Lecture 1 Flashcards
SCM definition
Management, across and within a network of upstream and downstream organisations, of both relationships and flows of material, information and resources that lead to the creation of value in the form of products and/or services
Key flows in a supply chain
Physical flows of materials
Flows of information that inform the supply chain
Resources (especially finance, but also others such as people and equipment) which help the supply chain to operate effectively. Furthermore, not all resources in the supply chain are tangible, for example good quality inter-company relationships are often cited as a highly important ingredient of effective supply chains
15 SCM managerial considerations
Global environment, outputs, marketing, sales, R and D, forecasting, production, purchasing, logistics, information systems, finance, customer service, inter functional coordination, inter corporate coordination, performance measurement
What does SCM encompass
All traditional business functions, all the suppliers and customers, exists in a global environment, the intra-company concept of trust, commitment, risk and dependence, the inter-company concepts of relationship management
What is intra-company?
Have many stores and distribution depots
The systems and processes are managed as 1 company (transport, Human Resources, health and safety, it systems, financial systems, inventory management)
What is inter-company?
Many companies involved, each company has its own (transport, HR, health and safety, etc)
All may be required to adapt/ adopt and manage internal systems in accordance with supply chain partners
What is logistics?
Concerned with the storage and movement of service and goods and related information
It involves getting in the right way, the right product, in the right quantity, and the right quality, in the right place, at the right time, for the right customer, at the right cost
What is the evolution of integrated supply chain?
Fragmentation(1960), evolving integration(1980), total integration
discrete activities becoming the concern of one organisation/functional unit
(Upstream) suppliers, manufacturing, distributors, retailers, consumers (downstream)
4 perspectives
Traditionalist (SCM is part of logistics), re-labelling (all labelled SCM), unionist (logistics is a part of SCM), intersectionist (SCM and logistics are separate, but intersect)
Is transport an additional cost?
Yes
Regarded as “non-value adding cost”, allows the realisation of the value
Essential to SC
May cause or permit a SC to become more effective/efficient
What are the different transport modes?
Air, road, water, rail, pipeline
The information superhighway is also considered to be a sixth transport mode (data, software)
What must be considered when selecting a transport mode?
The volume and value of the freight, the distance travelled, the availability of different services, freight rates charged
LSP Usually apply volumetric charging
What is intermodal transport?
The freight moves within a loading unit (ITU)
1970
What is a TEU?
Twenty foot equivalent unit
1972
What are the 5 key developments in logistics and SCM?
Reduced transport intensity of freight, falling product prices, deregulation of transport, productivity improvements, emphasis on inventory reduction
Describe reduced transport intensity of freight
International trade was dominated by bulky raw materials, now in TEU.
Rather than transporting components, transport the finished product and “in-process”
What is transport cost sensitivity?
Can I increase the value of the produce before I move it, or should I move it in it’s raw state for a higher relative cost
Relative cost = cost of transport/ value
What is deregulation of transport?
Removal of controls imposed by governments on the operation of markets, particularly taking away barriers of entry
Opening up of markets to competition can be achieved by: allowing many companies to operate one route, introduce heavy penalties for price fixing, short franchises encourage low fares but are a disincentive to long term investment in infrastructure and rolling stock
What are productivity improvements?
Standardisation of TEU, propulsion tech(more efficient), ICT technology(RFID)
What is inventory reduction?
Cost money to store inventory, if you can reduce the amount of stored inventory
Just in time (JIT) has become standard practice in many industries, offers flexibility in production and therefore responsiveness in demand
What is the relationship between rate (cost) and distance?
The further it is, the more it costs, but the additional cost is progressively less
What is the relationship between rate per kilo and consignment weight?
Each additional weight is less additional cost than the previous one
What is tonne kilometres?
The distance travelled by 1 tonne of freight
TKM = total load carried x total distance covered
What is commodity value?
The relative cost of transport is allocated across the value of the commodity
(1 tonne / 1km) / £1
What are the characteristics of road transport?
Fixed costs are low (infrastructure available), variable costs increasing (fuel, taxation etc), score well on speed, availability, dependability and frequency. Score less well on capacity, weight, volume.
However get from source to destination directly
What are the characteristics of rail transport?
High fixed costs due to expensive equipment, variable costs low, good speed, transport large/heavy goods over long distances
What are the characteristics of air transport?
Fixed costs lower than air, higher variable costs, main advantage is speed, small capacity, relies on other forms of transport to transport from airport to destination
What are the characteristics of water transport?
Medium fixed costs, low variable costs (capacity to transport large volumes), slow, limited in access to some ports, no direct link from source to destination
What are the characteristics of pipeline transport?
High fixed costs (rights of way, construction), low variable costs, excellent dependability, single, high volume liquid or gas only
What is the split of transport in the EU?
Oil pipeline(3%), maritime trans(37%), waterways(3%), rail(11%), road(45%)
What can logistics and SCM be used for?
Cost savings and service enhancements
What is a supply chain?
The network of organisations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer
