Lesson 7: Supply Chain Management Flashcards
Supply Chain
Sequence of Organizations that are involved in producing and delivering a product
Supply Chain Management
Collaboration of participating organizations of the supply chain and coordination of their activities to meet the demand as efficiently and effectively as possible.
Goal of Supply Chain Management
The goal of supply chain management is to produce and bring the product to the market at a competitive price, in the right quantity, and at the right time.
Competitive price means that the customer must see value in the product.
Right quantity means matching the demand.
Right time means delivering a product at an appropriate time when customers need it, for example, winter jackets from the beginning of winter to the end of winter.
To do it all, organizations have to focus on their expertise and collaborate and join hands with other expert organizations, for example, transporters, component suppliers, etc.
Supply management goals:
Determine the appropriate level of outsourcing
Manage Procurement
Manage suppliers
Manage customer relationships
Be able to quickly identify problems and respond to them
Outsourcing is a very common phenomenon in supply chains. Mostly some common tasks low-value task, low expertise tasks are outsourced to firms that can handle it in much more efficient and economical ways. Outsourcing helps firm to focus on core expertise.
Procurement process involves bringing the required material resources at the right price and at the right quality. Given that a product supply chain extends globally, the procurement process could be very complex and time-consuming due to processing of payments, quality, regulations, guarantee, logistics, etc.
Suppliers management are very key to any supply chain. Supply chains keep multiple suppliers for managing supply risks, maintaining competitions among suppliers and more importantly, product innovation, and research & development. In most of the innovative products, important key features and technology are developed or proposed by suppliers. For example, batteries, touch screen for smarts phones, security systems such as smart keys, airbags for automobiles, etc.
As mentioned, the competition is between supply chains so losing the customers is loss to all supply chain partners.
Customer relationship management programs help in understanding the customer’s need and thus very much required for sustaining growth of supply chain and its partners.
And most importantly, working and coordinating with multiple organizations will always bring issues common to all supply chains. These should be resolved timely for betterment of the supply chain.
Why does working with multiple organizations need cooperation?
When we work in a team for a group project, we need coordination to complete all parts on time for timely submission of the report. Similarly, organizations are also run by humans and thus they have their own interest - it may be part of multiple supply chains, or may have their own set of rules or plans to handle various constraints and issues.
Since the completion is all about price, quality, time and innovation, without a smooth coordination supply chain cannot win these fronts.
Everyone handles variability differently and when organizations react to variability it propagates disproportionally and leads to a false situation which could be undesirable for everyone.
Bullwhip Effect (Demand Variability)
A small impulse given at one end becomes very big on the other end.
Demand variations begin at the customer end of the chain and become increasingly large as they radiate backward through the chain.
CPFR
A process for communicating and agreeing on forecasts between the manufacturer and the customer (distributor).
C- collaborative
P- planning
F- forecasting
R- replenishment
To avoid such incidents happening frequently, supply chain partners collaborate on forecasting and replenishment. Each downstream partner produces its own forecast and then each upstream partner has to agree on those forecasts. The whole supply chain works with the agreed forecast and replenishes accordingly. Each change in demand has to be communicated accordingly – i.e. all the upstream partners have access to sales and planning data/information associated with downstream partners. Such an approach helps in reducing or eliminating variability that arises due to asymmetric information.
True or False:
A company’s supply chain involves the flow of materials and information from suppliers, through production, to the final customer.
True
True or False:
Supply chain management is collaboration among, and coordination of all the facilities and activities of companies so that market demand is met as effectively as possible.
True
True or False:
Supply chains are sometimes called value chains.
True
True or False:
As the level of outsourcing increases, the need for supply chain management decreases.
False
True or False:
Examples of metrics for supply chain performance are logistics costs, percentage of on-time delivery, and item fill rate.
True
True or False:
Collaborative planning, forecasting, and replenishment (CPFR) is the latest effort to increase the effectiveness and efficiency of supply chains.
True
True or False:
Outsourcing carries the risk of less control over outside suppliers than producing internally.
True
True or False:
Bullwhip effect refers to a phenomenon in which the demand variations that exist at the customer end of the supply chain are magnified as orders are generated back through the supply chain.
True
