SCMN 2150 Exam 2 Robert Straw

What is procurement?

The purchase of merchandise or services at the optimum possible total cost in the correct amount and quality

What is strategic sourcing?

an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company

What is the difference between traditional purchasing and strategic sourcing?

strategic sources seeks for continuous improvement

What are the steps in the procurement process and why is it important to follow them?

1) Identify material & service needs

2) Evaluate supplier options

3) Select supplier

4) Release orders and receive products

5) Measure and manage performance

It is important to follow these steps because you do not want to make a decision based on incomplete information

What are the goals of supply chain management and why is it important?

To buy products and services....

- At the right price

- From the right source

- At the right specification

- In the right quantity

- For delivery at the right time

- To the right internal customer

It is important because it wants to generate a sustainable advantage through lower costs, higher quality, and better service from our global supply base of trading partners

What is a quadrant analysis and why is it important?

A quadrant analysis is a visual tool that categorizes data or elements into four quadrants based on two criteria, helping to prioritize and make decisions from either the products or services. It is important for simplifying complex data, identifying trends, and making informed choices in various fields.

Why is it important to evaluate supplier performance?

- To monitor KPIs (key performance indicators) and take corrective action, to ensure value is provided by suppliers

- To create visibility into process and performance across the entire supply management lifecycle

Fill Rate

Total Quantity Received / Total Quantity Ordered

Defect Rate

Total Quantity Defective / Total Quantity Received

On Time

Orders Received On Time / Total Orders

Perfect Purchase Order Percent

Order arrives on time, without defects, and with perfect documentation at the right location with correct quantities of all SKUs (stock keeping unit) ordered

What is a supplier scorecard and how are they created and utilized?

- Monitor performance across multiple metrics over extended time period

- Categorize suppliers based on their scores

- Offer additional business to best performers

What are the 7 steps of strategic sourcing?

1. Analyze product categories used by the business, spending patterns, and the processes and departments involved.

2. Develop a sourcing strategy based on business goals.

3. Analyze the supplier market and create a supplier portfolio.

4. Define request for proposal criteria and templates.

5. Negotiate with and select suppliers.

6. Integrate suppliers into existing processes, onboarding any new vendors or outsourcing providers.

7. Track performance metrics and optimize the sourcing plan, as needed

What is holding procurement back?

1. Lack of KPIs and metrics to monitor the effectiveness of the performance tomeet the goals of the relationship. If KPIs do exist, they are generally focused on safety and adherence to payment terms with a very limited view, if any, on performance and productivity

2. Unwillingness for end-users / operations groups to modify day to day interactions with suppliers

3. Lack of executive support and commitment to the new operating model developed through the contracting process

What types of large-scale changes are companies planning in the coming out of the pandemic?

1. Expand their supply base

2. Shrink their global supply chain and rely on local suppliers

3. Increase inventory levels

4. Increase financing for key suppliers

What is Production

the process by which inputs are combined, transformed,and turned into outputs. May involve products and/or services

What is manufacturing?

to transform materials via assembly, fabrication, conversion processes into a finished product, especially by means of a large-scale industrial operation

What are three key decisions in the production and manufacturing process?

1. How much input

2. Which transformation process

3. How much output required to meet demand

What are the primary production performance objectives?

1. Quality objective - do things right

2. Speed objective - do things fast, productivity

3. Dependability objective - do things on time

4. Flexibility objective - develop ability to change

5. Cost objective - perform at minimum cost. You'll achieve this goal if you perform well on the other objectives. In addition, we need to reduce waste and maintain a smooth flow of output.

What are the differences in the Push and Pull production strategies?

PUSH:

- Mass Production

- "Push" product to customers

- Make to stock strategy

- One-size fits all

- Rigid, inflexible

- Slow, static

PULL:

- TPS & Lean

- Products "pulled" by demand

- Build to order methods

- Customization capabilities

- Flexible; scalable

- Fast flows

Lean Production

A model that emphasizes eliminating "waste" while delivering quality products at the least cost to the manufacturer and customers.

Objectives:

- Reduce production resource requirements

- Increase manufacturing velocity and flexibility

- Improve quality and eliminate defect

Goal:

the elimination of waste in production effort (Waste = anything that the customer is not willing to pay for)

What production process characteristics around labor and material can determine a production strategy?

