SUPPLY CHAIN AND OPERATIONS MANAGEMENT

QUESTION

Objectives
This assessment item relates to the course learning outcomes numbers 1to 4.  Before starting this assessment
students are advised to read the marking criteria at the end of this document.  Students are strongly
encouraged to consult the course web site on Moodle for further assessment guidance and advice.
Purpose
The primary purpose of this assessment item is for students to familiarize themselves with concepts of
Supply Chain Management.
Details
Answer the following questions:

Question 1

a. Explain what lead-time means in a supply chain context. Use examples.
b. Explain why many companies desire lead-time reductions in the supply chain.
c. Discuss at least five ways to reduce lead-time within a supply chain.

(Word limit 1000 words)

Question 2

Refer to the case study ‘Dell Inc: Improving the Flexibility of the Desktop PC Supply Chain’.  The case
study is found in the prescribed textbook (Simchi-Levi et al., p.179).  Answer the following questions related
to the supply chain:
a. What are the fundamental reasons for Dell’s past success?
b. What should Dell do next to maintain its competitive advantage?
c. Explain whether the Dell formula is applicable to other product categories?  If not, why not?
(Word limit 1000 words)

In answering question 1 and 2 you are expected to reference at least three (3) relevant journal articles.
Assignment Submission
The assessment submission must be made online through the course web site. The file submitted must be a
Microsoft Word or Rich Text Format (.doc or .docx or .rtf) document.
Submit your assignment with a cover sheet showing the course name and number, and your name and
student number, then attach answers to the questions asked.  Ensure you indicate clearly each question
number and part that you are answering.
Each submission will be processed through Turn-it-In (the copy detection system), and you will have access
to the copy detection similarity score. You may submit multiple times, but the final copy must be submitted
by the due date.  More information about Turn-it-In and how to interpret the Turn-it-In report is available on
the course website.
Assessment Criteria
This assessment item is graded out of 100% and rescaled to 20 marks.
Marks will be awarded for completing this assessment task according to the following marking criteria:

MGMT19106 –Supply Chain Management

Assessment Item 1 Marking Criteria
Your essay will be assessed according to the following criteria.

Marks
Content
Submissions must demonstrate in depth understanding of the key supply chain management issues in the
relevant literature and application of these to the area of discussion and investigation.
Question 1

a. Explain what lead-time means in a supply chain context. Use examples.
b. Explain why many companies desire lead-time reductions in the supply chain.
c. Discuss at least five ways to reduce lead-time within a supply chain.
Question 2

Refer to the case study ‘Dell Inc: Improving the Flexibility of the Desktop PC Supply Chain’.  The case
study is found in the prescribed textbook (Simchi-Levi et al., 2008).  Answer the following questions
related to the supply chain:
d. What are the fundamental reasons for Dell’s past success?
e. What should Dell do next to maintain its competitive advantage
f. Explain whether the Dell formula is applicable to other product categories?  If not, why not?

SOLUTION

Supply Chain Management

(valuestreamguru, 2012) Lead time is basically termed as the time gap in which the product reaches the customer. This time is calculated from the time the order is placed for the shipment of the goods. It is built up of two components namely, value add time and non value add time. Value add time is the time spent which is on adding any value to the product and the non value add time is basically the time which is spent on waiting between several process which is present in the supply chain steps.

(Howard M, 2011) According to Howard lead time may be defined as the delay which occurs between the initiation and the end or completion of the process. This is a more generalized definition. In the domain of supply chain management there are namely two types of lead times, material lead time and information lead time. Material lead time is the lead time which is taken by the goods to get produced.

Information lead time: Information is a vital aspect in any organization and it will not be false statement when it can be also said that it is a backbone of the organization. Information can be used in different domains to bring about benefit to the firm. It can be used in planning, forecasting and in coordination of different activities which are performed every day. Electronic data interchange (EDI) can be used in the reduction of lead time of the information as EDI does not have human interpretation of data which considerably reduces the lead time and fastens the process.

