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Operations Management > Chapter 12: Supply Chain Design > Flashcards

Chapter 12: Supply Chain Design Flashcards

1
Q

Supply chain

A

The interrelated series of processes within a firm and across different firms that produces a service or product to the satisfaction of customers

Also
Network of service, material, monetary and information flows that link a firm’s customer relationship, order fulfillment and supplier relationship processes to those of it’s suppliers and customers

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2
Q

Pressures on a supply chain

A
  • dynamic sales volumes
  • customer service and quality expectations
  • service/product proliferation
  • emerging markets
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3
Q

Major areas of focus in creating an effective supply chain

A

Linking operations strategy and competitive priority to guide supply chain choices

  • link services or products with internal processes
  • link services or products with external supply chain (competitive priorities reflected in supplier network
  • link services or products with customers, suppliers, and supply chain processes
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4
Q

Supply chain management

A

The synchronization of a firm’s processes with those of it’s suppliers and customers to match the flow of materials, services, and information with demand

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5
Q

Supply chain design

A

Designing a firm’s supply chain to meet the competitive priorities of the firm’s operations strategy

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6
Q

Efficiency curve

A

Graph of trade-off between costs and performance

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7
Q

Categories of supply chain design options

A
  • strategic options (linking design to competitive priorities)
  • logistical network options
  • integration options (supplier selection and collaboration)
  • sustainability options
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8
Q

Basic measures of inventory

A
  • average aggregate inventory value
  • weeks of supply
  • inventory turnover
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9
Q

Average aggregate inventory value

A

Total average value of all items held in inventory by the firm

Expressed at cost value

Usually averaged over a period of time

Sum of all (quantities*unit cost) for each SKU

Can be expressed as percentage of assets in inventory

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10
Q

Weeks of supply

A

An inventory measure obtained by dividing the average aggregate inventory value by sales per week at cost (aka CoGS)

Shows how long the inventory resides in stock/ how long a periods inventory is in stock at any given time

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11
Q

Inventory turnover

A

= annual sales (at cost) / average aggregate inventory value for year

How many time your whole inventory turns over in a year

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12
Q

Cash-to-cash

A

The time lag between paying for the services and materials needed to produce a product and receiving payment for it

Shorter lag = better cash flow position (less working capital required)

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13
Q

Working capital

A

Money used to finance operations

Increasing cash flow in
Decreasing inventory held (increased turns or lean operations)
All reduces needed working capital

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14
Q

Effect of reduced inventory on ROA

A

Because reduces denominator increases ROA

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15
Q

Distinct designs of supply chains

A
  • efficient supply chains
  • responsive supply chains
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16
Q

Environments best suited for efficient supply chains

A
  • predictable demand with low forecast errors
  • competitive priorities like low cost, consistent quality, on time delivery
  • infrequent new service or product introduction
  • low contribution margins
  • low product variety
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17
Q

Environments best suited for responsive supply vhains

A
  • unpredictable demand with potential for high forecast errors
  • competitive priorities like development speed, fast delivery times, customization, variety, flexibility, high quality
  • frequent new product/service introduction
  • high contribution margins
  • high product variety
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18
Q

Make to stock

A

Most common design for efficient supply chains

Product is built to a sales forecast and sold to the customer as finished goods stock. Low to no customer input, no customization

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19
Q

Focus of make to stock supply chains

A

Efficient service, material, monetary, and information flows
Low inventory
Long cycling products
Small variety
Low contribution margins

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20
Q

Popular designs for responsive supply chains

A
  • assemble to order
  • make to order
  • design to order
21
Q

Assemble to order supply chains

A

ATO

Product is built to customer specifications from a stock of existing components (can choose from standard set of options but cannot alter components)

Nothing assembled until order received

Lots of material flows only on an as needed basis

22
Q

Make to order supply chain

A

Product is based on a standard design but component production and manufacture are linked to customer specifications

23
Q

Design to order supply chains

A

Product is designed and built entirely to the customers specifications

24
Q

Design features for efficient supply chains

A
  • Operations strategy emphasizes high volumes
  • low capacity cushions
  • low inventory investment aimed at high turns
  • lead times as short as possible without increasing cost
  • supplier selection focuses on low prices, consistent quality, on-time delivery
25
Q

