective scheduling can yield
Cost savings
Increases in productivity
Other benefits
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.1
Scheduling Context
Scheduling is constrained by multiple system design and

24. operations decisions
System capacity
Product and/or service design
Equipment selection
Worker selection and training
Aggregate planning and master scheduling
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.1
Scheduling Hierarchies
Manufacturing
Aggregate Planning
Master Production Schedule
Material Requirements Planning
Shop Floor Schedule
Service
Aggregate Planning
Master Schedule
Monthly or Weekly Schedule
Daily Schedule
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.3
High Volume Systems
Flow system
High-volume system in which all jobs follow the same sequence
Flow system scheduling
Scheduling for flow systems

25. The goal is to achieve a smooth rate of flow of goods or
customers through the system in order to get high utilization of
labor and equipment
Workstation 1
Workstation 2
Output
16-‹#›
© McGraw-Hill Education.
7
Learning Objective 16.3
High-Volume: Scheduling Difficulties
Few flow systems are entirely dedicated to a single product or
service
Each product change requires
Slightly different inputs of parts
Slightly different materials
Slightly different processing requirements that must be
scheduled into the line
Need to avoid excessive inventory buildup
Disruptions may result in less-than-desired output
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.3
High-Volume Success Factors
The following factors often dictate the success of high-volume
systems:

26. Process and product design
Preventive maintenance
Rapid repair when breakdowns occur
Optimal product mixes
Minimization of quality problems
Reliability and timing of supplies
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.4
Intermediate-Volume Systems (1 of 3)
Outputs fall between the standardized type of output of high-
volume systems and the make-to-order output of job shops
Output rates are insufficient to warrant continuous production
Rather, it is more economical to produce intermittently
Work centers periodically shift from one product to another
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.4
Intermediate-Volume Systems (2 of 3)
Three basic issues:
Run size of jobs
The timing of jobs
The sequence in which jobs will be produced

27. 16-‹#›
© McGraw-Hill Education.
Learning Objective 16.4
Intermediate-Volume Systems (3 of 3)
Important considerations
Setup cost
Usage is not always as smooth as assumed in the economic lot
size model
Alternative scheduling approach
Base production on a master schedule developed from customer
orders and forecasted demand
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.5
Low-Volume Systems
Job shop scheduling
Scheduling for low-volume systems with many variations in
requirements
Make-to-order products
Processing requirements
Material requirements
Processing time
Processing sequence and setups
A complex scheduling environment
It is impossible to establish firm schedules until actual job
orders are received
16-‹#›
© McGraw-Hill Education.

28. Learning Objective 16.5
Low-Volume Systems: Loading
Loading
The assignment of jobs to processing centers
Gantt chart
Used as a visual aid for loading and scheduling purposes
Purpose of the Gantt chart is to organize and visually display
the actual or intended use of resources in a time framework
Managers may use the charts for trial-and-error schedule
development to get an idea of what different arrangements
would involve
16-‹#›
© McGraw-Hill Education.
14
Learning Objective 16.6
Gantt Charts
Load chart
A Gantt chart that shows the loading and idle times for a group
of machines or list of departments
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.6
Loading Approaches (1 of 2)
Infinite loading

29. Jobs are assigned to workstations without regard to the capacity
of the work center
Finite loading
Jobs are assigned to work centers taking into account the work
center capacity and job processing times
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.6
Loading Approaches (2 of 2)
Infinite Loading
Finite Loading
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.6
Scheduling Approaches
Forward scheduling
Scheduling ahead from some point in time
Used when the question is:
“How long will it take to complete this job?”
Backward scheduling
Scheduling backwards from some due date
Used when the question is:
“When is the latest this job can be started and still be completed
on time?”

