CHAP 3 Flashcards
What measures the return earned on each dollar invested by the firm in assets?
Return on asset (ROA)
What captures the return generated by a firm’s operating and investing activities, without regard for how these activities are financed?
Return on asset (ROA)
What roughly measures the average amount of time from when cash enters the process as cost to when it returns as collected revenue?
Cash to cash (C2C) cycle
What are two important financial measures of supply chain performance that are not recorded in financial statements?
Markdowns and lost sales
What are the logistical drivers?
Facilities
Inventory
Transportation
What are the cross functional drivers?
Information
Sourcing
Pricing
Do the logistical and cross functions drivers act independently?
They DO NOT act independently but interact to determine the overall supply chain performance
What can vastly improve the supply chain performance on both responsiveness and efficiency?
Information but it must be made based on the strategic position supported by the other drivers.
What can be used to attract the right target customer segment?
Pricing
Differential pricing can be used to attract customers who value responsiveness as well as customers who want efficiency
actual physical locations in the supply chain network where product is stored, fabricated, or assembled. What logistical driver is this?
Facilities
What are the two major types of facilities sites?
production sites and storage sites.
Firms can ____responsiveness by_____ the number of facilities, making them more flexible, or increasing capacity
Increase; increasing
Firms must also decide whether to design a facility with a _____ focus or a _____ focus.
Product focus or a functional focus
Facility performs all functions (e.g., fabrication and assembly) needed for producing a single type of product.What type of facility design is this?
product-focused facility
performs a given set of functions (e.g., fabrication or assembly) on many types of products. What type of facility design is this?
Functional focused facility
Deciding where a company will locate its facilities constitutes a large part of the design of a supply chain. A basic trade-off here is whether to _____ to gain economies of scale or to ______ to become more responsive by being closer to the customer.
Centralize; decentralize
A facility with little excess capacity will likely be____ efficient per unit it produces than one with a lot of ___ capacity.
More ; unused
company must make a ____to determine the____ amount of capacity and _____to have at each of its facilities.
Trade-off; right; flexibility
Given the location, capacity, and flexibility of facilities, the allocation of geographic markets and products to facilities should be revisited at least _______ as market conditions change.
Annually
What measures the maximum amount a facility can process?
Capacity
What measures the fraction of capacity that is currently being used in the facility?
Utlization
What measures the fraction of capacity that is currently being used in the facility. Utilization affects both the unit cost of processing and the associated delays. Unit costs tend to decline (PPET increases) and delays increase with increasing utilization?
Processing/setup/down/idle time
measure the fraction of production lost as a result of defects.
Quality losses
Quality losses hurt both ______ and ______
Financial performance ; responsiveness
measures the average cost to produce a unit of output. These costs may be measured per unit, per case, or per pound, depending on the product.
Production cost per unit
measures the time required to process a unit if there are absolutely no delays at any stage
Theoretical flow/cycle time of production
what measures the average actual time taken for all units processed over a specified duration, such as a week or a month?
Actual average flow/cycle time
The actual flow/cycle time includes the _____time and any ____. This metric should be used when setting due dates for orders
Theoretical; delays
What measures the number of products or product families processed in a facility?
product variety
Processing ___and ____ are likely to increase with product variety.
costs; flow times
measures the fraction of total volume processed by a facility that comes from the top 20 percent of SKUs or customers. An 80/20 outcome, in which the top 20 percent contribute 80 percent of volume, indicates likely benefits from focusing the facility so separate processes are used to process the top 20 percent and the remaining 80 percent
Volume contribution of top 20 percent SKUs and customers
measures the average amount produced in each production batch. Large batch sizes will decrease production cost but increase inventories.
Average production batch size
measures the fraction of production orders completed on time and in full.
Production service level
What encompasses all raw materials, work in process, and finished goods within a supply chain?
Inventory
What is Material flow time?
is the time that elapses between when material enters the supply chain to when it exits.
What is the average amount of inventory used to satisfy demand between receipts of supplier shipments?
