Logistics and supply chain management: Exam 1

What is NAFTA?

(NAFTA) North American Free Trade Agreement establishes free trade between Canada, United States, and Mexico.

Describe the evolution of Logistics from the 60's to the 2000's?

*1960's:* the development of the physical distribution management concept that focused on the outbound side of a firm's logistics system. A fragmentation... *1980's:* the development of logistics management through the deregulation of transportation provided an opportunity to coordinate inbound and outbound transportation movements (Inbound logistics refers to the transport, storage and delivery of goods coming into a business. Outbound logistics refers to the same, for goods going out of a business). Coordination between the two systems increased efficiency & improved customer service. Evolving Integration... *1990's to today:* then the supply chain management came on in 1990. A system of connected networks between the original vendors and the ultimate final customer. 2000 brought Total Integration (connecting companies for increased efficiency & effectiveness)....

What are the item procurement matrix components?

*Distinctives:* high risk, low value. Engineered items *Criticals:* High risk, high value. Unique items, items critical to final product *Generics:* Low risk, Low value. Office supplies, Maintence repair and operating (MRO) items. *Commodities:* Low risk, High value. Basic production (bolts) items, basic packaging (exterior box), logistics services (transportation services).

Describe the 5 major characteristics of strategic sourcing?

1. *consolidation and leveraging or purchasing power:* concentrate larger volumes of purchases into fewer suppliers or fewer purchasing transactions. Consider everything being purchased 2.*Emphasis on Value:* cost isn't everything 3. *More meaningful supplier relationships:* Collaboration is key 4. *Process Improvement:* reformulation and streamlining 5. *Teamwork/Professionalism:* Cross-functional teams, to include suppliers and customers as appropriate.

What are the 5 supply chain enabling functions?

1. Demand planning & sales forecasting 2. SCM Manufacturing & Operations 3. Purchase & supply management 4. Logistics 5. Reverse business

What are the 5 driving forces behind the changing economic and political landscape?

1. Globalization: 2. Technology: 3. Organizational consolidation: 4. The empowered consumer: 5. Government policy and regulation:

Identify the steps of the supplier screening process?

1. Initial supplier research and screening 2. request for information 3. request for proposal 4. supplier site visits 5. supplier selection

What are the key components that make up total landed costs?

1. Lifecycle costs 2. Inventory costs 3. Transaction costs 4. Quality costs 5. Technology costs 6. Management costs

What are the 4 types of Global transportation options?

1. Ocean (most pervasive) 2. Air 3. Motor 4. Rail

What are the 3 e-commerce models?

1. Sell-side system 2. Electronic market place 3. Buy-side system

Describe the major supply chain issues

1. Supply chain networks: need a network system that is capable & flexible to respond & change with the dynamics of the marketplace. 2. Inventory deployments: The bullwhip effect is an exaggeration in the supply chain that occurs when suppliers up the supply chain order more goods based on forecasted consumer demand rather than actual consumer demand. This results in an excess of inventory in the supply chain. Inventory is also being duplicated because consumers get excited and place the same order with multiple suppliers and then the first one that arrives they keep and return the rest creating an overage in supply. 3. Information: its a challenge to share info along the supply chain and ensure the integrity of the date thats being collected but if done properly it can be a substitute for inventory b/c it reduces uncertainty. 4. cost and value: Efficiency (cost) and effectiveness (value), the challenge is the prevention of sub-optimization (focusing on one component of a total and making changes intended to improve that one component and ignoring the effects on the other components.) 5. organizational relationships: internal and external collaboration and cooperation are key. Communication is important in order to explain opp. for system tradeoffs that make the SC more competitive. 6. performance measurement: measures of performance or metrics in place to evaluate their efficiency & progress over diff. time periods. For example, orders filled and shipped per day. 7. Technology: challenge to evaluate and successfully implement the technology to make improvements. Analysis, planning and educating are key. 8. Transportation Management: the challenge in supply chain is to deliver the right product, at the right time, in the right quantity, at the right cost, to the right destination, transportation management is the glue that makes that happen but due too high gas prices, and the need for infrastructure (roads, bridges, etc) to meet the growth. 9. Supply Chain Security: due to globalization risk has grown of interruptions or shutdowns due to terrorism, risk analysis, possible threats, and alternative plans now have to be implemented.

What are the 4 storage facilities?

1. Transit sheds: temporary storage while goods await the next portion of the journey 2. hold-on-dock storage: free of charge until the vessels next departure date 3. Public warehouses: extended storage periods 4. Bonded warehouses: Secured facility supervised by customs authorities, where dutiable landed imports are stored pending their re-export, or release on assessment and payment of import duties, taxes, and other charges. Also called customs warehouse.

What are the 9 major supply chain issues?

