Deze samenvatting is gebaseerd op het studiejaar 2013-2014.

Lecture 1: Supply Chain Management and Logistics

Supply Chain encompasses all activities associated with the flow and transformation of goods and services from the raw materials stage through to the end-user, as well as the associated information and monetary flows.


Downstream flows: Supplier to customer

Upstream flows (return flows): customer to supplier
Reasons for return flows are, for example,

  • recycling of products

  • money back guarantee for unsatisfied customers

  • repairs

  • empty packaging materials

  • waste

  • returned new products


Operations Management Management of the Transformation Process in an effective and efficient way


Transformation Process
Input (Job/Tasks): raw materials, information, customers

Resources: facilities, machines, staff
Output: semi-finished products, finished products, components, services


General representation of a Supply Chain

Supplier supplies raw materials, semi-finished products and finished products to downstream customers. Several strategies:

  • Supplying demand at lowest possible costs.

  • Responding quickly to changing requirements and demand to minimize stock outs.

  • Sharing market research for jointly development of products and services.


Manufacturer assemblage of products and services. Objective of purchasing:

  • Identify products and services that can be obtained externally

  • Develop, evaluate and determine the best supplier, price and delivery for those products and services.


Selection of supplier(s) manufacturers that decide to buy instead of making products can follow three-stage process:

  • Vendor evaluation: finding potential vendors and determining likelihood of they’re becoming good suppliers

  • Vendor development: assuming that a firm wants to proceed with supplier, how to integrate activities into its own system?

  • Negotiations: several strategies exist to determine price(s)


Figure 1


Distributor distribution of products from manufacturers to retailers and customers. Activities are, for example:

  • Temporarily storage of products in warehouses to balance fluctuations in production and demand.

  • Transportation of products by, for example, trucks, trains, airplanes, ships or pipelines.


Customers buy products and/or services.

  • Direct delivery of products after ordering on the Internet or phone

  • Retailers, supermarkets, service organisations etc. offer products and services to customers.


Supply Chain Management can be defined as the efforts to integrate the processes in the supply chain. Cooperation, effective coordination and integration of materials and information and trust through out the supply chain might be necessary to obtain a valuable chain with satisfied customers. Simultaneously, attention can be paid to reduction of costs.


Trends (communication)

  • All techniques that enable paperless transactions


  • Site where a producer offers his products for a fixed price

  • Auctions

Improvements in exchange of information

  • EDI (Electronic Data Interchange): standardised data-transmittal format for computerized communication between organisations.


  • More but smaller orders


Trends (outsourcing)
Third party logistics

  • Core activities are executed by the company itself. Other activities are outsourced.

  • Major candidate for outsourcing: (reverse) logistics activities

  • Success is possible only if the third party logistics provider actively helps to solve problems, if there is perfect information exchange and trust between parties.

  • Dutch Figures:

  • Approximately 70% of the transport is outsourced

  • Warehousing activities of multinationals are usually outsourced to 3PLs

Vendor managed inventories

  • The supplier is in the general case of Vendor Managed Inventory responsible for the management of the inventories of his product at each location within the supply chain.


Trends (ever faster)

Efficient consumer response

  • Extensive collaboration between firms to respond faster/better/cheaper to the ever changing demands and wishes of customers

Cycle time reduction

  • The cycle time of a supply chain equals the total time required to complete the total process from raw materials to the delivery of the finished product to the customers.


  • Philosophy of continuous and forced problem solving that drives out waste (storage, insepection, waiting etc.)


Trends (production process)


  • Delaying any modifications or customisation to the product as long as possible in production process.
  • For example, Hewlett-Packard adds power system the moment the destination country of the printer is known.

Channel assembly

  • Postponement of final assembly until distribution
  • For example, Dell makes a computer in its warehouse from standardised components after the order of a customer.


  • Reduction of the number of variations in materials and components as an aid to cost reduction.


Logistics the part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, service and related information from the point of origin to the point of consumption in order to meet customer's requirements.

  • Logistics activities occur in nodes in the supply chain and between several nodes in the supply chain.

  • Examples of logistics activities are:

  • Transportation

  • Inventory of products.


Logistics environments

  • Production environments

  • Goods: products that can be bought by customers.

