Logistics & Supply Chain Management ( all inclusive)

Quantities and variants are the most important factors influencing the selection of the type of production (operations typology) in production plants:

• One-off production: Product is manufactured only once (e.g. cruise ship, architect's house)
• Repeat production: Product is manufactured several times in the quantity "one" (e.g. sailing yacht, prefabricated house).
• Variant production; basic product with a wide range of variants (features), workshop production (e.g. machine building).
• Series production: Basic product in limited variants, automated production facilities (e.g. cars, furniture).
• Mass production: Highly automated production processes, no or only a few variants (e.g. vacuum cleaner, television)

Quantities and variants are also factors influencing the provision of services:

• Individual service: service completely tailored to the customer's expectations (e.g. consultancy, asset management).
• General Service business: Room to maneuver is much narrower. A customer enters a business that is tailored to the provision of services (e.g. department store, bank).
• Mass service: The process is planned in detail. The customer must adhere to the pre-planned interactions (e.g. ATM, call center, Internet services like online shops or e-banking).

Red: cruise ship

Green: wealth/asset management

Blue: washing machine

Purple: online banking

Automobile for private households

• Volume: Series production
• Variants-range: Standard product with variants
• Variants-structure: Multicomponent product with simple structure
• Variation in demand: small
• Visibility for customers: customer is aware of the production process

Book a trip around the world at a travel agency

• Volume: mass production/ one-off
• Variants-rage: product according to customer specification
• Multicomponent product with complex product with simple structure
• Variation in demand: high
• Visibility for customer: customer is aware of the production process

«[A] competitive factor is an influencing factor that decisively determines the success of a company. It must be actively analysed, planned and designed.» ) Magic Pentagon:

• Quality: Can be assessed by the customer.
• Speed: Shortest delivery time, crucial for the customer when price and quality are interchangeable.
• Reliability: adherence to delivery dates and delivery reliability.
• Flexibility: Responding to customer requests, adapting to new requirements in the short-term
• Cost: the most important factor, decisive for the success of the company

Competitive factors are interdependent, they can reinforce each other or create conflicting objectives.

• Reinforcement: e.g. quality + speed, cost + speed
• Conflict: Delivery time and delivery reliability <--> Cost, Quality <-->Cost

For many companies it is unrealistic to be able to treat all factors equally. Prioritizing individual factors is an obvious option:

• Cost leadership: Economy of scale, standard products Customers expect a low price
• Differentiation strategy: Unique features, high quality Customers are willing to pay a higher price
• Niche strategy: special products, customer-specific products Customers expect high flexibility

Blue = globus, coop = red , lidl = green

The SCOR model was developed with the aim of standardizing processes within a supply chain. Within the company, the focus is on "Make"

At its core, the SCOR model is an ideal, industrywide approach in which the processes within the supply chain are consistently described by the business partners. The SCOR model describes four levels. Each level below shows a detailed description of the processes at the higher level.

1.  Top level
2. Configuration level
3. Process element level
4. Implementation level

1. Plan
   1. Determine supply and demand structures
   2. Set requirements for production and sales
   3. Plan stocks, define materials, compare capacities
   4. Make decisions regarding make-or-buy as well as introductions and pruning/divestments (new products, end-of-life)
2. Source
   1. Compare procurement sources (security of supply)
   2. Goods receipt, quality control, storage, payment
   3. Supplier Certification
   4. Signing frame agreements (contracts)
3. Make
   1. Manufacture of goods requested
   2. Manufacturing process (engineering, quality assurance)
4. Deliver
   1. Satisfying customer demand
   2. Manage customer orders (order entry, invoicing, collection)
   3. Warehouse management (picking, packing, shipping)
   4. Goods distributed (fleet management, incoterms, freight forwarding)
5. Return
   1. Return of raw materials (to suppliers)
   2. Receipt of returned finished goods (from customers)
   3. Return of defective products or surplus articles (re-logistics)
6. Enable
   1. Process to manage…
      1. Business rules(practices)
      2. Performance (of the production processes)
      3. Data and information
      4. Personnel (human resources)
      5. Facilities and infrastructure
      6. Contracts with customers and suppliers, network management
      7. Regulatory compliance
      8. Risk management
      9. Introduction and use of technology

On the second level, the configuration level, the process areas of the first level are broken down into process categories. The process categories can be divided into three process types.

• Planning
  • Planning of the entire supply chain
  • Definition of the planning horizon
  • Design of the planning processes
• Execution
  • Execution of planned activities
• Infrastructure
  • Creating the prerequisites to realize the planning and execution
  • Information processing and data management (maintenance)

On the third level, the process element level, the process categories are broken down into process elements. The focus is on the definitions of these process elements and the determination of input-output relations for each process element as well as key metrics for measurement (KPIs=Key Performance Indicators), see table).

