Tuesday, 26 July 2016

The Supply Chain “Game” Plan: What are the implications for planning and controlling the supply chain as a whole?

Poor coordination results in a supply chain that experiences amplification of changes in demand from upstream, known as the bullwhip effect.  While the demand at the tills may stay the same, the demand on the suppliers is uncertain and unstable.

To cope, the manufacturers can hold back the stocks. Inventory levels will be inconsistent and the supply chain as a whole will feel the impact. There are four causes of the bullwhip effect that are most common:

·         Updating demand forecasts
·         Order batching
·         Price changes
·         Rationing and shortage gaming

Controlling and planning the supply chain requires coordinated material flows over the complete supply chain. Attention to detail, planning and execution is required. The supply chain needs to be coordinated to work harmoniously across each and every party.

Monday, 25 July 2016

The Supply Chain “Game” Plan: What are the key steps in planning and executing material flow and information flow between partners in a supply network?

A focal firm positioned in a network can have multiple connections with lots of supplier and customer companies. Demand for upstream processes can be random and it is independent as it’s not affected by the actions of the focal firm. Dependent demand is fixed by the firm’s actions.

One of the ways the question of how many parts to make is answered has traditionally been to reference the economic batch quantity formula. The same type of principles is also used to determine how many parts at a time to order in economic order quantities. These are known as the EBQ and EOQ respectively and both assume that the parts are used uniformly and the other batch is ordered when the stock falls below the re-order point.
There’s a buffer tick line that lies below the reorder level. The buffer stock is a safety net that will cushion any variables in demand and the lead times. Therefore, the reorder point includes the buffer stock and the forecast demand.

Saturday, 23 July 2016

Chit Chat: What is Performance Goal and what are the specific/measurable goals?

Performance goals are statements that describe the things an employee needs in order to contribute to the success of the business. The statements normally describe the results that are required rather than how the goals will be achieved.

There isn’t a right format that is used for performance goals. There are different ways of writing goals but the wording used is usually a balancing act. The goals should be as specific as possible as this means the manager and employee will have a common and shared understanding about what the performance goals mean.  Generalising performance goals opens up opportunities for confusion and misunderstanding.

Specific goals are needed and the goals need to be measured. However, there isn’t any measurement criterion that can be applied to determine if the goal is met. We also want to include a criterion that can be used to measure if the employee has been achieved the goal and if the end of month report has been submitted.  The balancing act is that specific goals can narrow down the goals as they are so specific, so when using very specific goals there needs to be many different goals included to ensure all goals are met. The problem is, setting so many performance goals can be time consuming and frustrating.

Friday, 22 July 2016

The Supply Chain “Game” Plan: What are the key steps in planning and executing material flow and information flow within the focal firm?

The three key steps in planning and executing material flow and information flow within the focal firm are as follows.

  • Long term – Supporting decisions regarding capacity provision. These strategic decisions answer how much capacity is required, when it’s needed and what type of capacity is needed.
  • Medium term – Matching supply and demand with plans that are refreshed each month.
  • Short term – day to day demands are met. This may involve making weekly production plans and there could be multiple changes that may have an impact on the medium term planning.
An MPC system includes the front end section that matches demand and resources. The front end modules can be summarised into demand management, resource planning, sales and operations planning, master production scheduling and material and capacity planning.  The back end of the MPC execution system is the outputs from the material and capacity plans are instruction sets for the suppliers, manufacturing, and distribution. The schedules are in various forms such as purchase orders and work orders and shipping orders.

Thursday, 21 July 2016

How can logistics costs be better represented?

Here are three examples of how logistics costs can be better represented.

One of the best ways to describe logistic costs is by using different methods of allocating costs to products. The purpose of the variety of allocations is to learn more information about the cost base of logistic operations and to help make better decisions.  An example of this is DPP, direct product profitability, which tries to allocate logistics costs of products by considering how they use the fixed resources.  Another method is converting the discretionary costs such as the product availability into engineering costs.

ABC, activity based costing works to understand the factors that drive costs and also how the costs are incurred by the logistics processes across the supply chain and the organisation. This is a process based view of costing that works to improve decision making in logistics.

Past methods of financial measures aren’t suitable for modern logistics decisions as logistics is a lot faster than it once was. The balanced measurement portfolio is required, one that takes into account all the needs of the various stakeholders in the business. The balanced measurement portfolio is also extended over the supply chain with the supply chain operations reference model.

Wednesday, 20 July 2016

What is the “value” in the context of the supply chain?

Here are three examples of value in the context of the supply chain.
  1. Return on investment (ROI) is used to measure the shareholder value. The ROI encourages the logistics management to stay on top of costs, working capital and fixed assets.
  2. Logistics is becoming more concerned with the flow of funds and the flow of materials and information.  Logistics is cross-functional and it addresses the various management processes of plan, source, make, deliver and return.  These processes are repeated over the supply chain.
  3. The traditional cost accounting isn’t useful for logistic decision-making. The reason for that is because it’s not sensitive to the processes and cost drivers. The traditional cost accounting has a tendency of understating profits on the high-volume products and also overstates the profits on the low-volume/high variety products.

Tuesday, 19 July 2016

Supply chain operations reference model (SCOR): What are the five distinct management processes and the three levels of SCOR model?

