SCM 301 Exam 1 Study Guide Iowa state

SCM 301 Exam 1 Study Guide Iowa state Define Supply Chain Management - ANS -is a set of three or more organizations linked directly by one or more of the upstream or downstream flows of products, services, finances, and information from a source to a customer.​ -Make sure you understand the whole supply chain, it is in your powerpoint notes. Internal Supply Chain - ANS -PP def: That portion of the supply chain occurring within a single organization. External Supply Chain - ANS -PP def: That portion of the supply chain occurring outside of the given organization. (i.e. upstream suppliers and downstream distributors) Explain upstream and downstream supply chain along with supply chain tiers. How can you tell which ones are 1st tier and 2nd tier suppliers and 1st tier and 2nd tier customers? - ANS -1st tier suppliers and customers are the one step away on the supply chain. From the end product, a 1st tier supplier would be the intermediate component manufacturers. From the end product, a 1st tier customer would be the wholesalers or distributors where the end product goes first after getting finished. -2nd tier suppliers and customers are the two steps away on the supply chain from the end product. From the end product, the 2nd tier supplier would be the raw material suppliers. From the end product, the 2nd tier customer would be the retailers. -Upstream suppliers and downstream distributors are an external supply chain. What are the 4 foundations of supply chains? - ANS -Supply Management -Operations Management -Distribution -Integration Supply Management - ANS -Overall: Supply Elements: -Supplier management: Improve performance through supplier evaluation (determining supplier capabilities), and supplier certification (third party or internal certification to assure product quality and service requirements). -Strategic partnerships: Successful and trusting relationships with top-performing suppliers. Operations Management - ANS -Overall: Operations Elements: -Demand Management: Match demand to available capacity. -Linking buyers and suppliers via Material Requirements Planning (MRP) & Enterprise Resource Planning (ERP) systems. -Use lean systems to improve the flow of materials to reduce inventory levels. -Six Sigma: A disciplined, data-driven approach and methodology for eliminating defects (driving toward six standard deviations between the mean and the nearest specification limit) in any process - from manufacturing to transactional and from product to service. -Employ Six Sigma to improve quality compliance among suppliers. Distribution - ANS -Overall: Distribution Elements: -Transportation Management: Tradeoff decisions between cost & timing of delivery / customer service via trucks, rail, water, & air. -Warehouse Management: Storage of products for delivery to customer, functions including accumulating, allocating, assorting, and sorting. -Global Logistics: Global consideration and management globally. Integration - ANS -Overall: Integration Elements: -Supply Chain Process Integration: When supply chain participants work for common goals. Requires intra-firm functional integration, with efforts to change attitudes & adversarial relationships. -Supply Chain Performance Measurement: Crucial for firms to know if procedures are working as expected. -High level supply chain performance will occur when strategies at each firm fit well with overall supply chain strategies. Bullwhip Effect - ANS -Small changes in customer demand ripple through to create larger and larger changes as orders move through the supply chain. What will reduce the bullwhip effect? - ANS -Collaborative planning, forecasting, and replenishment activities reduce the bullwhip effect and lead to better customer service, lower inventory costs, improved quality, reduced cycle time, better production methods, and other benefits. -Solutions that reduce the bullwhip effect: -Make actual demand available to suppliers -Vendor-managed inventory (VMI) -Reduce the length of the supply chain -Reduce the lead times from order to delivery -Eliminate price discounting. Many retailers have adopted everyday low prices. -Use frequent and smaller order sizes -Allocate short supplies based on the demand histories of their customers. External Drivers of Change - ANS -Globalization and increased competition -Increasing customer expectations -Product proliferation -Shorter product life cycles -New technologies -Environmental issues Contracting the supply chain (A current trend in supply chain management) - ANS -U.S. firms are considering moving their foreign production back home. This is referred to as back-shoring, near-shoring, or right-shoring. -Contributions to this trend include: Volatile fuel costs, decreasing labor costs differentials, and desire to reduce delivery times. Increasing Supply Chain Responsiveness (A current trend in supply chain management) - ANS -Firms will increasingly need to be more flexible and responsive to customer needs. -Supply chains will need to benchmark industry