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Supply Chain Management > EST > Flashcards

EST Flashcards

1
Q

Predictable Variability

A

is change in demand that can be forecasted

cause increased costs and decreased responsiveness

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2
Q

Options for Predictable Variability

A
  1. Manage supply using capacity, inventory,
    subcontracting, and backlogs
  2. Manage demand using short-term price
    discounts and promotions
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3
Q

Managing capacity

A

Time flexibility from workforce
seasonal workforce
subcontracting
dual facilities – specialized and flexible
Designing product flexibility into production processes

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4
Q

Managing inventory

A

common components
high demand or predictable products

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5
Q

Managing Demand

MSF

A

With promotion, three factors lead to
increased demand
1. Market growth
2. Stealing share
3. Forward buying

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6
Q

Factors influencing timing of a promotion

A

– Impact of promotion
– Cost of holding inventory
– Cost of changing the level of capacity
– Product margins

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7
Q

Conclusions on Promotion

A

Average inventory increases if a promotion is
run during the peak period

Big increase in consumption + forward buying smaller fraction of demand increase from promotion = peak period profitable

Product Margin decline= peak period less profitable

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8
Q

Implementing Sales and Operations
Planning in Practice

A

Plan across supply chain
Account for Predictable variability
Senior Leader to own S&OP process
S&OP process modifies plans as the reality or forecasts change

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9
Q

Supply chain coordination

A

all stages of the align actions to increase total supply chain surplus
each stage share information and consider effects of its actions on the other stages

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9
Q

Lack of coordination results when

A

Objectives of stages conflict
Information delayed or distorted

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10
Q

Impact of Lack of Coordination

A

each stage maximize its own profits, resulting in actions that often diminish total supply chain

Information is distorted

increased inventories, poorer product availability, and lower profits

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11
Q

Bullwhip Effect

A
  • Fluctuations in orders increase as they
    move up the supply chain
  • Distorts demand information within the
    supply chain
  • Due to a loss of supply chain
    coordination
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12
Q

Effect on Performance of lack of coordination

MITRRLL

A

increases variability and hurts supply chain surplus
– Manufacturing cost
– Inventory cost
– Replenishment lead time
– Transportation cost
– Labor cost for shipping and receiving
– Level of product availability
– Relationships across the supply chain

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13
Q

Obstacles to Coordination
in a Supply Chain
BOPII

A

Behavioral Obstacles
Operational Obstacles
Pricing Obstacles
Incentive Obstacles
Information Processing Obstacles

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14
Q

incentive Obstacles

A

incentives offered to different stages or participants

**increase variability and reduce total supply chain profits

Local optimization within functions**
Sales force incentives

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15
Q

Information Processing Obstacles

A

demand information is distorted as it moves between stages

increased variability in orders

Forecasting based on orders and not customer demand

Lack of information sharing

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16
Q

Operational Obstacles

A

placing and filling orders lead to an increase in variability

Ordering in large lots
Large replenishment lead times
Rationing and shortage gaming

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16
Q

Behavioral Obstacles

A

information distortion

views its actions locally
react to the current local situation rather than trying to identify the root causes
blame one another for the fluctuations
does not learns from its actions over time
lack of trust causes them to be opportunistic at the expense of overall

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16
Q

Pricing Obstacles

A

pricing policies

Lot-size based quantity decisions
Price fluctuations

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16
Q

Aligning Goals and Incentives

A

works to maximize total supply chain profits

across the supply chain, functions
Pricing for coordination
Alter sales force incentives from sell-in (to the
retailer) to sell-through (by the retailer)

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17
Q

Managerial Levers to
Achieve Coordination

AIODT

A

Aligning goals and incentives
Improving information accuracy
Improving operational performance
Designing pricing strategies to stabilize
orders
Building strategic partnerships and trust

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17
Q

Improving Information Visibility and
Accuracy

SI

A

Share customer demand data
Implement collaborative forecasting and planning

– Continuous replenishment programs (CRP)
– Vendor managed inventory (VMI)

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18
Q

Designing Pricing Strategies
to Stabilize Orders

A

Encourage retailers to order in smaller lots and reduce forward buying
– change lot size-based to volume-based
quantity discounts
– Stabilize pricing
– Build strategic partnerships and trust

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19
Q

In-House or Outsource?