1. supply chain networks 2. inventory deployments 3. information 4. cost and value 5. organizational relationships 6. performance measurement 7. technology 8. transportation management 9. supply chain security

What are the 6 steps to find the total procurement price? TEST QUESTION KNOW KNOW

1. traditional basic input costs (price) 2. direct transaction costs 3. supplier relational costs 4. landed costs 5. quality costs/factors 6. operations logistitics costs add all up = Total Procurement Price

Identify the sources of price

1.Commodity markets 2.Price lists 3.Price quotations 4. Negotiations

Can you identify the eras of globalization?

1400-1800: Initially driven by COUNTRIES seeking materials and goods not available in their own land, They also wanted to increasing or growing (imperialistic) their economy & political power. 1800-2000: driven by COMPANIES seeking goods &materials, labor economies of scale, and markets. Era produced a lot of multinational companies. 2000-present: driven by INDIVIDUALS and smaller ORGANIZATIONS. Technology advancing in information and communications have connected the "Four corners of the globe". Due to the large multinational companies in the previous era it has created a NICHE (small market segment, specific product) opportunities for these small organizations to collaborate in their supply chains.

Ocean Global Transformation Facts ya need to know

2/3's of all global movement Trans-Pacific trade lane (Asia-North America) is worlds busiest container trade lane

Supply Chain Operational Reference Model- SCOR

A process reference model developed and endorsed by the Supply Chain Council as the cross-industry, standard 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, and return. 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 Supply Chain Council members have formed industry groups to collect best practices information that companies can use to evaluate their supply chain performance.

What are the advantages and disadvantages of e-sourcing and e-procurement?

Advantages: * low operating costs-*reduce paperwork, reduced sourcing time, improved control over inventory and spending Improve procurement and sourcing *efficiency-* find new supply sources, improve communications, improve personnel use, lower cycle times *reduce procurement price-* improve comparison shopping, reduce overall prices paid Disadvantages: security, loss of personal contact

What are the advantages and disadvantages of Rail?

Advantages: Lower rates over long distance, safety (own fixed guideway), reliability, environment (less emissions), reduce lead times in global SC through land bridge. Disadvantages: Limited accessibility to cross-border points

Major advantages and disadvantages for ocean?

Advantages: low rates and the ability to transport a wide variety of products and shipment sizes. Disadvantages: long transit times (slow speed), low accessibility, & higher potential for shipment damage.

Major advantages and disadvantages for air?

Advantages: short transit time, less protective packaging Disadvantages: higher rates

What are the major advantages and disadvantages for motor?

Advantages: speed, safety, reliability, accessibility to delivery site. Disadvantages: import regulations, paperwork & delay.

Can purchasing, procurement, and strategic sourcing be used to improve supply chain management? how?

By increasing their effectiveness and efficieny

Identify the types of purchasing activity and examples

Capital goods: a long-term investment for an organization ex. a plane Rebuy- standard: identical to historical purchases Rebuy-modified: When a previously purchased item needs to be reordered, but with changes or additions. Ex. Apple wants faster microprocessor for new macs Maintenance, repair, and operations (MRO): items needed for the continuing operation of the company ex. office supplies, industrial equipment

Why can packaging be an issue in global business?

Due to unfavorable conditions the shipper may find settling liability claims for damage difficult. the freight handling involves many firms, located in different countries. Export shipments by ocean require more stringent (strong) packaging than domestic.

What is the hierarchy of price measurement approaches?

It builds upward from raw materials through manufacturing, to distribution, to final marketing and selection and use by the ultimate customer in order to determine total procurement cost and highest total value. *Strategic:* highest total value to the ultimate customer of the final firm in the supply chain Lowest total cost to the final firm in the entire supply chain *Optional:* lowest total cost to the firm lowest landed cost *Tactical:* lowest base/unit cost

Can you describe the item procurement matrix?

It is a quadrant technique that assesses the importance of each product or service being purchased and then a value risk quadrant categorizes the item importance and classifies item.

What is the importance of ports?

It plays a vital part in global commerce, cruise industry, and national defense and security. global commerce: Over 2 trillion in trade value per year passes through U.S. ports. Ports handle the imports and exports of goods. Cruise Industry: The flow of passenger traffic has increased the economy due to the money spent to help support the cruise industry. National defense & security: ports are bases of operation to deploy troops & equipment. Security responsibility is shared between public and private sectors.

What are the 3 major ocean services?

Liner service: scheduled services on regular routes Charter Vessels: For hire service for no set routes Private Carriers: fleet in a firm's own supply chain

Operations Logistics Costs

Logistics costs relate to the charges for various transportation methods, including train travel, trucks, air travel and ocean transport. Additional logistics costs include fuel, warehousing space, packaging, lot size, security, materials handling, tariffs and duties.

What are some of the major ports in the world?

