BA339

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Author:
sharmin28
ID:
89283
Filename:
BA339
Updated:
2011-06-07 15:49:10
Tags:
IKEA
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Description:
Final Review
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  1. What is IKEA doing?
    IKEA has 1,300 suppliers in 53 countries to quickly customize and deliver products to global markets.

    IKEA has reduced the number of direct suppliers and increased the use of single sourcing to build long-term, collaborative supplier which leads to innovative and low-cost ways to bring new products to the market.
  2. Why is what they are doing with the supply chain important?
    • Upstream suppliers work with IKEA’s designers to create innovative products at affordable prices using social responsible practices.
    • Downstream, logistic suppliers move products from suppliers’plants, through the distribution channel to IKEA stores.
    • IKEA depends on many
    • different suppliers; therefore supply management is successful for its success.
  3. Supply Management’s impact on firm and supply chain performance
    • Ensure timely availability of resources
    • Reduce total costs
    • Enhance quality
    • Access technology and innovation
    • Foster social responsibility
  4. Reduced Costs:
    Purchases are often a firm’s largest expenses, effective supply management offers a huge potential to reduce costs and improve cash flows. By collaborating with suppliers, creative ways to reduce costs emerge.
  5. Total Cost of Ownership (TCO):
    • Sum of costs incurred before, during and after a purchase.
    • Before: costs of finding, assessing and selecting a supplier
    • During: costs of buying and receiving items
    • After: costs and risks of storing and owning items including those incurred after sale to customers
  6. Supplier Quality Causes Problems for Audi?
    Audi quality team found that the underlying cause was defective circuit boards from its only supplier of that part. When there was a problem with that part the supplier could not keep up with the demand for replacements. Because Audi did not have another supplier for that part, customers had long waits to have their car repaired. Audi sent a team of experts to work closely with the circuit board supplier and to improve quality processes. Audi reduced supply risk and a second circuit board supplier. Overall reliability increased and warranty costs went down.
  7. Atlanta International Airport Example
    • Expansion program, addition of a 5th runway, rerouting through a tunnel
    • Project required 10,000 interdependent schedule items and 23 subprojects, working with government and local constituencies to prevent delays, raw material delivery, subcontractor schedules
    • Each week of delay would cost airline industry $5 million in revenue, also each day (!!) of delay carried a #5 million penalty for bidding company
    • To manage this massive task, project managers used software programs
    • Software plans in great detail, see how delays in one subproject impacts the entire project
    • Program created scenarios to work around delays
    • Software helped with payments of contractors by checking off progress as each task was completed
    • Result was close and efficient project supervision
    • Runway was completed 11 days early and $102 million under budget
  8. Patterns in Demand
    • Stable – no trend, consistent horizontal stream
    • Seasonal – cyclic, repeating highs and lows
    • Trend – sloping tendency, upward or downward, linear or non-linear
    • Step – one time change in demand (external influences)
  9. Center of Gravity
    • Finding the lowest-cost location for a distribution facility based on demand and distance
    • Attempts to find the lowest-cost location for a facility based on demand and distance.
    • Center of gravity is important because gives a business owner an idea of where the business should be located.
  10. Audi
    • Very good reputation, high quality cars
    • Problem: engine failure in colder weather for some 4-cylinder cars, car wouldn’t start
    • Customers needed to have cars towed and repaired
    • Failure rate was up 50%, 50,000 cars affected
    • Cause: supplier sent defective parts (circuit boards)
    • Even worse: supplier was unable to meet high demand for replacement
    • Audi had no 2nd supplier, customers faced long waits to have cars repaired
    • Supplier quality team reduced supply risk by adding 2nd supplier
    • Audi worked closely with suppliers to improve quality
    • Supply management changed for the better, overall reliability increased while costs went down
  11. Supply Risk
    The probability of an unplanned event that negatively affects a firm’s ability to serve its customers
  12. Number of Suppliers
    • Use of supply base optimization to determine how many suppliers to use
    • Too few- risk of shortage, price increase, less sources of innovation
    • Too many – higher complexity, communication & control difficult
  13. Foster Social Responsibility
    • = Behaviors that benefit related communities
    • Add value to communities
    • Increase social diversity
    • Environmental responsibility
    • Ethical behavior
    • Financial responsibility
    • Respect human rights
    • Safe working environment
  14. Goals of Effective Supply Management:
    • Ensure timely availability of resources
    • Reduce total costs
    • Enhance quality
    • Access technology and innovation
    • Foster social responsibility
  15. What is IKEA Doing?
    • Depending heavily on suppliers (1,300 suppliers in 53 countries)
    • Managers are bridge from retail shelves to suppliers
    • Reducing number of direct suppliers
    • Increasing use of single-sourcing to build long-term partnerships (leads to lower prices)
    • Example: ski manufacturer (expert in bending wood) produces the armchairs, or grocery cart manufacturer produces parts for sofas, low-price coffee-mug producer provides cheap colors
    • IKEA is social responsible in dealing with suppliers
    • IWAY code of conduct for prevention of child labor, protecting environment (no plastic bags)
    • Suppliers must follow same expectations
  16. A Successful Project Meets Objectives Of
    • Within budget
    • On time
    • Customer expectations
  17. Critical Path Method (CPM)
    • Emphasis on most important activities
    • Tasks have well-defined start and end
    • Tasks are independent
    • Task sequenced can be established
  18. Characteristics of Transportation Modes
    Transportation managers have to decide which mode of transportation should be used for each order that must be delivered, they compared on the five dimensions.

