scm 3- more logistics Flashcards
What are the 4 P’s
1.Price- list price, discounts, bundling, credit terms
2. Place- logistics, distribution, inventory, channel
3. Promotion- advertising, sales force, publicity, sales promo
4. Product- Functionality, brand, packaging, services
Different types of goods held in inventory
- Raw Materials
- Final products
- WIP
- pre-assembled or preprocessed goods
5.supplies
What are RMs and what do they represent in a supply chain?
Raw Materials:
Definition: Raw materials are the fundamental building blocks used to create a product. They are the basic components required for manufacturing.
Role in Supply Chain:
Raw materials serve as the starting point for production.
Manufacturers procure raw materials to transform them into finished goods.
Efficient management of raw materials ensures uninterrupted production.
What is WIP and what do they represent in a supply chain?
Definition: WIP refers to items currently in the process of being made or worked on within the supply chain.
Role in Supply Chain:
WIP represents partially completed products.
It includes goods at various production stages (e.g., assembly lines, fabrication, or processing).
Tracking WIP helps optimize production flow and resource allocation.
Examples: Half-assembled cars, partially sewn garments, etc.
What are final products and what do they represent in a supply chain?
Definition: Finished goods are fully completed products ready for sale and use by customers.
Role in Supply Chain:
Finished goods are the end result of production.
They are stocked in warehouses or retail stores awaiting customer orders.
Efficient management ensures timely delivery to customers.
Examples: Packaged electronics, clothing, furniture, etc.
What are supplies and what do they represent in a supply chain?
Maintenance, Repair, and Operating (MRO) Supplies:
Definition: MRO supplies are essential items necessary for maintaining operations but not directly used in production.
Role in Supply Chain:
MRO supplies support day-to-day business activities.
They include items like tools, lubricants, office supplies, and cleaning materials.
Proper management ensures smooth operations and prevents disruptions.
Examples: Office stationery, spare parts, cleaning agents, etc.
Why do we hold Inventory when designing our Supply Chain ?.
- Risk Mitigation- In manufacturing we sometimes carry large amounts of inventory. This safe guards from some uncertainty or risk in our supplier base.
Our aim is to mitigate should a/some suppliers have some risk of shortages, work stoppages, poor quality, or late deliveries, this is the reason why more stock may be carried to ensure the risk is reduced.
The stock level in between deliveries is usually triggered by a predetermined value in stock which would trigger a reorder of stock, This is traditionally known as a reorder quantity level.
During this time for the delivery of the new stock to arrive the amount we use would usually be in our buffer stock before coming to a critical stock point which should not be entered known as a critical stock level. Usually both out inventory and stock is managed to avoid getting to that level. - Seasonal demand-Building stock of an item which is traditionally a seasonal item such as during winter to store corn to allow for production during months when the climate does not allow, stock piles of the raw material is kept during months of harvest to allow continuous production.
- Discounts based on Bulk Purchasing – Purchasing in large quantities sometimes allowing for extra discounts. The discounts are based on suppliers not only getting a larger sale than what they are budgeting for but also for large shipment eg using vessels by chartering an entire vessel affords for a cheaper transportation cost.
- Surge Demands- This can be in the case of a similar type of seasonal demand, in many cases this can be compared to electronics during Christmas when surge in purchases of Gaming systems and cell phones.
What is the bullwhip effect?
The bullwhip effect is the distortion of demand and increased volatility that occurs as forecasts and orders move from the retailer up to the manufacturer. When a spike in demand occurs, each party in the supply chain adds additional products to their orders to act as a buffer, also known as demand information amplification, is one of the principal obstacles in supply chains. This was a concept coined by P & G, Proctor and Gamble in the 1990’s.
Effects of the Bullwhip Effect
Excess Inventory
Lost Revenue
Overinvestment in Production
Excess investment in Inventory or overstocking of items.
Lost Revenue
Decline in Customer Service
Delayed Schedule
Layoffs
Bankruptcy
.
What is a Global Value Chain
Global value chains (GVCs) are where the different stages of the production process are
located (or can be located) across different countries. Globalization motivates companies
to restructure their operations internationally through outsourcing and offshoring of
activities.
Leveraging on international outsourcing arrangements to optimize organizational
efficiency and/or value creation
The proper use of outsourcing can reduce costs, improve returns, and help a company
focus on its core competencies
* However, research has shown that outsourcing is often a major culprit for the continued loss
of international competitiveness by western companies due to lack of strategy
How to prevent the bullwhip effect
Clear communication with all entities ensuring that all abnormalities are communicated as they occur
Disadvantages of outsourcing
Loss of Control and Monitoring: When you outsource, you’re entrusting certain tasks or processes to a third party. This can lead to concerns about losing control over quality, performance, and adherence to standards.Proper monitoring mechanisms are essential to address this challenge.
Communication Issues: Effective communication is crucial for successful outsourcing.Language barriers, time zone differences, and cultural nuances can hinder smooth collaboration between your organization and the outsourcing provider.
Time Zone and Cultural Incompatibility: Working across different time zones can lead to delays in communication and project execution.Additionally, cultural differences may impact understanding, expectations, and work dynamics.
Risks of Losing Intellectual Property and Data Security: Sharing sensitive information with an external provider can pose security risks.Ensuring robust data protection measures and clear contractual terms is essential to mitigate these risks.
Inefficient Skills and Output: If the outsourcing team lacks the necessary skills or expertise, it can result in subpar work quality.Proper vendor selection and ongoing performance evaluation are critical to address this challenge2.
Relinquishing ownership should not negatively affect control:
* From a competitive advantage standpoint, the activity is not a direct source of
competitive advantage.
* As such, one may be inclined to outsource – but even if its not a source of advantage, it
may crucial to brining your product to market
* Control can be maintained through oversight (but increase transaction cost) or Formal
contracting
* Bargaining power in the relationship
* Even as you outsource, you (the firm) should be mindful of changes in bargaining power.
* When engaging with subcontracting, you always want to ensure that you dependence
on the other party isn’t substantial
What is a core compatibility assessment?
Using VRIO framework to understand what resources help obtain and maintain competitive advantage
They are activities that offer long-term competitive advantage and must be invested in,
controlled, and protected. Thus, for a firm to keep its competitive advantage, the core
activity(ies) should be kept in-house.
* Probing questions may include:
* Does activity need highly specialized design and manufacturing skills?
* Does activity have a high impact on what customers perceive as the most important
product attributes?
* Does activity provide potential access to a wide variety of possible future markets?
* Is activity difficult for competitors to imitate?
