Chapter 1 Flashcards
Intoduction to SCM
What is the definition of a supply chain?
A supply chain is a network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer.
A supply chain can be seen as a succession of three processes
- Sourcing
- Production
- Sales and distribution
Inter-organizational supply chain
A supply chain that consists of two or more legally distinct organizations, i.e., two or more companies.
Intra-organizational supply chain
A vertically integrated company that owns, manages, and operates all its business functions
All the parties in a supply chain are linked by three flows
- Material flows
- Informational flows
- Financial flows
Three types of reverse product flows
- Manufacturing returns
- Distribution returns
- Customer returns
Supply chain management is
a set of approaches utilized:
* to efficiently integrate organizational units along a supply chain
* and to coordinate material, information, and financial flows,
* so that merchandise is produced and distributed
➢at the right quantities,
➢to the right locations,
➢and at the right time,
* in order to improve the competitiveness of a supply chain as a whole.
Total system-wide costs
➢ Manufacturing costs,
➢ Transportation costs,
➢ Inventory costs,
➢ Facility costs, etc.
Sub-optimization:
The process of optimizing individual activities without considering their interactions. This means that while the individual activities in that system appear to be operating well, the net result for the total system is relatively poor performance.
Global optimization:
The process of finding the best system-wide strategy.
What is the difference between supply chain management and logistics management?
Logistics management is that part of supply chain management that plans , implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.
(logistics management is basically a function of supply chain management)
Difficulties of Supply Chain Management
- Structural complexity
- Conflicting objectives of the partners
- Uncertainty inherent in the system
- Predictable system variations
Two transportation modes in SCM
- LTL (less than truck load) –> Price paid is related to volume that is utilized (relatively high transportation cost per unit)
- TL (truck load) –> Pay for the truck itself as you utilize the entirety of it (relatively low transportation cost per unit)
Decision Levels in a Supply Chain
- Strategic Level (Supply chain strategy or design)
- Tactical Level (Supply chain planning)
- Operational level (Supply chain operations)
Strategic Level
- The strategic level deals with decisions that have a long-lasting effect on the firm.
- Strategic decisions determine
➢the product development strategy,
➢the marketing and sales strategy,
➢and the supply chain strategy of a company.
(> 2 years)
Tactical Level
For decisions made during this phase, the time frame considered is a year or 18 months.
* The supply chain configuration determined in the strategic phase is fixed.
* The goal of supply chain planning is to maximize the supply chain profit that can be generated over the planning horizon given the constraints established during the strategic or design phase.
Operational Level
- The time horizon here is weekly, daily, and even hourly basis.
- At the operational level, supply chain configuration is considered fixed and planning policies are already defined.
- The goal of supply chain operations is to handle incoming customer orders in the best possible manner and to manage demand and supply fluctuations.
Supply chain responsiveness includes a supply chain’s ability to:
➢build highly innovative products,
➢meet a high service level,
➢handle a large variety of products,
➢meet short lead times,
➢respond to fluctuating demands,
➢handle supply and demand uncertainties, …
Supply chain efficiency
is the inverse of the cost of making and delivering a product to the customer, i.e., increasing costs lowers efficiency.
For every strategic choice to increase responsiveness, there are additional costs that lower efficiency.
Cost-responsiveness efficiency boundary
showing the lowest possible cost for a given level of responsiveness:
High responsiveness –> High cost
Low responsiveness –> Low cost
