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supply chain

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network of all entities involved in producing and delivering a finished product or service to the final customer (can be product or service)

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value chain

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each activity that occurs in the process of producing and delivering a product or service to the final customer should add value

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two ways to add value

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minimize cost or add service

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supply chain management

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design, integration, and management of the flows of products, information, and funds from original suppliers to the final customer AND ensuring that products are available in the right quantities, in the right locations, and at the right time while minimizing system-wide costs and satisfying customer service level requirements

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three key activities of SCM

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1. coordination 2. information sharing 3. collaboration

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three overriding business goals

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1. customers drive the decisions/actions of of supply chains 2. differentiate products/services from competitors (responsiveness is key determinant - used to be quality) 3. generate profits and extract some of the value created for shareholders

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beginning of SCM

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used to be siloed units within a company, but began to change in the 1980s due to intense global competition

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factors that influenced SCM

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1. information technology (internet) 2. globalization (increased competition) 3. increased customer sophistication, affluence, knowledge

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three challenges of SCM

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1. conflicting objectives 2. complexity 3. variability

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three imperatives for success

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1. differentiation 2. responsiveness 3. efficiency

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three questions to design SC from strategy

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1. What is our business and/or industry? 2. Who are our customers? 3. What do customers demand?

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five parts of SC network

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1. facilities (manufacturing, DCs, retailers/customers) 2. transportation 3. suppliers 4. inventory 5. information

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foundations of SC design

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1. competitive priorities 2. technological 3. macroeconomic 4. political 5. infrastructure

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six outcomes of the supply chain

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1. cost 2. responsiveness (time) 3. security 4. sustainability 5. resilience 6. innovation *quality and service are order qualifiers

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procurement

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tactical processes involved in obtaining merchandise, capital equipment, raw materials, services, or maintenance, repair, and operating supplies

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sourcing

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selecting the firm's (upstream) supply base to acquire its materials, services, supplies, and equipment

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three questions to determine supply base

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1. How to select and qualify suppliers? 2. How many suppliers? 3. Make or buy in-house or outsource?

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reasons for a single supplier

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- no other available suppliers - establish a collaborative relationship - reduce variability - quality, service, etc. - lower cost and/or economies of scale - product or process is high value or high intellectual property

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reasons for multiple suppliers

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- reduce or spread risk of supply interruption - create competition - sourcing policy requirements (small business, women, minority, etc.)

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strategic sourcing

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evaluating and selecting suppliers to acquire materials, services, supplies, and equipment based on a long-term strategic framework

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value of strategic suppliers

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- reduce costs and delivery cycle times - improve quality and long-term financial performance - reduce high costs of globalization and materials - deliver more innovative products more frequently and at lower costs

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functional products

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low profit margins with relatively stable demands and high levels of competition, so strategy based on stable supply at lowest cost

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innovative products

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short product life cycles, product line complexity, variable demand, high profit margins, so strategy based on supplier quality, speed, and flexibility

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five strategic sourcing strategies

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1. supply base reduction 2. collaborative supplier selection and evaluation process 3. early supplier involvement (ESI) 4. alliance development 5. outsourcing

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benefits of supply base reduction (supply rationalization)

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- buyer-supplier partnerships easier to manage - reduced cost (economies of scale) - closer and more frequent interaction between buyer and supplier - increases levels of quality and delivery reliability - mindful of single vs. multi-source questions

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outsourcing

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any supply chain function being performed by a third party that the company could control in-house

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off-shoring

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company maintains control of a function but moves it off-shore

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three considerations of outsourcing

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1. scope (degree of supplier responsibility) 2. criticality (importance of task/activities to the focal company) 3. core competencies (differentiation points)

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three ways outsourcing reduces costs

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1. aggregation (economies of scale) 2. lower costs of capital, materials, labor, facilities 3. higher quality = fewer defects

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four ways outsourcing increases customer value

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1. higher product quality = customer satisfaction 2. innovation, expertise, and faster time to market 3. enables greater product flexibility and variety 4. lower prices for customers

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four risks of outsourcing

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1. underestimate total cost or overestimate cost savings 2. loss of internal capability/expertise=innovation 3. business complexity 4.market risks

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manufacturing

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process of turning inputs into a finished product

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four factors in a manufacturing strategy

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1. regionalization 2. vertical integration 3. automation and robotics 4. modularity or platforming

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forecasting

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effectively matching supply and demand to achieve optimal levels of cost and customer service

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five results of more accurate forecasts

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1. lower inventories 2. fewer stock-outs or obsolescence 3. smoother production plans 4. reduced costs 5. improved customer service

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three principles of forecasting

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1. forecasts are always wrong 2. the longer the forecast horizon the less accurate the forecast 3. aggregate forecasts are generally more accurate

