Supply chain - ANSWER the network of activities that deliver a product or service to the
customer.
Activities within the supply chain - ANSWER 1. Obtaining raw materials
2. Transforming raw materials into basic finished goods
3. Further processing of basic finished goods into customized products that are sold
Supply chain echelon/tiers - ANSWER -the lower the tier level, the closer the level to the
customer
Objective of supply chain management - ANSWER build a chain of suppliers that focuses
on maximizing value to the ultimate customer
Supply Chain Management - ANSWER The business function that coordinates all of the
network links
-coordinates movement of goods through supply chain from suppliers to manufacturers to
distributors
-promotes information sharing in the supply chain, such as forecasts, sales data, &
promotions
The Supply Chain's Strategic Importance - ANSWER supply chain management is the
integration of the activities that:
-procure materials and services
-transform them into intermediate goods and final products, &
-deliver them through a distribution system
1
,Activities performed as part of supply chain management - ANSWER 1. Suppliers
2. Distributors
3. Warehousing and inventory
4. Transportation vendors
5. Order fulfilment
6. Credit and cash transfers
7. Accounts payable and receivable
8. Sharing customer, forecasting, and production information
Outsourcing - ANSWER -transfers traditional internal activities and resources of a firm to
outside vendors
-utilizes the efficiency that comes with specialization
-firms outsource:
Information technology, accounting, legal, logistics, & production
6 sourcing strategies - ANSWER 1. Negotiating with many suppliers
2. Long-term partnering with few suppliers
3. Vertical integration
4. Joint ventures
5. Keiretsu
6. Virtual companies that use suppliers on an as needed basis
Many Suppliers - ANSWER -Commonly used for commodity products
-Purchasing is typically based on price
-Suppliers compete with one another
-Supplier is responsible for maintaining necessary levels of technology, expertise, forecasting
abilities, as well as cost, quality, and delivery competencies
2
,Few Suppliers - ANSWER -Buyer forms longer term relationships with fewer suppliers
-Create value through economies of scale and learning curve improvements
-Suppliers more willing to participate in JIT programs and contribute design innovations and
technological expertise
-Cost of changing suppliers is huge
Trade secrets and other alliances
Vertical Integration - ANSWER -developing the ability to produce goods or services
previously purchased
-integration may be forward, towards the customers, or backwards, towards suppliers
-can improve cost, quality, and inventory but requires capital, managerial talent, and
demand
-risky in industries with undergoing technological changes
Joint venture - ANSWER -formal collaborations:
Enhance skills, secure supply, & reduce costs
-cooperate without diluting the brand or conceding competitive advantage
Keiretsu Networks - ANSWER -part collaboration, part purchasing from few suppliers, and
part vertical integration
-supplier becomes part of the company coalition
-often provide financial support for suppliers through ownership or loans
-members expect long-term relationships and provide technical expertise and stable quality
production
-may extend through several tiers of the supply chain
Virtual Companies - ANSWER -Rely on a variety of good, stable relationships to provide
services on demand
3
, -Exceptionally lean performance, specialized management expertise, low capital investment,
flexibility, and speed
Supply chain risk - ANSWER -More reliance on supply chains means more risk
-customer and its suppliers are more dependent on each other as the number of suppliers
used decreases
-risk is compounded by globalization and logistical complexity
Types of risk - ANSWER Traditional Concerns:
-vender reliability
-vendor quality
Concerns Due To Globalization:
-increase shipping times =>less reliable logistics
-tariffs and quotas impacting companies ability to do business
-more complex information flows
-greater political/currency risks
Mitigation Tactic (supplier fails to deliver/supplier with quality problems) - ANSWER -use
multiple suppliers, contract with penalties, subcontractors on retainer, pre-planning
-improver supplier selection process, require supplier certification, train and monitor
suppliers
Mitigation Tactic (logistic delays or damage/distribution) - ANSWER -have redundant
transportation modes and warehouses, improve packaging design, contracts with penalties
- careful partner selection, contracts with penalties, monitoring of partners
Mitigation Tactic (political/economic) - ANSWER -political risk insurance, diversify across
multiple countries, use franchising and licensing agreements
-hedge to combat exchange rate risk, purchase contracts that address price fluctuations
4
customer.
