SCM Chapter 1: Supply Chain Overview A supply chain consists of the flow of products and services from: Raw

materials manufacturers, Component and intermediate manufacturers, Final product manufacturers, Wholesalers and distributors and Retailers reduced bullwhip effect= the magnified reduction of safety stock costs based on coordinated planning and sharing of information Current Trends in Supply Chain Management: 1. Expanding and contracting the supply chain: U.S. firms are expanding partnerships and building facilities in foreign markets. Right shoring for maximum flexibility and minimum cost. The expansion involves: Breadth - foreign manufacturing, office & retail sites, foreign suppliers & customers Depth - second and third tier suppliers & customers 2. Increasing supply chain responsiveness : 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 3. Greening of supply chains: 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. consumers influenced by a firms environmental friendliness reputation. Recycling and conservation are a growing alternative in response to high cost of natural resources 4. Reducing supply chain costs: Cost reduction achieved through: Reduced purchasing costs, Reducing waste, Reducing excess inventory, and Reducing non-value added activities. Continuous Improvement through: Benchmarking improve over competitors performance, Trial & error, Increased knowledge of supply chain processes SCM Textbook Chapter 2: Purchasing Management Outsourcing Buying materials and components from suppliers instead of making them in-house. The trend has moved toward outsourcing. Backward vertical integration Refers to acquiring sources of supply Forward vertical integration Refers to acquiring customers operations. The Make or Buy decision is a strategic decision : Cost advantage Especially for components that are non-vital to the organizations 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 economy of scale Reasons for Making: Protect proprietary technology, No competent supplier, Better quality control, Use existing idle capacity, Control of lead-time transportation, and warehousing cost, Lower cost. Reasons favoring a single supplier: To establish a good relationship, Less quality variability , Lower cost, Transportation economies, Proprietary product or process, Volume too small to split. Reasons favoring multiple suppliers: Need capacity, Spread risk of supply interruption , Create competition, Information, Dealing with special kinds of business International / global sourcing: Reasons for Global Sourcing Opportunity to improve quality, cost, and delivery performance Potential Challenges Requires additional skills and knowledge to deal with international suppliers, logistics, communication, political environment, and other issues SCM Textbook Chapter 3: Creating and Managing Supplier Strong supplier partnerships: Important to achieving win-win competitive performance for the buyer and supplier -- these require a strategic perspective as opposed to a tactical position . Involve a mutual commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship Supplier Evaluation: Performance metrics- You cant improve what you cant measure, Measures 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 A multi-criteria approach is best Total cost of ownership (TCO), is made up of all costs associated w/acquisition, use, & maintenance of a good or service Supplier certification- an organizations process for evaluating the quality systems of key suppliers in an effort to eliminate incoming inspections. 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 of overall score. 6. Classify vendors based on their overall score: Unacceptable, Conditional, Certified, & Preferred 7.Audit & perform ongoing certification review. Supplier Scorecard: Performance Measure= Rating x Weight- Final Value ISO 9000- Developed by International Organization for Standardization (ISO) - series of management & quality standards in design, development, production, installation, & service. Companies wanting to sell in the global market seek ISO 9000 certification. ISO 14000- A family of standards for environmental management. The benefits include reduced energy consumption, environmental liability, waste & pollution, & improved community goodwill. SCM Textbook Chapter 4: Ethical and Sustainable Sourcing Advantages of outsourcing: Concentrate on core capabilities, Reduce staffing levels, Accelerate reengineering efforts, Reduce management problems, Improve manufacturing flexibility. Risks associated with outsourcing: Loss of control- Production decisions & intellectual property, Increased reliance on suppliers, Increased need for supplier management Define third party logistics or 3PL A growing industry that involves managing a firms sourcing or materials &/or product distribution responsibilities.3PL providers charge a fee for services for an estimated savings of 10 to 20% of total logistics costs; benefits include improved service, quality, & profits for their clients. SCM Textbook Chapter 5: Demand Forecasting What is the role of demand forecasting in a supply chain? -A forecast is an estimate of future demand & provides the basis for planning decisions, The goal is to minimize forecast error , The factors that influence demand must be considered when forecasting., Managing demand requires timely & accurate forecasts, Good forecasting provides reduced inventories, costs, & stockouts, & improved production plans & customer service Qualitative Forecasting Methods Generally used when data are limited, unavailable, or not currently relevant. Forecast depends on skill & experience of forecaster(s) & available information . Four qualitative models used are 1.Jury of executive opinion 2.Delphi method 3.Sales force composite 4.Consumer survey Quantitative Methods: 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 It is generally recommended to use a combination of quantitative & qualitative techniques Several measures of forecasting accuracy follow Mean absolute deviation (MAD)- a MAD of 0 indicates the forecast exactly predicted demand. Mean absolute percentage error (MAPE)- provides a

