evaluating and seen 19.11.10
TRANSCRIPT
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George Harris, President781-674-0041
EVALUATING AND ASSESSING YOUR
SUPPLY CHAIN
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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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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)
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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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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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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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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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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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Supply Chain Measures
1. Costs Total Costs of:
I Purchase Price
I Transportation
I
Payment TermsI Tooling
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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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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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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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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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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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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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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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Supply Chain Total Cost Analysis
I [ Refer to Supply Chain Cost Model ]
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Supplier Lead Time
I Pre-manufacture / Service
I Manufacture / Service
I Post Manufacture
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Supply Chain Lead Time
I Pre-Manufacture
Development
Forecast
Tooling
First article
Beta-test
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Supply Chain Lead Time (contd)
I Manufacture
Supplier manufacturing
Buyer integration
Third party integrator
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Supply Chain Lead Time (contd)
I Post Manufacture
Distribution
Installation
Service
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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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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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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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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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Supply Chain Lead Time
I [Refer to the Supply Chain Model]
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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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The Quality Challenge
I Many measurable points
I Some points difficult to quantify
I No current total metric
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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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Supply Chain Quality
I [Refer to the Supply Chain Model]
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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