(Mt) – Supply Chain Management Questions

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A supply chain is the sequence of organizations—their facilities, functions, and activities—that are involved in producing and delivering a product or service (Stevenson, 2021). A supply chain involves everything related to the product or service from the beginning to the end, which involves everything from the raw materials to the final customer. For this assignment do the following: • • • • Select two Middle Eastern organizations and identify their industry, and their products or services. Identify supply chain aspects from both of your selected organizations like purchasing issues, supplier issues, logistics, information systems, quality, and customer service, and compare them. Explain how Information Technology impacts the Supply Chain Management for both organizations. Finally, based on your results, offer recommendations for improvements for each organization. Directions: • • • • Your assignment is required to be 6 pages in length, which does not include the title page and reference pages, which are never a part of the content minimum requirements. Support your submission with course material concepts, principles, and theories from the textbook and at least three scholarly, peer-reviewed journal articles. Use the Saudi Digital Library to find your resources. Formatted according to APA 7th edition and Saudi Electronic University writing standards. It is strongly encouraged that you submit all assignments into Turnitin prior to submitting them to your instructor for grading. If you are unsure how to submit an assignment into the Originality Check tool, review the Turnitin – Student Guide for step-by-step instructions. Chapter 15 Supply Chain Management Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-1 Chapter 15: Learning Objectives You should be able to: LO 15.1 LO 15.2 LO 15.3 LO 15.4 LO 15.5 LO 15.6 LO 15.7 LO 15.8 LO 15.9 LO 15.10 LO 15.11 LO 15.12 LO 15.13 LO 15.14 Explain the terms supply chain and logistics Name the key aspects of supply chain management List, and briefly explain, current trends in supply chain management Outline the benefits and risks related to outsourcing Explain what the main supply chain risks are, and what businesses can do to minimize those risks Describe some of the complexities related to global supply chains Briefly describe the ethical issues in supply chains and the key steps companies can take to avoid ethical problems Describe the three concerns of small businesses related to the supply chain and suggest ways to manage those concerns List several strategic, tactical, and operational responsibilities related to managing the supply chain Discuss procurement in terms of the purchasing interfaces, the purchasing cycle, ethics, and centralized versus decentralized decision making Briefly describe the key aspects of supplier management Discuss the logistics aspects of supply chain management, including RFID technology Discuss the issues involved in managing returns Describe some of the challenges in creating an effective supply chain and some of the trade-offs involved Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-2 Supply Chain ⚫Supply chain: ⚫The sequence of organizations — their facilities, functions, and activities — that are involved in producing and delivering a product or service ⚫Logistics: ⚫The part of a supply chain involved with the forward and reverse flow of goods, services, cash, and information LO 15.1 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-3 Typical Supply Chains LO 15.1 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-4 Facilities ⚫The sequence of the supply chain begins with basic suppliers and extends all the way to the final customer ⚫ Warehouses ⚫ Factories ⚫ Processing centers ⚫ Distribution centers ⚫ Retail outlets ⚫ Offices LO 15.1 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-5 Functions and Activities ⚫Supply chain functions and activities ⚫ Forecasting ⚫ Purchasing ⚫ Inventory management ⚫ Information management ⚫ Quality assurance ⚫ Scheduling ⚫ Production and delivery ⚫ Customer service LO 15.1 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-6 Supply Chain Management ⚫Supply Chain Management (SCM) ⚫The strategic coordination of business functions within a business organization and throughout its supply chain for the purpose of integrating supply and demand management LO 15.2 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-7 SCM Managers ⚫SCM managers ⚫ People at various levels of the organization who are responsible for managing supply and demand both within and across business organizations ⚫ Involved with planning and coordinating activities ⚫Sourcing and procurement of materials and services ⚫Transformation activities ⚫Logistics LO 15.2 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-8 Key Aspects of SCM ⚫The goal of SCM is to match supply to demand as effectively and efficiently as possible ⚫Key issues: 1. 