Supply Chain Exam 2

Logistics

The process of coordinating and moving material and other resources from one location to another.

International logistics

All functions concerned with the movement of materials and finished goods on a global scale.

Third-party logistics company

An outside company used to manage all or part of another company’s logistics

Cross-docking

An approach used in consolidation warehouses where, rather than making larger shipments, incoming shipments are broken down into small shipments for local delivery in an area.

Hub-and-spoke systems

Systems that combine the idea of consolidation and that of cross-docking.

Free trade zone

A closed facility (under the supervision of government customs officials) into which foreign goods can be brought without being subject to the payment of normal import duties.

Trading blocs

A group of countries that agree on a set of special arrangements governing the trading of goods between member countries. Companies may locate in places affected by the agreement to take advantage of new market opportunities.

Factor-rating system

An approach for selecting a facility location by combining a diverse set of factors. Point scales are developed for each criterion. Each potential site is then evaluated on each criterion and the points are combined to calculate a rating for the site.

Transportation method

A special linear programming method that is useful for solving problems involving transporting products from several sources to several destinations.

Centriod method

A technique for locating single facilities that considers the existing facilities, the distances between them, and the volumes of goods to be shipped.

Hub

Sorting goods is the main purpose of this type of warehouse.

Cost of shipping

The main cost criterion employed when a transportation model is used for analyzing a logistics network.

Solver

The Microsoft Excel function used to solve the transportation model.

Total capacity

For the transportation model to be able to find a feasible solution, this must always be greater than or equal to total demand.

Allocation of demand to a plant or warehouse

The "changing cells" in a transportation model represent this.

Highway

A mode of transportation that is the most flexible relative to cost, volume, and speed of delivery.

Water (ship)

Have very high capacity, and operating costs relative to this capacity are very low, but transit times are slow, and large areas of the world are not directly accessible to carriers. This mode is especially useful for bulk items such as oil, coal, and chemical products.

Air (planes)

There carriers are fast but very expensive to operate. Small, light, expensive items are most appropriate for this mode of transportation.

Rail (trains)

This is a fairly low-cost alternative, but transit times can be long and may be subject to variability. The suitability of this option can vary depending on the infrastructure. In the US, the infrastructure has declined over the last 50 years.

Pipelines

This is highly specialized and limited to liquids, gases, and solids in slurry forma. No packaging is needed and the costs per mile are low. The initial cost to build it is very high.

Hand delivery

This is the last step in many supply chains. Getting the product in the customer's hand is often a slow and costly activity due to the high labor content.

Service Package

A bundle of goods and services that is provided in some environment.

High and low degree of customer contact

A concept that relates to the physical presence of the customer in the system.

Web platform business

A firm that creates value by enabling the exchange of information and processing of transactions between consumers and providers of a service or product.

Service blueprint

A flowchart of a process emphasizing what is visible and what is not visible to the customer.

Poka-yokes

Procedures that prevent mistakes from becoming defects.

Queuing system

A process where customers wait in line for service.

Arrival rate

The expected number of customers that arrive during each period.

Exponential distribution

A probability distribution associated with the time between arrivals.

Poisson distribution

Probability distribution for the number of arrivals during each time period.

Service rate

The number of customers a server can handle during a given time period.

Service-system design matrix

A framework that relates to the customer service system encounter.

Line of visibility

This is the key feature that distinguishes a service blueprint from a normal flowchart

Poka-yoke

This is done to make a system mistake-proof.

Strategic forecasts

Medium- and long-term forecasts used to make decisions related to strategy and estimating aggregate demand.

Tactical forecasts

Short-term forecasts used as input for making day-to-day decisions related to meeting demand.

Time series analysis

A type of forecast in which data relating to past demand are used to predict future demand.

Moving average

A forecast based on average past demand.

Weighted moving average

A forecast made with past data where more recent data are given more significance than older data.

Exponential smoothing

A time series forecasting technique in which each increment of past demand data is decreased by (1 - a).

Smoothing constant alpha (α)

The parameter in the exponential smoothing equation that controls the speed of reaction to differences between forecasts and actual demand.

Smoothing constant delta (δ)

An additional parameter used in an exponential smoothing equation that includes an adjustment for trend.

