Chapter 4a: Demand Process- The "Move" Process Flashcards
The demand side processes in the supply chain include the “______” and “_____” activities.
move; serve
All the flow and storage activities related to moving products (ex: crab legs, apparel, electronics, etc.) to the store or your front door.
The Move Process
_______ activities allow products to flow downstream to customers in the supply chain.
Logistics
What begins when we place an order and continues until we receive a delivery; there is a variety of fulfillment activities between those two events to ensure that the product is in stock.
Order Fulfillment Cycle
The Order Fulfillment Cycle helps us to get our products ______, ______, and at a reasonable _______. These three things are how _______ ______ and ________ are created.
on-time, intact, price; customer value, utility
What is the main objective in logistics?
Taking care of the customer
T or F: All activities within logistics need to be coordinated.
True. (order fulfillment has to be linked to transportation, inventory in the system, the warehouses that hold the inventory/process our orders, and the customer response activities that keep us informed about our order status)
From a cost standpoint, productive order fulfillment operations will minimize our need for _______, _______ transportation.
pricey, expedited
From a service standpoint, perfect order delivery improves _______ ______ about supply chain quality, and drives future ________ intentions.
customer perceptions; purchase
Logistics is a ________ function in the supply chain.
coordinating
the part of supply chain management that focuses on the planning, implementation and control of the FLOW and STORAGE of goods, relevant information and related services.
logistics
What is goal of logistics?
Match (available) supply with (marketplace) demand
What are the 5 key activities in logistics?
- Inventory Management
- Warehousing Management
- Fulfillment
- Transportation
- Support Functions
What are the 4 logistics roles (which must all perform well and collaborate with each other to ensure a strong supply chain)?
- Inventory managers
- Transportation directors
- Demand analysts
- Fulfillment coordinators
Which came first: Logistics or all the different functions?
All the different functions
T or F: The concept of logistics is a relatively new idea.
False. Been around for a long time, but it emerged from the need to coordinate all the different areas.
What was one of the 1st organizations to use logistics?
The military
In what year did most companies begin to focus on logistics?
1950s
focus of physical distribution is called (inbound/outbound) logistics
outbound logistics
When companies combined inbound _______ _______ and outbound _______ ________, they create an integrated logistics process.
materials management; physical distribution
Combining inbound materials management and outbound physical distribution, which creates an integrated logistics process results in what 5 things?
- Better coordination
- Less money spent
- Products flow better
- Customers served properly
- Supports end-to-end synchronization
What are the 6 evolutionary forces that have driven logistics integration?
- The Regulatory Environment (one major issue)
- Economic deregulation of transportation industry
- Rebalancing of power in logistics channel
- Consumers gaining greater influence
- Technology Advancements
- The Influence of Cost
Which of the 6 evolutionary forces that have driven logistics integration does this describe:
historically, government rules (particularly those related to transportation), made it hard to achieve logistics efficiencies
The Regulatory Environment
Which of the 6 evolutionary forces that have driven logistics integration does this describe:
happened around 1980; created free market competition and the ability to develop more innovative and cross-functional logistic strategies.
economic deregulation of transportation industry
In relation to the 6 evolutionary forces that have driven logistics integration, the rebalancing of power in the logistics channel shifted from ________ control of logistics to _______ control.
The retailers emphasize logistics ________ over manufacturing efficiency.
manufacturer; retailer; effectiveness
T or F: Consumers have gained greater influence in the marketplace. As consumers demand faster product delivery, greater product variety, and new versions of products, integrated logistics networks and strong supply chains become a business priority.
True
In what 3 ways have technology advancements contributed to being an evolutionary force that has driven logistics integration?
- Created visibility to to inventory in the system
- We can order products online
- We can demand next day/second day delivery at a very low cost
How has the influence of cost been an evolutionary force that has driven logistics integration?
With prices going up for individuals and company, there’s a need to control cost to minimize bottom line impact
Collectively, US companies spend more than a _______ dollars each year on transportation, inventory, and logistics administration
trillion
Companies have found that high quality, integrated logistics services promote customer _______ and _______.
If companies can serve customers better, faster, and cheaper than the competition, then what 3 things will rise?
- satisfaction; retention
- demand, efficiency, and profitability
What 3 types of utility will customers benefit from by companies being logistics-focused?
- Time utility
- Place utility
- Quantity utility
The primary goal of logistics operations are to be effective, efficient, and productive with a central focus of ________.
quality
In regards to inventory, we need it in the right _______ at the right _______ to satisfy demand.
location; time
Managing inventory is all about ________: one one side, customers want an endless selection of products in many styles, colors, and sizes (and they want it now). Providing this level of product variety and availability for great customer service requires an enormous amount of inventory in the SC. On the other side, there’s a Chief Financial Officer who’s not a fan of inventory.
balancing
What are the 3 reasons why a CFO would want to minimize inventory?
