Supply Chain Management Lecture Flashcards

Comprehensive vocabulary terms and definitions covering general supply chain concepts, financial metrics, strategic frameworks, and logistical drivers as well as cross-functional drivers.

Supply Chain

All stages, direct and indirect, in fulfilling a customer request, including manufacturing, suppliers, transporters, warehouses, retailers, and customers.

Supply Chain Surplus

The difference between what the value of the final product is to the customer and the costs the supply chain incurs in filling the customer’s request, calculated as $\text{Customer Value} - \text{Supply Chain Cost}$.

Consumer Surplus

The difference between the value of the product and its price that remains with the customer.

Supply Chain Profitability

The difference between the revenue generated from the customer and the overall cost across the supply chain.

Strategic Fit

Consistency between the customer priorities that the competitive strategy hopes to satisfy and the supply chain capabilities that the supply chain strategy aims to build.

Implied Demand Uncertainty

The demand uncertainty imposed on the supply chain because of the customer needs it seeks to satisfy.

Return on Equity ($ROE$)

The main summary measure of a firm’s performance, calculated as $\frac{\text{Net Income}}{\text{Average Shareholder Equity}}$.

Return on Assets ($ROA$)

Measures the return earned on each dollar invested by the firm in assets, calculated as $\frac{\text{Net income} + [\text{Interest expense} \times (1 - \text{tax rate})]}{\text{Average total assets}}$.

Accounts Payable Turnover ($APT$)

A financial ratio measuring how effectively a company uses its short-term debt, calculated as $\frac{\text{Cost of Goods Sold}}{\text{Accounts Payable}}$.

Cash-to-Cash ($C2C$) Cycle

Roughly measures the average amount of time from when cash enters the process as cost to when it returns as collected revenue.

Cycle Inventory

The average amount of inventory used to satisfy demand between receipts of supplier shipments, exploiting economies of scale.

Safety Inventory

A buffer held in case demand exceeds forecasts or if supply is delayed, balancing stockout costs against overstocking costs.

Seasonal Inventory

Stock built up during low-demand periods to prepare for predictable spikes where capacity might be insufficient.

Bullwhip Effect

The fluctuation in orders increasing as they move up the supply chain from retailers to manufacturers.

Aggregate Planning

The process by which a company determines planned levels of capacity, production, subcontracting, inventory, stockouts, and pricing over a specified time horizon, usually 3 to 18 months.

Mean Squared Error ($MSE$)

A measure of forecast error calculated as the sum of squared errors divided by the number of observations.

Mean Absolute Deviation ($MAD$)

The average of the absolute deviation over all periods, used to estimate the standard deviation of the random component.

Mean Absolute Percentage Error ($MAPE$)

The average absolute error as a percentage of demand, used when the forecast has significant seasonality.

Chase Strategy

An aggregate planning strategy where the production rate is adjusted to match demand by changing workforce or machine capacity.

Level Strategy

An aggregate planning strategy that maintains a constant production rate, workforce, and machine capacity, using inventory or backlogs to handle demand fluctuations.

Sales and Operations Planning ($S\&OP$)

A process used to balance supply and demand by coordinating pricing and production decisions to improve profitability and responsiveness.

Vendor-Managed Inventory ($VMI$)

A coordination strategy where the manufacturer or supplier is responsible for all decisions regarding product inventories at the retailer.

Collaborative Planning, Forecasting, and Replenishment ($CPFR$)

A business practice that combines the intelligence of multiple partners in the planning and fulfillment of customer demand.

Cycle Service Level ($CSL$)

The probability of having a product in stock when a customer order arrives, or the probability that demand during lead time does not exceed the reorder point.

Fill Rate ($fr$)

The fraction of customer demand that is met on time from inventory, calculated as $1 - \frac{\text{Expected Shortage per Cycle}}{\text{Lot Size}}$.

Echelon Inventory

The inventory at a specific stage plus all downstream inventory toward the customer.

Intermodal Transportation

The use of more than one mode of transport to move a shipment to its destination.

Offshoring

A sourcing decision where a company moves operations to another country, whether those operations are owned internally or externally.

Third-Party Logistics ($3PL$)

A provider that performs logistics activities such as transportation, warehousing, $IT$, and reverse logistics for companies.

Revenue Management

The use of pricing to increase the supply chain surplus and profit generated from a limited availability of supply chain assets like capacity and inventory.

Dynamic Pricing

The practice of systematically varying prices over time (often as markdowns) to align with changing customer price sensitivity and to clear remaining inventory.

Customer Relationship Management ($CRM$)

Macro processes focusing on the interface between the firm and its customers, including marketing, pricing, sales, and order management.

Internal Supply Chain Management ($ISCM$)

Macro processes internal to the enterprise focused on planning for and fulfilling customer orders at the lowest possible cost.

Supplier Relationship Management ($SRM$)

Macro processes focused on the interaction between the enterprise and its suppliers, including supplier selection and negotiation.

Transaction Management Foundation ($TMF$)

The foundation of enterprise software systems, including $ERP$, that supports supply chain operations through transaction processing and data management.