Supply chain management ch 2

Supply Chain management between

Focus on: - building strategic partnerships - corporate Social Responsibility (CSR) - Supply chain sustainability - Risk and opportunity management - accelerated pace of driven by the explosion of e-commerce

Types of quantitative data

time series and cause and effect. it is generally recommended to use a combination of quantitative and qualitative techniques

Simple linear regression

tries to model the relationship between a single independent variable and a dependent variable (demand) by fitting a linear equation to the observed data

time bucket

unit of time/ time period used in MRP (days, weeks, months

Simple moving average

uses a calculated average of historical demand during a specified number of the most recent time periods to generate the forecast

quantitative forecasting

uses mathematical models and historical data to make forecasts

Exponential Smoothing is well accepted for the following reasons

- VERY ACCURATE - relatively easy to formulate - the user can understand how the model works - little computation is required to use the model - computer storage requirements are small - tests for accuracy are easy to compute

time series forecasting model types

- naive forecast - moving average - weighted moving average - exponential smoothing - linear trend forecast

Advantages of Historical analogy

- potential to provide a significant amount of information that can be used, at least initially, to create a forecast for a new product - can be a relatively inexpensive way to create a forecast

disadvantages of customer survey

-poorly formed questions may lead to unreliable information - customers fo not always answer the questionnaire - it is time consuming and costly to survey a large population

two main reasons that companies implement supply chain management:

1. Achieve cost savings 2. better coordinate resources

the five qualitative models used are

1. personal insight 2. jury of executive opinion 3. Delphi Method 4. Historical Analogy 5. Customer Survey

Scheduled receipt

A committed order awaiting delivery for a specific period

Materials requirements planning (MRP)

A computer- based materials management tool that calculates the exact quantities, need dates, and planning order releases for all the components parts and materials required to manufacture a product

Total Quality Management (TQM)

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 . Everyone in the organization has to take ownership for quality.

production planning

A process to determine the overall level of manufacturing output to best satisfy the planned level of sales while meeting the company's profitability objectives

Which supply chain planning process is defined as a hierarchical planning process that translates annual business plans, marketing plans, and demand forecasts into a production plan for a product family in a plant or facility?

Aggregate Production Planning (APP)

Companies will continue to concern themselves with ongoing trends in the areas of

Artificial intelligence, internet of things, and blockchain

with the __ things are moving at internet speed in both the B2C and B2B markets

Explosion of e-commerce

All Cause-and-Effect Models focus on the impact of one independent variable.

False

Costs which cannot be trace directly to the volume of units being produced are known as variable costs (TF)

False

If you choose to pick your desired Enterprise Resource Planning (ERP) applications from the top vendor of each individual application, you are using the single integrator approach to selecting your ERP system. (TF)

False

The Chase Production Strategy sets a baseline production rate based on a stable core workforce, and then uses other short-term means, such as overtime, subcontracting and part-time labor to manage short-term fluctuations in demand.

False

The inventory turnover ratio shows how many times a firm turns over its inventory in an accountin period, and higher (i.e. more) inventory turnover is generally viewed as negative.

False

Supply Chain flow: Manufacturer

Finished product manufacturer in sourced and/or outsourced)

Inventory cost which are independent of the output quantity are called?

Fixed cost

Which of the following is NOT one of the basic types of forecasting

Force Field Analysis

Which one of the following is a type of qualitative forecasting?

Historical analogy

Supply Chain management between 1990 and 2000s

Introduction of new concepts, methodologies, and processes to enhance planning and control of the supply chain. Just in time, and Total quality management, Business process Reengineering (BPR), Collaborative Planning, Forecasting and Replenishment (CPFR), sales and operations planning (S&OP)

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

MRP Explosion

Logistics Management

Managing all of the movement and storage of products and materials within the supply chain, whether the flow is forward or reverse - warehousing and distribution - transportation - international trade management - customer relationship management - service response logistics

Supply Management

Managing all of the supplies and suppliers that are needed to run the business - purchasing management - strategic sourcing - supplier relationship management

Operations Management

Managing internal ressources - forecasting and demand planning - planning systems - inventory management - Process Management

Companies establish Time Fences in order to?

