operations planning and scheduling
the process of balancing supply with demand, from the aggregate level down to the short-term scheduling level
product family
a group of services or products that have similar demand requirements and common process, labor, and material requirements
business plan
a projected statement of income, costs, and profits
annual plan or financial plan
a plan for financial assessment used by a nonprofit service organization
demand management
the process of changing demand patterns using one or more demand options
complimentary products
services or products that have similar resource requirements but different demand cycles
revenue management
varying price at the right time for different customer segments to maximize revenues yielded by existing supply capacity
backlog
an accumulation of customer orders that a manufacturer has promised for delivery at some future date
overtime
the time that employees work that is longer than the regular workday or workweek for which they receive additional pay
undertime
the situation that occurs when employees do not have enough work for the regular-time workday or workweek
chase strategy
a strategy that involves hiring or laying off employees to match the demand forecast
level strategy
a strategy that keeps the workforce constant, but varies its utilization via overtime, undertime, and vacation planning to match the demand forecast
mixed strategy
a strategy that considers the full range of supply options
workforce scheduling
a type of scheduling that determines when employees work
rotating schedule
a schedule that rotates employees through a series or workdays or hours
fixed schedule
a schedule that calls for each employee to work the same days and hours each week
sequencing
determining the order in which jobs or customers are processed in the waiting line at a workstation
priority sequencing rule
a rule that specifies the job or customer processing sequence when several jobs are waiting in line at a workstation
first-come, first served (FCFS)
a priority sequencing rule that specifies that the job or customer arriving at the workstation first has the highest priority
earliest due date (EDD)
a priority sequencing rule that specifies that the job or customer with the earliest due date is the next job to be processed
expediting
the process of completing a job or finishing with a customer sooner that would otherwise be done
flow time
the amount of time a job spends in the service or manufacturing system
past due
the amount of time by which a job missed its due date
tardiness
see past due ---> the amount of time by which a job missed its due date
advanced planning and scheduling (APS) systems
computer software systems that seek to optimize resources across the supply chain and align daily operations with strategic goals
sales and operations plan (S&OP)
a plan of future aggregate levels so that supply is in balance with demand. it states a company's or department's production rates, workforce levels, and inventory holdings that are consistent with demand forecasts and capacity constraints. the S&OP is ti
aggregate plan
another term for the sales and operations plan
production plan
a sales and operations plan for a manufacturing firm that centers on production rates and inventory holdings
staffing plan
a sales and operations plan for a service firm, which centers on staffing and on other human resource-related factors
resource plan
an intermediate step in the planning process that lies between S&OP and scheduling. it determines requirements for materials and other resources on a more detailed level than the S&OP. it is covered in the next chapter
schedule
a detailed plan that allocates resources over shorter time horizons to accomplish specific tasks
regular time
regular-time wages paid to employees plus contributions to benefits, such as health insurance, dental care, social security, retirement funds, and pay for vacations, holidays, and certain other types of absences
hiring and layoff
costs of advertising jobs, interviews, training programs for new employees, scrap caused by the inexperience of new employees, loss of productivity, etc. layoff costs include the cost of exit interviews, severance pay, lost productivity, etc.
