SCM Exam 1 Study Guide

SCM

1st Tier Supplier

a supplier that provides products or services directly to a firm

2nd tier suppliers

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

5 modes of transportation

(1) Road
(2) Rail
(3) Ocean/Water
(4) Air
(5) Pipeline: used only for liquids or items that can be shipped in a slurry.

Actual number of workstations (n)

the letter n may be used to denote the actual number of workstations. It is possible that n may equal TM.

anticipation inventory

inventory that is created and stored for future use ex. Snow shovels stored in back for summer in anticipation of snowy winter

assembly line challenges

Bottlenecks, too many employees or workstations, employee inequities, present needs vs. future demands

Assembly Line Production

can be stopped at any time without compromising the inventory flow ex. Assembling a car

backwards integration

Taking over supply chain responsibilities formerly performed by upstream supply chain partners.

bottlenecks

A section of a supply chain that limits the overall output of the assembly line. Typically, this is the slowest and/or weakest workstation in the assembly line.

business model

a company's plan for how it will purchase items, transform them, deliver them and sell them in an effort to produce a profit

calculate pipeline inventory

dL \= (Periodic demand * Lead Time)

cargo classifications

(1) Bulk: cargo that is loose and free flowing (usually pumped, scooped, shoveled, etc.)
(2) Break bulk: Cargo that is packaged and/or secured on a pallet.
(3) Neo-bulk: typically large items that don't quite fit into either the bulk or break bulk categories. (Ex. Vehicles, logs, and livestock)

central return center

A facility that performs a number of reverse logistics functions typically related to returned consumer products.

centralized vs decentralized purchasing

Centralized- avoid duplication, volume discounts, consolidated shipping, established supply base, supply specialization
Decentralized- closer knowledge of requirements and supplier, speed of purchase (can be bought immediately)

choosing a supplier

Consumer needs, cost/quality/speed/flexibility, tech capabilities, location, information technology system, ability to innovate, capacity potential, 2nd and 3rd tier suppliers, reliability, service

Container Load (CL)

fill entire container

Container on a flat car (COFC)

Standardized containers are placed directly on a rail car.

continuous flow system

must run to completion once the process has been started. Ex. baking bread

core competencies

Things a company does extremely well, that others do not have which sometimes give it an advantage over its competition

cost of inventory

1. Cost to purchase
2. Holding cost (rent, energy, etc)
3. Ordering cost- costs associated with placing an order for inventory
4. Stockout cost- costs associated with not having enough inventory on hand to meet customer demand

cross-docking

Distribution of goods from an upstream supplier to a downstream customer through a distribution center with minimal handling and storage times typically less than 24 hours.

cube vs. weight

Cube represents the dimensional space (volume) inside of a container. The weight limit of a container communicates the maximum combined weight of the cargo that can fit inside of that container.

Cycle Time (CT)

Cycle time is the pace at which products must move through the assembly line in order for the assembly line to keep pace with demand.
Cycle time \= Operating time / Demand
(c \= OT / D)

cycle time rule

In order for each workstation to be allowable, the workstation must have a total task time equal to or less the cycle time (c).

different types of distribution options

direct distribution- no distribution center, lots of empty trucks

distribution center- facilitates movement

drop shipment

three-party system made up of a retailer, a manufacturer, or wholesaler, and a consumer. The consumer places an order w/ the retailer (usually online), who tells the manufacturer/wholesaler, who packs the shipment and sends it to the consumer.

Effective cycle time

the time that maximizes the assembly line's speed

EOQ

EOQ is the lot size (Q) that will minimize total annual inventory cost (TC); it is therefore seen as the optimal lot size.

EOQ equation

square root of 2DS/H

Established channels of distribution

Chain of organizations help bring products to end user

established supplier base

the collection of companies from which an organization presently purchases products and/or services.
implies a working relationship, might imply transactions occur more regularly/fluidly

fixed position layout

used for large and hard to move items, the workers and machines come to the worksite and move around the item as needed.

Flexible Flow Layout

Producing end items that are low demand and high customization
Each work center performs a single function and a large degree of variation is possible at each workstation

forward integration

Taking over supply chain responsibilities formerly performed by downstream supply chain partners.

Global Supply Chain

a worldwide network to maximize profits in production

high inventory pros

High pros- higher levels of customer service, quantity discounts may be possible, fewer orders will need to be placed, greater security against unexpected demand variability

how does SCM maximize ROI

ROI (higher\=better). Control costs\= decrease in investment. Good products \= increase profits

how to balance an assembly line

you need your precedence diagram, sum of task times (t) and the cycle time (c). You can now calculate your theoretical minimum number of workstations (TM). This then gives you an idea of how many workstations might be ideal for the balanced assembly line.

how to calculate TEU's

Example 1: 35 forty-footers and 15 twenty-footers
35 forty-footers * 2 TEUs each \= 70 TEUs
15 twenty-footers * 1 TEU each \= 15 TEUs
Total shipment size \= 85 TEUs

Example 2: 250 forty-footers and 120 twenty-footers
250 forty-footers * 2 TEUs each \= 500 TEUs
120 twenty-footers * 1 TEU each \= 120 TEUs
Total shipment size \= 620 TEUs

Hybrid Strategy and Layout

A manufacturing layout that combines elements from both line flow and flexible flow layouts. In this strategy, products may pass through a layout in a linear fashion, but each workstation would have the ability to allow for some level of customization

hypercompetitive markets

an industry that is heavily concentrated in a particular region, where the companies compete fiercely. May result in rapid innovation but short cycles of competitive advantages. ex. Vegas casinos

independent vs dependent demand

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.

