Section A: Introduction to Supply Chain Management Flashcards
What two platforms spearheaded the Supply Chain Management revolution of the 1970s and 1980s?
The two platforms that spearheaded the Supply Chain Management revolution are: 1. Innovators worked with suppliers as trusted partners to pursue sharing the reduction of costs, meeting customer needs, improving quality from the earliest stage of supply chain to the end product. 2. Computerizing management systems. It incorporated Manufacturing Resource Planning that connected activities across multiple functional groups and provide the associated views of each activity’s impact and conflict.
What is ERP?
ERP is Enterprise Resource Planning Software systems for running business transactions. Manufacturing Resource Planning (MRP II) served as the core of developing these interconnected platforms between different functional groups. ERP allowed enterprises to replace slow paper-based forms with rapid information exchange.
Core Competency
An organization’s ‘Core Competency’ is what it does best.
Supply Chain
Supply Chain is the global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.
Service Industry
A Service Industry is 1. In its narrowest sense, an organization that provides an intangible product (e.g., medical or legal advice) 2. In its broadest sense, all organizations except farming, mining, and manufacturing. Includes retail trade; wholesale trade; transportation and utilities; finance, insurance, and real estate; construction; professional, person, and social services; and local, state, and federal governments.
Supply Chain Management
Supply Chain Management is The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.
Upstream
Upstream is Used as a relative reference within a firm or supply chain to indicate moving in the direction of the raw material supplier.
Downstream
Downstream is Used as a relative reference within a firm or supply chain to indicate moving in the direction of the end customer.
Echelon
Echelon is A distinct function within the supply chain. An echelon can comprise of multiple echelons. If an echelon adds more value than cost, it should be included. If it consumes more value than it costs, it should be eliminated.
What are the three primary flows that need to be managed optimally from the perspective of the overall supply chain (instead of being managed optimally individually)?
The 3 primary flows managed in a supply chain are 1. Flow of information. (Both directions) 2. Flow of cash (Flows upstream) 3. Flow of materials (Flows downstream)
Reverse logistics
Reverse Logistics is The supply chain for returns. This system needs its own planning and infrastructure to maintain efficiency and be separate from the forward supply chain.
What’s the first step of an organization in forming a supply chain?
The first step of an org in forming a supply chain is Internally orienting to become more cross functional. After which, an organization can integrate externally.
What are the characteristics of how departments function in a functional oriented organization?
Characteristic of a functional oriented org -Each operates in its own silo. -Slow/formal communication and conflicting metrics -Incentivized to maximize its own metrics for success
What are a couple examples of functionally oriented organizations & their priorities?
Sales and marketing’s highest priority will be customer service, which results in requests for expedited orders or changes in what is being produced with lttle notice, maintaining high inventories and/or a distribution network with facilities near each market for rapid delivery –> signficant inventory, infrastructure, and labor costs.
Finance’s highest priority is to minimize inventory and physical assets, Reducing inventory or having a less extensive distribution network, high production efficiency to minimize costs.
What is Value Chain Analysis (K)
Value Chain Analysis is An examination of all links a company uses to produce and deliver its products and services, starting from the origination point and continuing through delivery to the final customer. The end goal is: -effective collaboration -prioritizing processes over departmental goal -eyes on big picture win for company
Logistics
Logistics is a unifying role… 1) In a supply chain management context, it is the subset of supply chain management that controls the forward and reverse movement, handling, and storage of goods between origin and distribution points. 2) In an industrial context, the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities. 3) In a military sense (where it has greater usage), its meaning can also include the movement of personnel.
Risk management
Risk Management is The identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Examples include insurance, geographic diversification, redundancy of operations, having multiple suppliers.
Bullwhip Effect
The Bullwhip Effect is an extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.
What are the core functions within the supply chain?
Core functions within the supply chain are Manufacturing and Materials Management
What is the role of Manufacturing?
The role of manufacturing Manufacturing adds value to society by transforming raw materials and labor into products and services that are in demand.
Operations Management
Operations Management 1) The planning, scheduling, and control of the activities that transform inputs into finished goods and services. 2) A field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or service organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions as they affect the operation.
Materials Management
Materials Management is the grouping of management functions supporting the complete cycle of material flow, from the purchase and internal control of production materials to the planning and control of work in process to the warehousing, shipping, and distribution of the finished product.
What is the second major responsibility of a Materials Manager?
The 2nd major responsibility of a Materials Manager In addition to making the best use of organizational resources, a materials manager has a second major responsibility, which is to ensure meeting a predetermined level of customer service.
Customer Service
Customer Service is 1) The ability of a company to address the needs, inquiries, and requests of customers. 2) A measure of the delivery of a product to the customer at the time the customer specified.
Customer expectations for delivery can be expressed as Demand Lead time, otherwise defined as…
Demand Lead Time the amount of time potential customers are willing to wait for the delivery of a good or a service.
Objectives of Manufacturing (the 7 rights)
The seven “rights” of logistics define the objectives of manufacturing: Provide the right number of the right products and services at the right time, the right place, and the right cost and at the right quality level.
Order Qualifiers
Order Qualifiers are those competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace. The minimum customer expectations for lead times, and other specifics. For example, a firm may seek to compete on characteristics other than price, but in order to “qualify” to compete, its costs and the related price must be within a certain range to be considered by its customers.
