Introduction to Supply Chains 1

What three factors determine cash flow for an organization?

Sales, after-tax operating profit margins, and capital requirements There are three factors that determine cash flows: sales, after-tax operating profit margins, and capital requirements. Some organizations consider cash flow to be a better long-term indicator of financial health than net income.

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.

keiretsu

A form of cooperative relationship among companies in Japan where the companies largely remain legally and economically independent, even though they work closely in various ways such as financial backing. A member of [this] generally owns a limited amount of stock in other member companies. [It] generally forms around a bank and a trading company, but "distribution" (supply chain) alliances [of this type] have been formed of companies ranging from raw material suppliers to retailers.

Which of the following is true of e-business strategy?

A nucleus firm needs to upgrade its own systems and organization to the desired level of interorganizational connectivity before seeking partners. A nucleus firm needs to initiate an interorganizational strategy, but it needs to have a sufficient level of supply chain maturity to start this process. Organizations cannot skip stages of supply chain development but must progress through each stage due to the immense complexity and cost of achieving each stage. Organizational change also requires that these stages not be skipped.

Technically speaking, which of the following combinations of companies is sufficient to constitute a supply chain?

A supplier, a nucleus firm (company), and a customer A very basic supply chain might be one with only three entities—a producer with one supplier and one customer.

Understanding process interdependencies and responsibility for each substep and identifying bottlenecks will provide which supply chain ability?

Ability to streamline operations As supply chains evolve, their ability to streamline key operational processes and flows also increases. Each of the competencies listed in the question relate to the ability to successfully streamline operations.

What are key qualities to look for in software for organizations wanting to remain at Stage 4 of supply chain network technology optimization, the extended enterprise?

Adaptability and scalability Technology links between partners should be seen as a continuous improvement initiative, and adaptable and scalable software solutions should be used when possible.

The stages of supply chain management evolution occur in which of the following?

All of the above Whether the supply chain ownership strategy rests on vertical integration, lateral integration, or a compromise (like keiretsu), the relative sophistication with which the chain is managed develops along the continuum that is divided into the stages.

The purpose of supply chains is to be globally competitive. What are the basic elements in a supply chain that can impact its ability to respond competitively to changes in the global marketplace?

Collaboration, time, distance Time, distance, and collaboration are basic elements in modern supply chains that impact a supply chain's ability to respond to competitive changes in the global marketplace. The relationships of time, distance, and collaboration weave like three bright threads through the fabric of any supply chain on the globe.

You are working in an organization that is in the second developmental stage of organizational design. What should you be prepared to do?

Communicate upward or laterally in functional teams. In the second stage, organizational design follows functional lines, with each department ensconced in its own silo and focused on meeting its own goals. Supply chain decisions, such as number and location of warehouses, inventory management, or modes of transportation, are made entirely within their separate silos. Communication flows upward through the chain of command or, perhaps, horizontally in departmental teams.

An organization makes several adjustments to the supply chain to be more sustainable and use fewer natural resources from the area. The financial impacts of these changes are negligible. From a values perspective, which supply chain stakeholders would these changes best align with?

Communities Communities are likely to value these environmental changes the most, given that the changes do not have an appreciable financial impact (which aligns more closely with investors and lenders). If the changes result in a significant increase in image and reputation, other companies in the supply chain may also find that the changes align with their values. However, not all sustainable changes will result in an increase in image and reputation.

Which of the following are benefits of a vertical supply chain?

Complete control and visibility of operations The benefits of vertical integration include control and completely visibility to the parent company (at least in theory).

Which of the following is the primary benefit of a vertical supply chain strategy?

Control The primary benefit of vertical integration is control. A department or wholly owned subsidiary with no independent presence in the marketplace can't deal with competitors to sell its components or services at a higher price. Its operations are completely visible to the parent company (at least in theory) and can be synchronized with other company functions by directives from the top. Its schedules, workforce policies, locations, amounts produced—all aspects of its business—are controlled by the overarching management.

Customer information

Customer information flows through the organization and the extended enterprise via orders, sales activity, and forecasts.

The APICS Dictionary, 15th edition, refers to a supply chain as a "global network." Which of the following correctly indicates what could comprise this network?

Entities and processes (the engineered flow) of any size or configuration The global network referred to in the definition of a supply chain comprises a network of both entities and processes (the engineered flow). A supply chain doesn't have to be global.

A company benchmarks its competitor as having unattended internet trading and capable-to-promise (CTP). What stage of supply chain development has this competitor reached?

Extended enterprise At Stage 4 of supply chain development, extended enterprise, companies typically have moved beyond simple participation in exchanges and have automated trading and have moved past available-to-promise (ATP) to CTP.

In a service industry such as an electrical utility supply chain, which of the following is a Tier 1 supplier?

Facility maintenance Tier 1 suppliers in this supply chain include fuel suppliers, janitorial services, and facility maintenance. The steel manufacturer and the manufacturer of coal excavator equipment would both be considered Tier 2 suppliers, as they produce products needed by the Tier 1 suppliers. Commercial customers are a customer type for the electric utility, not a supplier.

Revenues, profit margin, market share, expenses, image, and reputation are values for which stakeholder group?

