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102 Cards in this Set
- Front
- Back
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Supply chain management is... |
the EFFICIENT INTEGRATION of suppliers, transporters, manufacturers, warehouses, retailers and all other parties associated with the delivery of the final product
-achieve goals - cost, speed, quality -efficient execution - get things done right, but with minimal effort and resources -manage resources - people, materials, machines |
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ROI formula |
profit / investment |
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profit formula |
revenue - costs |
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core competencies are... |
the primary advantage a company has over its competitors;
primary skills or knowledge; difficult to learn, copy, and acquire; INTANGIBLE
Examples: better product design; sole access to a world-class supplier; a culture of happy and motivated employees; a well-respected brand name |
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primary goals of a corporation |
-sustainable long-term profits -maximize return on investment |
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value is... |
the ratio of "output purchased" divided by "inputs used to purchase" the product or service |
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produtivity is... |
the ratio of outputs to inputs; from a manufacturing perspective companies seek to maximize the amount of outputs that can be produced and delivered to market while minimizing the required inputs
example: (300*$25)/$3000 = 2.5 in June
but if May's productivity was 3, things weren't as efficient in June |
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7 types of waste |
Shigeo Shingo; often decreasing one of the wastes may increase another
1. defects 2. overproduction 3. transportation 4. motion 5. waiting 6. inventory 7. over-processing |
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defects (7 types of waste) |
poorly manufactured products are garbage |
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overproduction (7 types of waste) |
making products no one needs is a waste of time, money, and effort |
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transportation (7 types of waste) |
moving products doesn't improve them; might increase the possibility of theft, damage, and loss |
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motion (7 types of waste) |
if employees move too much in a supply chain they could get tired, injured, they may be wasting time |
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waiting (7 types of waste) |
work-in-process waiting to be finished was made too early |
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inventory (7 types of waste) |
items on the shelf are not providing an immediate return and they could get lost, broken, or stolen |
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over-processing (7 types of waste) |
doing work that is unnecessary or undesired is a waste of time and resources and may actually make a product unsellable |
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4 competitive priorities |
1 cost 2 quality 3 speed/time 4 flexibility
a good company defines itself based on these 4 things
McDonalds vs Red Robin example |
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competitive priorities (competitive priorities) |
materials costs
production costs - machine and labor packaging, transportation, storage costs
quality costs - returns, warranties, repairs, rework, errors, time
customer service costs
other organizational costs - marketing, finance, technology, waste disposal, rent, insurance, legal, HR |
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quality (competitive priorities) |
design quality - product or service; good workers and materials can't make-up for bad design; Apple example
material & production quality - production system, good materials, labor, high performance, aesthetics, durability; Toyota example
quality level delivered - how does it look when the end-user finally gets it? Pizza example
consistent quality - must be the same every time; McDonalds example
service quality - sales, support, repairs, maintenance, assembly, delivery |
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time (competitive priorities) |
delivery time - lead time (pizza delivery); from order placement to order fulfillment
on-time delivery (airline industry); developing schedules & staying on time |
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flexibility (competitive priorities) |
companies typically offer you large quantities OR a large range of customizable features; both are considered a form of flexibility
1. product or customization flexibility -options offered -built to your specifications
2. volume flexibility -coping with demand changes -large and/or small orders (timely)
3. mass customization -both customization and volume flexibility
Oreganos pizza vs frozen pizza example |
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other types of flexibility modern organizations require (competitive priorities) |
design flexibility - easy to change color, size, features materials/parts flexibility - can the materials be used for many different items and in many ways? facility flexibility - producing many items in the same plant tools/machinery flexibility - can tools be used to make many items? employee flexibility - agile employees; competent service flexibility - repairs, returns, assembly, recycle, suggestions, help desk, locally, worldwide, on site, in person |
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buy it, make it, move it, sell it, service it |
buy it - purchasing make it - operations move it - logistics sell it - sales, retail operations service it - support, returns, maintenance/repairs |
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organization as a body |
supply chain is the muscles and bones; marketing design strategy is the brain; materials, IT, marketing, and accounting are the bloodflow; |
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procurement is... |
the process of obtaining services, supplies, and equipment in conformance with corporate regulations;
examples of duties: -supplier selection -purchasing negotiations -managing supplier relationships - motivation, development -materials/inventory management
buying almonds example |
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operations are... |
"the management of the systems that make the stuff"
design, operation, and improvement of the production systems that EFFICIENTLY transform inputs into finished goods & services, maximizing productivity
examples of duties: -process management, plant management -capacity planning - resources, speed (how much, how fast?) -scheduling jobs/people -waiting line management -process improvement projects |
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logistics is... |
the COORDINATED planning and execution of the following: -preparation of packaged product -movement itinerary (transport) -storage itinerary (warehousing) -product distribution through the supply chain - who gets what? when? how?
