SCM Operations - Make

MakeThis is the manufacturing step.

Supply chain managers schedule the
activities necessary for production, testing,
packaging and preparation for delivery.
This is the most metric-intensive portion
of the supply chainone where companies
are able to measure quality levels,
production output and worker
productivity.

Push System

Push system : In push system you plan

(demand forecast) first and push the material
down to all the facilities
Production and distribution decisions based
on long-term forecasts.
The difference between the push and pull
system lies in inventory management
technique

Advantages:
Stock Out risk reduction
Economies of Scale in production, warehousing and
transportation

Disadvantages
Reduced flexibility
Inventory carrying cost

Pull-Based Supply Chains

Production and distribution demand driven

Coordinated with true customer demand rather than

forecast demand

Advantages
Reduced Inventory Levels
Increased Flexibility

Disadvantages

Risk of stock out

Push VS Pull Strategy

Supply Chain Integration Push/Pull

Strategies

Hybrid of push and pull strategies to overcome disadvantages

of each
Early stages of product assembly are done in a push manner

Partial assembly of product based on aggregate demand forecasts

(which are more accurate than individual product demand forecasts)
Uncertainty is reduced so safety stock inventory is lower

Final product assembly is done based on customer demand for

specific product configurations
Supply chain timeline determines push-pull boundary
PushPull
Boundary

Generic Product
Push Strategy
Raw
Materials

Customized Product
Pull Strategy

Supply Chain Timeline

End
Consumer

Consider Two PC Manufacturers:

Build to Stock

Forecast demand
Buys components
Assembles computers
Observes demand and
meets demand if possible.

A traditional push system

Build to order

Forecast demand
Buys components
Observes demand
Assembles computers
Meets demand

A push-pull system

Make-to-Stock (MTS)

Here, the product is built against a sales forecast,

and sold to the customer from finished goods
stock; this approach is common in the grocery
and retail sectors, FMCG companies,

Make-to-Stock
Environment

Make to forecast
Rapid delivery From
finished goods stock
Standard products
High volumes
Low variety
Typically lower profit
margins per unit

Business Impact

Finished goods are stocked

Forecast error costs money

Make To Order
Here, the product is based on a standard design,
but components production and manufacturing
of the final product is linked to the order placed
by the final customer's specifications

Make-to-Order
Environment

More variety than Make-toStock (MTS)

Some repeat products
Long lead times
Low volumes
High end item variety
Large profit margins

Business Impact

Forecasted revenue
Raw material is stocked in
anticipation of future sales

Here, the product is based on a standard design, but components production and
manufacturing of the final product is linked to the order placed by the final customer's
specifications; Tailor made suits etc.

Characteristics

Make-to-Stock

Make-to-Order

Product

Producer-specified
Low variety
Inexpensive

Customerspecified
High variety
Expensive

Objectives

Balance inventory,
capacity, and service

Manage delivery
lead times and
capacity

Main operations Forecasting

problems
Planning production
Control of inventory

Delivery promises
Delivery time

Make To Order

There are various models for Make To Order.

For example, in some cases, the process of
assembling prepared parts starts when actual
demand occurs (Assemble to Order). Or, in
other cases, the production process starts with
the obtaining of materials and parts (Build To
Order) , or further back from development
designing (engineer to Order).

Assemble-to-Order
Environment

Fewer products than MTO

Higher volume than MTO
Some standard subassemblies
Build to forecast at the
option level
Configured to customer
order
Planning Bills

Business Impact

Limited finished goods

Material is stocked at a
semi-finished stocking
point
Minimal configuration time
Maximum product
flexibility

Here, the product is built to customer specifications from a stock of existing

components; a typical example for this approach is Dell's approach to customizing its
computers

Engineer-to-Order
Environment

Custom designed products

Unique bills of material
Unique item numbers
Very long lead times
Low volumes
High product variety

Business Impact

No finished goods
Low levels of raw material
Revenue forecasts
Difficult to forecast
Estimating is very
important

Here, the product is designed and built to customer specifications; this approach is
most common for large construction projects and one-off products, such as Formula 1
cars

The Product-Process Matrix

High

Product Variety

Engineer-to-Order

Make-to-Order
Assemble-to-Order

Make-to-Stock
Low
Low

Product Volume

High

Customer Order De-coupling

(Based upon the Manufacturing Environment)

Inventory
Location

Supplier

Raw
Material

Engineer to
Order (ETO)

Make-toOrder (MTO)

WIP
Parts
& Matls

Finished
goods

Customer Order
De-coupling Point

Environment

Assemble to
Order (ATO)

Make-toStock (MTS)

Just-In-Time and Lean Manufacturing

ITS ALL ABOUT SPEED!

Mouse busting through maze

goes here!!! Too big of file.

What is Lean?
Producing what is needed, when it is needed,
with the minimum amount of materials,
equipment, labor, and space.

Definition of Value
Value Added Activity
An activity that changes the size,
shape, fit, form, or function of
material or information (for the first
time) to meet customer
requirements.
Examples: injection molding,
stamping, and forging

Non-Value Added Activity

Those activities that take time
or resources, but the customer
is not willing to pay for.

Example: travel between

stations

Lean Production / JIT

WHAT IT IS
Management philosophy
Pull system though the plant

WHAT IT REQUIRES

Employee participation
Industrial engineering/basics
Continuing improvement
Total quality control
Small lot sizes

WHAT IT DOES
Attacks waste
Exposes problems and bottlenecks
Achieves streamlined production

WHAT IT ASSUMES
Stable environment

Steps Towards JIT

Manufacturing

Reengineer the manufacturing system

Reduce setup
Integrate quality control
Integrate preventive maintenance
Level and balance the system
Integrate a pull system
Control inventory
Implement a vendor program
Utilize computer integrated manufacturing (CIM)
benefits