inventory holding
costs that vary with the level of inventory investment: the cost of capital tied up in inventory, variable storage and warehousing costs, pilferage and obsolescence costs, insurance costs, and taxes
backorder and stockout
additional costs to expedite past-due orders, the cost of lost sales, and the potential cost of losing a customer to a competitor (loss of goodwill)
operations scheduling
a type of scheduling in which jobs are assigned to workstations or employees are assigned to jobs for specified time periods
makespan
the total amount of time required to complete a group of jobs
total inventory
the sum of scheduled receipts and on-hand inventories
utilization
the degree to which equipment, space, or the workforce is currently being used, and is measured as the ration of average output rate to maximum capacity expressed as a percent
job shop
a manufacturer's operation that specializes in low-to medium-volume production and utilizes job or batch processes
flow shop
a manufacturer's operation that specializes in medium to high volume products and utilizes line or continuous flow processes
critical ratio
a ratio that is calculated by dividing the time remaining until a job's due date by the total shop time remaining for the job, which is defined as the setup, processing, move, and expected waiting times of all remaining operations, including the operation
shortest processing time
a priority sequencing rule that specifies that the job requiring the shortest processing time is the next job to be processed
slack per remaining operations
a priority sequencing rule that determines priority by dividing the slack by the number of operations that remain, including the one being scheduled
single-dimension rules
a set of rules that bases the priority of a job on a single aspect of the job, such as arrival time at the workstation, the due date, or the processing time
multiple-dimension ratio
a set of rules that apply to more than the one aspect of a job
johnson's rule
a procedure that minimizes makespan when scheduling a group of jobs on two workstations
labor-limited environment
an environment in which the resource constraint is the amount of labor available, not the number of machines or workstations
Inventory
any asset held for future use/sale
Objectives
- maintain sufficient inventory
- incur lowest possible cost
Inventory management
planning, coordinating, controlling the acquisition, storage, handling, movement, distribution, possible sale of:
raw materials
component parts
subassemblies
supplies and tools
replacement parts
other assets that are needed to meet customer wants, needs
four categories inventory cost
1. ordering/setup cost
2. Inventory-holding cost
3. Shortage cost: SKU unavailable
4. unit cost of stock-keeping units (SKU)
price paid for purchased goods or the internal cost of producing them
Raw materials, component parts, subassemblies, supplies
inputs to manufacturing and service-delivery
WIP inventory
consist of partially finished goods in various stages of completion that are awaiting further processes
stock-keeping unit SKU
single item or asset stored at a particular location
Independent demand
demand for an SKU that is unrelated to the demand for other SKUs and needs to be forecasted
depend demand
demand directly related to the demand of other SKUs and can be calculated with our needing to be forecasted
static demand
stable demand
dynamic demand
demand that varies over time
lead time
is the time between placement of an order and its receipt
- affected by transportation carriers, buyer order frequency & size, supplier production schedules, may be deterministic or stochastic
stockout
inability to satisfy the demand for an item
backorder
customer is willing to wait for the item
lost sale
custom his unwilling to wait and purchases the item elsewhere
Major characteristics that impact inventory decisions
describe essential characteristics of the environment and inventory system
1. number of items: assigned a unique identifier
2. nature of demand: independent/depended
3. number/size of time periods: single/multiple period
4. lead time
5. stockouts
Fixed-quantity system (FQS)
oder quantity, lot size is fixed. same amount Q os ordered every time
Fixed-quantity system (FQS)
manage
- continuously monitor the inventory level and place orders when level reaches some "critical" value
- triggering order is based on inventory position
- inventory position below r, reorder point, new order
Fixed-period system (FPS)
inventory position is checked only at fixed intervals of time, T, rather than one a continuous basis
Inventory Position (IP)
on-hand quantity (OH) plus any oder placed but which have not arrived (called scheduled receipts, SR) minus any back-orders (BO)
reorder point
value of the inventory position that triggers a new order
economic order quantity (EOQ)
minimizes total cost, sum of inventory holding + ordering cost
EOQ Model Assumptions
1. only single item (SKU) is considered
2. entire order quantity (Q) arrives at one time
3. only two types of costs are relevant:
order/set up and inventory holding costs
4. no stockout allowed
5. demand is constant and continuous
