Supply Chain Exam 1 (1-4)

bullwhip effect

Refers to the phenomenon that even minimal variability in customer demand can be distorted and amplified with increasing volatility upstream in the supply chain. That is, variability in customer demand is magnified as the supply chain participants become more remote from the end customer. This results in large variations on orders being placed upstream and inefficiencies all throughout the supply chain as suppliers react to their customers who are reacting to their customers. The reason for the effect can be attributed to individual supply chain participants second-guessing what is happening with ordering patterns in the absence of any other information or visibility

False

The Chase Production Strategy relies on a constant output rate and capacity while varying inventory and backlog levels to handle the fluctuating demand pattern.

Personal Insight

The forecast may be based on the insight of the most experienced, most knowledgeable, or most senior person available. Sometimes, this approach is the only option, but methods that include more people are generally more reliable. -Fasted and cheapest forecasting technique -It can provide a good forecast

True

The goal of supply chain planning is to balance supply and demand in a way that realizes the financial and service objectives of the company.

Time Series Model

The main purpose of a time series model is to collect and study the past data of a given time series in order to generate probable future values for the series. In other words, forecasts for future demand rely on understanding past demand.

Rough-Cut Capacity Planning (RCCP)

The medium-range capacity planning technique used to check the feasibility of the Master Production Schedule (MPS) is called?

MRP Explosion

The process of converting a parent item's planned order releases into component gross requirements

True

The three basic production strategies for addressing the aggregate planning problem are the chase production strategy, the level production strategy, and the mixed production strategy.

Key components of successful supply chain

Focusing on core competencies, outsourcing those things are not core competencies, using the expertise of trading partners, and strengthen-ing those relationships are

Operations Management (OM)

Forecasting and demand planning Planning systems Process mgmt- using LEAN and Six Sigma

APICS definition for Supply Chain

-"the global network used to deliver products and services from raw materials to customers through an engineered flow of information, physical distribution, and cash." In simpler terms, a supply chain is everything that happens to a product on the journey from "concept to consumer." -"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"

SCM in 1950s

-Advantages brought forward through this period included higher output and more productivity, reduced cycle times, and lower work-in-process inventories. -Drawbacks included high investment in facilities and infrastructure, the overall cycle time was limited by the slowest operation, and a breakdown of one machine could stop an entire production line.

Goals of supply chain

-Increase customer service -Reducing inventory investment and operating expenses

SCM in the 60s and 70s

-MRP and MRPII were developed

Responsive

-Supply chain designed to respond quickly to market demand -Ideal for innovative products

Push Model

-Vast majority follow it today -Create forecast -> create supply plan -> buy materials to produce -> manufacture products -> warehouse products -> sell products to customers -> deliver products to customers

Fundamental truths about SC

-Your forecast is most likely inaccurate -Simple forecast methodologies are better than complex methodologies -A correct forecast does not prove that the forecast method is correct -If you don't use the data regularly, trust it less when forecasting -All trends will eventually end. -Most forecasts are biased, and it is hard to eliminate bias. -Large numbers are easier to forecast than small numbers. -Technology is not the solution to better forecasting.

Efficient supply chain capability models

-to minimize cost -Ideal for functional products

Return

Also known as reverse logistics, this is the part of supply chain management that deals with planning and controlling the process of moving goods specifically from the point of consumption back to the point of origin for repair, reclamation, re-manufacture, recycling, or disposal

Deliver

Also known as the logistics phase, this is the part of supply chain management that oversees the planning and execution of both the forward and reverse flow of goods and related information between various points in the supply chain to meet customer requirements. Companies coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to transport products to customers, and set up an invoicing system to receive payments, among other aspects

Tier 1 Supplier

Any company that delivers to us directly

2 Basic Supply Chain Capability Models

Efficient and Responsive

Jury of Executive Opinion or Management Estimate

In an organization, those people who know the most about the marketplace and the product would likely form the jury or management panel determining the forecast. The forecast relies upon a consensus of panel members. Generally, the panel conducts a series of forecasting meetings to discuss the forecast until the panel reaches a consensus -Advantages: · Decisions are enriched by the experience of competent experts. · Companies don't have to spend time and resources collecting data by survey. · It is very useful for new products. -Disadvantages: · Experts may introduce some bias. · Experts may become biased by other colleagues or a strongly opinionated leader.

