Supply Chain Management Exam 1 – Flashcards
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12 Things Supply Chain can include
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Concept design manufactures engineering sales and marketing logistics customer service transportation procurement project management finance and accounting distribution warehousing
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SCM is connected and integrated through:
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transportation storage demand planning integration activities
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Organizations are moving from:
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vertical to flat structures
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3 SCM associations
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Institute of Supply Management Logistics and SCM Society Council of SCM Professionals
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Old Paradigm characteristics (5)
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vertically integrated ownership coordinate several supply chain activites short term culture focused performance
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New Paradigm (5)
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specialization in project management trust relationship with suppliers & customers all parties in the SC benefit extends benefits from suppliers to customers reverse logistics
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Reverse Logistics include:
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3R and W returns recycling repairs and warranties
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Who benefits most from SCM? (4)
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firms with: large inventories large number of suppliers complex products customers with large purchasing budgets
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How do firms benefit from SCM? (3)
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lower purchasing and inventory costs improved quality stronger level of customer service
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4 steps to SCM:
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1. start with understanding the flow 2. conducts business through defined tasks 3. integrate tasks with all services 4. delivers results to customers
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Bullwhip Effect
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-change in consumer demand companies order more -effect flows up the supply chain from retailer to supplier -occurs when demand is based on forecasts not actual consumer demand
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Reducing the Bullwhip Effect benefits (5):
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collaborative planning, forecasting, replenishment -better costumer service -lower inventory costs -improve quality -reduce cycle time -better production methods
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1950s & 1960s (2)
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focused on mass production for cost reduction and productivity improvement
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1960s -1970s (5)
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Intro of computers: -material requirements planning (MRP) -manufacturing resource planning (MRPII) coordinated inventory management improve internal communications
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MRP
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material requirements planning of 60s-70s
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MRPII
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manufacturing resource planning of 60s-70s
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1980s & 1990s (5)
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GLOBAL competition pushed mfg. to: supply chain management (SCM) Just-in-time (JIT) total quality management (TQM) business process re-engineering (BPR)
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JIT
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1980s & 1990s just-in-time -reduce inventory and associated carrying costs
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TQM
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1980s & 1990s total quality management - climate in which an organization continuously improves its ability to deliver high quality products and services to customers
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BPR
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1980s & 1990s business process re-engineering -fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world-class competitors
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2000s & Beyond
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Focus on: relationships, sustainability, and social responsibility Improve supply chain capabilities with: -3rd party service providers -integrating logistics -using transportation to facilitate rapid response
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3PLs
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third party service providers
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4 Elements of SCM:
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Supply Operations Logistics Integration
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Supply Element (5)
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-improve performance by supplier evaluations -supplier certification for quality and service -strategic partnerships to build trust -ethics and sustainability -suppliers impact
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Operations Element (5)
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-demand mgt (match demand to capacity) -link buyers & suppliers via MRP and MRPII -improve flow of materials -reduce inventory -employ six sigma (improving quality and compliance among suppliers)
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Logistics Element (3)
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-transportation mgt (trade off btwn delivery cost and timing of customer service via trucks, air, water, rail) -customer relationships about satisfaction -network design creating distribution networks
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Integration Element
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-supply chain participants work for common goals -requires intra-firm functional integration -try's to change attitudes and adversarial relationships
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right shoring
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The placement of a business' components and processes in localities and countries that provide the best combination of cost and efficiency. -for max flexibility and lowest costs
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Expansion involves:
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-foreign manufacturing, suppliers, and customers -second and third tier suppliers and customers
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Supply Chain Responsiveness:
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-be flexible to customer needs -benchmark industry performance continuously -faster and more effective product service delivery systems
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GO GREEN with SCM
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-reduce environmental issues through packaging, producing, storing, moving, delivering -75% consumers are influenced by environmental rep of a company -recycling to lower natural resource costs
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Current SCM trends:
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-reduce purchasing costs -reduce waste -reduce excess inventory -reduce non value added actvities -bench marking (improvement over competitors) -trial and error improvement -increased knowledge of SC processes
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MRO
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maintenance repair operating
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CHAPTER 2
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PROCUREMENT
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Define Purchasing
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obtaining merchandise, capital equipment, raw materials, services, or maintenance, repair, and operating
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Define Merchants
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wholesalers and retailers who purchase for resale
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Define Industry Buyers
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purchase raw materials for conversion, capital equipment, and MRO
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Define Supply Management