Examples of duties: -distribution/warehousing, infrastructure mgmt -packaging, containerization, transportation, documentation -third party mgmt and communication
traveling example (buy ticket, pack, get to airport, security, boarding, layover, etc) |
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reverse logistics is... |
the management of products and packaging that flow backward in the supply chain, away from he consumer and back in the direction of manufacturers;
reusing, refurbishing, recycling to get value back out of goods |
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business models are... |
A company's plan for how it will purchase items, transform them, deliver them, and sell them in an effort to produce a profit
examples: movie rentals - netflix vs blockbuster retail book sales - amazon vs barnes & noble computer sales - dell vs sony hamburgers - mcdonalds vs red robin |
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basic business models |
business to consumer (B2C) business to business (B2B) both B2B and B2C Brick & mortar - land-based commerce only internet only retailer - net commerce only click & mortar - land-based and net commerce |
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supply chain visibility is... |
the ability to see what is happening with inventory up and down a supply chain |
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lead time is... |
the time elapsed between customer placing an order and the order being received by the customer
how much and how often would you order from them?
low cost but long lead time will cost more to store
high cost and low lead time can have high storage costs (theft, damage, etc) |
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lot size |
typically refers to the order size |
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SKU |
stands for Stock Keeping Unit;
unique identifying number used to track each unique product customers can purchase
every variation of a product has a different SKU |
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inventory is... |
stock of any item or resource used in an organization; not just what you sell; includes what you need to run the business on a day-to-day basis |
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inventory considerations |
storage - space, heat/cool environment, energy requirements, labor, handling, buy/lease, cost
transport - vehicle, cool/heat, fuel, labor, packaging, cost
shrinkage - pilferage, security, lost items, damaged, obsolescence
other inventory needs - what else do we hold in inventory? do we have enough room for everything we typically carry?
money - cash, financing terms, taxes, insurance
legal considerations - licenses, certifications, other laws |
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shampoo principle |
you use a lot of shampoo when you just bought a new bottle, but you can make the last quarter of the bottle last as long as the first 3 quarters did |
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types of risk |
loss, damage, theft, breakdowns
human resources
fluctuating demand (electricity)
market changes - innovation, growth
other - environmental, political, criminal |
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Why keep inventory? |
1. insurance - manage risk/uncertainty 2. customer expectations - support strategic plan 3. managing cost - economies of scale |
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insurance (why keep inventory?)* |
common risks - breakdowns, accidents, weather, defects, strikes, illness, forecasting errors, theft
buy it - suppliers have the same risks; protect yourself against their problems
make it - labor, machine breakdowns, high demand
move it - theft, late shipments, logistics problems associated with distance
sell it - theft, high demand, damaged items
service it - defects, repair, warranties, maintenance |
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customer expectations (why keep inventory?)* |
some companies make it their business to have large amounts of inventory on hand for your convenience (walmart, home depot, circle K)
low cost may require longer lead times
your supplier's lead times may be too long to compete without inventory; consider perishable items and seasonal items |
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managing cost - economies of scale (why keep inventory?)* |
quantity discounts - lower purchase costs could offset other inventory related costs
manufacturing - some items are made in batches, making them as needed would be economical; maximize capabilities, minimize cost |
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long-term (inventory)* |
these items can be sold today, next month, next year, or even 5 years from now; quick sale is preferred but not required.
