BA EXAM 2Order Fulfillment Decisions1. What should we produce or purchase2. How much should we produce or purchase3. Where should we position the productAnticipatory Order FulfillmentDemand is supported by deploying inventory in anticipation of projected sales levels and locationEconomic Order Quantity Model (EOQ)1. EOQ balances fixed order costs against inventory carrying costs to determine least-costs order frequency to determine optimum order quantity.2. Can be modified to accommodate volume transportation rates & purchase quantity discounts3. IGNORES VARIANCELTLead TimeDDDaily DemandROPLT x DD + SSSSSafety StockSynchronization of activities through shared informationOne set of numbers and one schedule for the entire supply chainProcess ReengineeringSimplifying and reshaping the organizational processes with the goal of achieving the desired outcomes at less cost and in shorter time frames.Impact of Shortened Order/Set-up CostsReduction in ordering or setup costs drives lower total cost at lower order quantityReduce process and network complexityLess handling, Less materials, Ask why things are the way they are.Performance cycle acceleration and postponementKeep a product as a generic work in process as long as possible to allow flexibility and to ensure the right product is at the right place at the right timeUse appropriate metricsBusiness performance reflects customer responsivenessLean Order FulfillmentReduce uncertainty by managing demand and order cycle time varianceReduce uncertainty by managing demand and order cycle time variance1. Synchronization of activities through shared information : One set of...2. Process Reengineering : Simplifying and reshaping the organizational...3. Supplier partnerships/delivery lead time and variance reduction, quality...BA EXAM 24. Reduce process and network complexity : Less handling, Less materials, Ask...5. Performance cycle acceleration and postponement : Keep a product as a...6. Use appropriate metrics : Business performance reflects customer responsivenessLean vs. Agile1. Lean : Containing little fat2. Agile : NimbleLean : Containing little fatWorks best in high volume, low variety and predictable environmentsAgile Fulfillment1. Eliminate uncertainty by postponing form and/or time and...2. Agile supply chain is market sensitive meaning it is...3. Key Techniques for Agility4. Customer focus vs. Product focus5. Cross functional and cross organizational process integration6. Leveraging relationship7. Information visibility8. Postponement: the process which the commitment of a...Agile : NimbleNeeded in less predictable environments where the demand for variety is high- Postponementthe process which the commitment of a product to its final form or location is delayed for as long as possibleKanbanAs one product is sold it is replacedHybridSeek to reduce lead time, Postpone the distribution of the productGoal of HybridBuild an agile response upon s lean platform by following lean principles to the decoupling point and agile after the decoupling pointExamplePaint manufacturersLeanprovide few base colorsAgileAble to mix any color on demandTime Based CompetitionTime  MoneyCustomer’s Perspectivethe elapsed time from order to delivery (Order to Delivery cycle)GoalBA EXAM 2Reduce the length of the pipeline and/or speed up the flow through the pipeline (Longer pipelines obscurethe visibility of end demand so that it is difficult to link manufacturing and procurement decisions to marketplace requirements)Time Based Competition: Time Money1. Shortening Product Life Cycles (PLC)2. Customers’ drive for reducing inventories3. Volatile markets = Uncertainty = High forecast errorShortening Product Life Cycles (PLC)1. Less time available to develop new products, to launch them and to meet marketplace demand2. Getting into the market late means less time to make a profit and higher risk of obsolescenceCustomer’s Perspective: the elapsed time from order to delivery (Order to Delivery cycle)1. 6 Steps2. Order preparation and transmittal3. Order received and entered into system4. Order processing5. Warehouse picking and packing6. Transit time7. Customer receivingCustomers’ drive for reducing inventories1. Firms are focusing on reducing inventories to release capital locked up in inventory and holding costs2. The supplier must SUBSTITUTE RESPONSIVENESS for INVENTORY whenever possibleVolatile markets = Uncertainty = High forecast error1. Forecasting is always wrong2. The longer the forecasting horizon, the worse is the forecast3. Aggregate forecasts are more accurate4. If a firm could drive lead time to zero, it would forecast only next day sales5. The response is to increase safety stock to provide protection against errors6. The real target is to reduce lead time as much as possible at every stage in the pipelinePipeline Management1. Value added time (VAT): The percent of the total cycle time that a product is actually workedon2. Non-Value added time (NVAT): The percent of the total cycle time that a product may spendwaiting, being moved, or...BA EXAM 23. Goal: Reduce the length of the pipeline and/or speed up the flow through the pipeline (Longer pipelines obscure the...4. Goals of Pipeline ManagementRamp up timeThe time it would take for the system to respond to an increase in demandDrain timeThe time it would take to drain the system of inventoryValue added time (VAT): The percent of the total cycle time that a product is actually worked on1. Provides form, place, or time utility2. Can be as little as 5% of the time3. Creates some benefit to the customerNon-Value added time (NVAT): The percent of the total cycle time that a product may spend waiting, beingmoved, or being inspected1. All the time that is not VAT2. Should be minimized as close to zero as possibleGoals of Pipeline Management1. Lower cost2. Higher quality3. More flexibility4. Faster response timesThe GAPsupply chain lead time – Customer’s required order cycle timeDrain time: The time it would take to drain the system of inventoryThe challenge is to find ways in which the ratio of value added to cost added time in the pipeline can be improvedLead Time Gap1. The time it takes to procure, make and deliver the finished product to a customer is often longer than the time the customer is prepared to wait for it.2. The GAP = supply chain lead time – Customer’s required order cycle time3. Reducing the gap can be achieved by shortening end-to-end pipeline time while