1. Identify processes already in place
2. Analyze processes
3. Optimise process
4. Document new processes
5. Execute process, communicate and train the people on the new processes

Some goods are not produced until a corresponding customer order has been received. Others are produced on a forecast basis in order to be available from stock from a potential customer. The goal is to keep delivery times for customers as short as possible.

• Customer decoupling point
  • Point is determined by market requirements and products structure
  • Everything is prepared or produced that is not customer-specific
  • Is the start of the order throughput time (customer order-specific process)
• Make-to-Stock: e.g. food
  • Standardized products as finished goods in stock
  • Forecasts determine production volume: secure supply and optimized inventories
• Assemble-to-order: e.g. automobile manufacturing from standard parts
  • Individual parts and assemblies on the basis of forecasts
  • Components are processed into a customer-specific product on a sales order basis.
• Make-to-order: e.g. tooling machines
  • The first production steps take place after receipt of the customer's order,
  • Few selected key components, mostly with long delivery times
• Engineer-to-order: e.g. construction of equipment or ships
  • Product development only begins with the customer's request, high number of variants of the products
  • Raw materials and components are defined and procured

The customer decoupling point determines the planning and control procedure.

If the order lead times are too long: Shift decoupling point to the right

• reduction of waiting and holding times or the storage of semi-finished products.
• postponement: The product is designed in such a way that the customer-specific configuration of the product does not take place until final assembly, shortly before the delivery date.

When order lead times are shorter than expected: Move decoupling point to the left

• stock less material and produce only when needed, cost reduction through lower stock levels
• offer customers shorter delivery times in order to gain market share
• Load-levelling in own production

Differences in comparison to goods: Some goods have more than 1000 components (items in the bill of materials), services have only a few separately-planned partial services; services can rarely be "stored". Uncertainty, arising from the customer as an external factor directly involved in the provision of services (large fluctuations in the requirements over time). The decoupling point lies between the final combination and the customer’s participation (passive or active).

• Point determined by the degree of activity of the customer
• Plannability depends on the distribution of the service provision from pre- through the final combination

Three influencing factors must be combined: Capacity, commitment and level of customer involvement (external factor). 

Two-stage production process

• Combination: Object-related service provision, including the customer (simultaneity)
  • Capacity must be available:
    • sufficiently-qualified employees are freely available
    • suitable equipment and tools are available for access
• Pre-combination: establish the ability to perform, without involving the customer
  • Preparatory activities (e.g. preparing hotel rooms for the next guest)
• Services with standardized final combination: e.g. going to the cinema, using automated tellers (ATMs)
  • The customer can only decide whether he wants to buy the service or not.
  • Service provider provides forecast-related capacity.
• The service required per sales order is always the same. Services with customer-specific combination, passive participation of the customers: e.g. visit toa doctor or hairdresser
  • Service provider has full control over time, which leads to a high planning security
  • The scope of services is, however, very different
• Services with customer-specific final combinations, active customer participation: e.g., Advisory service provided by banks and insurance companies.
  • Customer actively involved in the service expresses additional wishes and asks questions
  • Large fluctuations over time, depending upon the customer
  • Extreme case: pre-combination consists of only technical, methodological and social skills, which are employed as a part of the final combination to be provided, e.g. management consulting.

Assemble-to-Order: e.g. automobile manufacturing from standard parts

– Individual parts and assemblies on the basis of forecasts

– Components are processed into a customer-specific product on a sales order basis.

Services with customer-specific combination, passive participation of the customers: e.g. visit toa

doctor or hairdresser

– Service provider has full control over time, which leads to a high planning security

– The scope of services is, however, very different

Depending upon order type for goods and services, different planning procedures must be used. The order type can be differentiated according to the following characteristics:

• How requirements are planned
• Procurement methodology
• The control of resources
• The methods of planning and control

The morphological boxes provide an overview of planning procedures.

The funnel model represents a queuing system (e.g. single workstation or complete production)

The system describes the throughput behaviour on the basis of

• Incoming (new orders)
• Inventory(waiting orders)
• Output (completed orders)

Funnel formula

• Performance (pm) = cross section of the lower opening of the funnel
• Quantity of incoming orders > output -> average inventory (im) rises
• Increase of waiting orders -> average throughput (tptm) rises
• Throughput time and inventory are proportional to each other

The relation between throughput times and inventories as the basis for the successful management of companies: low inventories -> short throughput times -> low warehousing costs

Flow diagram for the analysis of Incoming and Output behavior, detection of load irregularities. Each step of the input curve shows the date of receipt and the quantity of work (labor) required:

• Incoming orders, including the required hours of work, are recorded cumulatively on the date of receipt.
• Completed operations including hours worked are recorded cumulatively on the date of dispatch.
• An increase in the output curve characterizes the average performance of the work system.
• The time span between the input and output curves indicates the average order lead-time.
• The separation on the work (labor) axis shows the fill level in the funnel and, thus, the order backlog.