2. 3. 4. 5. LO 15.2 Determining appropriate levels of outsourcing Managing procurement Managing suppliers Managing customer relationships Being able to quickly identify problems and respond to them Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-9 Flow Management ⚫Three types of flow management ⚫ Product and service flow ⚫Involves movement of goods and services from suppliers to customers as well as handling customer service needs and product returns ⚫ Information flow ⚫Involves sharing forecasts and sales data, transmitting orders, tracking shipments, and updating order status ⚫ Financial flow ⚫involves credit terms, payments, and consignment and title ownership arrangements LO 15.2 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-10 Trends in SCM ⚫Trends affecting supply chain design and management: ⚫Measuring supply chain ROI ⚫“Greening” the supply chain ⚫Re-evaluating outsourcing ⚫Integrating IT ⚫Adopting lean principles ⚫Managing risks LO 15.3 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-11 Benefits & Risks of Outsourcing ⚫ Benefits: ⚫ Lower prices may result from lower labor costs ⚫ The ability of the organization to focus on its core strengths ⚫ Permits the conversion of some fixed costs to variable costs ⚫ It can free up capital to address other needs ⚫ Some risks can be shifted to the supplier ⚫ The ability to take advantage of a supplier’s expertise ⚫ Makes it easier to expand outside of the home country ⚫ Risks ⚫ Inflexibility due to longer lead times ⚫ Increased transportation costs ⚫ Language and cultural differences ⚫ Loss of jobs ⚫ Loss of control ⚫ Lower productivity ⚫ Loss of business knowledge ⚫ Knowledge transfer and intellectual property concerns ⚫ Increased effort required to manage the supply chain LO 15.4 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-12 Supply Chain Risks ⚫Supply chain risks ⚫Supply chain disruption ⚫Natural disasters ⚫Supplier problems ⚫Quality issues ⚫Another form of disruption that may disrupt supplies and lead to product recalls, liability claims, and negative publicity ⚫Loss of control of sensitive information ⚫If suppliers divulge sensitive information to competitors, it can weaken a firm’s competitive position LO 15.5 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-13 Risk Management ⚫Risk management ⚫Involves identifying risks, assessing their likelihood of occurring and their potential impact and then developing strategies for addressing those risks ⚫Strategies for addressing risk include: ⚫Risk avoidance ⚫Risk reduction ⚫Risk sharing ⚫Key elements of successful risk management include: ⚫Know your suppliers ⚫Provide supply chain visibility ⚫Develop event-response capability LO 15.5 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-14 Global Supply Chains ⚫Global supply chains ⚫ Product design often uses inputs from around the world ⚫ Some manufacturing and service activities are outsourced to countries where labor and/or materials costs are lower ⚫ Products are sold globally ⚫Complexities ⚫ Language and cultural differences ⚫ Currency fluctuations ⚫ Political instability ⚫ Increasing transportation costs and lead times ⚫ Increased need for trust amongst supply chain partners LO 15.6 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-15 SCM Ethical Issues ⚫ Examples: ⚫ Bribing government or company officials to secure permits or favorable status ⚫ “Exporting smokestacks” to developing countries ⚫ Claiming a “green” supply chain when the level of “green” is only minimal ⚫ Ignoring health, safety, and environmental standards ⚫ Violating basic worker rights ⚫ Mislabeling the country of origin ⚫ Selling products abroad that are banned at home ⚫ Dealing with ethical issues: ⚫ Develop an ethical supply chain code of behavior ⚫ Monitor supply chain activities ⚫ Choose suppliers that have a reputation for good ethical behavior ⚫ Incorporate compliance with labor standards in supplier contracts ⚫ Address any ethical problems that arise swiftly LO 15.7 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-16 Small Business Concerns ⚫ Three small business SCM concerns: 1. Inventory management ⚫ Carry extra inventory as a way to avoid shortages due to supply chain interruption ⚫ Have backups for delivery from suppliers and to customers 2. Reducing risks ⚫ ⚫ ⚫ ⚫ ⚫ 3. International trade ⚫ ⚫ ⚫ ⚫ ⚫ LO 15.8 Use only reliable suppliers Determine which suppliers are critical and get to know them and any challenges they have Measure supplier performance Recognize warning signs of supplier issues Have plans in place to manage supply chain problems Work with someone who has expertise to help oversee foreign suppliers Set expectations for demand and timing Do not rely on a single supplier Build goodwill to help in negotiations and resolving any problem that arise Consider using domestic