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82 Cards in this Set
- Front
- Back
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What is Supply Chain Management? What does it consist of? |
The coordinated set of techniques to plan and execute all steps in the global network used to acquire raw materials from vendors, transform them into finished goods, and deliver both goods and services to customers.
- supply management, operations, distribution, and integration |
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Supplier Management (supply management) |
improve performance through supplier evaluation and supplier certification |
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strategic partnerships (supply management) |
successful trusting relationships with top performing suppliers |
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Ethics and sustainability (supply management) |
recognizing suppliers impact on reputation and environmental impact |
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Transportation Management |
tradeoff between cost & timing of delivery & customer service, discuss modes of transportation |
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Customer Relationship Management |
strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements |
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Network Design |
creating distribution networks based on tradeoff decisions between cost &sophistication of distribution system
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Supply Chain Process Integration |
when supply chain participants work for common goals. Requires intra-firm functional integration. Based on efforts to change attitudes and adversarial relationships |
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SCM Old vs New Paradigm |
old: vertically integrated firm, short term focused performance
new: focus on core competency, trust-based relationships with supplier and customer firms. focus on total supply chain performance |
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Current Supply Chain Trends |
- Expansion through right shoring, involving breadth and depth - Increasing responsiveness - Reducing supply chain costs - Supply Chain greening |
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Goal of SCM |
–Goal is to have the correct product in the needed quantity at the right location for the lowest cost. Balancing constant manufacturing with variable demand |
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What is Purchasing? |
Obtaining merchandise, capital equipment; raw materials, services, or maintenance, repair, and operating (MRO) supplies in exchange for money or its equivalent |
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Merchant Buyers |
Wholesalers, retailers, and distributors who purchase completed products for resale |
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Industrial Buyers |
Purchase raw mats., services, capital equipment & maintenance, repair, and operating supplies (MRO) to produce another product/service |
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Primary Goals of Purchasing? |
1. Ensure uninterrupted flow of products at the lowest total cost 2. Improve the quality of finished goods 3. Optimize customer satisfaction |
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Profit-Leverage Effect |
A decrease in purchasing expenditures directly increase profits before taxes, assuming no decrease in quality or other costs |
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Return on Assets Effect (ROA) |
Profit/Assets |
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Inventory Turnover Effect |
COGS/Inventory |
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Supply Base |
A list of suppliers that a firm uses to acquire materials, services, supplies, and equipment.
- emphasis on long term strategic supplier alliances, consolidating volume into one or fewer suppliers into smaller supply base |
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What do Preferred Suppliers provide? |
- early supplier involvement, latest trends, processes, designs - information on supply market - capacity for meeting unexpected demand - cost efficiency due to economies of scale |
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Reasons for buying vs outsourcing |
Cost advantage, insufficient capacity, lack of expertise, quality |
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Reasons for making |
- protect proprietary technology - no component supplier - better quality control - use existing idle capacity - control of lead-time, transportation, and warehousing cost - cost advantage |
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Make-or-break-even analysis |
Total Cost to Make = Total Cost to Buy
- find break even point (Q) - Requirement is 15,000? 25,000 + 5Q = 500 +7Q Q = 12,250 Requirement > Q, -> make Requirement < Q, -> buy |
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Centralized Purchasing Org |
purchasing department located at firms central location handles all purchasing decisions |
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Decentralized Purchasing Org |
individual, local, purchasing departments, such as plant level, make their own purchasing decisions |
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Hybrid purchasing organization |
centralize large national contracts at a corporate level and decentralize items specific to business at the local level |
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World Trade Organization (WTO) |
- only international org dealing with global rules of trade between nations - main function to ensure that trade flows as smoothly, predictably, and freely as possible |
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NAFTA (North American Free Trade Agreement) |
Mexico, USA, Canada
- eliminated tariffs between those countries in 1994 |
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European Union (EU) |
- Created May 9, 1950 - Act as a single market to compete with larger economies - 28 member countries, Euro used in 19 of 28 EU members |
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Public Procurement is characterized by... |
Competitive bidding, Sealed Bids, Performance bonds |
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Federal Acquisition Streamlining Act |
removed restrictions on purchases <$100,000 |
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Small Business Promotion |
purchases between $2,500 and $100,000 reserved for small businesses (<100 employees) |
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Buy American Act |
US government purchases and 3rd party purchases using federal funds must buy domestically produced good if the price is not more than a certain differential above the foreign good |
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Green Purchases |
a variety of federal, state, and local statutes and executive orders require environmental and human health considerations when making purchases |
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General Services Admission (GSA) |
Establishes contracts for products purchased by government agencies. About 25% of government purchases. |
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Strategic Sourcing Decisions |
1. Backward vertical integration 2. Forward vertical integration 3. Outsourcing
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Outsourcing |
Taking in house activities / operations and deciding to purchase from suppliers instead. Outsourcing has become a key method to reduce costs and increase flexibility.
