Adobe Systems
Inbound logistics and operations – MUNI – ABEC
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Inbound logistics and operations
Two big topics

Adobe Systems
Inbound logistics and operations – MUNI – ABEC
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Inbound logistics
Primary activities - inbound logistic; buying activities; suppliers; warehousing; logistic;
distribution

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Inbound logistics and operations – MUNI – ABEC
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Primary activities

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Inbound logistics and operations – MUNI – ABEC
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Primary activities – inbound logistics
̶Physical flow of material
̶part of business operations for manufacturing firm involving the processes of receiving, storing
and distributing raw materials for use in production.
̶cover anything that company orders from suppliers: tools, raw materials and office equipment
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Inbound logistics and operations – MUNI – ABEC
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Material flow
Information flow

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Inbound logistics and operations – MUNI – ABEC
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Inbound marketing mix
̶Informational and communication mix
̶Mix of products and services
̶Pricing and contractory mix
̶Logistic mix
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Inbound logistics and operations – MUNI – ABEC
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Informational and communication mix
̶Gaining the information from the potential suppliers and communication with the participants on
the market (in the area of purchased goods and services, suppliers, prices, terms of delivery and
payment and so on.
̶Gained information need to be actual and sufficiently detailed.
̶Sources of these information are the firm documents such as: accounting, statistics, (operative
evidence of individual purchase of the technical department and manufacturing department.)
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Inbound logistics and operations – MUNI – ABEC
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Informational and communication mix
̶The ground of communication mix is in perfect information about suppliers such as:
̶Research of suppliers
̶Choice of supplier
̶Communication during the process of ordering and contractation
̶Communication during the delivery of goods
̶Communication after the delivery
̶Evaluation of the supplier and decision concerning the following customer supply relationship.

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Inbound logistics and operations – MUNI – ABEC
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Product mix and mix of services
̶Product mix is based on the decision in these area:
̶Qualitative parameters of each individual product and its substitutes.
̶Wide and deep of purchased product line and assortment
̶The choice of material depends on the specifics and norms demanded by the end users and consumers.
(national and international norms).
̶Purchase alternatives: own production, cooperation, leasing
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Inbound logistics and operations – MUNI – ABEC
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Princing and contractory mix
̶We find the optimal terms for our company, based on the real and actual information concerning the
suppliers
̶Suppliers compete each other in the area of products, quality, terms of delivery terms of payment
.
̶We assume also the discounts and rebate and eventually surcharge ( for extra services)
̶Contractory mix  includes the decision concerning the way of ordering deliveries. It can be
ordering by samples (e.g. fair trade , exhibition) or standard ordering ( e.g. repeated order,
long-term cooperation within suppliers )
̶The economic and administration burden is based on the form of purchase order.
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Inbound logistics and operations – MUNI – ABEC
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Logistic a delivery mix
̶Is connected with the decision about purchase realization and its final delivery to the company.
̶Decision include these :
̶The distribution channel
̶Bulk of delivery , period of ordering, the solution for the unpredictable problems
̶Logistic transport in the company : transport , way of manipulation, size of the package, storing,
handling and so on.
̶Technology and organization of logistic processes

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Inbound logistics and operations – MUNI – ABEC
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Support activities - procurement
̶(paperworks, transaction costs)
̶Planning, organizing, coordination, motivation (i.e. leading people), evidence, checks,
̶...methods, techniques, tools and methods of action...for activities in input logistics and
procurement
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̶modern approach defines the inbound marketing
̶Utilises the similar marketing methods: research of suppliers, choice of the convenient supplier,
regime and terms of delivery and payment of supplies,  and so on.
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Inbound logistics and operations – MUNI – ABEC
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Activities of procurement management
The goal of PM :
̶Right quality
̶Right amount
̶Right time
̶Right vendors
̶Right cost
̶Right terms
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Inbound logistics and operations – MUNI – ABEC
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Right quality
̶Value analysis – process for assesing the performance of a product or service relative to its
cost. Performance includes any quality characteristic that is important to the buyer.
̶Helpful when comparing products
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Inbound logistics and operations – MUNI – ABEC
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Right quantity
̶Need for sales forecasting or demand forecasting ( sugar, butter before Xmas)
̶Rely on inventory data – information on the number of such items the business already has in stock
̶Purchase quantity may be influenced by vendors ( wholesalers sell in very large batches)
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Inbound logistics and operations – MUNI – ABEC
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Timing purchases
̶Using the sales and inventory data
̶Periodic reordering – items  that are used or sold at a relatively constant rate
̶Nonperiodic reordering – for items used at irregular time intervals
̶Lead time - period between starting an activity and realizing its result
̶Depends also on seasonal factors, cash flow and tax consequences
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Inbound logistics and operations – MUNI – ABEC
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Choosing the right vendors
Depends on numerous factors such as:
̶Price
̶Quality
̶Lead time
̶Location
̶Delivery and shipping options
̶Reliability
̶Customer service
You can choose to work with a large number of vendors or develop close working relationship with a
small number of vendors.
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Inbound logistics and operations – MUNI – ABEC
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Price
̶In the case of large or expensive purchase buyers ask several vendors to provide a price quotes
showing what they would charge to fill the order.
̶Quantity discount - discount given to buyers for purchasing a large quantity of a product or
service from a vendor. ( The larger the order, the larger the quantity discount. )
̶Volume buying ( buying in bulk ) means purchasing a large quantity from vendor, typically to take
advantage of a quantity discount.

