evaluating and seen 19.11.10

7/30/2019 Evaluating and Seen 19.11.10

1/31

1027 NAPM 1

George Harris, President781-674-0041

[email protected]

EVALUATING AND ASSESSING YOUR

SUPPLY CHAIN


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1027 NAPM 2

Objectives

I Describe the elements of the Supply chain

I Identify three (3) measures of supply chain efficiency

I Define the Key dimensions of each measure

I Provide an overview of a tool to measure Supply Chainefficiency


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1027 NAPM 3

Supply Chain Defined

A set of activities required to provide products and

services to customers

I Physical (Material flow)

I Informational (Virtual)

I Sequential (Design to Installation)


4/31

1027 NAPM 4

Key Aspects of

Supply Chain Management

Understand this First!

Then look at sub-activities!

Demand

Management

Demand

Management

Supply

Management

Supply

Management

Transformation or

ManufacturingProcess

Transformation or

Manufacturing

Process DistributionDistribution


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1027 NAPM 5

Standard

Customized

Standard

Customized

Customers:

Commercial

International

U.S. Government

Customers:

Commercial

International

U.S. Government

OrdersOrdersOrder QualityOrder Quality

DistributionDistribution

Order

Completion

Order

Completion

ShopShop

Order ReleaseOrder Release

Shop Flow

Control

Shop Flow

Control

ShipmentsShipments

SuppliersSuppliers

Supplier

Management

Supplier

Management

Suppliers:

Mills

Intermediate

Processors Prototype

Services

Suppliers:

Mills

Intermediate

Processors Prototype

Services

Market:

Regulations

Increasing

More Standards

Supplier Market

Cost Pressures

Market:

Regulations

Increasing

More Standards

Supplier Market

Cost Pressures

Order

Management

Order

Management

GovernmentGovernment CommercialCommercial

Special

Requirements

Special

RequirementsSpecial

Requirements

Special

Requirements

Master

Schedule

MasterSchedule

CapacityCapacity

Lead TimeLead Time

InventoryInventory

FlowFlow

Supply Chain: A Forging Supplier


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1027 NAPM 6

Supply Chain: Travel Service

Customers:

Corporate

Individuals

On-Site

Customers:

Corporate

Individuals

On-Site

OrdersOrders

Order QualityOrder Quality

Order

Fulfillment

Order

Fulfillment

Suppliers:

Travel Related Direct Providers

Software

Suppliers

Suppliers:

Travel Related Direct Providers

Software

Suppliers

Market:

Dynamic

Cost Drivers

Buyers Market

Time Sensitive

Regulated

Market:

Dynamic

Cost Drivers

Buyers Market

Time Sensitive

Regulated

Order

Management

Order

Management

CorporateCorporate

Order

Acknowledgement

and Billing

Order

Acknowledgement

and Billing

IndividualIndividual On-SiteOn-Site

OptionsOptions


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1027 NAPM 7

Injection Molding Supply Chain

ResinsSupplier

Mold/Die

Maker

CapitalEquipment

Manufacturer

In-boundLogistics

In-bound

Logistics

Plant

(PlasticsManufacturer)

InterplantMovement

AssemblyOperations

Supplier(Plastics

Manufacturer)

Transport

ContractorTransport

Distribution

Centers

Customer/Integrator

Dealer

EndUser

EndUser

Outbound

Logistics

Packingand

Packaging

DistributionOperations


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1027 NAPM 8

The Challenges of Supply Chain Measurement

I Little research

I Few tools

I Some items difficult to understand

I Disparate coverage


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1027 NAPM 9

Supply Chain Measures

1. Costs Total Costs of:

I Purchase Price

I Transportation

I

Payment TermsI Tooling


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1027 NAPM 10

Supply Chain Measures (contd)

2. Delivery Total Lead Time of:

I Forecasting

I MPS / MRP Planning

I Order Placement

I Supplier Lead Time

I Transport Time to Buyers Plant

I Inspect Time

I Time to Stock or Deliver to Point

of Use


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1027 NAPM 11

Supply Chain Measures (contd)

3. Quality Total Quality Levels Based On:

I Incoming Quality

I In-Process Quality

I At Final Inspection and Test

I Field Failure


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1027 NAPM 12

1. Quantity:

2. Number of orders:3. Unit price:

4. Cash discounts (percent):net unit price

ReducesCosts

5. Freight costs:Freight Cost / Avg. # units per order

(#1/#2) = Freight Costs per unit

IncreasesCosts

6. Payment period:Days after shipment receipt; annualinterest rate;

ReducesCosts

7. Tooling costs:

Tooling price / # of units in useful life

Increases

Costs

Total Cost Analysis


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1027 NAPM 13

8. Cost of rejects per formula:

% cost of poor quality:Increases

Costs

9. Transit inventory: (for FOB plant)Transport time:

= total avg. transport time X 1.08 (interestrate) X 1.03 (holding cost) X purchase

price/ 250 work days

IncreasesCosts

10. Inventory carrying costs:Annual interest rate 10%Days inventory held by vendor

Total inventory carrying cost

IncreasesCosts

11. Ordering cost:Ordering cost per POTotal ordering cost/unit

IncreasesCosts

Total Cost Analysis (contd)


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1027 NAPM 14

Total Cost Analysis (contd)

12. Customs and duties:Percent costs and fixed rate

Total costs/unit X unit price

IncreasesCosts

13. Delivery performance (expediting,shortages, safety stock)

IncreasesCosts

> 99% 1%

> 98% < 99% 2%

> 97% < 98% 3%

> 96% < 97% 4%

> 95% < 96% 5%

> 94% < 95% 6%

> 93% < 94% 7%> 93% 15%

14. Total Cost

(Probably20-30% ofunit price or

more)


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1027 NAPM 15

P. O. CostP. O. Cost

P.O.Issue (Fax, Hard-copy, EDI, e-commerce/Internet)

$25 - 75 / P.O.