6. lead time is constant
Cycle Inventory
inventory results form purchasing or producing in larger lots that are needed from immediate consumption or sale
= max. inventory + min inventory / 2
Inventory holding cost for the year Ch
cost of storing one unit in inventory for the year
Ch = I x C
I
Annual inventory - holding cost charge expressed as % of unit cost
C
unit cost of inventory item or SKU
Annual inventory - holding cost
Average Inventory x Annual holding cost/unit
= 1/2
Q
C(h)
Annual ordering cost
Number of orders per year * cost per order
= D/Q * Co
D
annual demand
Co
Cost of placing an order
Total annual Cost
Annual Inventory Holding Cost + Annual Ordering Cost
Calculating the reorder point
the reorder point, r, depends on the lead time and demand rate
safety stock and uncertain demand in FQS
demand uncertain -> EOQ on average demand -> most likely stock out
safety stock
additional planned unhand inventory that ads a buffer to reduce the risk of stockout
service level
desired probability of not having a stockout during a lead time period
reorder point with safety stock, normal distribution
Normal Distribution
Fixed Period Inventory System
Management
at time of review, order is placed to fill up stock to predetermined max. inventory level
EOQ: best economic time interval T = Q/*D
M
demand during lead time plus review period, safety stock can be added
single period inventory model
one order is placed for a good in anticipation of a future selling season where demand is uncertain
end of period: product sold out or discounted
C(s)
cost per item of overestimating demand (salvage cost)
C(u)
cost per item of underestimating demand (shortage cost)
ABC analysis
categorizes SKUs into three groups according to their total annual dollar usage
A items
large dollar value (60% - 80% of total dollar value), relatively small percentage of total items (5% - 25%)
C items
small dollar value (5% - 15% of total dollar value) but a large percentage of total item (50% - 60% of items)
B items
in-between A and C
Supply Chain Design
Designing a firm's supply chain to meet the competitive priorities of the firm's operations strategy.
Supply Chain Design Pressures
Dynamic sales volumes
Customer service levels
Service/product proliferation
Efficient Supply Chains
Predictable, low forecast errors Demand,
Competitive priorities Low cost, consistent quality, on-time delivery,
New-service/product introduction Infrequent,
Contribution margins Low
Product variety Low
Responsive Supply Chains
Demand Unpredictable, high forecast errors
Competitive priorities Development speed, fast delivery times, customization, volume flexibility, variety, top quality
New-service/product introduction frequent
Contribution margins high
Product variety high
Efficient supply chains stategy
Make-to-stock
Responsive supply chains strategy
Assemble-to-order
Make-to-order
Engineer-to-order
Location of Inventory
Centralized placement
Inventory pooling
Forward placement
Mass customization
A strategy whereby a firm's highly divergent processes generate a wide variety of customized services or products at reasonably low costs.
Mass Customization competitive advantages
Managing customer relationships
Eliminating finished goods inventory
Increasing perceived value of services or products
Supply chain design for mass customization
Assemble-to-order strategy
Modular design
Postponement
purpose of supply chain design
to shape a firm's supply chain to meet the competitive priorities of its operations strategies.
centralized placement
Keeping all the inventory at one location such as a firm's manufacturing plant or a warehouse and shipping directly to customers.
Forward placement
is locating stock closer to customers at a warehouse, wholesaler, or retailer.
inventory pooling
is a reduction in inventory and safety stock because of the merging of variable demands from customers.
backward integration
One way to gain control over suppliers in a chain is to buy a controlling interest in them
Supply Chain
A set of three or more companies directly linked by one or more of the upstream or downstream flows of products, services, finances, and information from a source to a customer.
Delivers value to the end customer by leveraging the resources and skills of
Distribution Channels or marketing channels
Intermediaries, such as wholesalers, distributors, and retailers, through which the flow of products travels. All along the supply chain, these add value to the product by changing its form and location.
Supply Chain Network
The concept of a supply chain is actually a simplified version of what is, in actuality, a network of companies made up of many suppliers and customers. A supply chain that provides the most value to its customers will succeed.
Supply Chain Orientation
A management philosophy that guides the actions of company members toward the goal of actively managing the upstream and downstream flows of goods, services, finances, and information across the supply chain.
Implies an outward focus on the actives and pe
Downstream Flow
Direction of flow of products and related services.
Two way flow
Direction of flow of information.
Upstream
Direction of flow of finances.
