Supply Chain

The time needed to respond to a customer order.

The point at which the customer takes ownership of a product.

With McDonalds this is POS. With a custom made product, the decoupling point is probably at the beginning of construction.

firm that produces a fixed finished product with no customization.

e.g. McDonald's, Little Ceasars Hot and Ready pizzas

Preassembled modules are manufactured and customer selects which modules to include in the order.

e.g. Dell computers

Production does not begin until the customer has placed an order.

e.g. Boeing

Customer commisions a new product to be designed.

e.g. Government asks Northrop to build a new missle.

The total dollar amount of raw materials, work-in-progress inventory, and finished goods.

COGS/Average Inventory Value

The amount of goods that have been sold divided by the amount of inventory on hand. This is measured over time.

This is good for comparing to other firms, but not for performance.

It is roughly the number of times that you have to restock all of your inventory at the current production rate. In other words it is a measure of lean manufacturing.

The inverse of inventory turn multiplied by number of days.

This shows how many days worth of raw materials and WIP inventory a process has assuming no new raw materials.

e.g. if there is an inventory turn of 6 for a year, then days-of-supply is equal to 1/6 of a year or 61 days.

The long term average rate that items are flowing through the process.

e.g. 20 cars are produced an hour

How long it takes a product to go from raw materials to finished goods.

e.g. from start to finish it takes 3 days to make a car.

WIP inventory = Throughput rate x Flow time.

Formula for calculating how much inventory you have on hand.

Product is stationary

e.g. a construction site.

AKA job shop

Equipment with similar functions is grouped together. A product will move from one function group to another.

e.g. One facility can do painting for a variety of products while another facility can smelt numerous types of ores

Discrete products are made by moving from worksation to workstation at a controlled rate.

Each section of the facility can perform one specific function, but the sum of all parts at this facitlity can produce a single product.

e.g. raw materials enter one end of the facility and finished goods come out of the other.

Similar to an assembly line but with a continuous product like liquid instead of a discrete process like an auto.

The time between units comming off the end of the assembly line.

How long each worker has to work on each product.