Design features for responsive supply chains

A
  • operations strategy emphasizes variety
  • high capacity cushion
  • inventory investment is as needed to enable fast delivery times (high WIP inventory, low finished goods)
  • lead times are shortened aggressively
  • supplier selection emphasis fast delivery time, customization, variety, volume flexibility, high quality
26
Q

Best supply chain design for high volume, low demand variability

A

Efficient supply chain

27
Q

Best supply chain design for low volume, high demand variability

A

Responsive supply chain

28
Q

Autonomous supply chain

A

Using the latest digital technology to facilitate and automate decision making up and down supply chains

29
Q

Independent demand inventory systems

A

Technology that monitors inventory levels and is programmed to reorder at a certain point (or decides based on information)

30
Q

Mass customization

A

A strategy whereby a firm’s highly divergent processes generate a wide variety of customized services or products and reasonably low costs.

Allows customer to select from a variety of standard options to create the service or product of their choice

31
Q

Competitive advantages of mass customization

A
  • improved management of customer relationship due to extensive interaction and collecting of data
  • elimination of finished goods inventory (just have all the assembly bits)
  • increasing perceived value of services or products (allows for price increases)
32
Q

Configurator

A

A software system that gives firms and customers easy access to data relevant to the options available for the service or product

33
Q

Process design for mass customization

A
  • uses assemble-to-order process design and may be able to keep component inventory in large volumes for low costs /quick production

Two stage
- production of standard components (inexpensive, standardize)
- assembly to customer order (more flexible process than production and must be fast)

34
Q

Supply chain design for mass customization

A
  • assemble-to-order process strategy
  • modular design of service or product to allow for assemble to order customization
  • postponement of differentiating the service or product for the end customer
35
Q

Postponement

A

Concept whereby some of the final activities in the provision of a service or product are delayed until the order is received to allow for greatest amount of standardizing before customizing

Postponement specifies where standardized is separated from customized

36
Q

Channel assembly

A

Where members of the distribution channel act as if they were assembly stations in the factory. Only last minute customization necessary at final distribution center

Good when parts of customizing have geographic rational (like language of instructions)

37
Q

Strategic advantage of postponement

A

plants focus on standardized aspects of products while distribution focuses on customization

38
Q

Vertical integration

A

Sections on a supply chain coming under same ownership

39
Q

Outsourcing

A

Paying suppliers and distributors to preform processes and provide needed services and materials

May allow for efficiencies but also firm can lose skills and knowledge

40
Q

Offshoring

A

A supply chain strategy that involves moving processes to another country

May be motivated by market potential and cost advantages

41
Q

Next-shoring

A

A supply chain strategy that involves locating processes in close proximity to customer demand or R&D

Useful when there is a premium on the ability to adapt products to different regions or reduce logistics cost

42
Q

Decision factors for outsourcing

A
  • comparative labor cost
  • Potential for rework and product returns
  • logistics costs
  • tariffs and taxes
  • market effects
  • labor laws and unions
  • internet reduces cost of managing from a distance
  • comparative energy costs
  • access to low-cost capital
  • supply chain complexity
43
Q

Potential pitfalls of outsourcing

A
  • “pulling the plug too quickly” (deciding to outsource before seriously attempting to fix a problem)
  • technology transfer (potentially setting other firm up to be a competitor if sharing tech)
  • process integration between firms
44
Q

Backwards integration

A

Vertical integration where a firm moves (acquires control of processes) “upward” in the supply chain towards the source of raw materials, parts, and services

Reduces risk of supply

45
Q

Forward integration

A

Vertical integration where a firm acquires more channels of distribution for it’s products and services, such as distribution centers, retail stores, its own business customers.

46
Q

Why a firm chooses vertical integration

A
  • it has the skills, volume, and resources to hit competitive priorities better than outsiders can
  • better control over processes
  • potential for economies of scale
47
Q

Make-or-buy decision

A

A managerial choice between whether to outsource a process or do it in-house

48
Q

Equation for make-or-buy break-even quantity

A

Quantity where costs the same to make or to buy the product or service

= (Fixed costs to make - fixed costs to buy) / (variable cost to make - variable cost to buy)

Operations Management (11 decks)

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