Cycle inventory
What is inventory held in case demand exceeds expectation; it is held to counter uncertainty?
Safety inventory
What is is built up to counter predictable seasonal variability in demand?
Seasonal inventory
Companies using seasonal inventory buildup inventory in periods of ____ demand and store it for periods of ____ demand, when they will not have the capacity to produce all that is demanded
Low; high
What is the fraction of demand that is served on time from product held in inventory?
Level of product availability
What is a high-level metric that includes inventories, accounts payable, and receivables?
C2C cycle time
What measures the average amount of inventory carried?
Average inventory
Average inventory should be measured in ___, ___ of demand, and ___ value
Units, days, financial
What measures the number of times inventory turns over in a year. It is the ratio of average inventory to either the cost of goods sold or sales?
Inventory turns
What identifies the products for which the firm is carrying a high level of inventory?This metric can be used to identify products that are in oversupply or to identify reasons that justify the high inventory, such as price discounts or a product being a very slow mover.
Products with more than a specified number of days of inventory
What measures the average amount in each replenishment order? The batch size should be measured by SKU in terms of both units and days of demand. It can be estimated by averaging over time the difference between the maximum and the minimum inventory (measured in each replenishment cycle) on hand
Average replenishment batch size
What measures the average amount of inventory on hand when a replenishment order arrives?
Average safety inventory
Average safety inventory should be measured by ____in both ____and ____ of demand. It can be estimated by averaging over time the minimum inventory on hand in each replenishment cycle.
SKU, UNITS AND DAYS
What measures the amount by which the inflow of product exceeds its sales (beyond cycle and safety inventory)?
Seasonal inventory
Seasonal inventory is built up solely to deal with anticipated spikes in _____.
Demand
What measures the fraction of orders/demand that is met on time from inventory?
Fill rate
Fill rate should be averaged not over ___but over a specified number of ___ of ___ (say, every thousand or million).
Time, units , demand
What measures the fraction of time that a particular SKU had zero inventory?This fraction can be used to estimate the lost sales during the stockout period.
Fraction of time out of stock
What measures the fraction of inventory older than a specified obsolescence date?
Obsolete inventory
What entails moving inventory from point to point in the supply chain?
Transportation
What is the collection of transportation modes, locations, and routes along which product can be shipped?
Transportation network
What are the transportation modes?
air, truck, rail, sea, and pipeline
What typically measures the cost of bringing product in to a facility? Ideally, this cost should be measured per unit brought in, but it is often measured as a percentage of sales or COGS. The inbound transportation cost is generally included in COGS. It is useful to measure this cost separately for each supplier.
Average inbound transportation cost
What measures the average number of units or dollars in each incoming shipment at a facility?
Average incoming shipment size
What measures the average transportation cost of each incoming delivery? Along with the incoming shipment size, this metric identifies opportunities for greater economies of scale in inbound transportation.
Average inbound transportation cost per shipment
What measures the cost of sending product out of a facility to the customer? Ideally, this cost should be measured per unit shipped, but it is often measured as a percentage of sales. It is useful to separate this metric by customer.
Average outbound transportation cost
What measures the average number of units or dollars on each outbound shipment at a facility?
Average outbound shipment size
What measures the average transportation cost of each outgoing delivery?Along with the outgoing shipment size, this metric identifies opportunities for greater economies of scale in outbound transportation.
Average outbound transportation cost per shipment
What measures the fraction of transportation (in units or dollars) using each mode of transportation? This metric can be used to estimate whether certain modes are over used or under used.
Fraction transported by mode
What consists of data and analysis concerning facilities, inventory, transportation, costs, prices, and customers throughout the supply chain?
Information
What is potentially the biggest driver of performance in the supply chain because it directly affects each of the other drivers?
Information
important to evaluate the _____ information required to accomplish the desired objectives
Minimum
What is the process of generating the best estimate of future demand based on historical sales, planned marketing and promotion efforts, and other factors such as the economy and the competition?
