Supply Chain Management- Exam I

Flashcard maker : Lily Taylor
Vertically integrated
A firm whose business boundaries include former suppliers and/or customers.
Many large firms
Consumers considerations b4 purchase
Cost, quality, availability, maintainability, and reputation factors.
Focal firm
Firm in the middle of figure
Supply chain
Series of companies eventually making products and s services available to consumers -including all of the functions enabling the production, delivery, and recycling of materials, components, end products and services
Key to effective supply chain management
Keeping the costumer in mind
Bullwhip effect
Supply chain forecasting, safety stock, and production problem
BPR- business process reengineering
Radical rethinking and redesigning of business processes to reduce waste and increase performance
SCM evolvution
The purchasing & supply management emphasis from industrial buyers and transportation & logistics emphasis from wholesales to retailers
Electronic data interchange
Supplier management
Encouraging or helping the firms supplier to perform in so m e desired fashion
Supplier evaluation
Determining the current capabilities of suppliers
Supplier certification
Programs can be company designed and administered, or international standardized programs (ISO 9000)
Strategic partnerships
Creation of closer working relationships with costumers in terms of long-term, higher-volume sales.
Ethical & sustainable sourcing
Purchasing from suppliers that are governed by enviromental sustainability and social and ethical issues
Demand management
Strategies and systems, with the objetive of matching demand to available capacity, either by improving production scheduling, curtailing demand, using a back-order system or increasing capacity.
MRP- material requirements planning
Software system for managing their inventory
ERP- enterprise resource planning
Providing real-time sales data, inventory and production information to all business units and the ket supply chain participants
Information, money and materials
What do supply chain managers manage?
supply, operations, logistics, and integration
Elements of Supply Chain
bullwhip effect
occurs due to lack of communication
reverse logistics
refers to recycling and returns
variability and complexity
What makes managing supply chains difficult?
merchant buyers
wholesalers & retailers, who primarily purchase for resales purposes
industrial buyers
primary task is to purchase raw materials for conversion purposes
Electronic data interchange
benefits of e-procurement
time savings, cost savings, accuracy, real time, mobility, track-ability, management (benefits to the suppliers)
strategic procurement
procurement for current requirement
strategic procurement examples
spot buying, volume purchasing agreements, forward purchasing, product life cycle, JIT, commodity purchasing, supplier management
use more suppliers that promotes competition, which leads to lower price
backward vertical integration
acquiring upstream suppliers
technical components
use fewer suppliers
forward vertical integration
acquiring down stream costumers
responsiveness, capability, competitive value
To select suppliers evaluate their:
total cost of ownership
goes beyond the purchase of the unit price involves all variables necessary to fully own product
inventory turnover
shows how many times inventory is utilized and replenished. Usually, the higher the better.
vertical integration
movement up or down, related to different industries
horizontal integration
movement across, related to direct competition
small purchase orders
a relative term depending on the size of the firm, small purchasing orders
key tenents to Supply Relationship Management
1. automation
total cost of ownership
the combo of the purchase or acquisition price of a good or a service and additional costs incurred before or after product or service delivery
common supplier performance metrics
transaction costs
the cost of the good or service and cost associated with placing and receiving the order
strategic sourcing
managing the firms external resources in ways that support the long term goals of a firm
ethical sourcing
attempts to take into account the public consequences or organizational buying or bring about positive social change through organizational buying behavior
fair trade products
manufactured or grown by a disadvantaged producer in a developing country that receives a fair price for their goods
green purchasing
practice aimed at ensuring that purchased products/materials meet environmental objectives such as waste production, hazardous materials elimination, recycling and reuse
sustainable sourcing
process of purchasing goods& services that takes into account the long term impact on people, profit, and the planet.
vendor managed inventory
partner based approach to controlling inventory and reducing supply chain cost- vendor takes on risk of monitoring & replenishment of inventory
bench marking
the process of copying what other businesses do best and a comparison among the competitors
steps to forecasting
1. determine purpose
2. establish time horizon
3. gather/ analyze data
4. select technique
5. make forecast
6. monitor & update
features of forecasting
-past will project future
-not perfect
-forecasts for grouped items are more accurate than those for individual items
elements of forecasting
– reliable,
-easy to understand
short term forecasts
What type of forecasts are more accurate?
