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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
Third parties increase surplus through CIRRI WPL TS
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
19
CRP
Continuous Replenishment Program wholesaler or manufacturer replenishes based on POS data
19
VMI
Vendor-Managed Inventories **manufacturer or supplier** is responsible for all decisions regarding inventory
19
Building Strategic Partnerships and Trust
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.
19
Specificity of assets
If assets required are specific to a firm, a third party is unlikely to increase the surplus
19
Sourcing
entire set of business processes required to purchase goods and services
19
Collaborative Planning, Forecasting, and Replenishment (CPFR) | ROSDC
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
20
Purchasing/ procurement
companies acquire raw materials, components, products, services, or other resources from suppliers to execute their operations
20
Outsourcing
supply chain function being performed by a third party
20
Factors Influencing Growth of Surplus by a Third Party
Scale Uncertainty Specificity of assets
20
Uncertainty
If requirements are highly variable over time, third party can increase the surplus through aggregation
20
Achieving Coordination in Practice CAMBERT
Communication Achieve coordination throughout Management commitment Quantify bullwhip effect Share the benefits equitably Devote resources Use technology for connectivity
20
Outsourcing questions
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
Benefits of Effective Sourcing Decisions
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
Supplier Selection
Single sourcing or multiple sourcing based on the total cost of using a supplier Offline competitive bids Reverse auctions Direct negotiations
20
Risks of Using a Third Party
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
Scale
Large scale it is unlikely that a third party can achieve further scale economies and increase the surplus
21
Strategic Factors in Sourcing
Support for the business strategy Improve firm focus
21
Auctions
quantifiable acquisition cost is the primary component of total cost not appropriate if ownership or post-ownership costs are significant (negotiations better)
21
Third-Party Logistics Providers
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
Elements of auctions
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
Basic Principles of Negotiation
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
Sharing Risk and Reward in the Supply Chain
Independent actions by two parties result in lower profits Stronger firms tend to push risk on to supply chain partners
25
Sharing Risk to Grow Supply Chain Profits Approaches
Buyback or returns Revenue sharing Quantity flexibility
25
Quantity Flexibility
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
Revenue-Sharing Contracts
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
Sharing Risk to Grow Supply Chain Profits questions
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
Buybacks Contracts
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
Contracts to Induce Performance Improvement
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
Contracts to Coordinate Supply Chain Costs | (quantity discount_
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
Contracts to Increase Agent Effort
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
Design Collaboration
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
Risk Management in Sourcing
Inability to meet demand on time An increase in procurement costs Loss of intellectual property
28
Designing a Sourcing Portfolio: Tailored Sourcing
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
Making Sourcing Decisions in Practice | MC0R
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
Role of Sustainability in a Supply Chain
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
Sustainable development
development that meets the needs of the present without compromising the ability of future generations to meet their own needs
32
Three pillars of sustainable development
Economic sustainability Environmental sustainability Social sustainability
33
Factors driving an increased focus categories
1. Reducing risk and improving the financial performance 2. Community pressures and government mandates 3. Attracting customers that value sustainability
33
Barriers to increased focus on sustainability
Insufficient return on investment Customers’ unwillingness to pay a premium for green products Difficulty evaluating sustainability across a product life cycle
34
Role of Sustainability in a Supply Chain
Most effort expended in reducing risk Activity slow as actions may require upfront investment
35
Tragedy of the Commons
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
SDG 15
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
Sustainability and Supply Chain Drivers | SPICIEST F
Facilities, Inventory, Transportation, Sourcing, Information, Pricing, Closed-Loop Supply Chains, Pricing of Sustainability, Pricing Emissions
35
Social Pillar | (supplier)
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
SDG 14
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
Key Pillars of Sustainability
Social, Environmental & Economic
37
Two fundamental challenges for social and environmental pillars
Scope of measurement Absolute of relative measures
37
Transportation
Improve environmental performance through resource and emission reduction Product design can play a significant role
37
Environmental Pillar
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
Solutions to this “Tragedy”
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
Sourcing
**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
Pricing Emissions
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
Facilities
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
Information
One of the biggest challenges Absence of standards for measurement and reporting means that some claims of improvement are not verifiable
38
Pricing
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
Inventory
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
Pricing of Sustainability
Internalize the “monetary value” of the social or environmental cost Suitable prices for the social and env impacts of actions challenging to set
39
Closed-Loop Supply Chains
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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