A

based on supply chain surplus and risk incurred
Third parties increase surplus

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19
Q

Third parties increase surplus through

CIRRI WPL TS

A

Capacity aggregation
Inventory aggregation
Transportation aggregation by transportation intermediaries
Transportation aggregation by storage intermediaries
Warehousing aggregation
Procurement aggregation
Information aggregation
Receivables aggregation
Relationship aggregation
Lower costs and higher quality

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19
Q

CRP

A

Continuous Replenishment Program

wholesaler or manufacturer replenishes based on POS data

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19
Q

VMI

A

Vendor-Managed Inventories

manufacturer or supplier is responsible for all decisions regarding inventory

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19
Q

Building Strategic Partnerships and
Trust

A

Share accurate information

no duplicated effort to lowering of transaction cost, share accurate information, coordination.

more responsive at lower cost.

information sharing, changing of incentives,
operational improvements, and stabilization of pricing improve the level of trust.

identification of roles and decision rights for all parties, effective contracts, and good conflict resolution mechanisms.

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19
Q

Specificity of assets

A

If assets required are specific to a firm, a third party is unlikely to increase the surplus

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19
Q

Sourcing

A

entire set of business processes
required to purchase goods and services

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19
Q

Collaborative Planning, Forecasting, and
Replenishment (CPFR)

ROSDC

A

Retail event collaboration
DC replenishment collaboration
Store replenishment collaboration
Collaborative assortment planning
Organizational and technology requirements for successful CPFR
Risks and hurdles for a CPFR implementation

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20
Q

Purchasing/ procurement

A

companies acquire raw materials,
components, products, services, or other
resources from suppliers to execute their
operations

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20
Q

Outsourcing

A

supply chain function being
performed by a third party

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20
Q

Factors Influencing Growth of Surplus
by a Third Party

A

Scale
Uncertainty
Specificity of assets

20
Q

Uncertainty

A

If requirements are highly variable over time, third party can increase the surplus through aggregation

20
Q

Achieving Coordination in Practice
CAMBERT

A

Communication
Achieve coordination throughout
Management commitment
Quantify bullwhip effect
Share the benefits equitably
Devote resources
Use technology for connectivity

20
Q

Outsourcing questions

A

Will the third party increase the supply
chain surplus relative to performing the
activity in-house?
To what extent do risks grow upon
outsourcing?
Are there strategic reasons to outsource?

20
Q

Benefits of Effective Sourcing Decisions

A

Higher quality and lower cost
Better economies of scale
Reduced the overall cost of purchasing
Design collaboration for easier manufacturing and distribution, lower overall costs
Facilitate coordination with the supplier and improve forecasting and planning, lower inventories, improved matching of supply and demand
Share risk and benefit
Lower purchase price through the use of auctions

20
Q

Supplier Selection

A

Single sourcing or multiple sourcing
based on the total cost of using a supplier

Offline competitive bids
Reverse auctions
Direct negotiations

20
Q

Risks of Using a Third Party

A

The process is broken
Underestimate cost of coordination
Reduced customer/supplier contact
Loss of internal capability and growth in third-party power
Leakage of sensitive data and information
Ineffective contracts
Loss of supply chain visibility
Negative reputational impact

20
Q

Scale

A

Large scale it is unlikely that a third party can achieve further scale economies and increase the surplus

21
Q

Strategic Factors in Sourcing

A

Support for the business strategy
Improve firm focus

21
Q

Auctions

A

quantifiable acquisition cost is the primary component of total cost

not appropriate if ownership or post-ownership costs are significant
(negotiations better)

21
Q

Third-Party Logistics Providers

A

performs one or more of the logistics activities relating to the flow of product, information, and funds that could be performed by the firm itself

22
Q

Elements of auctions

A

Qualify potential suppliers
– Suppliers bid on requirements
– When unit price is important, buyer must specify
performance expectations
– Setting up auctions when not all attributes can be quantified is difficult
– When there are many important non-price attributes, use direct negotiations
– Second-price (Vickrey) auctions
– Collusion among bidders

23
Q

Basic Principles of Negotiation

A

difference between the values of the buyer and seller is the bargaining surplus
goal is to capture as much of the bargaining surplus as possible
-idea of your own value, estimate of the third party’s value
- fair outcome based on equally or
equitably dividing the bargaining surplus (win-win)