Supply Chain Management
Became common in the 1990s as organizations began to look for additional ways to create customer value.
Refers to the actions the firm takes to coordinate the various flows within a supply chain.
Companies that view the total system of interrelated compan
Inventory and customer service trade off
When there is not enough inventory to satisfy customer demand, the firm may incur additional costs or lose sales or both. To combat such situations, companies sometimes store extra inventory. However, money tied up in inventory is not available to a compa
Inventory carrying costs
The costs required to make or buy a product, including risk of obsolescence, taxes, insurance, and warehousing space used to store the goods.
Supply Chain Integration
The ultimate objective of supply chain management is to integrate related companies, thus facilitating the coordination of activities across the supply chain in a manner that improves the entire chain's performance.
For an integrated supply chain to work,
Push Strategy
Also known as a speculation strategy, is one in which a company builds goods based on a sales forecast, puts those goods into storage, and waits for a customer to order the product.
Push Strategy Advantages and Disadvantages
ADV: Allows firms to achieve economies of scale. Because the firm makes large batches of one good at a time, it can reduce manufacturing, transportation, and other costs.
DIS: If sales forecasts aren't accurate, the company will have too much of a product
Pull Strategy
Also known as a responsive supply chain. Customer orders drive manufacturing and distribution operations. The good is not made until a customer order to received.
Pull Strategy Advantages and Disadvantages
ADV: This eliminates risks associated with producing an unwanted product. Allows the firm to customize products.
DIS: Doesn't allow a firm to take advantage of economies of scale. Typically orders small quantities, eliminating the possibility of quantity
Push-Pull Strategy
A hybrid of the other two strategies. The initial stages of the supply chain operate on a push system, but completion of the product is based on a pull system. A company may forecast sales, build an inventory of components based on the forecast and hold t
Push Pull Strategy Advantages and Disadvantages
ADV: Companies can achieve economies of scale in purchasing, while engineering flexibility into manufacturing.
DIS: May not be as cost competitive as a push system since the firm cannot take advantage of manufacturing and transportation of economies of sc
Selecting the appropriate strategy
1. How stable demand is.
2. How cost competitive a firm needs to be.
3. How customized products need to be.
4. How quickly customers need the product.
Logistics
That part of supply chain management that plans, implements, and controls the flow of goods, services, and information between the point of origin and the final customer.
Comprises some specific functions that enable a supply chain to operate smoothly and
Seven Rs of Losistics
Delivering the Right product, to the Right place, to the Right customer, at the Right time, in the Right quantity, in the Right condition, and at the Right price
How price is effected by logistics
Purchasing activities impact the cost of buying or making goods through volume discounts, reliability of suppliers, and the quality of goods produced.
Shipping goods in full vehicles, rather than partially loaded vehicles, lowers transportation costs, sav
How product is effected by logistics
Too little packaging may cause the good to be damaged in transit, leading to dissatisfied customers and costly returns.
How promotion if effected by logistics
Logistics managers must be aware of any increase in expected sales so that sufficient inventory, equipment, and personnel are available to handle increased volumes.
Enterprise Resource Planning Systems (ERP)
Data management systems that integrate information across all the departments of an organization.
Can be used to communicate with the IT systems of other companies through electronic data interchange (EDI)
Just-in-time (JIT) manufacturing process
Approach that seeks to make products based on customer orders rather than in anticipation orders and to receive components from suppliers only when they are needed for production. It relies on short and consistent delivery lead times from suppliers, a hig
Logistics Functions
Managing inventories,
Inventory costs,
Purchasing ,
Materials management, warehousing, and distribution
Cyclical Inventory
Inventory a firm needs to meet average demand.
Pipeline Inventory
Refers to inventory that is in transit between suppliers and customers.
Anticipative Stock
Inventory that is produced or purchased when a company expects something to occur in the future that will negatively affect stock availability.
