Supply Chain Management and Inventory Basics

Comprehensive flashcards covering introductory Supply Chain Management concepts, inventory classification, purchasing processes, and supplier management based on the provided lecture notes.

Supply Chain Management

The effective and efficient integration of the suppliers, manufacturers, transportation organizations as well as the other parties responsible for collectively bringing products and services to market.

Procurement (Purchasing)

The process of acquiring materials, equipment, products, and services, including finding suppliers, negotiating terms, and developing long-term relationships.

Operations

Focuses on making business processes effective and efficient to create high-quality products or services while using the fewest resources possible.

Logistics

Responsible for developing transportation itineraries and finding appropriate storage partners to navigate the flow of materials from the point of origin to the final destination.

Reverse Logistics

The movement of products and packaging that flow backward in the supply chain, away from the consumer and back toward manufacturers.

1st-tier suppliers

A company’s direct suppliers that provide goods and/or services directly to the firm.

2nd-tier suppliers

A firm that provides goods and services to a company’s first-tier supplier.

Downstream supply chain

The direction in a supply chain that points towards the end consumer.

Upstream supply chain

The direction in a supply chain that points towards the suppliers.

Three SCM Flows

The three components that must continuously flow for supply chains to function: materials, money, and information.

Business Model

A company’s plan for how the organization will purchase items, transform them, deliver them, and sell them to produce a profit.

Inventory Visibility (Supply Chain Visibility)

The ability to see what is happening with inventory both upstream and downstream in a supply chain.

Profit

The difference between revenue and the cost of all expenditures required to buy, make, move, sell, and deliver a product or service; $\text{Profit} = \text{Revenue} - \text{Cost}$.

ROI (Return on Investment)

An economic measure that is a ratio of total profit to total invested money; $\text{ROI} = \frac{\text{Profit}}{\text{Investment}}$.

Competitive Priorities

The four areas in which companies and supply chains often compete: Cost, Quality, Speed, and Flexibility.

Core Competencies

The primary advantages a company has over its competitors that are typically difficult or impossible to replicate.

Value

The ratio of output purchased divided by inputs used to purchase the product or service; $\text{Value} = \frac{\text{Output}}{\text{Input}}$.

Productivity

The ratio of output created divided by inputs used to produce the product or service; $\text{Productivity} = \frac{\text{Output}}{\text{Input}}$.

Primary Supply Chain Goals

The pursuit of effectiveness, efficiency, and adaptability.

Seven Types of Waste

Managerial focuses for elimination: Defects, overproduction, transportation, motion, waiting, inventory, and over-processing.

Inventory

Items owned by a company for the purpose of present or future sales or for use in day-to-day operations.

Lead Time

The period of time between when an order is placed and when the order is received by the customer.

Lot Size

The accepted order size or amount of units ordered each time inventory is needed.

Raw Materials

Materials, parts, or components used to create an end item that have not yet begun the manufacturing transformation.

Work-in-progress (WIP)

Items that have begun the manufacturing process but are not yet completed.

Finished Goods (FG)

Items that are completed and ready for shipment at a manufacturing facility or assembly plant.

MRO (Maintenance, Repair, and Operations)

Items not intended as part of finished goods but important for daily operations, such as computers, cleaning supplies, and factory equipment.

Safety Stock (Buffer Stock)

Inventory kept specifically to account for variation and uncertainty in demand; it is not intended to be used.

Anticipation Inventory

Inventory created and stored for future use to absorb uneven rates of demand, often related to seasonal growth or holidays.

Pipeline Inventory

Inventory currently in transit between two points; calculated as $\text{periodic demand} \times \text{lead time}$ ($dL$).

Stock Keeping Unit (SKU)

A specific identification code used to track inventory or catalog sales for a particular product or service.

Independent Demand Item

An item for which demand levels are not directly impacted by the demand of another related item.

Dependent Demand Item

An item for which demand levels are directly impacted by the demand of another related item.

Shrinkage

Any negative outcome resulting in a decrease in inventory, including theft, damage, spoilage, and obsolescence.

Stockout Cost

The costs associated with not having enough inventory to meet demand, including lost sales and consumer 'ill will'.

Economic Order Quantity (EOQ)

The optimal lot size that minimizes total annual inventory cost; specifically where annual holding costs ($AHC$) equal annual ordering costs ($AOC$).

Material Requisition (MR)

A document used to initiate the purchasing process, signaling a need for a product or service and providing specifications.

Request for Quotation (RFQ)

A document issued to potential suppliers asking for a detailed quote, including price, delivery date, and payment terms.

Purchase Order (PO)

A formal contract that states the terms and conditions of an order; once accepted by the supplier, it becomes a binding contract.

Total Cost of Ownership (TCO)

The comprehensive cost of owning an item over its entire lifetime, including purchase, storage, maintenance, and disposal.

Centralized Purchasing

A system where all corporate employees send material requisitions to a single department responsible for all purchasing decisions.

Decentralized Purchasing

A system where material requisitions are sent to departmental purchasing sections, allowing for closer knowledge of requirements and speed.

Backward Integration

Taking over supply chain responsibilities formerly performed by upstream partners (suppliers).

Forward Integration

Taking over supply chain responsibilities formerly performed by downstream partners (customers).

Supplier Scorecard

A report card used to communicate desires before a sale or performance outcomes after a shipment to manage supplier relationships.

Supplier Certification

Assessments that help ensure a buyer’s suppliers all meet the minimum required supplier standards.