Productions and Operations Management: CHAPTER 3: Managing Supply Chain, Managing Inventory and Aggregate Scheduling

1. CHAPTER 3:
Productions/Operations Management

2. Contents
Managing the Supply Chain
Managing Inventory
Aggregate Scheduling

3. Managing the Supply Chain

4. Supply Chain Management
Supply Chain Management is a systematic and strategic management of the
product from raw material to finished goods.
SCM helps the company to maximise their productions.

5. Objectives of Supply Chain Management
01
03
02
04
Reduce
Operating
Expenses
Enhance
Customer
Satisfaction
Improve
Distribution
Channel
Strengthen
Financial
Position
05
Regulate
Proper
Inventory
Promotes
Better
Coordination
06

7. Supply Chain for Beer

8. SOURCING ISSUES:
Make-or-Buy and Outsourcing
choosing products and services that
can be advantageously obtained
externally as opposed to produced
internally is known as the
make-or-buy decision.
Make-or-Buy
transfers some of what are traditional internal
activities and resources of a firm to outside
vendors, making it slightly different from the
traditional make-or-buy decision.
Outsourcing

9. Six Sourcing Strategies
Having decided what to outsource, managers have six strategies to consider.
a supplier responds to the
demands and specifications of
a “request for quotation,” with the
order usually going to the low
bidder.
Many Suppliers
forming a long-term relationship
with a few dedicated suppliers.
Long-term suppliers are more
likely to understand the broad
objectives of the procuring
firm and the end customer.
Few Suppliers
Developing the ability to produce
goods or services previously
purchased or actually buying a
supplier or a distributor. .
Vertical Integration
firms may engage in collaboration
to enhance their new
product prowess or technological
skills.
Joint Ventures
These manufacturers are often
financial supporters of suppliers
through ownership or loans
Keiretsu Networks
rely on a variety of good, stable
supplier relationships to provide
services on demand.
Virtual Companies

10. Supply Chain Risk
The environment, controls, and process performance all affect supply chain risk.
This risk is compounded by globalization and logistical complexity.
In any supply chain, vendor reliability and quality may be challenging.

11. Risks and
Mitigation Tactics
represents a hybrid technique
where two suppliers each provide
a different component, but they
have the capability of producing
each other’s component— that is,
each acting as a backup source.
Cross Sourcing

12. Supply Chain Risks and Tactics
RISK RISK REDUCTION
TACTICS
EXAMPLE
Supplier failure
to deliver
Use multiple suppliers; effective
contracts with penalties; subcontra
ctors on retainer; preplanning
McDonald’s planned its supply chain 6 years before
its opening in Russia. Every plant—bakery, meat,
chicken, fish, and lettuce—is closely monitored to en
sure strong links.
Supplier quality
failures
Careful supplier selection,
training, certification, and
monitoring
Darden Restaurants has placed extensive controls,
including third-party audits, on supplier processes
and logistics to ensure constant monitoring and
reduction of risk.
Outsourcing Take over production; provide
or perform the service
yourself
Tyson took over chicken farm production in China to
mitigate product quality and safety concerns related
to using independent farmers.

13. Logistics Management
An approach that seeks efficiency operations through
the integration of all material acquisition,
movement, and storage activities.
Shipping Systems Warehousing Third-Party Logistics (3PL)

14. Determining when tokens of friendship become
bribes can be challenging. Many companies have
strict rules and codes of conduct that limit what is
acceptable.
In this age of hyper-specialization, much of any
organization’s resources are purchased, putting
great stress on ethics in the supply chain.
Good ethics extends to doing business in a way
that supports conservation and renewal of
resources. This requires evaluation of the entire
environmental impact, from raw material, to
manufacture, through use and final disposal.
Personal Ethics
Ethics Within the Supply Chain
Ethical Behavior Regarding the Environment
Ethics and Sustainable Supply Chain Management
Supply Chain Management Ethics

15. Reverse logistics involves the processes for sending
returned products back up the supply chain for resale,
repair, reuse, remanufacture, recycling, or disposal.
Closed-loop supply chain a supply chain designed to
optimize both forward and reverse flows.
Establishing Sustainability in Supply Chains

16. Managing Inventory

17. The Importance of Inventory
Operations managers around the globe have long
recognized that good inventory management is crucial.
The objective of inventory management is to strike a
balance between inventory investment and customer
service.

