Supply Chain Management: Sourcing, Scheduling, and Process Improvement

Vocabulary review flashcards covering strategic sourcing, supplier selection, master scheduling, MRP logic, process mapping, lean manufacturing, and quality improvement tools.

Strategic Sourcing

The process of identifying ways to improve long-term business performance by better understanding sourcing needs, developing long-term sourcing strategies, selecting suppliers, and managing the supply base.

SSQDC Criteria

A qualitative supplier screening framework consisting of Safety (internal and external), Sustainability (green and ethics), Quality (consistency, conformance, service), Delivery (reliability, speed, capacity), and Cost (total cost of ownership).

Weighted-Point Evaluation System

A multi-criteria supplier selection method where a supplier score is calculated as $\text{Score}_X = \sum_{Y=1}^n \text{Performance}_{XY} \times W_Y$, with $\text{Performance}_{XY}$ representing supplier $X$'s rated performance on dimension $Y$, and $W_Y$ representing the assigned weight such that $\sum_{Y=1}^n W_Y = 1$.

Request for Quotation (RFQ)

A formal supplier bidding document outlining all required specifications, delivery terms, payment conditions, and contract lengths; primarily utilized when price is the dominant selection criterion and requirements are straightforward.

Fixed-Price Contract

A formal contracting agreement where the stated purchase price remains constant and does not change over the life of the agreement.

Cost-Based Contract

A procurement contract where the ultimate price of the good or service is directly tied to the cost of key inputs or other defined economic factors.

Purchase Order (PO)

A formal commercial document that authorizes a supplier to deliver a product or service under specified terms and conditions (including price, delivery, and quality), becoming a legally binding agreement once formally accepted by the supplier.

Statement of Work (SOW)

Specified terms and conditions for a purchased service indicating the exact scope of services to be performed and the criteria against which the service provider will be evaluated.

Ethical Sourcing

A supply management practice ensuring fair pay scales, worker safety, human rights, diversity, and avoidance of child labor or worker abuse, including purchasing Fair Trade products at fair prices to support disadvantaged producers in developing countries.

Sustainable Sourcing

The practice of green purchasing (reducing packaging, materials, waste, and byproducts with an environmental sustainability goal) alongside active replenishment of natural resources.

Bottleneck Items (Kraljic's Portfolio)

Purchased items characterized by high supply risk/complexity and low cost/value potential, featuring complex specifications, few alternative supply sources, and new or untested technologies; managed by widening specifications, developing new suppliers, and setting medium-term contracts.

Critical or Strategic Items (Kraljic's Portfolio)

Purchased goods or services characterized by both high supply risk/complexity and high cost/value potential, requiring close supplier partnerships, detailed process monitoring, contingency planning, and persistent negotiations.

Routine or Arms-Length Items (Kraljic's Portfolio)

Everyday, unspecified items with low supply risk and low cost/value potential (such as office supplies), managed by simplifying procurement through electronic purchasing, vendor-managed inventory, and supplier rationalization.

Leverage or Preferred Items (Kraljic's Portfolio)

High-expenditure commodity items with low supply risk and high cost/value potential, managed to maximize commercial advantage by maintaining supplier pressure, establishing long-term contracts with improvement conditions, and aligning procurement with market cycles.

Planning and Control

A set of tactical and execution-level business activities that integrates master scheduling, material requirements planning (MRP), production activity control (PAC), and vendor order management.

Master Scheduling

A detailed planning process that operationalizes overall S&OP resource levels by tracking production output, matching it to customer orders, and stating exactly when and in what quantities specific products will be produced.

Master Production Schedule (MPS)

The planned quantity of products that will be finished and made available for sale at the beginning of each designated planning week, driving downstream Material Requirements Planning (MRP).

Planning Horizon

The total amount of time into the future covered by a master schedule record or MRP record, requiring greater forward duration as production and supplier lead times increase.

Projected Ending Inventory ($EI_t$)

The estimated on-hand inventory balance remaining at the close of time period $t$, calculated by the formula $EI_t = EI_{t-1} + MPS_t - \max(F_t, OB_t)$, where $F_t$ is forecasted demand and $OB_t$ represents booked customer orders.

Available to Promise (ATP)

A master schedule metric indicating the uncommitted stock available to promise to new customers; in the first week, it is calculated as $ATP_t = EI_{t-1} + MPS_t - \sum_{i=t}^{z-1} OB_i$, where $z$ is the period of the next positive MPS quantity.

Material Requirements Planning (MRP)

A planning system that explodes the Master Production Schedule of independent demand items to calculate the precise timing and order quantities needed for dependent demand raw materials and subassemblies.

Independent Demand

Demand for finished goods and products ready for sale, which is forecasted or customer-driven rather than derived from higher-level production schedules.