perspective of the true magnitude of the forecast error. Mean squared error (MSE)analogous to variance, large forecast errors are heavily penalized SCM Textbook Chapter 6: Resource Planning Systems Alternate production strategies and their specific application: Chase strategy- Adjusts capacity to match demand. Firm hires & lays off workers to match demand. Finished goods inventory remains constant. Works well for make-to-order firms. Level strategy- Relies on a constant output rate while varying inventory & backlog according to fluctuating demand. Firm relies on fluctuating finished goods & backlogs to meet demand. Works well for make-to-stock firms. Mixed aggregate strategy- Maintains stable core workforce while using other short-term means, such as overtime, subcontracting & part time helpers to manage short-term demand. ERP system: Advantages= Added visibility reduce supply chain inventories, Helps to standardize manufacturing processes, Measure performance & communicate via a standardized method . Disadvantages= Substantial time & capital investment, Complexity , Firms adapt processes to meet ERP system SCM Textbook Chapter 7: Inventory Management Inventory Costs- Direct costs- directly traceable to unit produced (e.g., labor), Indirect costs- cannot be traced directly to the unit produced (e.g., overhead), Fixed costsindependent of the output quantity (e.g, buildings, equipment, & plant security) , Variable costs- vary with output level (e.g., materials), Order costs- direct variable costs for making an order. In mfg, setup costs are related to machine setups , Holding or carrying costsincurred for holding inventory in storage. Inventory Turnover Ratio = Cost of Revenue/Average Inventory What is RFID and how is it used to manage the supply chain? Successor to the barcode for tracking individual unit of goods. RFID does not require direct line of sight to read a tag and information on the tag is updatable. Automates the supply chain: Materials Management goods automatically counted and logged as they enter the supply warehouse, Manufacturing assembly instructions encoded on RFID tag provide information to computer controlled assembly devices, Distribution Center shipment leaving DC automatically updates ERP to trigger a replenishment order and notify customer for delivery tracking, Retail Store no check out lines as scanners link RFID tagged goods in shopping cart with buyers credit card SCM Textbook Chapter 8: Process Management Lean & Six Sigma in the Supply Chain Lean Production- an operating philosophy of waste reduction & value enhancement & was originally created as Toyota Production System (TPS) by key Toyota executives . Early versions were based on Ford assembly plants & U.S. supermarket distribution systems . Key concepts incorporated in TPS are Muda - waste in all aspects of production. Kanban - signal card & part of JIT. Statistical process control (SPC) as part of TQM efforts . Poka-Yoke - error or mistakeproofing Supply chain management (SCM) seeks to incorporate Lean elements using crosstraining,, satisfying internal customer demand , quickly moving products in the production system, communicating demand forecasts & production schedules up the supply chain- optimizing inventory levels across the supply chain, Channel integration - extending alliances to suppliers suppliers & customers customers, The silo effect works against channel integration . The Elements of Lean: Waste Reduction, Lean Supply Chain Relationships, Lean Layouts, Inventory & Setup Time Reduction, Small Batch Scheduling, Continuous Improvement, Workforce Empowerment Six Sigma; Near quality perfection (the statistical likelihood of non-defects 99.99966% of the time), Pioneered by Motorola in 1987, A statistics-based decision-making framework designed to make significant quality improvements in value-adding processes SCM Textbook Chapter 9: Domestic U.S. & Global Logistics Logistics is necessary to: Move goods from suppliers to buyers. Move finished goods to the customer. Describe three different strategies for warehouse location. Edgar Hoover recommended Market-positioned strategy - warehouses close to customers to maximize distribution svcs & improve transp. economies of scale, Product positioned strategy close to supply source for firm to collect goods & consolidate, Intermediately positioned strategy midway between supply source & customers when distribution requirements are high & product comes from various locations. Von Thunen - transportation costs should be minimized when considering facility location. Market prices & production costs would be