18. Types of Inventory
Raw material inventory
Materials that are usually
purchased but have yet to
enter the
manufacturing process.
Work-in-process
(WIP) inventory
Products or components
that are no longer raw
materials but have yet to
become finished products.
.
Maintenance/repair/
operating (MRO) inventory
supplies necessary to keep
machinery and processes
productive
Finished-goods
inventory
An end item ready to be
sold, but still an asset on
the company’s books.
.

19. ABC analysis
A method for dividing on-hand inventory into three classifications based
on annual dollar volume.

20. Record Accuracy
is a prerequisite to inventory management, production
scheduling, and, ultimately, sales.
Regardless of the inventory system, record accuracy
requires good incoming and outgoing record keeping as
well as good security. Stockrooms will have limited access,
good housekeeping, and storage areas that hold fixed
amounts of inventory

21. Record Accuracy
Periodic systems require regular (periodic) checks of
inventory to determine quantity on hand.
Perpetual inventory tracks both receipts and
subtractions from inventory on a continuing basis.

22. Cycle Counting
A continuing reconciliation of inventory with inventory records.
With cycle counting procedures, items are counted, records ar
e verified, and inaccuracies are periodically documented.
A items will be counted frequently, perhaps once a month;
B items will be counted less frequently, perhaps once a quarter;
C items will be counted perhaps once every 6 months.

23. Cycle Counting
Cycle counting also has the following advantages:
1. Eliminates the shutdown and interruption of production
necessary for annual physical inventories.
2. Eliminates annual inventory adjustments.
3. Trained personnel audit the accuracy of inventory.
4. Allows the cause of the errors to be identified and remedial
action to be taken.
5. Maintains accurate inventory records.

24. Control of Service Inventories
Good personnel selection, training, and discipline
Tight control of incoming shipments
Effective control of all goods leaving the facility

25. Aggregate Scheduling

26. Aggregate Scheduling
Aggregate planning is the process of developing,
analyzing, and maintaining a preliminary, approximate
schedule of the overall operations of an organization.
The aggregate plan generally contains targeted sales
forecasts, production levels, inventory levels, and
customer backlogs.

27. The Planning Process

28. Sales and Operations Planning
A process of balancing resources and forecasted demand,
aligning an organization’s competing demands from supply
chain to final customer, while linking strategic planning
with operations over all planning horizons.

30. Aggregate Planning Strategies
When generating an aggregate plan, the operations manager must answer several questions:
1. Should inventories be used to absorb changes in demand during the planning period?
2. Should changes be accommodated by varying the size of the workforce?
3. Should part-timers be used, or should overtime and idle time absorb fluctuations?
4. Should subcontractors be used on fluctuating orders so a stable workforce can be
maintained?
5. Should prices or other factors be changed to influence demand?
All of these are legitimate planning strategies. They involve the manipulation of inventory,
production rates, labor levels, capacity, and other controllable variables.

31. capacity option
demand option

32. Mixing Options to Develop a Plan
Chase Strategy
typically attempts to achieve output rates for each period that match the
demand forecast for that period.
Level Strategy
is an aggregate plan in which production is uniform from period to period.
Mixed Strategy
a planning strategy that uses two or more controllable variables to set a
feasible production plan

33. REFERENCES
01
02
03
04
05
https://commercemates.com/supply-
chain-management/
https://www.referenceforbusiness.com/
management
https://www.youtube.com/watch?v=tZxS7u
CmIcU&list=RDCMUCHOG3jDe_EGwC-
Gc_6YXwOA&index=8
Principles of Operations
Management/ Jay Heizer • Barry
Render • Chuck Munson/10th edition

34. Thank you