examples: nails, paper, cleaning supplies |
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seasonal (inventory)* |
these items must sell quickly; the period of high demand for this item is limited; next year may be an option
examples: christmas trees, valentines day candy |
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perishable (inventory)* |
the demand period for these items is finite; selling them after today may not be possible
spoilage - fruits, vegetables, meat, flowers
obsolescence - clothing, computers
time perishable - airline sears, rental cars, hotel rooms, newspapers |
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7 inventory classifications |
raw materials work-in-process (WIP) finished goods (FG) Maintenance, repair, and operations (MRO) market inventory safety stock (buffer stock) anticipation inventory pipeline inventory |
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safety stock AKA buffer stock (inventory classifications) |
protects against uncertainty in demand, lead time, supply; not intended to be used; cushion |
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anticipation inventory (inventory classifications) |
used to absorb uneven rates of demand or supply perhaps caused by seasonal demand, holidays, price reductions, economic production runs
lawn mower factory example |
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market inventory (inventory classifications) |
inventory readily available on the shelf
does amazon have any market inventory? yes, everything in their distribution center |
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pipeline inventory (inventory classifications) |
inventory in transit between 2 points, but doesn't mean it is on a truck/train;
orders that have been placed but not yet received nor paid for by customer; inventory "on its way" to the customer; DOESN'T include safety stock
formula: pipeline inventory = dL = (periodic demand * lead time)
example: if it takes 7 days from raw material to shelf, and 100 shovels are sold per day, the pipeline inventory would be 700 units |
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raw materials (inventory classifications) |
material, parts, or components that will be used to create an end item or service; have not begun their manufacturing into a finished good/service
examples: unassembled handles, shafts, and shovel blades |
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work-in-process WIP (inventory classifications) |
items that have begun the manufacturing process but aren't completed
example: partially assembled shovels |
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finished goods FG (inventory classifications) |
completed items ready for shipment
example: fully assembled shovels |
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maintenance, repair, and operations MRO (inventory classifications) |
items important to the daily operation of the company
examples: desks, computers, cleaning supplies, factory equipment |
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demand forecasting is... |
a predictive analysis and/or estimation of consumer demand in a future period;
2 types: qualitative and quantitative |
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qualitative (demand forecasting methods)* |
using experts to predict demand; experts could be: executives, salespeople, consumers, industry experts
use this if there is: irrelevant current data, lack of current data, incomplete data, or if there are new products/new markets |
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quantitative (demand forecasting methods)* |
using historical data to predict future demand
casual methods - linear regressions
time series - averages, trends, seasonal |
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simple moving average |
average demand over a certain number of prior periods
works well in industries where demand is fairly stable |
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weighted moving average |
average demand over a certain number of prior periods, but each period is weighted differently; the sum of the weights should equal 1 |
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1st tier suppliers are... |
a company's direct supplier. A firm that directly provides goods and/or services to a company; denoted as s1 |
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2nd tier suppliers are... |
A firm that provides goods and/or services to a company's first-tier suppliers. A weak S2 company can create problems for their S1 customers. Poor 2nd-tier suppliers increase the risk-level of their customer's customer. |
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Downstream supply chain |
In a supply chain the direction in which products flow towards an end consumer; a downstream manager finds ways to get goods/services closer to the customer in an effective and efficient manner.