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Positives/Negatives of Outsourcing |
Positives - organization can concentrate on core competencies, increase capabilities, reduce staffing, accelerate reengineering, reduce risk management, improve flexibility Negatives - Loss of control and intellectual property, increased reliance on suppliers, increased need for supplier management, public perception issues |
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Strong Supplier Partnerships |
- important to achieve win-win competitive performance for buyer & supplier - mutual commitment for mutual benefit of both parties |
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Keys to Successful Partnership |
- Build Trust - Shared Vision & Objectives - Personal Relationships - Mutual Benefits and Needs - Commitment of Top Management - Prepared to Change Management - Information Sharing & Open Lines of Communication - Must have right tech and capabilities to meet expectations - Supplier Evaluation and Certification - Performance Metrics |
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Performance Metrics |
1. Aligned with company's goals 2. Understandable 3. Measurable at key intervals 4. Focused on value generation 5. Based on facts, not perceptions |
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Successful partnerships focus on Total Cost of Ownership (TCO) |
all costs associated with acquisition, use and maintenance of a good/service |
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Group Costs Around Transaction |
- pre-transaction: costs incurred prior to order receipt - transaction: costs acquired during acquisition - post-transaction: costs incurred after receipt of goods |
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What is Kaizen? |
continuous improvement
- series of small improvements by removing waste from system |
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What is Supplier Certification? |
an organization’s process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections |
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ISO 9000 |
Quality Management |
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ISO 14000 |
Environmental Management |
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What is Supplier Development? |
A buyer's activities to improve a suppliers performance and/or capabilities based on the following approach |
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Strategic Sourcing |
managing a firm's long term goals |
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Sustainable Sourcing |
a process of purchasing goods and services that takes into account long term impact on people, profits, and the planet |
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Demand |
the state of being wanted or sought for purchase or use |
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Forecast |
to predict a future condition or occurrence, calculate in advance |
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What is a forecast? |
an estimate of future demand & provides the basis for supply planning decisions as well as company financial investment decisions |
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What is the Goal of Demand Forecasting? |
minimize forecast error (improve accuracy), requires timely and accurate forecasts |
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Qualitative Forecasting |
based on opinion and intuition |
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Quantitative Forecasting |
uses mathematical models and historical data to make forecasts
1. Time series model most frequently used 2. Cause & Effect identify causes of demand and base forecast based on estimation and cause |
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4 Types of Qualitative Forecasting |
1. Jury of Executive Opinion 2. Delphi Method 3. Sales Force Composite 4. Consumer Survey |
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Jury of Executive Opinion |
An experienced group of senior management executives knowledgeable about the market, competitors, and the business environment develop a forecast |
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Delphi Method |
Internal and external experts are surveyed about future events and long-term forecasts of demand. Multiple survey rounds until there is a consensus |
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Sales Force Composite |
Utilizes the knowledge of the sales force. The sales force is seen to have recent and accurate information concerning the market and the needs of the customer and are best to make the forecast |
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Consumer Survey |
Surveys are administered to customers and issues such as future buying habits, new product ideas, and opinions about existing products are gathered and analyzed to determine a forecast. |
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2 Types of Quantitative Forecasting |
1. Time Series Forecasting 2. Cause & Effect Forecasting
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Time Series Forecasting |
based on the assumption that the future is an extension of the past. Historical data is used to predict future on demand. |
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Cause & Effect Forecasting |
Assumes that one or more factors (independent variables) predict future demand |
