ADMS 3351: Chapter 6 Notes:
Production Processes (pg. 167):
Production processes are used to make everything that we buy ranging from the
apartment
... [Show More] building in which we live to the ink pens with which we write.
The high-level view of what is required to make something can be divided into three
simple steps:
o Step 1: Sourcing the parts we need (Source)
Parts are procured from one or more suppliers
o Step 2: Actually making the item (Make)
Manufacturing takes place
o Step 3: Sending the item to the customer (Deliver)
Product is shipped to the customer
A supply chain view of this may involve a complex series of players where
subcontractors feed suppliers, suppliers feed manufacturing plants, manufacturing plants
feed warehouses, and, finally, warehouses feed retailers.
Depending on the item being produced, the supply chain can be very long with
subcontractors and manufacturing plants spread out over the globe, or short where parts
are sourced and the product is made locally.
Depending on the strategy of the firm, the capabilities of manufacturing, and the needs of
customers; these activities are organized to minimize cost while meeting the competitive
priorities necessary to attract customer orders.
For example: For consumer products such as candy or clothes, customers normally want
these products “on-demand” for quick delivery from a local store
o As a manufacturer of these products, we build them ahead of time in anticipation
of demand and ship them to the retail stores where they are carried in inventory
until they are sold.
For custom products such as airplanes are ordered with very specific uses in mind and
need to be designed and then built to the design.
o In the case of an airplane, the time needed to respond to a customer order (called
the lead time) could easily be years, compared to only a few minutes for the candy
or clothes.
Customer order decoupling point: Determines where inventory is positioned to allow
processes or entities in the supply chain to operate independently.
o For example: If a product is stocked at a retailer, the customer pulls the item from
the shelf and the manufacturer never sees a customer order.
o Inventory acts as a buffer to separate the customer from the manufacturing
process.
o Selection of decoupling points is a strategic decision that determines customer
lead times and can greatly impact inventory investment. [Show Less]