Minimize the impact of changes and costly distributions

Foundations of supply chain management

Operations management, supply management, Logistics management, integration

The ___ in the supply chain continues to accelerate, and it's only going to get faster

Pace of change

Jury of Executive Opinion

People who know the most about the product and the marketplace would likely form a jury to discuss and determine the forecast - generally the panel conducts a series of forecasting meetings to discuss the forecast until the panel reaches a consensus agreement

Which inventory stock level is inventory that is already out in the market being held by wholesalers, distributors, retailers, and even consumers. The ownership of this inventory has been transferred to the trading partners, but may still influence decisions the company makes regarding how they manage and control their internal inventory.

Pipeline

Three types of supply chain flows

Product and Service glow, information flow, Payment flow, returns flow (not primary but in there)

Projected Available Inventory

Projected closing inventory at end of a period. Beginning inventory minus gross requirements, plus scheduled receipts plus planned receipts from planned order releases.

Which forecasting technique uses mathematical models and historical data to make forecasts?

Quantitative

What technology stores information on a small electronic device which van be attached to an object and read from up to several feet away, without the need for direct line of site?

Radio Frequency Identification

Supply Chain flow: Supplier

Raw materials suppliers, intermediate suppliers, finished material or service suppliers (external source of supply)

The lowest inventory level at which a new order must be places to avoid a stockout is known as?

Reorder Point

A type of inventory system in which inventory is only ordered for a one-time stocking is known as?

Single period inventory model

Supply Chain between 1970 and 1980

Starts to use production planning, materials requirements planning, manufacturing resource planning

Supply Chain flow:

Suppliers, Manufacturer, Customers

Personal insight

The forecast is based on the insight of the most experienced, most knowledgeable, or most senior person available - methods that include more people are more reliable

Enterprise Resource Planning (ERP) Systems allow supply chain members to share information so that scarce resources can be fully utilized to meet demand, while also minimizing supply chain inventories. (TF)

True

Sales and Operations Planning (S&OP) 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.

True

The Master Production Schedule (MPS) represents what the company plans to produce expressed in specific product configurations, quantities, and dates. (TF)

True

The economic order quantity (EOQ) is the optimal order size because it minimizes the annual total inventory cost (TF)

True

The four broad categories of inventory are raw materials, work-in- process, MRO, and finished goods

True

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

True

The master production schedule represents?

What the company plans to produce

Supply chain between 1970 and 1980

When beyond their four walls and incorporate their supply chain partners into their planning activities (external collaboration) Intense global competition led U.S. manufactures to adopt supply chain management.

Supply Chain flow: Customers:

Wholesaler and distributer customers, retail customers, consumers

First tier

With whom you have a direct relationship

Collaborative Planning, forecasting and replenishment (CPFR)

a process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final product to end customers

safety stock

a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. over planning supply versus demand can be used to create safety stock

Planed order release

a specific order for a specific item and quantity to be released to the shop or to the supplier

Materials requirements planning

a time-phased method of determining what materials are needed and when they are needed to support the production plan

gross requirement

a time-phased requirement prior to netting out on- hand inventory and lead-time

As the supply chain continues to evolve, it is critical for companies to

adapt to emerging technologies and strategies

chase production strategy

adjusts the production rate and capacity to exactly match demand

cause and effect

assumes that one or more factors (independent variables) predict future demand (e.g. seasonality in retail markets)

Aggregate Production Plan (APP)

at least one year and is usually rolled forward by three moth every quarter - strategic plans, business planning, financial plans all go into this -at PRODUCT FAMILY LEVEL

multiple linear regression

attempts to model the relationship between two or more independent variables and a dependent variable (demand) by fitting a lear equation to the observed data

indirect

cannot be traced directly to the unit produced

ABC system

classifies inventory based the degree of importance

Supply chain management has transformed from an often-overlooked cost center into a vital segment of operations that can be turned into a

competitive advantage

carrying

costs for physically having inventory on-site and for maintaining the infrastructure needed to store the inventory and o secure and insure it over time

