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Chap 12: Purchasing and Supply Chain Analysis: Tools and Techniques -…
Chap 12: Purchasing and Supply Chain Analysis: Tools and Techniques
I. Project Management
What Is a Project?
Project is defined as a series of tasks
that …
Requires completion of specific objectives
within a certain timeframe
Has defined start and stop dates
Consumes resources, particularly time,
personnel, and budget
Operates with limited resources
Defining Project Success
Within allocated time and budget
At proper performance or specification
level
At level accepted by customer, user, or
management
With minimal or only mutually agreedupon changes
Without disturbing main work flow of
organization
Dimensions of a Project
Defined scope
Project overview
Agreed-upon tasks, responsibilities, and
deliverables
Time frame
Starting and ending points
Cost
Six Phases of a Project
Concept Phase
Develop broad concept or definition of
project
Identify broad constraints
Create initial budget estimates
If project is feasible, move to next
phase
Project Definition Phase
Develop project description in greater
detail
How to accomplish work
How to organize for the project
Support personnel required
Tentative timing schedules
Tentative budget, personnel, resource
requirements
Planning Phase
Develop detailed plans that identify
Tasks
Timing milestones
Budgets and resources
Create organization to effectively
manage project
Preliminary Studies Phase
Validate assumptions made in project
plan through
Literature search
Interviews
Data collection
Experience
Performance Phase
Execute project plan
Control via periodic monitoring
Report work results on continuous
basis
May be longest phase of project in
terms of time and resources committed
Post-Completion Phase
Confirm final project results meet
expectations
Conduct post-implementation meeting
to discuss strengths and weaknesses
Reassign personnel
Restore equipment and facilities
Document project files for future
reference
Project Planning and Control Techniques
Gantt Charts
A Gantt chart visually displays the tasks and times associated with a project
Advantages
Relatively inexpensive to develop and use
Can convey great deal of information
Disadvantages
Difficult to use and maintain for larger
projects
Critical path method (CPM)
Use when there is single known time for
each activity with no variance
Program evaluation and review
technique (PERT)
Use where time estimates are variable or
uncertain
Most likely vs. pessimistic vs. optimistic
Rules for Constructing a Project Management
Network
Identify each unique activity by capital letter that corresponds only to that activity
2.Unique branch or arrow represents each activity in project – circles or nodes represent events
This diagram means only that B cannot start until A is complete
Branch direction indicates general progression in time from left to right
When a number of activities end at one event, no activity starting at that event may begin until all activities ending at that event are complete
Two or more activities cannot share graphically same beginning and ending events
Networks start and finish at only single event
Project Management with Time Estimates
PERT Network Steps
Identify each activity requiring completion and relationship between those activities
Construct network reflecting proper precedence relationships
Determine three time estimates
Optimistic (a)
Pessimistic (b)
Most likely (m)
Calculate expected activity time for
each activity
Expected activity time = (a + 4m + b) ÷ 6
Place activity times on network and identify critical path
Identify early start (ES), late start (LS) early finish (EF), and late finish (LF)
Early start (ES)
Earliest point in time an activity can begin
Late start (LS)
Latest point in time an activity can begin without delaying entire project
Early finish (EF)
Earliest time project can finish given
expected activity time
ES + expected activity time
Late finish (LF)
Latest time activity can finish without
delaying entire project
LS + expected activity time
II. Learning curves Analysis
Learning Curve Components
Ability of work force to learn and improve through repetitive effort and increased efficiency
Effort by management to pursue productivity gains
Modification to process
New production methods
Substitution of automation for labor
Vertical integration à cost control
When to Use the Learning Curve
Not all processes or items benefit from
learning curve effects
When supplier uses new production
process for first time
When supplier produces technically
complex item for first time
When item has high direct labor
content
Learning Curve Illustrated
III. Value Analysis/Value Engineering
Value = Function ÷ Cost
VE is the application of value analysis techniques during product or service design
Who Is Involved in VA/VE?
Executive
management
Suppliers
Purchasing
Design
engineering
Marketing
Production
Industrial/process
engineering
Quality control
Tests for Determining Value in a Product or Service
Does the use of this product contribute value to our customers?
2.Is the cost of the final product proportionate to its usefulness?
Are there additional uses for this product?
Does the product need all its features or internal parts?
Are product weight reductions possible?
Is there anything else available to our customers given the intended use of the product?
Is there a better production method to produce the item or product?
Can a lower-cost standard part replace a customized part?
Are we using the proper tooling considering the quantities required?
Will another dependable supplier provide material, components, or subassemblies for less?
Is anyone currently purchasing required materials, components, or subassemblies for less?
Are there equally effective but lower-cost materials available?
Do material, labor, overhead, and profit equal the product’s cost?
Are packaging cost reductions possible?
Is the item properly classified for shipping purposes to receive the lowest transportation rates?
Are design or quality specifications too tight given customer requirements?
If we are making an item now, can we buy it for less (and vice versa)?
The Value Analysis Process
Gather Information Stage
What does this product do for
customer?
Why does customer buy this product?
Primary vs. secondary functions
Name each function with noun and verb
Collect detailed product information
2.Speculate Stage
Wide-open, creative thinking
Use brainstorming or other idea
generating techniques
Develop as many improvement ideas as
possible withholding judgment
Evaluate ideas later
Analyze Stage
Perform critical evaluation of ideas
created in speculate stage
Cost/benefit calculations
Feasibility assessment
Do ideas address original goals and
objectives?
General à specific
Recommend and Execute Stage
Determine priorities
Make proposal to management for
approval
Requires:
Motivation and creativity
Good communication skills
Analytical thinking and product knowledge
Commitment and salesmanship
Implement
Timing
Budget requirements
Responsibilities
Develop project plan
Generate support from outside the team
Summarize and Follow Up Stage
Ensure that implementation progress is
being made: VA team may follow up
Separate implementation team may
have this responsibility
IV. Quantity Discount Analysis
Allows buyer to verify that quantity
discounts are reasonable
Buyer may be able to negotiate price
improvements
Better understanding of incremental unit costs
Prices at specific quantities vs. prices
at different quantity ranges
V. Process Mapping
Types:
-Sequential processes
-Concurrent processes
Often conducted by cross-functional
teams
Generates buy-in from affected groups
Typical Supply Chain Processes
Supplier evaluation
and selection
Supply-base
management
New-product design
and development
Accounts receivable
and accounts payable
Inventory control and
management
......
Steps in Process Mapping
Search for better ways and methods to
perform tasks
Replace sequential activities with
concurrent activities wherever possible
Identify those activities that contribute to waste or add minimal value and target for elimination
Identify time associated with each part of process and identify how much is waste
Involve functional groups that impact process
Represent process graphically for clearer understanding
Value Stream Mapping
Visual representation of flow of materials and information to identify wasted time and actions in a process
Streamlines processes for greater
efficiency
Categories of Waste
Overproduction: Producing items for which there are no
orders
Waiting time: Employees standing around or inventory
at a standstill
Unnecessary transport: Moving material unnecessarily or long
distances
Excess inventory: Retaining unnecessary inventory between
process steps
Unnecessary movement: Any wasted motion by man or machine
Defect: Making incorrect product
Value-adding vs. Non-value-adding
Value is from customer’s perspective
Value-adding (keep): Create value for the customer
Non-value-adding (remove): No value for customer but forced to pay for
Necessary non-value-adding (minimize): No value for customer but required
VSM Process
Statistical Tools Used in VSM
Scatter plots
Pareto charts
Pie diagrams
Cause-and-effect diagrams