- Facility Size

- Process Flow

- Speed

- Labor content

- Skill Level

- Materials required

- Scheduling

What is a breakeven analysis, how is it calculated, and how is it utilized?

a basic mathematical technique that allows acomparison of total costs for different processes. This technique takes the fixed costs and variable costs and finds the break-even point for which the cost of two or more processes are equal in cost.

Breakeven = Fixed Cost / (Unit Price - Cost per unit)

Workstation cycle time

a uniform time interval in which a moving conveyor passes a series of workstations

WCT = Production Time per Day / Planned Units of Output

Theoretical Number of Workstations

Number of workstations = Sum of task time / WCT

What is Industry 4.0 and what are the four key benefits?

Cyber Physical Systems(CPSs)

- Productivity

- Quality

- Speed

- Flexibility

What is assembly line balancing?

The process of optimizing an assembly line to minimize costs and maximize gains

Logistics

focuses on storage and flow to ensure that products are in-stock and ready to be delivered when needed

Fulfillment Process

the company delivers the goods or services to its customers or resellers

order fulfillment

the complete process from point of order inquiry to delivery of a product to the customer

Inventory Management

Determine and maintain the lowest inventory levels possible while meeting required customer service levels

Key activities/decisions:

- Forecasting demand and order quantity

- Inventory replenishment: how to reorder

- Inventory deployment: where to hold goods

GOAL: service level optimization

Warehousing

The part of a firm's logistics system that stores and handles inventory between the point-of-origin and point-of-consumption

Roles of Warehousing

- Buffer against fluctuating

demand

- Promote efficient fulfillment

- Supports innovative strategies

- Allows logistics trade-offs

Warehousing Benefits

Allows companies to....

- Receive, hold and process required level of inventory to meet customer needs in a cost efficient, timely manner

- Receive in bulk & create assortment

How much do US businesses spend on logistics?

$1.6 Trillion

7.6% of US GDP

Which logistics activity supports the physical flow of goods and accounts for the largest portion of logistics spending?

Transportation

Average Inventory Value

- how much do we typically have on hand

- .5 (value of goods on hand)

Inventory Turns

- The number of times inventory is sold or used during a specific period

- Sales or Cost of goods sold/Average inventory value

selling days on hand

- how long will the current inventory serve demand

- 365/Inventory Turns

inventory carrying costs

- The costs (warehousing, insurance, etc.) of having inventory available for sale but not yet sold

- ICC (inventory carrying costs) x Inventory Value

As average inventory increases, inventory turns __________ (increase, decrease, or remain constant).

decreases

As average inventory increases, ICC ______________ (increase, decrease, or remain constant).

increases

As inventory turns decrease, days sales on hand _________________ (increase, decrease, or remain constant).

increases

What is Service Parts Logistics and what does it include?

- An industry that supports the overall repair and maintenance of high value products across their lifecycles.

- SPL includes:

- Parts management, distribution and return

- Parts repair and refurbishment

What are the challenges of Service Parts Logistics?

Traditional forecasting concepts and supply chain strategies do not apply to service parts. Need for rapid repairs, especially in high $$$ equipment scenarios.

According to Zappos what % of online products ordered are returned?

30%

Why should companies focus on returns?

Because 30% of what they sell is going to be returned

Reverse Logistics

The process of planning, implementing and controlling the efficient, cost-effective flow of materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.

What are four key strategies to manage reverse logistics flows?

- Avoidance of returns

- Gatekeeping to limit flows

- Leverage Technology to generate visibility

- Establish centralized facility

What disposition options are available for returned goods to as much recoup as much value as possible?

- Resell as is

- Refurbish it

- Cannibalize parts

- Dump it in the landfill

What is the potential impact of neglect of the importance of returns process?

opens an opportunity to create and manage customer relationships and build customer loyalty to the retailer

Disposition Options best to worse

1. Resell

2. Recondition

3. Refurbish

4. Remanufacture

5. Cannibalize

6. Recycle

7. Dump

What is gatekeeping?

refers to the practice of controlling and regulating the flow of returned or end-of-life products and materials as they re-enter the supply chain or move through a reverse logistics process.

just-in-case inventory

The extra quantity of inventory that a firm carries just in case suppliers do not deliver when scheduled or just in case the company decides to make previously unplanned quantities of product for sale to customers