Chapter1-3 slides

First half of exam info

Supply chain management

The systemic strategic coordination of business functions for long term performance

Procurement

Strategic buying focused on security and cost, guided by supply market conditions

Operational procurement

Purchasing, processing and paying for goods/services, focused on day to day needs.

Strategic procurement

A process where suppliers are aligned with the business strategy through anticipation of opportunity and risk

Profit leverage effect

The concept that small savings in procurement largely impact the bottom line

Return on Assets formula

profit/assets

Competing challenges in SCM

levereging SCM practicies in small organization and assessing supply chain performance

Risk and sustainability challenges in SCM

Broader risks and increasing emphasis on ESG sustainability requirements (environmental, social, governance)

Strategic role challenges in SCM

Growing importance of SC function and new opportunities from digital technologies

The two professional certifications

CPSM and SCMP (certified professional in supply management) (supply chain management professional)

The 6 areas of strategic concern (remember RACCES)

Risk management

Assurance of supply

Cost reduction

Competetive edge

Enviromental change

Support activities

Order qualifiers and winners of lean supply chains

Quality, lead time, service

Cost

Detrimants of responsive supply chains

responsive SCS through to pull production resulting in market responsiveness

The four categories of product attributes

MRP (Materials Requirement Planning)

Kanban

Packing centre

Design and build

Risk definition

A situation with perfect knowledge, whereby one knows the probabilities of all outcomes.

Uncertainty definition

Situations where the probability cannot be expressed mathematically

Operational risk

Supply risk involving disruptions affecting material flows, logistics, supplier performance.

Financial risk

Supply risk involving exposure to price volatility, exchange rates, inventory carrying costs and broader economic uncertainty

Reputational risk

Supply risk involving damage arising from legal, ethical, environmental, social issues in supply base.

Need Uncertainty

Supply uncertainty involving variability in current and future demand

Market uncertainty

Supply uncertainty involving supplier availability, performance and overall supply market dynamics.

Transaction Uncertainty

A supply uncertainty involving challenges in ensuring stable supply flows, coordination, and exchange conditions

Purchasing decisions that warrant need uncertainty

Identification of need

Establishing objectives and specifications

Purchasing desicions that warrant market uncertainty

Identifying buying alternatives

Evaluating alternative buying actions

Purchasing desicion that warrant transaction uncertainty

Selecting supplier and order routine

Stock price disruption impact

Firms undergoing supply chain disruption stock prices decline by 40% a year before and two years after disruption announcement

Equity Risk Impact

Variance of stock returns, increasing by 13.5%. Meaning increased uncertainty and volatility

The 5 pieces to build a resilient SC

Leanness

Flexibility

Agility

Robustness

Redundancy

Leanness

A simple SC with little to no waste

Flexibility

A SC capable of modification and change

Agility

A SC with the ability to respond quickly to small scale market opportunities

Robustness

A SC with the ability to withstand disruptions within network

Redundancy

A SC with resource buffers built in advance just in case

Parametrical adaptation

Adjusting production schedules, order quantities, lot sizes, or replenishment rules to absorb disturbance.

Process adaptation

Modifying existing processes or reallocating capacity to restore flow. Ex. overtime, shift changes.

Structural adaptation

Re-configuring supply network after existing suppliers failed.

The nine supply function objectives

Improve competetiveness

Maintain flow

Minimize inventory

Meet and improve quality

Identify capable suppliers

Develop standards and specifications

Minimize total ownership cost (TCO)

Improve internal integration

Reduce transaction and operational costs

Annual inventory cost %

May reach 20% to 50% annually

Characteristics of a centralized structure

Strategic

scale economies

Common large supplies

High job specialization

Lower external transaction costs

High coordination and control

Characteristics of a decentralized structure

Business unit focus

Strong local responsiveness

Leverage local suppliers

Broad job definition

Lower internal reporting costs

Local flexibility

Sourcing and Commodity Manager

Selects supplies, negotiates prices, manages commodity contracts

Mateirals manager

Oversees materials flow, logistics, inventory and quality after contracts signed

Administrator

Manages data, documentation, information systems

Supply Researcher

Conducts long term analysis of demand, materials, new sources and benchmarking

Cheif Purchasing Officer (CPO)

Usually hired from outside organizations, usually at the third level in the hierarchy under VP. Average CPO length is 4.6 years.