Supply Chain Manegment (Chapters 1-5)

Term

Definition

What is a supply chain?

The network of organizations and activities involved in producing and delivering products to customers.

What is supply chain management?

Coordinating product, information, and financial flows from suppliers to customers.

What are the three main supply chain flows?

Product flow, information flow, and financial flow.

What is product flow?

Movement of materials and finished goods through the supply chain.

What is information flow?

Sharing orders, forecasts, and inventory information among supply chain partners.

What is financial flow?

Movement of payments and money among supply chain partners.

What is a supplier?

A business that provides materials, products, or services.

What is a manufacturer?

A business that converts materials or components into finished products.

What is a distributor?

A business that stores and moves products toward retailers or customers.

What is a retailer?

A business that sells products directly to consumers.

What is logistics?

Planning and managing the movement and storage of goods.

What is inventory?

Goods and materials a business keeps available for production or sale.

What is purchasing?

Buying the goods and services a business needs.

What is procurement?

The broader process of obtaining goods and services, including planning, sourcing, purchasing, and supplier management.

What is sourcing?

Finding, evaluating, and selecting suppliers.

What is outsourcing?

Using an outside company to perform work or provide goods or services.

What is insourcing?

Performing work or producing goods within the company.

What is supplier selection?

Evaluating potential suppliers and choosing the one that best meets company needs.

What is total cost of ownership (TCO)?

The full relevant cost of acquiring and using something, not just its purchase price.

What is a purchase order?

An official document a buyer sends to a supplier to request goods or services.

Why is the cheapest supplier not always the best?

It may have poor quality, unreliable delivery, limited capacity, or higher costs elsewhere.

What factors matter when selecting a supplier?

Price, quality, delivery, reliability, capacity, service, communication, and reputation.

What is supplier relationship management (SRM)?

Developing and managing supplier relationships to improve performance and create value.

What is supplier performance?

How well a supplier meets expectations for quality, delivery, cost, and service.

What is a supplier scorecard?

A tool that measures and compares supplier performance using selected criteria and weights.

How do you calculate a weighted supplier score?

Multiply each category score by its weight, then add the weighted scores.

What is supplier collaboration?

Buyers and suppliers sharing information and working together toward common goals.

What is lead time?

The time between placing an order and receiving it.

What is supplier development?

Working with suppliers to improve their capabilities and performance.

Why are strong supplier relationships valuable?

They can improve quality, delivery, communication, problem-solving, and costs.

What is ethics?

Principles that guide judgments about right and wrong behavior.

What is sustainable sourcing?

Obtaining goods and services while considering environmental, social, and economic impacts.

What is corporate social responsibility (CSR)?

A company's responsibility to operate ethically and consider its effects on society and the environment.

What is fair labor?

Treating workers fairly and providing lawful and safe working conditions.

What is environmental sustainability?

Protecting natural resources and reducing pollution, waste, and environmental harm.

What is green purchasing?

Choosing goods and suppliers that reduce negative environmental impacts.

What is a supplier code of conduct?

Rules and expectations suppliers are required or expected to follow.

What are the three dimensions of sustainability?

Environmental, social, and economic.

What is compliance?

Following applicable laws, regulations, standards, and company policies.

What is demand forecasting?

Estimating how much of a product or service customers will want in the future.

Why do businesses forecast demand?

To plan production, inventory, staffing, purchasing, supplier capacity, and deliveries.

What is qualitative forecasting?

Forecasting based mainly on judgment, experience, surveys, or expert opinions.

What is quantitative forecasting?

Forecasting based on numerical data and mathematical methods.

What is a trend in demand?

A general long-term increase or decrease in demand over time.

What is seasonal demand?

A pattern that repeats at regular intervals, such as holiday shopping demand.

What is cyclical demand?

Demand movement associated with longer-term economic or business cycles.

What is random demand variation?

Unpredictable changes in demand that do not follow a consistent pattern.

What is a moving average forecast?

The average of actual demand over a selected number of the most recent periods.

How do you calculate a simple moving average?

Add actual demand for the selected periods and divide by the number of periods.

What is a weighted moving average?

A forecast that assigns different weights to demand observations and adds the weighted values.

What should weighted moving average weights add up to?

Usually 1.00, or 100 percent.

What does a larger weight mean in a weighted moving average?

That observation has more influence on the forecast.

What is exponential smoothing?

A method that updates the previous forecast using the latest actual demand and a smoothing constant.

What is the exponential smoothing formula?

New forecast = Previous forecast + alpha × (Previous actual demand − Previous forecast).

What does alpha represent in exponential smoothing?

The smoothing constant that controls how strongly the forecast responds to the latest actual demand.

What happens when alpha is higher?

The forecast responds more strongly to recent actual demand.

What happens when alpha is lower?

The forecast changes more gradually and is less responsive to the latest demand.

What is simple linear regression forecasting?

A method that estimates demand using a straight-line relationship between time and demand.

What is the simple linear regression equation?

Y = a + bX; Y is forecast demand, a is the intercept, b is the slope, and X is the period.

What is the intercept in linear regression?

The estimated value of demand when X equals zero; where the line crosses the vertical axis.

What is the slope in linear regression?

The estimated change in demand for each one-unit increase in the period.

What does a positive regression slope indicate?

Demand is generally increasing over time.

What does a negative regression slope indicate?

Demand is generally decreasing over time.

What does MAD measure?

Mean absolute deviation: the average of the absolute forecast errors.

What does MSE measure?

Mean squared error: the average of the squared forecast errors.

What does MAPE measure?

Mean absolute percentage error: the average absolute forecast error as a percentage of actual demand.

When comparing forecasts using MAD, MSE, or MAPE, which is generally preferred?

The forecast with the smaller error measure, when comparing the same data and measure.

What is forecast error?

The difference between actual demand and forecast demand; use a consistent sign convention.

What is supplier capacity?

The maximum amount a supplier can provide in a specified period.

What can a company do if forecast demand exceeds supplier capacity?

Increase supplier capacity, use a backup supplier, change order timing, or adjust the sales plan.

How does a weighted moving average differ from a simple moving average?

A simple moving average weights selected periods equally; a weighted moving average assigns different weights.

How does exponential smoothing differ from a moving average?

A moving average uses a fixed set of recent observations; exponential smoothing updates a previous forecast using a smoothing constant.