Assignment: Managing the Supply Chain (Operations and Inventory)
Details: Operations Simulation … Inventory Management, Forecasting and Process Information. Complete with Teammate
Report: Word Document and/or Excel (Attached in the assignment area)
Format: None … Student Submission Should Look Professional and Answer the Questions Below
Length: No Requirement … Requirement is to Answer all the Questions in the Assignment
Your need to evaluate data and make recommendations and decisions shown below.
Excel Spreadsheet Explanation
What you have is an Excel spreadsheet with 6 models we assembly at our facility. Giving more description, here are the details of the Excel file.
Sheet “A” … picture and bill of material of Model A
Sheet “C” … picture and bill of material of Model C
Sheet “Annual Customer Requirements” … past 12 months of actual demand from our customers.
Sheet “Inventory” … actual on hand quantities of models A and C
Assignment is broken up into 3 sections:
1) Inventory Management … the Materials department has not been doing their job. Inventory levels have not been managed for over a year. Assembly outages have caused the group to just order “a lot” of parts to make sure the build goes as schedule. Major opportunity for cost saving in inventory.
Calculate the annual demand for each component of Models A and C
Calculate the EOQ for each component of Models A and C
Adjust inventory levels as compared to current on-hand quantities of each component
Calculate inventory costs saving based on your EOQ calculations
Hints and Tips for Section 1
You will need to research EOQ and make assumptions for some of the components of the equation.
Make sure you add a buffer … don’t go with the actual EOQ number
Don’t forget the inventory holding costs in you saving calculations
I would use the spreadsheet to assist with the EOQ calculations … will save much time
2) Forecasting… using the spreadsheet data, graph the forecast for Model A, Model C and all the models
I want to see the visibility for the next 3 months on the graph, with a trend line.
What are you going to do with one specific datapoint (Model A – September) in your calculations
Hints and Tips for Section 2
You will need to research forecasting
You will *probably* use a different forecasting technique for the individual forecasting of Model A and Model C than you use for all the models together
3) Process Documentation… using the picture of Model A and Model C
Complete a process drawing for the operator to assembly this product.
Hints and Tips for Section 3
Don’t go crazy here … just complete a diagram where the model can be assembly correctly.
Less words the better
NOTES-Lesson One EOQ
The often asked questions … how much to order and when to order?
EOC – Economic Order Quantity is a great tool to assist with this. The link below describes the components of the equation.
Beware when using this equation from experience. First you have to make some assumptions. Cost of placing an order … basically, how much does it cost the company to call the supplier, get a quotation, fill out a purchase requisition, get it signed, and place the order. Technology has improved this activity … but there is still a cost associated. A second assumption is a holding cost of the inventory. Industry guidelines estimate there is a 2% to 15% of the price of the good to hold it in storage.You will have to make an estimate and justification of each of these for your case study.
WARNING … don’t go cutting your inventory levels. This equation works under ideal environments … and we all know that never happens. For supplies with long lead times you need to order more frequent. For equipment with historical problems or downtime, or tooling that breaks a lot order more frequent. For troublesome and new supplier that do not have a documented performance history, you need to order more frequent.
My major project while working on my MBA was with EOQ. My company did a very bad job of managing supplies and inventory and enabled me to look like a guru. After super conservative estimates, I took the top 25 tools and top 25 raw materials and applied EOQ to my companies’ inventory. I was able to turn in an annual cost savings of $430K! SWEET!
NOTES-Lesson 2 Forecasting Tutorial
Good luck with the forecasting section of this assignment … how is that for support and encouragement. Lets start with the bad of forecasting. Think of the weather … although technology has vastly improved forecasting it is still inaccurate often. Think of the stock market, if I could “half-way” predict the movement of the market or a stock, I would not be sitting here … I would own an island somewhere and be retired. In both cases there are too many unknowns to predict the outcomes. Here is a final thought on forecasting:
· Forecasts are usually wrong. (Do not treat as known information!).
· Forecasts must include analysis of their potential errors.
· The longer the forecast horizon, the less accurate the forecast will generally be.
· Benefits can often be obtained from transforming a forecasted quantity into a known quantity (when this can be done, it comes at a cost however).
· Systems that are agile in responding to change are less dependent on accuracy in forecasts.
So lets move onto the good of forecasting … in the right environment, it can be a great tool used by managers and those responsible for strategic planning. To simplify, most books state there are 2 types of forecasting with different techniques in each. I would do some brief research for this part of the assignment. Each technique has its own pros and cons …your forecasting for this part of the assignment can be more accurate with the techniques highlighted in red.Read up and select the proper technique.
Qualitative Forecasting [HINT … you will not be using any of these methods]
· Jury of Executive Opinion (I think that is like “the boss said so”)
· Delphi Method
· Composite of Sales Force
· Consumer Survey
· Time Series – Simple Moving Average
· Time Series – Weighted Moving Average
· Time Series – Exponential Smoothing
· Linear Trend – Simple Regression
· Linear Trend – Multiple Regression
· Nonlinear Trend Analysis (way beyond the scope of this course)
NOTES Lesson 3 Process Documentation
Nothing fancy here … take the picture and create an assembly drawing.
Experience here tells me you need pictures, drawing, and diagrams to have a great end product. Get creative with this one. Take a look at documentation around your work place and in fast food restaurants … they are (should be) simple