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business plan
1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement. A business plan is usually stated in terms of dollars and grouped by product family. The business plan is then translated into synchronized tactical functional plans through the production planning process (or the sales and operations planning process). Although frequently stated in different terms (dollars versus units), these tactical plans should agree with each other and with the business plan. 2) A document consisting of the business details (organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business.
UN Global Compact Management Model
A framework for guiding companies through the process of formally committing to, assessing, defining, implementing, measuring, and communicating the United Nations Global Compact and its principles.
United Nations Global Compact
A voluntary initiative whereby companies embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anticorruption.
There are three primary flows that need to be managed
Flow of information Flow of cash Flow of materials and services
performance standard
In a performance measurement system, the accepted, targeted, or expected value for the criterion.
Subcontracting
Sending production work outside to another manufacturer.
service
Sometimes used to describe those activities that support the production or distribution functions in any organization, such as customer service and field service.
Strategic
Strategy sets the long-term direction of the organization. Performance measurements at this level relate to long-term goals such as profitability, productivity, learning and growth, and market share.
make-or-buy decision
The act of deciding whether to produce an item internally or buy it from an outside supplier. Factors to consider in the decision include costs, capacity availability, proprietary and/or specialized knowledge, quality considerations, skill requirements, volume, and timing.
supply chain management
The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.
scrap
material outside of specifications and possessing characteristics that make rework impractical.
demand lead time
the amount of time potential customers are willing to wait for the delivery of a good or a service.
Fixed cost
An expenditure that does not vary with the production volume; for example, rent, property tax, and salaries of certain personnel.
bullwhip effect
An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving
Variable cost
An operating cost that varies directly with a change of one unit in the production volume (e.g., direct materials consumed, sales commissions).
The cyclical steps in UN Global Compact Management Model are as follows:
Commit. This first step is undertaken by company leaders, including management and the board of directors. They commit in a transparent way to incorporate the principles into formal governance structures such as board approval processes, culture, strategy, and daily operations. Assess. In this step, the organization assesses its current state in terms of risks and opportunities related to human rights, labor, the environment, and anti-corruption. A risk and opportunity analysis considers financial costs or potential gains as well as other harder-to-quantify positive and negative impacts and then weights these benefits and costs. This helps the organization prioritize areas for improvement based on the largest net gains or mitigation of the worst risks. Define. This is where the results of the assessment are used to create or refine the organization's strategy and related policies, goals, and metrics. This step defines the end results up front so success can be determined. Implement. In this step, the new strategy is transformed into tactics such as capital improvement projects to provide any necessary capacity and resources, worker engagement and education, new policies and procedures for the organization and its suppliers or distributors, plans for assessing compliance, and action plans for dealing with missed goals. Note that suppliers or other partners who choose not to comply with these policies or cannot become compliant within a reasonable amount of time may need to be replaced. Measure. This is a monitoring and controlling step. This involves adjusting metrics to ensure that there is a way to determine whether the new policies and procedures are being followed. It is also important to adjust metrics used in individual, team, and external provider performance assessments so that everyone has an incentive to work toward the committed goals. Communicate. The last step is where much of the payoff of the investment in corporate social responsibility comes from. Engaging with local communities, the workforce, the press, and other stakeholders helps the organization to celebrate its successes and improve its reputation. Since communication includes listening, a vital part of this step is listening to these various stakeholders to identify goals for continuous improvement and new levels of commitment.
product differentiation
a strategy of making a product distinct from the competition on a nonprice basis such as availability, durability, quality, or reliability.
SMART
abbreviation for organizational goals that are (1)specific, (2)measurable, (3)achievable/attainable, (4)relevant/realistic, and (5)timely.
value chain analysis
an examination of all links a company uses to produce and deliver its products and services, starting from the origination point and continuing through delivery to the final customer.
sustainability
an organizational focus on activities that provide present benefit without compromising the needs of future generations.
logistics
1) In a supply chain management context, it is the subset of supply chain management that controls the forward and reverse movement, handling, and storage of goods between origin and distribution points. 2) In an industrial context, the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities. 3) In a military sense (where it has greater usage), its meaning can also include the movement of personnel.
service industry
1) In its narrowest sense, an organization that provides an intangible product (e.g., medical or legal advice). 2) In its broadest sense, all organizations except farming, mining, and manufacturing. Includes retail trade; wholesale trade; transportation and utilities; finance, insurance, and real estate; construction; professional, personal, and social services; and local, state, and federal governments.
materials managers perform two major organizational functions:
1) Manufacturing planning and control (MPC). MPC is a blanket term that encompasses high-level planning, master scheduling, material requirements planning (MRP), and execution control along with the related checks on available capacity. 2) Logistics. Materials managers are responsible for incoming physical supply and outgoing physical distribution. They monitor and control purchasing, warehouses, and raw materials, work-in-process, and finished goods inventories.
customer service
1) The ability of a company to address the needs, inquiries, and requests of customers. 2) A measure of the delivery of a product to the customer at the time the customer specified.
operations management
1) The planning, scheduling, and control of the activities that transform inputs into finished goods and services. 2) A field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or service organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, production
participative design/engineering
A concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs.
key performance indicator (KPI)
A financial or nonfinancial measure that is used to define and assess progress toward specific organizational goals and typically is tied to an organization's strategy and business stakeholders. A KPI should not be contradictory to other departmental or strategic business unit performance measures. A metric used to measure the overall performance or state of affairs. SCOR level 1 metrics are considered KPIs.
balanced scorecard
A list of financial and operational measurements used to evaluate organizational or supply chain performance. The dimensions of the balanced scorecard might include customer perspective, business process perspective, financial perspective, and innovation and learning perspectives. It formally connects overall objectives, strategies, and measurements. Each dimension has goals and measurements.
