SCM 410 - Midterm #1 Written Portion

Short Answer 1a (5 points) - Describe the Supply Chain Management Concept, and in doing so, define three key concepts and explain how it develops (supply chain → supply chain orientation → supply chain management). Need to incorporate the lecture material.

• The Supply Chain Management Concept consists of 3 things. Supply Chain is a minimum set of 3 or more entities, organizations or individual, that are directly involved in the upstream and downstream flows of products, services, finances, and information from a source to a customer. There are 4 walls of operations. They also have dyads which is a relationship between a single buyer and and a single supplier.

• Second, Supply Chain Orientation is the recognition by an organization of the systemic, strategic implications of the tactical activities involved in managing the various flows in a supply chain. They’re not all managed but they should be but it’s difficult as you’re often working with suppliers who try to cut corners which leads to the other party being at fault. Each entity needs SCO. We’re only as strong as our weakest link in the supply chain. Supply chains often need to “take one for the team” to be properly managed, as in contracts or rewards.

• Lastly, Supply Chain Management is an integrating function responsible for linking major business functions and processes within and across companies into a cohesive, high-performing business model. Long-production runs = more output. It impacts areas like planning/procurement. Suppliers are involved too because you need stock/retailers. Integrating, you’re not looking at the best interest as it spreads across the entire supply chain not just your own company.

Short Answer 1b (15 points). You will be given three separate sections to individually explain the distinct supply chain flows (products/services; information; financials). For each of these three flows, you need to identify their name, explain both directions they flow with brief use of examples, and identify the departments responsible for the flows.

• Product/Services

  • As products flow downstream value is being created. Form utility, i.e a supplier turns wood/metal into nuts and bolts which results in value being created. Ikea is cheap because you’re the one building or “creating the value”. Products also flow upstream in case of defects. Upstream reverse logistics, recalls. Manufacturing department is responsible. Services facilitate the flow either going upstream or downstream. Logistics are responsible for warehousing, inventory management, and transportation.

• Information

  • Downstream flow of information is Advanced Shipping Notice. Which lets companies or people know what’s coming down the line. They want to know either per hour or per minute. Point Of Sale date is shared with upstream members which allows for planning to be done more accordingly, aka forecasting. It’s better for the whole supply chain to forecast. IS/IT department’s responsible for Point of Sale. Done through email and information/technology, as in “did you restart your computer”.

• Finances

  • Supplier ships the product to the manufacturer. Accounting and or finance departments responsible for finances.

  
  

Short Answer 2a (5 points). Describe the Triple Bottom Line Concept (2 pts), and in doing so, also define/briefly describe each of the three Ps (3 pts: People, Planet, Profts).

• TBL is a sustainability framework that expands upon the traditional measure of business success - profit - to include social and environmental performance.

  • The people dimension focuses on the social impact of a business or project. It evaluates how operations affect employees, communities, and society at large like wellness programs.

  • The planet dimension refers to a firm’s environmental responsibility. Measures how well a firm minimizes its ecological footprint and supports environment health like waste reduction or recycling.

  • The profit dimension refers to economic performance but with a broader view than short-term financial gains. Considers long-term value creation that is financially viable and aligned with social and environmental goals like customer retention.

Short Answer 2b (15 points). You will be given three logistics activities (prepare for all six). Under each activity, you will be given three separate sections to (1) Describe the key responsibilities of the activity (i.e., define); (2) Describe in detail how a specific “People” practice or innovation affects Profit (revenue or expense); and (3) Describe in detail how a specific “Planet” practice or innovation affects Profit (revenue or expense).

• Transportation:

  • The act of conveying materials from one point to another; and functional area that prepares the outgoing shipment for transport. Transportation extends reach. A company can reduce driver turnover by improving driver working conditions by providing safer equipment which lowers recruiting/training expenses because the company does not have to constantly replace and train drivers. Using electric vehicles (less greenhouse gas) or vehicles that consume less fuel lowers the amount spent on gasoline for each shipment. Over many shipments, the lower fuel expense can be significant.