performance and meet and improve on a continuous basis. -Responsiveness improvement will come from more effective and faster product & service delivery systems. Increasing Supply Chain Visibility (A current trend in supply chain management) - ANS -Knowing exactly where products are, at any point in the supply chain. -Inventory visibility is made easier by technology. -Sophisticated software applications for tracking orders, inventories, deliveries, returned goods, and even employee attendance. The Greening of Supply Chains (A current trend in supply chain management) - ANS -Producing, packaging, moving, storing, delivering, and other supply chain activities can be harmful to the environment. -Supply chains will work harder to reduce environmental degradation. -Large majority (75%) of U.S. customers influenced by a firm's environmental friendliness reputation. -Recycling and conservation are a growing alternative in response to high cost of natural resources. Purchasing - ANS -PP def: Obtaining merchandise, capital equipment, raw materials, services, or maintenance, repair, and operating (MRO) supplies in exchange for money or its equivalent. -The primary goals of purchasing are: 1. Ensure uninterrupted flows of raw materials at the lowest total cost. 2. Improve quality of the finished goods produced. 3. Optimize customer satisfaction. Merchant Buyers - ANS -PP def: Wholesalers and retailers who purchase for resale. Industrial Buyers - ANS -PP def: Purchase raw materials for conversion, services, capital equipment, & MRO supplies (products that go into that maintain the equipment you use). Purchase Order (purchasing term) - ANS -PP def: Is the buyer's offer & becomes a binding contract when accepted by supplier. When initiated by the supplier on their own terms, the document is a sales order. The Uniform Commercial Code (UCC) governs transactions in the U.S. except Louisiana. Material Requisition / Purchase Requisition (purchasing term) - ANS -PP def: Stating product, quantity, and delivery date. May originate as a planned order release from the MRP system. Traveling requisition used for recurring orders. The Request for Quotation (RFQ) (purchasing term) - ANS -PP def: Buyer identifies suppliers & issues a request for quotation (RFQ) for routine items or a Request for Proposal (RFP) for more demanding products. Supplier Development is used to develop supplier capabilities. Supply Base - ANS -PP def: List of suppliers that a firm uses to acquire its materials, services, supplies, and equipment. -Many firms are emphasizing long-term strategic supplier alliances consolidating volume into one or fewer suppliers, resulting in a smaller supply base. Third-Party Logistics (3PL) Services - ANS -PP def: An external supplier that performs all or part of a company's logistics functions. -May include transportation, warehousing, distribution, related financial services, vendor managed inventory, etc. Lead Logistics Provider (LLP) or 4PL - ANS -A 3PL provider that also oversees other 3PL's. VMI - ANS -PP def: Suppliers manage buyer inventories to reduce inventory carrying and stockout costs for the buyer. -From the buyer-firm's perspective: Supplier tracks inventories, determines delivery schedules and order quantities, and buyer can take ownership at stocking location. -From the supplier's perspective: Avoids ill-advised customer orders, supplier decides inventory setup and shipments, opportunity for supplier to educate customers about other products. Supplier Relationship Management Systems - ANS -PP def: Refers to streamlining the processes and communication between buyer and supplier using software applications to manage processes more efficiently and effectively. -Transactional SRM is used to track supplier interactions such as order planning, order payment, and returns. -Analytic SRM allows the company to analyze the complete supplier base. The 5 key points of an SRM system: 1. Automation handles routine transactions. 2. Integration spans multiple departments, processes, & software applications. 3. Visibility of information & process flows. 4. Collaboration through information sharing. 5. Optimization of processes & decision making. E-Procurement Process - ANS -It goes through the buying process with the buyer and supplier through the internet and it has made supply chain a lot easier to do and for people to communicate better and to make things more accurate. Step 1: Material user inputs a materials requisition - Relevant information such as quantity and date needed. Step 2: Materials requisition submitted to buyer - At purchasing department (hardcopy or electronically). Step 3: Buyer assigns qualified suppliers to bid - Product description, closing date, & conditions are given. Step 4: Buyer reviews closed bids & selects a supplier. -Advantages of E-Procurement: -Savings in cost and time -Accuracy -- less prone to manual errors, avoids double-key inputs. -Real-time -Mobile and flexible -- can be accessed in any location. -Trackable -- tracing and tracking electronic information