Scm300 - Supply Chain Management Exam 1 Study Guide With Examples PDF

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SCM Exam 1 Study Guide MOD 1 Supply Chain Management is the efficient integration of suppliers, transporters, manufacturers, warehouses, retailers and all other parties associated with delivery of a final product. o Achieve Goals o Execute efficiently o Manage resources Operations Management: Design, operation, and improvement of the production systems that efficiently transform INPUTS into finished goods maximizing productivity EX of Duties: Process/Plant Management, Capacity planning (Resources, speed—How much, how fast), Scheduling people, Waiting line management, Process improvement project (How can we make more cars? How should we schedule staff? Increase quality?) 3 Flows o Materials o Money o Information Primary goal: Sustainable long-term profits and maximizing ROI (return on investment) o Do this by:  Increase profits (profit= revenue-cost)  Increasing revenue by increase customer value  Controlling Costs by increasing productivity and eliminate waste  Developing core competencies  maximize ROI, ROI formula= profit/investment Customer Value: o What do I get/What is the price Organizational Productivity: o What did I make/ What was the cost Competitive Priorities (gaining an advantage): are what a business focuses on. while every business would like to be the leader in ever category, usually businesses differentiate themselves by one or two of these qualities (ex: apple vs dell) o Cost:

Types, materials, production, packing, transportation, storage, quality, customer service, organizational (ex: bottled water) o Quality: -design quality: product or service (nothing can make up for bad design) -material& production quality: requires well designed production systems, good materials, & exceptional labor. result= high performance, aesthetics, and durability -quality level delivered: how does it look when the customer finally gets it -consistent quality: is the product the same every time -service quality: sales, support, repairs, maintenance, assembly, delivery o Speed/Time: -delivery time: lead time (pizza delivery), from order placement to order fulfillment, supplier delivery times, manufacturing time, transport time, inventory management, forecasting -on time delivery: (airline industry) percentage of time delivered when promised, understanding limits of supply chain, developing schedules, staying on schedules. o Flexibility: look up six detailed strategies on PDF  Product or Customization Flexibility · Options offered · Built to your specifications  Volume Flexibility · Coping with demand changes · Large and/or small orders  Mass Customization · Both customization and volume flexibility Supply Chain Visibility: Being able to know if your supplies will arrive on time in advance. You must have a good relationship with suppliers in order to attain more information and data on supplies. Productivity: (organizational perspective) how much stuff the company made in relation to its starting materials -formula: (what did i make; outputs)/(what was the cost; inputs)

Value: (customer’s perspective) customers assigned worth to an object given its cost. -formula: (what the customer gets; quantity, quality, size)/(the price; money, waiting time) SEVEN TYPES OF ORGANIZATIONAL WASTE 1. Defects: obvious, but could cause additional waste 2. Overproduction: Production used to mask something 3. Transportation: No value added, Possible Loss 4. Motion: Employee and machine 5. Waiting: Resources are wasted during waiting 6. Inventory: Not providing a return 7. Over Processing: Best workers doing most basic tasks Business Model: the mechanism by which a business intends to generate revenue and profits. its a summary of how a company plans to serve its customers at the strategic level. Business to consumer company- B2C (amazon, best buy) Business to business company- B2B (Boeing, consult/MKT agen Both B2B & B2C- (IMB, Ford Motors, Dell, Sprint PCS) Brick & Mortar- land based commerce only (burger king, circlek Internet Only Retailer- Net commerce only (amazon, overstock) Click & Mortar- land based and internet commerce (barnsnoble Why is it important to understand a business model before making supply chain decisions? - different business models require different approaches to business decisions. also, as parts of the supply chain, procurement and logistics requires that: -one know who their customer is and how they are going to store the product -how much of the product they are going to store -how they are going to transport the product to their customer -the form of the product TEXTBOOK ·

Supply Chain o Supply chain starts with firms extracting raw materials from the ground, selling them to suppliers and distributors

o The firms raw materials is sold to turn these into materials that are usable by customers o The series of companies eventually making products and services available to consumers, including all of the functions enabling the production, delivery, and recycling of materials, components, end products, and services, is called supply chain ·

Supply Chain Management o The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer o Managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer o For Supply Chain Management to be successful firms must work together by sharing information on things like demand forecasts, production plans, capacity changes, new marketing strategies, new product and service developments, new technologies employed, purchasing plans, delivery dates, and anything else impacting the firm’s purchasing, production, and distribution plans.