Dependent demand

demand for an items that is directly related to other items or finished products, such as a component or materials used in making a finished product (demand for these items is CALCULATED)

variable

dependent on the unit volume produced vary with output level

short-range

detailed planning process for components and parts to support the master production schedule

Direct costs

directly traceable to unit produced

Forecasting

first step, developed through data analysis and judgement - organizations must have a formal forecasting process to develop an agreed upon set of numbers that becomes the driver for demand planning

Safety stock (buffer stock)

fluctuations in demand or supply

Every entity within the supply chain (suppliers, manufacturer, customers) ...

has its own supply chain

Bullwhip effect

how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer and raw material supplier levels

Order

labor costs associated with placing an order for inventory and the cost of receiving the order

single integrator solution

pick all the desired applications from a single vendor

SCOR Model

plan, source, make, deliver, return, enable

pegging

relates the gross requirements for a component part to the planned order releases of the parent item, as as to identify the source (s) of the item's. gross requirements. Pegging can be thought of as active where-used information

Hybrid Production Strategy

sets a baseline production rate based on a stable core workforce, and then uses other short-term means, such as overtime, subcontracting and part-time labor to manage short-term fluctuations in demand

naive forecasting

sets the demand for the next time period to be exactly the same as the demand in the last time period

intermediate range

shows the quantity and timing of end items

weighted moving average forecasting

similar to a simple moving average except that not all time periods are values/ weighted equally

Cause and effect is quantitative from cause and effects goes

simple regression and multiple regression

strategic stock

stock that has a very specific purpose, for a defined period of time

Facilitating goods

tangible elements that are used or consumed by the customer or the service provider along with the service provided, produced and consumed simontaniously

New __ offer the opportunity to reduce this complexity, transforming the supply chain from technology enabled to technology-centric

technical innovations

What is supply chain management?

the coordination of the network of otherwise independent trading partners who are creating a desired product or service, and then moving it through the supply chain out to customers, when and where the customer wants it

Independent demand

the demand for an item that is unrelated to the demand for other items, such as a finished product, aa spare part, or a service part (demand for these items is forecasted VERY IMPORTANT)

reorder point

the lowest inventory level at which a new order must be place to avoid a stockout

demand

the need for a particular product of component. Various sources: customer order, a forecast, manufacturing of another product

Lead time

the time it takes to process and prepare material, produce the product, and transport it to the customer

net requirement

the unsatisfied item requirement for a specific time period. Gross requirement for period minus current on-hand inventory

cyclical variations

wavelike pattern that last longer than 1 year, and can extend over multiple years - not easily predicted - ex: business cycles, GDP, China growth

Supply chain management is the

way business gets done, it is the execution process of any business, active management, maximize customer value and achieve a sustainable competitive advantage.

Master production scheduling

what the company plans to PRODUCE in terms of finished goods expressed in specific product configurations, quantities, and dates -THE PLAN THAT DRIVES THE BUSINESS -a detailed disaggregation of the aggregate production plan - a set of planning numbers that provides the major input for materials requirements planning -CAN BE FINISHED AHEAD OF TIME, MAKE TO STOCK

Costs related to inventory

- direct - indirect - variable - fixed - carrying

Disadvantages of Delphi method

- experts may introduce some bias - companies must spend time & resources collecting data by survey - if external experts are used there is a risk of loss of confidential information - the Delphi Method can be time consuming and is therefore best for long term forecasts

Disadvantages of Jury of Executive opinion

- experts may introduce some bias - experts may become bias by their colleagues or a strongly opinionated leader

Advantages of personal insight

- it is the fastest and cheapest forecasting technique - it can provide a good forecast

Time series forecasting

- 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 - forecasts for future demand rely on understanding past demand - the act of predicting the future by understanding the past