• Industrial Packaging:

  • Protects the product during the transportation and storage, includes materials such as cardboard boxes, stretch wrap, banding, bags, etc. Using packaging that is easier and safer for employees to handle can reduce workplace injuries. Fewer injuries can reduce medical expenses/workers' compensation. It can also reduce product damage caused by improper handling. Reducing the amount of packaging material used can lower material and disposal expenses. Replacing excessive cardboard or plastic with smaller-sized and recyclable packaging reduces the amount of material purchased for each shipment. Less packaging waste also reduces disposal expenses and is better for the environment since the cardboard will use less water and wood.

• Procurement:

  • The activities associated with acquiring products or services. Requires managing a wide range of processes associated with a firm’s need to procure goods and/or services to manufacture a product (direct) or to operate the organization (indirect). A company can select suppliers that provide fair treatment of employees. This reduces the risk of supply disruptions caused by labor problems, which prevents extra costs from having to find emergency suppliers or replacing disrupted orders. Strong supplier relationships can also support more reliable sourcing. Procurement can select suppliers that use renewable energy. Although sustainable materials can be expensive, they can reduce expenses in areas like waste disposal, energy use, or regulatory costs.

• Returns Management:

  • Supports closed-loop supply chain strategy. Logistics has a key role in product returns, materials substitution, reusing materials, re-manufacturing, recycling, refurbishing, & disposal. A company can make the returns process easier for customers by providing clear and convenient return procedures. An easy process can lead to loyal customers, leading to reliable revenue. Properly trained employees can also process returned products correctly and reduce unnecessary handling expenses. Returned products can be refurbished and reused instead of being disposed. This allows the company to recover value from products and materials that would otherwise become waste. Reusing components can reduce the expense of purchasing new materials which can lead to more revenue.

• Storage (Warehousing):

  • The storing (holding) of goods. Focuses on the storage facilities (number and location). A warehouse can provide employee development opportunities like certifications and promotions which can lead to lesser people being scheduled driving down payroll expenses, going from 2-3 people scheduled for one task to only 1 if skilled enough. Warehouses save energy by using LED lighting and motion sensors which can lower the amount of electricity used when areas are unoccupied. This directly lowers the warehouse's utility expenses.

• Storage (Inventory Management):

  • The process of ensuring the availability of products through inventory administration. Processes include ordering, storing, using, and selling inventory (raw materials, components, and finished products), as well as their warehousing and processing. Training employees to properly manage inventory can reduce picking, stocking, and order errors. Fewer errors mean fewer incorrect shipments, returns, and replacement orders, which lowers operating expenses. Using inventory-management systems to reduce excess and obsolete inventory can decrease product waste. When companies order and hold only the inventory they need, fewer products expire, become damaged, or become obsolete. This reduces the expense of disposing of unusable inventory and prevents the company from tying up money in products that cannot be sold.

Calculation (10 points). You will need to calculate C2C based on financial data (in all answers, round to nearest one-hundredth place (0.00) and have correct unit of analysis. Interpret (2 points) (i.e., what does the final number mean and why is C2C important); Evaluate (3 points) (i.e., is it good, how do you know, how to improve, best and why).

• C2C Formula:

  • (+) Inventory: Inventory * 365 / COGS

  • (-) Payables: AP * 365 / COGS

  • (+) Receivables: AR * 365 / Net Sales

• Interpret: It takes the company xyz days to pay their supplier for inventory to getting paid from the customer for the finished good. We don’t know if it’s good, we need to check the industry benchmark/average. C2C is important because a firm needs to be competitive and in order to be competitive they need to buy stuff. You also need to pay payroll. If you need money, you have to borrow it which leads to paying interest. To improve you can extend days of payable, shorten days of receivables, and shorten days of inventory. The best option is to shorten days of inventory because it doesn’t increase the C2C of other supply chains.