Final GSCM Flashcards
Drivers of sourcing relations
Specificity
Transaction costs
Contract duration
Specificity
Refers to how common the item is and, in a relative sense, how many substitutes might be available
Transaction costs
Costs associated with making a purchase: ordering, selecting, billing, price setting, etc.
Contract duration
Length of the relationship
Types of relationships
Strategic alliance
Spot purchase
Request for proposal
Reverse auction
Request for bid
Vendor managed inventory
Electronic catalog
Strategic alliance
Close relationship
Spot purchase
No relationship, market based
Request for proposal
Requirements are formulated and potential vendors prepare a detailed proposal how they intend to meet requirements, including a price
Reverse auction
Sellers compete (often electronically) to obtain business, and prices typically decrease over time, buyer specifies the item
Request for bid
Specification of item is given and price is the main or only factor in selecting
Vendor managed inventory
The supplier manages an item or group of items for a customer
Electronic catalog
Online purchasing
Bullwhip effect
The phenomenon that small fluctuations in demand at the customer end of the supply chain are amplified to extreme fluctuations at the supplier side of the supply chain.
Causes of the Bullwhip effect
Order synchronisation
Order batching
Trade promotion and forward buying
Reactive and over-reactive ordering
Shortage gaming
Order synchronization
Customers order on the same order cycle
Order batching
Retailers may be required to order in integer multiples of some batch size
Trade promotion and forward buying
Supplier gives retailer a temporary discount / retailer purchases enough to satisfy demand until the next trade promotion.
Reactive and over-reactive ordering
Each location forecasts demand to determine shifts in the demand process / responding to a ‘high’ demand observation.
Shortage gaming
To secure a better allocation, the retailers inflate their orders
Consequences of Bullwhip effect
Inefficient production or excessive inventory
Low utilization of the distribution channel
Necessity to have capacity far exceeding average demand
High transportation costs
Poor customer service due to stock outs
Excessive inventory among the supply chain
Social of triple bottom line
Pertains to fair and beneficial business practices toward labor, the community, and the region in which a firm conducts its business
Economic
The firm’s obligation to compensate shareholders who provide capital via competitive returns on investment
Environmental
The firm’s impact on the environment and society at large
Total Cost of Ownership (TCO)
Estimate of the cost of an item that includes all the costs related to the procurement and use of the item including disposing of the item after its useful life.
Acquisition costs
Purchase planning costs
Quality costs
Taxes
Purchase price
Financing costs
Ownership costs
Energy costs
Maintenance and repair
Financing
Supply chain/supply network costs
Post-ownership costs
Disposal
Environmental costs
Warranty costs
Product liability costs
Customer dissatisfaction costs
Logistics
Planning, controlling, and implementing the flow and storage of goods from origin to consumption
Functions of a warehouse
Storage
Sorting and picking
Transport
Operations
Factor rating method (qualitative data)
Possible locations are known
Use weights to assign importance of a factor
Weakness due to subjectivity of weights
Assignment of weight is subjective so the decision may change based on who does it
Cost-volume analysis (quantitative data)
To make an economic comparison of known locations
Determine fixed and variable costs for each location
Fixed costs (e.g. costs for a truck)
Variable costs (e.g. costs per product or costs per kilometer)
Graphically:
- plot cost for each location (y=costs, x=annual volumes
-select location with lowest cost for expected volume
Centre-of-gravity method
Mathematical technique for finding the best location for a single warehouse
Method uses
Location of markets (retailers)
Volume of goods to be shipped to those markets
Costs directly proportional to distance and volume
Ideal location: minimizes weighted distance between warehouse and retailers
Design of warehouses
Select systems
Forklift truck, automated vehicles, etc.
Sizing
How much storage capacity is needed?
Which height/width/depth is appropriate for the building?