30. 16-‹#›
© McGraw-Hill Education.
Learning Objective 16.6
Gantt Charts
Schedule chart
A Gantt chart that shows the orders or jobs in progress and
whether they are on schedule
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Assignment
Assignment model
A linear programming model for optimal assignment of tasks
and resources
Hungarian method
Method of assigning jobs by a one-for-one matching to identify
the lowest cost solution
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Hungarian Method (1 of 4)
Row reduction: subtract the smallest number in each row from
every number in the row
Enter the result in a new table
Column reduction: subtract the smallest number in each column

31. from every number in the column
Enter the result in a new table
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Hungarian Method (2 of 4)
Test whether an optimum assignment can be made
Determine the minimum number of lines needed to cross out all
zeros
If the number of lines equals the number of rows, an optimum
assignment is possible. Go to step 6.
Else, go to step 4
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Hungarian Method (3 of 4)
If the number of lines is less than the number of rows, modify
the table:
Subtract the smallest number from every uncovered number in
the table
Add the smallest uncovered number to the numbers at
intersections of cross-out lines
Numbers crossed out but not at intersections of cross-out lines
carry over unchanged to the next table
5. Repeat steps 3 and 4 until an optimal table is obtained

32. 16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Hungarian Method (4 of 4)
Make the assignments
Begin with rows or columns with only one zero
Match items that have zeros, using only one match for each row
and each column
Eliminate both the row and the column after the match
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (1 of 11)
Determine the optimum assignment of jobs to workers for the
following data:Worker
AWorker
BWorker
CWorker
DJob 18624Job 2671110Job 33576Job 4510129
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (2 of 11)Worker
AWorker
BWorker
CWorker
DRow MinimumJob 186242Job 26711106Job 335763Job

33. 45101295
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (3 of 11)Worker
AWorker
BWorker
CWorker
DJob 16402Job 20154Job 30243Job 40574
Subtract the smallest number in each row from every number in
the row
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (4 of 11)Worker AWorker
BWorker
CWorker
DJob 16402Job 20154Job 30243Job 40574Column
minimum0102
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (5 of 11)Worker
AWorker

34. BWorker
CWorker
DJob 16300Job 20052Job 30141Job 40472
Subtract the smallest number in each column from every number
in the column
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (6 of 11)Worker
AWorker
BWorker
CWorker
DJob 16300Job 20052Job 30141Job 40472
Determine the minimum number of lines needed to cross out all
zeros. (Try to cross out as many zeros as possible when drawing
lines.)
Since only three lines are needed to cross out all zeros and the
table has four rows, this is not the optimum. Note: The smallest
uncovered value is 1.
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (7 of 11)Worker
AWorker
BWorker
CWorker
DJob 16300Job 20052Job 30141Job 40472

35. 16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (8 of 11)Worker
AWorker
BWorker
CWorker
DJob 17300Job 21052Job 30030Job 40361
Subtract the smallest uncovered value from every uncovered
number, and add it to the values at the intersection of covering
lines
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (9 of 11)Worker
AWorker
BWorker
CWorker
DJob 17300Job 21052Job 30030Job 40361
Determine the minimum number of lines needed to cross out all
zeros. (Try to cross out as many zeros as possible when drawing
lines.)
Since four lines are needed to cross out all zeros and the table
has four rows, this an optimal assignment can be made
16-‹#›
© McGraw-Hill Education.

36. Learning Objective 16.7
Example: Hungarian Method (10 of 11)Worker
AWorker
BWorker
CWorker
DJob 17300Job 21052Job 30030Job 40361
Make assignments: Start with rows and columns with only one
zero. Match jobs with workers that have a zero.
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.7
Example: Hungarian Method (11 of 11)AssignmentCost2-B$74-
A$51-C$23-D$6Total$20
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.8
Sequencing
Sequencing
Determine the order in which jobs at a work center will be
processed
Priority rules
Simple heuristics used to select the order in which jobs will be
processed
The rules generally assume that job setup cost and time are
independent of processing sequence
Job time
Time needed for setup and processing of a job

37. 16-‹#›
© McGraw-Hill Education.
Learning Objective 16.8
Priority Rules
FCFS - first come, first served
SPT - shortest processing time
EDD - earliest due date
CR - critical ratio
S/O - slack per operation
Rush - emergency
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.8
Priority Rules: Assumptions
The set of jobs is known; no new orders arrive after processing
begins and no jobs are canceled
Setup time is independent of processing sequence
Setup time is deterministic
Processing times are deterministic
There will be no interruptions in processing such as machine
breakdowns or accidents
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.8