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-all acquisition activities -identification, acquisition, access, positioning, and management of resources an organization needs or potentially needs in the attainment of it strategic objectives
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Primary Goals of Purchasing (3):
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-ensure uninterrupted flows of raw materials at lowest total costs -improve quality of finished goods -optimize customer satisfaction
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Purchasing contributes to objectives by (3):
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-seek better materials and reliable suppliers -work with suppliers to improve quality and materials -involve supplies and purchasers in product design and development
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Profit Leverage Effect
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decrease in purchasing costs directly increases profits before taxes
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return on assets (ROA)
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high ROA indicates ability to generate profits with lower spending
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inventory turnover effect (4)
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increased inventory turnover: -improves utilization of space -inventory levels -increased sales -avoidance of inventory obsolesce
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3 Steps in the Purchase Process
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1. Material/Purchase Requisition 2. The request for quotation (RFQ) 3. The Purchase Order (PO) -becomes binding contract
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4 Steps in the Procurement Process
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1. Requester submits materials requisition 2. Materials requisition submitted to buyer (purchasing dept) 3. Buyer assigns qualified suppliers to bid 4. Buyer reviews closed bids and selects a supplier
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e-Procurement advantages
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-saves time -cost savings -real time -mobility -trackability -management -benefits to suppliers
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Outsourcing
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-make or buy decision -buying from suppliers not making it in-house -backward vertical integration is acquiring sources of supply -forward vertical integration is acquiring customer's operations
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Reasons for buying or outsourcing
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-cost advantages -insufficient capacity -lack of expertise -quality
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Reasons for making
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-protect proprietary technology -no component supplier -better quality control -use existing idle capacity -controls costs and lead-time transportation
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Supply Base
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a list of suppliers
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Reasons for single supplier
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-strong relationship -less quality variability -lower cost -transportation costs -proprietary costs -volume to small to split
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Reasons for multiple suppliers
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-need capacity -spread risk of supply interruption -create competition -information -special type of business
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Centralized purchasing
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department located at corporate office and makes all purchasing decisions ADVANTAGES: -concentrated volume -leveraging volume -avoid duplication -specialization -lower transport costs -no competition within units -common supply base
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decentralized purchasing
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individually located departments, such as plant level, and makes own decisions ADVANTAGES: -closer knowledge of requirements -local sourcing -less bureaucracy
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Why Global Sourcing?
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-opportunity to improve quality, cost, and delivery performance
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Challenges to Global Sourcing
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skills and knowledge dealing with international suppliers, logistics, communications, politics and cultures
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GOVT Competitive bidding
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usually awarded to lowest and responsible bidder
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GOVT sealed bids
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used to satisfy, invitation for bid (IFB) and opened publicly
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GOVT performance bonds
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incentive to fulfill contract
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GOVT bid or surety bonds
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successful bidder will accept contract
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GOVT Payment bonds
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protection against 3rd party liens not fulfilled by bidder
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CHAPTER 3
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SUPPLIER RELATIONS
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strong partnerships are:
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-win win competitive performance for buyer and supplier -strategic approach opposed to a tactical position -mutual commitment -both parties share relevant information, risks, and rewards
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10 Keys to Successful relations
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1.build trust 2.shared vision and objectives 3.personal relationships (communicate) 4.mutual benefits and needs 5.commitment and top management support 6.change management 7.information sharing 8.capabilities (meet costs, deliver quality) 9.performance metrics (measure costs and quality) 10.continuous improvement
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Supplier Evaluation:
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-a process to identify best and most reliable suppliers -source based on facts, not perception -regular feedback avoids surprises, builds relationships -evaluate quality systems to eliminate incoming problems
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Supplier Certification Program (7):
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-control incoming product rejections -control incoming non-product late deliveries for a specified time period -no negative production related incidents for a specified time period -on site systems evaluation -agreed clearly specified quality performance measures -documented process and quality system -suppliers processes stable and in control
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ISO 9000 Supplier Certification
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-international organization for standardization (ISO) -quality standards in design -companies selling global markets seek certification
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ISO 14000
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-standards for environmental mgt -benefits reduced energy consumption
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Supplier Development
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activities improving supplier performance and capabilities -identify critical products and services -identify critical suppliers -form a cross-functional team -identify key project -meet with top management of supplier -define details of Agreement -monitor status and modify strategies
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Supplier Recognition Programs
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-recognize and celebrate achievements of suppliers -award winners are role models for other suppliers
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Supplier Relationship Management (SRM)
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-must improve profits and reduces costs -extended procurement processes
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Extend Procurement Processes
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-sourcing analytic -sourcing execution -procurement execution -payment and settlement -supplier score carding -performance monitoring
