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70 Cards in this Set

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  • Back
Define "supply chain"
The network of services, material, and information flows that link a firm's customer relationship, order fulfillment, and supplier relationship processes to those of its suppliers and customers.

*a firm may have multiple supply chains, depending on the service/product mix. suppliers may not overlap b/w chains

** "supply chain" and "value chain" are sometimes used interchangeably
Define "supply chain management"
Developing a strategy to organize, control, and motivate the resources involved in the flow of services and materials w/in the supply chain
Define "supply chain strategy"
Designing a firm's supply chain to meet the competitive priorities of the firm's operations strategy.

*essential for both service and manufacturing firms
What is supply chain design for a service provider driven by?
the need to provide support for the essential elements of the various service packages it delivers
(must support the service package)
What is a fundamental purpose of supply chain design for manufacturers?
to control inventory by managing the flow of materials.
What are the 3 aggregate categories of inventory?
1- Raw materials (RM)- considered to be inputs to the transformation processes

2- Work-in-process (WIP)- also present in some service operations

3- Finished Goods (FG)- FG of one firm may be the RM of another
Where can finished goods be held?
-plant
-distribution center (may be owned by mfr or retailer)
-retail locations
What are the 3 categories of measures of supply chain performance?
1- Inventory measures
2- Process measures
3- Link to financial measures
What do all methods of measuring begin with?
a physical count of units, volume, or weight
What are the 3 basic ways measures of inventory are reported?
1- average aggregate inventory value
2- weeks of supply
3- inventory turnover
What is "average aggregate inventory value"?
the total value of all items held in inventory for a firm

-usually represents the inventory investment over some period of time
-express $ values at cost
-tells managers how much of a firm's assets are tied up in inventory
-contains RM, WIP, and FG

ex: avg agg inv value = (# units of item A typically on hand)(value of each unit of item A) + (# units B on hand)(value of B)
What is "weeks of supply"?
an inventory measure obtained by dividing the average aggregate inventory value by sales per week at cost

denominator is cost of goods sold

weeks of supply = avg agg inv value / weekly sales (at cost)
What is "inventory turnover"?
(turns) an inventory measure obtained by dividing annual sales at cost by the avg agg inv value maintained during the year

inv turnover = annual sales (at cost) / avg agg inv value
What are 3 major process related to supply chains?
1- customer relationship
2- order fulfillment
3- supplier relationship
What are the links to financial measures used to measure supply chain performance?
-ROA (NI/total assets)
-Working Capital ($ used to finance ongoing operations, reflects weeks of inventory)
-Cost of Goods Sold
-Total Revenue
-Cash Flow
What is the "bullwhip effect"?
The phenomenon in supply chains whereby ordering patterns experience increasing variance as you proceed upstream in the chain.

-the slightest change in customer demands can ripple through the entire chain, w/each member receiving more variability in demands from the member immediately downstream.
What are some typical external causes of changes in demand?
-Volume changes (ex: electric company experiencing an unusually warm day may require immediate power backup from another company to avoid a brownout)

-Service and Product Mix changes

-Late deliveries (may force a firm to switch its schedule from production of 1 product model to another)

-Underfilled Shipments (effects are similar to those of late shipments unless it contains enough to allow the firm to operate until the next shipment)
What are some typical internal causes of changes in demand?
-Internally Generated Shortages (ex: machine breakdowns, inexperienced workers, strike at mfring plant, labor shortages due to high turnover)

-Engineering Changes (changes to the design of services or products)

-New Service or Product Introductions (always affect the supply chain, may even require a new supply chain or addition of new members to an existing chain)

-Service or Product Promotions (ex: price discounts-->increased demand & forward buying; pricing programs can also induce efficiencies in supply chain if they discourage activities that increase costs)

-Information Errors (it's unrealistic to think that all disruptions can be eliminated)
What is "forward buying"?
The practice of consumers buying in excess of immediate needs to take advantage of price discounts.
What is a starting point for minimizing supply chain disruptions?
Develop a supply chain with a high degree of functional and organizational integration.
Firm strives to work w/its customers so that everyone benefits from improved flows of services and materials.
-must understand a better understanding of its suppliers' organizations, capacities, strengths, & weaknesses- include suppliers earlier in design stage
What is the purpose of the customer relationship process?
To identify, attract, and build relationships with customers and to facilitate the transmission and tracking of orders.
What are key nested processes of the customer relationship process?
-Marketing Process
-Order Placement Process
Define "e-commerce"
The application of information and communication technology anywhere along the value chain of business processes
How has e-commerce had an impact on the supply chain?
It has dramatically changed the way companies design their customer relationship process and the nested marketing and order placement processes.
What are 2 e-commerce technologies that relate to the marketing process?
1. B2C systems- e-commerce is particularly attractive for products the consumer doesn't have to look at carefully or touch. internet offers an advantage w/higher-value branded convenience goods over the in-store experience.