  • Distribution environments

  • Service environments

  • Services: activities that typically produce an intangible product, such as education, lodging, entertainment, government, financial and health services


Examples of logistics decision problems

  • Staff planning and scheduling
  • Layout (e.g., hospital, store, airport)
  • Selection of services to offer
  • Assortment decisions (e.g., what products to offer)
  • Inventory management (e.g., avoiding empty shelves)


Radio-Frequency Identification (RFID) Tracking and tracing of products and consumers. Can be used locally and in supply chains. Examples:

  • RFID-chip in clothes resulting in better inventory management and less lost sales in supply chain.
  • Control of prisoners
  • Self-service libraries
  • Check-out at grocery stores
  • Design store layout


The Logistics Process

  • Materials Management: all activities to move materials, components and information efficiently to and within the production process and all activities to use the production process efficiently.

  • Physical distribution: refers to the movement of goods and information outward from the end of the assembly line to the customer.

  • Reverse logistics: logistics management skills to manage reverse flows.


Schematic view on the Logistics Process

Figure 2


Transportation is important for the success of any supply chain:

  • Transportation costs are directly affected by location of plants, warehouses, vendors and customers.
  • Inventory requirements are influenced by mode of transportation used.
  • Transport mode selected determines packaging required.
  • Customer service goals influence type and quality of carrier


Transportation Management planning, implementation and control of external transportation services such that objectives and constraints are met.

  • What mode(s) of transportation will be used?
  • Relation with materials handling
  • Routing
  • Costs analyses
  • Outsource transportation or manage it yourselves?
  • What carriers in each mode will be used?


Modalities such as rails, road, water, air, pipeline. Criteria:

  • Speed

  • Accessibility

  • Can each mode of transport reach each destination?

  • Costs

  • Frequency

With which frequency can we use a certain mode of transportation?

  • Risks
    • Which modality has the largest risk for loss of damage of the goods to be transported?

  • Delays

  • Possibility that transport starts and/or ends at the right time.

  • Usefulness

  • Can we use a mode of transportation for all types of goods in all different sizes etc..


Costs analyses

  • Product with low value: cheap and relatively slow mode of transportation. Costs form an important part of logistics costs (e.g. coals).

  • Product with high value: fast and more expensive mode of transportation. Costs for transport are less relevant than moving inventory costs (e.g. computers).

Lecture 2: Process analysis


Performance analysis

  • What is the initial design?

  • Is it a good or bad design?

  • Possible criteria:

    • Determenistic throughput time

    • Design capacity

    • Location and maximum capacity of the bottleneck

    • Departure rate

    • Utilisation

    • Work-in-progress


Continuous improvement

Performance estimation in dialy life

  • Objective: To organise and design the various processes as efficient as possible such that customers are satisfied and operating costs are minimised.

  • You are hired to perform a study on the performance .
    Your first step is to set up a project outline:

    • Which steps do you take?

    • Which actions need to be taken in each step?

Figure 3

Analytical project outline

  1. Problem definition

  2. Collection of input data (conceptual model)

  3. Model implementation

  4. Verification

  5. Validation

  6. Experiments

  7. Output analysis

  8. Report


Steps in an analytical project

Problem definition

  • Define general objectives project. Be realistic.
  • Define performance measures to evaluate system
  • Describe system

Collect data

  • Realise that data often contain errors (or is not what you think it is).
  • Understand the system. Otherwise, you cannot judge the input data.

Conceptual model

  • Summary of input data
    • A document with all assumptions

    • Description of all processes and interactions

    • Roughly resembles the flow diagram.

Model implementation

  • Make model in a software environment


  • Check if your model corresponds with conceptual model.


  • Check if your model corresponds to reality.
  • Quantitative approach: run model with data of last year.
  • Qualitative approach: face validity & Turing test


  • Create alternative models

Output analysis

  • Analyse performance of the models
  • Compare models based on their performance.
  • Ensure that your results are reliable


  • Write a clear report and present your results


Normal distribution

If a production/service time follows a normal distribution Normal(μ,σ) then

  • The mean equals μ

  • The standard deviation equals σ

  • The probability that a production time falls between μ-σ and μ+σ is 68%.

  • The probability that a production time falls between μ-2σ and μ+2σ is 95%.

