Finance Business Partnering - Supply Chain Flashcards
What does supply chain management look at?
All activities from goods inwards to goods outwards
What is the goal of supply chain management?
To design and manage the supply chain process to be efficient and effective
How does good supply chain management create competitive advantage?
It creates customer value and increases the likelihood of a sale
What can an organization achieve by operating an effective supply chain process?
Cut costs and offer goods at a cheaper price than competitors
What are some benefits of a robust supply chain?
Higher quality, more reliability, less wasted time, lower frustration
What are the component parts of supply chain management?
Sourcing, production, and distribution
What is the role of the sourcing function in supply chain management?
Identify and buy inputs for production
What is another name for the production function?
Manufacturing or operations
What does the production function coordinate?
Activities involved in manufacturing products
What is a key focus of the production function?
Ensuring goods are made in the right quantities, at the right time, and to the expected quality
What is the responsibility of the distribution function?
Physical distribution of the product to the end user
What can efficient logistics operations achieve?
Reduce costs and impress customers
How can poor logistics management affect customers?
Lead to dissatisfaction even if the product is excellent
To whom can a company sell and deliver products?
Directly to consumers, retailers, or wholesalers
What tasks do distribution centres typically perform?
- Hold manufactured products in storage
- Execute order processing and fulfilment
- Manage final deliveries
- Manage item returns
Fill in the blank: The sourcing function works closely with ______ and production teams.
Research and development (R&D)
True or False: The production function aims to monitor product quality.
True
What is a primary consideration when identifying the right supplier?
Price must be low enough to achieve target profitability without jeopardizing quality
What does the production process require for efficiency?
Well-planned machinery and methods to produce desired products
What is essential for manufacturing operations regarding machinery?
Operate machinery close to full capacity to minimize idle time
What is a consequence of complex distribution chains?
They often cross countries or continents
What triggers the production process in a build to order system?
The receipt of a customer order
This process is used for customised or complex items that are not pre-manufactured.
What is an example of a build to order process?
An energy utilities company ordering wind turbines from a manufacturer
This illustrates how production starts only after an order is placed.
Why might a manufacturer avoid producing complex goods ahead of an order?
To avoid expending vast amounts of money without guaranteed sales
Producing ahead may not meet exact specifications for future orders.
What type of goods do customers expect to buy immediately?
Mass-market items
Examples include clothing, foodstuffs, small furniture, and electrical goods.
What is the importance of demand forecasting in supply chain management?
It helps ensure resources are in place to meet demand
Accurate forecasting prevents stock surpluses or deficits.
What are the consequences of producing too much stock?
Excess stock storage, discounting sales prices, and potential obsolescence
These issues negatively impact organisational performance.
What happens if an organisation produces too little stock?
Out of stock issues may arise, leading to customer dissatisfaction
Customers may choose to buy from competitors instead.
How does poor forecasting affect the supply chain?
It complicates supplier orders and can lead to increased costs
Predicting quantities is generally easier and cheaper than adjusting orders last minute.
What methods do organisations use to forecast demand?
Historical data, anticipated influences, customer research, expert opinions, and big data analysis
These methods help predict sales patterns over time.
True or False: Most organisations consider accurate forecasting unimportant.
False
Accurate forecasting is crucial for optimising performance.
Fill in the blank: Demand forecasting is an important part of _______.
[supply chain management]
Why do companies need to use suppliers?
Few companies have free access to all the inputs they require to develop and manufacture products.
What are common inputs sourced from suppliers?
Inputs include:
* Raw materials
* Component parts
* Machinery
* Equipment
* Services
What is a key consideration when selecting suppliers related to quantity?
Buying in large quantities can result in discounts and prevent inventory from running out.
What must organizations balance when deciding how much and how often to buy?
The costs of carrying a high level of inventory.
What is the importance of quality in supplier selection?
Goods purchased must be of an acceptable quality; suppliers must be approved and deliveries checked.
What is the primary focus in the purchasing process?
Minimising cost while ensuring the best overall value.
What does the delivery consideration involve?
The supplier’s ability to deliver consistently, on time, and at expected volumes.
What is the goal of developing seamless processes with suppliers?
To ensure goods flow into the production process in the right quantities when needed and to minimise waste.
What is the economic order quantity (EOQ) model?
A model that minimises holding and ordering costs by determining the optimal order point and quantity.
How does demand environment complexity affect inventory management?
The more dynamic the demand environment, the more difficult it is to manage order periods and quantities.
What is the advantage of a partnership style approach to supplier relationships?
It can improve quality, reduce waste, reduce costs, and increase efficiency.
What is the risk of using too few suppliers?
Becoming too dependent on a supplier, which can create issues if they have problems or increase prices.
What is delegated sourcing?
When a chosen supplier obtains supply from other suppliers, introducing further risks in the supply chain.
What is a key ethical consideration in selecting suppliers?
Choosing suppliers who operate on similar ethical and socially responsible bases as your organization.
Why is corporate social responsibility important in supply chains?
Consumers expect organizations to demand high standards of corporate social responsibility from their supply chains.
What is a recent trend in sourcing despite globalization?
A movement towards local sourcing.
What are the benefits of local sourcing?
It creates jobs and prosperity in local regions and reduces environmental damage from transportation.
What is the manufacturing process?
The manufacturing process transforms raw materials into final products.
Can the entire manufacturing process for a product be performed in a single factory?
