Supply Chain Management Review

Flashcards for Supply Chain Management revision.

Logistics

The process of transporting and storing raw materials, finished goods, inventory, and other resources.

Globalization

Creates more economic and political risk, shorter product life cycle, and the blurring of traditional organizational boundaries.

Inventory management challenges

Faster duplicability of products and services, Faster reduction in demand, Requirement of new pricing policies, Higher risk of obsolescence

Technology

A facilitator of internal process and supply chain transformation and a major force in changing the dynamics of the marketplace.

Organization Consolidation and Power Shifts

Economic power and the driving force in supply chains shift from product manufacturers to the retail end of the supply chain.

Bullwhip effect

When small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer and raw material supplier levels.

Empowered Consumers

Consumers are empowered by exponentially expanded access to product sources and related information and increased buying power due to high income levels.

Government Policy and Regulation

More competitive environment resulting from deregulation of several important sectors in the US in the 1980s and 1990s.

Transportation industry deregulation impact

Expanded services beyond transportation, with service providers’ role evolving to outsourcing partners.

Financial sector deregulation impact

More flexible and responsive to customer needs, making businesses more cognizant (be aware) of SCM impact on efficiency and cash flow.

Communications industry deregulation impact

A component of the information revolution, leading to dramatic improvements and opportunities in logistics and supply chains.

Sustainability

The pursuit of sustainability is widely recognized as a key element of successful SCM. Critical to effective risk management and achieving competitive advantage.

Integrated Supply Chain

Integrating the flows of products, information and financials through the entire supply pipeline from the supplier’s supplier to the customer’s customer.

Production Flow

Physical movement of goods and materials.

Information Flow

Enabling physical flow of products, decision making, supply chain collaborations.

Cash Flow

Management of working capital.

Demand Flow

Detect and understand demand signals, synchronize demand vs supply.

Supply Chain Network

Network system like facilities and supporting transportation services must be capable and flexible to respond to sudden changes of the market dynamics.

Complexity

Increased requirements in simplifying and constantly evaluating areas of complexity in the various aspects of supply chains.

Inventory Deployment

Increased requirements for coordination or integration to reduce inventory levels on horizontal (single-firm) and vertical (multiple-firms) levels in the supply chain.

Information

Sharing of information along the supply chain. The discipline to ensure the integrity of the vast amount of data collected and stored.

Cost and Value

The prevention of sub-optimization.

Organizational Relationships

Internal collaboration (marketing, sales, operations, finance). External collaboration (vendors, customers, transportation companies).

Performance Measurement

Connecting lower-level metrics in an organization directly to the high-level performance measures of the organization and the supply chain.

Technology

Evaluate, strategically plan, and successfully implement the technology to make the improvements desired.

Transport “perfect storm”

Transport market changes, driver shortages, fuel costs, infrastructure constraints, and regulatory changes.

Supply Chain Security

Risk of disruptions, vulnerability, and exposure to terroristic threats exacerbated (made continuously worse) by distance and complexity in global supply chain.

Talent Management

Attract, develop, and maintain the appropriate pool of talent from entry level to executive level.

Rationale for Global Trade and Commerce

Lower cost and/or access to items not available locally, Differences in the cost of producing products in different countries

Contributing Factors for Global Flows and Trade

Population size and distribution, Urbanization, Land and resources, Technology and information, Globalized economy

Urbanization

The rise of 'megacities'

Global outsourcing

When a company delegates the performance of certain business functions to external service providers

Free trade agreements (FTAs)

Global trade growth has been fueled by these that lift most tariff, quota, and fee/tax limitations on trade.

Bilateral

Agreements are between two nations

Regional trade agreements

Trade agreements involve 3 or more nations

Logistics

Part of organizational management with four major subdivisions.

Business Logistics

Part of supply chain that plans, implements, and controls the flow and storage of goods, services, and related information.

Military Logistics

Design and integration of all aspects of support for the operational capability of the military forces and their equipment.

Event Logistics

Network of activities, facilities and personnel required to organize, schedule and deploy resources for an event to take place and withdraw after the event.

Service Logistics

Acquisition, scheduling and management of facilities, assets, personnel, and materials to support a service operation and business.

Types of Economic Utility

Time, Form, Possession, Quantity, Place

Order Cycle Length

Shorter order cycles reduce the inventory required by the customer.

Inventory Effect

Increasing inventory costs can reduce the costs of lost sales.

Transportation Effect

Cost of lost sales can be reduced by spending more on transportation service to improve customer service.

Spatial Relationships

The location of fixed points in the logistics system with respect to demand and supply points are very important to transportation costs.

Product-related Factors

Dollar value, Density, Susceptibility to damage, Special handling requirements (heating or cooling) are all able to change costs (e.g. Transport, Packaging, Inventory, Warehousing).

Short-run or Static Analysis

Concentrates on a specific point in time or level of production output.

Long-run or Dynamic Analysis

Examines a logistics system over a long time period or range of output.

Materials management vs. physical distribution

Examine logistics as inbound vs. outbound logistics.

Cost centers

Examine logistics activities as these, allowing tradeoffs between them to be analyzed.

Nodes vs. links

Examine these (fixed special points where goods stop for storage or processing) vs. these (transportation network that connect the nodes in the logistics system).

Logistics Channels

Examine supply chain of network organizations engaged in transfer, storage, handling, communication, and other functions that contribute to product flow.

Demand Management

To estimate and manage customer demand and use this information to make operating decisions. To further ability of firms throughout the supply chain to collaborate on activities related to the flow of products, services, information, and capital.

