This document discusses strategies for logistics, transportation, procurement, and manufacturing. It covers: 1. Transportation strategies must balance costs, delivery speed, and flexibility. Companies use multiple transportation modes coordinated through information systems. 2. Procurement strategies include defining supplier performance metrics and conducting audits. Total cost of ownership estimates all procurement and usage costs. 3. Manufacturing strategies include make-to-stock, assemble-to-order, and make-to-order approaches. Location impacts service manufacturing.

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Lecture 8
Strategies in Logistics
•Transportation Strategy
•Procurement and Manufacturing Strategies

2. 19-2
Transportation Strategy (Chapter 15)
Logistics
•The art and science of obtaining, producing,
and distributing material and product in the
proper place and in the proper quantities.
International logistics
•All functions concerned with the movement of
materials and finished goods on a global scale.

3. 19-3
•The problem of deciding how best to transport
goods from plants to customers is a complex
one that affects the cost of a product.
•Major trade-offs related to the cost of
transporting the product, speed of delivery, and
flexibility to react to changes are involved.

4. 19-4
•Few companies use a single mode of transportation.
•Multimodal solutions are the norm, and finding the correct
multimode strategies can be a significant problem.
•The problem of coordination and scheduling the carriers
requires comprehensive information systems capable of
tracking goods through the system.
•Standardized containers often are used so that a product
can be transferred efficiently from a truck to an airplane or
ship.

5. 19-5
Centroid method
•A technique for locating single facilities that considers the
existing facilities, the distances between them, and the
volumes of goods to be shipped.
•The technique is often used to locate intermediate or
distribution warehouses.
•This method assumes that inbound and outbound
transportation costs are equal and it does not include
special shipping costs for less than full loads.

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Summary:
•Logistics companies now have complex
computer tracking technology that reduces the
risk in transportation and allows the logistics
company to add more value to the firm than it
could if the function were performed in-house.

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Procurement and Manufacturing
Strategies
Institutionalize the sourcing strategy in procurement:
•The procurement process begins once the vendor is
selected and contracts finalised.
•Here, the sourcing and procurement department needs to
define a set of metrics against which the supplier will be
measured for the contract’s duration.

8. 19-8
Procurement and Manufacturing
Strategies
Institutionalize the sourcing strategy in procurement:
•These metrics should be based on performance, delivery,
compliance with pricing guidelines, and similar factors.
•It is vital that metrics that relate to the company’s
sustainability goals are considered as well.
•Periodic audits may also need to be incorporated in the
process to directly observe practices that relate to these
metrics to ensure honest reporting of data.

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Procurement and Manufacturing
Strategies
Total cost of ownership Estimate of the cost of an item that includes all the costs related
to the procurement and use of the item, including disposing of the item after its useful
life.
•Total cost of ownership (TCO) is an estimate of the cost
of an item that includes all the costs related to its
procurement and use, including any related costs in
disposing of the item after it is no longer useful.
•The concept can be applied to a company’s internal costs
or it can be viewed more broadly to consider costs
throughout the supply chain.

10. 19-10
Procurement and Manufacturing
Strategies
•To fully appreciate the cost of purchasing an item from a
particular vendor, an approach that captures the costs of
the activities associated with purchasing and actually
using the item should be considered.
•Depending on the complexity of the purchasing process,
activities such as pre-bid conferences, visits by potential
suppliers, and even visits to potential suppliers can
significantly impact the total cost of the item.

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Procurement and Manufacturing
Strategies
Manufacturing:
•Firms that serve customers from finished goods inventory
are known as make-to-stock firms.
•Those that combine a number of preassembled modules
to meet a customer’s specifications are called assemble-
to-order firms.

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Procurement and Manufacturing
Strategies
Manufacturing:
•Those that make the customer’s product from raw
materials, parts, and components are make-to-order firms.
•An engineer-to-order firm will work with the customer to
design the product, and then make it from purchased
materials, parts, and components.

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Procurement and Manufacturing
Strategies
Manufacturing that focus on location
•Generally, production takes place, and then the goods
are distributed to the customer in manufacturing.
•However, as for the capacity to deliver, the service must
first be distributed to the customer either physically or
through some communications medium, such as the
telephone

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Procurement and Manufacturing
Strategies
Manufacturing that focus on location
•Then the service can be produced.
Example:
•A hotel room or rental car that is available in another city
is not much use to the customer
•It must be where the customer is when that customer
needs it.

15. McGraw-Hill/Irwin Copyright © 2011 The McGraw-Hill Companies, All Rights Reserved
Scheduling
Chapter 19

16. 19-16
Learning Objectives
1. Know what a Manufacturing Execution
System production activity control is.
2. Understand typical priority scheduling
rules and the impact they have on
scheduling performance measures.
3. Recognize a simple job allocation
procedure.
4. Explain the issues considered in
employee scheduling.