Order Winners
Those competitive characteristics that cause a firm’s customers to choose that firm’s goods and services over those of its competitors. Order winners can be considered to be competitive advantages for the firm. Order winners usually focus on one (rarely more than two) of the following strategic initiatives: price/cost, quality, delivery speed, delivery reliability, product design, flexibility, after-market service, and image. Order winners can be a unique capability or quality no competitor has or a combination of price, product features, quality, and related services that customers will see as a superior value.
Specifically, materials managers perform two major organizational functions:
Material Managers perform: 1) Manufacturing planning and control (MPC). MPC is a blanket term that encompasses high-level planning, master scheduling, material requirements planning (MRP), and execution control along with the related checks on available capacity. 2) Logistics. Materials managers are responsible for incoming physical supply and outgoing physical distribution. They monitor and control purchasing, warehouses, and raw materials, work-in-process, and finished goods inventories.
Demand Lead Time
Demand Lead Time The amount of time potential customers are willing to wait for the delivery of a good or a service.
Sustainability
Sustainability is an organizational focus on activities that provide present benefit without compromising the needs of future generations.
United Nations Global Compact
UNGC is a voluntary initiative whereby companies embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anti-corruption.
UN Global Compact Management Model
The UNGC management model is a framework for guiding companies through the process of formally committing to, assessing, communicating the United Nations Global Compact and its principles.
Strategic Plan
The plan for how to marshal and determine actions to support the mission, goals, and objectives of an organization. Generally includes an organization’s explicit mission, goals, and objectives and the specific actions needed to achieve those goals and objectives.
Product differentiation
Product differentiation a strategy of making a product distinct from the competition on a nonprice basis such as availability, durability, quality, or reliability.
Business Plan
1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement. A business plan is usually stated in terms of dollars and grouped by product family. The business plan is then translated into synchronized tactical functional plans through the production planning process (or the sales and operations planning process). Although frequently stated in different terms (dollars versus units), these tactical plans should agree with each other and with the business plan. 2) A document consisting of the business details (organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business.
SMART
SMART is an abbreviation for organizational goals that are specific, measurable, achievable/attainable, relevant/realistic, and timely.
What-if Analysis
What-if Analysis is the process of evaluating alternate strategies by answering the consequences of changes to forecasts, manufacturing plans, inventory levels, and so forth.
Tactical Plans
Tactical Plans is the set of functional plans (e.g., production plan, sales plan, marketing plan) synchronizing activities across functions that specify production levels, capacity levels, staffing levels, funding levels, and so on, for achieving the intermediate goals and objectives to support the organization’s strategic plan.
Performance Standard
Performance Standard In a performance measurement system, the accepted, targeted, or expected value for the criterion.
Metrics
Metrics can determine the extent to which strategy is being realized. Need three things to be useful: 1) What to measure and how to measure 2) The target value or goal a.k.a. performance standard 3) The result or measurement
Metrics
Metrics can determine the extent to which strategy is being realized. Metrics need three things to be useful: 1) Performance criterion - what to measure/how to measure it 2)Target value or goal, which is called a performance standard. 3) An actual result or measurement.
Performance Standard (K)
Performance Standard is a performance measurement system, the accepted, targeted, or expected value for the criterion.
Key Performance Indicator (KPI)
Key Performance Indicator (KPI) A financial or nonfinancial measure that is used to define and assess measures. A metric used to measure the overall performance or state of affairs. SCOR level 1 metrics are considered KPIs.
Supply Chain Operations Reference (SCOR) model
SCOR model The standard cross-industry diagnostic tool for supply chain management. The SCOR model describes the business activities associated with satisfying a customer’s demand, which include plan, source, make, deliver, return, and enable. Use of the model includes analyzing the current state of a company’s processes and goals, quantifying operational performance, and comparing company performance to benchmark data.
The Balanced Scorecard
The Balanced Scorecard A list of financial and operational measurements used to evaluate organizational or supply chain performance. The dimensions of the balanced scorecard might include customer perspective, business process perspective, financial perspective, and innovation and learning perspectives. It formally connects overall objectives, strategies, and measurements. Each dimension has goals and measurements.
The Balanced Scorecard (Modified by Kaplan & Norton)
Kaplan and Norton added three other perspectives to The Balanced Scorecard to help organizations focus on the long term: 1. The customer perspective helps organizations stay focused on their customers’ changing needs. 2. The business process perspective helps organizations measure the cost and efficiency of their processes and continually improve them. 3. The innovation and learning perspective helps spur investment in future growth and workforce maturity.
Participative Design/Engineering (or Current Engineering) (K)
Participative Design/Engineering (or Current Engineering) A concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs.
Fixed cost
Fixed cost : An expenditure that does not vary with the production volume; for example, rent, property tax, and salaries of certain personnel.
Variable cost (K)
Variable cost : An operating cost that varies directly with a change of one unit in the production volume (e.g., direct materials consumed, sales commissions).
Make-or-buy Decision
Make-or-buy Decision The act of deciding whether to produce an item internally or buy it from an outside supplier. Factors to consider in the decision include costs, capacity availability, proprietary and/or specialized knowledge, quality considerations, skill requirements, volume, and timing.
Outsourcing
Outsourcing The process of having suppliers provide goods and services that were previously provided internally. Outsourcing involves substitution—the replacement of internal capacity and production by that of the supplier.
Subcontracting (K)
Subcontracting Sending production work outside to another manufacturer.
Scrap
Scrap Material outside of specifications and possessing characteristics that make rework impractical.
Service
Service Used to describe those activities that support the production or distribution functions in any organization, such as customer service and field service.
