9.2 Supply chain management Flashcards

1
Q

A supply chain consists of a

A
  • network of org.
  • together they work together to provide and process the necessary raw materials into work in progress and then into finished goods for distribution and sale to end customer
  • Eg: raw materials supplier - manufacturer - wholesaler/retailer - customer
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2
Q

The transformation of the product along the supply chain includes activities such as:

A
  • Production planning
  • Purchasing
  • Materials management
  • Distribution
  • Customer service
  • Forecasting
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3
Q

Supply chain management (SCM) involves

A
  • the coordination of activities from the suppliers of raw materials on one end of the SC to the customer at the other end
  • this should be done in a way to save costs and add value
  • the objective should be to achieve synergies that benefit every player along the chain
  • technology can play a key part in SCM
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4
Q

The strategic supply wheel - Cousins (pg 242):

A
  • this model emphasises the importance of viewing supply as central to the org and it’s effectiveness
  • the notion is that the supply strategy should involve a number of key areas (spokes) for attention and action
  • the wheel depicts the corp supply strategy as hub and an integrated approach is needed to balance all fives spokes
  • there is an interface between spokes and the FF, particularly in areas of cost/benefit and performance measures
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5
Q

Cousins model - spokes of wheel:

A
  • Organisation structure - whether centralised / decentralised impacts control and interaction and should enhance rather than hinder supply strategy
  • Relationships with suppliers - can be competitive (contractual) or collaborative (relational)
  • Cost / benefit - supply decisions should be based on benefits and costs and cost/benefit should be done when making strategic decisions
  • Competences - do the skills exist to achieve the strategy
  • Performance measures - necessary to monitor and control the chosen strategy
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6
Q

Relationship with suppliers (Cousin) - Competitive (contractual):

A
  • purchasing function looked for lowest price suppliers, often through process of tendering, use of power and constantly switching supply sources to prevent getting too close
  • supplier contracts had heavy penalty clauses and were drawn up in a spirit of general mistrust
  • the knowledge and skills of supplier could not be exploited as info was deliberately withheld in case supplier used it to gain power during price negotiations
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7
Q

Relationship with suppliers (Cousin) - Collaborative (relational):

A
  • Org look to enter into partnerships with key customers and suppliers so they can better understand how to provide value and customer service
  • product design processes include discussions involving both customers and suppliers, resulting in a synergy that can lead to generating new ideas, solutions and innovative products
  • to enhance collaboration the org may reward supplier with long term sole sourcing agreements in return for greater levels of support and commitment to ongoing improvement
  • the nature of the collaboration needs to shift to reflect the constant change in environment
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8
Q

Material requirement planning (MRP):

A
  • is a computerised system for planning the requirements for raw materials, work in progress and finished products
  • It is designed to answer three questions:
    • What is needed?
    • How much is needed?
    • When is it needed?
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9
Q

Functions of MRP include:

A
  • Identifying firm orders and forecasting future orders with confidence
  • Using orders to determine quantity of materials required
  • Determining the timing of material requirement
  • Calculating purchase orders based on stock levels
  • Automatically placing purchase orders
  • Scheduling materials for future production
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10
Q

The following technology has been developed from MRP:

A
  • Manufacturing resource planning (MRPII) - goes beyond MRP to include:
    • production planning
    • machine capacity scheduling
    • demand forecasting and analysis
    • quality tracking tools
    • employee attendance
    • productivity tracking
  • Enterprise resource planning (ERP) - integrates info from many aspects of operations and support functions into one single system
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11
Q

Quality is one of the key ways in which a bus can

A
  • differentiate it’s g/s, improve performance and gain a competitive advantage
  • it can be defined in a number of ways:
    • it means the g/s are free from errors and adheres to design specifications
    • the g/s are fit for use
    • the g/s meets the customers needs
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12
Q

Why quality is important to a bus:

