MGSC 487 GAFFNEY EXAM 1 VERIFIED STUDY GUIDE
Evolution of the supply chain - Answers - Early 1900's: clerical and tactical, focused on
policies and procedures
key challenges: availability of supply and cost management
Early 21st century:strategy orientation, global supply chains, executive level leadership
key challenges: sustainability, security, globalization, risk management
Spend in the supply chain - Answers - lead times are usually in months, value add times
as very small percentages
Basically it pays to invest in supply chain to improve it as it is often one of the most
costly parts of an operation
Profit leverage effect - Answers - the increase in corporate profit obtained by decreasing
purchase spend; measured by determining the increase in profit obtained by a decrease
in purchase spend (ex. in the book shows that in order to achieve increased revenue of
$6mil, the company could either increase sales by 75% or decrease purchase spend by
10%); more realistic in firms that have neglected supply and given sales a lot of
attention already
better to dec spending than inc sales
Return on assets - Answers - displayed as a percentage; an indicator of how profitable
a company is relative to its total assets - gives an idea as to how efficient management
is at using its assets to generate earnings (higher is better, in terms of attractiveness to
investors)
Contributing to organizational strategy - Answers - Operational vs Strategic Contribution
Operational= day to day issues
Strategic= Forward thinking
Direct vs Indirect Benefit
Direct= Tangible return, ROA, Profit leverage
Indirect "soft": information source, supplier relationships, customer satisfaction
Supply Strategy Questions: - Answers - Supply Strategy
who? what? where? when? why? how much? what price?
, Supply Strategy: What? - Answers - the most fundamental question.. make or buy,
insourcing, outsourcing
will the organization require standard items/materials that are readily available, or will
they need special, custom-specified requirements
Supply Strategy: Quality? - Answers - a more consistent quality of end product output is
essential to maintaining and growing market share - strategy for developing suppliers'
knowledge of quality requirements and helping them implement program to achieve
these is essential (zero defect plans, process quality control programs, quality
certification programs)
Supply Strategy: How Much? - Answers - how much will be acquired in total - and how
much per delivery; trending towards smaller quantities delivered as needed (JIT) supply
should analyze inventory position to figure out which method is best
Supply Strategy: Who? - Answers - who should make the supply decisions?
whether supply should be centralized, where staff should be located, to what extend top
management should be involved in the total acquisition process
Supply Strategy: When? - Answers - decision tied closely with how much; now vs. later
Supply Strategy: What Price? - Answers - whether the organization wants to pay
premium price for amazing service and quality, standard price to be aligned with the rest
of the market, or low price to give cost advantage
Make or Buy - Answers - part of the "what" question - compare and find most cost
efficient between making or buying components
requires constant reevaluation
a make decision means the organization will produce the good/service internally
a buy decision means the good or service will be purchased from a supplier
insourcing - reversing previous buy decision
outsourcing - reversing previous make decision
Supplier involvement (esp. benefits of early supplier involvement) - Answers - Ford ABF
Case Study :-)
cost avoidance, time to market, competitive advantage
Evolution of the supply chain - Answers - Early 1900's: clerical and tactical, focused on
policies and procedures
key challenges: availability of supply and cost management
Early 21st century:strategy orientation, global supply chains, executive level leadership
key challenges: sustainability, security, globalization, risk management
Spend in the supply chain - Answers - lead times are usually in months, value add times
as very small percentages
Basically it pays to invest in supply chain to improve it as it is often one of the most
costly parts of an operation
Profit leverage effect - Answers - the increase in corporate profit obtained by decreasing
purchase spend; measured by determining the increase in profit obtained by a decrease
in purchase spend (ex. in the book shows that in order to achieve increased revenue of
$6mil, the company could either increase sales by 75% or decrease purchase spend by
10%); more realistic in firms that have neglected supply and given sales a lot of
attention already
better to dec spending than inc sales
Return on assets - Answers - displayed as a percentage; an indicator of how profitable
a company is relative to its total assets - gives an idea as to how efficient management
is at using its assets to generate earnings (higher is better, in terms of attractiveness to
investors)
Contributing to organizational strategy - Answers - Operational vs Strategic Contribution
Operational= day to day issues
Strategic= Forward thinking
Direct vs Indirect Benefit
Direct= Tangible return, ROA, Profit leverage
Indirect "soft": information source, supplier relationships, customer satisfaction
Supply Strategy Questions: - Answers - Supply Strategy
who? what? where? when? why? how much? what price?
, Supply Strategy: What? - Answers - the most fundamental question.. make or buy,
insourcing, outsourcing
will the organization require standard items/materials that are readily available, or will
they need special, custom-specified requirements
Supply Strategy: Quality? - Answers - a more consistent quality of end product output is
essential to maintaining and growing market share - strategy for developing suppliers'
knowledge of quality requirements and helping them implement program to achieve
these is essential (zero defect plans, process quality control programs, quality
certification programs)
Supply Strategy: How Much? - Answers - how much will be acquired in total - and how
much per delivery; trending towards smaller quantities delivered as needed (JIT) supply
should analyze inventory position to figure out which method is best
Supply Strategy: Who? - Answers - who should make the supply decisions?
whether supply should be centralized, where staff should be located, to what extend top
management should be involved in the total acquisition process
Supply Strategy: When? - Answers - decision tied closely with how much; now vs. later
Supply Strategy: What Price? - Answers - whether the organization wants to pay
premium price for amazing service and quality, standard price to be aligned with the rest
of the market, or low price to give cost advantage
Make or Buy - Answers - part of the "what" question - compare and find most cost
efficient between making or buying components
requires constant reevaluation
a make decision means the organization will produce the good/service internally
a buy decision means the good or service will be purchased from a supplier
insourcing - reversing previous buy decision
outsourcing - reversing previous make decision
Supplier involvement (esp. benefits of early supplier involvement) - Answers - Ford ABF
Case Study :-)
cost avoidance, time to market, competitive advantage
