7 supply& capacity management -1

8/2/2019 7 Supply& Capacity Management -1

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SUPPLY & CAPACITYMANAGEMENT


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Strategic Supply

Focus

Choose customer groups and market segment

Core competency Outsource non core areas

Buyer Supplier relationship

Concerns

Political effects of outsourcing

Vertical Integration


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such suppliers become much more significant

players and may be expected to employ more

sophisticated management skills, rather thansimply doing what they are told. SysInteg ?

No or very limited direct labor. Virtualorganisation ?


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Supply bases

Supplier Base

Large and powerful Small and fragmented: numerous

Tiers in supply

First tier

Second tier

Rationalization of suppliers


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Tiers in Supply

Logical Basis ?

Value wise?

Quantity wise? Size wise?

How many?

Rationalise


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Supply Policy and Strategy

Controlling Policy

Acceptable to lose one or

two suppliers Subcontracting

Cost

Competitive

Collaborative Policy Small number of

specialized suppliers

Outsourcing

Differentiation


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Sourcing matrix (Kraljic)

EnsureReliablesupply

Critical Co-operate

Autobuying,

stockcontrol

Subcontractcompletely

Cost

Importance


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Purchasing role

Passive Not strategic, reacts

Independent use of techniques, practices

independent of competitive strategy Supportive - co work to strengthen

competitive position

Integrated Part of strategic plan


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Strategic Capacity Planning

To achieve a match between long term supply

capabilities and predicted level of long term

demand

Changes in demand

Changes in technology

Threats and opportunities

What, When, How much


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Capacity Strategic

Future Demands

Affect operating costs

High initial cost Long term commitment

Affect delivery speed, competitiveness

Globalisation


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Capacity management

Transformation of inputs

Hard and Soft systems

Effective & efficient utilisation Operations - Capacity Planning, Master

Scheduling

Process - Production control, Loading

Flow of inputs has to be smooth


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Definition & Measurement

Limitation on capacity

Designed capacity

Effective capacity Actual capacity

Efficiency = Actual output/effective output Utilisation = Actual output/design capacity


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Effective Capacity

Facilities

Design

Layout Location

Environment

Product/Service

Design

Mix


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Process

Quantity

Quality Resources

Job design

Training

Motivation

Compensation


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Management Policy

Operation

Scheduling Materials management

Maintenance

Supply chain

External

Standards

Safety


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Capacity Challenge

Demand of Product/Service - Size

Range/ Type of Product/ Service - Scope

Volume Total demand of output

Variety Range of output

Variation Change in total demand Variability Change in demand for range


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Formulation

Growth rate & variability of demand

Cost of operating facilities

Technology change Competitors

Availability of capital and resources


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Amount of capacity

Timing of change

Balance through the system Flexibility of facilities and workforce


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Capacity Alternatives

Design flexibility

Stage of life cycle

Systems approach


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Service capacity

Close to customers

Inability to store

Degree of volatility Demand Management strategy

Supply Management strategy


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Location Decision

Optimize on Total Cost, which comprises of

Transportation of raw materials

Labor cost Rental for facility and warehouse

Transportation of FG to warehouse, andwarehouse to market

Taxes


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Managing Capacity

Maintain fixed capacity - utilisation

Chase demand

Vary the resource - demand forecast

Capacity leads demand Proactive, Risky?

Capacity lags demand Reactive Capacity averages demand


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Demand smoothing, level production

Chase demand

Demand management


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Order Scheduling

First Come First Served

Earliest Delivery

Least Slack Time Shortest first operation

Shortest last operation

Critical Ratio: (Due In time) / (Process time)


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Throughput is governed by the capacity of

bottleneck

Balance material flow rather than keep theresources fully occupied

Increase in the output of non bottleneck does

not increase the output of the system


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Capacity Management through

Scheduling Managing Bottleneck

Balance flow, not capacity

Keep the process batch size as variable Transfer batch vs. process batch

Lead times cannot be known before scheduling

Hence scheduling is iterative

Schedule considering all constraints simultaneously


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Thank You

7 supply& capacity management -1

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