Infrastructre

typically refers to the physical structure within a region that is available for the movement and distribution of goods through a supply chain

intermodal

When cargo is moved from one vehicle or vessel to another vehicle or vessel without directly handling the cargo.

inventory

Items that are owned by a company for the purpose of present or future sales or for use in day-to-day operations
Ex. chairs, buildings, items for sale etc.

Inventory Calculations
Q-
D-
C-
H-
S-

Q - Lot size
D - Annual demand
C - Cost to purchase one unit of inventory
H - Cost to hold one unit of inventory for one year
S - Cost to place a single order
Average Amount of Inventory \= Q/2
Number of orders per year \= D/Q
Time between orders (in weeks) \= (Q/D)*52

Inventory Classifications

Raw materials, work in process, finished goods, maintenance/repair/operations, market inventory, safety stock, anticipation inventory, pipeline inventory

keiretsu

close-knit networks of vendors that continuously learn, improve, and prosper along with their parent companies.

Key issues, Manufacturing Layout

(a) Labor, (b) Facility, infrastructure, and utilities, (c) Laws, (d) Resource availability, (e) Local risks, (f) Climate (g) Transportation, (h) Trade agreements/tariffs/quotas

Keys to being a successful SC Manager

(1) Satisfy the needs of the customer
(2) Satisfy the needs of the company
(3) Be prepared for the future.

last mile

refers to the portion of the supply chain between the final inventory holding facility and the end consumer.

lead time

The period of time between when an order is placed and when the order is received by the customer
Want short lead times

less than container shipper (LCL)

not whole container is full

less than truckload shippers (LTL)

reasonable amount of goods but doesn't fill entire truck (container - LCL shipping)

line balancing rules

1) identify work station candidates, 2) choose one of the candidates for placement 3) test viability of chosen candidate a) if candidate brings total task time of that workstation above (cycle task time) will not fit b) if candidate does fit go back to step 1 and try and place a new task into work station

line flow

Produce items in high demand and little to no customization (usually linear but can be in s or u shapes)
assembly lines, continuous flow systems

logistics

responsible for developing the transportation itinerary and finding the appropriate transportation and storage partners to successfully navigate the flow of materials from the point of origin to the final destination.
downstream

lot size

An accepted order size
Want flexible lot sizes

low inventory pros

Low pros- less storage required, lower chance of inventory obsolescence and shrinkage, less inventory typically means less materials handling requirements, less money invested in inventory means more money available for other investment opportunities

making vs buying

Why Making- proprietary tech, no competent supplier, better quality control, idle capacity, control
Why Buying- insufficient capacity, lack of expertise, no competent supplier, better use of resources

material requisition (MR)

The document used to initiate the purchasing process

new product development considerations

1. Market Research- who is the customer?

2. Designing and Engineering a new product- make product functional and appealing

3. Supply Chain Management- produce, deliver, satisfy demand.
Standardization vs. Customization decisions

4. Finance- profitability
Profit\= Revenue - Cost

5. Competition, Market Growth, Market Evolution

Ocean Carrier classifications

1. bulk carriers- oil tanker, grains, rice
2. neo bulk ships- roll-on roll-off
3. container ships

operations

responsible for making business processes effective and efficient. In essence, operations seek to help the organization create high-quality products and/or services while using the fewest resources possible.

order fulfillment

Delivering the right order (product and quantity), to the right place (location and customer), at the right time, in the expected condition, with the appropriate documentation.

outsourcing considerations

supplier considerations, procurement, operation, logistics

packaging

It secures the item, makes it easy to move, it allows the customer to see and make judgments about the item, and in some cases it fulfills legal requirements.

pallets

A platform upon which large amounts of cargo can be securely placed for easy movement by a human-operated or automated forklift, pallet jack or reach truck

perishable inventory

Perishable- items a company sells that lose their value over time until they eventually are rendered worthless
Ex. hotel rooms, food, rental cars

Pipeline Inventory

inventory that is in transit between suppliers and customers

Planograms and Planogram Considerations

Schematic drawing that illustrates product placement to maximize the use of shelf space and drive sales
ex. how target lays out their products in the store

precedence diagram

An illustration that shows the relationships between all the work elements in an assembly line process. More than just demonstrating which work element goes 1st, 2nd, 3rd, etc. the precedence diagram also illustrates if certain tasks can be completed simultaneously.