Linear regression forecasting

Past data and future projections are assumed to fall around straight line

Used both for time series forecasting and for causal relationship forecasting

Use Excel to determine the best fit line

Decomposition

The process of identifying and separating time series data into fundamental components such as trend and seasonality.

Forecast error

The difference between actual demand and what was forecast.

Mean absolute deviation (MAD)

The average forecast error using absolute values of the error of each past forecast.

Mean absolute percent error (MAPE)

The average error measured as a percentage of average demand.

Tracking signal (TS)

A measure of whether the forecast average is keeping pace with any genuine upward or downward changes in demand. This is used to detect forecast bias.

Causal relationship forecasting

Forecasting using independent variables other than time to predict future demand.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

An Internet tool used to coordinate the efforts of a supply chain - Demand forecasting, Production and purchasing, Inventory replenishment

Integrates all members of a supply chain - manufacturers, distributors, and retailers

Strategic capacity planning

Finding the overall capacity level of capital-intensive resources to best support the firm's long-term strategy.

Capacity

The amount of output that a system can achieve over a specific period of time

Best operating level

The level of capacity for which process was designed. Output at which average unit cost is minimized

Capacity utilization rate

Measure of how close the firm is to its best possible operating level (percentage).

Economies of scale

As a plant gets larger and volume increases, the average cost per unit drops

Focused factory

A facility designed around a limited set of production objectives. Typically, the focus would relate to a specific product or product group.

Plant within a plant (PWP)

An area within a larger facility dedicated to a specific production objective (for example, product group). This can be used to operationalize the focused factory concept.

Economies of scope

When multiple products can be produced at lower cost in combination than they can be separately.

Capacity cushion

Capacity in excess of expected demand.

Learning curve

A line displaying the relationship between the cumulative number of units produced and the time or cost to produce the unit.

Individual learning

Improvement that results when people repeat a process and gain skill or efficiency from their own experience.

Organizational learning

Improvement that comes both from experience and from changes in administration, equipment and product design.

Truckload (TL)

Move full truckload

Solo - Single driver

Team - two drivers, one sleeps while the other drives

Less-Than-Truckload (LTL)

Move pallet quantities

Use of crossdocks to combine multiple customers’ shipments

Water

Ideal for materials with high weight-to-value ratio, especially if delivery speed is not critical.

Typically move full container quantities

Air

Ideal for customers with a low weight-to-value ratio, especially if delivery speed is critical.

Move single box quantities

Rail

Alternative to Trucking that can often save 20-30% per shipment

Move full container quantities

Landed Costs

The cost of a product plus all costs driven by logistics activities, such as transportation, warehousing, handling, customs fees, etc.

Make sure they are for the same destination

Trend

A long-term upward or downward movement in data

Seasonality

Fairly regular variations related to factors such as the calendar or time of day

Last Period Model

Forecast is equal to the actual from the pervios period

Qualitative Forecasting Techniques

Useful when judgement is required, when products are new, or if the firm has little experience in a new market

Generally used to take advantage of expert knowledge

Often little or no data is available

Market Research

Structured questionnaires submitted to potential customers

Expensive and time consuming to perform

Historical analogy

Base the forecast on the history of a similar product

Choosing the “similar product” is critical

Panel consensus

Experts joimtly discuss and develop forecasts

Delphi method

Experts work individually to develop forecasts

Forecasts are then shared with the group

Experts modify their forecast based on information from this sharing

CPFR Steps

Creation of a front-end partnership agreement

Joint business planning

Development of demand forecasts

Sharing forecasts

Inventory replenishment

Diseconomies of Scale

At some point, the plant becomes too large and average cost per unit begins to increase

Theory of Constraints

An approach to managing capacity which recognizes that nearly all products and services are created through a series of linked processes, and in every case, there is one process step (bottleneck) that determines the capacity for the entire chain

Decision Tree

Is a schematic model of the sequence of steps in a problem - including the condistions and consequences of each step

Decision tree - Decision Nodes

Represented with squares

Decision tree - Chance Events

Represented with circles

Decision tree - Branches

links between nodes, she the choices available to the decsion maker

Optimal levels of utilization - Low Rates

When the degree of uncertainty (in demand) is high and/or the stakes are high (e.g. emergency rooms)

Optimal levels of utilization - Higher Rates

Are possible for predictable services or those without extensive customer contact (e.g. commuter trains)