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

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