EXAM 3 - Global Supply Chain 7-9

Offshoring

the transfer of specific processes to lower cost or more favourable locations in other countries.

EX: involves handing process ownership over to a third party - companies offshore because it lower cots, less stringent regulatory controls, deregulation of trade facilities

Postponement

the reconfiguration of product and process design so as to allow postponement of final product customization as far downstream (i.e. near to the customer) as possible

EX: Packaging postponement, for example, is simply delaying final packaging of products until customer orders are received

Outsourcing

the transfer to a third party (i.e. another company) of the management and delivery of a process previously performed by the company itself.

EX: many organisations procure inputs (products and services),

Functional strategy

the development of strategies for specific areas of activity within a business unit (e.g. marketing, IT and logistics).

Virtual organizations

companies which outsource most, if not all, major functions.

Service-level agreement (SLAs)

Companies need to ensure that a mutually agreed and understood agreement is in place between both the company buying the service or product and the supplier

Includes:

• Roll-out and duration of the service or process being purchased

• Scope of services

• Areas of responsibility and legal requirements

• Performance metrics

• Agreement on termination/exit arrangements

Original equipment manufacturer (OEM)

used to describe the top-tier organisation, that is, the manufacturer/ultimate client organisation. The producers of the final product that carries their brand.

EX: they may just assemble the various supplied components

Environmental separation index scoring

s used to assess the level of difference between the working environments of the outsourcer and supplier companies

A higher value of ESI indicates large differences in work practices, culture and perceptions. Once the supplier gains experience in working closely with the outsourcer and performs as per the expectations of each other, the ESI could reduce to a lower value.

Outsourcer supplier relationship

organisation of suppliers into a hierarchy of levels known as tiers.

• top tier is the manufacturer or client organisation

• t is not unusual then for a supplier to be for example a first tier supplier in one supply chain and a second tier supplier in another

• an OEM could itself be a first or lower tier supplier in another company's supply chain

Decoupling

The point at which we move from the base product to customised products - the point in the production process where the base product is configured into the various final products demanded by customers

EX: adding different combinations of modules to the base product.

Integration without collaboration

Integration - is the alignment and interlinking of business processes across the supply chain

Collaboration - is the relationship between supply chain partners developed over a period of time

Integration without collaboration - order processing via electronic data interchange (EDI, a technology we will meet in Chapter 10) is an example of an integrated transaction, but it does not require the customer and supplier to operate collaboratively

Integration is an enabler of collaboration

Carbon equivalent

is the standard measurement unit used to combine and track different greenhouse gases (such as carbon dioxide, methane, and nitrous oxide) into a single number based on their global warming potential

ESG - environmental, social, and governance

It is a framework used to evaluate a company's sustainability efforts, transparency and social impacts - implies for example selecting suppliers according to their carbon emissions, social practices, and compliance with international transparency standards

CSR – corporate social responsibility

which in essence concerns how ‘ethical’ a company's activities are - refers to commitments internal to a company

Scope 1, 2, and 3 emissions

1 - refers to a company's direct emissions – think about vehicle emissions for a trucking company.

2 - are a company's indirect emissions for the generation of the energy the company uses to carry out its activities.

3 - are indirect emissions upstream – not included in Scope 2 - think for example about the emissions generated by 3PLs to store and transport consumer products to retail stores. (difficult to task)

GHG - greenhouse gas

gases in Earth's atmosphere that trap heat by absorbing and re-radiating infrared radiation

SAF - sustainable aviation fuels

are usually blended in with traditional jet fuels - biogenic biofuels (made from organic matter and waste) and synthetic e-fuels (made from captured carbon and hydrogen)

Circular economy

aims to eliminate waste by designing and optimising products for a cycle of disassembly and reuse

the ‘3Rs

• Reduce the use of resources

• Reuse products and components

• Recycle products and components

Ways to focus on reducing emissions for supply chain

• Reducing empty running, pooling and sharing capacity, obtaining ‘backhaul’ loads (a number of websites have been developed which match carriers who have available capacity with shippers seeking capacity – see the caselet later in the chapter on electronic logistics marketplaces).

• Increasing vehicle payload capacity (by weight and/or by cubic volume) – double deck and higher trailers, single tractor unit and multiple trailer combinations etc.

• Improved vehicle routing using GPS and other systems

• More efficient use of packaging and loading of containers

• Improved vehicle driving (in-cab computer monitoring of driving style, even examining the benefits of air conditioning versus open windows!)

• Enhancing vehicle operating efficiency (e.g. using hybrid fuels, ensuring correct wheel alignment and enhanced aerodynamic styling of trucks)

Resilient supply chain

is used to mean ‘the ability of a system to return to its original (or desired) state after being disturbed

Systematic risks

Those which affect the operation of the economy in general. these risks may be political, social, macroeconomic or environmental uncertainties.

ex: Political uncertainties, Macroeconomic uncertainties Social uncertainties Environmental uncertainties

Market risks

• On a specific sector of the economy

• Market uncertainties - Fluctuations in price levels of inputs and products, technological changes, changes in consumer preferences, availability of alternative products

• Regulatory or institutional uncertainties - Quality standards and regulations, changes in the specific regulations of the sector

Operational Risk

• On a specific supply chain

• Supply uncertainties, Production uncertainties, Administrative uncertainties, Cybersecurity uncertainties

Credit and liquidity risks

• On a specific supply chain or its nodes

• Uncertainty about the sector or the firm segment, Uncertainty about the payment cycle, and Uncertainty about the firm's financial health

External shocks to supply chain

• weather or extreme events

• protests, blockades, and strikes

• transport system disruption - blockage of a canal

• shortages of key suppliers

• terrorism and other security threats

• cyber attacks

• corporate accounting scandals

Risk management

the ability to foresee and evaluate risks, and thereafter identify the actions necessary to avoid them or minimise their impact – has become critical for supply chain managers

Bullwhip effect

characterised by the distortion of orders along the supply chain where small fluctuations in end customer demand result in an amplifying oscillation of inventory levels upstream in the supply chain.’

ISPS - International Ship and Port Security

mostly concerned with ports and terminals and not the wider supply chain

VUCA

acronym emerged in the military in the 1990s and has since attracted interest in other sectors too as a way of helping people and organisations deal with risk and uncertainty:

• From Volatility to Vision

• From Uncertainty to Understanding

• From Complexity to Clarity

• From Ambiguity to Agility