Port of Long Beach, Georgia Ports Authority, Dubai Ports Authority, Port of Singapore

Air Freight Forwarders:

Primarily consolidate small shipments, which they present to air carriers for movement to destination. No license required.

What is the criteria that impacts supplier selection?

Reliability: on time delivery, performance history Risk: supply and price uncertainties Financial Considerations: stability of supplier Desirable Capabilities: attitude, training, maintenance, etc.

Quality Costs

Sum of costs incurred in maintaining acceptable quality levels plus the cost of failure to maintain that level (cost of poor quality).

Supply Chain Management

Supply chain management is the efficient and effective flow of products/materials, services, information, and financials from the supplier's suppliers through various intermediate entities out to the end user.

Understanding Total Landed Cost

Tangible, Visible cost: Purchase/Acquisition Cost Additional Relevant cost: Life Cycle Costs, Inventory costs, other logistics costs, costs of disposition, quality costs, strategic sourcing costs, management costs, technology costs, cost impacts on other fundamental areas, transaction costs.

Identify important US trading partners (countries)?

Top 5: 1.87 Trillion in Global Business 1. Canada 2. China 3. Mexico 4. Japan 5. Germany

Does NAFTA impact supply chain management?

Yes, It promotes challenges. Information systems, procedures, language, labels, documentation, storing facilities, and intermediaries (the link that connects things) all need to be redesigned or updated in order to operate a borderless logistics network. Many US companies do not recognize certain French-English requirements for packaging & ingredient labeling. Trade with Mexico includes supply chain barriers of a poor transportation infrastructure, restrictive foreign capital rules, and custom rules. Mexican highway system is poor, only has 1 railroad (operated by the government), no LTL (carries small freight) and limited airports. In all 3 countries you have to adhere to cabotage restrictions.

Buy-side system

buyer controlled e-procurement or e-commerce service ex. usually large companies (Elemica)

Cash Flow (Financial Flow)

consists of credit terms, payment schedules, and consignment and title ownership arrangements. The faster cash-to cash cycle, which just means customers receive orders sooner and are billed faster is huge in companies.

Supplier relation costs

costs of creating and maintaining a relationship with a supplier

Direct transaction costs

costs of detecting, transmitting the need for, and processing the material flow.

Key facts for air

door to door service, next day delivery. It includes high value low density items such as computers, perishables, time-sensitive documents, etc.

Foreign Freight Forwarders

employs people who are knowledgeable in all aspects of international shipping, supplies its experts to small international shippers that find employing such people in their department uneconomical. Regulated by the Federal Maritime Commission Consolidates small shipments into economical sizes Income: fees, rates, and commission

What are the roles of global intermediaries?

helping new and established companies venture into global business. They help comprehend operations involving sourcing and destinations in other countries.

Information Flow

involves the flow of information on orders and updating the status of delivery.

strategic sourcing define:

it takes the procurement(managing broad range of processes acquire goods and services) process further by focusing on supply chain impacts of procurement and purchasing decisions, and works cross-functionally within the business firm to help achieve the organization's overall business goals.

Online trading community

maintained by a third party technology vendor where multiple buyers and multiple sellers in a given market can conduct business ex. travelocity

Sell-side system

online businesses selling to individual companies or consumers ex. staples

Demand Flow

provides organizations the ability to better synchronize supply and demand by detecting and understanding demand "signals" and making appropriate adjustments to demand changes more effectively.

Electronic marketplace

represents a seller-operated service that consists of a number of electronic catalogs from vendors within a market ex. amazon

Land Bridge

substitutes land transportation for part of a containers ocean voyage, taking several days off transit and saving in transit inventory cost.

What is a supply chain?

the flow of materials, information, money, and services from raw material supplies, through factories, and warehouses to the end customers. Includes the organizations and processes that create and deliver products, information, and services to end customers.

Traditional Basic Input Costs

the primary price of a product or materials as paid by the firm

Landed costs

the total price of a product once it has arrived at a buyer's door. Includes the original price of the product, all transportation fees (both inland and ocean), customs, duties, taxes, insurance, currency conversion, crating, handling and payment fees.

Define e-sourcing and e-procurement

the use of electronic capabilities to conduct activities and processes relating to procurement and sourcing

What are the objectives of supply chain management?

to improve the overall organization performance and customer satisfaction by improving product or service delivery (using information flows) to meet consumers needs while being as effective and efficient as possible to reduce overall supply chain costs.

Product Flow

usually involves movement of products from a supplier to a customer, and also the back end process such as any customer returns or service needs.

Key facts for motor?

you can bond a shipment to minimize delay and paperwork which means you seal the trailer till it reaches its destination. Use when shipping goods to adj. countries for example NAFTA. Is a major role in intermodal shipments, moving and picking up freight from airports and ports.