Opman Quiz 4 theories

Supply Chain

The sequence of organizations— their facilities, functions, and activities— that are involved in producing and delivering a product or service.

Facilities

The sequence of the supply chain begins with basic suppliers and extends all the way to the final customer.

examples of Facilities

• Warehouses

• Factories

• Processing centers

• Distribution centers

• Retail outlets

• Offices

Supply Chain Functions and Activities

• Forecasting

• Purchasing

• Inventory management

• Information management

• Quality assurance

• Scheduling

• Production and delivery

• Customer Service

SCM Managers

People at various levels of the organization who are responsible for managing supply and demand both within and across business organizations

Key issues/Aspects of SCM

• Determining appropriate levels of outsourcing

• Managing procurement

• Managing suppliers

• Managing customer relationships

• Being able to quickly identify problems and respond to them

match supply to demand as effectively and efficiently as possible.

The goal of SCM is to

Product and Service Flow

involves movement of goods and services from suppliers to customers as well as handling customer service needs and product returns.

Information Flow

involves sharing forecasts and sales data, transmitting orders, tracking shipments, and updating order status.

Financial Flow

involves credit terms, payments, and

consignment and title ownership arrangements.

Trends in Supply Chain Management

• Measuring Supply Chain ROI

• “Greening” the Supply Chain

• Reevaluating Outsourcing

• Integrating IT

• Managing Risks

• Adopting Lean

• Principles

• Being Agile

Measuring Supply Chain ROI

Enables managers to incorporate economics into outsourcing and other decisions, giving them a rational basis for managing their supply chains.

“Greening” the Supply Chain

This may involve:

• redesigning products and services;

• reducing packaging;

• near-sourcing to reduce pollution from transportation;

• choosing “green” suppliers;

• managing returns;

• and implementing end-of-life programs, particularly for appliances and electronic equipment.

Reevaluating Outsourcing

Companies are taking a second look at _____, especially global suppliers.

Managing Risks

For some businesses, the supply chain is a major source of risk, so it is essential to adopt procedures for ____.

Lean Principles

Many businesses are turning to this to improve the performance of their supply chains.

Ways of lean principles:

• eliminating non-value-added processes;

• improving product flow by using pull systems rather than push systems;

• using fewer suppliers and supplier certification programs (eliminate the need for inspection of incoming goods);

• never ceasing to improve the system

Being Agile

Flexible enough to be able to respond fairly quickly to unpredictable changes or circumstances:

Benefits of Outsourcing

• Lower prices may result from lower labor costs

• The ability of the organization to focus on its core strengths

• Permits the conversion of some fixed costs to variable costs

• It can free up capital to address other needs

• Some risks can be shifted to the supplier

• The ability to take advantage of a supplier’s expertise

• Makes it easier to expand outside of the home country

Risks of Outsourcing

• Inflexibility due to longer lead times

• Increased transportation costs

• Language and cultural differences

• Loss of jobs, control, and business knowledge

• Lower productivity

• Knowledge transfer and intellectual property concerns

• Increased effort required to manage the supply chain

Examples of Ethical Issues are:

• Bribing government or company officials to secure permits or favorable status.

• “Exporting smokestacks” to developing countries.

• Claiming a “green” supply chain when the level of “green” is only minimal.

• Ignoring health, safety, and environmental standards.

• Violating basic worker rights.

• Mislabeling the country of origin.

• Selling products abroad that are banned at home.

how to deal with ethical issues:

• Develop an ethical supply chain code of behavior.

• Monitor supply chain activities.

• Choose suppliers that have a reputation for good ethical behavior.

• Incorporate compliance with labor standards in supplier contracts.

• Address any ethical problems that arise swiftly.

Strategic Responsibilities

• Supply Chain Strategy Alignment

• Network Configuration

• Information technology

• Products and services

• Capacity planning

• Strategic partnerships

• Distribution strategy

• Uncertainty and risk reduction

Supply Chain Strategy Alignment

Aligning supply and distribution strategies with organizational strategy and deciding on the degree to which outsourcing will be employed

Network Configuration

Determining the number and location of suppliers, warehouses, production/operations facilities, and distribution centers

Information Technology

Integrating systems and processes throughout the supply chain to share information, including forecasts, inventory status, tracking of shipments, and events.

Products and Services

Making decisions on new product and services selection and design

Capacity Planning

Assessing long-term capacity needs, including when and how much will be needed and the degree of flexibility to incorporate

Strategic Partnerships

Partnership choices, level of partnering, and degree of formality

Distribution Strategy

Deciding whether to use centralized or decentralized distribution, and deciding whether to use the organization’s own facilities and equipment for distribution or to use third-party logistics provider

Uncertainty and Risk Reduction

Identifying potential sources of risk and deciding the amount of risk that is acceptable.