Dr. Wolfgang Partsch

In the early 1980s, the term supply chain management was coined by Dr. Wolfgang Partsch and his team at Booz, Allen & Hamilton, and the concept began to come into its own. Instead of focusing only internally, companies started to look beyond their four walls and incorporate their supply chain partners into their planning activities.

80s, 90s, and 2000s

Instead of focusing only internally, companies started to look beyond their four walls and incorporate their supply chain partners into their planning activities -JIT -TQM -Business Process Reengineering

Simple Moving Strategy

Instead of using the most recent time period demand data to forecast demand for the next time period like naïve forecasting, a _____________ uses a calculated average of demand during a specified number of the most recent time periods. A simple moving average is where all the data points are assigned equal weights -Ex. Formula: (M1 + M2 + M3 + M4) / 4 -Advantages: This forecasting technique provides a very consistent demand over long periods of time and smooths out random variations. Including more time periods will smooth the amount of variation in the model. -Disadvantages: This forecasting technique generally fails to identify trends or seasonal effects. It will also create shortages when demand is increasing, because it lags behind actual demand. Adding more periods to the average actually increases the amount the forecast lags behind actual demand.

Sustainability and Greening the Supply Chain

Is an increasingly prominent trend, with companies actively trying to be more socially and environmentally responsible. They are paying attention to their carbon footprint.

Supply Chain Cost Optimization

Is essential for continued economic growth for companies. Improvements in gross margins over the next couple of years will not likely come from price increases; rather, gross margin improvements will come from reductions in supply chain costs.

False

Master Production Scheduling is a process that brings all the demand and supply plans for the business (sales, marketing, development, production, sourcing, and finance) together to provide management with the ability to strategically direct the business to achieve a competitive advantage

Foundations of Supply Chain Management

Operations Supply Logistics Integration

New Paradigm

Outsourcing non-core competencies

Qualitative Forecasting Technique;

Personal Insight Jury of Executive Opinion Delphi Method Sales Force Estimation Customer Survey

SCOR Model

Plan, Source, Make, Deliver, Return, Enable

Pull Model

Sell products to customer -> create supply plan -> buy materials to produce products -> manufacture products -> deliver products to customer

Integration

Supply chain process integration Supply chain risk assessment and mitigation Supply chain performance measurement

Enable

These processes facilitate a company's ability to manage the supply chain. Enabling processes include elements such as supply chain systems and network operations, systems configuration control, interfaces, gateways, database ad-ministration, electronic data interchange (EDI), telecommunications services, performance measurement, contract management, business rules, standards, and training and education, to name just a few.

Sales Force Estimates

This method is also basically the same as the Jury of Executive Opinion except that it is performed specifically with a group of salespeople. Individuals work-ing in the sales function bring special expertise to forecasting because they maintain the closest contact with customers. The resulting forecast is a blend of the informed opinions of the group. This method can be improved by providing salespeople with incentives for accurate forecasts and by training the salespeople to interpret their interactions with customers better -Advantages: · No additional cost to collect data because internal salespeople are used. · The forecast is more reliable because it is based on the opinions of salespeople in direct contact with customers. -Disadvantages: · Salespeople may introduce some bias. · Salespeople may not be aware of the economic environment. · It is not ideal for long-term forecasting.

Delphi Method

This method is basically the same as the Jury of Executive Opinion except that the insights, opinions, and judgments of each of the participants is collected separately so that people are not influenced by one another. In the Delphi method, questionnaires are submitted to individual experts for their anonymous responses. Instead of meeting face-to-face, the experts submit their responses to a panel director. -Advantages: · Decisions are enriched by the experience of competent experts. · Decisions are not likely a product of groupthink. · It is very useful for new products. -Disadvantages: · Experts may introduce some bias. · If external experts are used there is a risk of loss of confidential information. · Companies must spend time and resources collecting data by survey. -best for long-term forecasts

Customer Survey

This method is generally used for short-term forecasting where an organization conducts surveys with customers to determine the demand for their products and services and to anticipate future demand accordingly. Customers are directly approached and asked to give their opinions about the particular product -Advantages: · It is a direct method of assessing information from the primary sources. · It is simple to administer and comprehend. · Consumer intercepts are usually held to gain a fast and quick overview. · It does not introduce any bias or value judgment particularly in the census method if the questions are constructed carefully. -Disadvantages: · Customers do not always answer the questionnaire. · Poorly formed questions may lead to unreliable information. · It is time-consuming and costly to survey a large population.