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Components of Time Series Forecast |
1. Trend Variations: Long term trend of the demand (increasing or decreasing?). Any expected impact to long term trend (new tech, population change, etc.) 2. Cyclical Variations: wavelike movements that are longer than a year (business cycle). Economic swings (recession, expansion). |
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Components of Time Series Forecast cont. |
3. Seasonal variations: show peaks & valleys that repeat over consistent intervals, such as hours, days, weeks, months, or seasons. 4. Random variations: due to unexpected or unpredictable events (Disruptions; storms, strikes, etc.) |
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Naive Forecast (Time Series Forecasting Model) |
The estimate of the next period is equal to the demand in the past period. (study more from slide) |
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Simple Moving Average Forecasting Model (Time Series Forecasting Model) |
Uses historical data to generate a forecast. Works well when demand is stable over time. (study more from slides and book) |
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Weighted Moving Average Forecasting Model (Time Series Forecasting Model) |
based on an n-period weighted moving average. Works well when demand is stable over time with an increasing or decreasing trend. (study more from slides and book) |
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Key Considerations in Simple Vs Weighted Moving Average |
1. How many periods to use? - more periods = less reliance on each 2. How to determine weights for each period? - Simple - all periods have the same impact - Weighted - can give more emphasis to recent data - balance recent data vs. historical info best to try different methods and compare to actual results to find best fit |
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Linear Regression Forecasting Model (Time Series Forecasting Models) |
The trend can be estimated using linear regression to fit a line to a time series of data (study more from slides and book)
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Simple Regression Model (Cause & Effect Models) |
Only one explanatory variable used, same as the linear regression model. Difference is that x variable is no longer time, but an explanatory variable. (Study slide and text more) |
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Multiple Regression Model (Cause & Effect Models) |
Several explanatory variables are used to make the forecast. (study slides and text for formulas) |
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When to use Qualitative vs Quantitative |
Use Qualitative when historical data is neither available nor relevant.
Use Quantitative when historical data is both available and relevant. - Time Series when history is best indicator - Cause & Effect when there is clear alignment between cause and effect |
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Forecast Error |
Difference between actual quantity and forecasted amount (refer to slides and text for formula)
- must identify positive, negative, and absolute value of error |
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Measures of Forecasting Accuracy |
1. Mean absolute deviation (MAD): identifies how far off the forecast was in absolute terms 2. Mean Absolute Percentage Error (MAPE): provides a perspective of the true magnitude of the forecast error 3. Mean squared error (MSE): large forecast errors are heavily penalized, focuses on minimizing errors |
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Measures of Forecasting Accuracy cont. |
refer to slides and text for formulas and applications |
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Running Sum of Forecast Errors (RSFE) |
indicates the bias in the forecasts or the tendency of a forecast to be consistently higher or lower than actual demand (refer to slides for formula)
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Tracking Signal |
determines if forecast is within acceptable control limits. If tracking signal falls outside pre-set control limits, there is a bias problem with the forecasting method and an evaluation of the way forecasts are generated is warranted (refer to slides for formula) |
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Bullwhip Effect |
Forecast changes & their corresponding orders along a supply chain can become amplified and accumulate. |
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Collaborative Planning, Forecasting, and Replenishment (CPFR) |
- business practice that combines the intelligence of multiple trading partners in the planning & fulfillment of customer demands.
- Links sales & marketing best practices to supply chain planning processes to increase availability while reducing inventory, transporation, & logistics costs. |
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CPFR |
- real value of CPFR comes from sharing of forecasts among firms rather than sophisticated algorithms from only one firm - Does away with the shifting of inventories among trading partners in the supply chain - CPFR provides many benefits to partners in the supply chain and is best used with Strategic Supply Chain partners. It requires key successful partnerships to be implemented |