Dependent Demand

Demand for parts, subassemblies, and raw materials whose requirements are directly derived from the master schedule of parent or independent demand items.

Bill of Materials (BOM)

An engineering 'recipe' or complete listing of all dependent demand components, assemblies, and raw materials needed to manufacture one unit of an independent demand item.

Backward Scheduling

An MRP logic procedure that works backward from a finished good's due date using planning lead times to pinpoint the exact date when components must be ordered or fabrication begun.

MRP Nervousness

The operational phenomenon where small modifications or schedule updates to top-level Bill of Materials items cause severe, compounding volatility in ordering schedules for lower-level components.

Primary Process

A core business process addressing the direct value-added activities of an enterprise to create products or services for external customers.

Support Process

A business process that executes necessary, non-value-added activities to serve internal customers, such as recruiting staff, evaluating suppliers, or compiling an S&OP plan.

Development Process

A process geared toward continuous process improvement, targeted specifically at advancing the operational performance of existing primary and support processes.

SwimLane Process Map

A horizontal, chronological process mapping format where separate lanes represent distinct departments, actors, or software systems to highlight functional handoffs and parallel activities.

Value Stream Process Map

A visual lean diagram charting the end-to-end transformation of raw materials into customer products, recording cycle times, personnel, processing quantities, inventory delays, and information flow.

Line Balancing Process Map

A graphical diagram displaying individual task cycle times across workers or stations against a target process takt time to identify overburdened functions and rebalance responsibilities.

Process Efficiency

A percentage-based performance measure comparing productivity rates to established norms, calculated as $\text{Efficiency} = 100\% \times \left(\frac{\text{Actual Outputs}}{\text{Standard Outputs}}\right)$.

Benchmarking

The formal practice of identifying, studying, and adopting best practices from internal departments, direct competitors, or superior non-competitor organizations to improve business processes.

Six Sigma ($6\sigma$)

A structured business improvement methodology that centers on understanding customer requirements and uses rigorous statistical analytics to systematically identify and minimize process variation.

DMAIC

The core Five-step Six Sigma project methodology comprising Define (process goals and customer requirements), Measure (data collection and defect baselines), Analyze (root-cause variation analysis), Improve (designing and testing solutions), and Control (standardizing procedures and monitoring).

The 8 Forms of Waste (Muda)

Process activities consuming time and resources without adding value: Transportation, Inventory, Motion, Waiting, Overproduction, Overprocessing, Defects, and Unused Employee Ingenuity.

Lean Perspective on Inventory

The concept that high inventory levels act like water covering jagged rocks, hiding core operational problems, defects, and bottlenecks; lean requires lowering inventory slowly to expose and resolve root causes.

Visual Management

A lean operational technique utilizing clear visual indicators—such as shadowboards, floor markings, and color-coded bins—to make standards and abnormal conditions instantly visible.

Kanban System

A pull-replenishment signaling system utilizing physical cards, bins (such as two-bin systems), or markers to signal upstream production only when downstream consumption actually requires replenishment.

Kaizen

The continuous improvement philosophy grounded in the premise that small, incremental daily process improvements executed by all workers compound into substantial organizational performance gains.

Garvin's 8 Dimensions of Quality

A holistic quality assessment framework consisting of Performance, Features, Reliability, Durability, Conformance, Aesthetics, Serviceability, and Perceived Quality.

Juran's Costs of Quality

A cost categorization framework showing that investing in upfront Prevention Costs (training, planning) and Appraisal Costs (inspection, testing) dramatically reduces costly Internal Failure (scrap, rework) and External Failure (recalls, warranty claims) expenses.

Total Cost of Quality Curve

A graphical representation showing that as defect levels decrease toward zero, catastrophic failure costs decline steeply while prevention costs increase, leading to a minimized total quality expenditure point.

Taguchi's Quality Loss Function

A quality philosophy asserting that any variation or deviation away from the precise target value—even within specified upper and lower tolerance limits ($UTL$ and $LTL$)—imposes a continuous parabolic cost penalty on society and the firm.

Cause-and-Effect Diagram

A graphical root-cause brainstorming tool (also known as an Ishikawa or fishbone diagram) that categorizes potential causes of an observed defect across Manpower, Methods, Materials, Machines, and Measurements.

Pareto Chart

A vertical bar chart displaying process defect or delay frequency data arranged in descending order from highest to lowest to distinguish the 'vital few' problems from the 'trivial many'.

Statistical Process Control (SPC) Chart

A quality control chart plotting sampled performance data over time between Upper Control Limits ($UCL$) and Lower Control Limits ($LCL$) set at $\pm 3\sigma$ to differentiate random common-cause variation from assignable causes.