identical regardless of warehouse location. Greenhut - based on profit instead of transportation costs. The optimum location is one that maximizes profits, which may not be min. cost location Describe reverse logistics- aka backhauling is a response to the need for reducing carbon emissions and by ensuring trucks move loaded rather than empty SCM Textbook Chapter 10: Customer Relationship Management customer relationship management (CRM): Building & maintaining profitable long-term customer relationships. Seven Rs of customer service: having the right product, in the right quantity, in the right condition, at the right place, at the right time, for the right customer, at the right costs. SCM Textbook Chapter 11: Global Location Decisions Difference between two models used for location analysis: Weighted-factor rating model- Compares the attractiveness of several locations along a number of quantitative & qualitative dimensions. Identify the factors Assign weights to each factor. The weights sum to 1. Determine a score for each factor. Multiply the factor score by the weight, then sum the weighted scores. The location with the highest total weighted score is the recommended location. Breakeven Model: Useful location analysis technique when fixed & variable costs can be determined. Identify the locations to be considered. Determine the fixed cost of land, property taxes, insurance, equipment, & buildings. Determine the unit variable cost, materials, utilities, & transportation costs. Construct the total cost lines. Determine the break-even points on the graph. Identify the range over which each location has the lower cost. Advantages of business clusters- Geographic concentrations of interconnected companies & institutions. Research parks & special economic/industrial zones serve as magnets for business clusters. Reasons for successclose cooperation, coordination, & trust among clustered companies , fierce competition among rival companies, companies recruit from local skilled workers SCM Textbook Chapter 12: Service Response Logistics Differences between goods (tangible products) and services: Services cannot be inventoried . Services are often unique (e.g., Insurance policies & legal services. Services have high customerservice interactionServices are decentralized due to inability to inventory & transport service products What are the primary concerns of service response logistics? The management and coordination of the organizations service activities. The four primary activities of SRL Service capacity, Waiting times, Distribution channels, and Service quality. Demand management tactics are also important, as services cannot be inventoried & customer demand must be met SCM Textbook Chapter 13: Supply Chain Process Integration

Four requirements for supply chain process integration? Training, Willing & competent partners, Trust, Organizational culture change Five key elements used to manage supply chain risk? Increase safety stocks also known as stockpiling and forward buying. Identify backup suppliers & logistics services which may emergency sourcing & multiple sourcing . Diversify the supply base. Utilize a supply chain IT system. Develop a formal risk management program . What is the primary goal of managing supply chain security? Reducing the risk of intentionally created disruptions in supply chain operations. A supply chain is only as secure as its weakest link . Security management collaboration should include, for example, contractual requirements for secure systems. SCM Textbook Chapter 14: Performance Measurement along the Supply Chain Why are traditional financial performance measures inadequate to drive supply chain excellence? Traditional cost-based information does not reflect the underlying performance of an organizations productive systems; costs & profits can be hidden or manipulated. Decisions to maximize current stock prices do not necessarily reflect that the firm is performing well. Financial performance measures, while important, cannot adequately capture a firms ability to excel in these areas. Nine key steps to a world class performance measurement system. Identify the firms strategic objectives . Develop an understanding of each functional areas role & the required capabilities. Identify internal & external trends likely to affect the firm & its performance over time. For each functional area, develop performance measures that describe each areas capabilities. Document current performance measures & identify changes that must be implemented. Assure the compatibility & strategic focus of the performance measures to be used. Identify internal and external trends likely to affect firm and functional area performance over time. Implement the new performance system. Periodically reevaluate the firms performance measurement system. Balanced Scorecard and the four key design perspectives? Kaplan & Norton created BSC to align an organizations performance measures with its strategic plan & goals. The BSC framework consists of four perspectives Financial perspective , Internal business process perspective, Customer perspective, Learning & growth perspective . SCOR model developed by the Supply Chain Council (now CSCMP) for SCM diagnostic benchmarking & process improvement The SCOR model separates supply chain operations into 5 process categories : Plan, Source, Make, Deliver, Return