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bullwhip effect

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variability increases up the supply chain (retailer is least variable), which causes high levels of inventory and potential obsolescence in the supply chain

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four strategies to decrease the bullwhip effect

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1. centralize demand planning 2. reduce variability (pricing, SKUs, postponement) 3. reduce lead time 4. strategic partnerships

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qualitative forecasting

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based on opinion and intuition

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quantitative forecasting

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uses mathematical models and historical data to make forecasts

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four qualitative forecasting methods

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1. jury of executive opinion 2. delphi method 3. sales force composite 4. consumer survey

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time series forecasting

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based on the assumption that the future is an extension of the past

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four variations in time series

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1. trend variations 2. cyclical variations 3. seasonal variations 4. random variations

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three stages of planning

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1. strategic/long-range 2. tactical/intermediate 3. operational/short-range

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sales and operations planning

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cross-functional teams of marketing, operations, and finance that plan supply, demand, and product introductions

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four types of inventory

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1. raw materials 2. work-in-progress (WIP) 3. finished goods 4. maintenance, repair and operating *may also be safety stock

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logistics

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coordination of all activities involved in moving and positioning inventory across the supply chain; focuses on time, place, and quantity utility

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primary functions of logistics

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transportation, storage and materials handling, order/customer fulfillment inventory management, network design, packaging

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transportation

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most important part of SCM because products have little value until they are moved to the customer's point of consumption

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common carrier

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offer transportation services to all shippers at published rates between designated locations without discrimination

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contract carrier

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not bound to serve the general public, but rather serve specific customers under contractual agreements

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exempt carriers

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exempt from particular regulation of services and rates if they transport certain exempt products like produce, livestock, coal

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private carrier

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not subject to economic regulation and typically transports goods for the company owning the carrier

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six transportation modes

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1. truck/motor carriers 2. rail carriers 3. air carriers 4. ship/water carriers 5. pipelines 6. intermodal transportation

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three types of logistics service providers

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1. freight forwarders 2. transportation brokers 3. integrated logistics service providers

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distribution centers

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key functions: storage, order fulfillment, product customization

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functions of marketing

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- market research - product development - pricing - advertising/promotions - channels of distribution

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customer-driven supply chain

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empowered customers (end customer or organizational end user) are the driving force of the supply chain because they are highly knowledgeable and demanding

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six types of customer service

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1. time 2. dependability 3. communications 4. convenience 5. operations (packaging, delivery configuration, handling, technology) 6. support

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four customer strategies

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1. standardized strategy 2. customized strategy 3. niche strategy 4. micro-marketing

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standardized strategy

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all customers are viewed in the same way; products developed for the average customer (mass production; cost/economies of scale)

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customized strategy

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different versions of the product are developed for various, broader segments (higher costs)

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niche strategy

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targets only one segment of the overall market with very precise products

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micro-marketing strategy

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product is designed to meet the needs of an individual customer; sometimes called one-to-one marketing

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channels of distribution

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method by which products and services are passed from the manufacturer to the final customer

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four types of channels of distribution

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1. direct channels 2. indirect channels 3. e-commerce/internet channel 4. omni-channel

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three factors that influence the structure of the distribution channel

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1. market coverage 2. product characteristics 3. customer service

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logistics channel

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physical movement of products from where they are available to where they are needed

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problems associated with too much complexity

answer

- confused customers - brand dilution - high costs

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three keys to complexity management

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1. need market awareness of complexity impacts 2. supplier management 3. product commonality

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innovation fulcrum

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point at which the number of products strikes the right balance between customer satisfaction and operating complexity

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five ways to manage complexity

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1. conduct a "Model T" analysis 2. raise hurdle rate 3. postponement 4. institutionalize simplicity in decision-making 5. stay balanced

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postponement

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delaying the timing of customization until key customer data is known

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three types of postponement

answer

1. pull postponement (during manufacturing) 2. logistics postponement (at the DC) 3. form postponement (involves composition of product/design)

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benefits of postponement

answer

- lower costs - improved forecasting and decrease variability/bullwhip - increase customer satisfaction/service - allows companies to penetrate new markets, capture customers, and respond quickly to changes in the marketplace

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challenges of postponement

answer

- costly to implement - potentially lower capacity utilization - integration and collaboration of suppliers and partners

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ERP

answer

umbrella software system that links a variety of functional processes in a business and utilizes a centralized and shared database system to tie the entire organization together

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traditional performance measures

answer

operational/cost, revenues, profits

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performance variance

answer

the difference between the standard and actual performance

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balanced scorecard

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financial, operational, customer measures

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world-class performance measurements

answer

involves a hierarchy of supply chain metrics, including top tier (SC health assessment), mid-life (SC diagnostic), and ground level (SC effectiveness)

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