Firms in the supply chain Revenues, profit margin, market share, expenses, image, and reputation are values of supply chain firms.

In which stage of organizational design development might an organization start having at least one business process that requires collaboration from another corporation even if this is just for one product line or component?

Fourth: extended enterprise In the fourth stage, the extended enterprise, the organization makes the decision to extend at least one business process beyond the boundary of the individual corporation. It may involve an initial exploratory collaboration between a channel master and one of several partners in the supply chain and may involve only one component or product at first.

Which of the following is a benefit of lateral supply chains?

Improved business focus and expertise Lateral supply chains can benefit from focusing entirely on the particular business and can develop more expertise than an in-house department, leading to more attractive pricing, higher quality, or both.

A company has reached Stage 4 of supply chain development, extended enterprise, by engaging in extended supply chain global e-business. Which of the following is likelytrue of this company from this point forward compared to where they were a few years ago?

Increased outbound transportation costs Moving more business to the internet means that transportation costs will increase due to the need to ship anywhere in a short window. While inbound transportation can be optimized or centralized, outbound transportation increases because the company is doing work performed by the customers themselves in a retail environment and many smaller outbound shipments are needed.

Which is an example of how McDonald's is vertically integrated to some degree?

McDonald's owns the land for all of its United States retail stores. McDonald's owns the land upon which all of its retail sites sit in the United States and operates as a landlord to what are primarily franchised facilities. This omits independent landlords and provides significant rent revenue. This is an example of partial vertical integration. McDonalds does use a "vested interest model," but this model helps suppliers be motivated to create value for McDonald's because doing so helps them profit appropriately themselves.

A vertically integrated enterprise can grow by doing which of the following?

Merging with or acquiring other companies A vertically integrated enterprise may grow from an entrepreneurial base by adding departments and layers of management to accommodate expansion, or it may be built through mergers and acquisitions.

stakeholders

People with a vested interest in a company, including managers, employees, stockholders, customers, and suppliers.

In which directions do the four basic flows within a supply chain move?

Physical materials and services flow downstream, cash and the reverse supply chain flow upstream, and information flows in both directions. Physical materials and services flow downstream from suppliers to customers, cash and the reverse supply chain flow upstream from customers toward suppliers, and information flows in both directions.

What needs to be heavily emphasized in technology solutions if the organization is to truly become consistent and systematic and achieve the orchestrated supply chain level of supply chain maturity?

Process and cross-organizational data sharing automation Automation of repetitive processes should enable people to focus on exceptions, improvements, and relationships. Similarly, many more suppliers now automatically receive end customer demand data so they too can improve their planning horizons and right-size their inventories.

What are typically the main external ties for a company at Stage 2 of supply chain network technology optimization, the semifunctional enterprise?

Providers of functions that are not core capabilities for the organization At Stage 2, some companies have outsourced areas outside their core processes, and these outsource providers are their main external ties.

Demand and which of the following types of information typically flow from the end customer upward in a service supply chain?

Requirements Quality is said to be achieved if a product meets or exceeds customer expectations or requirements. A simple supply chain involves participants from upstream (toward the origin) to downstream (toward the ultimate consumer). Information flows upstream from the customer to suppliers to aid in identifying the characteristics of the demand for the product.

A firm's highest stage of production is manufacturing resource planning (MRP II), it uses informal demand planning with disconnected spreadsheets for the supply chain, and it has online catalogs on the internet. What stage of supply chain development has the firm reached?

Semifunctional enterprise At Stage 2, semifunctional enterprise, a firm has adopted MRP II, its demand planning is still done informally, and its internet capability has not progressed beyond online catalogs.

Which of the following is the supply chain evolution stage in which a nucleus company begins initiatives to improve efficiency, effectiveness, and quality within functional areas?

Semifunctional enterprise In a semifunctional enterprise, information flow has been improved and functional areas have been defined—but they tend to perform their functions one after the other without collaborating on the most effective ways of creating value. At this stage, there are no partnerships with customers and suppliers.

An organization that networks its enterprise resources planning (ERP) systems across corporate boundaries might do which of the following to reduce the bullwhip effect?

Send point-of-sale data directly to suppliers. In Stage 4 of supply chain development, partners begin to synchronize their ERP systems across corporate boundaries so they can share data as necessary for efficient collaboration. A retailer may, for example, send information from the point-of-sale to suppliers each time a customer purchases an item to trigger production of a replacement. This can help reduce or eliminate the bullwhip effect.

The supply chain manager has recently been told that he must increase the supply chain value to the external stakeholders. Which stakeholders should he focus on, and what should be done?

Shareholders; increase dividend income. Stakeholders external to the supply chain's business partners and end customers include public or private investors, lenders, and communities and governments. To investors and lenders, supply chain value may be defined as interest payments, capital growth, or dividend income and eventual return of invested capital.

What does the term "flattening of the globe" refer to?

Shrinking of the world into one global economy Supply chains and their management reflect the revolution in electronic communication and the shrinking of the world into one global community—what author Thomas Friedman calls the "flattening of the globe."