suppliers if the risks of working with foreign suppliers are prohibitive Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-17 Management Responsibilities ⚫Aspects of management responsibility: ⚫Legal ⚫Being knowledgeable about laws and regulations of the countries where supply chains exist ⚫Obeying laws and operating to conform to regulations ⚫Economic ⚫Supplying products and services to meet demand as efficiently as possible ⚫Ethical ⚫Conducting business in ways that are consistent with the moral standards of society LO 15.9 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-18 Management Responsibility: Strategic ⚫Certain strategic responsibilities have a major impact on the success of both supply chain management and the business itself: ⚫Supply chain strategy alignment ⚫Network configuration ⚫Information technology ⚫Products and services ⚫Capacity planning ⚫Strategic partnerships ⚫Distribution strategy ⚫Uncertainty and risk reduction LO 15.9 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-19 Management Responsibility: Tactical and Operational Tactical ⚫Forecasting ⚫Sourcing ⚫Operations planning ⚫Managing inventory ⚫Transportation planning ⚫Collaborating Operational ⚫Scheduling ⚫Receiving ⚫Transforming ⚫Order fulfilling ⚫Managing inventory ⚫Shipping ⚫Information sharing ⚫Controlling LO 15.9 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-20 Procurement ⚫The purchasing department is responsible for obtaining the materials, parts, and supplies and services needed to produce a product or provide a service. ⚫The goal of procurement ⚫Develop and implement purchasing plans for products and services that support operations strategies LO 15.10 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-21 Purchasing Interfaces LO 15.10 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-22 Duties of Purchasing ⚫Identifying sources of supply ⚫Negotiating contracts ⚫Maintaining a database of suppliers ⚫Obtaining goods and services ⚫Managing suppliers LO 15.10 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-23 The Purchasing Cycle ⚫The main steps: 1. 2. 3. 4. 5. LO 15.10 Purchasing receives the requisition Purchasing selects a supplier Purchasing places the order with a vendor Monitoring orders Receiving orders Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-24 Supplier Management ⚫Choosing suppliers ⚫Supplier audits ⚫Supplier certification ⚫Supplier relationship management ⚫Supplier partnerships ⚫CPFR (collaborative planning, forecasting, and replenishment) ⚫Strategic partnering LO 15.11 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-25 Vendor Analysis, Supplier Audits, and Supplier Certification ⚫Vendor analysis ⚫ Evaluating the sources of supply in terms of price, quality, reputation, and service ⚫Supplier audit ⚫ A means of keeping current on suppliers’ production (or service) capabilities, quality and delivery problems and resolutions, and performance on other criteria ⚫Supplier certification ⚫ Involves a detailed examination of a supplier’s policies and capabilities ⚫ The process verifies the supplier meets or exceeds the requirements of a buyer LO 15.11 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-26 Supplier Relationship Management ⚫Type of relationship is often governed by the duration of the trading relationship ⚫ Short-term ⚫Oftentimes involves competitive bidding ⚫Minimal interaction ⚫ Medium-term ⚫Often involves an ongoing relationship ⚫ Long-term ⚫Often involves greater cooperation that evolves into a partnership LO 15.11 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-27 Strategic Partnering ⚫Two or more business organizations that have complementary products or services join so that each may realize a strategic benefit ⚫Example: ⚫When a supplier agrees to hold inventory for a customer in return for a long-term commitment ⚫The customer’s inventory holding cost is reduced and the supplier is relieved of the costs that would be needed to continually find new customers LO 15.11 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-28 Contrasting Supplier Relationships Aspect Adversary Partner Number of suppliers Many; play one off against the others One or a few Length of relationship May be brief Long-term Low price Major consideration Moderately important Reliability May not be high High Openness Low High Quality May be unreliable; buyer inspects At the source; vendor certified Volume of business May be low due to many suppliers High Flexibility Relatively low Relatively high Location Widely dispersed Nearness is important for short lead times and quick service LO 15.11 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-29 Logistics ⚫Logistics ⚫Refers to the movement of materials, services, cash, and information in a supply chain ⚫Movements within a facility ⚫Incoming shipments ⚫Outgoing shipments LO 15.12 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-30 Movement Within