(valuestreamguru, 2012) Reducing lead time is one of the major activities in the firm. Lead time is associated with the cost and the more the lead time the more does it cost to the company. The cost of material and the overhead costs are associated with the waiting time that occurs between the steps in process. Reducing the lead time can save a lot of amount of money to the company.

Value stream map is the best method to analyse the lead time but there are other methods too which can be used. Lead time ladder diagram is one such method which can be used to review the lead time and another method is the value add analysis. The entire step is a systematic process to correctly figure out the lead time it is essential that all the processes should be mapped out and the time for each of the processes should be noted down and then the lead time for each unit of each of the processes should be calculated.

There are different forms of lead time that is encountered in the business processes:

• Processing time which is required to assess the demand
• Material supply from supply chain
• Processing time for the demand and production time for the product to be produced
• Waiting time between each of the production steps
• Final quality inspection time
• Transit time

Lead time can be divided into three basic components; the components are namely, review time, manufacture time, and transit time. Review time is the time taken for company in order generation this can be reduced by placing the orders in batch like placing daily or weekly instead of placing the orders monthly and this has a very straight and direct effect on the reduction of lead time.

The below picture shows the seven important waste areas where the lead time is more and where it can be reduced considerably to bring about profits to the firm and increase not only the  shareholders wealth but also improve the process and get the desired customer satisfaction. The efficient reduction of lead time improves the entire efficiency and productivity of the organization and helps in acquisition of new customers and the retention of the existing ones. It helps create the desired amount of trust in the industry and helps sustain the business for a longer period of time because it has greater ability to fight back the external forces and up and above fight back the competition.

The methods of lead time reduction are:

(Marc, S., 2004) Setting achievable targets by measuring the current lead times: Lead times though are considered to be very important yet are not measured effectively in every organization. Hence the effective measurement of the lead times is vital and then the firm should set achievable targets to cut down the lead time in the fixed set of time.

Shift of the organization from a functional orientation to a product orientation:  The orientation should be product focused and not operational. If the resources that are related to the development of the product is placed relatively closer then the production time is shortened considerably and hence the lead time is reduced. Also if the groups who work on homogenous things are place together it is profitable. These groups are termed as work cells of cellular manufacturing.

Providing cross-training to the plant personnel: Appropriate training should be provided to the personnel working in the plant so that they are well versed with the methods and procedures, and they are skilled in the job that they do so that the lead time is reduced because they are efficient and can do their job without any delay.

Ownership and Accountability: The work cells and teams should be empowered and should be given some authority so that they take ownership in whatever that they do and they are also motivated, engaged and accountable for their designated jobs. The accountability can be in product production, product cost, quality and delivery.

Reduction of batch sizes between work centers. If the operations are held in close proximity, then the transfer batches can be smaller and work in progress inventories can be minimized.

Initiating and controlling local scheduling between the work cells. Scheduling tools like visual shop floor scheduling, kanban systems, can be used to help support in minimizing the work in progress between the work cells and to deteriorate and eliminate queue time throughout the value stream.

Reference:

Marc, S., 2004, Lead Time Reduction, Viewed on 2^nd April 2012, http://elsmar.com/Lead_Time/

Howard, M., 2011, How To Reduce Lead Time In Supply Chain Process, Viewed on 2^nd April 2012, http://howardmoris.blogspot.in/2011/04/reduce-lead-time-supply-chain-process.html

Rachel, M., J., and Denis, R., T., 1999, Total cycle time compression and the agile supply chain, Int. J. Production Economics 62 (1999) 61-73, viewed on 2^nd April, 2012, http://www.business.ulster.ac.uk/intlbusiness/courses/bmg814m1/Towill1.pdf

Suzanne, T., 2009, Valuing Lead Time Reduction in the Supply Chain: Keys to Successful Supply Chain Collaboration, viewed on 2^nd April 2012, http://legacy-tuta.hut.fi/logistics/seminars/SCcollaboration-de_Treville.pdf

Valuestreamguru, 2012, Reduce Lead time – get rid of business enemy number one, viewed on 2^nd April, 2012, http://www.valuestreamguru.com/?p=92

JE72