Professional Documents
Culture Documents
Chapter 1
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Wealth
What is it? Where does it come from? Adding value
Designing the process Managing the process
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Wealth
Natural resources Transformation Conversion Managing the process Services
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Operating Environment
Government
regulations safety
Economy
effects demand shortages and surpluses
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Quality
Order Qualifiers:
customer requirements for price, quality, delivery, etc
Order Winners:
those characteristics that persuade customers to select a product or service
Manufacturing Strategy
Engineer-to-Order
Manufacturer does not start until the order is received Custom designs Unique products Long lead time Inventory purchased after order is received
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Make-to-Order
Manufacturer does not start until the order is received Often uses standard components Little design time Lead time is reduced Inventory held as raw materials
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Assemble-to-Order
Manufacturer inventories standard components No design time required Assembly only required Shorter lead time Inventory held as standard components
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Make-to-Stock
Manufacturer produces the goods in anticipation of customer demand Little customer involvement with design
Historical Perspective
In the past there were well defined and rigid boundaries between organizations JIT viewed suppliers as partners
mutual analysis for cost reduction mutual product design greatly reduced inventory improved communications (internet, EDI)
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Materials Management
Planning and controlling the flow of materials Objectives:
Maximize the use of the firms resources Provide the required level of customer service
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Company Objectives
Income = Revenue - Expense
Need to increase income with:
Best customer service Lowest production costs Lowest inventory investment Lowest distribution costs
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Overhead
Does not vary with volume sold
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
% of Sales $1,000,000 10
50 20 20
$900,000 $100,000
90 10
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Total Cost of Goods Sold Gross Profit Profit has increased 60%
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed.
$840,000 $160,000
84 16
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Total Cost of Goods Sold Gross Profit Sales must increase by 20%
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed.
$1,040,000 $160,000
87 13
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Production Planning
To meet the demands of the marketplace Establish priorities Ensure capacity Activities
Forecasting Master Planning Materials Requirements Planning Capacity Planning
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Purchasing
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Inventory Management
To support production (Raw Materials) or as a result of production (Finished Goods) Provide a buffer against the differences in demand rates and production rates How much is enough?
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Inventory Turns
Inventory Turns Ratio = Annual Cost of Goods Sold Average Inventory in Dollars Example: If the annual cost of goods sold is $1 million dollars and the average inventory is $500,000, then: Inventory Turns = $1,000,000 = 2 $500,000
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Product Description
Engineering Drawings
Specifications
Bill of Material
Components used to make the product Sub-assemblies at stages of production
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Process Specifications
Recorded on a Route Sheet Describe how the product is made
Operations required to make the product Sequence of operations Equipment and accessories required Standard time to perform each operation
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Available Facilities
What equipment is available What labor is available
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Quantities Required
Information from
Forecasts Customer Orders Production Planning
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Must be timely
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Challenges
1. Customers are never satisfied 2. Supply chains are large 3. Product life cycles are getting shorter 4. Lots of data 5. Narrow profit margins 6. Increasing number of alternatives
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Metrics
Performance measures
Quantified and objective Contain two parameters
e.g. Orders per day, Sales per person
Performance standards
Sets the goals Establishes controls
Performance standards sets the goal. Performance measure say how close you came.
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Metrics
Focus
Metrics
Operational Standard
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Metrics Program
1. Establish company goals and objectives 2. Define performance 3. State the measurement 4. Set performance standards 5. Educate the users 6. Apply consistently
Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Customer Service
2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.
Chapter 1 Summary
Manufacturing creates wealth Must make the best use of
labor, materials and capital