38. Sequence: Performance Metrics (1 of 2)
Common performance metrics:
Job flow time
This is the amount of time it takes from when a job arrives until
it is complete
It includes not only processing time but also any time waiting to
be processed
Job lateness
This is the amount of time the job completion time is expected
to exceed the date the job was due or promised to a customer
Jobs that are in a shop are considered to be WIP inventory
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.8
Sequence: Performance Metrics (2 of 2)
Makespan
The total time needed to complete a group of jobs from the
beginning of the first job to the completion of the last job
Average number of jobs
Jobs that are in a shop are considered to be WIP inventory
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.8
Two Work Center Sequencing
Johnson’s Rule
Technique for minimizing makespan for a group of jobs to be
processed on two machines or at two work centers
Minimizes total idle time

39. Several conditions must be satisfied
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.8
Johnson’s Rule Conditions
Job time must be known and constant for each job at the work
center
Job times must be independent of sequence
Jobs must follow same two-step sequence
All jobs must be completed at the first work center before
moving to second work center
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.8
Johnson’s Rule: Optimum Sequence
List the jobs and their times at each work center
Select the job with the shortest time
If the shortest time is at the first work center, schedule that job
first
If the shortest time is at the second work center, schedule the
job last
Break ties arbitrarily
Eliminate the job from further consideration
Repeat steps 2 and 3, working toward the center of the
sequence, until all jobs have been scheduled

40. 16-‹#›
© McGraw-Hill Education.
Learning Objective 16.9
Theory of Constraints (1 of 4)
Theory of constraints
Production planning approach that emphasizes balancing flow
throughout a system, and pursues a perpetual five-step
improvement process centered around the system’s currently
most restrictive constraint
Bottleneck operations limit system output
Therefore, schedule bottleneck operations in a way that
minimizes their idle times
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.9
Theory of Constraints (2 of 4)
Drum-buffer-rope
Drum = the schedule
Buffer = potentially constraining resources outside of the
bottleneck
Rope = represents synchronizing the sequence of operations to
ensure effective use of the bottleneck operations
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.9
Theory of Constraints (3 of 4)
Varying batch sizes to achieve greatest output of bottleneck

41. operations
Process batch
The economical quantity to produce upon the activation of a
given operation
Transfer batch
The quantity to be transported from one operation to another,
assumed to be smaller than the first operation’s process batch
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.9
Theory of Constraints (4 of 4)
Improving bottleneck operations:
Determine what is constraining the operation
Exploit the constraint (i.e., make sure the constraining resource
is used to its maximum)
Subordinate everything to the constraint (i.e., focus on the
constraint)
Determine how to overcome (eliminate) the constraint
Repeat the process for the next highest constraint
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.9
Theory of Constraints: Metrics
Three important theory of constraints metrics:
Throughput
The rate at which the system generates money through sales
Inventory
Inventory represents money tied up in goods and materials used

42. in a process
Operating expense
All the money the system spends to convert inventory into
throughput: this includes utilities, scrap, depreciation, and so on
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.10
Service Operation Problems
Service scheduling often presents challenges not found in
manufacturing
These are primarily related to:
The inability to store or inventory services
The random nature of service requests
Service scheduling may involve scheduling:
Customers
Workforce
Equipment
16-‹#›
© McGraw-Hill Education.
Learning Objective 16.10
Scheduling Service Operations
Scheduling customers: demand management
Appointment systems
Controls customer arrivals for service
Reservation systems
Enable service systems to formulate a fairly accurate estimate
demand on the system for a given time period
Scheduling the workforce: capacity management

43. Cyclical scheduling
Employees are assigned to work shifts or time slots, and have
days off, on a repeating basis
16-‹#›
© McGraw-Hill Education.
End of Presentation
© McGraw-Hill Education. All rights reserved. Authorized only
for instructor use in the classroom. No reproduction or further
distribution permitted without the prior written consent of
McGraw-Hill Education.
16-‹#›
u
-
p
p
H
2DS
Q
0
=
TO: Kelly Anderson, CEO
FROM: Alexis Finley, Operations Manager
DATE: April 27, 2020
SUBJECT: Supply Chain Management Plan