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Inbound logistics and operations – MUNI – ABEC
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Payment conditions
̶B2C demand the payment at the time of purchase.
̶B2B purchases are often handled differently – extra time to pay for purchase (30 - 60days)
̶Trade credit – is the extended payment time given by one business to another business for
purchased goods or services.
̶Cash discount is a discount given to buyers who pay for purchases in cash, either at time of
purchase or within a set time period after purchase.
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Inbound logistics and operations – MUNI – ABEC
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The process of purchasing
̶Product specification – detailed description of the characteristics ( size, shape, capability,
etc.) of a product.
̶Purchase order – document issued by a buyer to a vendor that lists the items to be purchased,
their quantities and prices, terms of payment and delivery.
̶Invoice (bill of sale)- document issued by a vendor to a buyer on fulfilment of purchase order.
̶Packing slip – list of all items in shipment.
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Inbound logistics and operations – MUNI – ABEC
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Warehousing – inventory management
̶Inventory is the amount of merchandise a business has available for sale at given time.
̶Inventory level – quantity of merchandise
̶Inventory value – the monetary value of merchandise
Main task of managing inventory is :
̶Not too little, not too much
̶Knowing when to restock certain items, what amounts to purchase or produce, what price to pay – as
well as when to sell and at what price – can easily become complex decisions
̶Small businesses will often keep track of stock manually and determine reorder points and
quantities using Excel formulas. Larger businesses will use specialized enterprise resource
planning (ERP) software. The largest corporations use highly customized software as a service
(SaaS) applications
̶Appropriate inventory management strategies vary depending on the industry.

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Inbound logistics and operations – MUNI – ABEC
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Reasons for keeping an inventory
̶Time - The time lags present in the supply chain, from supplier to user at every stage, requires
that you maintain certain amounts of inventory to use in this lead time. However, in practice,
inventory is to be maintained for consumption during 'variations in lead time'. Lead time itself
can be addressed by ordering that many days in advance.
̶Seasonal Demand - demands varies periodically, but producers capacity is fixed. This can lead to
stock accumulation, consider for example how goods consumed only in holidays can lead to
accumulation of large stocks on the anticipation of future consumption.
̶Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and
movements of goods.
̶Economies of scale - Ideal condition of "one unit at a time at a place where a user needs it, when
he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement
and storing brings in economies of scale, thus inventory.
̶Appreciation in Value - In some situations, some stock gains the required value when it is kept
for some time to allow it reach the desired standard for consumption, or for production. For
example; beer in the brewing industry
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Inbound logistics and operations – MUNI – ABEC
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Inventory costs
̶Ordering cost
̶Setup cost
̶Holding Cost
̶Shortage Cost
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Inbound logistics and operations – MUNI – ABEC
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Planning inventory investment – start-up
̶Calculating inventory level for business start –up- do not have previous sales data on which to
base inventory-level decision.
̶For start-up entrepreneurs conduct market research, analyse their competition and develop a
marketing plan and pricing strategy before they go into business. Proper planning allows new
business owners to make reasonable estimates about expected sales during the first weeks or months
after start-up.
̶They also know how much cash and storage space they can devote to inventory.
̶From all this information, they can estimate how much inventory they should have for opening day.
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Inbound logistics and operations – MUNI – ABEC
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Planning inventory investment - ongoing business
̶Ongoing business keeps good records that rely on many data-sources for inventory-planning
purposes. These include sales and cost data, vendor lead times, and loses of inventory due to
damage or other reasons.
̶Inventory managers can use this data to predict how inventory levels are going to decrease over
time and decide when to reorder merchandise.
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Inbound logistics and operations – MUNI – ABEC
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Inventory management

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Inbound logistics and operations – MUNI – ABEC
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Inventory management

Fixed order quantity "Q"
Variable order quantity made up to "S"
Ordering at variable moments
System B, Q: variable order moment, fixed order quantity "Q"
System B, S: Variable order moment, ordering up to target level "S"
Ordering in fixed moments
System s, Q: fixed order moment, fixed order quantity
System s, S: fixed point of order, replenishment to target level "S"