24
Q

Sharing Risk and Reward
in the Supply Chain

A

Independent actions by two parties result in lower profits
Stronger firms tend to push risk on to
supply chain partners

25
Q

Sharing Risk to Grow
Supply Chain Profits Approaches

A

Buyback or returns
Revenue sharing
Quantity flexibility

25
Q

Quantity Flexibility

A

Allows the buyer to modify the order (within limits)
after observing demand
Better matching of supply and demand
Increased overall supply chain profits if the supplier has flexible capacity
Lower levels of information distortion than either
buyback contracts or revenue sharing contracts

25
Q

Revenue-Sharing Contracts

A

Manufacturer charges the retailer a low wholesale
price and shares a fraction of the retailer’s
revenue

Allows both to increase their profits
lower retailer effort
Requires an information infrastructure
Information distortion

26
Q

Sharing Risk to Grow
Supply Chain Profits questions

A

How will risk sharing affect the firm’s profits
and total supply chain profits?
Will risk sharing introduce any information
distortion?
How will risk sharing influence supplier
performance along key performance
measures?

26
Q

Buybacks Contracts

A

return unsold inventory up to a specified amount at an agreed upon price

Holding-cost subsidies
Manufacturers pay retailers a certain amount for every unit held in inventory over a given period
Encourage retailers to order more

Price support
Manufacturers share the risk of product becoming
obsolete
Guarantee that in the event they drop prices they will lower prices for all current inventories

27
Q

Contracts to Induce
Performance Improvement

A

shared-savings contract provides the supplier with
a fraction of the savings that result from performance improvement

align supplier and buyer incentives when supplier is required to improve performance and most of the benefits of improvement accrue to the buyer

27
Q

Contracts to Coordinate
Supply Chain Costs

(quantity discount_

A

Differences in costs at the buyer and supplier can
lead to decisions that increase total supply chain
costs
A quantity discount contract encourage the
buyer to purchase a larger quantity
Quantity discounts lead to information distortion
because of order batching

27
Q

Contracts to Increase Agent Effort

A

agents act on behalf of a principal and the agents’ efforts affect the reward for principal
two-part tariff offers the right incentives for the
dealer to exert the appropriate amount of effort
Threshold contracts increase information distortion
Offer threshold incentives over a rolling horizon

28
Q

Design Collaboration

A

50-70% of spending at a manufacturer comes from
procurement

80% of the cost of a purchased part is fixed in the
design phase

reduced cost, improved quality, and decreased time to market

design for logistics, manufacturability

Modular, adjustable, dimensional customization

28
Q

Risk Management in Sourcing

A

Inability to meet demand on time
An increase in procurement costs
Loss of intellectual property

28
Q

Designing a Sourcing Portfolio: Tailored
Sourcing

A

whom and where to source from

Produce in-house or outsource to a third party
cost efficient or responsive
Onshoring, near-shoring, and offshoring

based on a variety of product and market characteristics

29
Q

Making Sourcing Decisions in Practice

MC0R

A

multifunction teams
Ensure appropriate coordination across regions and business units
Always evaluate the total cost of
ownership
Build long-term relationships with key
suppliers

30
Q

Role of Sustainability in a Supply Chain

A

health and survival of every supply chain
depends on the health of the surrounding
world

Expand the goal of a supply chain beyond the
interests of its participants

31
Q

Sustainable development

A

development that meets the needs of the present without compromising the ability of future generations to meet their own needs

32
Q

Three pillars of sustainable development

A

Economic sustainability
Environmental sustainability
Social sustainability

33
Q

Factors driving an increased focus categories

A
  1. Reducing risk and improving the financial
    performance
  2. Community pressures and government
    mandates
  3. Attracting customers that value sustainability
33
Q

Barriers to increased focus on sustainability

A

Insufficient return on investment
Customers’ unwillingness to pay a premium for
green products
Difficulty evaluating sustainability across a
product life cycle

34
Q

Role of Sustainability in a Supply Chain

A

Most effort expended in reducing risk
Activity slow as actions may require upfront
investment

35
Q

Tragedy of the Commons

A

common good does not align perfectly with the good of individual entities
affects everybody
hard to find sustainable solution
economic theory of a situation within a shared-
resource system where individual users acting
independently according to their own self-interest behave contrary to the common good of all users by depleting or spoiling that resource through their collective action.