17. 19-17
Manufacturing Execution Systems
• Manufacturing execution system (MES): an
information system that schedules,
dispatches, tracks, monitors, and controls
production
– Real-time linkage to:
• MRP
• Product and process planning
• Systems that extend beyond the factory
• Service execution system (SES): an
information system that links schedules,
dispatches, tracks, monitors, and controls the
customer’s encounters with the service
organization
LO 1

18. 19-18
The Nature and Importance of
Work Centers
• Work center: an area in which
production resources are organized
and work is completed
– May be a single machine, a group of
machines, or an area where work is done
– Can be organized according to function,
product in a flow, or group technology
• Jobs need to be routed between
functionally organized work centers to
complete the work
LO 1

19. 19-19
Loading
• Infinite loading: work is assigned to a
work center based on what is needed
– No consideration to capacity
• Finite loading: schedules each
resource using the setup and run time
required for each order
– Determines exactly what will be done by
each resource at every moment during the
day
LO 1

20. 19-20
Scheduling
• Forward scheduling: the system takes
an order and schedules each operation
that must be completed forward in time
– Can tell the earliest date an order can be
completed
• Backward scheduling: starts with due
date and schedules the required
operations in reverse sequence
– Can tell when an order must be started in
order to be done by a specific date
LO 2

21. 19-21
Limitations
• Machine-limited process: equipment
is the critical resource that is scheduled
• Labor-limited process: people are the
key resource that is scheduled
• Most actual processes are either labor
limited or machine limited but not both
LO 2

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Typical Scheduling and Control
Functions
1. Allocating orders, equipment, and
personnel
2. Determining the sequence of order
performance
3. Initiating performance of the
scheduled work
4. Shop-floor control
LO 2

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Objectives of Work-Center
Scheduling
1. Meet due dates
2. Minimize lead time
3. Minimize setup time or cost
4. Minimize work-in-process inventory
5. Maximize machine utilization
LO 2

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Job Sequencing
• Sequencing: the process of
determining the job order on machines
or work centers
– Also known as priority sequencing
• Priority rules: the rules used in
obtaining a job sequence
– Can be simple or complex
– Can use one or more pieces of information
– Common rules shown on next slide
LO 2

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Standard Measures of Schedule
Performance
1. Meeting due dates
2. Minimizing the flow time
3. Minimizing work-in-process inventory
4. Minimizing idle time
LO 2

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Scheduling and Jobs on Two
Machines
• Two or more jobs must be processed
on two machines in a common
sequence
• Wish to minimize the flow time from the
beginning of the first job to the finish of
the last job
• Use Johnson’s rule
LO 2

27. 19-27
Steps to Johnson’s Rule
1. List the operation time for each job
2. Select the shortest operation time
3. If the shortest time is on the first
machine, do first
– If the shortest time is on the second
machine, do the job last
– For ties, do first
4. Repeat 2-3 for each remaining job
LO 2

28. 19-28
Scheduling a Set Number of Jobs
on the Same Number of Machines
• Some work centers have enough machines
to start all the jobs
• Here the issue is the particular assignment
of individual jobs to individual machines
• Assignment method: a special case of the
transportation method of linear programming
1. There are n things to be distributed to n
destinations
2. Each thing assigned to one and only one
destination
3. Only one criterion can be used
LO 2

29. 19-29
Shop-Floor Control: Major
Functions
1. Assigning priority of each shop order
2. Maintaining WIP quantity information
3. Conveying shop-order status
information to the office
4. Providing actual output data for
capacity control purposes
5. Providing quantity by location by shop
order for WIP inventory and
accounting
6. Providing measurement of efficiency,
utilization, and productivity
LO 2

30. 19-30
Gantt Chart
LO 2

31. 19-31
Tools of Shop-Floor Control
1. The daily dispatch list
2. Various status and exception reports
a. Anticipated delay report
b. Scrap report
c. Rework report
d. Performance summary reports
e. Shortage list
3. An input/output control report
LO 3

32. 19-32
Principles of Work Center
Scheduling
1. There is a direct equivalence between work
flow and cash flow
2. The effectiveness of any job shop should be
measured by speed of flow through the shop
3. Schedule jobs as a string, with process steps
back-to-back
4. A job once started should not be interrupted
5. Speed of flow is most efficiently achieved by
focusing on bottleneck work centers and jobs
LO 3

33. 19-33
Principles of Job Shop Scheduling
Continued
6. Reschedule every day
7. Obtain feedback each day on jobs that are
not completed at each work center
8. Match work center input information to what
the worker can actually do
9. When improving output, look for
incompatibility between engineering design
and process execution
10.Certainty of standards, routings, and so forth
is not possible, but always work towards
achieving it
LO 3

34. 19-34
Personnel Scheduling in Services
• Scheduling consecutive days off
• Scheduling daily work times
• Scheduling hourly work times
LO 4