Challenges for companies:

• A large number of dependent "funnels" or work systems with different performance and capacities, which must be planned and controlled.
• The performance of the individual work systems must be coordinated with each other.

The funnel model can also be applied to services:

• Queues at counters (SBB, post office, supermarket)
• Application processing at an governmental agency or insurance company (the higher the pile of applications, the longer the processing time)
• Constant input is rather rare. Customer volume considerably influences the throughput time.

125000 / 26= 4807.6923

52 weeks/ 2

It is plausable.

MRP (Material Requirements Planning)

• Functions for calculating requirement dates
• The starting point is the planned availability date for the finished product.
• Demand planning and scheduling of raw materials, parts, assemblies and final products
• Demand is planned with the help of a Bill of Materials (BOM).

MRP II (Manufacturing Resource Planning)

• Builds upon the functionality of MRP
• Capacity considerations also for work centres
• Order scheduling and monitoring order progress
• Inclusion of upstream planning stages: Production program management (sales forecasts and sales order management), purchasing and materials planning

PPS (Production planning and control)

• Extension of MRP II with further functional areas
• Warehousing: inventory management, checking and recording of receipts and issues, valuation (stock value)
• Procurement (purchasing): order planning, order proposals, order time, order monitoring
• Material requirements planning: BOM explosion, gross and net requirements calculation
• Evaluations: ABC analyses, consumption statistics (as a basis for demand forecasts)
• Production planning: Scheduling, capacity levelling (date shifts of available capacities)
• Production control: order release, sequence planning, quantity and deadline monitoring, quality assurance $

ERP (Enterprise Resource Planning)

• Enhancement of PPS with functionalities of business software
• Integration of accounting, controlling, human resources, etc. (modular structure)
• Planning and execution of production orders through to delivery of finished products and invoicing

MES (Manufacturing Execution System)

• Production control or production management systems
• Digital transformation of production, industry 4.0, Internet of Things (IoT)
• MES connects the ERP system with the various process(-equipment) automation systems
• Information exchange in real time
• Continuous production data acquisition (PDA), machine data acquisition (PDA) and personnel data acquisition

ERP standard software for companies

Enterprise Resource Planning (ERP)

• ERP system - standard software for companies. Planning and control of company resources such as materials, machines, IT, personnel, capital
• ERP system = Enterprise Resource Planning system

Definition: «ERP for Enterprise Resource Planning; cross-departmental software solutions that control and evaluate business processes, e.g. in production, sales, logistics, finance and human resources. An ERP system is characterized by the uniform control of the various business areas. This makes it a useful controlling and steering instrument. Newer ERP systems can also be used to control and evaluate external business processes.».

Operation Management is planning and operation of operations process for creating goods or services and include the economical ensuring in the long term , further develop existing processes and structures.

Daily operations only include day-to-day decision making based on the strategic guidelines and the execution of plans and monitor performance.

It includes operational, tactical and strategic level and is a transformational process. Products and services are transformed into higher-value products and services

An operation strategy is a sub-strategy of the corporate strategy and following approaches can be distinguished;

• Benefit-oriented approach
• Market oriented approach
• Product- and service-oriented approach
• Competitive approach

Quality, Speed, reliability, flexibility and cost.

Quantities and variants are the most important factors influencing the selection of the type of production ( operations typology) in production plants

1. Top Level
2. Configuration Level
3. Process element level
4. Implementation Level

1. Plan supply and demand structure, stock and capacity
2. Source goods receipt, quality control, supplier certification…
3. Make goods requested
4. Deliver customer orders
5. Return of raw materials, finished goods, defective products
6. Enable processes to manage

1. Planning entire supply chain, definition of planning horizon and design of planning processes
2. Execution of planned activities
3. Infrastructure, creating the prerequisites to realize the planning and execution, information processing and data management.

Customer decoupling point refers to the point in the value chain at which a customer triggers the production activities. This point is determined by market requirements and product structure. Everything is prepared or produced that is not customer specific. Is the start of the order throughput time ( customer order-specific process). Some of those approaches are called

• Make-to-Stock e.g. food standardized products as finished goods in stock
• Assemble-to-order e.g. automobile manufacturing from standard parts. Components are processed into a customer specific product on a sales order basis.
• Make-to-order e.g tooling machines. The first production steps take place after receipt of the customer's order
• Engineer-to-order e.g. construction of equipment or ships. Raw materials and components are defined and procured

Tptm= im/pm

Increase of waiting orders = quantity of incoming orders (average inventory) / performance(completed orders)

It tells us how long on an average you need to wait till a specific amount of new order is processed to output.

• Production on order with individual orders
• Customer-anonymous pre- and order- related final production
• Make-to-stock