SCM #4 SC Drivers

Question 1

What are drivers of SC performance?

Answer 1

1. Facilities
2. Inventory
3. Transportation
4. Infos
5. Sourcing
6. Pricing

Question 2

What are role of facilities?

Answer 2

1. Role in SC
   - Where
   - Production sites; storage site
   - Key drivers in SC performance
2. Role in competitive strategy
   - Efficiency: economies of scale, effect of bundling
   - Responsiveness: large no. of smaller facilities

Question 3

What are (3) components of Facilities decision?

Answer 3

• Capability: Flexible, dedicated or combination of 2
  Product focus or a functional focus
• Location
  Central (efficiency) or decentralization (responsiveness)
• Capacity
  flexibility vs efficiency

Question 4

What are main 3 role of inventory?

Answer 4

1. mismatch btw S & D
2. sources of cost, influence on responsiveness
3. Flow times in SC
   - Material Flow time (T) (M enter - exit)
   - Throughput (R) Rate (sales to end-consumers occur)
   - Little law: I = R * T

Question 5

1. Cal. I (little law) with T = 10hrs (assembly process), R = 60units/h
2. If I is 300units, I = ? when R is the same?

Answer 5

Answer 1: Inventory = 60 * 10 = 600 units
Answer 2: Flow time = 300 units / 60 units per hour = 5 hours
» Inventory and throughput are “synonymous” in a SC

Question 6

What are the role of inventory

Role in competitive strategy?

Answer 6

1. Efficiency: if cost is more important, I can be reduced
2. Responsiveness: firm can locate larger amounts of I closer to cus.
3. Trade-off: btw Responsiveness & efficiency

Question 7

What are (5) components of inventory decisions?

Answer 7

1. Cycle I:
   - avg amount of I used to satisfy D btw shipments from Suppliers
   - lot size
   - reorder amount
2. Safety I:
   - D exceeds expectations
   - conflict: cost of I vs cost of losing sale
3. Seasonal I:
   - predictable variability in D
   - Conflict: cost of additional I vs flexible production
4. Level of Product Availability
   - Trade off btw cus service; cost
   - Fraction of D is served on time
5. Overall Trade-off: Responsive vs Efficiency

Question 8

What (2) role of transportation?

Answer 8

1. In SC:
   - Move products
   - impact on responsiveness & efficiency
2. Competitive strategy
   - Efficiency priority: slower trans.
   - Responsiveness priority: faster transportation

Question 9

What are 2 roles of Infos?

Answer 9

1. In SC:
   - Connection btw various stages in SC
   - allows coordination
   - crucial to daily operation (I levels, product scheduling)
2. in competitive strategy:
   - reduces the need for trade off btw E and R, SC become more efficient & more responsive
   - Tremendous growth of Info tech
   - Reduce cost, improve responsiveness
   - Replacement of stocks by infos

Question 10

What are (5) Components of Infos decisions?

Answer 10

1. Push & Pull:
   D infos transmitted quickly through out the SC
2. Coordination & Infos sharing:
   - shared infos: max SC profitability btw all stages
   - Critical for success
3. Sales & Operations Planning (S & OP)
   - creating SC (Production & I) to meet anticipated level of D
   - plan SC needs & Project revenues & profits
4. Enabling tech:
   - E-business
   - ERP sys.
   - SCM software
   - Identification sys & Software (Barcode, RFID)
5. Overall trade-off: complexity vs value

Question 11

What are (2) roles of sourcing?

Answer 11

1. In SC:
   - Set of B processes required to purchase goods & services
   - Supplier selection, contract negotiation
   - Single vs multiple, low vs best cost, local vs global
2. In Competitive strategy:
   - Sourcing decisions are crucial to level of E & R in SC
   - In-house vs outsource (make or buy)

Question 12

What are (2) components of Sourcing Decisions?

Answer 12

1. Components of Sourcing decisions:
   - In-house vs outhouse
   - Sup evaluation, sup selection, sup development
   - Procurement process (delivery call-offs, sup connections)
2. Overall trade-off
   increase the total SC surplus

Question 13

What are 2 roles of pricing?

Answer 13

1. Role in SC
   - the amount of charge cus.
   - match D & S
2. Role in Competitive Strategy
   - using opt pricing strategies to improve efficiency & Responsiveness
   - low price & low product availability
   - vary prices by response times

Question 14

What are components of pricing decisions?

Answer 14

1. Components of pricing decisions:
   - Pricing & economies scale
   - everyday low pricing vs high-low pricing
   - fixed price vs menu pricing
2. Overall trade-off: increase the firm profits

Question 15

What are 3 components of Trans decisions?

Answer 15

1. Mode of trans:
   - vary in cost, speed, size of shipment, flexibility
2. Route & network selection:
   - NW: collection of locations & Routes
3. Overall trade-off: Fast transportation: greater responsiveness but greater cost, lower inventory