Inventory v GDP
GDP increased at a higher rate than inventory costs. It created higher revenues with less assets.
associated with manufacturing; how long it takes to get from raw materials to finished goods, and the costs associated.
Can occur in the supply of raw materials, in the demand for finished product, or in both. There is a need to know the proper inventory level to have. Can impact transportation.
When an organization anticipates that an unusual event might occur that will negatively impact its source of supply.
Weighted average cost of capital (WACC)
Reflects the direct debt service cost of having capital tied up in inventory.
Storage Space Cost
Includes handling costs associated with moving products into and out of inventory, as well as such costs as rent, heat, and light
Inventory Risk Cost
reflects the possibility that inventory value might decline for reasons beyond firm's control
Ordering Cost or Setup Cost
refers to the expense of placing an order for additional inventory, not including product cost
expenses incurred each time an organization modifies a production or assembly line to produce a different item for inventory
In-Transit Inventory Carrying Cost
Owner of product while it is in transit will incur resulting carrying costs.
Determining the Cost of In-Transit Inventories
Capital Cost = Carry Inventory
Storage space cost is not relevant
Insurance requires special analysis
Obsolescence is not as important
when it is directly related, or derives from, the demand for another inventory item or product
Just-in-Time Approach Elements
Short, consistent lead times
small, frequent replenishment quantities
high quality, or zero deficits
Materials requirement Planning
supplying materials and component parts whose demand depends on the demand for a specific end product
MRP system elements
Master production schedule (MPS)
Bill of materials file (BOM)
Inventory status file (ISF)
Outputs and reports
Distribution Requirements Planning
is to more accurately forecast demand and to explode that information back to develop production schedules
The supplier and its customer agree on which products are to be managed using in the customer's distribution centers.
Also called "pull" data
Assigns inventory items to one of three groups according to the relative impact or value of the items
involves the physical movement of goods between origin and destination points.
The transportation system links geographically separated partners and facilities in a company's supply chain.
-Supply chain complexity
-Competing goals among supply chain partners
-Changing customer requirements
-Limited information availability
-Rising transportation rates
The Bill of Landing does what?
originates the shipment
provides all the information the carrier needs
stipulates the contract terms, including carrier's liability for loss and damage
acts as a receipt for the goods the shipper tenders to the carrier
in some cases, shows certificate of title to the goods
Transportation Management Systems Involve
Routing and scheduling
The Role of Distribution in SCM
Balancing supply and demand.
Protecting against uncertainty.
Allowing quantity purchase discounts.
Supporting production requirements.
Promoting transportation economies.
Product characteristics must drive the design of the distribution process such as product value, durability, temperature sensitivity, obsolescence, volume, and other factors
Two options for product flow
Direct shipment of goods
Movement of goods through distribution facilities to customers
Cost of distribution centers and inventory vs. cost of transportation
Cost of additional facilities vs. level of customer service
Space vs. equipment
Equipment vs. people
People vs. space
Distribution cost tradeoffs with other functional areas
Cost of lost sales
Product Handling Functions
Customer Facing Measures
Safety, maintenance, and sanitation
Perfect order index (POI)
delivered to the right place
at the right time
in defect-free condition
with the correct documentation, pricing, and invoicing
Distribution cost efficiency
Aggregate cost efficiency
Warehouse Management Systems (WMS)
software control system that improves product movement and storage operations
value-added capabilities of a WMS
generate performance reports
support paperless processes
enable integration of materials handling equipment
leverage wireless communication
Short run planning
a firm's logistics/supply chain network and the locations of its key facilities are fixed.
impractical in the short run
Site availability, leases, contracts, and investments make changing facility locations
Shifting Locations of Customer and/or Supply Markets
U.S. population shifts
Service/cost requirements of JIT manufacturing
Continuing searches for lower-cost manufacturing
growing economic importance of China and the
sourcing of raw materials from offshore suppliers
factors driving design change
Change in Corporate Ownership
Corporate Organizational Change
Current Trends Governing Site
Positioning of inventories located at "market-facing" logistics facilities
Greater use of "customer direct" delivery
Due diligence for location and site selection
Greater use of third-party-logistics services
the process of designing a model of a real system and conducting experiments with this model for the purpose either of understanding the behavior of the system or of evaluating various strategies within the limits imposed by a criterion or set of criteria for the operation of the system
are able to accommodate broad problem definitions, but they do not provide an optimum solution.
help to reduce a problem to a manageable size and search automatically through various alternatives in an attempt to find a better solution.
Potential Supply Chain Modeling Pitfalls to Avoid
Too little or too much detail
Thinking in two dimensions
Using published costs
Inaccurate or incomplete costs
Use of erroneous analytical techniques
Lack of appropriate robustness analysis
The Grid Technique Advantages
Simplicity and its ability to provide a starting point for location analysis.
Provides a starting point for making a location decision.
The Grid Technique Limitations
A static approach, and the solution is optimum for only one point in time.
The technique assumes linear transportation rates, whereas actual transportation rates increase with distance but less than proportionally.
The technique does not consider the topographic conditions.
Foreign Trade Zone (FTZ)
a geographic area into which importers can enter a product and hold it without paying duties—and only paying duties or customs when is it shipped into U.S. customs territory.