No, it may involve a network of factories and suppliers for components and final assembly.
What needs to be done before manufacturing starts?
Design the production process, source machinery, lay out the production floor, and train staff.
What is the role of the sourcing team in manufacturing?
Ensure that all materials, parts, or subassemblies are in inventory or ready for shipment.
What does logistics management ensure in the production process?
The flow and storage of supplies needed to produce the goods.
What are the three types of production?
- Design to order
- Build to order
- Build to stock
What is ‘Design to order’ production?
Relevant for complex products that need unique designs.
What is ‘Build to order’ production?
Relevant for products that can be customized in the production stage.
What is ‘Build to stock’ production?
Relevant for standardized products built in anticipation of orders.
What is project manufacturing?
Involves dealing with one complex and unique product build at a time.
What is batch production?
Production of a defined quantity of the same product on machines configured for it.
What is mass production?
Involves a production line running for a long time on one product with high automation.
What is continuous flow production?
Production that runs 24-7 to avoid starting and stopping, highly efficient and largely automated.
What factors determine the choice of production technique?
Need for high volumes, variety, or heavy customization.
Fill in the blank: ‘Build to order’ is relevant for a product that can be _______ in the production stage.
[customised]
True or False: Mass production typically involves low levels of task automation.
False
Fill in the blank: Continuous flow production works well for products that do not _______.
[change over time]
What is an example of project manufacturing?
Building a passenger airplane for a specific airline.
What is an example of batch production?
Production of high-end sneakers.
What is an example of mass production?
Production of a type of food product in large quantities.
What is an example of continuous flow production?
Gas refinery where production never stops.
What is the primary goal of lean production?
To eliminate all forms of waste and non-value-adding activities from operations.
What approach does lean production use to manage inputs?
Just-in-time approach.
What are prevention costs?
Costs involved in preventing errors and defects from arising, such as investment in staff training.
What are appraisal costs?
Costs involved in checking that the goods produced meet the required quality standards.
What are internal failure costs?
Costs involved when goods are found not to meet quality standards, such as rework costs or lost revenue from discounted items.
What are external failure costs?
Costs arising from selling substandard items, such as returns or damage to reputation.
How can higher levels of investment in prevention and appraisal affect failure costs?
They reduce internal and external failure costs experienced further down the line.
What advantages come from increasing quality?
Improved sales performance, enhanced reputation, and fewer returned items.
What are some challenges associated with techniques to increase quality?
They can be expensive, require staff buy-in, and may lead to low motivation if standards are set too high.
True or False: If quality is too high, organizations may need to increase selling prices to cover costs.
True.
What must organizations do to get the quality of their offerings just right?
Listen very carefully to customer expectations.
Fill in the blank: Lean production seeks to eliminate _____ and non-value-adding activities.
waste.
List the four types of costs associated with quality.
- Prevention costs
- Appraisal costs
- Internal failure costs
- External failure costs
What are key performance indicators (KPIs) important for?
Measuring performance within the supply chain
KPIs help organizations drive performance by monitoring relevant indicators.
What should organizations identify to improve performance?
KPIs that matter to them
Organizations should measure and monitor these indicators to enhance future performance.
What are the three categories of KPIs for sourcing, production, and delivery?
- Making the best use of available resources
- Quality measures
- Cash flow generation
Each category addresses specific aspects of performance management.
What does persistent occurrence of spare capacity indicate?
Potential cost savings without affecting output
This suggests inefficiency in resource utilization.
What does unscheduled downtime in production processes indicate?
A risk that output targets cannot be met
This may necessitate investment or expenditure to ensure reliability.
What should a budget include regarding quality measures?
A target for tolerable quality failures
Tracking this target ensures production effort is not wasted on non-value adding goods.
Why is it important to meet targets for delivery time?
To maintain customer loyalty
Delays can negatively impact customer satisfaction.
What are the consequences of accidents arising from negligence?
Costs in compensation, legal claims, public perceptions, and staff morale
These accidents can also delay delivery of production output.
What is essential for realizing the value an organization generates?
Net cash receipts reflecting the costs and value of goods or services
Monitoring cash flow is crucial for financial health.
What should organizations monitor regarding inventory levels?
To avoid tying up money without delivering corresponding value
Excess inventory can hinder cash flow.
What can early payments to suppliers create?
An unnecessary shortage of cash
It’s important to adhere to credit terms for financial stability.
What is a potential issue with late payments from customers?
Costs to recover cash that do not increase profitability
Late payments can strain cash flow management.
What are some suggested KPIs for efficiency?
- Cost variances to budget or history of supplied parts and services
- Percentage of inward deliveries on time (by supplier)
- Percentage of production capacity being used
- Production output volume as percentage of budgeted volume or current demand
- Downtime of production facility
- Cost per outward distribution channel
These KPIs help assess resource utilization and operational effectiveness.
What are some suggested KPIs for quality?
- Percentage of goods inwards returned back to supplier
- Meeting target times for production
- Meeting target rates for defective products in production
- Occurrence of safety incidents
- Number of delivery-related complaints
- Returns of product from customers
These KPIs focus on minimizing non-value-adding efforts.
What are some suggested KPIs for cash flow?
- Inventory turnover
- Payments to suppliers
- Receivables turnover
- Time from despatch to customer receipt, delivery speed
These KPIs help ensure cash remains available.