35
Q

SDG 15

A

Life on Land
Reforestation projects
Conservation efforts to protect endangered species and their habitats.
Sustainable land management practices that prevent soil erosion and degradation.
Initiatives to combat poaching and trafficking of protected species.
Community-based projects that promote sustainable use of land resources.

35
Q

Sustainability and Supply Chain Drivers

SPICIEST F

A

Facilities, Inventory, Transportation, Sourcing, Information, Pricing, Closed-Loop Supply Chains, Pricing of Sustainability, Pricing Emissions

35
Q

Social Pillar

(supplier)

A

its workforce, customers, and society

Audit and support suppliers
Supplier collaboration and capability building
strongly associated with social and environmental
responsibility performance improvement and
lower operating costs
Benefits accrue to all customers of the supplier

SDG 8: Decent Work and Economic Growth
Gender and Employment, Debate on Workforce Prioritization, Sustaining Livelihood in Puto Industry, SkillSphere V

36
Q

SDG 14

A

Life Below Water

Implementing catch limits to prevent overfishing.
Using fishing gear that reduces bycatch (the accidental capture of non-target species).
Establishing marine protected areas to allow ecosystems to recover.
Supporting small-scale fishers who use traditional and sustainable practices.
Promoting aquaculture practices that do not harm the environment.

37
Q

Key Pillars of Sustainability

A

Social, Environmental & Economic

37
Q

Two fundamental challenges for social and
environmental pillars

A

Scope of measurement
Absolute of relative measures

37
Q

Transportation

A

Improve environmental performance
through resource and emission reduction
Product design can play a significant role

37
Q

Environmental Pillar

A

air, land, water, and ecosystems

  • Resource reduction
    – Emission reduction
    – Product innovation

Not all “green” claims are valid :Greenwashing

SDG 13: Climate Action
Green House Gas Emission, Educating Youths, Environmental and Energy Management

37
Q

Solutions to this “Tragedy”

A

Choose from options that are unlikely to be
supported by all of their own free will

Mutual coercion – social arrangements or
mechanisms coerce all participants to
behave in a way that helps the common
good

Command-and-control approach
Government/regulators set standards
– Market mechanisms
Cap-and-trade

37
Q

Sourcing

A

Greatest social and environmental impact
occurs in the extended supply chain
Impact has grown with increased global
sourcing
Verifying and tracking supplier performance
with regard to sustainability a major
challenge

global

37
Q

Pricing Emissions

A

Firms will not put effort into
reducing GHGs unless they are “forced” to
reduce emissions or required to pay for the
social cost of their emission

– Carbon tax
– Cap-and-trade system

Evaluating pricing mechanisms
– Cost of administration
– Price volatility
– Emission uncertainty
– New information uncertainty
– Industry competitiveness
– Wealth transfer to energy-exporting countries
– Revenue neutrality

38
Q

Facilities

A

Consumers of energy and water and emitters
of waste and green- house gases

Separate the improvement opportunities into
those that generate positive cash flows and
those that do not

offer the best opportunity to simultaneously improve the environmental and financial performances through innovation

38
Q

Information

A

One of the biggest challenges
Absence of standards for measurement and reporting means that some claims of improvement are not verifiable

38
Q

Pricing

A

Differential pricing can improve the utilization of
assets, leading to resource reduction
– Delays the need for additional capacity
Consumption visibility and differential pricing
potentially lead to reduce resource consumption
Biggest challenge is changing the customer’s
willingness to pay
Government incentives can encourage customers
and firms

38
Q

Inventory

A

raw materials, work in process, finished goods
Inventory in a landfill
Cost borne collectively by society
Reduce harmful inventory, unlock unused value
“Cradle to cradle” design

39
Q

Pricing of Sustainability

A

Internalize the “monetary value” of the
social or environmental cost
Suitable prices for the social and env impacts of actions
challenging to set

39
Q

Closed-Loop Supply Chains

A

fewer resources and can be recycled and remanufactured

Depends on incentive and cost to recycle or manufacture

Cannibalization of demand for new products

Cost of recycling or remanufacturing has a
significant impact on the extent of recycling

Supply Chain Management (2 decks)

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