SCM 410 FINAL
Transferable
- Ability to transfer supply chain data from one format to another to make it understandable and useful. - Transfer data quickly from one location to another in order to facilitate accessibility and timeliness.
Information requirements
- Accessible - Relevant - Accurate - Timely - Transferable
4 Distribution Center functions
- Accumulation - Sortation - Allocation - Assortment
Roles of DCs
- Balancing supply and demand - Protecting against uncertainty - Allowing quantity purchase discounts - Supporting production requirements - Promoting transportation economies
Reasons for Carrying Inventory
- Batching Economies or Cycle Stocks - Uncertainty and Safety Stocks - Time/In-Transit and WIP Stocks - Seasonal Stocks - Anticipatory Stocks
Advantages of 3PLs
- Buyer can concentrate on its core business processes. - Flexibility - seasonality, geography, test new markets. - Gain management expertise and dedicated resources. - Cost reduction (total logistics costs and activity costs).
Network Redesign Elements
- Changing Customer Service Requirements - Shifting Locations of Customer and/or Supply Markets - Change in Corporate Ownership/Organizational Change - Cost Pressures - Competitive Capabilities
Stockout Outcomes
- Customer Waits - Back-order - Lost Sales - Lost Customer
Locational Determinants
- Labor Climate - Quality of Life - Company Preferences - Supplier Networks - Proximity to Markets/Customers - Transportation and Infrastructure - Taxes/Developmental Incentives - Land Costs and Utilities
Disadvantages of 3PLs
- Loss of internal control (i.e., visibility) - Lack of acceptance - managers and labor. - Possible increase in costs (i.e., cost creep). - Service-level commitments not realized. - Time/effort spent on logistics not reduced. - Inability to develop trusting relationships. - Lack of ongoing improvements in offerings. - Lack of consultative/knowledge-based skills.
Supply Chain Management is the art and science of integrating the flows of
- Products/services - Information - Financials
Supplier Selection Criteria
- Quality - Reliability - Risk - Capability - Financial Considerations - Desirable Capabilities
Demand Fluctuations
- Random Variation - Trend Variation - Seasonal Patterns - Business Cycles
Product Handling Process
- Receiving - Put-Away - Order Picking - Replenishment - Shipping
CRM Process
- Segment the Customer Base by Profitability - Identify the Package for Each Customer Segment - Develop and Execute the Best Practices - Measure Performance and Continuously Improve
Calculating and Interpreting ICC
- Step One: Determine the value of a particular item that is stored in inventory (exclude in-transit & WIP). - Step Two: Determine the cost associated with each of the four carrying cost components and add them. - Step Three: Divide the total costs calculated in Step Two by the value of the item determined in Step One. - Interpret: The total cost to hold item X as inventory for one year is ##.#% of that item's value.
Dimensions of customer service
- Time - Dependability - Communications - Convenience
Types of 3PL Providers
- Transportation Based - Warehouse/Distribution Based - Forwarder Based - Financial Based - Information Based
Cost
A measure for efficiency
Key Performance Indicators (KPI)
A measure/metric that is of strategic importance to a department or company.
Distribution Strategic Planning
A series of interrelated distribution planning decisions are made to ensure that the strategy can be executed at a reasonable cost while supporting the SC demands.
Supply Chain
A set of three or more entities directly involved in the upstream and downstream flows of products, services, finances, and/or information from a source to a customer.
Postponement
A strategy that minimizes risk by delaying further investment into a product until the last possible moment (time, place, and/or form).
4PL Provider
A supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution.
Transportation
A very important activity in the logistics system and is generally the largest variable logistics cost.
Total Landed Cost (TLC)
All the costs associated with making and delivering products to the point where they are needed.
Nodes vs. Links
Allows for analyzing a logistics system with regards to the two basic elements, which is convenient for identifying system improvements.
In-Transit Storage Areas
Allows shipper to perform required operation on the cargo before embarkation (waiting for documents, packing, crating, or labeling).
3PL Provider
An external supplier that performs or manages the performance of all or part of a company's logistics functions.
External balancing methods
Attempt to change the manner in which the customer orders - Price - Lead Time
Performance Reporting and Scorecarding
Automates the collection of data, measurement of KPIs, and dissemination of periodic reports.
Freight Bill auditing
Automates the manual transportation carrier invoice process via reconciling invoices to contracts; thus, avoiding under-/over-charging for freight services.