examples: delivering goods from a manufacturer to a distributor; suppliers (s1) getting parts to manufacturers |
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upstream supply chain |
the direction from customers to suppliers; an upstream manager might be responsible for: ensuring empty boxes from retailers are returned to the distributor for reuse; developing relationships with a company's 1st tier suppliers in order to better communicate the needs of the present and the future |
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3 SCM flows |
in order for supply chains to function and develop, 3 things must continuously flow: materials, money, and information
materials - no materials, no products
money - no money, everything comes to a hault
info - cant afford waste; knowing what was bought today, where it was bought, how much was paid, where inventory is getting stolen; if info stops flowing, a chain reaction of poor decisions will occur |
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global supply chain management |
when suppliers, manufacturers, transportation companies, warehouse and distribution centers, retailers, and other SC partners span across multiple countries; can offer competitive advantages as well as complicating circumstances |
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primary supply chain goals |
effectiveness, efficiency, and adaptability
effectiveness - are we getting the job done? does it meet the consumer's expectations?
efficient - are we working harder than we have to? spending too much? could we produce it with less resources?
adaptable - can we deal with change? are we flexible? |
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keys to being a successful supply chain manager |
1. satisfy the needs of the customer 2. satisfy the needs of the company 3. be prepared for the future |
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supply chain strategy includes: |
1. understanding the product/service and the market's desire; who, what, when, where 2. developing a business model (online? in store? both?) 3. organizing the right team of supply chain partners (suppliers, manufacturers, shippers, etc) |
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SC tools |
1. supply chain metrics (measure success/fail) 2. info technology tools (collect, organize, report data to SC managers) 3. relationship management skills (develop relationships with the other companies in the SC) 4. financial resources (SC improvements cost $) 5. organizational integration (communication between all departments is vital) |
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independent demand item |
an item for which demand levels are not directly impacted by the demand of another related item
example: car sales don't depend on other car sales; computers, refrigerators, and dining tables |
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dependent demand item |
an item for which demand levels are directly impacted by the demand of another related item
Example: tires are dependent on how many cars are sold |
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high inventory |
-higher levels of customer service bc you can deal with high demand; -quantity discounts when ordering; -fewer orders to place; -greater security against unexpected high demand |
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low inventory |
-less storage space required; costs of holding may be lower -lower chance of obsolescence and shrinkage -less materials handling -less money spent on inventory means more money for other investments |
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4 costs of inventory |
cost to purchase holding cost ordering cost stockout cost |
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cost to purchase (4 costs of inventory) |
the cost to purchase the inventory |
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holding cost (4 costs of inventory) |
may include: -rent for storage -energy and equipment required to maintain proper environment -insurance -security personnel -employees that handle inventory |
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ordering cost (4 costs of inventory) |
may include: -cost to research suppliers -negotiate purchase -shipping -upkeep of electronic ordering system |
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stockout cost (4 costs of inventory) |
costs associated with not having enough inventory on hand to meed demand
might include: loss of the unmet sale in the present -loss of any future sales from these customers -cost of expedited shipment -cost of altering operational plans to expedite production |
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inventory calculations basics |
Q - lot size D - annual demand C - cost to purchase one unit H - cost to hold one unit for one year S - cost to place a single order |
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average amount of inventory (inventory calculations basics) |
Q/2 |
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number of orders per year (inventory calculations basics) |
D/Q |
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time between orders (in weeks) (inventory calculations basics) |
(Q/D)*52 |
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total annual inventory cost calculation |
TC = DC + AHC + AOC
DC = annual cost to purchase inventory (Q/2)*H = annual holding cost (AHC) (D/Q)*S = annual ordering cost (AOC) |
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economic order quantity (EOQ) |
the lot size (Q) that will minimize total annual inventory cost (TC); seen as the optimal lot size
EOQ = DC + (Q/2)*H + (D/Q)*S
can be described as the lot size where AHC is equal to AOC |
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if AHC is greater than AOC... |
holding costs are too high; you are to the right of EOQ on the chart; decrease lot size to reduce TC |
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if AOC is greater than AHC... |
holding costs are too low; to the left of EOQ on chart; increase lot size to reduce TC |
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reasons for making |