Seasonal Stock
Refers to goods a firm sells only at certain times of the year (for example, the oranges used to make orange juice), or during certain seasons (for example, sunscreen)
Obsolete Inventory
When goods undergo design changes, are near the end of their product life cycles, have been over-ordered, or have expired.
Purchasing Costs
These costs include order-processing and placement costs, and transportation charges if the purchasing company pays freight charges.
Inventory Carrying Costs
These costs include storage and handling expenses, capital costs in tying up money, service costs such as property taxes and insurance, and costs associated with damage to or obsolescence of the good while it is in storage.
Stockout
Occurs when a company does not have enough inventory available to fill an order. In such cases, a customer can either place a back order or cancel the order.
Inventory turns
Refers to the number of times a firm's entire inventory is sold and replaced. It can be calculated by dividing the cost of goods sold by the company's average inventory level. This calculation is usually performed annually for finished goods.
Days of supply
Estimates how many days the firm's current inventory on hand by the average daily usage or sales. This calculation can be used to estimate days of supply for both finished goods and raw or packaging materials.
Purchasing
Involves the sourcing and procurement of raw materials, component parts, components, finished goods, and services for companies.
Materials purchased for manufacturing typically account for 40-60% of the product costs, meaning that any savings in purchase
Selecting and qualifying appropriate suppliers
A company selects suitable suppliers based on criteria, such as cost of service capability, established by the purchasing manager to fit the company's needs.
Negotiating contracts and placing purchase orders
Negotiations can occur over a number of aspects of a contract, including specific quantities to be delivered, quality factors, price, credit terms, and delivery terms.
Purchase Order
A legal obligation to buy a certain amount of product at a certain price from a supplier to be delivered at a specified date.
Monitoring supplier performance
Expectations often relate to quality, on-time delivery, rapid response to problems, and accuracy of invoices, but they can be customized to the needs of the buyer.
Supplier development
Purchasing managers can help develop supplier capabilities by visiting the supplier's operations to better understand issues, organizing supplier training by company experts, and providing financial assistance to suppliers of needed equipment purchases.
Reciprocity
Involves purchasing goods and services from suppliers only if they buy from the purchasing manager's company.
Personal buying
Occurs when a purchasing manager buys items for the personal use of employees rather than for business use.
Accepting gifts and favors
A common ethical problem for purchasing managers and should be covered in a company's ethics policy. Should be avoided.
Financial conflicts of interest
Involve giving business to a supplier when the purchasing manager or ratlines of the purchasing manager have financial interest in the supplier. Gives the impression that the purchasing manager is practicing favoritism.
Materials Management
Involves the inbound movement and storage of materials in preparation for those materials to enter and flow through the manufacturing process.
Benefits of effective materials management
Reduces procurement, transportation, and production costs through economies of scale. Coordinates supply and demand for materials. Supports manufacturing activities. Supports marketing objectives.
Storage
Involves holding inventories until they are needed.
Movement
Include receiving, put-away, picking, shipping, and delivery to a production area.
Put Away
Refers to moving goods to their temporary or semipermanent storage location and updating inventory records.
Picking
Involves retrieving materials from storage and bringing them to manufacturing to fulfill a production order, or retrieving finished goods from storage and preparing them for shipment to fulfill a customer order.
Production
Some warehouses also perform this function.
Distribution Center
A type of warehouse used specifically to store and ship finished goods to customers.
Product Accumulation
Involves receiving goods from various suppliers, storing the goods until they are ordered by a customer or other company owned facility, and consolidating orders to achieve transportation economies of scale.
Product Sortation
Refers to gathering goods with similar characteristics in one area of the DC to facilitate proper inventory controls and effectively provide customer service.
Product Allocation
Involves picking available goods to fulfill customer orders.
Product Assortment
Occurs when the DC mixes goods coming from multiple suppliers into outgoing orders so that each order includes a variety of goods rather than just one type of good.
Inventory levels
The more facilities in the network, the higher the overall inventory in the system.
Operating Expenses
The fewer facilities in the network, the less operating expense incurred.