A

Higher quality can help increase revenue and reduce costs:
- higher quality improves the perceived image of product which can lead to more customers wanting to buy it and willing to pay more
- a higher volume of sales may result in lower unit costs due to economies of scale
- higher quality in manufacturing should lower waste and defective rates which will reduce production costs
- need for inspection and testing should be reduced also reducing costs
- volume of customer complaints and warranty claims should be lower therefore reduced cost
- better quality in production should lead to shorter processing times and therefore reduce costs

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13
Q

Methods of quality measurement:

A
  • there are four main types of quality-related costs, the org needs to identify these
  • monitoring the costs of quality is central to the operation of any quality improvement programme
  • targets should be set for each quality-related cost
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14
Q

Quality related costs:

A
  • Costs of conformance
    • Prevention costs - cost of implementing a quality improvement programme to prevent defects before they occur (routine repairs of machinery & staff training costs)
    • Appraisal costs - cost of quality inspection and testing (inspection of raw materials)
  • Costs of non-conformance:
    • Internal failure costs - cost of failing to meet quality standards before g/s reaches customer (machine breakdown repairs)
    • External failure costs - cost of failing to meet quality standards after g/s reaches customer (returns from customers)
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15
Q

There are a number of techniques an org can use to improve the effectiveness of the supply chain and manage relationships withing:

A
  • Statistical process control
  • Total quality management (TQM)
  • Kaizen
  • Six sigma
  • Lean thinking
  • Just in time
  • Reverse logistics
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16
Q

Statistical process control (SPC)

A
  • a method for measuring and controlling quality during a process
  • quality data is obtained in real time and plotted on a graph with a pre determined target and control limits
  • data that falls within control limits indicates that everything is operating as expected
  • if data falls outside the control limits, the variation should be investigated and corrective action taken before a defect occurs
17
Q

Total quality management (Japan):

A
  • TQM is the continuous improvement in quality, productivity and effectiveness by establishing management responsibility for processes and outputs
  • every process has an identified owner and every person operates within a process and contributes to it’s improvement
  • it is less of a single technique and more of a culturally shared understanding
18
Q

The fundamental features of TQM include:

A
  • Prevention of errors before they occur (get things right first time) - shift from quality control to quality assurance (prevention costs)
  • Continual improvement - continuous examination and improvement of processes
  • Real participation by all - everyone in value chain is involved in process
  • Collaboration internally and externally is vital
  • Commitment of senior management - management must be fully committed and encourage everyone else to become quality concious
19
Q

TQM participation by all includes:

A
  • Employees - are encouraged to seek out, identify and correct quality problems. Teamwork is vital. They should be able to decide how best to do their work and achieve targets.
  • Suppliers - Quality and reliability is vital
  • Customers - goal is to identify and meet needs of customers
20
Q

TQM participation by employees may include:

A
  • quality circles which are small groups of workers of different levels to come to together to discuss and solve quality problems
21
Q

Common reasons for failure of TQM programmes:

A
  • Tail off - after an initial burst of enthusiasm, top management fails to maintain interest and support
  • Deflection - other initiatives or problems deflect attention from TQM
  • Lack of buy-in - managers pay only lip service to principles of worker involvement and communication
  • Rejection - TQM does not fit in with org culture and therefore rejected
22
Q

Kaizen is

A
  • is a Japanese term for the philosophy of continuous improvement in performance by small, incremental steps
23
Q

Characteristics of Kaizen:

A
  • involves setting standards and then continually improving these standards to achieve long term sustainable improvements
  • the focus is on eliminating waste, improving processes and systems and improving productivity
  • it involves all areas of the bus
  • employees often work in teams and are empowered to make changes (source of ideas on how to reduce costs, requires change in culture)
  • allows org to respond quickly to changes in the competitive environment
24
Q

Six sigma quality management programme (Motorola)

A
  • aim is to achieve a reduction in number of faults that go beyond an accepted tolerance limit by using statistical techniques
  • the sigma stands for standard deviation
  • this is the tolerance level set
25
Q

Lean thinking:

A
  • is a philosophy that aims to systematically eliminate waste by identifying and eliminating all non value adding activities
26
Q

Lean thinking wastes to be eliminated include:

