BUSI 740 - Supply Chain Management Flashcards
LO A
Supply Chain Development/Design
NETWORK PLANNING PROCESSES
- Network Design (locations, transportation/warehouse costs); data collection/aggregation
- Inventory Positioning - safety stock, RM/WIP/FG
- Resource Allocation - supply chain master plan
LO A
Supply Chain Development
STEP 1: NETWORK DESIGN
How many facilities? Type (factory or warehouse)?
Size of facilities?
Allocating space for each product in the facility
Which customers use which warehouse?
Data needed: customer locations & demand #s, transportation rates (air vs truck vs rail vs ship), holding costs, etc.
Also consider: future demand, infrastructure, labor availability, public interest, natural resources, flexibility (what if warehouse closed, redirect where?)
LO A
Supply Chain Development
STEP 2: INVENTORY POSITIONING & LOGISTICS
- Identify the push-pull boundary. Which facility should be “made to stock” and which should be “make to order?”
- Take advantage of Risk Pooling (changes in demand)
- Move from a sequential or local optimization to a globally optimized strategy where all steps are considered and cost minimized.
LO A
Supply Chain Development
STEP 3: RESOURCE ALLOCATION
Allocate production, transportation, & inventory resources
System-wide Cost Min if best during times of recession/oversupply. Profit Max is best during growth periods when demand>supply. Who should we serve?
Where should products be produced?
How much should be produced? Batch size?
Information Sharing Strategies
- Capacity Reservation Contracts - prices @ different quantities
- Advance Purchase Contracts - lower $ if purchased in advance; higher $ if purchased after a certain date
- Global Optimization - align all players’ goals to reduce overall cost in the entire supply chain
Demand…Retailer…Wholesaler…Supplier…Factory…Supplier…Wholesaler…Retailer…Customer
LO B
Lead-Time Reduction Strategies
- Push-Based (forecasts) used for items with long lead time
- Pull-Based (demand-based)
- Demand-Driven Strategies - forecasts and shaping (marketing related, ad campaign, etc.)
LO C
Legal & Political Implications that impact the design of an international supply chain
Trade Agreements
Tariffs & Import/Export Quotas
Political Unrest
- Key is to manage the risks and identify possible unknowns (weather. terrorists, etc.)
- Be adaptable, assess risk periodically, better info, back-up plans
LO D
Vendor-Managed Inventory System
In a VMI system, the supplier decides on the appropriate inventory levels based on POS info from the retailer.
Advanced Info Systems required - barcodes/scanners
Consignment relationships are common where retailer doesn’t own merchandise
Confidentiality, communication, & cooperation are all important
When the vendor is responsible for ordering, planned downtime can be accounted for
Suppliers must have sophisticated forecasting in order for the retailer to agree with VMI
LO D
RSP - Retailer/Supplier Partnership
VMI Implementation
1. Negotiate RSP Contract
Who owns merchandise
credit terms
who's responsible for orders and when
service/inventory level benchmarks
- Info systems must be integrated
Forecasting techniques developed
Coordination of inventory management & transportation policies developed
LO E
Bringing a New Supplier into the Product Development Process
SUPPLIER INTEGRATION
Benefits of including suppliers in design process:
- Decline in purchased materials cost
- Increase in material quality
- Decline in development time and cost
- Increased final product technology levels
Levels of Supplier Integration:
None…White Box…Grey Box…Black Box
White Box - Consultation with supplier
Grey Box - Collaborative teams of engineers from buyer and supplier develop product
Black Box - requirements are given to supplier to develop and design product
Keys to Successful SCM
- Master the DEVELOPMENT CHAIN (new product development and intro, existing product changes)
- GLOBAL OPTIMIZATION (consider the entire process & all partners)
- RISK MANAGEMENT (political uncertainty, weather, terrorists, etc.)
Key Issues in SCM
Strategic/LT Tactical/Qtrly/Yearly Operational/Day-to-Day
- Distribution
- Inventory Control
- Production Sourcing
- Supply Contracts
- Customer Value
- Strategic Partnering
- Outsourcing
- Product Design
- IT Design
- Smart Pricing (supply & demand)
Inventory Control Strategies
- Max-Min: If inventory reaches a “minimum” level (aka reorder point) then we order up to the max level
- Q,R Policy: When inventory falls to a reorder level “R”, we place an order for “Q” units.
**Marginal Profit per unit should be > than marginal cost to store (FC not considered).
**Periodic or continuous review of inventory levels needed depending on lead times.
Inventory Reduction Strategies
- Periodic Inventory Counts - identify slow movers
- Tight management of lead times & safety stock
- Reduce safety stock
- Cycle Inventory Counts (walmart) one department per month instead of all one-time per year.
- ABC Approach - count “A” products more b/c they turnover quickly
- Shift inventory to suppliers
- Quantitative approach - use stats to find right balance b/w inventory & holding costs
Demand Forecasting: JUDGEMENT METHODS
(Collection of Expert Opinions)
*Judgement methods are good to use during testing and intro phases.
- Sales Force
- Panel of Experts
- Delphi Method - surveys experts & then reach a consensus
Demand Forecasting: MARKET RESEARCH METHODS
*Market Research Methods are good to use during the Production Development Stage
- Market Testing
- Market Surveys
Demand Forecasting: TIME SERIES METHODS
*Time Series Methods are good to use during the rapid growth stages.
- Moving average
- Exponential smoothing
- Trend analysis & regression
- Seasonal decomposition
Demand Forecasting: CAUSAL METHODS
*Causal methods are best for the mature stage of the PLC.
- GDP
- Unemployment
- Weather
Risk Pooling - Changes in Demand
Standard Deviation = how much demand varies from the average
Coefficient of Variation = how much the Std Deviation varies from the average. A high CV indicates high risk (for example a high CV would imply high variability to forecasted demand).
