SCM 4301 Logistics Exam 1

Globalization (5 external forces)

Creates more economic and political risk, shorter product life cycles, and blurring of traditional organizational boundaries.

Technology (5 external forces)

A facilitator of internal process and supply chain transformation and a major force in changing marketplace dynamics.

Organizational consolidation (5 external forces)

Economic power and the driving force in supply chains shift from product manufacturers to the retail end.

Empowered consumer (5 external forces)

Consumers have expanded access to product sources, information, and buying power, causing increased pressure on the supply chain.

Government policy and regulation

a more competitive environment is a result of deregulation of several important sectors in the U.S

Supply Chain Management

Integrated management of the flow of materials and products, services, cash, and information from suppliers to the final customer and back again.

Production Flow

physical movement of goods and materials.

Information Flow

enabling physical flow of products. Decision making. Supply chain collaboration.

Cash Flow

management of working capital

Demand Flow

detect and understand demand signals. Synchronize demand v. supply

Mission

organizations purpose for being. Provides boundaries & focus. Expressed in a published statement.

Vision

consideration of unconventional, counter-intuitive strategies. SWOT analysis.

Good Strategy is:

An action to achieve the mission.

Addresses 4 components:

The company

Customers

Suppliers

competitors

Competitive Priorities includes?

Cost

Quality

Flexibility

Lead time

Time to market

Innovation

Cost Reduction

Minimize the variable costs associated with movement and storage.

Capital Reduction

Minimize the investment in the logistics system and maximize ROI.

Service Improvement

Maximize revenues.

ROLA=

Revenue-Cost/Assests

Strategic Planning

Long term planning (over a yr). Use of aggregate data.

Tactical Planning

Intermediate horizon (less than a year).

Operational Planning

Short term decision making (hourly or daily decisions). Use of very accurate data.

Efficient supply chain: Supply to stock

Characteristics

• Economic production runs

• Finished goods inventories

• Large shipment sizes

• Batch Order processing

Responsive Supply Chain: Supply to order

Characteristics

• Excess Capacity

• Quick Changeovers

• Short Lead Times

• Flexible and agile shipping and processing

Guiding Principles & Concepts

Total cost

Differentiated distribution

Mixed strategy

Postponement

Eliminating forecast error to the greatest extent possible

Controlling lead time variability

Decreasing average lead time

Consolidation

Standardization

Postponement

will take the inventory as far back in the supply chain as possible.

Capitalizing on firm customer orders

Business logistics

That part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, service, and related information from point of use or consumption in order to meet customer requirements.

Military Logistics

The design and integration of all aspects of support for the operational capability of the military forces (deployed or in garrison) and their equipment to ensure readiness, reliability, and efficiency.

Event Logistics

The network of activities, facilities, and personnel required to organize, schedule, and deploy the resources for an event to take place and to efficiently withdraw after the event.

Service Logistics

The acquisition, scheduling, and management of the facilities/assets, personnel, and materials to support and sustain a service operation or business.

Value-Added Roles of Logistics

Form utility

Time utility

Place utility

Quantity utility

Possession utility

Inventory

Management of materials in motion and at rest.

Customer

The 7 r's of logistics. Getting the RIGHT product, to the RIGHT customer, in the RIGHT quantity, RIGHT condition, RIGHT place, RIGHT time, and RIGHT cost.

Dictionary

The branch of military science concerned with procuring, maintaining, and transporting material, personnel, and facilities.

International Society of Logistics

The art and science of management, engineering, and technical activities concerned with requirements, design, and supplying and maintaining resources to support objectives, plans, and operations.

Utility/value

Proving time and place utility or value of materials and products in support or organizational objectives.

Council of SCM Professionals

That part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption in order to meet customer requirements

Component Support

Supply management for the plant (inbound logistics) and distribution management for the firm's customers (outbound logistics)

Competitive relationships (tradeoff)

Order cycle

Substitutability

Inventory effect

transportation

Geographical relationships System 1

manufacturer ships directly to the customer

Geographical relationships System 2

Manufacturer ships to its warehouse, which then ships to customer

Customer Service can be viewed as:

As an activity, in terms of performance levels, and as a philosophy of management.

Customer service in Supply Chain

Is a process for providing significant value-added benefits to the supply chain in a cost-effective way.

Customer Service

Refers specifically to the chain of sales-satisfying activities which usually begins with order entry and ends with delivery of products to customers, in some cases continuing on as equipment service or maintenance or other technical support.

Most important customer service elements

On time delivery

Order fill rate

Product condition

Accurate documentation

Customer relationship management (CRM)

Is the art and science of strategically positioning customers to improve the profitability of the organization and enhance its relationships with its customer base.

Influencing the order (customer relationship management)

-Segment the customer base by profitability

-Identify the product/service package for each customer segment

-Develop and execute the best processes

-Measure performance and continuously improve

Activity Based Costing (ABC)

Measures the cost and performance of activities, resources, and cost objects.

4 segments of customers

Protect, Cost Engineer, Build, Danger zone

Protect Zone

Those customers who fall into this segment are the most profitable. They have a low cost to serve and high sales value.

Build Zone

These customers have a low cost to serve and a low net sales value, so the firm should maintain the cost to serve and build net sales value to help drive the customer into the "Protect" segment.

