Question 10 Flashcards
Purpose of supply chain mapping
To gain an overview and minimize complexity, as well as identifying where improvement or optimization is needed (bottlenecks, under-utilization, to high supplier complexity)
Types of SC mapping
- Logical map: process-relationship map, showing nodes in the SC and the flows between them (material, financial and information)
- Geo map: geographical node relationship map, showing locations and transportation of materials (flow)
- Swimlane diagram: activity/responsibility map, showing who is responsible for what process and when responsibility is passed on
- Process flow chart: route-relationship map, showing what routes different items need to travel throughout the manufacturing and assembly line
SC KPIs
- Lead time
- TCO
- COGS
- Inventory turns
- IDOS
Lead time
The amount of time that passes from the start of a process to its conclusion.
Examples:
* Manufacturing lead time (time it takes to manufacture the product)
* Replenishment lead time (time for suppliers to us)
* Customer lead time (time from us to the customer)
Total Cost of Ownership (TCO)
Deals with all cost of acquiring, using and getting rid of product.
Looks at the bigger picture in sourcing instead of just the price of getting the product.
There are three “buckets”:
* Acquisition cost (supplier price, taxes, delivery…)
* Ownership cost (Inventory cost, manufacturing cost…)
* Post-ownership cost (Reputation if poor quality (non-quantifiable, replenishment…)
Cost of Goods Sold (COGS)
Total cost of incurred of making product:
* Direct labor cost (salary, hire and fire)
* Direct material cost (cost of buying material)
* Overhead cost (electricity, rent)
Inventory turns
The number of times that an inventory cycles, or turns over, during the year
Inventory turns = Annual COGS / Average inventory value
Inventory Days of Supply (IDOS)
A measure of how many days the current inventory will last without replenishment
IDOS = Inventory on hand / Average daily usage
Market Boundaries
A line between two methods of distribution where the landed cost is the same - choosing when to supply a customer from one location instead of another
Deciding which customers should be served from which location
Formula: Landed cost = P + Tx + F
P: Product unit cost
T: Transportation cost
X: number of units
F: Fees
Procurement perfomance
The extent to which the procurement function is able to realise its predetermined goals at the sacrifice of a minimum of the company’s resources, i.e. costs
Objectives of procurement performance measurement
To realise its predetermined goals at the sacrifice of a minimum of the company’s resources
Procurement effectiveness
The degree to which previously established goals and objectives have been met
Procurement efficiency
The relationship between planned and actual sacrifices (costs) made in order to realise a goal previously agreed upon
Internal and external resources used
The six dimensions of procurement performance measurement
- Procurement cost impact
- Product quality
- Procurement logistics
- Sustainability
- Procurement organisation
- Supplier relationships
Procurement cost impact
The relationship between standard and actual prices paid for materials and services
Materials costs/price control: continuous monitoring and evaluation of prices and price increases
Materials costs/price reduction: continuous monitoring and evaluation of activities initiated to reduce costs
Product quality
The quality of purchased materials and services
Product quality - total quality management: ensure that goods and services ordered are delivered according to the company’s specifications
Procurement’s involvement in New Product Development (NPD) - product innovation: indication of why new product development projects are becoming out of control both in terms of costs and time-to-market
Procurement logistics/delivery
(supply chain management)
An efficient incoming flow of purchased materials and services
Requisitioning and ordering: control of timely and accurate handling of requisitions
Supplier delivery reliability: control of timely delivery by suppliers - level of control over the incoming materials flow
Inventory management and control: control of quantities delivered - determination and control of inventory levels
Sustainability
To secure the sustainability of purchased materials and services (on product-, supplier- and SC level)
Improve carbon footprint, reduce waste and improve fuel efficiency
Social impact and ethical practices - labour conditions and safety
Procurement organisation
The internal resources used to achieve goals and objectives of procurement
Management - the way the procurement department is organized and strategically managed
Staff and competencies
Information systems
Processes and procedures
Supplier relationships
The external resources used to achieve goals and objectives of procurement
Supplier operational performance - monitoring the operational relationship with the supplier
Supplier satisfaction - monitoring the buying company’s position versus its suppliers
monitoring the quality of relationships with key suppliers
