Supply Chain CH 3, Supply Chain Ch 1, Supply Chain Ch 2, Supply Chain CH 4

5 modes of transportation

(1) Truck (2) Rail (3) Water (4) Air (5) Pipeline

Supply Chain Cost Optimization

A current trend in SCM Reducing purchasing costs, waste, excess inventory, non-value added activities. Improving demand planning. Increased outsourcing of non-core competencies.

Single Level Bill of Materials

Display of components that are directly used in a parent item, together with the quantity required of each component (i.e., the planning factor). Shows only the relationships one level down

Forecasting Accuracy

Error measurement plays a critical role in tracking _____, monitoring for exceptions, and bench marking the forecasting process.

Inventory Policy

Establishing target inventory levels for all products and materials Address these three fundamental questions: 1.When to review? 2.When to order? 3.How much to order?

DRP inputs

Forecast demands by DC Current inventory levels by DC Target safety stock by DC Recommended replenishment quantities Replenishment lead times

Safety Stock

also known as "buffer stock," is inventory that is above and beyond what is actually needed to meet anticipated demand. A quantity of stock planned to be in inventory to protect against fluctuations in demand and supply

Forecast

an estimate of future demand

Positive RSFE

indicates that the forecasts were generally too low, underestimating the demand. In this situation, stock-outs are likely to occur as companies are unable to meet customers' actual demand.

long range supply chain planning

involves planning for actions such as the construction of facilities and major equipment purchase (ref., Aggregate Production Plan - APP) . From the executive level (longer term, strategic vision)

Aggregate Planning Strategies - Supply Options

Change Inventory Levels Change Capacity

ERP Implementation Problems

Lack of top management commitment Lack of adequate resources Lack of proper training Lack of communication Incompatible system environment

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 & Distribution​ Transportation ​ International Trade Management​ Customer Relationship Management ​ Service Response Logistics

sharing of forecasts

The real value of CPFR comes from the ______ among firms, rather than firms relying on sophisticated algorithms and forecasting models to estimate demand

Fixed order quantity system Fixed time period system

The two common inventory ordering system categories (addresses the "how much to order", a fundamental question from inventory policy)

make to stock

Companies can operate a _________ supply chain where product is produced prior to receipt of a customer order. A forecast and demand plan are created and the finished goods are produced and held in inventory until a customer order is received

Exponential Smoothing

A type of time series forecasting Requires 3 basic elements: last period's forecast, last period's actual demand, and a smoothing factor, which is a number greater than 0 and less than 1 (used as a weighting percentage). creates a forecast more responsive to trends than other methods However, since the smoothing factor cannot exceed 1, it can still lag behind trends

Safety Stock

An MRP term 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 this

Lot Size

An MRP term order size for MRP logic

Change Inventory Levels

An aggregate planning strategy Increase inventories - build stock in advance of demand in order to use available capacity Decrease inventories - temporarily reduce inventory below normal safety stock levels during peak demand periods to meet customer requirements.

Influencing Demand

An aggregate planning strategy use advertising or promotion to increase demand in low periods so that it aligns to available production capacity

Planning Bill of Materials

An artificial grouping of items (e.g., a product family) in BOM format, used to facilitate master scheduling and material planning.

Individual Item Purchase Price Discounts

An example of volume economies of scale Discounts for ordering larger quantities. If the volume discount is sufficient to offset the added cost from carrying additional inventory, then ordering a larger volume may be desirable.

Multiple Item Purchase Price Discounts

An example of volume economies of scale If you purchase a combination of items from a supplier you may be able to take advantage of a volume discount based on the total volume across all the items purchased rather than just an individual item's volume.

2D bar codes

are a graphical image that stores information both horizontally and vertically. can store over 7,000 characters, allowing transmission of almost two paragraphs of informa

Network Design

creating distribution networks based on tradeoff decisions between cost & sophistication of distribution system.

The Goal of Supply Chain Management

Increase customer service Reducing inventory investment and operating expenses (costs)

Yes

Is it possible for some customers and suppliers to be both tier 1 and tier 2?

SCOR Model

Plan, Source, Make, Deliver, Return, Enable

Pull Business Model

Producing stock in response to actual demand​

Value

Supply Chain Management creates _____ by managing and facilitating the processes (plan, source, make, deliver) of all those independent trading partners

space

The more inventory a company holds, the more _____ is needed, and _____ costs money

Inventory control tools

-linear barcode -2D barcode -radio frequency identification (RFID)

Parent

An MRP term Item generating demand for lower-level components.