Danger Zone

Customers in this zone are the least profitable and incur a loss.

The firm has three alternatives for this zone they can change customer interaction with the firm so the customer can move to another segment, charge the customer the actual cost of doing business, switch the customer to an alternative distribution channel

Cost Engineer Zone

These customers have a high cost to serve and a high net sales value.

Variability

Inconsistency in the process. Absolute length of time is important; however, variability drives the safety stock.

Elements of customer service

Time, Dependability (cycle time, safe delivery, correct orders), Communications, and Convenience.

Fill rate vs. items delivered

The more items you deliver, the lower your fill rate.

Stockouts

occur when desired quantities are not available. Could be caused by numerous events.

Back Orders

Occurs when a seller has only a portion of the products ordered by the buyer.Are created to secure the portion of the inventory that is currently not available.

Lost Sales

Some customers will turn to alternative supply sources, they do not wait for the product

Lost Customers

Customer permanently switches to another supplier.

Service recovery

No matter how well an organization plans to provide excellent service, mistakes will occur. Recovery requires a firm to realize that mistakes will occur and have plans in place to fix them.

Form or Transformation Utility

Value added to the goods through a manufacturing or assembly process.

Place Utility

Provided by logistics by moving goods from production points to markets where demand exists.

Time Utility

Economic value added to a good or service by having it at a demand point at a specific time when it is needed.

Quantity Utility

Provided by delivering the proper quantities of an item to where it is demanded.

Possession Utility

Created primarily through the basic marketing activities related to the promotion and sales of products and services.

Promotion

The effort, through direct and indirect contact with the customer, to increase the desire to possess a good or benefit from a service.

Order Cycle

The time that elapses from when a customer places an order until the order is received.

Why carry inventory?

To protect against unexpected demand brought out by foreseeable and unforeseeable events, lead time variability and transportation costs.

Realities of forcasting

Forecasts are always wrong.

A forecast is two numbers: and expected value and a measure of accuracy (range,variance,ect)

Most forecasting methods assumes that there is underlying stability in the system

Short term forecasts are more accurate than long term forecasting

Aggregated (group) forecasts are more accurate than individual item forecasts

Cost of forecast error

If customer demand exceeds available inventory then a stockout occurs.

Other than the safety cost, stockout cost is a major contributor.

It is a serious cost because customer relationships are at risk.

Qualitative Methods

Subjective; used when the situation is vague and little data exist (e.g., new technology/products). Involves intuition and experience.

Jury of Executive Opinion (Qualitative)

Pool opinions of high-level executives, sometimes augmented by statistical models.

Sales Force Composite (Qualitative)

Estimates from individual salespersons are reviewed for reasonableness, then aggregated.

Delphi Method (Qualitative)

Panel of experts, queried iteratively.

Consumer Market Survey (qualitative)

Ask the customer.

Quantitative Methods

Objective. Used when the situation is stable and historical data exist for existing products or technology. Involves mathematical techniques such as forecasting sales of commodity products.

Simple moving average

A time series model used in quantitative forecasting.

Weighted moving average

A time series model used in quantitative forecasting.

Exponential smoothing

A time series model used in quantitative forecasting.

Linear regression

An associative or causal model used in quantitative forecasting.

Time series data

Evenly spaced numerical data obtained by observing response variables at regular time periods.

Time series assumption

Assumes past and present influencing factors will continue to influence the future.

Time Series Components

Trend, cyclical, seasonal,random

Choosing a forecasting method

Seek to minimize some measure of overall forecast error.

Forecast error calculation

Demand minus forecast.

Measures of forecast error

Mean Absolute Deviation (MAD), Mean Squared Error (MSE), Mean Absolute Percent error (MAPE), Weighted Mean Absolute Percent error (WMAPE), and Bias (Tracking Signal).

Mean Absolute Deviation (MAD)

Provides a measure of error dispersion, limited use when comparing forecast accuracy across data with different average demand.

Mean Squared Error (MSE)

Provides a measure of error variance

Penalizes larger errors more than smaller errors.

Mean Absolute Percent error (MAPE)

the average of the absolute differences between the forecast and actual values, expressed as a percent of actual values

Weighted Mean Absolute Percent error (WMAPE)

A forecasting accuracy measure that tells you how large your forecast errors are compared with the total actual demand, expressed as a percentage.

Tracking Signal

Provides a measure of the severity of forecast model bias.

Bias tracking signal

Indicates tendency to over/under forecast.

Naive Approach

Assumes demand in the next period is the same as demand in the most recent period. Used as a benchmark. Called the random walk.

Simple Moving Average (MA) Method

Series of arithmetic means. Used if little or no trend. Used often for smoothing. Provides an overall impression of data over time.

Weighted Moving Average (WMA) Method

Used when demand patterns are not stable, where older data is usually less important. Values between 0 and 1 that sum up to 1, impacting stability and responsiveness.

Exponential Smoothing

Form of weighted moving average (weights decline exponentially; most recent data weighted most).

Requires a smoothing constant (a). Ranges from 0-1. The alpha value is chosen to reduce error (minimize MSE or MAD).

Choosing A (alpha)

Seek to minimize some measure of overall forecast error.

Seasonal variations

Regular upward or downward movements in a time series.

Seasonal index

Multiplicative seasonal model.

Cyclical variations

Similar to seasonal variations occurring every several years.