Supply chain chap 1

Supply Chain

The global network used to deliver products and services from raw materials to customers through an engineered flow of information, physical distribution, and cash (APICS definition).

SCOR Model

The Supply Chain Operations Reference model, showing the major phases of a supply chain: Plan, Source, Make, Deliver, Return, and Enable.

Plan

The SCOR phase that establishes the parameters for how the supply chain will operate, including marketing/distribution channels, quantities, timing, and inventory/production policies.

Source

The SCOR phase of identifying and building relationships with suppliers who provide the materials and services needed to deliver the finished product.

Make

The SCOR phase where materials are converted into a finished product through manufacturing, testing, packaging, and scheduling for delivery.

Deliver

The SCOR phase (also called logistics) that oversees planning and execution of the forward and reverse flow of goods to meet customer requirements, including orders, warehousing, and transportation.

Return

The SCOR phase (also called reverse logistics) that handles moving goods from the point of consumption back to the point of origin for repair, reclamation, remanufacture, recycling, or disposal.

Enable

The SCOR phase that facilitates a company's ability to manage the supply chain through systems, network operations, EDI, performance measurement, and training; it runs throughout every other stage rather than sequentially.

Supply Chain Management vs. Logistics

Supply chain management is the cross-company coordination of independent trading partners acting as one seamless organization; logistics is more inwardly focused on a single organization's inventory, warehousing, distribution, and transportation.

Tier 1 Supplier/Customer

Any supplier or customer that a company deals with directly.

Tier 2 Supplier/Customer

A supplier or customer one step removed—reached indirectly through a Tier 1 supplier or customer.

Intermodal Transportation

Using more than one mode of transportation (e.g., truck, rail, ocean) to complete a single shipment.

Information Flow

The bidirectional movement of forecasts, orders, confirmations, and invoices needed to plan and execute supply chain activities.

Payment Flow

The flow of funds or money paid to members of the supply chain for products and services rendered.

Returns Flow

The reverse (right-to-left) flow of products through the supply chain to accommodate returns, recycling, or rejected products.

State Utility

A characteristic of a service performed on something the customer already owns (e.g., a car brought in for repair, hair for a haircut).

Facilitating Goods

Tangible goods that support delivery of a service but are not owned or provided by the customer (e.g., a hotel room, a restaurant glass); unlike services, these can be made and inventoried ahead of time.

Material Requirements Planning (MRP)

A method developed in the 1960s-70s for determining what materials are needed and when, to support the production plan and coordinate inventory management.

Manufacturing Resource Planning (MRP II)

An expansion of MRP developed to improve internal communication and operations across a manufacturer's broader functions.

Just in Time (JIT) Management

A philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement.

Total Quality Management (TQM)

A management approach to long-term success through customer satisfaction, based on participation of all members of an organization in improving processes, goods, services, and culture.

Business Process Reengineering (BPR)

A procedure involving the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed.

Vertical Integration

The old supply chain paradigm in which companies sought to own and control as many supply chain activities as possible themselves.

Core Competency Outsourcing

The new supply chain paradigm in which a company focuses on what it does best and outsources non-core activities to trusted trading partners who specialize in them.

Operations Management

One of the four foundational areas of SCM; involves managing internal resources such as demand determination, supply planning, and running operations (includes the SCOR "Make" function).

Supply Management

One of the four foundational areas of SCM; involves managing suppliers and materials, including purchasing management, strategic sourcing, and supplier relationship management.

Logistics Management

One of the four foundational areas of SCM; involves the movement and storage of products and materials, including warehousing, distribution, and transportation.

Integration

One of the four foundational areas of SCM; involves the systems, processes, policies, and collaboration needed to fully integrate operations, supply, and logistics functions.

LEAN

An operating philosophy that focuses on eliminating waste and improving efficiency.

Six Sigma

An operating philosophy that focuses on reducing both defects and process variation.

Efficient Supply Chain Model

A supply chain designed to minimize cost and maximize capacity utilization; generally appropriate for functional products.

Responsive Supply Chain Model

A supply chain designed to respond quickly to market demand with minimal stockouts; generally appropriate for innovative products.

Functional Products

Low-margin products with stable demand, high inventory turnover, and high volume, readily available from multiple sources.

Innovative Products

Newly developed products with high margins, volatile demand, short lifecycles, and relatively less competition.

Assemble-to-Order

A manufacturing strategy where components are held in inventory and the finished product is assembled only after the customer places an order (e.g., Dell computers).

Push Model (Make-to-Stock)

A production strategy where products are made based on a sales forecast and stored in a warehouse before a customer order is received.

Pull Model (Make-to-Order)

A production strategy where manufacturing is triggered only after the customer places an order.

Inventory (as a Shock Absorber)

Extra stock held to absorb variability in demand or supply, helping maintain customer service when actual demand or supply differs from the plan.

Flexibility (as a Shock Absorber)

Extra capacity beyond what was projected, used to absorb variability in demand or supply.

Planning and Procurement Process

The forward planning sequence: sales forecast, aggregate demand/supply planning, production planning and scheduling, and procurement planning.

Execution and Order Fulfillment Process

The process that runs in reverse of planning: suppliers deliver materials, production and packaging occur, and finished products are delivered to distribution channels and customers.

Key Performance Indicators (KPIs)

Measurements such as Delivery Performance, Conformance to Plan, and Forecast Accuracy used to check whether what was planned was actually executed.

Globalization: Breadth

The aspect of globalization involving a company having foreign suppliers and foreign customers.

Globalization: Depth

The aspect of globalization involving a company having foreign second- and third-tier suppliers and customers, not just first-tier ones.

Supply Chain Cost Optimization

The practice of managing and reducing total supply chain cost across all functions and interfaces as a driver of margin improvement.

Risk Management (SCM)

The practice of identifying and mitigating supply chain risk at each node of the supply chain, rather than simply shifting risk elsewhere.

Sustainability / Greening the Supply Chain

The trend of companies reducing environmental impact (e.g., less packaging material, fuller truckloads) to lower costs and improve public goodwill.

Corporate Social Responsibility

A commitment by a company's management to behave ethically and contribute to community development, beyond just environmental sustainability.