- The higher the CV, the greater benefit from centralized inventory location. If one market area experiences increase in demand, they can take inventory that would have gone to another market. Not possible if decentralized warehouses.
Supply Chain Trade-Offs
GOALS OF PLAYERS
- Supplier - stable volume requirements with little variation in mix of materials. Flexible delivery times & large volume orders (econ of scale)
- Manufacturers - limited changeovers, long order times, limited variability
- Warehouse & Logistics - low inventory levels, quantity discounts, quick replenish time
- Retailers - short order times, quick & accurate delivery
- Customers - enormous variety, in-stock, low prices
Supply Chain Trade-Offs
LOT-SIZE INVENTORY
Manufacturing is cheaper in bulk but leads to extra inventory
Relationship between distributor/retailer and manufacturer can help increase confidence.
Supply Chain Trade-Offs
TYPES OF TRADEOFFS
- Lot-Size Inventory Trade-Off
- Inventory-Transportation Trade-Off
- Lead Time-Transportation Trade-Off
- Product Variety-Inventory Trade-Off
- Cost-Customer Service Trade-Off
Supply Chain Trade-Offs
COST-CUSTOMER SERVICE
Direct shipping from factory to customer. Warehouse info must be available to stores and customer.
Mass customization - highly personalized goods
Supply Chain Trade-Offs
PRODUCT VARIETY - INVENTORY
Increased Variety = Increased Inventory Levels
Risk Pooling & Demand Forecasting can help reduce this trade-off.
“Delayed Differentiation” means a standard product is introduced prior to a variety product to gauge demand.
Supply Chain Trade-Offs
LEAD TIME - TRANSPORTATION COST
Should we hold items until full truck or incur higher per unit shipping costs to send now?
IT & info sharing can help with production timing to ensure full truck.
Forecasting techniques can be used to reduce lead time & help with this trade-off.
Supply Chain Trade-Offs
INVENTORY-TRANSPORTATION COST
A full truck costs the same to run as an empty truck. Shipping companies often offer quantity discounts.
IT & info sharing can help with production timing to ensure full loads.
Cross-docking to fill truck with several types of products.
Supply Chain Strategies
- PUSH-BASED (forecasts determine order)
- PULL-BASED (Demand/Orders determine order)
- PUSH-PULL or PULL-PUSH BASED
early stages are push & later stages are pull
manufacturer builds to order w/RM on hand from forecasts
Postponement - generic shell is made then customized when order received.
Ex: Furniture (Pull-Push)
EX: CDs & Books (Push-Pull)
Supply Chain Strategies
PULL-BASED BASICS
Use PULL-BASED (demand) when there is high demand uncertainty &/or economies of scale are not necessary.
Ex: Computer
Supply Chain Strategies
PUSH-BASED BASICS
Use PUSH-BASED (forecasts) when economies of scale is important &/or when demand uncertainty is low/predictable.
Ex: Groceries
Types of Strategic Alliances
- 3PL - Third Party Logistics
Allows company to focus on mfg and design instead of delivery
Use advantage of other company’s assets, knowledge, and cost-effectiveness
Disadvantage - loss of control - RSP - Retailer/Supplier Partnership (VMI)
POS info shared from retailer to supplier
Advanced IT systems required - DI - Distributor Integration
Sharing best practices with partners
Trust is very important
Outsourcing Risks & Benefits
Benefits - economies of scale, risk pooling, reduce capital investment, focus on core competencies, increased flexibility
Risks - loss of competitive knowledge, conflicting objectives (lead time vs quality)
Framework for Make/Buy Decision
Modular Product - made by combining many different components (ex: computer, car)
Integral Product - made of components that are highly related (ex: engine)
Modular - outsourcing is an opportunity
Integral - outsourcing is an option
(CAPACITY vs KNOWLEDGE)
Customer Value
Dimensions of CV:
- Conformance to requirements (convenience, available, etc.)
- Product Selection (variety)
- Price & Brand (quality and prestige)
- Value-Added Services (support & maintenance)
- Relationships & Experiences
Measurements of CV
- Service level (on-time delivery)
- Customer Satisfaction (loyalty)
- Supply Chain Performance/Benchmarks
Procurement Strategies
- STRATEGIC PARTNERSHIPS (contracts) should be made for items with high supply risk & high profit impact.
- SPOT PURCHASING for items with low supply risk & low profit impact,
- Exploit PURCHASING POWER for items with high profit impact and low supply risk.
Supply Chain Management
BIBLICAL INTEGRATION
SCM is about relationships - God’s communal nature & desire of relationships
Continuous improvement techniques allow employees to contribute to meaningful & creative work.
Employing CPI methods & including God in the decision-making process will ensure greater meaning for all involved - employees, business, community, etc.
Describe the main IT capabilities required to achieve supply chain excellence.
- STRATEGIC NETWORK DESIGN
a. Decision focus - minimization of total costs, may involve large capital investments and major distribution decisions
b. Data aggregation level – long-term forecasts
c. Time to implement – a few months to a few years
d. Number of users – few, upper management - TACTICAL PLANNING
a. Decision focus - supply chain master planning, resource allocation, and inventory planning
b. Data aggregation level – short-term forecasts
c. Time to implement – weeks or months
d. Number of users – few, middle management - OPERATIONAL PLANNING
a. Decision focus - one function
b. Data aggregation level – statistical and computational analysis
c. Time to implement – daily to weekly
d. Number of users – many users, extensive training - OPERATIONAL EXECUTION
a. Decision focus - minimization of total costs
b. Data aggregation level – many transactions company-wide
c. Time to implement – real-time, instantaneous
d. Number of users – many users, extensive training
