The Economic Order Quantity (EOQ) Model identifies the optimum number of items to order to minimize the costs of managing (ordering, storing and using) them. This is determined by cost alone. Just-In-Time (JIT) Inventory Management is a technique using smaller quantities of materials that arrive “just in time” for use in the transformation process and therefore require less storage space and other inventory management expense. JIT minimizes inventory by providing an almost continuous flow of items from suppliers to the production facility. The Material-Requirements Planning (MRP) schedules the precise quantity of materials needed to make the product. The basic components are a master production schedule, a bill of materials and an inventory status file. Can be, and often is, used in conjunction with just-in-time inventory management. 27
Increasingly, outsourcing has become a component of supply chain management in operations. Outsourcing refers to the contracting of manufacturing or other tasks to independent companies, often overseas. Many companies elect to outsource some aspects of their operations to companies that can provide these products more efficiently, at a lower cost, and with greater customer satisfaction. Globalization has put pressure on supply chain managers to improve speed and balance resources against competitive pressures. Outsourcing, once used primarily as a cost-cutting tactic, has increasingly been linked with the development of competitive advantage through improved product quality, speeding up the time it takes products to get to the customer, and overall supply- chain efficiencies. However, outsourcing may create conflict with labor and negative public opinion when it results in U.S. workers being replaced by lower-cost workers in other countries. 28
After all materials have been procured and their use determined, managers must then consider the routing, or sequence of operations through which the product must pass. The sequence depends on the product specifications developed by the engineering department of the company. Once management knows the routing, the actual work can be scheduled. Scheduling assigns the tasks to be done to departments or even specific machines, workers, or teams. 29
Many approaches to scheduling have been developed, ranging from simple trial and error to highly sophisticated computer programs. One popular method is the Program Evaluation and Review Technique (PERT) : 1. Identifies all the major activities or events required to complete a project 2. Arranges them in a sequence or path 3. Determines the critical path 4. Estimates the time required for each event The path requiring the longest time from start to finish is called the critical path because it determines the minimum amount of time in which the process can be completed.
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- Spring '14
- Management, Operations Manager, transformation process