SCM Test 2

Warehousing part of an agile supply chain

-Postponing final assembly -Combining components -Specialized packaging -Product tracking

Procurement process

1.Specify the requirements 2.Identify suitable potential suppliers 3.Select a suitable supplier(s) to deliver the contract 4.Manage the contract to ensure that the key deliverables are fully met

- high risk but low value - manage supply carefully; develop relationship or design procurement portfolio to remove the bottleneck (textbooks) -Unique requirements -Suppliers knowledge, assets, expertise critical -Scarce sources of supply -Difficult to substitute

Bottleneck

high variable cost; fast; cannot connect all points

Characteristics of Air

low variable costs; fast; limited to digital products

Characteristics of information superhighway

low variable costs; dependable; limited application

Characteristics of pipeline

low variable costs; dependable; requires terminals

Characteristics of rail

medium cost over distance; flexibility; connects A to B

Characteristics of truck

low variable costs; large volume capacity; slow; requires ports

Characteristics of water

T/F ABC analysis of a firm's inventory involves identifying the Ancillary, Billed and Costliest inputs to keep on hand.

False

T/F Cross-docking refers to a process whereby a product arrives at the in-bound docks of a warehouse and is transferred to the storage areas within the warehouse.

False

T/F In warehousing, "smoothing" refers to keeping an item easily accessible from anywhere in the warehouse.

False

T/F Safety stocks refer to the maximum amount of inventory a firm wishes to have on hand at any time.

False

T/F Smaller warehouses with limited floor space need not develop processes for receiving goods.

False

T/F Sourcing involves both procurement and purchasing of the inputs into a production process.

False

T/F The first step in the procurement process is to identify suitable potential suppliers.

False

T/F The price of a sourced input is the dominant consideration in determining the "value for money" for that input.

False

T/F When a firm develops a procurement strategy, its focus can be limited to price and ethical practices of the supplier.

False

- low risk and low value - source principally on price much as with commodity (paper clips) -Easy to find substitutes -Many suppliers available -Limited financial impact

Leverage

a chief procurement officer may be appointed. -Category managers may report to the CPO -Broad-based companies may need multiple decision-makers to allow for local market considerations.

Procurement officers in large companies

procurement is often under the job description of the founder or specific designated "buyer". -Few formal skills may be required for the job.

Procurement officers in small companies

Kralijick matrix

Risk Bottleneck Strategic Leverage Tactical Value

Procurement

Sourcing+purchasing. Requires a strategy

- high risk and high value - develop close relationship with supplier to avoid most issues; high exit costs ( science lab equipment) -Unique specifications or value added -Supplier technology critical -Few suppliers available -Difficult to substitute

Strategic

- low risk but high value - maintain supply diversification to ensure value for money (computers) -Large volume purchases -Unit cost important -Substitute available -Many equivalent suppliers available

Tactical

T/F A major aspect of the economic order quantity model is the effort to balance order processing costs and inventory holding costs.

True

T/F According to the Kraljik matrix, a firm may have to use different strategies in procurement depending on relative value and procurement risk issues.

True

T/F Effective warehouse management includes designing for a non-constant level of demand.

True

T/F Firms can use relationships they create in the supply chain to find ways to reduce inventory holdings at each level of the chain.

True

T/F If a company vertically integrates its chain, it can combine the inventory needs of its various components and save on required safety stocks.

True

T/F The difference between designed and effective capacity of a warehouse or production facility is the amount of time required for routine maintenance and other planned downtime.

True

•Plan for one level of demand and maintain a constant level of throughput •Continually adjust capacity to meet changing demand •Attempt to massage demand into a more regular, consistent state

Warehouse Capacity Management.

Low risk items in procurment

little critical damage if the item is incorrect. Paper clips or coffee cup design. •So balancing risks and impact on profit (value) is a key part of what the procurement officer must do.

effective SCM requires careful examination not only of one's ____________, but perhaps that of one's ________ as well...

own inventory management system; suppliers

High risks in procurment

those that matter greatly to the firm / product success - require a firm to consider the source more carefully. -Product malfunctions -Inexact specifications -Poor delivery timing / production stoppage

If a company __________ it can combine the inventory needs of its various components and save on required safety stocks. As long as information and inventory can move freely across locations, savings can be considerable.

vertically integrates its chain

ABC analysis

•ABC analysis separates out the most important items so that more attention can be focused on those items. •It is based on the principle that out of the myriad of items an inventory manager needs to handle, there are only a few that account for most of the inventory expenses. ie: •Total annual expenses (inventory) •Total sales per year ($) •Greatest frequency of sale •Greatest product quality problems •Most customer complaints

Procurement strategy things to consider

•Amount of expense being considered •The risk involved •Whether a one-off or recurring procurement •Relative market maturity for item sought •Technology lifecycle of product & its market •Number of potential suppliers / source locations •Contract duration •Potential for performance improvement & cost reduction

Transport as contributor to value added in a product's supply chain

•Extra services designed to reduce breakage, theft and spoilage •Investments in equipment & infrastructure that speed delivery •Specialized containers that allow bananas and other fruit to ripen in transit

Improving inventory management in the supply chain

•Integrating supply chains (common inventory) •Delaying product differentiation (mass customization) •Developing common parts that can be used in manufacture of multiple goods •Choosing transit modes that reduce lead times while balancing against transport costs •Reducing lead times so that forecasts of demand can be more accurate and savings are found in local and transit inventory costs. •Reducing uncertainty / variability in meeting customer needs so that less safety stock is needed •Employing Just-In-Time principles which help uncover and solve underlying problems that lead to larger safety stocks

Factors contributing to inventory level preferences

•Number of items used per year •Price of item •Processing costs to get item •Holding (e.g. storage) costs to keep inventory •Lead time required to replace used stock •Quantities available from suppliers at any time •Minimum "safety stocks" given market conditions

Major security aspects of transportation globally

•Standard access controls - physical barriers •Biometrics - ID cards or more sophisticated biometrics readers (fingerprints, retinal scans) •Detection systems - x-ray, gamma-ray detection, radiation monitors