Week 7: Purchasing & Supply Chain Design Flashcards
What are supply chains?
Supply Chain Uncertainty Framework
designed to help managers understand the nature of demand for their products and then devise the supply chain that can best satisfy that demand
Strategic sourcing
the development and management of supplier relationships to acquire goods and services in a way that aids in achieving the needs of a business
Sourcing
a process suitable for procuring products that are strategically important to the firm (complex)
Vendor managed inventory
when a customer allows the supplier to manage the inventory policy of an item or group of items
Forward buying
when a customer, responding to a promotion, buys far in advance of when an item will be used
Bullwhip effect
- the variability in demand is magnified as we move from the customer to the producer in the supply chain (supply chains are subject to systems dynamics)
- increasing variability of orders upstream in the supply chain
Functional products
everyday items, stable demand, long life
Innovative products
unpredictable demand, short life
Efficient supply chains
utilize strategies aimed at creating the highest cost efficiency
Responsive supply chains
utilize strategies aimed at being responsive and flexible
Outsourcing
moving some of a firm’s internal activities and decision responsibility to outside provide
Vertical integration
practice where a single entity controls the entire process of a product, from the raw materials to distribution
Make vs. Buy decisions
is a decision to make or develop a component of a project as compared to outright purchasing, licensing, leasing, or procuring the component can be thought of as a very simple decision to make
Inventory turnover
a measure of supply chain efficiency
Cost of goods sold
the annual cost for a company to produce the goods or services provided to customers
Average aggregate inventory value
the average total value of all items held in inventory for the firm, valued at cost
Weeks of supply
preferred measure of supply chain efficiency that is mathematically the inverse of inventory turnover times 52
The Bullwhip Effect
ordering patterns experience increasing variance as you proceed upstream
What is strategic about sourcing?
as a result of globalization and inexpensive communications tech, the basis for competition is challenging (what matters is the ability to make the most of available capabiliies