Maintenance, repair, and operating (MRO)

Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations Materials that you need to run the manufacturing operation and the business but do not end up as part of the finished product Some of these items are consumed during the process of converting raw materials into finished goods, e.g., oil for the manufacturing equipment Some of these items are used to facilitate the manufacturing operation, e.g., cleaning supplies, spare parts, etc. inventory is separate from production inventory, but it is just as important.

Seasonal Variations

Repeating pattern of demand from year to year, or over some other time interval, with some periods of considerably higher demand than others (e.g., holiday shopping, restaurant customers, swim suits sales by region, building construction slowing in winter by region)

Quantitative

This basic forecasting technique is based on mathematical models and historical data

Qualitative

This basic forecasting technique is based on opinion and intuition Generally used when data are limited, unavailable, or not currently relevant.

Firmed Time Period

This time fence is established at the outer limit of this period to signify when changes can no longer be made automatically by the planning system. Recommended changes must be reviewed and approved by the Master Production Scheduler or an authorized person

4 foundations of Supply Chain Management

Operations Management Supply Management Logistics Management Integration

Variable Cost

A cost related to inventory dependent on the unit volume produced vary with output level (e.g., materials, labor, utility power, etc.)

Developing the APP

1.Determining the demand for each period covered by the aggregate planning horizon. 2.Determining the available capacity for each period covered by the aggregate planning horizon. 3.Identifying any constraints which may influence the plan. 4.Determining the direct labor and material costs and the indirect manufacturing costs for each product or product family covered by the aggregate production plan. 5.Identifying or developing strategies and contingency plans to manage the potential upside or downside in the market. 6.Agree on a plan that best meets the planning goals and objectives.

Meet customer demand Buffer against uncertainty in supply/demand to decouple supply from demand To decouple dependencies in the supply chain

4 reasons to hold inventory

Direct Cost

A cost related to inventory directly traceable to unit produced (e.g., materials, labor, etc.)

Order Cost

A cost related to inventory labor costs associated with placing an order for inventory and the cost of receiving the order. incurred each time an order is placed Order preparation costs Order transportation costs Order receipt processing costs Material handling costs

Available to Promise (ATP)

A calculation to provide a response to customer order inquiries, based on product availability. It represents the uncommitted portion of a company's projected available inventory to support customer order promising

Multiple Linear Regression

A cause and effect model attempts to model the relationship between 2 or more independent variables and a dependent variable (demand) by fitting a linear equation to the observed data. Depending on the data and the number of independent variables, the mathematics involved can be complex.

simple linear regression

A cause and effect model attempts to model the relationship between a single independent variable and a dependent variable (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.

Old Paradigm

A company gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities. ​ Organizational cultures emphasized short-term, company focused performance

New Paradigm

A company in a supply chain focuses activities in its' area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms."Outsourcing non-core competencies" All participants in the supply chain benefit. ​ Boundaries are dynamic and extend from "the firm's suppliers' suppliers to its customers' customers (i.e., "end-to-end")​ Supply chains also deal with reverse logistics to handle product returns, warranty repairs, and recycling.​

Material Requirements Planning (MRP)

A computer-based materials management system that calculates the exact quantities, need dates, and planned order releases for sub assemblies, component parts and materials required to manufacture a final product. More suitable for Make to Stock Businesses Helps minimize inventory, but is expensive to implement ignores capacity and ignores shop floor conditions Its basic purpose is to measure what material you need, how much of it you need and when you need it by

Manufacturing Resource Planning (MRP II)

A computer-based system that can create detailed production schedules using real time data Coordinates the arrival of materials with the availability of machine and labor. is used widely by itself, but also as a module of more extensive enterprise resource planning (ERP) systems."

Transportation

A constraint to the practical use of EOQ The item being ordered and transported may require specialized or dedicated transportation, impacting the quantity per order.

Storage Capacity

A constraint to the practical use of EOQ The model may generate an order quantity which the company does not have sufficient storage capacity to handle at one time

obsolescence

A constraint to the practical use of EOQ The model may generate an order quantity which would create spoilage or obsolescence.

Unitization

A constraint to the practical use of EOQ The supplier may require the company to order an item in full pack, case, or pallet configurations.

production lot size

A constraint to the practical use of EOQ The supplier may require the company to order an item in full production lot sizes.

Limited Capital

A constraint to the practical use of EOQ The model may generate an order quantity which the company does not have sufficient available funds to purchase at one time.

Fixed order quantity system

A continuous inventory review system in which the same order quantity is used from order to order. When the inventory position drops to a predetermined reorder point, a predetermined fixed order quantity is placed The time between orders (i.e., order period) varies from order to order.

Fixed Cost

A cost related to inventory (aka Sunk Costs) - independent of the unit volume produced (e.g., buildings, equipment, rent, allocated overhead costs, etc.)