precedence rule

All tasks in the workstation must not violate precedence relationships illustrated in the precedence diagram.

procurement

responsible for acquiring materials, equipment, products and services. This would entail finding suppliers, choosing the supplier that offers the best value, negotiating the terms of the purchase, placing orders, and developing long-term relationships with suppliers so that consistent and improved quality can be expected over a long period of time.

productivity

the ratio of outputs to inputs
want max outputs with min inputs
compare against pervious periods

Profit Equation

Profit \= Total Revenue - Total Cost

pros and cons of air transportation

pros- fastest mode, minimal exposure to elements, works well with road transport

cons- very expensive, not easily linked with rail and ocean, cant accommodate standardized containers, needs airport at both places

pros and cons of ocean and waterways

pro- low cost per mile, almost anything can be shipped, works well with intermodal

con- slow, poor reliability, more exposure to elements/thieves/hazardous conditions, need other modes of transport

Pros and Cons of Railroads

pro- cheaper, heavier weight, long-distance, works well in conjunction with ocean/road

con- slow, not that accessible, vibration\=damage, low reliability, need other modes of transport

Pros and Cons of Road Transport

Pros: Fast (2nd fastest), Cheaper than air, high flexibility, competitive market so costs are reasonable and shippers need to be reliable to survive.

Cons: weather, traffic, and crime. Lots of licensed and reliable drivers. Fuel costs flux. Rules and regulations may quickly change from one region to the next.

purchase order (PO)

If a supplier is chosen and a quote is deemed acceptable, then an order can be formally requested

Qualitative demand forcasting

opinions, the wisdom of the crowd, is actually more accurate, helps develop new products/enter new markets
ex. google, uss scorpion

quantitive demand forcasting

based on data from the past

railcar doublestacks

Two containers are stacked on top of each other on a single but specialized railcar that can safely accommodate two containers while still allowing the double-stacked containers to clear tunnels.

relationship between AHC, AOC, and EOQ

The optimal order size, EOQ, is where AHC and AOC intersect.
AHC is greater than AOC: Holding costs are too high - You are to the right of EOQ on the chart below. Decrease lot size to reduce TC.
AOC is greater than AHC: Holding costs are too low - You are to the left of EOQ on the chart below. Increase lot size to reduce TC.

relationship with marketing, design, scm

Marketing identifies a target market.
Designers and engineers work to develop products that satisfy the needs of the target market.
Supply chains must then buy parts, manufacture hundreds or thousands of those end items and then deliver them into the hands of the customer.

Request for Quotation (RFQ)

If the product or service requested is not in stock, then an RFQ can be issued to one or more potential suppliers.

reverse logistics

responsible for the movement of products and packaging that flow backward in the supply chain, away from the consumer and back in the direction of manufacturers.
upstream

Risk's relationship to inventory

Carrying can be expensive \= risk ; risk of not having inventory and the risk of not being able to satisfy the needs of the customer
Company Risks: Theft or damage to inventory, late shipments from supplier, employee sickness, employee strike, machine malfunctions, harsh weather
Supplier Risks: Employee sickness or strikes, sudden increases in demand for your company's supplies, the risks posed by their suppliers
Customer Risks: Sudden increase in demand, damage to customer's inventory

ROI equation

ROI \= total profit / total investment

Saftey Stock Inventory

inventory kept to account for variation/uncertainty of demand.

SC Strategy

a) understanding the product/services b) developing a business model c) organizing the right group of suppliers

SC Tools-List of 5

1. supply chain metrics
2. information technology tools
3. relationship management skills
4. financial resources
5. organizational integration (share the info with whole co)

seasonal inventory

Seasonal- stock that is in high demand at a particular time of year.
Ex. x-mas trees, fruits

seven types of waste

1) defects 2) overproduction 3) transportation 4) motion 5) waiting 6) inventory 7) over processing

shipping labels

A label that is often attached to inventory (typically affixed to a box) that contains information about the shipment

simple moving average

average demand over a certain number of prior periods
works well in industries where demand is pretty stable

Single vs. Multiple suppliers

Single- quantity discount opportunities, lowest total cost, intellectual property advantages, quality control, relationship management is easier, easier collaboration
Multiple- competition breeds innovation, risk among multiple suppliers, capacity flexibility, location advantages

SKU

Stock keeping unit- a specific product or service's identification code used to track inventory or catalog sales

standardized containers

Twenty-footers - Container dimensions: 20'x8'x 8.5' (length, width, height)

Forty-footers (more prevalent/75%) - 40'x8'x 8.5' (length, width, height)

high cubes- 1ft taller than standard 40ft

controlled atmosphere- reefer

Garmentainers- for clothes

ventilated- for things that need ventilation while transport (livestock)

open-top- allow for bulk cargo to be poured into container