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Production economic > Lecture 1 > Flashcards

Lecture 1 Flashcards

1
Q

Supply chain

A

A supply chain encompasses all stages involved, directly or indirectly, in fulfilling a customer request. It includes manufacturers, suppliers, transporters, warehouses, retailers, and customers. Within each company, the supply chain involves all functions related to fulfilling a customer request, including the flow of products from suppliers to manufacturers to distributors, as well as the management of information, funds, and products

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2
Q

The objective of a supply chain

A

Maximize overall value generated

Supply chain surplus = customer value - supply chain cost

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3
Q

Example, objective of a supply chain

A

When a customer buys a product, such as a wireless router for $60, the supply chain incurs various costs (e.g., information, storage, transportation, components, and assembly). The difference between the revenue ($60) and total costs represents the supply chain profit. Supply chain profitability reflects the total profit shared across all stages, and success should be measured by overall profitability, not individual stage profits

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4
Q

Decision phases in a supply chain

A
  1. Supply chain strategy or design
  2. Supply chain planning
  3. Supply chain operation
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5
Q

supply chain strategy or design

A

How to structure the supply chain over the next several years

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6
Q

Supply chain planning

A

Decisions over the next quarter or year

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7
Q

Supply chain operation

A

Daily or weekly operational decisions

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8
Q

Process views of a supply chain

A
  1. Cycle view
  2. Push/Pull view
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9
Q

Cycle view

A

The processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of the supply chain

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10
Q

Push/Pull View

A

The processes in a supply chain are divided into two categories, depending on whether they are executed in response to a customer order in anticipation of customer whereas push processes are initiated and performed in anticipation of customer orders

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11
Q

Cycle view of supply chain processes

A

Customer order cycle
Replenishment cycle
Manufacturing cycle
Procurement cycle

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12
Q

Supply chain macro processes

A
  1. Customer relationship management (CRM)
  2. Internal supply chain management (ISCM)

Supplier relationship management (SRM)

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13
Q

Customer relationship management

A

All processes at the interface between the firm and its customers

  • Market
  • Price
  • Sell
  • Call center
  • Order management
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14
Q

Internal supply chain management

A

All processes that are internal to the firm

  • Strategic planning
  • Demand planning
  • Supply demand
  • Fulfillment
  • Field service
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15
Q

Supplier relationship management

A

All processes at the interface between the firm and its suppliers

  • Source
  • Negotiate
  • Buy
  • Design colloboration
  • Supply collaboration
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16
Q

Competitive and supply chain strategies

A
  • Competitve strategy
  • Product development strategy
  • Marketing development strategy
  • Supply chain strategy

All functional strategy must support one another and the competitive strategy

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17
Q

Competitve strategy

A

Defines the set of customer needs a firm seeks to satisfy through its products and services

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18
Q

Product development strategy

A

Specifies the portfolio of new products that the company will try to develop

19
Q

Marketing and sales strategy

A

Strategy specifies how the market will be segmented and product positioned, priced, and promoted

20
Q

Supply chain strategy

A

Determines the nature of material procurement, transportation of materials, manufacture of prouct or creation of service, distribution of product

21
Q

Achieving strategic fit

A

Strategic fit - competitive and supply chain strategies have aligned goals

A company may fail because of a lack of strategic fit or because its processes and resources do not provide the capabilities to execute the desired strategy

22
Q

How is strategic fit achieved

A
  1. Understanding the customer and supply chain uncertainty
  2. Understand the supply chain capabilities
  3. Achieving strategic fit
23
Q

Undertstanding the customer and supply chain undertainty

A
  • Quantity of product needed in each lot
  • Response time customers will tolerate
  • Variety of products needed
  • Service level required
  • Price of the product
  • Desired rate of innovation in the product

Demand uncertainty - uncertainty of customer demand for a product

Implied demand uncertainty - resulting uncertainty for the supply chain given the protion of the demand the supply chain must handle and attributes the customer desires

24
Q

Implied uncertainty and other attributes

A
  1. Products with uncertain demand are often less mature and have less direct competition. As a result, margins tend to be high
  2. Increased demand uncertainty leads to increased difficulty in matching supply with demand. For a given product, this dynamic can lead to either a lockout or an oversupply situation
  3. Markdowns are high for products with greater demand uncertainty because oversupply often results.
25
Q