the further out the forecast projection the less…
higher amount of errors- worst
the larger the numbers of MAD, MAPE, or MSE
lower the amount of errors-better
the larger the numbers of MAD, MAPE, or MSE
Reactive Approach
Demand Planning
Demand Planning
-uses historical data
-look in past
-view forecasts as probable future demand
-react to meet demand
proactive approach
demand management
demand management
-shape the quantity & timing of demand to meet a company’s needs
-move forward
-look to future
-seeks actively influence demand (advertising, pricing, products modifications)
-generally requires an explanatory model a subjective assessment of the influence on demand
primary goals of purchasing
-ensure uninterrupted flows of raw materials at lowest total cost
-improve quality
-optimize costume sanctification
purchasing contribution to goals
-actively seeking better materials and suppliers
-work closely with strategic suppliers to improve quality
-involving suppliers and purchasing personnel with new product design & development
centralized purchasing
single purchasing department, makes ALL purchasing decisions
centralized advantages
-concentrated volume
-avoid duplication
-lower transportation costs
-common supply base
-no competition with in units
decentralized purchasing
local purchasing departments make their own purchasing decisions
decentralized advantages
-closer knowledge of requirements
-local sourcing
-less bureaucracy
hybrid purchasing
enables firms to exploit both the advantages of decentralized and centralized purchasing
public procurement
management of the purchasing of the government and nonprofit sectors (educational institutions, hospitals, federal, state, and local governments)
public purchasing
public procurement
Federal Acquisition Regulation
differentiates private purchasing from public purchasing. Ensures that purchases of goods & services are in strict compliance with statues and policies in order to maximize competition
Major public procurement entities
reasons to outsource
-better quality
-technical support & expertise
-gain info on latest trends
-volatile demand
risks to outsourcing
-loss of control
-increases reliance on suppliers
increased need for supplier management
outsourcing benefits
-concentrate on core capabilities
-reduce staffing levels
-reduce management problems
-improve manufacturing flexibility
profit leverage effect
a purchasing performance measure that calculates the impact of a change in purchase spend on a firms profit before taxes, assuming gross sales & other expenses remain unchanged
request for quotation
request for proposal
there is no current suppliers for the item, the buyer must identify a pool of qualified suppliers and issue a request
enables suppliers to propose new material and technology, thus enabling the firm to exploit the expertise of suppliers
purchasing order
terms and conditions of the purchase, legally binding contract
blanket purchase order
covers a variety of items and is negotiated for repeated supply over a fixed period of time: used for small order purchases
open-end purchase order
additional items and expiration dates can be renegotiated
blanket order release
production schedule, used to release a specific quantity against the order
procurement cards
p-cards, credit cards with a predetermined credit limit issued to authorized personnel of the buying organization
ability to meet the needs of current supply chain members without hindering the ability to meet needs of future generations in terms of economic, environmental, and social challenges.
social sustainability
concerns involving worker safety, hourly wages, working conditions, child workers and basic human rights
Qualitative forecasts
techniques that permit the inclusion of soft information, factors are difficult or impossible to quantify
soft information
human factors, personnel opinions and hunches
qualitative forecasts approaches
-jury of execution
-delphi method
-sales-force composite
-consumer surveys
quantitative forecasts
techniques that involve either projection of historical data or the development of associative methods that attempt to use explanatory variables to make a forecast
times series and associative models
what are the types of quantitative forecasts?
time series
a timed ordered sequence of observations taken at regular time intervals, assumes future values can be estimated by past values
a long-term upward or downward movement in data
short term fairly regular variations related to the calendar or time of day
wavelike variations lasting more than one year, often related to a variety of economic, political or agricultural conditions
random variation
residual variation that remands after all other behaviors have been accounted for
irregular variation
due to unusual circumstances that do not reflect typical behavior, examples: labor strike, war, weather event
naive forecast
uses a single previous value of time series as a basis for a forecast- the simplicity is beneficial, used when times series is stable, and there is a trend or seasonality
trend naive forecast
determine if trend is +/-, then find difference of the last 2 actual values and add it to the latest real or actual #
techniques that smooth variations in the data
moving average
as new data becomes available the forecast is updated by adding the newest values and dropping the oldest.
# of data points
What determines the a moving average forecast model’s sensitivity?
more responsive
fewer data points
less responsive
more data points
weighted moving average
most recent values in time series are given more weight in computing a forecast
exponential smoothing
weighted average method that is based on the previous forecast plus a % of the forecast error- implements forecasts error
linear trend
a simply data plot can reveal the existence and nature of a trend
cause & effect model
one or several external variables are identified as related to demand- based on the development of an equation that summarizes the effects of predictor variables
linear regression
the technique for fitting a line to a set of data points
simple regression
only one explanatory variable is used
a measure of the strength & direction of relationships between 2 variables
What has a range between (-1)-1and can be either positive, negative or none?
correlation coefficient
measure of the percentage of variability in the values of y that is explained by the independent variables
correlation coefficient
represented by r squared-the higher the better- ranges between 0-1
forecast error
difference between the observed value (actual) and the forecast
mean squared error
weights errors according to their squared values. highlights big or major errors but doesn’t reveal smaller errors
mean absolute deviation
weights all errors evenly, does not cancel any errors out because we use the absolute values
mean absolute percentage error
provides a perspective of the true magnitude of the forecast error- weights errors according to relative error

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