Seasonal variations

- repeating patterns of demand - pattern of variations within one single year - the pattern can be repeated from year to year, with some period of considerably higher demand than others - examples: holiday shopping, snow shovel sales

Disadvantages of personal insight

-it relies on one person's judgement and opinions but also on their prejudices and ignorance - the major weakness is unreliability, someone who is familiar with the situation often provides. a worse forecast than someone who knows nothing

Basic production strategies

1. Level Production Strategy 2. Chase Production Strategy 3. Hybrid Production Strategy

Goals of supply chain management

1. increase customer service 2. reducing inventory and operating expenses

cause and effect forecasting

2 basic models : - simple linear regression - multiple linear regression - a statistical measure that determines the strength of the relationship between one dependent variable and a series of independent variables - regression uses the historical relationship between an independent and a dependent variable to predict the future values of the dependent variable, i.e., demand

Business Process Reengineering (BPR)

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

Which inventory system classifies inventory based on the degree of importance in order to determine which inventories should be counted and managed more closely?

ABC System

Supply Chain between 1950 and 1960

Limited to materials management and logistics. Didnt take into considerations like plan, internally focused

Supply chain flow is facilitated through the use of

Logistics

Sales and Operations Planning (S&OP)

a process to develop tactical plan that provide management the ability to strategically direct the business to achieve a competitive advantage by integrating customer forced marketing plans with the management of the supply chain

Distribution requirements planning (DRP)

a time-phased finished good inventory replenishment plan in a distribution network - forecast demands by distribution center (DC) - current inventory levels by DC - Target safety stock by DC - recommended replenishment quantities - replenishment lead times

Service inventory

activities carried out in advance o the customer's arrivals - companies in the service industry do not maintain inventory of services since services are basically produced and consumer immediately upon demand - companies can maintain inventory of facilitating goods, the items that are used to help facilitate the service being provided

bill of materials

all components required to make a parent item

Delphi Method

almost the same as the jury of executive opinion except that the input of each of the participants is collected separately so that people are not influenced by one another - this is done in several rounds until a consensus forecast is achieved

Qualitative forecasting

based on opinion and intuition, generally used when data are limited, unavailable, or not currently relevant (ex: New product, new market segment) - best use if for long range forecasts and for new products - forecast depends on skill and experience of forecaster(s) and available information

time series

based on the assumption that the future is an extension of the past. Historical data is used to predict future demand - the most frequently used among all the forecasting models

two types of implementation

best of breed, and single integrator solution

carrying costs

costs that are incurred for holding inventory in storage - cost of capital, taxes, insurance, obsolescence, storage

Supply Chain Management is based on two ideas

cumulative effort of multiple organizations (aka supply chain), Importance of collaborations

customer survey

customer are directly approached and asked to give their opinions about the particular product - customer surveys can be done in person (e.g. one-on-one, focus group) over the phone, by mail, email, or online

Random variations

instability in the data caused by random occurrences - generally very short term, can be caused by unexpected or unpredictable events such as wether emergencies, natural disasters, labor strikes, war, etc. - frequently considered abnormal demand and sometimes removed from the data set before the data set is used to generate new forecasts

planned factor

the number/ quantity of each component or material needed to produce a single unit of the parent item

RFID

DOES not Require a direct line of sight to read the tag

advantages of customer survey

- a direct method of assessing information from the primary sources - simple to administer and comprehend - it does not introduce any bias or value judgment particularly in the census method if the questions are constructed carefully

Advantages of Jury of executive opinion

- decisions are enriched by the experience of competent experts - companies don't have to spend time and resources collecting data by survey

Advantages of Delphi Method

- decisions are enriched by the experience of competent experts - decisions are not likely a product of groupthink - very useful for new products

Disadvantages of historical analogy

- there simply may not be a historical comparison available - no two historical situations are exactly identical in all respects, so it may prove to be ineffective

Variation in quantitative forecasting

- trend variations - random variations - seasonal variations - cyclical variations

selecting weights is based on

-experience and/or trial and error - the recent past is often the best indicator of the future, so weights are generally higher for more recent data - challenging part of using weighted moving average

mean absolute deviation

measures the size of the forecast error in units. It is calculated as the average of the unsigned, i.e., absolute, error over a specified period of time

Key building blocks from which all supply chain planning activities are derived and are crucial components of customer satisfaction.

