supply chain management midterm ch 4-6

inventory functions

buffer from uncertainty in the marketplace, decouple dependencies between stages in the supply chain

raw materials

unprocessed materials for manufacturing the finished product

work-in-process (WIP)

partially processed materials not yet ready for sales

finished goods

completed products ready for shipment

maintenance, repair, & operating (MRO) supplies

materials used in production, but not part of the product

absolute value of inventory

annual stock counts; reported on balance sheet

inventory turnover

how many times a company turns over (sells & replaces) its inventory during a given period

ABC inventory control system

determines which inventories should be counted and managed more closely than others

A

given the highest priority; accounts ofr about 20% of total items and about 80% of total inventory cost

greater attention, safety stocks, and resources devoted to these items

B

Account for the other about 40% of total items & 15% of total inventory cost

C

Have the lowest value and hence lowest priority. Account for the remaining 40% of total items & 5% of total inventory cost

pareto rule

80% of the effects come from about 20% of the causes

Radio Frequency Identification (RFID)

successor to the barcode for tracking individual unit of goods. does not require direct line of sight to read a tag, and information on the tag is updatable

economic order quantity (EOQ) model

a quantitative decision model based on the trade-off between annual inventory holding costs & annual order costs; seeks to determine an optimal order quantity and timing

order cost

the direct variable cost associated with placing an order

holding cost

the cost incurred for holding inventory in storage

slow-moving and obsolete inventory (SLOB)

slow moving: product that hasnt been moved in > 6 months

obsolete: expired or discontinued inventory; can no longer be sold

purchasing

obtaining merchandise, capital equipment; raw materials, services, or maintenance, repair, and operating (MRO) supplies in exchange for money or its equivalent

merchants

wholesalers and retailers who purchase (at high volumes) for resale to take advantage of quantity discounts

industrial buyers

purchase raw materials for conversion, services, capital equipment, & MRO supplies

outsourcing

buying materials and components from suppliers instead of making them in house

supply base

list of suppliers that a firm uses to acquire its materials, services, supplies, and equipment

supply base rationalization

reduce purchases from poor-performing suppliers; increasing purchases among top performing suppliers

supplier certification

allows firms to identify suppliers most committed to creating & maintaining a partnership & who have the best capabiltiies

weighted - criteria evaluation system

a method of evaluating multiple suppliers based on criteria deemed important by the company and its customers

supplier development

any activity that a buyer undertakes to improve a supplier’s performance and/or capabilities to meer the buyer’s needs

benchmarking

researching ( and potentially copying) what other businesses do best

ethical sourcing

when a company’s buying behavior is socially responsible and environmentally friendly

ethical sourcing risks

human rights, animal rights, safety, or environmental abuses can be risks associated with purchasing from developing countries

fair trade product

a product( mainly farming products) manufactured or grown by a disadvantaged producer in a developing country that recieved a fair price for their goods

ethical trading initiative (ETI)

an alliance of organizations seeking to take responsibility for improving working conditions and agreeing to implement the ETI base code

ETI Base Code

a standard for ethical practices for the firm and its suppliers

sustainable sourcing

purchasing goods & services taking into account the long-term impact on people, planet, and profits

greenwashing

“exaggerated and misleading claims that suggest a company or country are stewards of the environment without real action”