The five distinct management processes of the three levels of SCOR model are:
  1. Plan: This process is planning demand and supply based in a system that will include activities including but not limited to resource planning and long term capacity.
  2. Source: The process of acquiring materials using a sourcing system that includes various activities including vendor certification and contracting.
  3. Make: The process of executing production using an overall production system. This includes activities such as shop scheduling. Value added activities are also included under this type of process too.
  4. Deliver: This includes all the day-to-day task of management, includes managing demand, warehousing, transportation, orders, commissioning, and installation. These activities are set within the overall delivery management system and it will include rules and management of delivery quantities.
  5. Return: Returning the goods that need to be repaired, replaced or the materials need to be recycled.
The three levels of the SCOR model are:
  • Level 1: A wide definition of the plan, source, make, deliver and return management processes that are then used to establish the competitive objectives.
  • Level 2: Defining the core process categories that could be scenarios of a supply chain – for example, making to order, engineering to order.
  • Level 3: Provides the process breakdown that is required to describe each of the elements that comprise the categories of level 2. This is the level where performance metrics are established.

Monday, 18 July 2016

A balanced measurement portfolio: Balancing the needs of all stakeholders. - How can a balanced set of measures of performance be developed in order to address stakeholder satisfaction and stakeholder contribution?

Balancing the need of the stakeholders is important, but so is the need to balance the financial and operational measures of performance and between history and the future.  The traditional cost accounting systems have shortcomings as they’re focus more on the needs of the stock market. Modern systems need to have a better balance between financial and operations and the history and future.  Creating a modern performance measurement system is needed to find the balance.

Supply chain management and balanced scorecard

A cross supply chain measures need to have the following characteristics:

·         Be easy to understand
·         The total number not to exceed 10
·         Representative of an important casual relationship
·         Have an associated target
·         Can be shared over the supply chain

Eight measures that meet the characteristics above are:

  1. On time in full, outbound – measures the fulfilled customer orders that are complete and on time and that conform to the specification
  2. On time in full, inbound – measuring the supplier deliveries are received, fully complete and on time that conform t o the specification
  3. Internal defect rates – measure of the process conformance and control
  4. New product introduction rates –  measure of the responsiveness of the supply chain when new products are introduced
  5. Cost reduction - measure of the process improvement and the sustainable product
  6. Stock turns – measure of the goods flow in the supply chain
  7. Lead times – order to delivery – measuring the responsiveness of the supply chain
  8. Financial flexibility – measure of how simple it is to structure the supply chain for financial gain

Saturday, 16 July 2016

Chit Chat: Fashion Industry: What is the Colour Forecasting Methodology?

Forecasting methods different between different fashion editors that all work to predict what the desires of the customer will be through observing behaviour and mood. The basic forecasting methodology has never been explained fully. The processes involved are often shared but the methodology of each of those processes has not been described.

There’s a set criteria for the colour combinations, amount of colours and the illustrations that are being used to explain the story. Brain storming is a vital part of the process as it’s used to identify the natural evolution of fashion but there’s no recording to show how this is achieved. The forecasters like to focus on the evolution of colour and how colour changes from season to season. This information is then shared with the yarn and fabric and fibre manufacturers as the new colours that are coming have to harmonise with the current wardrobe so they can be successfully mixed and matched to promote sales.

Commercially, colours need to change dramatically in order to update the new season looks, but not too fast so that consumers can afford to replenish their wardrobes. Colour forecasting has to work together with the sales data and a colour forecasting tool so their consumer demands are accurately met.

It might be possible to create a scientific methodology to be used to train upcoming colour forecasters using three key areas: exploration, evaluation and analysis and gathering all this information together into a concept of fashion marketing.

Friday, 15 July 2016

A balanced measurement portfolio: Balancing the needs of all stakeholders. - Who are the key stakeholders in a business, and what needs to be achieved in order to satisfy them?

Balancing the needs of all stakeholders is necessary. There can be multiple stakeholders including the employees, customers, suppliers, government, community and the shareholders. Balancing the needs of all stakeholders is necessary. The interest of each group varies.

  • Shareholders generally have a passing interest in the company. They usually keep their shareholding providing they see a competitive return on their investment. They like high dividends, profitability and the business growth.  Failure to see a return will see the shareholders turn against the management.
  • Employees will generally have a long term commitment and they care about job stability, satisfaction in the job and competitive wages.  If their goals aren’t met, they may feel negative about the company, lack motivation and recruitment may prove to be problematic, industrial action may also be taken.
  • Customers are extremely important as it is their demand that pulls materials through the supply chain. Customers have freedom of choice and so may choose to buy elsewhere if they’re not happy.
  • Suppliers care about benefits such as being paid on time, long term business and being involved in the development of new products. Higher prices, delays in the supply and sanctions are a result of unhappy suppliers.
  • Local community is interested in the company as they’re a local employer. Any problems regarding long term commitments to the region and civic responsibility can lead to environmental disputes and problems getting planning permission.
  • The government is interested in the company as they create value in the economy and their contribution to employment and as a revenue source. Failing to meet the laws of the government could lead to prosecution and the business closing.
Balance is required in order to manage the potentially conflicting interests of each of the stakeholders.