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Figure 1.1

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Supplier Management o Encouraging or helping the firm’s suppliers to perform in some desired fashion, and there are a number of ways to do this 

This involves assessing suppliers’ current capabilities and then figuring out how they need to improve them

o One of the key activities of supplier management is supplier evaluation:

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Determining the current capabilities of suppliers

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This occurs when potential suppliers are being evaluated for a future purchase and when existing suppliers are periodically evaluated for ongoing performance purposes

Distribution Decision Trade-Offs o These decisions typically involve a trade-off between cost and delivery timing or customer service 

Motor carries, more expensive than rail carriers but offer more flexibility and speed, especially in short routes

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Air carriers most expensive but much faster than any transportation

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Water carriers are the slowest but are also the least expensive

o Desired outcome of distribution is customer service Terms: · Vertically Integrated Firm:A firm whose business boundaries include onetime suppliers and/or customers LOGISTICS: -Plant/Warehouse location: -Low material costs with high transport costs many not be optimal -Longer distances increase damage, theft, and lead time risks -Distant suppliers don’t allow for JIT systems -Consider customer response expectations -Technology Requirements: -Do they allow you to maximize the benefits offered by your technology system? -Consider shared hardware, software, bar codes, & databases ·

Reverse Logistics Activities: o Along the supply chain, intermediate and end customers may need to return products, obtain

warranty repairs, or may just throw products away or recycle them o Planning and management of items that move backward in the supply chain Supply Chain Integration: o Successful supply chain integration occurs when the participants realize that supply chain management must become part of the firm’s strategic planning processes, where objectives and policies are jointly determined based on the end-consumers needs and what the supply chain as a whole can do well o If one activity fails or is performed poorly, then supplies moving along the chain are disrupted, jeopardizing the effectiveness of the entire supply chain o The integration process also requires better internal functional integration of activities within each of the participating firms 1st Tier Supplier/Customers o

The firms most important direct suppliers or customers

2nd Tier Suppliers/ Customers o The suppliers’ suppliers and the customers’ customers’ o As well as non-domestic suppliers and customers o Wal-Mart Purchases Cereal from Kellogg’s. Kellogg’s purchases raisins for their cereal from Sun Maid. Sun Maid purchases grapes from the Vineyard Corporation 

Sun Made is Wal-Mart’s Second Tier Supplier

Business Process Reengineering: o The radical rethinking and redesigning of business processes to reduce wasted and increase performance

o Was the result of a growing interest during the 1990s in the need for cost reductions and a return to an emphasis on the key competencies of the firm to enhance long term competitive advantage ·

MRP: Material requirements planning. Software application used for managing inventory. Linked throughout the organization and supply chain partners o Controlling or managing inventory is one of the most important aspects of operations and is certainly value enhancing for the firm o Firms can and typically do have some sort of MRP software application for managing their inventory o These applications can be linked throughout the organization and its supply chain partners using ERP systems, providing real time sales data, inventory, and production information to all business units and to key supply chain participants o Wal-Mart uses this to scan bar codes of the products purchased, causing the local stores MRP system to deduct unites from inventory until a preset reorder point is reached o When this happens it generates another order

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Inventory Visibility o

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The ability to communicate with and continually assess the entire supply chain. A high inventory visibility can reduce the likelihood of stockouts or excess inventories.