Figure 4

Three methods for performance analysing

Deterministic performance estimation

  • Widely applicable

  • Easy and fast

  • Gives a rough estimate only


Analytical modeling (such as waiting lines)

  • Applicability is limited

  • Complex calculation

  • Limited number of performance criteria

  • Exact results


  • Widely applicable

  • Complex model building

  • Results for almost any performance



  • Numerical technique of experimentation

  • Attempts to duplicate a system

    • Features

    • Behaviour

  • Requires description of system

  • The idea behind simulation is to:

    • Imitate a real-world situation mathematically

    • Study its properties and operating characteristics

    • Draw conclusions and make action recommendations based on the results of the simulation

  • The model is an approximation of reality

    • You cannot determine all characteristics or not all characteristics can be modeled.

    • You cannot incorporate all external influences.

    • Incorporated external influences will be approximated.

    • For example, based on real data you can determine a theoretical probability distribution.

  • In simulation, the most important question you should continuously be asking yourself is: ‘Is the model close enough to reality, such that we can draw accurate conclusions?’

  • Advantages

    • Can be used for complex situations where analytical models are not useful.

    • Comparing alternatives is an easy job.

    • Possibility to perform experiments without investments.

    • Possibility to perform experiments without disturbances in the system (What-If analyses).

    • Possibility to examine the system during a long time period.

    • Possibility to incorporate uncertainty in system.

    • Possibility to gain insight in the system by using animation.

    • Possibility to find integrated solutions.

  • Disadvantages

    • Optimisation is not possible.

    • Difficult to analyse and interpret results.

    • Results are incorrect if input is incorrect (GIGO). Validation of the models is required.

    • Difficult to make simulation models.

    • Computation times are high.

    • Education, money and time are required.

    • Results look impressive. As a consequence, the value of the results is overestimated.


Deterministic performance estimation

Deterministic vs. Stochastic

  • Deterministic : No random input. Everything is known in advance .

Stochastic: Under similar circumstances different things could happen. For example, throwing a dice.



  • Interarrival time: Time between two subsequent arrivals of products at their entrance in the process.

  • Arrival rate: number of products that arrive per time unit (e.g. number of products that arrive per hour)


Design capacity Theoretical maximum output of a system or process in a given period.

Effective capacity Capacity that can be expected given the product mix, methods of scheduling, maintenance and standards of quality.

Serial means that steps are performed consecutively (one after the other)

Parallel means that steps can be performed simultaneously.

If we say that a single process consists of x parallel servers (machines or operators), we mean that

  • each product only needs to be treated by one of the servers;
  • the other server(s) can simultaneously treat other product(s).


An operation that limits output in the system. If none of the machines/workers/etc. in the system is a bottleneck, then we say that the arrival process is the bottleneck.

Determining a bottleneck

  1. Calculate the design capacity of each process.

  2. Calculate the expected number of products arriving at the system

  3. If design capacity of all processes is sufficient, arrival process is bottleneck; else, process with smallest design capacity is bottleneck


Departure rate (or throughput)
Number of products that leave the system per time unit. The departure rate is determined by the speed of the bottleneck. Only if the arrival process is the bottleneck, then the departure rate equals the arrival rate.


Lecture 3: Queuing and Distribution Logistics


Queue Waiting line

Arrival 1 person, machine, part, etc. that arrives and demands service

Queue discipline Rules for determining the order that arrivals receive service

Channel Number of servers

Phase Number of steps in service


Steps to solve a typical exam question

  1. Identify the appropriate waiting line model.

  2. Determine λ and m

  3. Identify the appropriate performance measure.

  4. Find the correct formula.

  5. Fill out the formula.


1 - Identify the appropriate waiting line model.

  • Two options: M/M/1, M/D/1

  • The first letter refers to the arrival process. The M means “Poisson distributed” arrivals.

  • The second letter refers to the service process. M means “negative exponential” (random) service times.
    D means “deterministic” (constant) service times.

  • The third letter refers to the number of service channels.


2 - Determine λ and m.

  • l = Mean number of arrivals per time period.

  • m = Mean number of people (or items) served per time period.

  • Note that there is a
    distinct difference
    between the rate
    and the time between
    two events.


3 - Identify the appropriate performance measure.