Understandning supply chain capabilities

A

Supply chain responsiveness is the ability to
- Respond to wide ranges of quantities demanded
- Meet short lead times
- Handle a large variety of products
- Build highly innovative products
- Meet a high service level
- Handle supply uncertainty

Supply chain effciency is the inverse to the cost of making and delivering the product to the customer

The cost-responsiviness efficient frontier curve shows the lowest possible cost for a given level of responsiviness

26
Q

Achieving strategic fit

A

Ensure that the degree of supply chain responsiviness is consistent with the implied uncertainty

Assign roles to different stages of the supply chain that ensure the appropriate level of responsiviness

Ensure that all functions maintain consistent strategies that support the competitive strategy

27
Q

Zone of strategic fit

A

y axel
Responsive supply chain <– Responsiviness spectrum –> Efficient supply chain

x axel
Certain demand <– Implied uncertainty spectrum –> Uncertain demand

28
Q

Changes over product life cycle

A

Beginning stages
1. Demand is very uncertain, and supply may be unpredictable
2. Margins are often high, and time is crucial to gaining sales
3. Product availability is crucial to capturing the market
4. Cost is often a secondary consideration

Later stages
1. Demand has become more certain, adn supply is predictablle
2. Margins are lower as a result of an increase is competitive pressure
3. Price becomes a signficant factor in customer choice

29
Q

Challenges

A

Greater product variety and shorter life cycles increase uncertainty

Significant fluctuations in exchange rates, global demand, and the price of crude oil effecting supply chain performance

New ownership structure makes aligning and managing the supply chain more difficult

The environment and sustainability is growing in relevance and must be accounted for when designing supply chain strategy

Changes in technology may force a firm to rethink their supply chain strategy

30
Q

Tradeoffs between facility, inventory and transportation costs

A

Increasing number of facilities increases facility and inventory costs, decreases transpportation costs and reduces response time

Increasing the flexibility or capacity of a facility increases facility costs but decreases invenotry costs and response time

A higher level of inventory facilites a reduction in production and transportation costs because of improved economies of scale

Using fast modes of transport raises responsiviness and transportation cost but lowers the inventpry holding cost

31
Q

Driving of supply chain performance - Facilities

A

The physical locations in the supply chain network where product is stored, assembled of fabricated

32
Q

Driving of supply chain performance - Inventory

A

All raw materials, work in process, and finished goods within a supply chain

33
Q

Driving of supply chain performance - Transportation

A

Moving inventory from point to point in the supply chain

34
Q

Driving of supply chain performance - Information

A

Data and analysis concerning facilites, inventory, transportation, costs, prices and customers

35
Q

Role in the supply chain - Facilities

A

Increase responsiviness by increasing the number of facilites, making them more flexible, or increasing capacity

36
Q

Role in the supply chain - Inventory

A

Mismatch demand-supply. Improve product availability. Drives holding costs but lowers transportation and production costs

37
Q

Role in the supply chain - Transportation

A

Allows a firm to adjust the location of its facilites and inventory to find the right balance between responsiviness and efficinecy

38
Q

Role in the supply chain - Information

A

Improves visibility of transactions and coordination of decisions across the supply chain

39
Q

Facilities

A
  • Capacity
  • Utillitization
  • Product variety
  • Processing time
  • Average produciton batch size
  • Quality losses
40
Q

Inventory

A
  • Inventory turns
  • Average safety inventory
  • Cycle inventort
  • C2C-time
  • Fill rate
41
Q

Transportation

A
  • Average inbound transportation cost
    -Shipment size
  • Average outbound transportation cost
  • Fraction transported by mode
42
Q

Information

A
  • Forecast horizon
  • Frequency of update
  • Forecast error
  • Seasonal factors
  • Variance from plan
  • Ratio of demand variability to order variability
43
Q

Sourcing

A
  • Range of purchase price
  • Average purchase quantity
  • Days payable outstanding
  • Supply lead time
  • Supplier reliability
44
Q

Pricing

A
  • Profit margin
  • Incremental fixed cost per order
  • Incremental variable cost per unit
  • Average sale price
  • Average order size
  • Range of sale price
  • Range of periodic sales

Production economic (7 decks)

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