2. B2B systems- B2B e-commerce outpaces B2C transaction. B2B trade makes up more than 70% of the regular economy.
What advantages does the internet provide for a firm's order placement process?
-Cost Reduction (allows for greater participation by the customer)

-Revenue Flow Increase (reduces billing time lags or waiting for checks in the mail)

-Global Access (orders placed 24/7- competitive advantage over brick-and-mortar firms)

-Pricing Flexibility (can change prices easily w/out cost of publishing new catalogs; can control for component shortages- e.g. Dell changing prices to steer customers to computers for which ample supplies exist)
What are some tactics and tools involving material flows b/w the firm and its external customers that can help manage the order fulfillment process?
-Inventory Placement
-Vendor-managed Inventories
-Continuous Replenishment Program
-Radio Frequency Identification
-Distribution Processes
Define "centralized placement"
Keeping all the inventory of a product at a single location such as a firm's manufacturing plant or a warehouse and shipping directly to each of its customers.

-disadvantage- added cost of shipping smaller, uneconomical quantities directly to customers over long distances
Define "inventory pooling"
A reduction in inventory and safety stock because of the merging of variable demands from customers.

-advantage of centralized placement
-higher-than-expected demand from 1 customer can be offset by lower-than-expected demand from another so total demand remains fairly stable
Define "forward placement"
Locating stock closer to customers at a warehouse, DC, wholesaler, or retailer.

2 advantages:
-faster delivery times
-reduced transportation costs
Define "vendor-managed inventories (VMI)"
An extreme application of the forward placement tactic, which involves locating the inventories at the customer's facilities.
-supplier has access to customer's inventory data and is responsible for maintaining the inventory level required by the customer
-Can be used by both service providers and manufacturers

ex: Wal-Mart and Dell leverage their market position to mandate VMI
What are the key elements of VMI?
-Collaborative Effort (need atmosphere of trust and accountability)

-Cost Savings (eliminate need for excess inventory)

-Customer Service (supplier is frequently on site and better understands the operations)

-Written Agreement
Define "Continuous replenishment program (CRP)"
A VMI method in which the supplier monitors the customer's inventory levels and replenishes the stock as needed.
-helps reduce inventories and boost efficiencies in warehousing and transportation

some companies that use it: IBM, Campbell Soup, Heinz Pet Products, Purina
What program did CRP's success spur the development of?
Collaborative, planning, forecasting, and replenishment (CPFR)- allows the supplier and customer to develop replenishment quantities jointly.
Define "radio frequency identification (RFID)"
a method for identifying items through the use of radio signals from a tag attached to an item.

-one major advantage is theft reduction

some companies that use is: Wal-Mart, Gillette
What are 3 important decisions that determine the design and implementation of distribution processes?
1- Ownership
2- Mode Selection
3- Cross-docking
What are the 5 basic modes of transportation?
1- truck
2- train
3- ship
4- pipeline
5- airplane
Define "cross-docking"
the packing of products on incoming shipments so that they can be easily sorted at intermediate warehouses for outgoing shipments based on their final destinations; the items are carried from the incoming-vehicle docking point to the outgoing-vehicle docking point without being stored in inventory at the warehouse
What are the benefits of cross-docking?
reductions in:
-inventory investment
-storage space requirements
-handling costs
-lead
increased inventory turnover
accelerated cash flow
What are the major nested processes of the supplier relationship process?
-Sourcing Process (qualifies, selects, manages the contracts, & evaluates suppliers)

-Design Collaboration Process (focuses on jointly designing new services/products w/key suppliers)

-Negotiation Process (focuses on obtaining an effective contract that meets requirements of internal customers)

-Buying Process (actual procurement of the service/material from supplier)

-Information Exchange Process (facilitates exchange of pertinent operating info b/w firm and supplier)
Define "purchasing"
The activity that decides which suppliers to use, negotiates contracts, and determines whether to buy locally.
Define "green purchasing"
The process of identifying, assessing, and managing the flow of environmental waste and finding ways to reduce it and minimize its impact on the environment.
What are the 2 activities that a firm's purchasing unit is responsible for?
1- Supplier selection
2- Supplier certification
What are 3 criteria often considered by firms selecting new suppliers?
1- price
2- quality
3- delivery
Define "competitive orientation"
A supplier relation that views negotiations between buyer and seller as a zero-sum game: whatever one side loses, the other side gains, and short-term advantages are prized over long-term commitments
Define "cooperative orientation"
A supplier relation in which the buyer and seller are partners, each helping the other as much as possible

