EXAM1 Flashcards
Difference between Supply Chain, Operations, and Supply Chain and Operations
Supply chain management
• Cooperation between different firms to create value for customers
Operations management
• Administration of transformation processes that create value for customers by meeting their needs or enabling them to meet their own needs
Supply Chain and Operations (SC&O)
• Emphasizes the linkages between firms that tie operations together with the goal of satisfying customers
Process design, management, control, and improvement
Processes
• Means by which all work is performed
Process Design
• Configuring inputs and resources in a way that provides value, enhances quality, and is productive
Process Management
• The act of executing and controlling the productive functions of a firm
Process Control
• The act of monitoring a process for its efficacy (Produce desired result), Process Improvement • Proactive effort to enhance process performance
Supply chain globalization strategies
Licensing – Sale of the same product with another trademark
Strategic Alliances – Forming business alliances with suppliers
Globalization – Establishing production and marketing facilities in foreign countries
Outsourcing and Nearsourcing
Outsourcing
• Process of moving the production of an item to another firm or producer
Nearsourcing
• Production of a component or product is moved geographically closer to where it was originally produced
Sustainability
Sustainability
• The proactive management of resources in an effort to be environmentally friendly
Difference between supply chain management and operations management
Supply Chain Management
• Multiple firms working together to create value
Operations Management
• Transformation of a single firm to create value
Primary flows of a supply chain
Upstream – Suppliers
Downstream – Consumers
Product Flows
- Upstream to downstream
- Reverse logistics – products move up the supply chain Monetary Flows
- Downstream to upstream, unidirectional
Information Flows
• Bidirectional, data flows
Service supply chain complexity
Many upstream suppliers and downstream consumers
Many to many relationship
Customers are also suppliers
Combining supply chain and operations
- Suppliers have transformation processes (operations) and the producing firm has transformation processes.
- Transformative processes of upstream suppliers are tied by supply chain and logistics activities to producers who have the same
Impacting
- Effectively managing core processes that affect customers
- Managing core processes satisfy the customers
Improving
- The act of making processes, products, and people better
- A process, not a single event
- Result of effective process management and design
Innovating
- Large-scale, sudden improvement, that has a dramatic effect on business results
- Incremental and continuous
- Necessary for firms to compete effectively
Integrating
- Collaboration and integration between all stakeholders in a supply chain
- Includes suppliers, operations people planners, …
- Results in streamlined communication, information sharing, and improved management outcomes
- One of the best ways to manage complexity
Upstream vs Downstream Collaboration
Upstream – Strategic sourcing or purchasing, supplier selection and development, tco
Downstream – Customer relationship management
Porter’s Generic Strategies
Focus Strategy
- Seek to service only select customers and provide these niche customers with a narrow range of unique products and services
- Amazon
Differentiation Strategy
- Seek to provide such distinctive products or services that competitors cannot compete with them
- Apple
Cost
- Seek ways to reduce costs and provide customers with lower prices than competitors
- Walmart
Fischer’s Supply Chain Alignment Model
Efficient Supply Chains
• Functional Products (Mass produced toaster) Responsive
Supply Chains
• Interactive Products (Haircut)
Agility and adaptability
Agility
• The ability of a supply chain to quickly respond to short-term changes in demand or supply
Adaptability
- Capturing the value of long-term changes
- Capability to adjust a supply chain’s design to meet major structural shifts in the market
Order winners and qualifiers
Order Winner
- Those attributes that differentiate a company’s products
- How the firm wins orders
Order Qualifiers
• Those necessary attributes that allow a firm to enter into and compete in a market, and a firm’s strategy must account for these necessities
Resource-based view
Competitive advantage come from applying tangible and intangible resources to operate effectively
Capabilities’ Four Core Aspects
- Four specific aspects to capability that provide a company with a core competency
- 1 – Value – valuable to customers
- 2 – Rarity – competitive advantage because competitors cannot utilize these resources
- 3 – Imitation-proof – resources that cannot be recreated or reverse engineered because of uniqueness
- 4 – Substitution-proof – resources cannot be easily replaced
Core competency
Core Competencies