Customer Service
More facilities result in faster delivery to customers since facilities will be closer to markets.
Transportation Costs
More facilities lead to higher transportation costs from production sites and suppliers to the warehouses or DCs.
Retailer
A firm that sells mainly to end-user consumers.
Railroads
Transport a wide variety of products over long distances. Almost half of the ton-miles (one ton of goods carried one mile) moved in the US are moved by this.
Trucks
Account for approx. one third of the ton miles of the US cargo movement and 84% of money spent on transporting goods in the country.
Small to mid-size shipments.
Common carriers and contract carriers.
Accessible, reliable and fast, but they charge a fairl
Common Carriers
Sell their services to any business
Contract Carriers
Move goods exclusively for certain cusomters
Air Transportation
Accounts for less than 1 percent of the intercity ton miles in the US, yet the speed with which goods can be transported secures its important role in logistics operations
Water Transportation
Taken on great significance as production has moved to low-cost producers in Asia and other parts of the world.
Pipelines
Make up a very specialized mode that services only a few industries. Account for approx. 20% of the total ton-miles shipped in the US.
Cyberspace
Anything that can be digitized can be sent through the Internet and delivered to businesses and homes
Intermodal Transportation
Many firms, particularly those with global supply chains rely on this. Involves using several types of transportation for the same shipment.
Container
Steel boxes used to transport goods, usually internationally. Can be loaded and unloaded from ships very quickly, which has greatly sped up the process of moving large amounts of goods between continents such as Asia and North America. Ships can transport
International Transportation
Globalization has made this an increasingly important topic. Has contributed to the rise of outsourcing and offshoring.
Core Carrier Strategy
Selecting a small number of carriers that offer volume discounts and quality service, which gives the company control and negotiating leverage when it comes to cost.
Goal of SCM
Create value for end customers & firms in the supply chain
Understand End Customers
Supply chains need to look at each market segment
and determine the needs of those customers.
- Variety of products required
- Quantity & delivery frequency needed
- Service level desired
- Product quality desired
- Price of the products
Understand Supply Chain Partner Requirements
Supply chain strategies must consider the potential
trade-offs existing between:
- Cost
- Quality
- Sustainability
- Service
Adjusting Supply Chain Member Capabilities
- SC members audit their capabilities
- Firms and their partners must continually reassess performance
with respect to requirements
- The best SC performers:
� Are more responsive to customer needs
� Quicker to anticipate changes in the markets
� Control
Key Supply Chain Business Processes
1. Customer Relationship Management
2. Customer Service Management
3. Demand Management
4. Order Fulfillment
5. Manufacturing Flow Management
6. Supplier Relationship Management
7. Product Development and
Commercialization
8. Returns Management
Silo Mentality
I win, you lose"
Using the cheapest supplies
ignoring customers
assigning few resources to new product and service design
Lack of Supply Chain Visibility
- In a recent survey, 1/3 of pharmaceutical manufacturers provided
adequate information visibility.
-RFID technology has promise to add real-time information visibility to supply
chains
Lack of Knowledge
- Technology changes quickly enabling process integration across
extended supply chains
- Firms must spend significant time influencing and increasing the
capabilities of themselves and their partners.
- Training of supply chain partner employees is also
Lack of Trust
Successful process integration requires trust.
�Trust occurs over time- Partners earn trust.
Collaboration & trust are based on:
- Start small
- Look inward
- Meet face-to-face.
- Go for the win-win
- Do not give away the store: Some information should
re
Managing Supply Chain Risk
- Increase safety stocks also known as stockpiling
and forward buying
- Identify backup suppliers and logistics services
- Diversify the supply base
- Utilize a supply chain IT system
- Develop a formal risk management program
Managing Supply Chain Security
- Reducing the risk of intentionally created
disruptions in supply chain operations
- A supply chain is only as secure as its weakest link
- Security management collaboration should
include, for example, contractual requirements for
secure systems.