is easier than paper information. -Supplier benefits -- lowers transaction costs. Outsourcing (Part of Make-or-Buy Decision) - ANS -PP def: Buying materials and components from suppliers instead of making them in-house. The trend has moved toward outsourcing. -When calculating the make-or-buy decision, you are doing that to try to decide if it would be cheaper to outsource the making of your product or to make your product within your own organization. Backward Vertical Integration (Part of Make-or-Buy Decision) - ANS -PP def: Refers to acquiring sources of supply. Forward Vertical Integration (Part of Make-or-Buy Decision) - ANS -PP def: Refers to acquiring customer's operations. Reasons for buying or outsourcing (Part of Make-or-Buy Decision) - ANS -Cost Advantage: Especially for components that are non-vital to the organization's operations, suppliers may have economies of scale. -Insufficient Capacity: A firm may be at or near capacity and subcontracting from a supplier may make better sense. -Lack of Expertise: Firm may not have the necessary technology and expertise. -Quality: Suppliers have better technology, process, skilled labor, and the advantage of economies of scale. Additional reasons for outsourcing: -Strategic benefits of using best-in-class suppliers -Greater flexibility in the purchase of rapidly developing new technologies -A reduction in design cycle time -Less capital is required as the requirement for investment is transferred to the supplier -Risk is transferred to the supplier -Technology Reasons for making (Part of Make-or-Buy Decision) - ANS -Protect proprietary technology -No competent supplier -Better quality control -Use existing idle capacity -Control of lead-time, transportation, and warehousing cost. -Lower cost Single vs. Multi-sourcing - ANS -Reasons favoring a single supplier: To establish a good relationship, less quality variability, lower cost, transportation economies, proprietary (a company's very own) product or process, or the volume you want is too small to split. -Reason for favoring multiple suppliers: If you really need capacity, spread risk of supply interruption, create competition, gaining of information from different people, or dealing with special kinds of business. Supplier Selection - ANS -The process of selecting suppliers is complex and should be based on multiple criteria: -Product and process technologies: how good it is compared to other suppliers. -Willingness to share technologies & information: early supplier involvement (ESI) and concurrent engineering (CE). -Quality: it may vary between suppliers. -Cost: you can calculate what each supplier will cost you overall with taking everything into account by calculating the total cost of ownership (TCO). -Reliability: some may be more reliable than others. -Order system & cycle time: some systems may be different than others and cycle times will vary between suppliers. -Capacity: see if the supplier is able to make the capacity that you are looking for. -Communication capability: if they will actively keep good communication with you, which is a key of having a good relationship with your supplier. -Location: you might have to pay more for transportation if one supplier is farther away than the other. -Service: suppliers will vary on how good of service they will give their customers. Total Cost of Ownership (TCO) Analysis - ANS -An important analysis that when calculated will tell you how much a supplier will cost you with including every single thing that will cost you, not just the unit cost. -This analysis calculates the costs of: unit cost, ordering cost, logistics cost (transportation), inventory cost, maintenance cost, and others if present. Purchasing Organization - ANS -PP def: Is dependent on many factors, such as market conditions, & types of materials required. Centralized Purchasing - ANS -PP def: Purchasing department located at the firm's corporate office makes all the purchasing decisions. -Corporate takes control and manages all purchasing. -Advantages: Concentrated volume, leveraging purchase volume, avoid duplication, specialization, lower transportation costs, no competition within units, and common supply base. Decentralized Purchasing - ANS -PP def: Individual, local purchasing departments, such as plant level, make their own purchasing decisions. -Corporate does not take control and manage all the purchasing, every department does their purchasing on their own. -Advantages: Closer knowledge of requirements, local sourcing, and less bureaucracy. Decentralized-centralized Hybrid - ANS -PP def: (large multiunit organization)- decentralized corporate and centralized at business unit. -Corporate makes the decisions they like, and also make the purchasing decisions for all the departments. But the individual departments might have control over a couple things they do the purchasing for, but most of the purchasing will be done by corporate. Centralized-Decentralized Hybrid - ANS -PP def: (large organization with centralized control)- centralized large