a Facility LO 15.12 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-31 Incoming and Outgoing Shipments ⚫Traffic management ⚫Overseeing the shipment of incoming and outgoing goods ⚫Handles schedules and decisions on shipping method and times, taking into account: ⚫Costs of shipping alternatives ⚫Government regulations ⚫Needs of the organization ⚫Shipping delays or disruptions LO 15.12 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-32 Tracking Goods: RFID ⚫Radio frequency identification (RFID) ⚫ A technology that uses radio waves to identify objects, such as goods in supply chains ⚫ Similar to barcodes but ⚫ Are able to convey much more information ⚫ Do not require line-of-sight for reading ⚫ Do not need to be read one at a time ⚫ Has the ability to: ⚫Increase supply chain visibility ⚫Improve inventory management ⚫Improve quality control ⚫Enhance relationships with suppliers and customers LO 15.12 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-33 3-PL ⚫Third-party logistics (3-PL) ⚫The outsourcing of logistics management ⚫Includes ⚫Warehousing and distribution ⚫Potential benefits include taking advantage of: ⚫The specialists’ knowledge ⚫Their well-developed information system ⚫Their ability to obtain more favorable shipping rates LO 15.12 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-34 Managing Returns ⚫Reverse logistics ⚫ The process of transporting returned items ⚫Products are returned to companies or third party handlers for a variety of reasons and in a variety of conditions ⚫ Elements of return management ⚫ Gatekeeping ⚫ Screening returned goods to prevent incorrect acceptance of goods ⚫ Avoidance ⚫ Finding ways to minimize the number of items that are returned LO 15.13 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-35 Creating an Effective Supply Chain ⚫It begins with strategic sourcing ⚫ Analyzing the procurement process to lower costs by reducing waste and non-value-added activities, increase profits, reduce risks, and improve supplier performance ⚫ There must be ⚫Trust ⚫Effective communication ⚫Information velocity ⚫Supply chain visibility ⚫Event management capability ⚫Performance metrics LO 15.14 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-36 Challenges ⚫Barriers to integration of organizations ⚫Getting top management on board ⚫Dealing with trade-offs ⚫Small businesses ⚫Variability and uncertainty ⚫Response time LO 15.14 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-37 Trade-Offs 1. Lot-size-inventory trade-off ⚫Large lot sizes yield benefits in terms of quantity discounts and lower annual setup costs, but it increases the amount of safety stock (and inventory carrying costs) carried by suppliers 2. Inventory-transportation cost trade-off ⚫Suppliers prefer to ship full truckloads instead of partial loads to spread shipping costs over as many units as possible. This leads to greater holding costs for customers ⚫Cross-docking ⚫ A technique whereby goods arriving at a warehouse from a supplier are unloaded from the suppliers truck and loaded onto outbound truck, thereby avoiding warehouse storage LO 15.14 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-38 Trade-Offs (cont.) 3. Lead time-transportation costs trade-off ⚫ Suppliers like to ship in full loads, but waiting for sufficient orders and/or production to achieve a full load may increase lead time 4. Product variety-inventory trade-off ⚫ Greater product variety usually means smaller lot sizes and higher setup costs, as well as higher transportation and inventory management costs ⚫Delayed differentiation ⚫ Production of standard components and subassemblies which are held until late in the process to add differentiating features LO 15.14 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-39 Trade-Offs (cont.) 5. Cost-customer service trade-off ⚫ Producing and shipping in large lots reduces costs, but increases lead time ⚫Disintermediation ⚫ Reducing one or more steps in a supply chain by cutting out one or more intermediaries LO 15.14 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-40 Chapter 18 Waiting Lines Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-41 Chapter 18: Learning Objectives You should be able to: LO 18.1 What imbalance does the existence of a waiting line reveal? LO 18.2 What causes waiting lines to form, and why is it impossible to eliminate them completely? LO 18.3 What metrics are used to help managers analyze waiting lines? LO 18.4 What very important lesson does the constant service time model provide for managers? LO 18.4 What are some psychological approaches to managing lines, and why might a manager want to use them? Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-42 Waiting Lines ⚫Waiting lines occur in all sorts of service systems ⚫Wait time is non-value added ⚫ Wait time ranges from the acceptable to the emergent ⚫Short waits in a drive-thru ⚫Sitting in an airport waiting for a delayed flight ⚫Waiting for emergency service personnel ⚫ Waiting time costs ⚫Lower productivity ⚫Reduced competitiveness ⚫Wasted resources ⚫Diminished quality of life LO 18.1 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-43 Queuing Theory ⚫Queuing theory ⚫Mathematical approach to the analysis of waiting lines ⚫Applicable to many environments ⚫Call centers ⚫Banks ⚫Post offices ⚫Restaurants ⚫Theme parks ⚫Telecommunications systems ⚫Traffic management LO 18.1 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-44 Why Is There Waiting? ⚫Waiting lines tend to form even when a system is not fully loaded ⚫Variability ⚫Arrival and service rates are variable ⚫Services cannot be completed ahead of time and stored for later use LO 18.2 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-45 Waiting Lines: Managerial Implications ⚫Why waiting lines cause concern: 1. The cost to provide waiting space 2. A possible loss of business when customers leave the line before being served or refuse to wait at all 3. A possible loss of goodwill 4. A possible reduction in customer satisfaction 5. Resulting congestion may disrupt other business operations and/or customers Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-46 Waiting Line Management ⚫The goal of waiting line management is to minimize total costs: ⚫ Costs associated with customers waiting for service ⚫ Capacity cost Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-47 Waiting Line Characteristics ⚫The basic characteristics of waiting lines Population source 2. Number of servers (channels) 3. Arrival and service patterns 4. Queue discipline 1. Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-48 Simple Queuing System System Processing Order Calling population Arrivals Waiting line Service Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education Exit 15-49 Population Source ⚫Infinite source ⚫Customer arrivals are unrestricted ⚫The number of potential customers greatly exceeds system capacity ⚫Finite source ⚫The number of potential customers is limited Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-50 Channels and Phases ⚫Channel ⚫A server in a service system ⚫It is assumed that each channel can handle one customer at a time ⚫Phases ⚫The number of steps in a queuing system Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-51 Common Queuing Systems Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-52 Arrival and Service Patterns ⚫Arrival pattern ⚫ Most commonly used models assume the arrival rate can be described by the Poisson distribution ⚫Arrivals per unit of time ⚫ Equivalently, interarrival times are assumed to follow the negative exponential distribution ⚫The time between arrivals ⚫Service pattern ⚫ Service times are frequently assumed to follow a negative exponential distribution Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-53 Poisson and Negative Exponential Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-54 Queue Discipline ⚫Queue discipline ⚫The order in which customers are processed ⚫Most commonly encountered rule is that service is provided on a first-come, first-served (FCFS) basis ⚫Non FCFS applications do not treat all customer waiting costs as the same Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-55 Waiting Line Metrics ⚫Managers typically consider five measures when evaluating waiting line performance: 1. 2. 3. 4. 5. LO 18.3 The average number of customers waiting (in line or in the system) The average time customers wait (in line or in the system) System utilization The implied cost of a given level of capacity and its related waiting line The probability that an arrival will have to wait for service Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-56 Waiting Line Performance The average number waiting in line and the average time customers wait in line increase exponentially as the system utilization increases LO 18.3 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-57 Queuing Models: Infinite Source ⚫Four basic infinite source models ⚫All assume a Poisson arrival rate 1. Single server, exponential service time 2. Single server, constant service time 3. Multiple servers, exponential service time 4. Multiple priority service, exponential service time Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-58 Infinite-Source Symbols Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-59 Basic Relationships System Utilization Average number of customers being served Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-60 Basic Relationships (cont.) ⚫Little’s Law ⚫For a stable system the average number of customers in line or in the system is equal to the average customer arrival rate multiplied by the average time in the line or system Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-61 Basic Relationships (cont.) ⚫The average number of customers ⚫ Waiting in line for service: ⚫ In the system: ⚫The average