Tactical Responsibilities

• Forecasting

• Sourcing

• Operations planning

• Managing inventory

• Transportation planning

• Collaborating

Forecasting

Prepare and evaluate forecasts

Sourcing

Choose suppliers and some make-or-buy decisions

Operations Planning

Coordinate the external supply chain and internal operations

Managing Inventory

Decide where in the supply chain to store the various types of inventory (raw materials, semi finished goods, finished goods)

Transportation Planning

Match capacity with Demand

Collaborating

Work with supply chain to coordinate plans.

Operational Responsibilities

• Scheduling

• Receiving

• Transforming

• Order

• fulfilling

• Managing Inventory

• Shipping

• Information sharing

• Controlling

Scheduling

Short-term scheduling of operations and distribution

Receiving

Management of inbound deliveries from suppliers

Transforming

Conversion of inputs to outputs

Order Fulfilling

Linking production resources and/or inventory to specific customer orders

Managing Inventory

Maintenance and replenishment activities

Shipping

Management of outbound deliveries to distribution centers and/or customers

Information Sharing

Exchange of information with supply chain partners

Controlling

Control of quality, inventory, and other key variables and implementing corrective action, including variation reduction, when necessary

Logistics

➔ refers to the movement of materials, services, cash, and information in a supply chain.

➔ Movements within a facility

➔ Incoming shipments

➔ Outgoing shipments

Production control.

Movement of goods within a manufacturing facility is part of

Movements Within A Facility may come from:

• incoming vehicles to receiving

• receiving to storage

• storage to the point of use (e.g., a work center)

• one work center to the next or to temporary storage

• the last operation to final storage

• storage to packaging/shipping

• shipping to outgoing vehicles

RFID = Radio Frequency Identification.

A technology that uses radio waves to identify objects, such as goods in supply chains

Traffic management

Overseeing the shipment of incoming and outgoing goods comes under the heading of

Inventory management

is a core operations management activity.

it is important for the successful operation of most businesses and their supply chains.

Inventory

stock or store of goods

Examples of inventory

• Department stores

• Hospitals

• Supermarkets

profit after taxes divided by total assets

One widely used measure of managerial performance relates to return on investment (ROI), which is

Functions of Inventory

• To meet anticipated customer demand

• To smooth production requirements

• To decouple operations

• To reduce the risk of stockouts

• To take advantage of order cycles

• To hedge against price increases

• To permit operations

• To take advantage of quantity discounts

Anticipation stocks

they are held to satisfy expected demand

Seasonal inventories

Firms that experience seasonal patterns in demand often build up inventories during preseason periods to meet overly high requirements during season periods.

Safety stocks

are stocks in excess of expected demand to compensate for variabilities in demand and lead time.

The overall objective of inventory management

is to achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds

Inventory Turnover

Indicates how many times a year the inventory is sold

Generally, the higher the ratio, the better

Inventory Days Turnover

A number that indicates the expected number of days of sales that can be supplied from existing inventory

A high number of days might imply excess inventory

A low number might imply a risk of running out of stock

Periodic inventory System

A physical count of items in inventory is made at periodic, fixed intervals

Perpetual inventory System

System that keeps track of removals from inventory continuously, this monitoring current levels of each item

Two-bin System

Two containers of inventory

Reorder when the first is empty

The second bin contains enough stocks to satisfy expected demand until the order is filled plus extra cushion

Universal Product Code

Computerized checkout systems using a laser scanning device

Barcode printed on a label that has information about the item to which it is attached

Point-of Sale Systems

Electronically record actual sales

Relaying information about actual demand in real time

Radio Frequency Identification (RFID) Tags

Providing real-time information

Carry much more information than barcodes

Don’t require line-of-sight

Purchase Costs

the amount paid to buy the inventory

Holding (Carrying Cost)

Cost to carry an item in inventory for a length of time, usually a year

Ordering Costs

Cost of ordering and receiving inventory

Setup Costs

The costs involved in preparing equipment for a job

Shortage Costs

Costs resulting when demand exceeds the supply of inventory; often unrealized

Basic Economic Order Quantity (EOQ) Model

It is used to identify a fixed order size that will minimize the sum of the annual costs of holding inventory and ordering inventory

Economic Production Quantity (EPQ)

This is where the batch mode is widely used in production.

Even in assembly operations, portions of work

are done in batches

Quality discounts

are price reductions for larger orders offered to customers to induce them to buy in large quantities

Reorder point

occurs when the quantity on hand drops to a predetermined amount

it also generally includes expected demand during lead time and perhaps an extra cushion of stock

Operations Strategy

improving inventory processes can offer significant benefits in terms of cost reduction and customer satisfaction.

Inventories often represent a substantial investment.