44. Background
Kibby and Strand is currently facing quality issues when
marketing started shortening delivery times to get their products
to their customers. The dilemma has created a domino effect in
the organization due to truck drivers being stuck in the
receiving department since the vehicles were filled to the
maximum with materials. Employees were overwhelmed and not
able to unload the large quantities of materials fast enough
causing truck drivers to be late at the loading dock. By
evaluating each department and creating a supply chain plan for
them, Kibby and Strand hopes to mitigate these issues.
Analysis
Kibby and Strand’s operational strategy is to provide the
highest quality of products and services to their customer’s
order on or before the requested delivery dates.
· Receiving – the receiving department plays a critical role in
the organization such as gathering data on seasonal trends. For
instance, calculate future sales and order enough raw materials
to fulfill customers’ wants for that specific quarter. In addition,
the receiving department will maintain a minimum level of
different materials so production is not halted as anticipated
orders come through during that season. And lastly, the
receiving department will maintain a standard number of
employees to ensure delivery of raw materials are processed and
sorted in a timely manner.
· Production – the production department is responsible for
converting raw materials and other inputs into finished goods.
The production department will succeed by maintaining and
developing high skilled machine operators capable of

45. maintaining high use and efficient automated machinery. In
between the processes of production, the department works to
improve the efficiency of the production line so that it can meet
the output targets set by company management and ensure
finished products offer consumers the best value and quality.
· Shipping - the shipping department is responsible for
receiving, logging and storing products until they can be
distributed to the customer before their contract deadline. In
addition, the department will be in charge of managing shipping
costs when selecting the most efficient delivery method in order
to meet contract commitments. And lastly, the shipping
department employees must fulfill shipping orders by picking
the right product from inventory and packaging the goods to get
them ready for shipment.
Execution
The checklist for receiving, production, and shipping should be
filled out at each assembly line to make sure contracts are being
finished in a timely manner.
Kibby and Strand Operations
Contract
Yes
No
Comments
A
Receiving
1. Vendor
2. Examine Quality
3. Determine Quantity
4. Number of Materials Available
5. Ordered Materials/Inventory Control
6. Fit for Production
Alpine

46. 60
750 Khaki
400
-
Yes
-
-
Yes
-
-
-
-
-
-
No
B
Production
1. Determine Machine Capacity
2. Organize Contract Requirements
3. Create Production Schedule
4. Record Weekly Productivity
-
Yes
Yes
-
-

47. -
Machine is being serviced
C
Shipping
1. Receive and Sort Goods
2. Analyze Quality for Orders
3. Adjust Quantity for Orders
4. Ship Fulfilled Orders
Yes
Yes
Yes
Yes
Attachment: Vendor Comparison Matrix of 2020
Vendor Comparison Matrix
Vendors
Price
Quality
Reliability
Materials
Kibby and Strand
Owen Textiles

48. Low
Medium
50
Order: 250
Low
Cotton
Wool
Denim
Nylon
Khaki
Silk
10
Freeway Fabrics
Low
Low
25
Order: 1000
Medium

49. Cotton
Wool
Denim
7
Alpine
Medium
Medium
60
Order: 1500
Medium
Wool
Nylon
Khaki
9
Preston Premium
High
Medium
80
Order: 500
High
Cotton

50. Nylon
Khaki
Silk
11
Red Maple Fabrics
Medium
Medium
40
Order: 750
Medium
Denim
Silk
8
Reliable Clothing
Medium
Medium

51. 35
Order: 2000
High
Cotton
Wool
Denim
Nylon
Khaki
Silk
13
Tigerlily Textiles
Medium
Medium
60
Order: 1200
Medium
Cotton
Wool
Silk
9
United Fabrics

52. High
Medium
70
Order: 3000
High
Cotton
Wool
Denim
Nylon
Khaki
Silk
14
Figure 2, includes a rating scale. This VCM shows the top
supplier as United Fabrics and the lowest as Owens Textiles.
The following criterion was used on this VCM:
Price: 1, 2, 3 (1 = low, 2 = medium, 3 = high)
Quality of Item: 1, 2, 3 (1 = low, 2 = medium, 3 = high)
Delivery Reliability: 1, 2, 3 (1 = low, 2 = medium, 3 = high)
Amount of Materials: 1, 2, 3, 4, 5, 6 (1 = little to 6 = great)
References:
Nichol, M. (2019, October 2). The 12 most important metrics to
measure in manufacturing. Retrieved April 13, 2020, from
https://blog.matthews.com.au/the-12-most-important-metrics-to-
measure-in-manufacturing