time customers are ⚫ Waiting in line for service ⚫ In the system Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-62 Single Server, Exponential Service Time ⚫M/M/1 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-63 Single Server, Constant Service Time ⚫M/D/1 ⚫ If a system can reduce variability, it can shorten waiting lines noticeably ⚫ For, example, by making service time constant, the average number of customers waiting in line can be cut in half ⚫ Average time customers spend waiting in line is also cut by half. ⚫ Similar improvements can be made by smoothing arrival rates (such as by use of appointments) LO 18.4 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-64 Multiple Servers (M/M/S) ⚫Assumptions: ⚫A Poisson arrival rate and exponential service time ⚫Servers all work at the same average rate ⚫Customers form a single waiting line (in order to maintain FCFS processing) Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-65 M/M/S Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-66 Cost Analysis ⚫Service system design reflects the desire of management to balance the cost of capacity with the expected cost of customers waiting in the system ⚫Optimal capacity is one that minimizes the sum of customer waiting costs and capacity or server costs Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-67 Total Cost Curve Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-68 Maximum Line Length ⚫An issue that often arises in service system design is how much space should be allocated for waiting lines ⚫The approximate line length, Lmax, that will not be exceeded a specified percentage of the time can be determined using the following: Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-69 Multiple Priorities ⚫Multiple priority model ⚫ Customers are processed according to some measure of importance ⚫ Customers are assigned to one of several priority classes according to some predetermined assignment method ⚫Customers are then processed by class, highest class first ⚫Within a class, customers are processed by FCFS ⚫Exceptions occur only if a higher-priority customer arrives ⚫ That customer will be processed after the customer currently being processed Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-70 Multiple–Server Priority Model Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-71 Finite-Source Model ⚫Appropriate for cases in which the calling population is limited to a relatively small number of potential calls ⚫Arrival rates are required to be Poisson ⚫ Unlike the infinite-source models, the arrival rate is affected by the length of the waiting line ⚫The arrival rate of customers decreases as the length of the line increases because there is a decreasing proportion of the population left to generate calls for service ⚫Service times are required to be exponential Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-72 Finite-Source Model (cont.) ⚫ Procedure: 1. 2. 3. 4. 5. Identify the values for a. N, population size b. M, the number of servers/channels c. T, average service time d. U, average time between calls for service Compute the service factor, X=T/(T + U) Locate the section of the finite-queuing tables for N Using the value of X as the point of entry, find the values of D and F that correspond to M Use the values of N, M, X, D, and F as needed to determine the values of the desired measures of system performance Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-73 Finite-Source Model (cont.) Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-74 Constraint Management ⚫Managers may be able to reduce waiting lines by actively managing one or more system constraints: ⚫ Fixed short-term constraints ⚫Facility size ⚫Number of servers ⚫ Short-term capacity options ⚫Use temporary workers ⚫Shift demand ⚫Standardize the service ⚫Look for a bottleneck Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-75 Psychology of Waiting ⚫If those waiting in line have nothing else to occupy their thoughts, they often tend to focus on the fact they are waiting in line ⚫They will usually perceive the waiting time to be longer than the actual waiting time ⚫Steps can be taken to make waiting more acceptable to customers ⚫Occupy them while they wait ⚫In-flight snack ⚫Have them fill out forms while they wait ⚫Make the waiting environment more comfortable ⚫Provide customers information concerning their wait LO 18.5 Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-76 Operations Strategy ⚫Managers must carefully weigh the costs and benefits of service system capacity alternatives ⚫Options for reducing wait times: ⚫ Work to increase processing rates, instead of increasing the number of servers ⚫ Use new processing equipment and/or methods ⚫ Reduce processing time variability through standardization ⚫ Shift demand Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15-77

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