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Inbound logistics and operations – MUNI – ABEC
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Safety stock
̶ a level of extra stock that is maintained to mitigate risk of stockouts (shortfall in raw
material or packaging) due to uncertainties in supply and demand. Adequate safety stock levels
permit business operations to proceed according to their plans. Safety stock is held when there is
uncertainty in demand, supply, or manufacturing yield; it serves as an insurance against stockouts.
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Inbound logistics and operations – MUNI – ABEC
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Reorder point
̶The reorder point (ROP, reorder level) is the level of inventory which triggers an action to
replenish that particular inventory stock. It is a minimum amount of an item which a firm holds in
stock, such that, when stock falls to this amount, the item must be reordered. It is normally
calculated as the forecast usage during the replenishment lead time plus safety stock.

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Inbound logistics and operations – MUNI – ABEC
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Lead time
̶Time needed for your supplier to deliver stocks.
̶By the time of supplier arrival, you should ge to the safety stock.
̶This should be in the balanvce with
̶Operations procedures (lead time)
̶Outbound logistics (lead time of delivery)

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Inbound logistics and operations – MUNI – ABEC
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EOQ
̶EOQ concerns the inventory costs of a single item
̶EOQ does not provide varying lot sizes to match projected variations in demand
̶EOQ is based on average demand
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Inbound logistics and operations – MUNI – ABEC
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EOQ

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Inbound logistics and operations – MUNI – ABEC
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ABC analysis - for planning
approx. 70 %
approx. 5 %
C
approx. 20 %
approx. 15 %
B
approx. 10 %
approx. 80 %
A
Quantitative share (%)
Value share (%)
Group

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Inbound logistics and operations – MUNI – ABEC
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ABC XYZ analysis
̶ABC shows the value share of inventory turnover
̶XYZ represents the frequency(regularity) of use in production
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̶X - groups of items with constant consumption (only occasional fluctuations) and therefore with
high predictive ability
̶Y - groups of items with stronger fluctuations in consumption (medium predictive ability)
̶Z - items with completely irregular consumption (high degree of uncertainty)
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Inbound logistics and operations – MUNI – ABEC
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ABC XYZ
Consumption driven
Demand driven

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Production (operations)
BPH_ABEC

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The Czech Republic
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The Czech Republic
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Adobe Systems Obsah obrázku mapa Popis byl vytvořen automaticky



Adobe Systems Obsah obrázku mapa Popis byl vytvořen automaticky



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General planning scheme
Planning
Short-term
Long term
Manufacturing
program
introduction of product variants, quantities of individual products (with regard to sales)
basic structure of the production programme, innovation, production process (type of HIM, personnel
statistics)
process
batch sizing (with respect to the technology and the process itself), scheduling, capacity planning
production type, organisational type of production

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Long term process planning
̶production type, organisational type of production

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Product-Process Matrix
Source: Adapted from Robert Hayes and Steven Wheelwright, Restoring the Competitive Edge: Competing
Through Manufacturing (New York: John Wiley & Sons, 1984), p. 209

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Service-Process Matrix
Source: Adapted from Roger Schmenner, "How Can Service Businesses Survive and Prosper?" Sloan
Management Review 27(3):29

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Types of output – production type
̶Type of output production
̶production type:
̶organizational type of production: (next slide)
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Examples?
̶Project – unique, only one
̶Job – custom made, bespoke
̶Batch – serial number, bespoke, custom made, in lots
̶Mass – serial number, higher volumes, customization limited from semi-finished products/parts
̶Continuous – no serial numbers, „one type and process“ production
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automaticky Obsah obrázku loďka, voda, loď, exteriér Popis byl vytvořen automaticky
https://www.youtube.com/watch?v=YEJzW8rsIzo&app=desktop   (and study materials)

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Types of output – organizational type of production - hint


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Rationality vs productivity v efficiency
̶rationality of production – basis of economic principle (maximize output with stated input and
vice versa)
̶production productivity – economic activity (connected to business), stated as a quantitative
rationality
̶production efficiency – same as productivity, but inputs and output are valuated – therefore some
KPI can be calculated
All this leads to buildup of metrics / KPI allowing to improve processes.

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Optimization of workshops
Creation
̶Automated Layout Design Program (ALDEP)
̶Computerized Relationship Planning (CORELAP)
Optimisation
̶Computerized Relative Allocation of Facilities Technique (CRAFT)

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CORELAP – how to 1
̶Describe processes / machines / workshop – area!
̶Analyse processes
̶Locate processes
̶Analyse interconnection between processe
̶A - the necessary proximity 5
̶E - very important proximity 4
̶I - important proximity 3
̶O - normal proximity 2
̶U - distance does not matter 1
̶X - proximity is undesirable 0
https://www.youtube.com/watch?v=hXvMoGLgeds

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CORELAP – how to 2
̶TCR (total closeness rating) score based on the relation matrix
̶Sum of A, E, I, O, U and X for each workshop
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̶Select highest score and place first (if same select larger)
̶If there is any X with the already placed workshops, the workshop will be assigned in the end!
(the lower TCR moves to back)
̶Select best connection to first one, if draw, select with higher TCL
̶Select second one

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CORELAP – how to 3
̶Placement rating
̶TCR * weight
̶Weight – 1 if bordering, 0,5 if only corner touch
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̶CREATE the layout!