Layout of the warehouses
Position various departments with respect to each other
Think of future expansion
U layout is appropriate for:
Appropriate for regular warehousing activities
I layout
Appropriate for high volume cross docking
Cross-docking
Approach to split large shipments into small shipments for local delivery
low inventory cost
Evaluation of layout design
Objective
Minimize the weighted distances between departments
The weighted distance is for example the distance from the middle of one area to the middle of another area multiplied with the amount of products that have to be transported between these areas
Criteria for choosing transport type
Speed
Accessibility
Costs
Frequency
Risks
Capability
Inventory cost =
Inventory cost =
quantity x value per unit x interest rate x time
Theoretical minimum number of workstations (Nt)
Nt = sum of task times (T) / workstation cycle time ( C )
Project
Unique product, one of a kind.
One or small number of products
High level of customisation
Consumer can give their preferences
Jobbing
Small scale, one or a few customised identical outputs.
Dedicated to a few products using the same resources.
Low volume/ high variety products
Batch
More standardized products, producing many identical items.
Same production line is used for multiple products
Advantage: economies of scale
Mass/ line
Similar or identical items produced in high volumes.
Efficiency = important
Continuous
Products are not countable (only measured in kg, l, m). Similar or identical products that flow through the process.
Produces in high volumes
Product (almost) never changes
Production (almost) never stops
Layout
Physical arrangement or grouping of production resources
Fixed position
End item remains in the same position while it being produced
Functional
Production means are grouped according to function
Cellular
Machines are grouped in order to optimize the movement of materials and to reduce the throughput time
Product
The arrangement of resources follows the steps in which the end-time is produced
Customer Order Decoupling Point (CODP)
Last major stockpoint in the goods flow
Point at which a customer gets involved in the production process
Deliveries to customers are made from here
Internal lead time
Time before the customer gets involved
Customer lead time
Time after the customer gets involved
Make-to-stock firms
Serve customers from finished goods inventory
Essential issue: Balance the level of inventory against the level of customer service
Forecasting is a very important task
Assemble-to-order firms
Combine a number of preassembled modules to meet a customer’s specifications
A primary task is to define a customer’s order in terms of alternative components
One capability required is a design that enables as much flexibility as possible in combining components
Manufacturing results in customer specific products, assembled in a similar way
Maintaining inventories of components is key issue
Forecasting at aggregate/component level
Make-to-order firms
Make the customer’s product from raw materials and parts
Essential issue is to deliver on time, while keeping costs low through high capacity utilization
Catalogue products with small demand and specific customer details/specification
Purchase-to-order firms
Will work with the customer and will start buying parts/products after an order has been placed
Companies wait for the customers to specify their wishes and start procuring after receiving an order
Products are very exclusive or specific and will not be kept in stock, but specification is more or less known
Customer is willing to wait
Engineer-to-order firms
Will work with the customer to first design, then purchase raw material and finally make the product
Frequently, Design of the products requires novel solutions and a lot of engineering knowledge
Manufacturing might be relatively easier, but still complex: many suppliers, materials, and subcontractors
Quality of design
Inherent value of the product
Quality conformance
Degree to which the product/ service design specifications are met
Quality performances
Performance
Features
Reliability
Durability
Serviceability
Aesthetics
Reputation
Importance of quality internally
Decrease of cost, improved planning, reduce fire-fighting, better motivated personnel.
Importance of quality externally
Satisfy customers, reputation of the company, product liability.
Statistical process control
Involves testing a random sample of output from a process to determine whether the process is producing items within a preselected range.
Process Capability Index shows
Shows how well the parts being produced fit into the range specified by the design specification
Total quality management (TQM)
Managing the entire organization so that it excels on all dimensions of products and services that are important to the customer.
Six sigma
A statistical term to describe the quality goal of no more than four defects out of every million units.
Waste
Anything that does not add value from the customer’s perspective
Muda
An activity that is wasteful and does not add value
Mura
Unevenness
Muri
Over-burden of resources
The seven sources of waste
Transportation
Inventory
Motion
Wait
Over-processing
Over-production
Defect
5S
Sort
Set in order
Shine
Standardised
Sustain
Poka Yoke
Mistake proofing
Andon: signalling
Communicating that there is an issue, Andon triggers problem solving
Kaizen
Continuous improvement