Quantitative Forecasting Technique;

Time Series -Naive -Simple Moving Average -Weighted Moving Average -Exponential Smoothing -Linear Trend Cause and Effect -Simple Regression -Multiple Regression

Logistics Management

Transportation management CRM (Customer relations management) Network design

Intermodal

Using more than one mode of transportation to make a single shipment is referred to as

Logistics

Whereas supply chain management refers to a network of independent companies that work together and coordinate their actions to deliver a product(s) or service(s) to market for the benefit of all companies in the supply chain, __________ is more inwardly focused on your own organization's operations, encompassing activities specific to inventory management, warehousing (i.e., material handling and storage), distribution (i.e., order fulfillment, pick, pack and ship), and transportation (i.e., the movement of inventories into and out of an organization)

Scheduled Receipts (SR)

Which of the following MRP terms represents a committed order awaiting delivery for a specific period?

Bill of materials

Which of the following is an engineering document that shows an inclusive listing of all the component parts and assemblies making up the final product?

Total Quality Management (TQM)

is a management approach to long-term success through customer satisfaction based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work.1 tion has to take ownership for quality

Corporate Social Responsibility (CSR)

a commitment by a company's management not only to behave ethically but also to contribute to community development (e.g., establishing a policy of not buying from suppliers in countries where they have unfair labor practices or use child labor or establishing a program to provide training, education, and job opportunities to underprivileged populations).

Make

aka manufacturing is the series of operations performed to convert materials into a finished product. This is the step where the finished product is manufactured, tested, packaged, and scheduled for delivery.

Qualitative Forecasting Techniques

are based on opinion, intuition, and judgment. This technique is generally used when data are not available, limited, or irrelevant for some reason. For example, when companies launch new products into the marketplace, they don't have any direct statistical or historical data they can rely on to create a forecast

Disadvantages of push model

are high inventories (and capital tied up in inventory), long lead times, dependency on forecasting, and forecasting errors that create non-value by adding time, inefficiencies, obsolescence, shortages, and additional cost.

Advantages of pull model

are high levels of customer service through responsiveness and flexibility to meet uncertain customer demand. Pull models have short lead times, reduce dependency on forecasting, use short and flexible production runs, store very low inventories, reduce waste, provide opportunities for customization, and improve cash flow

Functional products

are low margin and have stable demand, high inventory turnover, high volume, and are readily available from multiple sources (e.g., home, school, and office supplies).

Innovative products

are newly developed products with high margins, volatile demand, short product life cycles, and relatively less com-petition than functional products.

Disadvantages of pull model

are that every order is a rush order, and any problems will lead to customer dissatisfaction. Pull models are highly dependent on customer relationships. This model inherently has a reduced ability to take advantage of economies of scale. Fast, responsive, flexible, robust, and integrated systems and processes are a must for this model to work. Resource issues will have a significant and immediate impact on throughput and customer satisfaction

Advantages of push model

are that if the manufacturer creates a good forecast and supply plan, the product is immediately available to ship to the customer on demand from the existing finished product inventory in the warehouse. Manufacturers also have the opportunity to plan resources better or with more flexibility, and can maximize the utilization of resources at the lowest cost

Time Series Models

are the most frequently used of any method and follow the premise that the future is an extension of the past. They are intrinsic forecasting techniques that incorporate data collected during specific time intervals such as days, weeks, and months.

Payment Flow

arrow indicates the flow of funds or money paid to members in the supply chain for product and services rendered.

Simple Linear Regression

attempts to model the relationship between a single independent variable and a dependent variable (the demand) by fitting a linear equation to the observed data. The equation describes the relationship between the independent variable and dependent variable as a straight line

Multiple Linear Regression

attempts to model the relationship between two or more independent variables and a dependent variable (i.e., demand) by fitting a linear equation to observed data. For example, the forecasted demand might be dependent on how much money is spent on advertising and promotion and on the selling price charged for the product. As with the previous example, forecasts can be adjusted with knowledge of the independent variables. If advertising is increased, and the price is lowered, it is likely appropriate to increase forecast demand.

Cause-and-Effect Models

basically use the same historical demand data as time series models but make some assumptions and incorporate some independent variables in the effort to predict future demand more accurately. There is a "cause" (independent variable) and an "effect" (dependent variable). Cause-and-effect models are used where sufficient historical data are available, and the correlation between the dependent variable to be forecasted and the related independent variable(s) is well known

Facilitating goods

contrary to the services themselves, can be made and inventoried ahead of time

Medium-term forecasts

cover a period from six months to two years and are generally re-viewed on a monthly basis

Long-term forecasts

cover a period of two years or more and are generally reviewed on an annual or quarterly basis.