  • Average queue time, Wq

  • Average queue length, Lq

  • Average time in system, Ws

  • Average number in system, Ls

  • Probability of idle service facility, P0

  • Utilization, r

  • Probability of more than k customers in system, Pn > k


4 – Find the correct formula

5 – Fill out the formula


Utilization rate (for M/M/1 en M/D/1): = /m

Probability of 0 units in system, i.e., system idle:

 P0 = 1- ρ = 1- (λ / μ)
Probability of more than k units in system:

Pn>k= (λ / μ) k+1

(where n is the number of units in the system)


Distribution of products from manufacturers to retailers and customers.

Activities are, for example:

  • Temporary storage of products in warehouses to balance fluctuations in production and demand.

  • Transportation of products by, for example, trucks, trains, airplanes, ships or pipelines.

Distribution represents, on average, 25% of the total costs of products


Functions of warehouses

  • to facilitate the coordination between production and customer demand by buffering (storing) products for a certain period of time,

  • to accumulate and consolidate products from various producers for combined shipment to common customers,

  • to transship products from one mode of transportation to another

  • to split large quantities,

  • to provide same-day delivery to important customers,

  • to support product customization activities (value added logistics), such as packaging, labeling, marking, pricing or even final assembly.

Lecture 4: Manufacturing Processes


Process types represent the way prodycts are approached in an organization:

  • unique

  • as a commodity

  • or anything in between


The two distinguishing factors in determining how products are handled, are

  • volume

  • and variety


figure 6


Project unique product, general equipment and resources. the product remains

in a fixed location

  • unique, one-off product

  • clear start and clear end

Job shop unique, but similar products, similar equipment or functions are
grouped together

  • machines grouped together

Batch production in small series, less variation

  • same production line is used for multipe products

  • jobs follow more-or-less the same line

Line same products in large amounts, work processes are arranged
according to the progressive steps by which the product is made

  • production line produces only a single type of product continuously

  • all products follow the same path of activities

Continuous proces like a line only the flow is continuous such as with liquids

  • One product can not be distinguished from the next

  • Examples: chemicals, fibers, paper


The layout can be defined as the physical arrangement or grouping of production
resources, e.g.

  • Placement of departments

  • Workgroups within departments

  • Workstations, machines

  • Stock-holding points within a facility


Layout is the physical manifestation of the process type, and there is often some overlap between process types and the layouts that they could use.


Type of process and layout are different concepts, which is not very clear in the book.
Layout might refer to a whole organization or to one department.


Fixed position layout

  • Product remains on one position and production means are brought to the product

  • A high degree of task ordering/priority setting/sequencing is common.

  • A project layout may be developed by arranging materials according, to their assembly priority.

Functional layout

  • Production means are grouped according to function/specialization

  • Machines and/or resources are grouped by specialty, medial specialisms, technologies

Cellular layout

  • Production means are groupe to optimize movement of materials


Product layout

  • Production means are grouped following the steps of the production process

  • Order of production steps determines sequence of machines/resources

  • Dedicated production lines

Figure 7

Throughput efficiency

Theoretical throughput time / Actual troughput time = Value time / Elapsed time


Customer Order Decoupling Point (CODP) corresponds with the last major stock point in the goods flow. Deliveries to customers are made from here. It separates order-driven activities from forecast-driven activities. It creates a certain degree of freedom to optimize the upstream activities independently from irregularities/uncertainties in market demand.


Make-to-stock firms
Serve customers from finished goods inventory.
Essential issue: Balance the level of inventory against the level of customer service. Forecasting is a very important task.


Assemble-to-order firms
Combine a number of preassembled modules to meet a customer’s specifications.
A primary task is to define a customer’s order in terms of alternative components.
Manufacturing results in customer specific products, assembled in a similar way. Maintaining inventories of components is a key issue.


Make-to-order firms
Make the customer’s product from raw materials, parts and components. An essential issue is to deliver on time, while keeping costs low through high capacity utilization. These firms have limited inventory of raw materials, extensive planning and scheduling efforts.


Purchase to order
These firms will work with the customer and will start buying parts/products after an order has been placed. Companies wait for the customers to specify their wishes and start procuring after receiving an order. Customers are willing to wait.


Engineer-to-order firms
They will work with the customers to first design and then make the product. Frequently, design of the products requires novel solutions and a lot of engineering knowledge. Manufacturing might be relatively easier, but still complex; many suppliers, materials, and subcontractors.


