lesson 5 upstream supply chain management

Upstream Supply Chain Upstream Supply Chain ManagementManagement

UpstreamUpstream

• Where should the order be produced?

• Do we have materials for the order?

• Do we have adequate capacity?

• Who should produce the order?

• What will be the delivery time?

• What will be the costprice?

• Where must the order be delivered?

Logistic management principlesLogistic management principles

Fordisme◦ Planning af prognoses and production for stock

Lean◦ Avoid waste by reducing all not value adding activities◦ Planning starts by the customers needs to avoid stocks

Agility◦ Is based upon extreme customer orientation.◦ Works with higher prices and higher profits margins

because it is more important to supply flexible and fast on differentiation rather than cheap

FordismeFordisme

Characterised by:

◦ Production to stock◦ Specialised machines◦ Focus on productivity◦ Focus on standardisation◦ High degree of work specialisation◦ High production volumens

LeanLean

The strategy in lean is to avoid waste by all non-value adding activities.

The planning of production starts by the customers actually need to avoid stocks.

It means better customer service and less costs.

LeanLean

7 types of waste:

1. Overproduction2. Waiting time3. Unnessary tranport4. Process waste5. Unnessasary stock6. Unnessasary operations7. Lack in quality

LeanLean

Lean is known by:

◦ Production to actual customer need◦ Focus on quality◦ Focus on flexsibility◦ Focus on standardisation◦ Involvement of employees◦ High production volumens

Push vs Pull driven supply chainsPush vs Pull driven supply chains

PushIf products are taken from stock it means that they have been produced or bought in advance based upon expected sales.

PullIf production or purchase are not made before the customer orders them the supply chain is pull driven

De-coupling pointDe-coupling point

Push-driven Pull-driven

De-coupling point

Raw materials End customer

De-coupling point separates push-driven activities in the supply chain from activities in the supply chain that are pull-driven

Manufacturing strategies

1. Engeneering to order (ETO)

2. Sourcing to order (STO)

3. Make to order (MTO)

4. Assemble to order (ATO)

5. Packaging to order (PTO)

6. Labeling to order (LTO)

7. Deliver to order (DTO)

Postponement

the point where the differentiation of the product take place

spreading the risk of inventories in the distribution channel

Driving forces for postponement: increased difficulties with forecasting demands increased demand after customized products increased manufacturing costs incresed competition increased distribution costs increased research and development costs

Managements toolsManagements tools

MRP (Manufacturing Ressource Planning) – Fordisme (push)

JIT (Just in Time production) – Lean (pull)

Push MRPPush MRP

MRP contains the following head components:

Overall planningDetailed planning of materialsDetailed planning of capacitySurvilance of deliveries

MRP is a concept based upon forecasts

Overall planningOverall planning

Consequences could be:

Contribution marginDelivery timeCostsBottle necksPurchase needsCash flow

Advantates and disadvantages by MRPAdvantates and disadvantages by MRP

Advantage:StockYou can see the needCalculations of

consequences is possible

Evaluate if a plan can run on existing machines

See the need of purchase of raw materials and goods

Disadvantages:Forecasts failsNot flexibleNeed of relilable

informations in the item lists

Complicated to runDemands IT to run

Management concept JITManagement concept JIT

Is a concept under LEAN which based upon the customer need deliver products:

in the right time in the right amount at the right place

Production starts first when the order is received in the sales department.

JITJIT

Multi function

al employe

es

Quality cirkels

Group layout

JIT - Kanban - systemJIT - Kanban - system

Purpose is to start the number in production which the customer or another department has ordered.

JIT - Multifunctional employeesJIT - Multifunctional employees

Employees can do more processes.

SMED (Single Minute of exchange Dies)

JIT – Quality circlesJIT – Quality circles

Small group of employees who on a running basis control the companys production quality

Kaizen = running improvements on existing products and processes.

Advantages and disadvantages by JITAdvantages and disadvantages by JIT

Advantages:Customization via

postponementNo stocksFast takt timeFocus on zero

defectMotivated

employees

Disadvantages:Delivery timeDelayed processes

might reduce use of capacity

Questions:Questions:

What is decoupling point?

Explain the concept of Fordisme

Explain the concept of LEAN

What is meant by postponement?