Supply Chain Logistics Management - Term Paper Example

Inventory management of the Table of Contents Types of inventory and their characteristics 3 Toyota 3 Samsung electronics 3 Integration of design concepts 4 Inventory role in customer satisfaction, efficiency and performance 4 Importance of different types of layouts 5 Process layout 5 Product layout 6 Fixed position layouts 6 Cellular layouts 6 Evaluation of supply chain performance 7 Areas of improvement 7 References 9 Types of inventory and their characteristics Toyota Toyota Motor Corporation is one of the largest automobile manufacturing companies of the world. The company owes a major portion of its success to the unique and efficient inventory management techniques practiced. Toyota follows the Just in Time (JIT) inventory management concept. JIT system involves manufacturing products only when orders for the same have already been received from buyers and dealers. At Toyota, raw materials are not brought to the shop floor, until and unless orders for the final products have been received from dealers. The JIT inventory allows Toyota to maintain a minimum level of inventory and reduce the cost of production. This type of inventory management also enables Toyota to quickly adapt to the demand conditions and prevent wastage of expensive inventory (Monden, 2011). Samsung electronics Samsung Electronics is one of the largest consumer electronics manufacturing companies. Samsung follows the Short Cycle Time and Low Inventory in Manufacturing (SLIM) type of inventory management system. It is the largest company, which manufactures digital integrated circuits. The company with the support of Leachman’s consultants had developed the SLIM inventory management technique whereby optimal use of resources gets facilitated. The SLIM inventory system has helped Samsung to calculate cycle times required in individual manufacturing stages and the time required in work in process stage. SLIM inventory systems also allow implementing heuristic algorithms at the factory floor (Leachman, Kang & Lin, 2002). Integration of design concepts Toyota’s integrated production design system begins with designing the flow of inventory, framing support measures, reducing lot sizes and determining set up time. The next stage in the process is to set up total quality control measures for detecting errors and faults in the production system. The third stage is to prepare the capacity schedule, which involves analyzing the amount of work that can be taken up by individual departments at a time. The integration of goods and services design of Toyota also includes implementing the Kanban system whereby lot sizes are reduced and controlled on the basis of demand pull. Toyota also works with suppliers and vendors for estimating the real time required for goods delivery and communicating the quality related expectations (Berry, Whybark & Jacobs, 2005). The integration process of Samsung’s production system mainly concentrates upon efficient management of targeted cycle times. In order to manage targeted cycle times, it becomes essential to allocate buffer time to the bottlenecks present in the process. The system of integration also includes managing short-term production targets with the time allocated to WIP stage of manufacturing. The system is integrated in a manner such that inventory costs are minimized and complete care is taken regarding the product quality. Samsung also emphasizes on establishing communication points between the agents of ordering and shipping. Buyers are also provided with facilities of tracking the order (Berry, Whybark & Jacobs, 2005). Inventory role in customer satisfaction, efficiency and performance JIT inventory management system has helped Toyota to reduce the production time considerably. With reduced manufacturing time, customer satisfaction increased as the products could be delivered within a short notice. The company was also able to earn complete return on equity as production was only undertaken on receiving orders, thereby eliminating the risk of goods being unsold. Assemblers had limited choice regarding choosing the parts. Hence, every component must be manufactured perfectly. As a result, the product quality had significantly increased. JIT inventory helped the company to meet demand on time by reducing bottlenecks. All such aspects contributed towards facilitating increased efficiency in the manufacturing system and enhancing satisfaction levels of the consumers (Monden, 2011). The SLIM inventory concept focuses upon manufacturing based on forecasting demand conditions. Goods are produced according to the expected number of orders. This method prevents overcrowding of inventory and reduces time loss in bottlenecks. In SLIM system, high importance is given to collection of adequate information. Over or under production situations are eliminated if the information acquired is accurate. SLIM induces a high level of operational efficiency within the manufacturing system of Samsung by way of maintaining the right quantities of inventory as raw materials, WIP and finished goods. Highly advanced software systems are used to track each stage of the production process so as to correctly identify the lead time. The SLIM system aims at achieving high yield, throughput and low cycle time, leading towards better organizational performance and product quality (Leachman, Kang & Lin, 2002). Importance of different types of layouts Process layout Process layouts exist in job shops or in companies that manufacture low volume and highly customized variety of goods. In