Load Planning
Builds a database of package dimensions, loading instructions (i.e., top load, upright), and equipment capability - within seconds optimizes container utilization.
Strategic Alliance
Business relationship in which two or more independent organizations cooperate and willingly modify their business objectives and practices to help achieve long-term goals and objectives.
Production Flexibility
Changing production lines from a product to another (i.e., lean manufacturing) - react quickly to changing demand by altering the production schedules.
Index
Combines two or more SC performance metrics into a single value.
Internal Performance
Companies must balance customer expectations with the cost of operations.
Inventory Flexibility
Companies produce products to a forecast that includes safety stock to smooth the effects of demand and lead time variability (common and expensive).
Channel of Distribution
Consists of one or more organizations or individuals that participate in the flow of goods, services, information, and finances from point of production to the final consumption.
Phantom Demand
Created by over ordering during peak demand.
Bullwhip Effect
Demand variability increases as one moves up the SC whereby small changes in consumer demand creates large variations in upstream orders.
Random Variation
Development that can't be anticipated and is mitigated by having safety stock to avoid stockouts.
Service Quality
Doing things right the first time according to customer-defined requirements and expectations.
Business Cycles
Driven by the nation's economy and can be growing, stagnant, or declining.
Measure
Easily defined with no calculations and with simple dimensions. Examples: units of inventory and backorders.
Supply Chain Management
Encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities and also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, 3PLs, and customers.
Demand Management
Focused efforts to estimate and manage customers' demand, with the intention of using this information to shape operating decisions.
Sortation Function
Focuses on assembling like items together for storage in the facility or transfer to customers.
Capital Cost
Focuses on the cost of capital tied up in inventory and the resulting lost opportunity from investing that capital elsewhere.
Allocation Function
Focusing on matching available inventory to customer orders for a SKU, in which a DC can allocate products on a case or individual box unit basis.
Hold-on-Dock Storage
Free until the vessel's next departure dating, allowing the shipper to consolidate goods and to save storage costs.
Financial-Based
Freight payment and auditing; cost accounting and control; logistics management tools for monitoring, book-keeping, tracking, tracing, and managing inventory, and consulting.
Information-Based
Growth and development of Internet-based, B2B markets for logistics services has been significant in recent years.
LTL (less than truckload)
Handle shipments up to 150 lbs. and move multiple shipments on a single van/truck.
TL (truckload)
Handle single large shipments/ trailer that exceed 15k lbs. or use the full cubic capacity.
Inventory Management roles
How much to order, when to order, where inventory should be held, and what line items should be available at specific locations.
Lead Time (Available)
If demand exceeds the current supply (i.e., shortages), increasing expected lead times should decrease demand, and vice versa.
Price (Law of Demand)
If demand is less than current inventory levels (i.e., stored inventory), a price reduction should increase demand, and vice versa.
Logistics
In its simplest form, includes inbound logistics of materials management as well as the outbound logistics of physical distribution.
Free On Board (FOB)
In practice, should be used when the seller has direct access to the vessel for loading (e.g., bulk cargos or non-containerized goods).
Heavy Inbound
Inbound requires detailed scheduling, coordination, and planning to make sure the parts arrive when needed (varied lead times). Outbound requires no warehousing and less complex preparations.
Heavy Outbound
Inbound requires few raw materials from limited sources, high volumes over short distances. Outbound requires specialized transportation, package, and storage for industrial and consumer goods.
Horizontal SC Relationships
Includes business agreements between firms that have "parallel" or cooperating positions in the logistics process (e.g., service agreement between two or more 3PLs).
Inventory Service Cost
Includes insurance and taxes, in which both often vary considerably from product to product.
Storage Space Cost
Includes the handling costs associated with moving products into/out of inventory as well as rent and utilities
Accessible
Information must be available to those supply chain members that have a legitimate need for it (firms or managers), regardless of their location or employer.
Timely
Information must be up to date and shared within a reasonable time frame.
Transload Freight
Involves goods that are handled and transferred between transportation equipment multiple times.
Assortment Function
Involves the assembly of customer orders for multiple SKUs held in the distribution center facility.
Accumulation Function
Involves the receipt of goods from a variety of sources. Allows companies to consolidate orders and shipments for production and fulfillment processes.
Six Sigma
Involves training experts (belt levels) who work on solving problems using methods that improve processes while teaching others within their company.
Storage
Involves two separate, but closely related activities: inventory management and warehousing.
Containerized Freight
Loaded into or onto storage equipment (container or pallet) at the origin and delivered to the destination in or on that same equipment with no additional handling.
