IELM4200
Basics of Supply-Chain
Management
IELM 4200, Fall 2011
Dr. Emily Au
Dept. of IELM, HKUST
Note02: Basics of OM
1
What is a supply chain?
• A supply chain is a goal-oriented network of _________ and ____________ used to deliver goods and services to customers.
Fundamental activity: flow of entities through processes
Note02: Basics of OM
2
Key performance measures
•
Throughput (TH): the rate at which entities are processed by the system.
•
Work in Process (WIP): the number of entities in the system, which can be measured in physical units (e.g., parts, people, jobs) or financial units (e.g., dollar value of entities in system).
•
Cycle Time (CT): the time it takes an entity to traverse the system, including any rework, restarts due to yield loss, or other disruptions.
Note02: Basics of OM
3
Part I:
TH, CT and WIP
Note02: Basics of OM
4
Little’s Law
• Over the long-term, average WIP, TH, and CT for any stable process are related according to:
• A simple example:
Consider a firm’s accounts receivable. Suppose that the firm bills an average of $10,000 per day and the customers take 45 days on average to pay. Then what is the total amount of outstanding accounts receivable on average?
Note02: Basics of OM
5
TH, CT and WIP
• What do we want (high or low)?
– TH
– CT
– WIP
Note02: Basics of OM
6
The Philosophy of “Just In Time”
• “WIP is the root of all evil.”
– Increase material handling cost
– Reduce cash flow
– Preventing continuous improvement
Note02: Basics of OM
7
Push vs. Pull
• Push system: customers • Pull system
customers
Note02: Basics of OM
8
JIT and Pull system in practice
• Global Fulfillment Network in Dell
Note02: Basics of OM
9
Kanban Systems
• Purpose of a Kanban System
1.
2.
3.
4.
Authorize production
Authorize movement.
Limits amount of inventory in the system.
A tool for driving continuous
Management
IELM 4200, Fall 2011
Dr. Emily Au
Dept. of IELM, HKUST
Note02: Basics of OM
1
What is a supply chain?
• A supply chain is a goal-oriented network of _________ and ____________ used to deliver goods and services to customers.
Fundamental activity: flow of entities through processes
Note02: Basics of OM
2
Key performance measures
•
Throughput (TH): the rate at which entities are processed by the system.
•
Work in Process (WIP): the number of entities in the system, which can be measured in physical units (e.g., parts, people, jobs) or financial units (e.g., dollar value of entities in system).
•
Cycle Time (CT): the time it takes an entity to traverse the system, including any rework, restarts due to yield loss, or other disruptions.
Note02: Basics of OM
3
Part I:
TH, CT and WIP
Note02: Basics of OM
4
Little’s Law
• Over the long-term, average WIP, TH, and CT for any stable process are related according to:
• A simple example:
Consider a firm’s accounts receivable. Suppose that the firm bills an average of $10,000 per day and the customers take 45 days on average to pay. Then what is the total amount of outstanding accounts receivable on average?
Note02: Basics of OM
5
TH, CT and WIP
• What do we want (high or low)?
– TH
– CT
– WIP
Note02: Basics of OM
6
The Philosophy of “Just In Time”
• “WIP is the root of all evil.”
– Increase material handling cost
– Reduce cash flow
– Preventing continuous improvement
Note02: Basics of OM
7
Push vs. Pull
• Push system: customers • Pull system
customers
Note02: Basics of OM
8
JIT and Pull system in practice
• Global Fulfillment Network in Dell
Note02: Basics of OM
9
Kanban Systems
• Purpose of a Kanban System
1.
2.
3.
4.
Authorize production
Authorize movement.
Limits amount of inventory in the system.
A tool for driving continuous