Demand planning
good demand plan must include an estimation of _____.
Forecast error
What occurs when all stages of a supply chain work toward the objective of maximizing total supply chain profitability based on shared information?
Supply chain coordination
What is the process of creating an overall supply plan (production and inventories) to meet the anticipated level of demand (sales)?
Sales and operations planning (S&OP)
What is the goal Sales and operations planning (S&OP)?
is to come up with an agreed-upon sales, production, and inventory plan that can be used to plan supply chain needs and project revenues and profits
What identifies how far in advance of the actual event a forecast is made?
Forecast horizon
The forecast horizon must be ____________ to the lead time of the decision that is driven by the forecast.
Greater than or equal
What identifies how frequently each forecast is updated. The forecast should be updated somewhat more frequently than a decision will be revisited, so large changes can be flagged and corrective action take
Frequency of update
What measures the difference between the forecast and actual demand?
Forecast error
The forecast error is a measure of _____ and drives all responses to uncertainty, such as___inventory or ____ capacity.
Uncertainty , safety ,excess
What identifies the difference between the planned production/inventories and the actual values?These variances can be used to raise flags that identify shortages and surpluses.
Variance from plan
What measures the standard deviation of incoming demand and supply orders placed?A ratio less than 1 potentially indicates the existence of the bullwhip effect,
Ratio of demand variability to order variability
What is the set of business processes required to purchase goods and services?
Sourcing
What is the process of obtaining goods and services within a supply chain?
Procurement
What measures the number of days between when a supplier performed a supply chain task and when it was paid for that task?
Days payable outstanding
What measures the average price at which a good or service was purchased during the year? The average should be obtained by weighting each price by the quantity purchased at that price.
Average purchase price
What measures the fluctuation in purchase price during a specified period?The goal is to identify if the quantity purchased correlated with the price
Range of purchase price
What measures the average amount purchased per order? The goal is to identify whether a sufficient level of aggregation is occurring across locations when placing an order.
Average purchase quantity
What measures the quality of product supplied?
Supply quality
What measures the average time between when an order is placed and when the product arrives?
Supply lead time
Long lead times ____responsiveness and add to the inventory the supply chain must carry.
Reduce
What measures the fraction of deliveries from the supplier that were on time?
Percentage of on-time deliveries
What measures the variability of the supplier’s lead time as well as the delivered quantity relative to plan? Poor supplier reliability hurts responsiveness and adds to the amount of inventory the supply chain must carry.
Supplier reliability
What measures profit as a percentage of revenue?
Profit margin
What measures the average time between when a sale is made and when the cash is collected?
Days sales outstanding
What measures the incremental costs that are independent of the size of the order? These include changeover costs at a manufacturing plant or order processing or transportation costs that are incurred independent of shipment size at a mail-order firm.
Incremental fixed cost per order
What measures the incremental costs that vary with the size of the order?These include picking costs at a mail-order firm or variable production costs at a manufacturing plant.
Incremental variable cost per unit
What measures the average price at which a supply chain activity was performed in a given period? The average should be obtained by weighting the price with the quantity sold at that price.
Average sale price
What measures the average quantity per order? The average sale price, order size, incremental fixed cost per order, and incremental variable cost per unit help estimate the contribution from performing the supply chain activity.
Average order size
What measures the maximum and the minimum of sale price per unit over a specified time horizon?
Range of sale price
What measures the maximum and minimum of the quantity sold per period (day/week/month) during a specified time horizon. The goal is to understand any correlation between sales and price and any potential opportunity to shift sales by changing price over time.
Range of periodic sales
____ affects both the unit cost of processing and the associated delays. Unit costs tend to decline (PPET increases) and delays increase with ____.
Utilization; increasing utilization
Based on the class lecture PPT cycle inventory is considered to fall under what?
Convienience
Based on the class lecture PPT, seasonal inventory would fall under?
Unstable demand
Based on the class lecture, safety inventory would fall under?
Randomness