-favors fewer suppliers of a particular service/item, with just 1-2 suppliers being the ideal #.
Define "sole sourcing"
The awarding of a contract for a service or item to only one supplier
What are 4 approaches to e-purchasing?
1- Electronic Data Interchange (EDI)
2- Catalog Hubs
3- Exchanges
4- Auctions
Define "Electronic Data Interchange (EDI)"
A technology that enables the transmission of routine business documents having a standard format from computer to computer over telephone or direct leased lines
Define "Catalog hubs"
A system whereby suppliers post their catalog of items on the internet and buyers select what they need and purchase them electronically.

-can be used to reduce costs of placing orders to suppliers and costs of services/goods themselves
Define "Exchange"
An electronic marketplace where buying firms and selling firms come together to do business

-often used for "spot" purchases to satisfy an immediate need at the lowest possible cost
-more useful for commodities
Define "auction"
A marketplace where firms place competitive bids to buy something

-more useful for commodities
What is a "reverse auction"
Where suppliers bid for contracts with buyers. ex: FreeMarkets
Centralized vs Localized Buying
Centralized:
-increased purchasing clout
-favored by companies w/overseas suppliers
-helped by the trend of increased computer-based IS and the internet
-disadvantage: loss of control at the local level
-undesirable for items unique to a particular facility
-longer lead times, addt'l level in hierarchy

Localized:
-good for purchases that must be closely meshed w/production schedules
-advantage when the firm has major facilities in foreign countries
Define "Value analysis"
A systematic effort to reduce the cost or improve the performance of services or products, either purchased or produced
Define "early supplier involvement"
a program that includes suppliers in the design phase of a service or product
Define "presourcing"
A level of supplier involvement in which suppliers are selected early in a product's concept development stage and are given significant, if not total, responsibility for the design of certain components or systems of the product
What are 2 distinct designs used to create competitive advantage?
1- Efficient Supply Chains
-work best in envt's where demand is highly predictable
-service/product designs last a long time, new introductions are infrequent, & variety is small.
-competitive priorities are low-cost operations, consistent quality, and on-time delivery

2- Responsive Supply Chains
-competitive priorities are development speed, fast delivery times, customization, variety, volume flexibility, & top quality.
Define "mass customization"
A strategy whereby a firm's flexible processes generate a wide variety of personalized services or products at reasonably low costs.
What are the 3 competitive advantages of a mass customization strategy?
1- managing customer relationships
2- eliminate FGI
3- increase perceived value of services or products
How does mass customization affect the design of supply chains?
1- underlying process design is an assemble-to-order strategy
2- service or product must have a modular design that enables the "customization"
3- postpone the task of differentiating a service or product for a specific customer until the last possible moment
Define "postponement"
An organizational concept whereby some of the final activities in the provision of a service or product are delayed until the orders are received
Define "channel assembly"
The process of using members of the distribution channel as if they were assembly stations in the factory
What are 3 key activities required to attain a lean supply chain?
1- Strategic sourcing
2- Cost management
3- Supplier development
What are several factors that drive the offshoring strategy?
-Comparative labor costs
-Logistics costs
-Tariffs and taxes
-Labor laws and unions
-Internet
What are some potential pitfalls of the offshoring strategy?
-pulling the plug too quickly
-technology transfer
-process integration
What are some benefits of virtual supply chains?
-reduced investment in inventories and order fulfillment infrastructure
-greater service or product variety
-lower costs due to economies of scale
-lower transportation costs
When is the traditional approach to supply chain design favored (as opposed to virtual supply chain)?
-sales volumes are high
-order consolidation is important
-small-order fulfillment capability of suppliers is important
When is the virtual supply chain approach favored (as opposed to traditional approach)?
-demand is highly volatile
-high service or product variety is important
What are 2 other implications of the choice between traditional and virtual supply chain approaches?
1- virtual supply chains relinquish direct control of the order fulfillment process to other firms- need appropriate contractual relationships

2- virtual supply chains provide the firm w/more flexibility to change the design of its service packages or its products because it doesn't have the heavy overhead investment in the order fulfillment process

Firm needs to balance need for control against need for flexibility