Desired End Result [of demand management]

Greater value for the end user or consumer.

Common Problems in Demand Management

Lack of coordination between departments, Too much emphasis placed on forecasts of demand, with less attention on the collaborative efforts and plans needed to be developed from the forecasts, Non-strategic uses of demand information

Independent Demand

Demand for the primary item, known as base demand

Dependent Demand

Demand directly influenced by demand for independent item

Random Fluctuation

A development that cannot be anticipated and is usually the cause to hold safety stocks to avoid stockouts.

Trend Fluctuation

Gradual increase or decrease in demand over time for an organization.

Seasonal Fluctuation

Seasonal patterns that will normally repeat themselves during a year for most organizations.

Cumulative sum of forecast errors (CFE)

Calculates the total forecast error for a set of data, taking into consideration both negative and positive errors.

Mean squared error (MSE)

Squares each period error so the negative and positive errors do not cancel each other out.

Mean absolute deviation (MAD)

Takes absolute value of each error, so the negative and positive signs are removed.

Mean absolute percentage error (MAPE)

Evaluation metric used to measure the accuracy of predictions across industries.

TRACK Signal

Can be used to measure forecasts error, especially good at identifying if a “bias” exists in the forecast errors. CFE/MAD

Sales and Operations Planning (S&OP)

It is necessary for an organization to arrive at a forecast internally that all functional areas agree upon and can execute.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

Trading partners (retailers, distributions, and manufacturers) use available Internet-based technologies to collaborate on operational planning, allowing them to agree to a single forecast for an item where each partner translates this forecast into a single execution plan.

Influence and Order Phase

Organizations attempts to change how its customers place orders.

Customer Relationship Management (CRM)

Align the supplier’s resources with its customers in a manner that increases both customer satisfaction and supplier profits.

Activity-Based Costing and Customer Profitability

Combining Activity-Based Costing (ABC), customer profitability, and customer segmentation tools to build profitable revenue.

Cost-to-Serve Model

Identifies many other cost drivers that are impacted by customers and how they interact with the shipper.

Order-to-Cash (OTC)

All the activities that occur from when an order is received by a seller until the product is received by the buyer, plus the flow of funds back to the seller based on the invoice

Replenishment Cycle

Referring to the acquisition of additional inventory as in materials management. One organization’s order cycle is another’s replenishment cycle

Customer Service

Anything that touches the customer, including all activities that impact information flow, product flow, and cash flow between the organization and its customers.

Stockout

Occurs when desired quantities of finished goods are not available when or where a customer needs them.

Often overlooked definition of order cycle time

Customer Wait Time (CWT)

Logistics operations responsiveness (LOR)

The concept of this examines how well a seller can respond to a buyer’s needs.

Logistics System Information (LSI)

1. Pre-transaction information is used for planning 2. Transaction information is used for execution 3. Post-transaction information is used for evaluation

Post-sale Logistics Support (PLS)

The management of product returns form the customer to the supplier. The delivery and installation of spare parts.

Service Recovery

Requires an organization to realize that mistakes will occur and to have plans in place to fix them.

Inventory Carrying Cost

Inventory carrying costs incurred by inventory at rest and waiting to be used.

Ordering Cost

Expense of placing an order, excluding the cost of the product itself.

Setup Cost

Expense of changing/modifying a production/assembly process to facilitate line changeovers.

Expected Stockout Cost

The cost associated with not having a product/materials available to meet customer/production demand.

In-transit Inventory Carrying Cost

Inventory carrying costs become especially important on global moves since both distance & time increase.

Fixed order quantity

Type of inventory management system where a specific, predetermined quantity of items is reordered whenever the inventory level falls below a set reorder point.

Economic Order Quantity (EOQ)

Determines the optimal order quantity to minimize inventory costs.

Just-in-time (JIT)

Inventory management system that focuses on receiving goods from suppliers as needed rather than holding large inventories.

Material Requirements Planning (MRP)

System used in manufacturing to manage inventory and production scheduling by determining the right materials, quantities, and timing of production.

Distribution Requirements Planning (DRP)

Systematic process that determines the quantities, locations, and timing of product distribution to meet anticipated demand.

Vendor Managed Inventory (VMI)

Supply chain strategy where a supplier takes responsibility for managing and replenishing a customer’s inventory, rather than the customer directly placing orders.

Independent demand

Demand is unrelated to the demand for other items

Dependent demand

Demand which is directly related to, or derives from, the demand for another inventory item or product.

Pull vs. Push

Relies on customer orders to move product through a logistics system, while the approach uses inventory replenishment techniques in anticipation of demand to move products.

System-wide approach

Plans and executes inventory decisions across multiple nodes in the logistics system.

Fixed Order Quantity

Involves ordering a fixed amount of product each time reordering takes place. Also called two-bin model.

Fixed Order Interval

Involves ordering inventory at fixed or regular intervals. Also called the fixed period or fixed review period approach. Generally, the amount ordered depends on how much is in stock and available at the time of review.

Principal differentiator

A JIT commitment to short, consistent lead times and to minimizing or eliminating inventories is this from the more traditional approaches.

Materials Requirements Planning (MRP)

Deals specifically with supplying materials and component parts whose demand depends on the demand for a specific end product.

DRP (Distribution Requirements Planning)

Systems accomplish for outbound shipments what MRP accomplishes for inbound shipments. Determines replenishment schedules between a firm’s manufacturing facilities and its distribution centers.