Supply Chain Management and Lean Systems

Vocabulary flashcards covering Supply Chain Management (Chapter 13), Supply Chain Design (Chapter 14), and Lean Systems (Chapter 5).

Supply Chain Efficiency Curve

A non-linear relationship between total costs and supply chain performance, showing how improvements in design and execution can shift the curve to reduce costs and improve performance.

Green purchasing

Identifying, assessing, and managing the flow of environmental waste and finding ways to reduce it and minimize its impact on the environment.

Preference matrix

A tool management can use in the supplier selection problem when faced with multiple criteria.

Design collaboration

A process focusing on jointly designing new services or products with key suppliers, facilitating concurrent engineering.

Early supplier involvement

A practice that yields valuable comments and suggestions from suppliers during design and materials choices to improve efficiency and quality.

Pre-sourcing

A practice in the automotive industry where suppliers are selected during a product's concept stage and given design responsibilities for specific components.

Value analysis

An intensive examination of services, materials, processes, and information systems involved in the production of an existing item to reduce costs and improve profit.

Competitive orientation

A negotiation stance where buyer and seller see the interaction as a zero-sum game, prioritizing short-term advantages over long-term commitments.

Purchasing power

The clout a firm has when its purchasing volume represents a significant share of the supplier’s sales.

Referent power

A source of power where the supplier values identification with the buyer.

Expert power

A source of power where the buyer has access to knowledge and skills desired by the supplier.

Reward power

A source of power where the buyer promises future business to the supplier.

Legal power

A source of power where the buyer demands strict compliance with the negotiated contract.

Coercive power

A source of power where the buyer threatens to cancel future business with the supplier.

Cooperative orientation

An approach where buyer and seller act as partners with a focus on long-term commitment, shared information, and simplified supply chains.

Sole sourcing

The awarding of a contract to only one supplier.

Average aggregate inventory value

The total value of all items held in inventory for a firm.

Weeks of supply

An inventory measure calculated as: $\frac{ ext{Average aggregate inventory value}}{ ext{Weekly sales at cost}}$, or $\frac{52}{ ext{Inventory turns}}$.

Inventory turnover

A measure of efficiency calculated as: $\frac{ ext{Cost of goods sold}}{ ext{Average aggregate inventory value}}$, or $\frac{52}{ ext{Weeks of supply}}$.

Cash-to-cash

The time lag between paying for services and materials and receiving payment for the final product or service.

Working capital

Money used to finance ongoing operations.

Return on assets (ROA)

A financial measure calculated as: $\frac{ ext{Net Income}}{ ext{Total Assets}}$, which improves as supply chain performance increases.

Efficient supply chains

Supply chains best suited for environments with predictable demand, low forecast errors, and competitive priorities of low cost and consistent quality.

Responsive supply chains

Supply chains designed for unpredictable demand, frequent product introductions, and competitive priorities like customization and development speed.

Make-to-stock (MTS)

A strategy where the product is built to a sales forecast and sold to the customer from finished goods stock.

Assemble-to-order (ATO)

A strategy where products are built to customer specifications using a stock of existing components.

Make-to-order (MTO)

A strategy based on standard designs, but where production and manufacture are linked to specific customer specifications.

Design-to-order (DTO)

A strategy where the product is designed and built entirely to customer specifications, such as large construction projects.

Mass customization

A strategy where a firm’s highly divergent processes generate a wide variety of customized services or products at reasonably low costs.

Configurator

Software that gives firms and customers access to data relevant to available options, allowing for custom product design.

Modular design

A product design approach that allows final products to be quickly and economically assembled from a set of standardized modules.

Postponement

A concept where some final activities in product provision are delayed until specific orders are received.

Channel Assembly

A practice where members of the distribution channel act as the assembly station.

Outsourcing

Paying suppliers and distributors to perform processes and provide needed services and materials.

Offshoring

A supply chain strategy involving the movement of processes to another country.

Next-Shoring

A supply chain strategy involving the location of processes in close proximity to customer demand or localized R&D.

Vertical integration

A strategy that includes backward integration toward suppliers or forward integration toward customers.

Backward integration

A form of vertical integration where a firm moves upstream in the supply chain toward sources of raw materials.

Forward integration

A form of vertical integration where a firm acquires more control downstream toward the customer, such as distribution centers.

Make-or-buy decisions

A managerial choice between whether to outsource a process or perform it in-house.

Environmental Disruptions

External supply chain risks caused by natural disasters, war, or terrorism.

Bullwhip Effect

The phenomenon where ordering patterns experience increasing variance as they proceed upstream in the supply chain.

Supply Chain Integration

The effective coordination of supply chain processes through the seamless flow of information up and down the chain.

SCOR Model

A framework for supply chain integration focusing on five functions: Plan, Source, Make, Deliver, and Return.

Cloud computing

The practice of using a network of remote servers hosted on the Internet to store, manage, and process data.

Blockchain

A digital record of transactions in which individual records, called blocks, are linked together in a single chain.

Transaction integration

The level of supply chain coordination involving access to purchase orders, work orders, invoices, and payments.

Strategic collaboration

The level of supply chain coordination involving shared efforts to improve forecast accuracy and resolve critical supply chain events.

Kaizen

The Japanese term for continuous improvement.

Muda

The Japanese term for waste.

Overproduction

A type of waste involving manufacturing an item before it is needed, leading to excessive lead times and inventory.

Inappropriate Processing

A type of waste involving the use of expensive high-precision equipment when simpler machines would suffice.

JIT II

A vendor managed inventory system where an in-plant representative from the supplier is empowered to plan and schedule replenishment.

Pull Method of Workflow

A Lean method in which customer demand activates the production of a service or item.

Push Method of Workflow

A method in which production of an item begins in advance of customer needs based on demand forecasts.

Quality at the source

A Lean philosophy of catching and correcting defects precisely where they occur.

Jidoka

A visual management system where the process is stopped when something is wrong to fix it immediately on the line.

Takt Time

The cycle time needed to match the rate of production to the rate of sales or consumption.

Heijunka

The leveling of production load by both volume and product mix.

TPS (Toyota Production System)

A system characterized by the discipline and process of continuous improvement where all work is completely specified as to content, sequence, timing, and outcome.