BUAD 337 Exam 1

Supply Chain

Consists of the organizations, people, activities, information, and resources involved in moving a product or service from origins of supply all the way to a point of final consumption

The three core flows of a supply chain

1. Product / Service Flow (the physical movement of raw materials, components, and finished goods forward through the chain)

2. Information Flow: The exchange of data, requests, and status updates between partners to coordinate activities

3. Financial Flow: The movement of money and credit management across the supply chain as goods and services are received

The four ways organizations create value

Form Value - Physical transformation of inputs into desirable goods

Time Value - Having products available exactly when needed

Place Value - Delivering goods to the precise location demanded

Exchange Value - Forms marketing, the activities and processes used to generate demand

How is SCM linked to financial performance

-Delivers revenue increases by enabling improvement in form, time, or place value

-Increases profitability through total cost reductions resulting from efficiencies in the cost of goods sold

-Improves asset utilization

The Great Divide Definition

Unaligned separation between demand creation (Marketing/Sales) and demand fulfillment (SCM)

Causes of The Great Divide

Mismatched goals, poor communication, and isolated planning

Consequences of The Great Divide

Stockouts (lost revenue), markdowns (excess stock cleared at a loss), and expedited shipping fees

Functional Silos

Departments optimizing local operations in isolation

System Optimization

Managing trade-offs across the entire network to minimize total cost

Why Local Efficiency Raises Total Cost

A plant running full capacity to lower unit manufacturing costs creates excess inventory, driving up warehouse holding and transport costs

Traditional Internal Supply Chain (SCOR Model)

Plan: Demand/supply alignment and resource allocation

Source: Procurement of materials and vendor selection

Make: Production and assembly activities

Deliver: Order processing, warehousing, and transportation

Reality of disintegration in SCOR

Silo Conflicts such as sales push high volume; Ops seeks steady production; Finance pushes low inventory

It assumes sequential, linear handoffs - efficient under stable conditions but limited under high volatility

Pitfalls of disintegration in SCOR

• Multiple uncoordinated forecasts across departments

• Inventory misallocation (excess of wrong items, shortage of right ones)

• Expediting costs due to last-minute fire-fighting

• Spikes in delivery costs to meet sudden unannounced deadlines

Optimizing for True Internal Integration

• Holistic Approach: Aligning all functions toward common strategic goals

• Shared Metrics: Joint KPIs where Marketing, Supply Chain, and Finance share targets

• Joint Accountability: Cross-functional governance and shared risk/reward structures