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38 Cards in this Set
- Front
- Back
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What is supply chain? |
Focus on the development of capabilities to design, produce and deliver products and services in a competitive market |
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What are the key factors that drive performance in supply chain? |
- Products and service features, costs, quality, time to market, ability to innovate |
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Six primary processes of supply chain? |
Plan, source, make, deliver, return, engage |
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Consequences of poor supply chain? |
Loss of productivity, customer complaints, increased costs, loss of revenue, damage to brand |
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What are the biggest supply chain challenges? |
Responding to changes in demand or product mix, hiring qualified workers, supplier performance (in terms of risk, reliability and quality), ensuring sufficient capacity to meet demand, effectively support new product launches, lack of competitive cost structure, customer demand for lower prices, customer demand for faster response times, increasing competition and forecasting |
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Hierarchy of supply chain decisions |
1. Strategy - Long term decisions - big picture projects 2. Operation planning - medium term (1 year) - tactical decisions 3. Execution planning - real time - day to day decisions |
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What is efficient supply chain model? |
Focus on cost reduction, asset utilization, efficiency, productivity, yield capacity utilization, scale Better for functional products that operate in a stable market |
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What is responsive supply chain model? |
Focus on responding speedily to changes in customer delivery requirements (typically volume and lead time) Better for innovative products I a unpredictable market |
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What is capacity? |
The maximum rate at which your company can produce goods or services |
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What is utilization? |
A percentage of your current performance measured against your capacity |
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Advantages of a centralized supply chain |
Less total inventory, more availability, more shipment volumes, better negotiating power with shippers, less complexity, more standardized practices |
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What are the disadvantages of a centralized supply chain? |
Longer shipping distances and times, greater transportation costs |
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What are the advantages to decentralized supply chain? |
Shorter shipping distances and less lead time, lower transportation costs, and greater responsiveness |
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Disadvantages of decentralized supply chain |
More total inventory (summed across all supply chain centers), less availability, lower shipment volumes which means lower negotiating power with shippers, increased complexity, fewer standardized practices |
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When is a centralized strategy better? |
Stable/predictable demand, low velocity, higher product availability, fewer points of sale, low distribution cost per weight, high volume per shipment, low distribution complexity. Pairs with an efficient supply chain |
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When is a decentralized strategy better? |
Higher demand uncertainty, high velocity environment (fast moving products), need to reduce delivery lead times, need higher delivery responsiveness, many points of sale, high distribution cost per weight, more delivery customization. Pairs well with a responsive supply chain |
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What is the philosophy of lean? |
The elimination of waste |
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Definition of throughput time |
The time it takes to process raw materials into a finished good |
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5 Principles of Lean |
1. Identify value 2. Map the value stream (VSM) 3. Create flow (5S) 4. Establish pull (Kanban) 5. Seek perfection (Kaizen) |
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What is push? Definition and pros/cons |
Every worker maximizes own output, making as many products as possible. Focuses on keeping individual operators and workstations busy rather than effective use of materials. Volumes of defective work may be produced. Throughout time will increase as work in process increases. Line bottlenecks and inventories of unfinished products will occur. Hard to respond to special orders and order changes due to long throughput time |
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What is pull? |
Production line is controlled by the last operation, Kanban cards control work in process. Controls maximum (WIP) and eliminates (WIP) bottlenecks. Keeps material busy, not operators. Operators work only when there is a signal to produce. If a problem arises, there is no slack in the system. Throughput time and WIP are decreased, faster reaction to defects and less opportunity to create defects. One downside is that idle labor could drive up per fixed cost per unit |
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Common internal strategies to adjust supply to match demand (supply chain side) |
- Hire and fire - temporary workers - overtime or reduced hours - subcontracting - store excess inventory for times of need - large backlogs - you just accept that you will have a backlog - change production rates |
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Average inventory |
Q/2 |
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H |
Annual holding cost per unit |
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Ordering Cost |
(Number of orders per year X cost per order) Or S times (D/Q) |
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Inventory Cost |
(Average inventory X holding cost per year) Or H times (Q/2) |
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Reorder point |
Average daily demand X lead time in days |
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WHEN should we order more? |
reorder point = average daily demand X lead time in days |
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HOW MUCH to order? |
Economic order quantity = sqrt(2SD/H) |
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Common external strategies to adjust demand to supply (sales side) |
- change the price - promotions/advertising - ‘bundled’ or ‘packaged’ offerings - turn down orders - pre-orders/reservations |
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What is inventory? |
Inventory is the raw material, component parts, work in process, or finished goods that are held at a location in the supply chain |
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Benefits of inventory |
- hedge against uncertain demand - hedge against uncertain supply - economize on ordering costs - order in large batches - smoothing |
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Costs of inventory |
- holding costs - obsolescence - spoilage - rework - shrinkage - opportunity costs |
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What are the two key inventory management decisions? |
1. HOW MUCH should we order? 2. WHEN should we order more? |
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Total cost |
Ordering cost (# of orders per year X cost per order) + Inventory cost (average inventory X holding cost per year) |
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D |
Demand aka Units per year |
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S |
Ordering cost |
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Q |
Quantity or sqrt((2SD)/H) or economic order quantity |