Assembly Line Balancing

  1. Specify the sequential relationships among tasks

  2. Determine the required workstation cycle time

  3. Determine the theoretical minium number of workstations

  4. Select a primary and secondary assignment rule

  5. Assign tasks

  6. Evaluate the efficiency of the balance

  7. Rebalance if needed


Lecture 5: The Lean Philosophy and Quality Management


Fundamental Lean/JIT approach: to remove waste.


All things that do not add value.


Seven sources of waste

  • T-I-M-W-O-O-D

    • T: Transportation: Material movement

    • I: Inventory: Work-in-Process Inventory Waste

      • Buffers; Large batch sizes

    • M: Motion: Unnecessary motion of producer, worker or equipment

      • Poor house-keeping

    • W: Wait: Waiting time of Jobs and Resources

    • O: Over-processing: doing more work than what is required by customer

      • E.g. using tools that are more precise, complex, or expensive than required

    • O: Over-production: Producing too early, too much

      • Attack End product inventories

    • D: Defect: Rework, rescheduling, repair

      • Quality Management


Lean objective

  • Produce

    • Exactly what is needed (quality)

    • Exactly how much is needed (variety – volume)

    • Exactly when it is needed (just-in-time)

    • Exactly where it is needed (location)

    • At the lowest possible cost

  • It is not primarily a cost-cutting / productivity strategy

    • Cutting cost is result of

      • More Efficient Operations (“Operational Excellence”)

      • Higher Quality

      • Less Inventory


The Lean-Philosophy

  • Attack problems rather than containing them

  • Be “pragmatic”: Inventories and Defects do exist, However, the long term goal is to remove them

  • “Labor is concerned with quality and Management with productivity”

    • Management is focused on avoiding the problems to occur

    • Quality first, productivity comes later

  • Integration: Functions should work together as one organization

    • Do not strive for local optima

  • Does not rely on automation: “Simplicity” is key


5 Why’s to find the root cause


  • 1. Why?
    The battery is dead

  • 2. Why?
    The alternator is not functioning

  • 3. Why?
    The alternator belt has broken

  • 4. Why?
    The alternator belt was well beyond its useful service life and has never been replaced

  • 5. Why?
    I have not been maintaining my car according to the recommended service schedule


Quality of Design
Inherent value of the product in the marketplace.
Is the design of the product according to the customer’s wishes?


Quality of Conformance
Degree to which the product/service design specifications ar met.
Is the product manufactured according to the design?


Total Quality Management
Everybody in the organization is responsible for delivering good quality. Each process has an (internal) customer. The entire organization is focused on achieving quality.


  1. Everything is focused on the customer

  2. Empowerment

  3. Quality at the source

  4. Ongoing improvement (Kaizen)

  5. Management based on facts


Lecture 6: Global Sourcing and Procurement


Triple Bottom Line

  • Social: pertains to fair and beneficial business practices toward labor, the community, and the region in which a firm conducts is business

  • Economic: the firm’s obligation to compensate shareholders who provide capital via competitive returns on investment

  • Environmental: the firm’s impact on the environment and society at large


The act of moving a firm’s internal activities and decision responsibility to outside providers. It allows a company to create a competitive advantage while reducing cost. An entire function e.g. distribution, manufacturing may be outsourced, or some elements of an activity e.g. producing parts, may be outsourced, with the rest kept in-house.


Strategic sourcing
The development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of the business. In the past, sourcing was another name for purchasing. As a result of globalization, sourcing implies a more complex process suitable for products that are strategically important.

The Bullwhip effect
Demand variablility increases as you move up the supply chain from customers towards supply. Consequences:

  • Inefficient production or excessive inventory

  • Low utilization of the distribution channel.

  • Necessity to have capacity far exceeding average demand.

  • High transportation costs.

  • Poor customer service due to stock outs


Four types of Supply Chain Strategies

  1. Efficient supply chains: utilize strategies aimed at creating the highest cost efficiency

  2. Risk-hedging supply chains: utilize strategies aimed at pooling and sharing resources in a supply chain to share risk, eg shared inventories

  3. Responsive supply chains: utilize strategies aimed at being responsive and flexible by mass customization and make-to-order

  4. Agile supply chains: utilize strategies aimed at being responsive and flexible to customer needs, using pooled capacities and inventory


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