Purchase

Cost

Purchase

Cost Activity CostActivity Cost Total CostTotal Cost

Product / ServiceLaborMaterial

OverheadG & AProfit

Tooling Maintenance

Training Packaging Custom / Duties Freight

Advance Payment( +) Early payment

discounts (-)

Quality Costs (+) Delivery Costs (+)

expeditingsecond source

Inventory Carrying Cost

buyer (+)supplier (-) Transit inventory (+)

Another Way to Evaluate Total Costs: By Activity

++++ ++++ ====


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1027 NAPM 16

The Major Components of Lead Time

Design andDevelopment

Design andDevelopment

First ArticleApproval

First ArticleApproval Forecasting

Forecasting

Customer OrderManagement

Customer OrderManagement Scheduling

SchedulingSupplierSupplier

IntegrationIntegration Test and

Approval

Test and

Approval Ship / DeliveryShip / Delivery

InternalInternal

InstallationInstallation ServiceService


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1027 NAPM 17

Supply Chain Total Cost Analysis

I [ Refer to Supply Chain Cost Model ]


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1027 NAPM 18

Supplier Lead Time

I Pre-manufacture / Service

I Manufacture / Service

I Post Manufacture


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1027 NAPM 19

Supply Chain Lead Time

I Pre-Manufacture

Development

Forecast

Tooling

First article

Beta-test


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1027 NAPM 20

Supply Chain Lead Time (contd)

I Manufacture

Supplier manufacturing

Buyer integration

Third party integrator


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1027 NAPM 21

Supply Chain Lead Time (contd)

I Post Manufacture

Distribution

Installation

Service


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1027 NAPM 22

Lead Time Analysis

Pre Manufacture/Service Operation Components On Critical Path

1. Forecast N

2. Tool Development Y

2a. First Article Approval Y

3. Master Scheduling Y

4. Material Control N

5. Material Lead TimeY

(unless supplier stocking)

6. ReceivingY

(unless drop ship)

7. Incoming InspectionY

(unless delivered to stock)

8. Delivery to Stockroom

Y

(unless delivered to point ofuse)

9. Kit Detail N

10. Deliver Material to Operation #1Y

(unless product delivered to

point of use)


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1027 NAPM 23

Manufacture / Service Operation

Key Process On Critical Path1. Y/N

2. Y/N3. Y/N

4. Y/N

5. Y/N

6. Y/N

Total Lead Time _______ Days

Each Process Has:# Minutes/Hours/Days

1. Set up time:2. Process time:

3. Queue time:

4. Move time:

Total Process Lead Time


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1027 NAPM 24

1. Transport Time to Customer

2. Customs Clearance

3. In Country Transit

4. Receiving Time

5. Inspection Time

6. Move/Time to Storage/Point of Use or Service

Total

Total Pre Manufacture/Service

Total Manufacture/Service Process

Total Post Manufacture/Delivery

Total Lead Time

Post Manufacture / Service Delivery


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1027 NAPM 25

Total Lead Time From One Client

Receive PO fromCustomer

Receive PO fromCustomer Production planmeetingProduction planmeeting

Confirmcomponent

delivery

Confirm

componentdelivery

Component 5Component 5 Component 4Component 4

Issue POs tosuppliers

Issue POs tosuppliers

Component 3Component 3

Component 2Component 2 Component 1Component 1 Sub assemblySub assembly


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1027 NAPM 26

Supply Chain Lead Time

I [Refer to the Supply Chain Model]


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1027 NAPM 27

Supply Chain Quality Elements

Sub-supplier

Quality

Sub-supplier

Quality

SpecificationsSpecificationsOrder

Communications

Order

Communications

Supplier

Manufacturing

Supplier

ManufacturingTransport

Quality

Transport

QualityIncoming

Inspection

Incoming

Inspection

Finished Goods

Inspection

Finished Goods

Inspection Field QualityField Quality

In-Process

Testing

In-Process

Testing

Supplier

Development

Supplier

Development


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1027 NAPM 28

The Quality Challenge

I Many measurable points

I Some points difficult to quantify

I No current total metric


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1027 NAPM 29

Evaluating Quality: Focus on a Few Key Items

I Average Supplier Quality

I Average First Pass

Yield (all products)

I Average Product Quality

Acceptable to Customer

Total Quality Metric

(these percentages can be

reduced to specific costs)

%

%

%

%


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1027 NAPM 30

Supply Chain Quality

I [Refer to the Supply Chain Model]


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1027 NAPM 31

Studying Your Supply Chains Performance

I Provides awareness of existing performance

I Early warning to potential problems

I Allows for cross-functional and cross-organizational teamwork

I Opens up dialog for continuous improvement

I Can lead to gap determination and action items for improvement

evaluating and seen 19.11.10

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