Transit Sheds
Located next to piers for temporary storage. Port usage fee includes a fixed number of free storage days, then a daily charge.
Procurement
Managing a broader range of processes associated with acquiring those goods/services required to manufacture the product (direct) or to operate the company.
Drop-shipped Fulfillment
Manufacturer delivers its products directly to the retailer's stores, bypassing the retailer's distribution network (VMI).
Materials Handling
Materials handling is important in warehouse design and efficient warehouse operations and equipment.
C2C conversion
Mathematically, subtract days of payables from days of inventory and then add days of receivables. The final calculated number is in units of days (interpret).
Marketing Channel
Means by which necessary transactional elements are managed (i.e., customer orders, billing, A/R).
Logistics Channel
Means by which products flow physically from where they are available to where they are needed.
LTT
Move a number of shipments ranging from 150 pounds and up to 15k lbs.
Metric
Needs definition, involves calculation or a combination of measurements, and often a ratio.
Seasonal Patterns
Normally repeat themselves during a year.
ISO 9000
Objective is to make sure that companies have standard processes in place (formal documents are strictly followed/audited). Third-party registration.
Lost Sales
Occurs when a buyer has decided that if the entire order cannot be delivered at the same time, it will cancel the order and place it with another seller.
Lost Customer
Occurs when a buyer permanently switches to another supplier (deter future purchase).
Back-order
Occurs when seller only has a portion of the product that was ordered by a buyer (part fill).
Flow-through Fulfillment
Online order is placed, the retailer's DC sends the product to the nearest retail store where the customers pick it up.
Store Fulfillment
Order is placed via a home website,the order is then sent to the nearest retail store where the customers pick it up.
Fixed Order Quantity
Ordering a fixed amount of product each time reordering takes place.
Fixed Order Interval Approach
Ordering inventory at a fixed interval; generally, the amount ordered depends on how much inventory is in stock at the time of review.
For-Hire Fleets
Organizations that move freight for other organizations.
FOB Origin
Ownership changes at origin - shipping point or the seller's DC loading dock. The buyer generally pays the transportation carrier.
Scorecard
Performance measurement tool used to capture a summary of KPIs.
Inventory Positioning (centralized)
Product is distributed to the customers across the network from central stocking location.
Inventory Positioning (decentralized)
Product is positioned close to demand points (customer-facing) and is readily dispatched.
Packaging
Protects products during transportation and storage and includes materials such as cardboard boxes or plastic bins, stretch wrap, banding, bags, and so on.
Load Tendering
Rather than subjectively assigning loads, a TMS database verifies which carriers are eligible to move the freight and then tenders the load to the best carrier.
Collaboration
Refers to a business practice that encourages individual organizations to share information and resources for the benefit of all.
Horizontal Collaboration
Refers to a connection that is buyer to buyer and/or seller to seller, and in some cases even between competitors.
Vertical Collaboration
Refers to collaboration typically among buyers and sellers in the supply chain.
Quantity Utility
Refers to the added economic value associated with delivering the proper quantities of an item to where it is demanded (i.e., when, where, and how much).
Full Collaboration
Refers to the dynamic combination of both vertical and horizontal collaboration. Often, it is here where dramatic efficiency gains occur.
Time Utility
Refers to the economic value added to a good/service by having it at a demand point at a specific time when it is needed (not only where but also when needed).
Possession Utility
Refers to the satisfaction that comes from owning a product or enjoying a service. Satisfaction comes from the right use the product/service as intended.
Place Utility
Refers to the value added to goods by having them at the location where they are needed (e.g., retail).
Form Utility
Refers to the value added to goods via manufacturing or assembly processes (results when raw materials or components are combined to make finished products).
Vertical SC Relationships
Refers to traditional linkages between organizations that make up the supply chain such as retailers, distributors, manufacturers, and raw parts/materials suppliers.
Intermodal Transportation
Refers to using two or more different transportation modes in the origin-to-destination movement of the freight.
Vendor (Arm Length)
Represented simply by a seller or provider of a product or service, such as there is little or no integration or collaboration with the buyer or purchaser.
Total Quality Management TQM
Represents a strategy in which entire firms are focused on examining process variability as well as on continuous process improvements.
Assuring Adequate Inventory Levels
Requires monitoring current inventory levels and placing replenishment orders or scheduling production to bring inventory levels up to a predetermined level.
