Week 2 - SCM & Make or buy?

Question 1

What is Supply chain management? (Christopher, 2005)

Answer 1

The management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to supply chain as a whole

Question 2

What is the purpose of supply chain management? (Mentzer et al., 2001)

Answer 2

To improve the long term performance of the individual companies and the supply chain as whole through systemic strategic coordination of the traditional business functions

Question 3

What are some examples of different activities within a supply chain? (5)

Answer 3

• Buy
• Make
• Store
• Move
• Sell

Question 4

What are the 3 types of supply chain strategies?

Answer 4

• Stable
• Reactive
• Efficient reactive

Question 5

When is a stable supply chain strategy appropriate?

Answer 5

For supply chains focused on execution, efficiencies and cost performance through connecting technology with little need for real time information

Question 6

When is a reactive supply chain strategy appropriate?

Answer 6

Is appropriate for supply chains that fulfil demand from trade partners e.g kit manufacturers for sport teams

Question 7

When is an efficient reactive supply chain strategy appropriate?

Answer 7

For supply chains focused on efficiency and cost management e.g in supermarket chains distribution centres and manufacturers replacing sold goods

Question 8

What are the four flows in supply chains?

Answer 8

• information
• Primary cash
• Primary product
• Reverse product

Question 9

What does information flow in supply chains include? (6)

Answer 9

• Invoices
• Sales literature
• Specifications
• Receipts
• Orders
• Rules and regulations

Question 10

What does primary cash flow in supply chains include? (2)

Answer 10

• Payments of products
• Supplies

Question 11

What does primary product flow in supply chains include? (5)

Answer 11

• Materials
• Components
• Supplies
• Services
• Finished products

Question 12

What does reverse product flow include? (4)

Answer 12

• Returns for repair
• Replacements
• Recycling
• Disposals

Question 13

What’s the main difference between vertical and horizontal Integration?

Answer 13

Supply chain of a company is owned by the company and grows from an entrepreneurial base and adding management layers or mergers. Where as in horizontal integration it expands by acquiring a similar company in the same industry which can lead to a monopoly

Question 14

Benefits of vertical integration (3)

Answer 14

• Control
• no dependency for components or services
• Operations can be synchronised with other company functions

Question 15

Benefits of lateral integration (3)

Answer 15

• Economies of scale and scope
• Focuses on particular business
• Know their market well

Question 16

Objectives in vertical integration (4)

Answer 16

• Strengthen it’s supply chain
• Reduce it’s production costs
• Capture upstream or downstream profits
• Access downstream distribution channels

Question 17

What are some Organisational Objectives in horizontal integration? (5)

Answer 17

• Increase it’s size
• Diversify it’s product or service
• Achieve economies of scale
• Reduce competition
• Gain access to new customers of the same market

Question 18

What are the four fundamentals of supply chain management?

Answer 18

• Objectives
• Philosophy
• Manage the flows
• Relationships

Question 19

What is the objective of supply chain management? (four fundamentals)

Answer 19

Aims to achieve a competitive advantage through enhanced customer service, optimised costs and investments

Question 20

What is the supply chain management ‘philosophy’? (one of four fundamentals)

Answer 20

That a product reaches the final consumer through a chain of companies which will typically include suppliers, processors, distributors and retailers to help the organisation gain a true competitive advantage

Question 21

What is a ‘make-or-buy’ decision?

Answer 21

Refers to an act of using cost-benefit analysis to make a strategic choice between manufacturing a product/service in-house or purchasing from an external supplier

Question 22

When will a make-or-buy decision occur? (4)

Answer 22

When a producing company faces:
- Diminishing capacity
- Experiences problems with the current suppliers
- Sees changing demand
- Offers a new product or service to market

Question 23

What is insourcing? (aka make)

Answer 23

Assigns a project to a person or department within the company instead of hiring an outside person or company, utilising developed resources within the organisation

Question 24

What is an example of Insourcing? (aka make)

Answer 24

Insourcing technical support for a new product because the company already has existing technical support for another product within the organisation

Question 25

Critique of insourcing (aka make)

Answer 25

Can be more expensive for a company because it often involves the implementation of new processes to start a different division within the organisation

Question 26

What is the impact of Insourcing? (aka make) (5)

Answer 26

• Use idle capacity and resources
• Lead time reduction
• Overhead recovery (fixed cost recovery)
• Manage exchange rate risks
• Cost known in advance

Question 27

What is outsourcing?

Answer 27

Is the supply of products/services governed by an ongoing or time-specific agreement involving a degree of delegation of management responsibility where that service would more typically be provided by an in-house team of the customer themselves

Question 28

What are the key decisions that are made in outsourcing (aka buy)? (5)

Answer 28

• How the business benefits
• Role of procurement
• Selection criteria
• Contractual obligations
• Legal implications

Question 29

How could outsourcing (aka buy) go wrong? (7)

Answer 29

• Mobilisation weaknesses
• Poor specification
• Poor measures of performance
• Lack of outsources personnel
• Poor contract management
• Indecisive management actions when dealing with failure to meet contact obligations
• Cost escalation