JIT/Lean Production o Another common form of inventory management o Implementing this type of system usually results in faster delivery times, lower inventory levels, and better quality o Dell Inc. uses this

o A customer calls Dell through its Web site and custom configures his computer 4 Trends in SCM o Expanding and contracting the supply chain o Increase Responsiveness o Green supply chain o Reducing Costs Module One Reading: Examples P&G Example (4-5) P&G is trying to win customers at two critical points, (1) when the customer chooses a brand and (2) how the brand the customer chooses lives up to his or her expectations. To fulfill their goals P&G built a set of capabilities: reliable service, agile demand-driven supply, and affordable differentiation. • Reliable Service – providing the right product at the right time to the right place • Agile, Demand-Driven Supply – building a flexible and responsive supply network that can produce what is actually selling not just what is forecasted to sell. • Affordable Differentiation – product, packaging, or supply chain solutions that help retail customers better serve their customers

Grebson example (10-11) Pearson and Fawcett supply roller bearings for Grebson, but they have a hard time forecasting with certainty how many they will need to supply for any given quarter. This puts Pearson and Fawcett in a dangerous situation because if they produce too many they will have to incur the extra holding costs and if they produce too few they risk losing current and future sales to Grebson. • The main problem in this supply chain is the lack of communication among the companies because each one is accounting some safety stock into their production. This causes high amounts of overproduction. • This lack of communication has caused the production problem that is known as the bullwhip effect (each supplier procures unnecessary “safety stock,” which added together significantly increases costs). Wal-Mart Example (15-16) Wal-Mart is the inventory turnover king. By using technology and tight communication with their vendors they have streamlined their supply chain from manufactures to their stores. They accomplished this using a process called cross-docking where a large truckload of an item is

transferred to multiple smaller trucks which go to their end location rather than to other stores or warehouses. • High performance collaboration in a company develops through bringing experts from separate divisions such as marketing, operations, and finance together to achieve a common goal. Global Perspective for Banks (21-23) Due to the rise of globalization, banks now have to switch from a physical supply chain (paper billing/info) to a financial supply chain process (electronic billing/info). One major change is the removal of paper from the process which saves on the cost of supplies and transportation. A major benefit is the real time processing of transactions which ultimately speeds up the supply chain and makes it easier for banks to be aware of what is going on in the business. What is the importance of each corporate stakeholder? What is their relationship to SCM? Stakeholders are the ones who ultimately benefit or suffer because of how the companies supply chain is run. Stakeholders consist of owners, investors, stockholders, managers, employees, business partners, and most importantly customers.

MOD 2

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Independent demand item: Demand is influenced by market condition not related to demand for other items. Demand dependent item: Items that are required as components or inputs to other products or services – demand is dependent on demand for another item. Lead time: Time between customer placing an order and the customer receiving the order. Lot size: Typically, the order size. SKU: Stock Keeping Unit. Unique identifying number used to track each unique product consumers can purchase. Types of inventory: o Raw Materials/components, Work-in-Process, Finished Goods o Spare and/or replacement parts o Capital Equipment, MRO (Maintenance, repair& operations)  Inventory is the ultimate insurance against risk, less risk = less inventory. Inventory classifications: o Long- term: items that can be sold today, next month, next year or even a couple years down the road. Prefer quick sale but don’t require it. Ex. Nails, paper, cleaning supplies o Seasonal: sell quickly, high demand for this is limited. Next year maybe an option. Ex. Xmas trees, valentines candy o Perishable: Demand period for these items is finite. Selling them later than today may not be possible. Ex. Fruits, clothing (susceptible to changes in culture, style), airline seats, hotel rooms o Safety Stock: Protects against uncertainties in demand, lead time, supply. Don’t intend to use this. Meant as an insurance. o Anticipation Inventory: Used to absorb uneven rates of demand or supply, holiday items (Halloween costumes) o Market inventory: Inventory readily available on the shelves. o Pipeline inventory: Orders that have been placed, but not yet received nor paid for by customer. Inventory that’s “on its way” to the customer. Formula: Period demand x Lead time. Cycle Stock: Inventory used to accommodate normal demand or inventory that varies directly with lot size. Cycle stock = Q/2 (cycle inventory, average inventory) Holding/carrying cost: o Warehouse rent, security systems, depreciation o Obsolescence/shrinkage, materials handling