national contracts at corporate level and decentralized items specific to the business unit. -Explained in an example- Walt Disney: the different departments including walt disney studios, parks and resorts, and media networks all do their own purchasing because it is decentralized at that business unit. But then Walt Disney has a say that is centralized within these business units that they have control over like food for example. Keys to Successful Partnerships - ANS -Strong supplier relationships -Building trust -Shared vision & Objectives -Personal relationships -Mutual benefits & Needs -Commitment & Top management support -Change management -Information sharing & Lines of communication -Performance metrics: You can't improve what you can't measure. Measure related to quality, cost, delivery, & flexibility are used to evaluate suppliers. Metrics should be 1) Understandable, 2) Easy to measure, 3) Focused on real value-added results. TCO is a performance metric. -Continuous improvement -Monitoring supplier relationships Challenges to managing relationships - ANS -Sharing information and maintaining confidentiality. -R&D and proprietary information. -Satisfying customer expectations. Supplier Evaluation - ANS The Weighted-Criteria Evaluation System: 1. Select the key dimensions of performance mutually acceptable to both customer & supplier. 2. Monitor & collect performance data. 3. Assign weights to each of the dimensions. 4. Evaluate performance measures between 0 & 100. 5. Multiply dimension rating by weight & sum overall score. 6. Classify vendors based on their overall score: Unacceptable, conditional, certified, & preferred. 7. Audit & perform ongoing certification review. Demand Management - ANS -Look in Chap. 5 slides to get a clear definition by looking at the chart. -Separates into independent demand and dependent demand. -Independent demand are finished goods. -Dependent demand are raw materials, component parts, sub-assemblies, etc. Independent Demand - ANS -What a firm can do to manage it. -These are finished goods. How to influence demand - ANS -You can take an active role to influence demand by pricing strategies and advertising. -You can simply respond to demand by adjusting capacity. Demand Components - ANS -Average: average demand for a period of time. -Trend: increasing or decreasing. -Cyclical Variations: wavelike movements that are longer than a year, usually due to the business cycle. -Seasonal Element: peaks and valleys that repeat over a consistent interval. -Random Variation: due to unexpected or unpredictable events. Qualitative (Judgemental) (A forecasting technique) - ANS -PP def: Based on opinion and intuition. Generally used when data is limited, unavailable, or not currently relevant. -Based all off of different people's opinion. Quantitative (A forecasting technique) - ANS -PP def: Uses mathematical models and historical data. Historical data is used to predict future demand. -Examples are: time series analysis, causal relationships, and simulation. -Based off of calculated mathematical equations. What are the different Qualitative models? - ANS -Jury of Executive Opinion -Delphi Method -Sale Force Composite -Customer Surveys -Historical Analogy What are the different Quantitative methods? - ANS -Time Series Forecasting: based on the assumption that the future is an extension of the past. Historical data is used to predict future demand. -Cause & Effect Forecasting: assumes that one or more factors (independent variables) predict future demand. Naive Forecast - ANS -A quantitative method -A Time Series forecasting model -Forecast=Actual sales from the week before Collaborative Planning, Forecasting, and Replenishment (CPFR) (A type of web-based forecasting) - ANS -PP def: A tool used to coordinate demand forecasting, production and purchase planning, and inventory replenishment between supply chain trading partners. -What was said about it in review lecture: It links information throughout different departments in order to improve how you are going about the supply chain by using effective communication. -Additional in PP: Business practice which combines the intelligence of multiple trading partners in the planning & fulfillment of customer demands. -Additional in PP: Links sales & marketing best practices, such as category management, to supply chain planning processes to increase availability while reducing inventory, transportation, and logistics costs. CPFR Model - ANS Steps: 1. Collaboration arrangement 2. Joint business plan 3. Sales forecasting 4. Order planning/forecasting 5. Order generation 6. Order fulfillment 7. Exception management 8. Performance assessment Benefits of CPFR - ANS -Strengthens supply chain partner relationships -Provides analysis of sales and order forecasts -Uses point-of-sale, seasonal activity, promotions, new product introductions, and store openings or closing to improve forecast accuracy. -Integrate planning and forecasting -Provides efficient category management and understanding of customer purchasing patterns.