process layout, functions of similar nature are grouped together. Such layouts are, therefore, referred to as functional layouts. Usually, the machine shops existing in most manufacturing concerns are set up in the form of a process layout, wherein several processes can be handled simultaneously. Toyota is identified to have process layout across its manufacturing line. The process layout helps the company to maintain a low level of inventory and control costs of manufacturing. Product layout Product layouts are usually found in those plants that are required to manufacture in bulk. The products are highly standardized and are manufactured through repetitive techniques. In this type of layout, resources are arranged on the basis of product requirements. Product layouts are generally in the form of a line. The lines may either be paced or un-paced. Manufacturing stations of automobile plants are found to be in the form of a line paced product layout. Fixed position layouts Fixed position layouts are used for those products, which are excessively heavy or bulky to be moved around. For instance, huge ships cannot be moved along an assembly line and requires to be built at a single position. Resources and other materials are brought to the layout location. Cellular layouts In this type of layout, parts that require similar processing are grouped together. These groups are referred to as cells. This system involves identifying parts, which require similar processing and exhibit similar characteristics. Accordingly, the parts are sent down the manufacturing line. Hence, cellular layouts are essentially based on the processing and the manufacturing requirements related to products. Samsung follows the cellular manufacturing system. Since Samsung’s manufacturing system is highly focused upon technology, cellular layout is considered as most suitable (Bowersox, Closs & Cooper, 2002). Evaluation of supply chain performance Balanced scorecard- Most managers are seen to adopt the balanced scorecard metrics to measure efficiency of a supply chain. The scorecard is usually developed in a manner such that processes are evaluated based on long as well as short term objectives. A balanced score card approach involves analyzing the system from the viewpoints of cost, customers, innovation and learning and internal business needs. From the cost perspective, supply chain strategies that help in lowering costs and increasing net profitability ratio are rated most favorably. Similarly from the customers’ perspectives, strategies and systems that facilitate reduction in lead time and effective management of customer query are rated satisfactorily. Supply chain operations reference (SCOR) - In this categorical system, the supply chain is evaluated on the basis of reliability, responsiveness, agility, assets and cost. The model may also contain various other metrics against which the supply chain systems are evaluated. These metrics are known as key performance indicators. This system is usually adopted for measuring and identifying the best practices existing in the supply chain system. The SCOR metrics of evaluations can be implemented on various levels of operations so as to enable segmented valuation (Bowersox, Closs & Cooper, 2002). Areas of improvement Toyota’s inventory management system is regarded as one of the most efficient systems of production across the world. Although the system is highly profitable and enable the company to earn huge revenue, there are few areas that can be restructured in order to improve performance. In JIT inventory system, production is only undertaken when orders are received. If there are any errors in the manufacturing process, then rectification process becomes elaborate. This is because JIT does not involve manufacturing in large quantities and engineers are not provided with extra parts to make a choice. The process may slow down under such circumstances. The JIT inventory is also not found to be suitable when the product demand is very high (Stevenson & Hojati, 2007). SLIM inventory management technique followed by Samsung also appears to suffer from certain drawbacks. The system gives less importance to quality control. SLIM technique focuses upon the overall time required for manufacturing and devising methods for reducing the same, which may have a negative impact upon the quality of production. Samsung must implement efficient quality checks in between the production process so as to minimize errors. Establishing interim quality control mechanism eliminates drastic drawbacks in product quality. SLIM emphasizes upon manufacturing based on demand conditions. If demand conditions are not predicted accurately, then manufacturing quantities would be inadequate to meet the consumers’ needs. Also, the SLIM inventory system gives less importance to cost control. The system is highly technology oriented and may not be considered cost effective for most plants (Stevenson & Hojati, 2007). References Berry, W. L., Whybark, D. C. & Jacobs, F. R. (2005). Manufacturing planning and control for supply chain management. New York: McGraw-Hill/Irwin. Bowersox, D. J., Closs, D. J. & Cooper, M. B. (2002). Supply chain logistics management. New York: McGraw-Hill. Leachman, R. C., Kang, J. & Lin, V. (2002). SLIM: Short cycle time and low inventory in manufacturing at Samsung electronics. Interfaces, 32(1), 61-77. Monden, Y. (2011). Toyota production system: an integrated approach to just-in-time. Florida: CRC Press. Stevenson, W. J. & Hojati, M. (2007). Operations management. Boston: McGraw-Hill/Irwin. Read More