A company can demonstrate cross-functional integration of planning and capacity for operations. It appoints a leader with experience in external integration, who starts by aggregating purchasing to find volume discounts. This organization is currently trying to grow out of which of the following stages of supply network technology optimization?

Stage 2, semifunctional enterprise At the semifunctional stage, many companies have completed an MRP II (manufacturing resource planning) implementation and can demonstrate cross-functional integration of planning processes involving automated capacity planning. They are taking steps to reach Stage 3.

At which of the following stages would a company be if it has multiple uncoordinated improvement efforts, such as inventory reduction, better forecasting techniques, and lower cost procurement, occurring sequentially instead of in concurrence?

Stage 2: Semifunctional enterprise A company at Stage 2 will have multiple initiatives to improve individual functional areas, but these will not generally be coordinated with one another and will therefore fall short of their potential for reducing costs, improving margins, expanding markets, or delivering better service.

At the orchestrated supply chain level, what is likely to be used to enable supply chain planning to be data driven?

Supply chain data analytics plus cross-organizational teams with technology, people, and change expertise To be data-driven, organizations rely on supply chain data analytics to find the optimum solution to a problem. Being data-driven also requires mature cross-organizational teams who have technology, people, and change expertise.

What group is the primary stakeholder in any business activity?

The business itself The primary stakeholder in any business activity is the business itself. A business must be profitable to survive and create value for any other stakeholder group.

Semifunctional enterprise

The company is starting at Stage 1, multiple dysfunction, and wants to get to Stage 3, integrated enterprise, or higher to match or surpass the competitor. However, the firm must proceed through each stage of supply chain development due to the massive complexity required to get to each major stage. Therefore, even with a large budget, the firm must proceed to Stage 2, semifunctional enterprise, first.

its business processes are facilitated by organization-wide technology.

The integrated enterprise stage of supply chain evolution (Stage 3) is significantly different from the semifunctional enterprise stage (Stage 2) for many reasons, including its focus on business processes that are facilitated by the increased availability of email, file transfers, powerful databases, and enterprisewide software applications.

Organization ABC's leaders believe that the organization's supply chain is in the fifth stage of supply chain maturity, the orchestrated supply chain. What might be a red flag that they are more likely at just the fourth stage of maturity?

The organization has succeeded in closing visibility gaps in its technology despite a great deal of change resistance. While closing end-to-end visibility gaps is a quality of a stage 5 supply chain, another aspect is people maturity. An organization at this stage should have mature change management processes, so the level of change resistance here may indicate that this part of the supply chain needs work. The other answers fit with the fifth level of maturity. For example, allowing other suppliers to produce to a design that one supplier helped create is a form of resilience.

When Henry Ford organized Ford Motor Company to include raw materials extraction and dealerships as well as his assembly lines, he created which of the following?

Vertical supply chain Vertical integration is the ownership of many or all parts of the supply chain. By bringing many supply chain activities in-house and putting them under corporate management, vertical integration solves the problem of who will design, plan, execute, monitor, and control supply chain activities.

What lesson can be learned from studying a humanitarian and disaster relief supply chain?

When social and physical infrastructure breaks down, long-term relationships based on trust become invaluable. Humanitarian and disaster relief supply chains become agile in operating a supply chain where supply and demand are routinely unbalanced, where demand can spike quickly, and where roads, electricity, or the full rule of law may be compromised. One way that they stay agile is by developing ongoing relationships with persons in the community whom they can trust.

The organization has succeeded in closing visibility gaps in its technology despite a great deal of change resistance.

While closing end-to-end visibility gaps is a quality of a stage 5 supply chain, another aspect is people maturity. An organization at this stage should have mature change management processes, so the level of change resistance here may indicate that this part of the supply chain needs work. The other answers fit with the fifth level of maturity. For example, allowing other suppliers to produce to a design that one supplier helped create is a form of resilience.

Many Japanese companies build keiretsu to:

form cooperative relationships, usually through ownership of stock in member companies. Keiretsu is an intermediate form of integration that differs from vertical or horizontal integration in that suppliers and customers are not completely independent but instead own significant stakes in one another. This helps the network of firms be more willing to consider each other's needs.

The integrated enterprise stage of supply chain evolution is significantly different from the prior stage in that:

its business processes are facilitated by organization-wide technology. The integrated enterprise stage of supply chain evolution (Stage 3) is significantly different from the semifunctional enterprise stage (Stage 2) for many reasons, including its focus on business processes that are facilitated by the increased availability of email, file transfers, powerful databases, and enterprisewide software applications.

If you are working in a firm that is in Stage 1 of supply chain management evolution, you should be prepared for:

overly optimistic forecasting. In Stage 1, multiple dysfunction, forecasting tends to be mostly guesswork and is often inflated by unfounded marketing optimism. The other issues listed arise in Stages 2 and 3.

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.

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.

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.

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.

A coal mine ships coal to a generating plant that supplies power to a manufacturer that produces a machine that is shipped to a distributor that sells mining equipment to the same mine that began the process. This is an example of a:

supply chain that doubles back on itself. This is an example of a manufacturing supply chain that doubles back on itself. These types of supply chains include distributors that purchase and resell these products.