A
  • Inventory - holding / purchasing unnecessary raw materials, wip and finished goods
  • Waiting - time delays / idle time when value is not added to product
  • Defective units - production of a part that is scrapped or requires rework
  • Effort or motion - actions of people/equipment that don’t add value
  • Transportation - delays in transportation or unnecessary handling due to poor planning or factory layout
  • Over processing - unnecessary steps that don’t add value
  • Over production - producing more than customers ordered
27
Q

Lean synchronisation aims to

A
  • meet demand instantly with perfect quality and no waste
  • it overlaps to a large degree with lean and just in time
28
Q

Just-in-time (JIT)

A
  • is a system where the objective is to produce or procure products as they are required by the customer for use, rather than for inventory
  • inventory levels of raw materials, wip and finished goods are kept to a minimum
29
Q

Requirements for successful operation of JIT system:

A
  • High quality and reliability - emphasis on getting work right first time through
    • highly skilled and well trained staff
    • fully maintained machinery
    • long term links with suppliers to ensure reliable and high quality service
  • Elimination of non-value adding activities - value is only being added while a product is being produced and not while it’s stored (therefore low inventory)
  • Speed of throughput - speed of production should match the rate of demand of customers (shorter production runs with lower finished goods stocks)
  • Flexibility - is needed to respond immediately to customer orders
    • system should be able to switch from making one product to another
    • workforce should be dedicate and have appropriate skills
    • it is an org culture that must be adopted by everyone
    • workers should be able to use their initiative and deal with problems as they occur
  • Lower costs by
    • raising quality and eliminating waste
    • achieving faster throughput
    • minimising inventory levels
30
Q

Advantages of JIT:

A
  • lower stock holding costs
  • less working capital tied up in stock
  • less stock perishing, becoming obsolete or out of date
  • avoids build up of unsold finished products
  • less time spent on checking and re-working products
31
Q

Disadvantages of JIT:

A
  • little room for mistakes
  • production is very reliant on suppliers (can cause delays)
  • no spare finished products for unexpected orders
  • may be difficult to empower employees to embrace concept and culture
  • won’t be suitable for all companies (supermarkets)
  • can be difficult to apply to service industry
32
Q

Reverse logistics is the

A
  • return of unwanted or surplus goods, materials or equipment back to the org for reuse, recycling or disposal
  • internet selling and shorter product life cycles has led to org focusing on their reverse logistics capability
33
Q

The main reasons for returns are:

A
  • The customer is not satisfied with the product
  • Installation or usage problems - if installation or usage is complicated
  • Warranty claims for defective products
  • Return of unsold stock by retailers
  • Manufacturer recall program due to faults
34
Q

Steps should be taken to deal with the returns challenge:

A
  • Minimise returns - production of good quality products that meet customer requirements and have clear guidelines for installation and use
  • Ensure the possible reuse or recycling of material
35
Q

Techniques to deal with the returns challenge - these should reduce costs, improve customer service and increase revenue

A
  • Root cause analysis to understand the reasons for returns
  • Creation of profit centres around the returns process to focus on maximising the price they will get for returns
  • Separation of supply chain into forward and reverse logistics
  • Centralising the returns centre to improve speed and efficiency of handling returns
  • Outsourcing the returns process to a competent and dedicated provider
  • the use of technology such as ERP which supports reverse logistics processes
36
Q

A collaborative relationship between CFO and leader of supply chain is advantageous for org growth and competitive advantage:

A
  • the role of supply chain leader has become more prominent, with a shift to creating supply chain strategy that is aligned with overall corp goals and helps org respond to new opportunities
  • the FF now collaborates more closely with other functions as a supporter and enabler of performance
  • the result is that CFOs and supply chain leaders are working increasingly together to understand, analyse and address supply chain issues
37
Q

In the FF’s unique position with end to end view of org, there are a number of areas the CFO can enhance performance by bus partnering with the supply chain, including:

A
  • Stronger alignment between the supply chain and broader strategy and consistency of strategy within the supply chain
  • CFO’s help to set the right growth priorities and pace of growth
  • Monitor and enhance performance by establishing KPIs aligned with broader org
  • Managing risk and business continuity