Supply Chain Management MidTerm

ABC Analysis

ABC Analysis

• What: Categorizes products total consumption (price * volume)

• Manufacturers use it to allocate limited inventory planning resources (daily planning of A items)

• Retailers use it to allocate planning resources but also to decide what items to drop (C items)

Inventory management

• can use ABC analysis

• lower inventory carrying cost = increase cash flow, risk reduction, faster response to market changes, decrease interest expense, leaner supply chain

Demand planning

• Used to help better manage inventory with fewer stock out and less excess inventory/holding cost

• Use tech and data (Point of sale data) to make forecasting better —> and plan demand better

S&OP

• Forecasting across sales. Operations, Finance and Supply chain management 

• It is very hard to achieve bc of each groups different objectives 

Demand Shaping

• Pushing the market twoard certain product

• Methods like Buy one Get one

Toyota Production System (TPS)

• A manufacturing management system reduces wast (inventory, set up time)

• Key Processes: Utilizing front line workers, Value stream map, JIT/Pull, Pro active continue improvement

Six Sigma

• A process improvment method that reduces variation

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Set Up Time

• Non Value added

• Reducing set up time can increase capacity

Just in Time (Jits)

• Producing what is needed when its needed

Economic Order Quantity (EOQ) Theory

• What: Determine the optimal amounts of each order

• Why: minimize total cost

Process Mapping

• Best way to see inefficiencies and get rid of the bottle neck

• Visualize process into individual small steps

Functional Product

• Is a “need” product like groceries 

• Easy to forecast —> low tock outs 

• Cost is King 

• Low Margins 

• Long life cycle 

• Low Variety 

• Is a good fit for Just in time 

Efficient Supply Chain

• Firm schedule/info flow 

• Low cost 

• Low Inventory

Innovative Product

• Is a “want” products 

• Difficult to forecast 

• Short lead time 

• High Margins 

• High variety 

• May also be called fashion

• Poor fit for Just in time 

Responsive SC

• Flexible schedule

• Differentiation 

• Short Lead times 

• Buffer inventory/capacity 

Make to order

• When manufacturing and supplies are waiting on stand by waiting for order to come in 

• Example: when you order food from restaurant the chef has the ingredients but doesn’t make the food until you order 

• An example of a pull system bc an order has to pull products through supply chain 

Make to stock

• Forecasting how much you think you can sell 

• Example: when you go to a clothing store and their is already a certain amount of inventory you can select from (there is no back what we have is what we have) 

• Push system bc we are pushing our inventory onto customers even though they haven’t yet laced orders 

Engineer to order

• Making a customized product for each order can’t finish product design until customer tells you what they want; everything is triggered by a customer order 

• Example: Commissioning a piece of art the artist can not start the process until the customer lets them know what type of art they want how big and so on 

• A pull system bc the item has to be pulled through the supply chain 

Theory of Constraint (TOC)

Find/Relive bottleneck

Total Landed cost

• The total price of a product once it has landed on a customers door

• You get it by adding the original price with all the transportation cost custom duties and ect

Total Quality Management (TQM)

• A structured approach to overall management

Process Analysis

• A set of activities which take inputs (materials or info) and transform into an out put

Inventory management 

• 2nd most important in supply chain

• Can use ABC analysis & EOQ (TAC)

Lower inventory carrying cost

• Increase cash flow

• faster response to market change

• risk reduction

• decreased interest expense

• leaner supply chain

Return On Assets (ROA)

• ROA = Profit as percentage of sales × Asset turnover = Profit before taxes × Sales

  Sales Total assets

Standard Work

• Hard because no one likes change and resits

• Don’t like loss of freedom

• Remember the physicians and Cortez (either get with the program or get out)

Supplier Selection

• Use “K matrix” to decide

• Want to have trustworthy suppliers

Supplier Management

Tactical side of Sourcing— supplier scorecards , expediting, etc

Change Management

• Challenges

  • Training/Qualified

  • Transition Ramp Up/Ramp Down

  • Loss of relationship/Working procedures

  • Inevitable start up cost/revenue

Economy of Scale

• Lower costs with higher volume due to spreading fixed costs

  • when you make a lot of a product, it's cheaper to make each individual unit.

Diseconomy of Scale

• Getting bigger leads to higher costs per unit, which can reduce overall efficiency and profitability.

Category Strategy

• Determine the types of products you have and how to best source them for maximum profit and minimized supply risk —> Use K Matrix