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Short – term process planning
̶batch sizing (with respect to the technology and the process itself), scheduling, capacity
planning
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Capacity planning
̶The size of monthly sales is constant (bakeries)
̶The sales quantity regularly fluctuates seasonally (ice cream, drinks, bicycles):
̶production quantities adjust to fluctuations in sales (hiring and firing seasonal workers) +
part-time employees
̶increasing or decreasing the number of working days (Škoda auto)
̶constant production is maintained (use of warehouses to compensate for irregularities in demand)
̶maintaining resources for periods of high demand (resource - material - cheaper and more liquid)
̶products whose seasonal sales fluctuations are phase-shifted relative to the original products are
included in the production programme,
̶the possibility to produce for other companies in times of declining sales or, on the contrary, to
outsource work to other companies in peak seasons - wage labour
̶Seasonal fluctuations occur in purchasing (sugar mills) - warehouses, deliveries from abroad
̶Cyclical fluctuations
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Constant production


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Anticipation of demand


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Quality and performance in production

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Quality by scientists
̶"quality is compliance with demand." (Crosby)
̶"eligibility to use - usable" (Juran and Godfrey 1999)
̶"quality is inversely proportional to the losses that the product has caused to the manufacturer
since its shipping". (Tagauchi in Dehnad 1989)
̶"is the fulfilment of flawlessness, stability and qualitative parameters". Veber (2002, pp. 18-19)
̶“degree of fulfilment of requirements by set of inherent characteristics" ČSN ISO 9000: 2005
(2006)

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How to achieve quality?

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Proces mapping – where?
̶BPMN is for business process mapping
̶For production, the blue prints are needed…
Created with Enterprise Architect (Build: 1600) 2

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Bill of material
̶Gravely important for production process planning!
̶summary, assembly, structural
̶Shopping list, IKEA manual, WBS/PBS – exploded-view drawing
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automaticky

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Power graph / Lorenz curve – What?

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Process quality measurement
̶PPM
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̶6 Sigma
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̶HACCP Thresholds
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Root cause diagram / Ishikawa / Fishbone – Why?

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Lean management
Lean manufacturing
Tidy workplace
Performance
Numbers game

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Performance
̶Theory of contraints
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̶5 steps
1.Identify (identify constraint blocking fulfilling the plan)
2.Utilise (maximise utilisation of constraint)
3.Synchronize (subordinate everything to constraint)
4.Remove limitation (investment)
5.Return – to step 1

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History
̶The principles described by Benjamin Franklin since 1732 in the story Poor Richard or The Road to
Prosperity - the core and foundations thus originated in the USA
̶
̶Developed and especially introduced on a larger scale in Japan after 1945 as Toyota production
systems (since 1948)
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̶In the context of globalization, transferred to the whole world
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̶Named in 1988 as LEAN Production
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Avoiding MUDA (waste)
Cost + Profit = Price
changes to: Price - Cost = Profit
(1706 - 1790)

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Waste
MUDA
̶Waste…
MURA
̶Imbalance, unevenness…
MURI
̶Inadequacy…
(MUCHI lack of knowledge and MUSCHI ignorance)
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̶

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MUDA
Muda means waste, vanity, futility or even pointlessness. This is the most famous evil in the
production of the three. They are usually divided into seven types of waste.
̶Transport
̶Unnecessary movements
̶Waiting
̶Excess processing
̶Defects and repairs
̶Stocks
̶Overproduction

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MURA
Mura means unevenness, unevenness, imbalance, irregularity, imbalance or lack of uniformity. This
is any unevenness or irregularity. And although it is often related primarily to material flow, it
is a problem of many other cases outside the material flow. Below is a list of examples of when we
may encounter mura and when it can cause problems.
̶Uneven customer demand
̶Inventory fluctuations - too much, too little
̶Uneven production speed or change in production volumes
̶Irregularities in the quality of good pieces
̶Irregular work rhythm
̶Unbalanced staff training
̶Uneven distribution of workload

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MURI
̶Muri means overloading resources, inadequacy, impossibility, exaggeration, beyond one's strength,
excessive difficulty. Muri is any overloading and doing anything that is too difficult. The main
focus here is, of course, on people. However, Muri can also apply to materials, machines and
organizations.

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̶Thank you