Basic Intiatives
Consider use of security badges and guards, conducting
background checks on applicants, using anti-virus
software and passwords, and using shipment tracking
technologies
Reactive Initiatives
C-TPAT refers to a partnership whereby companies agree
to improve security in their supply chain in return for
"fast lane" border crossings at both the Canadian and
Mexican borders
Proactive Initiatives
- Creating an executive-level position such as director of
corporate security
- Hiring of former military, intelligence, or law enforcement
personnel with security management experience
Advanced Initiatives
- Full collaboration with key suppliers and customers in
developing quick recovery and continuity plans for supply
chain disruptions
- Train participants to test the resilience of the supply chain to
security disruptions
Traditional Performance Measures
- Cost and Profit based performance measures must be used
with caution
- Traditional cost-based information does not reflect the
underlying performance of an organization's productive
systems; costs & profits can be hidden or manipulated
- Decisions to ma
Performance Variance
The difference between the standard &
actual performance
Drawbacks of Performance Variance
- Managers can be pressured to find ways to make up these
variances, resulting in poor decisions
- Standards can reinforce the idea of functional silos
(departments only concerned with what is going on in
their department)
Productivity
-Is a common measure on how well
resources are being used
-Relative Measure (it is meaningful only when you compare it to another value)
Basic Productivity Ratio
Outputs(goods and services produced) /Inputs(al resources used)
Sources of Productivity Growth
External
Improved labor inputs
Economies of scale
Technological change
World-Class Performance Measurements Systems
Quality
Cost
Customer Service
Quality
� No. of defects per unit
produced and per unit
purchased
� No. of product returns per
units sold
� No. of warranty claims per
units sold
� No. of suppliers used
� Lead time from defect
detection to correction
� No. of workcenters using
statistical proces
Cost
� Scrap or spoilage losses per
workcenter
� Average inventory turnover
� Average setup time
� Employee turnover
� Avg. safety stock levels
� No. of rush orders required for
meeting delivery dates
� Downtime due to machine
breakdowns
Customer Service
� Flexibility
� Dependability
� Innovation
Flexibility
� Average number of labor
skills
� Average production lot size
� No. of customized services
available
Dependability
� Average service response
time or product lead time
� % of delivery promises kept
� 4. No. of stockouts per
product
Innovation
� Annual investment in R&D
� No. of new product or
service introductions
Seven SC Performance Measures
1. Toal SCM cost
2. SC cash-to-cash cycle time
3. SC Production Flexibility
4. SC Delivery Performance
5. SC perfect order fulfillment performance
6. Supply chain e-business performance
7. Supply Chain Environmental Prformance
Toal SCM cost
cost to process orders; purchase and manage
inventories; information systems
SC cash-to-cash cycle time
Avg. # of days between paying for
materials and getting paid by SC partners
SC Production Flexibility
Avg. time required to provide an
unplanned 20% increase in production
SC Delivery Performance
Avg. % of orders filled by requested
delivery date
SC perfect order fulfillment performance
Average % of orders
that arrive on time, complete, and undamaged
Supply chain e-business performance
Avg. % of electronic orders
received for all SC members
Supply Chain Environmental Prformance
% of SC w/ISO
14000 partners; avg. % of environmental goals met
Balanced Scorecard
Kaplan & Norton created BSC to align an
organization's performance measures with its
strategic plan & goals. The BSC framework consists
of four perspectives -
- Financial perspective
- Internal business process perspective
- Customer perspective
- Learnin
Reliability Performance Category
� On-time
delivery
performance
� Order fill rates
� Order accuracy
rates
Responsiveness Performance Category
� Order lead
times or speed
Agility Performance Category
� Response
times for
unforeseen
events
� Production
flexibility
Cost Performance Category
� Supply chain
management
and logistics
costs
� Cost of goods
sold
� Warranty and
returns
processing
costs
Asset Management Performance Category
� Cash-to-cash
cycle time
� Inventory days
of supply
� Asset turns