proprietary technology - others can't make it and we don't want to tell anyone how to make it -no competent supplier - can't make it as well as us -better quality control - we like it made a certain way and are picky -idle capacity - we have the resources so why not - control - we want it faster, cheaper, and better |
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reasons for outsourcing |
-insufficient capacity - we can make it, but don't have the time/resources -lack of expertise - we don't know how -competent supplier - we can make it, but not as well as a supplier -better use of resources - suppliers can make it faster and/or cheaper for same quality |
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Total Cost of Ownership (TCO) |
the cost of owning an item over the entire life of the item
criticisms: difficult to capture all costs; TCO drives cost cutting w/o valuing other product/service aspects that may provide value to the user and/or consumer |
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vertical integration is... |
the act of a company taking on additional supply chain responsibilities that were formerly done by outside parties
2 classes:
forward integration - taking over SC responsibilities performed by downstream SC partners; example: bakery purchasing sandwich shop and using bread from the bakery
backward integration - taking over SC responsibilities performed by upstream SC partners; example: bakery purchasing a flower company |
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steps in the purchasing process |
-requisition - discovering we need something; use a materials requisition (MR) to let procurement know you need the item
-supplier selection - procurement searches suppliers; if current suppliers doesn't sell the item, they need to find other suppliers; may send out a Request for Quotation (RFQ) and negotiate -place order - a Purchase Order (PO) may be issued by procurement to order item -track order -receive order - inspect order, scanned into inventory, and moved to be used or into storage |
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material requisition (MR) |
doc used to initiate purchasing process; lists quantity needed, product/service description and/or specifications |
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request for quotation (RFQ) |
asks supplier(s) for a detailed quote that may include delivery date and payment terms |
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purchase order (PO) |
formal request for purchase; contract that states the terms and conditions of the order; if accepted, supplier returns a signed copy of the binding contract |
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E-procurement system |
can aid in submitting requests for materials, making material orders, negotiating with suppliers, tracking shipments, and receiving shipments; data collected can help analyze procurement actions and lead to better decisions in the future |
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centralized purchasing |
single purchasing department; responsible for all decisions including supplier choice, order size, and payment terms
advantages: -avoid duplication - if another department has the item since they know all inventory -volume discounts -consolidated shipping -established supply base - allows for deep supplier relationships to form -supply specialization - certain purchasing employees can develop expertise in buyer certain categories of products/services |
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decentralized purchasing |
purchasing department in each department or each office might be able to make purchases on their own
advantages: -closer knowledge of requirements; example: ASU biology department -closer knowledge of the suppliers - especially when departments are spread across country/world -speed of purchase - product can be bought immediately |
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supplier base is... |
an established group of suppliers that a company makes most of its purchases |
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choosing a supplier |
consumer needs - will their part make your product more desirable to the customer? -cost, quality, speed, and flexibility -technological capability - do they offer a product/service no one else does? -location - effects of distance traveled (lead time, tariffs, risks) - information technology system - will both of your systems be compatible? -ability to innovate - money for R&D? must be able to improve as you do -capacity potential - can they handle your growing demand? -2nd and 3rd tier suppliers - will they pose a risk or opportunity? willing to let us develop a relationship? -reliability - are they able to deliver on their promises? if not, what is the typical outcome? - service - what separates them from their competition? |
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supplier scorecards are... |
a report card used to communicate desire before a sales presentation or shipment; can also communicate performance outcomes after the sales presentation or shipment; results can be used to discuss changes that may be required in future interactions |
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supplier certifications are... |
assessments that help ensure that a buyer's suppliers all meet the minimum supplier standards; can be developed by the actual supplier or an outside agency
drivers license example |
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single supplier |
-quantity discount opportunities -lowest total cost - product and service package can't be matched -intellectual property advantages - no one can do it like they can -quality control - consistent quality -relationship management is easier -collaboration easier |
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multiple supliers |
-competition can breed innovation -risk is spread out among multiple suppliers -capacity flexibility - if more are needed it can be spread out between the suppliers easier -location advantages - if you have multiple plants all over, it could be better to go with a closer supplier to each plant |