• Hone only those capabilities that tie most closely to their customer values and that provide companies with a unique competitive advantage
Reverse logistics
Reverse Logistics
- The ability of a company to move product upstream while managing waste streams in an effort to reduce the cost of the waste stream or make the waste stream profitable
- Reduction, reuse, and recycling
- Reduction – elimination of waste before waste occurs
- Reuse – reusing part or all of an object
- Recycling – breaking down used items to reuse base materials
Dynamic capabilities
Dynamic Capabilities and Retaining Value
- Capabilities that win customers one day may not win the same customers the next day
- Dynamic Capabilities – firm’s ability to integrate, build, and reconfigure internal and external competencies to address rapidly change
Types of relationships: transactional, complementary, synergistic
Transactional Relationships
- Firm that pursues a cost advantage through its supply chain partners, to find the lowest-cost providers for supplies
- Arm’s length, bidding
Complementary Relationships
- Occurs when a company that clearly understands its core competencies needs another firm’s competencies so as to maintain world-class service
- Combining core competencies
Synergistic Relationship
- Relationship between two companies that are committed to work together in a way that the result is greater than the sum of the individual parts
- Sum
Calculate the “Economics of Purchasing” problem (pg 149-150)
Study
Impact of quality on profitability
Higher Perceived Value
Increased Market Share
Lower Transformation and Defect Costs
Portfolio approach to strategic sourcing o How to identify portfolio types o Recommended management strategies
Routine Items
- Low value, purchased in small volumes, individual transactions
- Automate the purchasing process, Simplify process
Leverage Items
- Potential to affect profit, High level of expenditures while having many suppliers
- Contract with suppliers to maximize commercial advantage
Bottleneck Items
- There are few alternate sources of supply (complexity, new technologies, untested process) and low profit impact
- Ensure supply, Search for alternatives
Critical Items
- Big effect on profitability with few qualified suppliers
- Form alliances and prepare contingency plans
Portfolio Pic
Strategic Cost Management
• Involves four types of analyses: spend analysis, price analysis, cost analysis, and total cost of ownership analysis
Spend Analysis
- Review of a firm’s entire set of purchases
- Answers – What is the firm spending its money on?
- Done at both aggregate and detailed levels
- Spend is categorized as direct, indirect, and capital
- Useful in categorizing purchases into the portfolio model quadrants
WHEN TO USE - What is the firm spending money on?
Direct Spend Category
• Any material or service that is part of the final product
Indirect Spend Category
- All the spend that supports the operations of a firm
- Everything from cafeteria services to spare parts for factory equipment
Capital Spend
• All spend for buildings and large equipment anything that will be depreciated
Spend Analysis can be used to Determine
- If a firm received the correct number of products and services given, what if paid for them
- Which suppliers received the majority of the business and if they charged an accurate price across divisions
- If opportunities to combine volumes and spending for different business groups, standardize product requirements, reduce the number of suppliers, or take advantage of market conditions to receive better pricing
Price analysis
- Process of comparing supplier prices against one another or against external benchmarks
- Useful when there are many suppliers, purchases categorized as either routine or commodities
- Primary challenge – comparing items with the same specifications, quality levels, lead times, warranties, and so on
- Common difference comes in payment terms
- ITEMS MUST BE THE SAME
WHEN TO USE - comparing suppliers
Cost analysis
- Analyzing each of the individual cost elements that make up the final price
- Use when price analysis is impractical or when price analysis alone does not allow a buyer to reach the conclusion that a price is fair and reasonable
- Use when there are few alternatives to sources of supply (Bottleneck/Critical categories)
WHEN TO USE - you can’t use price analysis
Total Cost of Ownership Analysis
Total Cost of Ownerships (TCO)
- Combination of all costs involved in a product
- To include all costs in your analysis of a purchase, not just purchase price
- Applies to all the quadrants of the portfolio model
TCO Cost Categories
- Acquisition Costs: identifying, selecting, ordering
- Ownership Costs: quality and maintenance
- Postownership Costs: customer’s use and disposition of the purchased item
Calculate an effective price with differing payment windows (price analysis)
- Calculate difference in days
- Calculate daily cost of capital x%/365
- Days * Daily Cost * Price
- Price + 3
Profit Margin
Net Income / Sales