Activities within the supply chain - ANSWER 1. Obtaining raw materials
2. Transforming raw materials into basic finished goods
3. Further processing of basic finished goods into customized products that are sold
Supply chain echelon/tiers - ANSWER -the lower the tier level, the closer the level to the
customer
Objective of supply chain management - ANSWER build a chain of suppliers that focuses
on maximizing value to the ultimate customer
Supply Chain Management - ANSWER The business function that coordinates all of the
network links
-coordinates movement of goods through supply chain from suppliers to manufacturers to
distributors
-promotes information sharing in the supply chain, such as forecasts, sales data, &
promotions
The Supply Chain's Strategic Importance - ANSWER supply chain management is the
integration of the activities that:
-procure materials and services
-transform them into intermediate goods and final products, &
-deliver them through a distribution system
1
,Activities performed as part of supply chain management - ANSWER 1. Suppliers
2. Distributors
3. Warehousing and inventory
4. Transportation vendors
5. Order fulfilment
6. Credit and cash transfers
7. Accounts payable and receivable
8. Sharing customer, forecasting, and production information
Outsourcing - ANSWER -transfers traditional internal activities and resources of a firm to
outside vendors
-utilizes the efficiency that comes with specialization
-firms outsource:
Information technology, accounting, legal, logistics, & production
6 sourcing strategies - ANSWER 1. Negotiating with many suppliers
2. Long-term partnering with few suppliers
3. Vertical integration
4. Joint ventures
5. Keiretsu
6. Virtual companies that use suppliers on an as needed basis
Many Suppliers - ANSWER -Commonly used for commodity products
-Purchasing is typically based on price
-Suppliers compete with one another
-Supplier is responsible for maintaining necessary levels of technology, expertise, forecasting
abilities, as well as cost, quality, and delivery competencies
2
,Few Suppliers - ANSWER -Buyer forms longer term relationships with fewer suppliers
-Create value through economies of scale and learning curve improvements
-Suppliers more willing to participate in JIT programs and contribute design innovations and
technological expertise
-Cost of changing suppliers is huge
Trade secrets and other alliances
Vertical Integration - ANSWER -developing the ability to produce goods or services
previously purchased
-integration may be forward, towards the customers, or backwards, towards suppliers
-can improve cost, quality, and inventory but requires capital, managerial talent, and
demand
-risky in industries with undergoing technological changes
Joint venture - ANSWER -formal collaborations:
Enhance skills, secure supply, & reduce costs
-cooperate without diluting the brand or conceding competitive advantage
Keiretsu Networks - ANSWER -part collaboration, part purchasing from few suppliers, and
part vertical integration
-supplier becomes part of the company coalition
-often provide financial support for suppliers through ownership or loans
-members expect long-term relationships and provide technical expertise and stable quality
production
-may extend through several tiers of the supply chain
Virtual Companies - ANSWER -Rely on a variety of good, stable relationships to provide
services on demand
3
, -Exceptionally lean performance, specialized management expertise, low capital investment,
flexibility, and speed
Supply chain risk - ANSWER -More reliance on supply chains means more risk
-customer and its suppliers are more dependent on each other as the number of suppliers
used decreases
-risk is compounded by globalization and logistical complexity
Types of risk - ANSWER Traditional Concerns:
-vender reliability
-vendor quality
Concerns Due To Globalization:
-increase shipping times =>less reliable logistics
-tariffs and quotas impacting companies ability to do business
-more complex information flows
-greater political/currency risks
Mitigation Tactic (supplier fails to deliver/supplier with quality problems) - ANSWER -use
multiple suppliers, contract with penalties, subcontractors on retainer, pre-planning
-improver supplier selection process, require supplier certification, train and monitor
suppliers
Mitigation Tactic (logistic delays or damage/distribution) - ANSWER -have redundant
transportation modes and warehouses, improve packaging design, contracts with penalties
- careful partner selection, contracts with penalties, monitoring of partners
Mitigation Tactic (political/economic) - ANSWER -political risk insurance, diversify across
multiple countries, use franchising and licensing agreements
-hedge to combat exchange rate risk, purchase contracts that address price fluctuations
4