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o Insurance, opportunity costs Ordering (purchasing) costs: o Order clerk salary, E-procurement system, delivery fees Total annual inventory cost equation: o TC = DC + (Q/2)H + (D/Q)S  TC = Total Cost of inventory  D = Annual demand for item  C = Cost per unit  H = Cost to hold one unit of inventory for one year  S = Cost to place a single order • DC = Annual cost to purchase inventory – “Buy it” • (Q/2)H = Annual holding cost (AHC) – “Hold it” • (D/Q)S = Annual ordering cost (AOC) – “Order it” Economic Order Quantity (EOQ) o Q = EOQ = Sqr rt( 2DS/H)  Annual Holding Cost = Annual Ordering Cost If AHC > AOC – operating above EOQ If AHC < AOC – operating below EOQ Make vs. Buy o Make if:  No competent supplier  Better quality control  Able to control lead times o Buy if:  Insufficient capacity to make  Lack expertise  Lack quality Centralized v Decentralized purchasing o Centralized:  Volume  Specialization  Consolidated shipping  Common supply base o Decentralized  Closer knowledge of requirements  Local sourcing  Less bureaucracy You purchase from someone else if the posses core competencies/ have competitive priorities over other suppliers and your own ability to make the desired product.

TEXTBOOK

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Supply Management: identification, acquisition, access, position and management of resources an organization needs or potentially needs in the attainment of its strategic objectives

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Primary goal of purchasing: ensure uninterrupted flows of raw materials at the lowest total cost, to improve quality of finished goods and improve customer satisfaction. Purchase Order

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o When a suitable supplier is identified, or a qualified supplier is on file, the buyer issues a purchase order o The Purchase Order is the buyer’s offer and becomes a legally binding contract when accepted by the supplier o Should be prenumbered and issued in duplicate, and buyers should not be authorized to pay invoices o Prenumbered purchase orders make it easier to trace any missing or unaccounted for purchase order o A duplicate purchase order should be issued to the accounting department for internal control purposes and to inform the department of a future payment or commitment of resources ·

Material Requisition o Purchasing process starts when the material user initiates a request for a material in duplicate o The product, quantity, and delivery due date are clearly described on the material requisition

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RFQ: Request for Quotation o If the material is not available in the warehouse, the material requisiting is channeled to the purchasing department o If there is no current supplier for the item, the buyer must identify a pool of qualified suppliers and issue a request for quotation

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RFP: Request for Proposal

o This is issued instead for a complicated and highly technical component part, especially if the complete specification of the part is unknown o A RFP allows suppliers to propose new material and technology, thus enabling the firm to exploit the expertise of suppliers RFQ or RFP: Request for quotation/ Request for proposal. If the material is not available in the warehouse, the Material Requisition is sent to Purchasing, if there is no current supplier for the item. The buyer must identify a pool of qualified suppliers and issue a RFQ. RFP can be issued for a complicated/highly technical component part, where the complete specs of the part is unknown. Allow suppliers to propose new material/ tech, enabling the firm to exploit expertise of suppliers Procurement: The process of obtaining services, suppliers, and equipment in conformance with corporate regulations. -Used in place of purchasing, typically includes the added activities of specifications development, expediting, supplier quality control and some logistics activities. Used widely by government agencies due to type of purchases and frequent service contracting. EX of Duties: Supplier selection, purchasing negotiations, managing supplier relationships, materials and inventory management -Tires for Toyota—who do you buy from? ·

Advantages of e-Procurement System o Time Savings: E-procurement is more efficient when: ·

Selecting and maintain...