Short-term forecasts

cover a period up to six months and are generally reviewed on a weekly basis

Old Paradigm

emphasized short-term, company focused performance

Principle Mission of SCM

ensure that demand is met

Plan

establishes the parameters within which the supply chain will operate. Companies need a strategy for managing all of the resources necessary to address how a product or service will be created and delivered to meet the needs of their customers. It includes the determination of marketing and distribution channels, promotions, quantities, timing, inventory and replenishment policies, and production policies.

Risk Management

has become an increasingly critical challenge across the entire global supply chain. Dealing with cost pressures, many companies have started shifting supply chain risks (i.e., holding inventory) upstream to their suppliers. Companies are also shipping finished products to customers immediately after production. However, these approaches only shift risk from one part of the supply chain to another

Integration area

involves all of the enabling systems, software packages, processes, policies, procedures, performance standards and measures, information, and risk management necessary to facilitate the complete integration of the operations, supply, and logistics functions outlined above.

Logistics Management Area

involves all of the movement and storage of products and materials within the supply chain, whether the flow is forward or reverse.

Supply Chain Management Area

involves all of the supplies and suppliers that you need to run your business

Cyclical Variation

is a demand pattern that repeats like a seasonal variation but follows a wavelike pattern that can extend over multiple years and, therefore, cannot be easily predicted. These long-term cycles typically correlate with the general business or economic cycle. The stock market is an example of a cyclical variation. A "bull market" or a "bear market" can last for a long time, potentially even multiple years.

Exponential Smoothing

is a more sophisticated version of the weighted moving average. The equation requires three basic elements: last period's forecast, last for calculating the forecast using exponential smoothing is the most recent period's demand multiplied by the smoothing factor, PLUS the most recent period's forecast multiplied by (one minus the smoothing factor). -Forecast = (D x S) + (F x (1 − S)) Where: D = last period's actual demand S = the smoothing factor represented in decimal form F = last period's forecast the smoothing constant is not a given. It has to be determined based on the best judgment of a company's experts -Advantages: Exponential smoothing will create a forecast more responsive to trends than previous methods. -Disadvantages: Exponential smoothing will still lag behind trends, especially upward trends, be-cause the smoothing factor would need to be greater than 1.0 to approach an accurate forecast. Picking an appropriate smoothing factor is essential for this method to work, but selection of a smoothing factor requires much experience and experimentation in order to arrive at a reliable value for the smoothing factor.

Just-In-Time Management (JIT)

is a philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement.

Business Process Reengineering (BPR)

is a procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed.

Seasonal Variation

is a repeating pattern of demand from year to year, or over some other time interval, with some periods of considerably higher demand than others. Demand may fluctuate depending on time of the year (e.g., seasonal weather, holidays). Seasonality is based on history repeating itself, and therefore can be predicted. Some industries and products have definitive seasons (e.g., snow shovels, swimsuits, Halloween candy, Christmas wrapping paper)

Forecast

is an estimate of future demand. A forecast can be constructed using quantitative methods, qualitative methods, or a combination of methods, and it can be based on extrinsic (external) or intrinsic (internal) factors. Various forecasting techniques attempt to predict one or more of the four components of demand: cyclical, random, seasonal, and trend

Random Variation

is an instability in the data caused by random occurrences. These random changes are generally very short term, and can be caused by unexpected or unpredictable events such as weather emergencies, natural disasters, and the like. A sudden demand for wood may occur, for example, aster a hurricane because many homes are damaged. As these variations are unexpected and unpredictable, they are normally excluded from the forecast data as abnormal demand. Manufacturers may provide a contingency for these potential variations through a mitigation strategy such as maintaining some additional stock (i.e., safety stock)

LEAN

is an operating philosophy that focuses on eliminating wastes and improving efficiency

Six Sigma

is an operating philosophy that focuses on reducing both defects and process variations. These are processes that complement one another.

Dependent Demand

is demand for an item that is directly related to other items or finished products (i.e., a component part or material used in making a finished product). Dependent demands are calculated and should not be forecasted.

