CHAPTER 3 – DIGGING INTO YOUR SUPPLY CHAIN Flashcards
Prioritizing Supply Chain Goals Steps
Step 1: Understand what customers value
Step 2: Recognize Competitors
Step 3: Understand your product or services
– the first step in engineering and managing a supply chain
understanding exactly what your customers value.
a particular customer (focus in on their specific preferences)
key customer
Techniques to help with identifying what customers value:
Quality functional design (QFD) or House of quality (HOQ)
A-B testing
looks like a bunch of boxes with a roof on top (interview customers to determine which characteristics or features they value the most)
Quality functional design (QFD) or House of quality (HOQ)
give customers a choice between two options. Can also be used in f2f experiments.
A-B testing
To understand who your real competitors are, you need to stop thinking about the product or service that you sell and start thinking about the problem that it solves
Recognize Competitors
matching your product with a customer’s problem
Jobs to Be Done Theory
The easiest way to illustrate this step is to show how different kinds of products need to achieve different goals to deliver the greatest value to their customers.
Understand your product or services
Product Types (5)
Commodities
Luxury goods
Fashion goods
Durable goods
Technology
need to have high availability, meet minimum quality standards, and be cheap. (low price, high availability, minimum quality standards)
commodity supply chains
need to accommodate a wide assortment of products with plenty of protection to keep them safe. (high quality, uniqueness)
supply chains for luxury goods
need to focus on speed and flexibility (fast throughput, low inventory, wide variety)
Supply chains for fashion
need to balance the cost of keeping inventory available close to where the customers will want it with the cost of transporting the products and keeping them in inventory. (balance between transportation/inventory cost and customer needs)
Supply chains for durable goods
need to be fast, flexible, and secure. (speed, flexibility, security)
Supply chains for technology products
Cost Drivers (4)
a. Procurement costs
b. Transportation costs
c. Inventory costs
d. Quality Costs
– one of the most obvious cost in SC is the amount that you pay for the products you buy
– includes salaries and overhead costs for your procurement team and the information systems that they use.
a. Procurement costs
– Moving a product from one place to another costs money
b. Transportation costs
bank interest, paying for the building that keep inventory, paying people to move the inventory, and shrinkage
c. Inventory costs
risk that products could be lost, damaged or stolen
shrinkage
– to have formal inspection and quality assurance processes
– Any product that doesn’t meet the standards costs you money, and the more closely you have to look for quality problems, the more money you spend.
d. Quality Costs
– one of the big challenges with supply chains is that things are often interconnected, so making a change in one area to lower costs can cause a change somewhere else that actually increases the cost.
Looking at Cost Drivers
– conflicts occur between any two functions in a business, as well as between any two businesses that work together as a part of a supply chain.
Dealing with Trade-offs
Six Conflicts or Trade-Offs:
Sales vs operations
Customer vs. supplier
Engineering vs. procurement
Inventory vs. customer service
Inventory vs. Downtime
Procurement vs. Logistics
forces the sales and operations teams to coordinate and agree on their goals and targets, usually starts with a sales forecast for a certain planning horizon
Sales and Operations Planning (S&OP) - Sales vs operations
companies share information about how much they expect their customers to buy and how much inventory they have on hand so that they can help each other achieve high service levels with lower amounts of inventory
Collaborative planning, forecasting, and replenishment (CPFR) - Customer vs. supplier
Engaging procurement professionals during the design phase of a product can help you ensure that you’re considering the costs of each step in a product’s life cycle. Likewise, engaging engineering teams throughout the procurement process can help you ensure that lower-cost options that meet the needs of your company and your customers are properly vetted.
Cross-functional teams - Engineering vs. procurement
there is a single contract awarded to a supplier who both designs and makes a product.
Design-build Strategy - Engineering vs. procurement
our ability to provide customers with all of the products they want when they order them
service level
optimizes inventory; the process in which you try to guess how much product you’re going to sell and when you’re going to sell it.
Forecasting - Inventory vs. customer service
degree to which a forecast is wrong
error
random and is generally a result of imperfect information.
unbiased error
an error that occurs in a pattern
biased error
degree of forecast accuracy
Mean Absolute Percentage Error (MAPE)
Inventory that provides you with protection from a stockout
Safety Stock
help manufacturers minimize the number of unplanned shutdowns caused by inventory stockouts while minimizing the amount of inventory in a supply chain.
Lean Manufacturing - Inventory vs. Downtime
a container for inventory, empty ___ are used to trigger inventory replenishment
Kanban (pull strategy)
The way to balance the priorities of purchasing and logistics
Total Cost Analysis