- Money tied up in inventory can’t be used elsewhere in the business
- Inventory loses value over time (which effects profit margins)
- Expenses for warehouse storage, insurance, and taxes
To balance customer demand and CFO’s need to minimize inventory, inventory managers must simultaneously engage in what 3 key activities?
- Actively participate in demand forecasting and order quantity
- Choose inventory replenishment models ( (to establish how much inventory to order and when to order it)
- Make inventory deployment recommendations of where the product should be located (based on demand)
What are the 2 inventory order models?
- Fixed Order Quantity Model
- Fixed Time Period Model
What is the difference between the Fixed Order Quantity Model and Fixed Time Period Model for:
Order Quantity?
- Fixed Order Quantity Model: set quantity ordered at variable time intervals
- Fixed Time Period Model: variable quantity ordered at a set time (assess the inventory level at a specific point in time)
What is the difference between the Fixed Order Quantity Model and Fixed Time Period Model for:
Order Timing?
- Fixed Order Quantity Model: only do so whenever inventory drops to the reorder point
- Fixed Time Period Model: when the time to reorder arrives
What is the difference between the Fixed Order Quantity Model and Fixed Time Period Model for:
Order Trigger? (this is the base distinction between the two)
- Fixed Order Quantity Model: event triggered (initiates an order when the event of reaching a specified reorder level occurs; may take place at any time)
- Fixed Time Period Model: time triggered (limited to placing an order at the end of a predetermined period; only the passage of time triggers this model)
The Fixed Order Quantity Model is based on the ________ _______ _______.
Economic Order Quantity (EOQ)
What seeks to balance the cost of ordering with the cost of holding inventory?
Economic Order Quantity
T or F: Thanks to technology, the cost of ordering inventory is fairly low. As a result, fewer companies seek to order a specific amount every single time, unless it triggers some type of quantity/transportation discount.
True
In the fixed time period model, when are inventory levels reviewed?
At the designated time
Which inventory order model generally requires a higher level of safety stock to cover the time between the review point and when the new stock arrives (replenishment lead time)?
Fixed Time Period Model
What is the difference between the Fixed Order Quantity Model and Fixed Time Period Model for:
Record keeping?
- Fixed Order Quantity Model: each time a withdrawal or addition is made
- Fixed Time Period Model: counted only at review period
Which inventory order model requires a larger size of inventory?
Fixed Time Period Model
What is the model called that combined both the Fixed Order Quantity Model and the Fixed Time Period Model?
Continuous Replenishment Model
Which type of inventory order model does this describe:
- Every day, the company looks at each item and sees if the inventory level has dropped off to a point where they need to place another order.
- When a set number of scans occur (when checking out for a specific product), an inventory replenishment signal is initiated.
(This is how point-of-sale data contributes to the in-stock availability without carrying excess inventory)
Continuous Replenishment Model
Inventory Deployment Options: What are the two primary options for where to hold goods in anticipation of demand?
- Centralization
- Decentralization
Which inventory deployment option does this describe?
inventory is placed in fewer, more centrally located facilities (sometimes as less as one facility)
Centralization
Which inventory deployment option does this describe?
inventory is regionalized, or placed in many customer-facing facilities to promote easier stock access.
Decentralization
The Centralization inventory deployment model works well if the product is easy to ________, and not _____ ________.
transport; time-sensitive
Some companies use both inventory deployment options. They use the centralized model for (slow/fast) moving inventory and the decentralized model for (low/high) volume inventory.
slow; high
What are the 4 benefits of the centralization inventory deployment option?
- Lower inventory carrying cost
- Better control/visibility over inventory
- Economies of Scale (which leads to lower overhead costs)
- Reduced INbound transport costs (bc you have fewer, larger orders coming into that single facility)
What are the 4 benefits of the decentralization inventory deployment option?
- Faster response to customers
- Reduce order cycle time
- Lower OUTbound delivery costs (bc shorter distance)
- More region specific (customized) services
Where should inventory be put?
In warehouses and distribution centers (D.C.’s) located between point-of-origin and the point-of-sale/consumption
the part of a firm’s logistics system that handles inventory between the point-of-origin and the point-of-consumption.
warehousing
What is the primary role of warehousing?
Provide a buffer against fluctuating demand (which improves product availability)
What are the 5 primary purposes of holding inventory/warehousing roles (along with providing a bugger against fluctuating demand)?
- Promote efficient fulfillment of customer orders
- Support Just-in-Time distribution
- Discount (trade-off) opportunities with large quantity orders
- Generate transportation efficiency
- Allow companies to achieve assortment
T or F: if we have a warehouse, we can purchase larger quantities of inventory to generate a price discount and lower inbound transportation rates.