Integrated Fulfillment
Retailer operates one distribution network to service both their retail stores and their online orders (click-&-mortar).
Dedicated Fulfillment
Retailer operates two separate distribution networks to service their retail stores and online orders, respectively.
Outsourced Fulfillment
Retailers will maintain internal control of their retail store fulfillment and outsource their online fulfillment to a 3PL.
Customer Waits
Should cost nothing. This situation is more likely to occur when product substitutability is very low (e.g., Tesla; brand loyalty product - iPhone).
Truck
Strengths: Accessible; Fast/Versatile; Customer Service Limitations: Limited Capacity; High Cost
Rail
Strengths: High Capacity; Low Cost Limitations: Accessibility; Inconsistent Service; Damage
Water
Strengths: High Capacity; Low Cost; International Capabilities Limitations: Slow; Accessibility
Pipeline
Strengths: In-Transit Storage; Efficiency; Low Cost Limitations: Slow; Limited Network
Air
Strengths: Speed; Freight Protection; Flexibility Limitations: Accessibility; High Cost; Low Capacity
Relevant
Supply chain managers need pertinent information to make decisions.
Appointment Scheduling
TMS tools provide the real-time visibility necessary to make appointment scheduling easier and more accurate (i.e., automate the scheduling function).
Strategic Sourcing
Takes the procurement process further by focusing on SC impacts of procurement and purchasing decisions, and works cross-functionally to achieve overall goals.
Logistics Management
That part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption in order to meet customer requirements.
Transportation-Based
The 3PL serves as the organization's private fleet and devotes a management team, drivers, and equipment to the relationship (e.g., dedicated contract carriage).
Customer Relationship Management (CRM)
The art and science of strategically positioning customers to improve the profitability of the company and enhance its relationships with its customer base.
Inventory Carrying Cost (ICC)
The costs that are incurred by inventory at rest and waiting to be used.
Private Fleets
The freight is owned by the organization that is operating the trucks (e.g., Pepsi and Cola-Cola).
Trend Variation
The gradual increase/decrease in demand over time for an organization.
Status Tracking
The in-transit progress of shipments can be monitored using TMS tools in conjunction with satellite capabilities and other visibility tools
Accurate
The information must be correct and depict reality.
Cash-to-Cash (cash conversion cycle)
The length of time a company's cash is tied up in working capital before that money is finally returned when customers pay for the products sold or services rendered.
Materials Management (inbound)
The movement and management of materials and products from procurement (suppliers) through the production process.
Physical Distribution (outbound)
The movement and storage functions associated with finished goods from manufacturing plants to warehouses and to customers.
External Performance
The objective is to meet customer expectations (i.e., customer-facing KPIs)
Slotting
The placement of product in a facility for the purpose of optimizing materials-handling and space efficiency (focused on criteria and strategy).
Inventory Management
The process of ensuring the availability of products through inventory administration.
Risk Pooling
The process of forming objects into a larger group whereby the risk of the group is less than the sum of risk of the individual objects.
Supply Chain Orientation
The recognition by an organization of the systemic, strategic implications of the tactical activities involved in managing the various flows in a supply chain.
Process Measure Categories
The three major process categories that provide a useful way for examining logistics activities performance include, time, quality, and cost.
Cash-to-Cash
The time between when you pay your suppliers and when your customers pay you.
Warehouse/Distribution-Based
These 3PLs dedicate space, labor, and equipment to a client's specific product needs with the goal of providing integrated, accurate distribution services
Inventory Risk Cost
This cost reflects the very real possibility that inventory dollar value may decline for reasons beyond an organization's control.
FOB Destination
Title (ownership) changes at destination - typically at the buyer's unloading dock. Seller generally pays the transportation carrier.
Certifying Inventory Accuracy
To assure that the actual physical inventory levels match those shown in the information system, cycle counts are taken of items every period during the year.
Role of Information
To provide supply chain managers with insight and visibility into supply chain activities that take place at distant locations
Routing and Scheduling
Uses mathematical methods and optimization routines to evaluate possible combinations in which routes could run and chooses the most economical.
Forwarder-Based
Using companies that provide logistics services as an intermediary between the shipper and the carrier, typically on international shipments.
Internal Balancing Methods
Utilizing an organization's internal processes as a means to manage the supply-demand gap - Production Flexibility - Inventory Flexibility
Warehousing
What functions will be performed, how many warehouses are needed, where to locate these warehouses, and what size of warehouses.
EOQ and TAC Formula Components
study