Independent Demand

is demand for an item that is unrelated to the demand for other items (i.e., a finished product or spare/service parts). The demand for finished products generally comes from the external customer and is independent from other items and may therefore need to be forecasted. Forecasting should be done for the independent demand items only

An efficient supply chain model

is designed to minimize cost and to maximize capacity utilization. It is generally the appropriate strategy for functional products

Responsive Supply Chain Model

is designed to respond quickly to market demand with minimal stock-outs. Flexibility in capacity is necessary to meet fluctuating demand so there is normally an inventory of parts and materials readily available and production lead times are minimized. Appropriate for innovative products

The service supply chain

is more about managing the relationships between the trading partners than it is about managing the chain of supply

Trend Variation

is movement of a variable over time. Quantitative forecasts measure the rise or fall of demand for a product. Is the actual demand for an item increasing or decreasing over time; and is that pattern projected to continue into the future, and for how long? -Movement of a variable over time -Might be more easily observed by plotting actual demand on a graph over time to see whether there is an increase or decrease. (e.g., laptops, cell phones, fashion products, toys)

SCM (Supply Chain Management)

is really the coordination of a network of independent organizations (i.e., trading partners) involved in creating a desired product or service, where the partners function together as one seamless organization

The bullwhip effect

the lack of flexibility in a company's supply chain to manage these demand changes has become an increasing problem which could be further magnified by ________________

Linear Trend

is used to impose a line best fit across the demand data of an entire time series. A linear pattern is a steady increase or decrease in numbers over time. In other words, linear regression will always create a straight line that can be defined by a simple formula. There are no bends (i.e., variations) in a best fit line. -Advantages: When a best fit line is available, this method can provide an accurate forecast several time periods into the future. The use of linear regression allows these models to remain useful even amid random variation. -Disadvantages: While the overall trend is identified with linear regression, seasonal and cyclical variations are softened as the historical data becomes more expansive, making forecasts more useful for annual forecasts than monthly forecasts. In other words, linear regression will show the overall growth from year 1 to year 9 and be able to project year 12. It will not, however, generally show that demand increases in the summer and decreases in the winter (or some other variation), because the simple line is creating an average of sorts.

Weighted Moving Average

is very similar to a simple moving average except that not all historical time periods are valued equally. In the previous example, all of the time periods were weighted equally, totaled up, and then divided by the number of periods to get the simple moving average. With a weighted moving average, different weight is applied to each time period according to its importance. The weight given to each time period is flexible so long as the weight for each time period is a positive number and all of the weights total 100%. -Formula: (W1 x M1) + (W2 x M2) + (W3 x M3) + (W4 x M4) -Advantages: This forecasting technique is more accurate than a simple moving average if actual demand is increasing or decreasing—that is, if there is any trend variation. Properly weighted time periods provide accurate information for forecasts. -Disadvantages: Though better than a simple moving average, this technique will still lag behind actual demand to some degree. The challenging part of using a weighted moving average is deciding on the weight for each time period. There is no guideline to help decide which weights to use. Appropriate weighting relies on experience and knowledge about the product and the market.

Single integrator solution

pick all the desired applications from a single vendor -Implementation Problems: Lack of top management commitment Lack of adequate resources Lack of proper training Lack of communication Incompatible system environment Organizations that choose to implement one single system with all of the desired applications from a single vendor is said to have chosen a?

Supply Management (SM)

purchasing Supplier management Strategic partnerships Ethics and sustainability

Important parts of the supply chain

research and development

Naïve

sets the demand for the next time period to be exactly the same as the demand in the last (or current) time period. For example, if a company had an actual demand for 100 bicycles in June, using the naïve forecasting method for July, the forecast would be set at 100 bicycles and so on for subsequent months. -Advantages: This technique works for mature products and is very easy to determine. -Disadvantages: This technique works for mature products only. Any variations in demand will create inventory issues

Concept of Logistics

the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities

Forecasting

the business function that attempts to estimate future demand for products so that they can be purchased or manufactured in appropriate quantities in advance

Demand Planning

the process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services across the supply chain from suppliers' raw materials to the individual consumer's needs

Source

the process of identifying the sup-pliers that provide the products/materials and services needed for the supply chain to deliver the finished product(s) desired by the customer(s). This phase involves not only identifying reliable suppliers but also building a strong relationship with those suppliers

In the service center

there is no inventory but there are facilitating goods

Quantitative Forecasting

use historical demand data to project future demand, more of a science, historical demand data are used in conjunction with statistical models to create the forecast. The two main techniques are time series models and cause-and-effect models.