True
They bring products into the D.C. in bulk. There, they mix the goods into a requested _________ so that each customer/store gets the variety and quantity of products that they need to meet demand.
assortment
primary method of distributing product from a factory/distribution center into a store.
fulfillment
What are the 3 fulfillment methods?
- Direct delivery
- Distribution Center Warehouse
- Cross-Docking
Order Fulfillment starts with a ______ _______ (when you make an initial contact and ask questions to help you decide whether or not to place a product order)
product inquiry
Order Fulfillment ends with order ______, ________, and ________.
completion, invoicing, and payment
T or F: The majority of fulfillment activities take place inside the four walls of a warehouse/D.C., with some support of a customer service center. Those facilities may be company-owned or you may use a 3rd party logistics facility.
True
The final fulfillment activity of ______ _______ begins another key logistics function: _________.
order shipment; transportation
focuses on the efficient, physical flows of product between facilities across the supply chain.
transportation management
What is the highest cost logistics function that accounts for over 60% of all logistics costs; nearly $900 billion annually in the U.S. alone.
Transportation
T or F: Transportation system links all pick-up and deliver-to points (the nodes in our network).
True
What are the 3 goals of transportation?
Are these easy or difficult to do?
- On-time
- Damage free
- Within budget
Simple goals, but difficult to do
Most companies rely on ________ (external service providers) for their long-distance domestic and all global transportation. This makes transportation a specialized procurement activity where companies purchase freight delivery services.
carriers
In the corporate world, companies go through a variety of key decision processes to get their orders delivered.
What is the first step?
negotiate who will pay for and control the transportation– the buyer or the seller.
What are the 5 modes of transportation companies can choose from?
- Roadways
- Railways
- Airways
- Waterways
- Pipelines
Using a combination of modal options to leverage their specific advantages and capabilities is called:
intermodal/multimodal transportation
What are the 5 key factors that must be considered when choosing a mode or carrier?
- Volume of freight
- Customer location (international vs. local)
- Product value
- Product characteristics
- Service requirements
Faster modes of transportation tend to be more _________ and more ________.
expensive; reliable
Match the following with which mode of transportation they describe:
1. large shipments of international freight long distances; also used for large domestic shipments via rivers, canals.
2. small shipments of international freight long distances or urgent shipments of domestic freight
3. smaller shipments in local, regional, and national markets
4. large shipments of domestic freight long distances
5. move large volumes of domestic freight long distances
- waterways
- airways
- roadways
- railways
- pipelines
Roadways:
- 3 strengths?
- 2 limitations?
Strengths:
1. Accessible
2. Fast/versatile
3. Customer service
Limitations:
1. Limited capacity
2. High cost
Railways:
- 2 strengths?
- 2 limitations?
Strengths:
1. High capacity
2. Low cost
Limitations:
1. Inconsistent service
2. Damage rates
Airways:
- 3 strengths?
- 2 limitations?
Strengths:
1. Speed
2. Freight protection
3. Flexibility
Limitations:
1. High cost
2. Low capacity
Waterways:
- 3 strengths?
- 2 limitations?
Strengths:
1. High capacity
2. Low cost
3. International capabilities
Limitations:
1. Slow
2. Limited door-to-door accessibility unless combined with other modes
Pipelines:
- 3 strengths?
- 2 limitations?
Strengths:
1. In-transit storage
2. Efficiency
3. Low cost
Limitations:
1. Slow
2. Limited network
Match the following characteristics with which mode of transportation they describe:
1. low value, raw materials, high volume bulk goods, containerized finished goods.
2. high value, finished goods, low volume
3. high value, finished goods, low volume, time sensitive
4. low value, not time sensitive, liquid commodity
5. low value, raw materials, high volume
- waterways
- roadways
- airways
- pipelines
- railways
What are the 3 benefits of intermodal transportation?
- Improves accessibility problems
- Helps cut costs
- Gain better control over long distance moves
What is the transportation procurement process goal?
Find capable, reliable sources who provide consistent service at a reasonable price.
What are the 4 steps of the Transportation Procurement Process?
- Step 1: Preliminary Preparations
- Step 2: Qualification and Selection
- Step 3: Freight Operations
- Step 4: Performance Evaluations
Match each description to the transportation procurement process step they describe:
a. negotiate the contracts, assign freight lanes, establish reporting structure. Then, begin shipping.
b. define your goals and objectives
c. compare results to standards in contract. Give more business to the best carriers.
d. pre-screen potential carriers; qualify them in terms of financial strength and service quality. Then, make your decision on who.
a. Freight Operations
b. Preliminary Preparations
c. Performance Evaluations
d. Qualification and Selection
After finding a good carrier, you should develop ______ _________ with them.
strong relationships
What are the 3 things that are the lynchpin to SC success and control?
Inventory, transportation, and warehousing
T or F: Logistics has a direct impact on the financial performance of companies, and is a major spending area that we have to control.
True
