SCM 301 EXAM 1

where does supply chain begin and end?

Point of Extraction → Tier N Suppliers → Manufacturing → Distribution → Transportation → Retail → E-Tail → End of Use/Pantry 

how we move beyond the four walls

Upstream

Activities or firms positioned earlier in the supply chain.

Downstream

Activities or firms positioned later in the supply chain.

First-Tier Supplier

A supplier that provides products/services DIRECTLY to your company.

Second-Tier Supplier

A supplier that provides products/services to a firm's first-tier supplier. 

second teir—> first tier —> company —>distributor —> retailer —> final customers

cash flows the opposite direction ←—-

what is the order of the supply chain? think bushweiser

Agility

The ability to recalculate plans in the face of market, demand and supply volatility and deliver the same or comparable cost, quality and customer service.

information technologies

internet, electronic commerce

people

There is currently a shortage of talented operations and supply chain professionals.  

Poor relationships within any link of the supply chain can have disastrous consequences for all other supply. 

Digital Transformation / Supply Chain

Integration of advanced digital technologies (IoT, AI, Blockchain, Big-data analytics, Robotics) to create "smart" and connected supply chains

Impact: improves visibility, predictive capability, and decision-making speed 

EX: predictive demand forecasting using AI; real-time shipment tracking using loT sensors 

Essentially using technology to take over the jobs people don't want to do 

Mission Statement

a statement explaining why an organization exists. It describes what is important to the organization (core values) , and it identifies the organization's domain

focuses on WHY

Business Strategy

The strategy that identifies a firm's targeted customers and sets time frames and performance objectives for the business that focus on differentiation or low cost. 

focuses on WHAT

A mechanism by which a businesses coordinates its decisions regarding structural and infrastructural elements. 

Distinctive Core Competency

organizational strength or ability developed over a long period, that customers find valuable and competitors find difficult or even impossible to copy

Operations Strategy

vison that aligns performance objectives with broad decisions shaping the operations resources, capabilities, and processe

focuses on HOW

Functional Strategies

a strategy that translates an operations strategy into specific actions for functional areas such as marketing, human resources, and finance

focuses on HOW

WHY = Mission → WHAT = Business Strategy → HOW = Operations/SC + Functional Strategies.

WHY → WHAT → HOW

consulting cascade

Aspirations → Where to Play → How to Win → How to Configure

start at the bottom (“How to Configure”) and work your way up.

Trade-Offs Among Performance Dimensions

in a competitive marketplace, no firm can sustain an advantage on all performance dimension indefinitely. 

Delta EX: More flights means greater customer flexibility but higher costs, larger more comfortable airline seats improves service/quality but raises costs and lowers the number of people it can carry

Law 1 

Forecasts are almost always wrong but they are still useful 

Law 2 

Forecasts for the near term tend to be more accurate. 

(think whats more accurate weather in the next hour or next saturday), fewer things can change in near term 

Law 3 

Forecasts for groups of products/services tend to be more accurate than forecasts for individual items. 

Think Coca Cola specific forecast will be closer than if you include coke zero and diet coke, need to know all though 

Law 4 

Forecasts are not a substitute for calculated/known values. - (not as important) 

laws of forecasting

Order Qualifier

A performance dimension on which customers expect a minimum level of performance before they will even consider the company. 

Order Winner

A performance dimension that differentiates a company's products/services from competitors. A firm wins a customer's business by providing superior levels of performance on order winners. 

Qualitative Forecasting

Forecasting based on intuition/informed opinion when useful data is scarce or unavailable.

Quantitative Forecasting

Forecasting based on measurable or historical data to generate forecasts

number based

Randomness

Unpredictable movement from one time period to the next.

Trend

Long-term movement up or down in a time series

Seasonality

A repeated pattern of spikes or drops in a time series associated with certain times of the year. (can be weekly or just a pattern)

Cyclical Demand

Demand influenced by recurring long term changes

weighted moving average

A form of the moving average model that allows the actual weights applied to past observations to differ  

(each forecast multiplied by assigned weights and added all together) 

This lets more important/recent observations receive more influence. 

Exponential Smoothing general Rule

The greater the randomness in the time series data, the lower the α value should be  

Causal Forecasting

a class of quantitative forecasting models in which the forecast is modeled as a function of something other than time.

EX: linear regression, multiple regression 

Forecast Error

Demand − Forecast.

MFE

Average forecast error; useful for identifying whether forecasts are biased high or low.

sumation of all FE/n

MAD

Average ABSOLUTE forecast error measured in units.

sumation of all AD/n

MAPE

Forecast error expressed as a PERCENTAGE; useful for comparing different-sized items.

Negative MFE

Over-forecasting.

Positive MFE

Under-forecasting.

Strategic Planning

Long-term YEARS; major decisions, highest risk.

Tactical Planning

MONTHS; workforce, inventory, subcontracting, and logistics decisions, moderate risk

Detailed Planning

DAYS/WEEKS; day-to-day decisions, lowest risk.

S&OP

how an organization uses tactical capacity resources to meet expected demand and gets departments on the same plan.

strikes a balance between the various needs and constraints of the firm.  