    • Speed - (How long it takes to get shipments to destinations)
    • Availability – (The ability to service any location)
    • Dependability – (Expected delivery times)
    • Capability – (Handling any size and or load)
    • Frequency – (Number of scheduled movements that can be arranged by shippers)
  19. Selecting a Project Manager
    • Project managers need to have technical and social skills.
    • A leader, an enthusiastic influencer of people
    • A clear and sometimes forceful communicator
    • A good time manager who is de-motivated
    • A high tolerance for ambiguity and stress
    • Politically astute and well-connected with the customer and with important people in the organization
    • Capable of understanding critical technical details of the project, including issues from different disciplines and functional areas
    • Has high ethical standards
  20. Modal share of U.S. Freight Volume
    • Truck 69% (Low cost, door to door service, high fixed costs)
    • Rail 15% (Train, best for long distance)
    • Pipeline 10% (Moving liquid, gasoline, crushing coral)
    • Water 6% (Good for moving large shipments)
    • Air <1% (Fastest method)
  21. Negotiation
    • Bargaining process of planning, reviewing, analyzing, compromising to reach agreement.
    • Negotiation is a better tool when there is a high degree of uncertainty, different combinations of requirements, a need for early supplier involvement in product development and complex start-up or customized equipment is needed.
  22. Supply Base Optimization
    The determination of the number of suppliers to use.
  23. Figure 10-3 Sourcing Strategies
    Strategic:
    • Purchases that are core to the firm’s performance and involves purchases.
    • Tactic - Partnership with suppliers for collaboration and innovation.
  24. Figure 10-3 Sourcing Strategies
    Bottleneck:
    • Purchases that are not core to performance but lack of availability can cause delays.
    • Tactic - Use at least two suppliers.
  25. Figure 10-3 Sourcing Strategies
    Leverage:
    • Purchases involving standard goods & services where many possible suppliers are available.
    • Tactic - Consolidate purchases with one or a few suppliers for discounts.
  26. Figure 10-3 Sourcing Strategies
    Noncritical:
    • Low overall spend and have little impact on performance.
    • Tactic - Electronic catalogs, vendor-managed inventory and corporate credit cards lowering transaction costs.
  27. Operations Management:
    The processes used to design, supply, produce, and deliver goods and services to customers.
  28. Capabilities and location are important:
    • Proximity impacts ease of communication, transportation costs and community perceptions.
    • Consideration of trade barriers and incentives.
    • Global presence may impact access to markets.
  29. Transportation Economics:
    Economy of Scale:
    Cost per unit of weight decreases as shipment size increases.
  30. Transportation Economics:
    Economy of Distance:
    Cost per unit traveled decreases as distance moved increases.
  31. Total Cost of Ownership
    • All the cost incurred before, during and after a purchase (sourcing, purchasing, handling, transportation, inspection, maintenance, purchase price etc)
    • Before – Time spent searching for suppliers, evaluating them
    • During - Purchase price, cost of ordering, transporting, receiving, inspecting
    • After - Cost of inventory, supply risk, production downtime, defects, warranty, safety recalls, Replacement, lost sales, damaged reputation
  32. Core Capability
    A unique set of skills, which is an advantage because competitors cannot easily duplicate them.
  33. Atlanta International Airport Example
    • Expansion program, addition of a 5th runway, rerouting through a tunnel
    • Project required 10,000 interdependent schedule items and 23 subprojects, working with government and local constituencies to prevent delays, raw material delivery, subcontractor schedules
    • Each week of delay would cost airline industry
    • $5 million in revenue, also each day (!!) of delay carried a #5 million penalty for bidding company
    • To manage this massive task, project managers used software programs
    • Software plans in great detail, see how delays in one subproject impacts the entire project
    • Program created scenarios to work around delays
    • Software helped with payments of contractors by checking off progress as each task was completed
    • Result was close and efficient project supervision
    • Runway was completed 11 days early and $102 million under budget
  34. Stages in the Life of a project
    • Definition
    • Planning
    • Execution
    • Completion
  35. Stages in the Life of a project
    Definition:
    • Idea
    • Organize project
    • Select project manager
    • Organizing teams
    • Establish project charter
  36. Stages in the Life of a project
    Planning:
    • Budgeting time and cost
    • Detailed scheduling using critical path method
    • Analyzing resources and trade-offs
    • Making time-cost-scope trade-offs
    • Planning for uncertainty
  37. Stages in the Life of a project
    Execution:
    • Project work is actually done
    • Managers encourage, monitor and control performance
    • Status reports with updates on budget, schedule and quality of output
    • Gantt chart (bar chart shows timing, relationships and percentage completion for activities in project)
  38. Stages in the Life of a project
    Completion:
    • All deliverables completed to satisfaction of client
    • Review activities
    • Capture lessons learned
  39. critical path method
    • Critical - Path is the longest path of activities from beginning node to end node
    • Project - Task has well defined beginnings and endings
    • Tasks - Are independent (duration of one task is not dependent on the duration of another)
    • Required - Sequence of tasks can be established

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