Forecasting and demand planning

Which type of forecast variation involves a pattern of variation within one that can be repeated from year-to-year? Typically has some period of considerably higher demand

Seasonal Variation

Demand Planning

The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services is known as?

Collaborative planning, forecasting, and replenishment (CPFR)

a business practice that combines the intelligence of multiple trading partners who share their plans, forecast, and delivery schedules with one another in an effort to ensure a smooth flow of goods and services across a supply chain - can significantly reduce the Bullwhip effect and provide a plethora of benefits - value comes from the sharing of forecasts among firms rather than firms relying on sophisticated algorithms and forecasting models to estimate demand

Economic Order Quantity (EOQ)

a fixed order quantity model - a quantitative decision model based on the trade-off between annual inventory order costs and annual inventory carrying costs - where the sum of the annual order costs and the annual inventory carrying costs is minimized

Historical analogy

a judgement forecasting technique based on identifying a sales history that is comparable to a present situation, such as the sales history of a similar product - an approach to sales forecasting in which the past sales results of a similar product are used to predict the likely sales of a similar new product

Manufacturing resource planning

a method for the effective planning of all resources of a manufacturing company through business planning, production planning, master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems all linked together.

Just-in-time

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

Firmed planned order

a planned order that can be frozen in quantity and time so that the MRP computer logic cannot automatically change when conditions change. Established by the planner or supply chain manager to prevent system nervousness. this can aid planner working with mrp systems to respond to material and capacity problems by firming up selected planned orders

Order costs

costs that are incurred each time an order is placed -order preparation, transportation, receipt, materials handling costs

Mean Absolute deviation

measures the size of the forecast error in units. It is calculated as the average of the unsigned errors over a specified period of time.

fixed

independent of the unit volume produced

Service firms offer

intangible products, what customers are paying for is labor and the intellectual property of the service provider , frequently involved work on a tangible item (car service, dry cleaning)

Long range

involves planning for actions such as the construction of facilities and major equipment purchase

exponential smoothing

is a more sophisticated version of the weighted moving average. - requires 3 basic elements: last period's actual demand, last periods forecast, and a smoothing factor, which is a number greater than 0 and less than 1 - weights decline exponentially, most recent data weighted most

linear trend forecasting

is imposing a best fit line across the demand data of an entire time series. Used as the basis for forecasting future values by extending the line past the existing data and out into the future while maintaining the slope of the line

parent

item generating demand for lower-level components

level production strategy

maintains a CONSTANT production rate and allows inventory and backlog to vary according to fluctuating demand

Integration

managing all of the enabling systems necessary to facilitate the complete integration of the operations, supply, and logistics functions - enabling systems - supply chain risk and security management - Performance measurement - project management

The service supply chain is more about

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

mean absolute percentage error (MAPE)

measures the size of the error in percentage terms. It is calculated as the average of the unsigned percentage error - most widely used

customers are _ in the service industry

more directly involved

trend variations

movement of a variable over time. - identification of trends is a common starting point when developing a forecast - more easily observed by plotting actual demand on a graph over time to see whether there is a pattern in the data - common trend types include linear, s-curve, asymptotic(downward facing curve), and exponential (upward facing curve)

Cycle stock

normal stock to meet regular demand

Single period inventory model

only ordered for one-time stocking

Lot Size

order size for MRP logic

components

parts demanded by a parent

best of breed

pick the best application for each individual function. Disadvantage- software may not integrate well but this may not be a major issue in future

MRP Explosion

the process of converting a parent item's planned order releases into components gross requirements