“gets everyone on same plan”  

Week 4 (P)

constraints, issues, and required decisions are brought to leadership so an agreed to plan can be executed. 

Week 3 (&)

often times there may be constraints or conflicts that arise as the supply plan seeks to meet the demand plan 

Week 2 (O)

supply chain (aka Operations) uses forecast from Week 1 to develop an operation plan 

Week 1 (S)

consider prior month demand, forecast demand for future months 
“what’s our forecast” 

Level Production Plan

An S&OP plan in which production is held constant and inventory is used to absorb differences between production and the sales forecast. 

Chase Production Plan

An S&OP plan in which production is changed in each time period to match the sales forecast. 

Mixed Production Plan

An S&OP plan that varies both production and inventory levels in an effort to develop the most effective plan. 

Beginning Inventory + Production − Sales = Ending Inventory.

Basic Inventory Formula

Top-Down S&OP

Use when resource needs are similar across products OR product mix stays similar.

(think one product)

Bottom-Up S&OP

Use when resource needs/product mix are NOT similar from period to period.

(think multiple products)

1. Creates Value and Financial Impact  

2. Builds Relationships with Supply Chain Partners  

3. Quality of Goods and Services  

4. Speed to Market  

5. Manage Risk 

Why PROCUREMENT Is So Important?

$1 saved in purchasing → $1 increase in pretax profit.

Profit Leverage Effect

Transactional Relationship

Routine, low-value supplier relationship.

Collaborative Partnership

Critical, high-value supplier relationship.

Strategic Alliance/Acquisition

Very critical, high-value supplier relationship.

80%

Studies show ____% of product cost is determined during design

Spend Analysis

The application of quantitative techniques to purchasing data in an effort to better understand spending patterns and identify opportunities for improvement. 

Apart of step 1: assess opportunities in the strategic sourcing process

Insourcing

Advantages 

• High degree of control  

• Ability to oversee the entire process  

• Economies of scale and/or scope  

Disadvantages 

• Reduced strategic flexibility  

• Required high investment  

• Potential suppliers may offer superior products and services  

Outsourcing

Advantages 

• High strategic flexibility  

• Low investment risk  

• Improved cash flow  

• Access to state-of-the-art products and services  

Disadvantages 

• Possibility of choosing a bad supplier  

• Loss of control over the process and core technologies  

• Communication/coordination challenges  

• Increased risk of supply chain disruption  

• Customer social responsibility (CSR) risks 

Total Cost Analysis

A process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options. 

Direct Costs

Costs tied directly to the level of operations or supply chain activity.

Indirect Costs

Costs NOT tied directly to the level of operations or supply chain activity.

Portfolio Analysis

Choose a sourcing strategy based on VALUE POTENTIAL/SPEND and COMPLEXITY/RISK.

complexity or risk impact

Portfolio analysis vertical axis (up and down)

value potential/spend

Portfolio analysis horizontal axis (left and right)

Routine

Readily available products or services representing a relatively small portion of a firm’s purchasing expenditures. 

Low spend + low complexity/risk → minimize purchasing effort. EX: office supplies

Leverage

Standardized and readily available products or services representing a significant portion of spend. 

High spend + low complexity/risk

Action to take – go to market, better deals, makes the $ 

Bottleneck

Products or services with unique or complex requirements that can be met only by a few potential suppliers. 

Low spend + high complexity/risk → redesign or eliminate the need.

Critical

Product or services with unique or complex requirements coupled with a limited supply base. 

High spend + high complexity/risk → Create strong relationships to grow overall value

Multiple Sourcing

The buying firm shares its business across multiple suppliers. 

Cross Sourcing

The buying firm uses a single supplier for one particular part or service and another supplier with the same capabilities for a different part or service. 

Dual Sourcing

The buying firm uses two suppliers for the same purchased product or service. 

Single Sourcing

A choice to leverage all spend with one supplier. 

Multiple suppliers exist, but you CHOOSE ONE.

Sole Sourcing

The only supplier you can buy from. 

Only ONE supplier is available.

Single vs. Sole

Single = you CHOOSE one. Sole = you HAVE only one.

Responsible Sourcing

Code of Conduct, traceability, carbon/environmental impacts, human rights, and supplier/community partnerships.

Supply Chain Risk Matrix

Evaluate risks using PROBABILITY of occurring and financial IMPACT.

Early stakeholder agreement 

• What are we looking for from this negotiation? 
  Examples: savings, access to technology, commitment to volumes, …  

• Priorities (can’t always negotiate everything) 

BATNA

Best Alternative to Negotiated Agreement.

MDO

Most Desired Outcome — your ideal result.

Target

The result you are aiming for in the negotiation.

LDO

Least Desired Outcome — your minimum acceptable result.

Distributive Negotiation

WIN-LOSE.

Integrative Negotiation

WIN-WIN.

Mixed-Motive Negotiation

Making a deal with a “secret weapon” behind them.

Negotiation Zone

diagrams comparing a buyers MDO and LDO vs a Sellers MDO and LDO, looking to see if they overlap