Operational
Operations are the daily activities of the organization. Performance measurements at this level relate to daily work progress. Manufacturing metrics might include utilization, efficiency, and work center cycle times.
Kaplan and Norton
Organizations have conventionally measured performance using financial results, but the authors of The Balanced Scorecard, Kaplan and Norton, believed that this led to short-term management at the expense of long-term goals. While the financial perspective remains vital to measure and manage, Kaplan and Norton added three other perspectives to help organizations focus on the long term:
In this way the metrics help form the links between three levels of management:
Strategic. Strategy sets the long-term direction of the organization. Performance measurements at this level relate to long-term goals such as profitability, productivity, learning and growth, and market share. Tactical. Tactics turn strategy into discrete medium-term plans. The APICS Dictionary, 16th edition, defines tactical plans as the set of functional plans (e.g., production plan, sales plan, marketing plan) synchronizing activities across functions that specify production levels, capacity levels, staffing levels, funding levels, and so on, for achieving the intermediate goals and objectives to support the organization's strategic plan. Performance measurements at the tactical level show progress toward medium-term goals needed to realize the strategy. This might include budgets, production plans, and manufacturing metrics like inventory turnover or perfect orders. Operational. Operations are the daily activities of the organization. Performance measurements at this level relate to daily work progress. Manufacturing metrics might include utilization, efficiency, and work center cycle times.
Tactical
Tactics turn strategy into discrete medium-term plans. The APICS Dictionary, 16th edition, defines tactical plans as the set of functional plans (e.g., production plan, sales plan, marketing plan) synchronizing activities across functions that specify production levels, capacity levels, staffing levels, funding levels, and so on, for achieving the intermediate goals and objectives to support the organization's strategic plan. Performance measurements at the tactical level show progress toward medium-term goals needed to realize the strategy. This might include budgets, production plans, and manufacturing metrics like inventory turnover or perfect orders.
Kaplan and Norton added three other perspectives to help organizations focus on the long term:
The customer perspective helps organizations stay focused on their customers' changing needs. The business process perspective helps organizations measure the cost and efficiency of their processes and continually improve them. The innovation and learning perspective helps spur investment in future growth and workforce maturity.
supply chain
The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.
risk management
The identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.
strategic plan
The plan for how to marshal and determine actions to support the mission, goals, and objectives of an organization. Generally includes an organization's explicit mission, goals, and objectives and the specific actions needed to achieve those goals and objectives.
Outsourcing
The process of having suppliers provide goods and services that were previously provided internally. Outsourcing involves substitution—the replacement of internal capacity and production by that of the supplier.
Supply Chain Operations Reference (SCOR) model
The standard cross-industry diagnostic tool for supply chain management. The SCOR model describes the business activities associated with satisfying a customer's demand, which include plan, source, make, deliver, return, and enable. Use of the model includes analyzing the current state of a company's processes and goals, quantifying operational performance, and comparing company performance to benchmark data. SCOR has developed a set of metrics for supply chain performance, and ASCM members have formed industry groups to collect best practices information that companies can use to evaluate their supply chain performance.
order qualifiers
Those competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace. For example, a firm may seek to compete on characteristics other than price, but in order to "qualify" to compete, its costs and the related price must be within a certain range to be considered by its customers.
order winners
Those competitive characteristics that cause a firm's customers to choose that firm's goods and services over those of its competitors. Order winners can be considered to be competitive advantages for the firm. Order winners usually focus on one (rarely more than two) of the following strategic initiatives: price/cost, quality, delivery speed, delivery reliability, product design, flexibility, after-market service, and image.
Downstream
Used as a relative reference within a firm or supply chain to indicate moving in the direction of the end customer.
Upstream
Used as a relative reference within a firm or supply chain to indicate moving in the direction of the raw material supplier.
materials management
the grouping of management functions supporting the complete cycle of material flow, from the purchase and internal control of production materials to the planning and control of work in process to the warehousing, shipping, and distribution of the finished product.
what-if analysis
the process of evaluating alternate strategies by answering the consequences of changes to forecasts, manufacturing plans, inventory levels, and so forth.
tactical plans
the set of functional plans (e.g., production plan, sales plan, marketing plan) synchronizing activities across functions that specify production levels, capacity levels, staffing levels, funding levels, and so on, for achieving the intermediate goals and objectives to support the organization's strategic plan.