Indirect Cost

A cost related to inventory cannot be traced directly to the unit produced (e.g., overhead; MRO items, buildings, equipment, etc.)

Carrying Cost

A cost related to inventory costs for physically having inventory on-site and for maintaining the infrastructure needed to store the inventory and to secure and insure it over time incurred for holding inventory Insurance Security Taxes

Sustainability and "Greening" the Supply Chain

A current trend in SCM Customers increasingly prefer products that are made and sourced in 'the right way'; minimizing business' social, economic and environmental impact on society and enhancing positive effects.

Globalization

A current trend in SCM Expanding the Supply Chain. International, mature and emerging markets have become a part of the overall business growth strategy for many companies. Both breadth and depth of global operations.

Demand Volatility and Forecast Inaccuracy

A current trend in SCM Firms will increasingly need to be more flexible and responsive to customer needs, adapting to unexpected changes and circumstances. Necessitating closer integration and collaboration​

Risk Management

A current trend in SCM Many companies have started shifting supply chain risks such as holding inventory, upstream to their suppliers, and shipping finished products to customers immediately after production. Supply chain risks can only be effectively mitigated by managing risk at each node in the supply chain.

Master Production Schedule (MPS)

A detailed disaggregation of the aggregate production plan (APP), listing the exact end items to be produced by a specific period. More detailed than APP and easier to plan under stable demand. Planning horizon is shorter than APP, but longer than the lead time to produce the item.

Multi Level Bill of Materials

A display of all the components directly or indirectly used in a parent, together with the quantity required of each component (i.e., the planning factor). If a component is a sub assembly, blend, intermediate, etc., all its components and all their components also will be exhibited, down to purchased parts and raw materials

Work in Process

A good or goods in various stages of completion throughout the plant, spanning from raw material that has been released for initial processing up to fully processed material awaiting final inspection and acceptance as finished goods Materials in the state of continuous transformation Known as the "black hole" of inventory

Resource Requirement Planning (RRP)

A long-range capacity planning module used to check whether aggregate resources (i.e., labor and manpower) are capable of satisfying the Aggregate Production Plan.

Inventory turnover

A measure of inventory investment The number of times that an inventory cycles, or "turns over," during the year. The more turns, the better

Absolute Inventory Value

A measure of inventory investment The value of the inventory at either its cost or its market value. Generally found on the balance sheet

Rough-Cut Capacity Planning (RCCP)

A medium-range capacity planning module used to check the feasibility of the Master Production Schedule. Converts MPS from the production needed to the capacity required, then compares it to capacity available.

Sales & Operations Planning (S&OP)

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 determines the optimum level of manufacturing output It is the definitive statement of the company's plans for the immediate to long term covering a horizon sufficient to plan for resources, and to support the annual business planning process. It is performed at least once a month and is reviewed by management at an aggregate (product family) level. creates an alignment between salesmen and operations/production people. A salesman cannot sell everything if there are inefficiencies in the operations side. is vital for small businesses. For example, if a small business fails to meet orders, consumers will be dissatisfied and never order from them ever again. But if a big company like NIKE fails to meet an order, people will be mad. But since Nike is very big, people will order from them again soon.

Sales force estimation

A qualitative forecasting method Basically the same as the Jury of Executive Opinion except that it is performed specifically with a group of sales people. Individuals working in the sales function bring special expertise to forecasting because they maintain the closest contact with customers. More reliable forecast as it is based on the opinions of salespersons in direct contact with the customer, but not ideal for long term forecasting Salespersons understate potential sales to make themselves look good, indicating bias

Delphi Method

A qualitative forecasting method Basically 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, which means group thinking won't be an issue. Useful for new products This is done in several rounds until a consensus forecast is achieved. Experts may introduce some bias. Companies must spend time & resources collecting data by survey. Time-consuming, better for long term forecasts

Customer Survey

A qualitative forecasting method Customers are directly approached and asked to give their opinions about the particular product A direct method of assessing information, It does not introduce any bias or value judgment particularly in the census method if the questions are constructed carefully However, poorly formed questions may lead to unreliable information It is also time consuming and costly to survey a large population

Personal Insight

A qualitative forecasting method The forecast is based on the insight of the most experienced, most knowledgeable, or most senior person available The fastest and cheapest forecasting technique The major weakness is unreliability. Someone who is familiar with the situation often provides a worse forecast than someone who knows nothing. It relies on one person's judgement and opinions, but also on their prejudices and ignorance.

Time Bucket

An MRP term Unit of time / time period used in MRP, e.g., days, weeks, mon

jury of executive opinion

A qualitative forecasting method people who know the most about the product and the marketplace would likely form a jury (i.e., management panel) to discuss and determine the forecast Generally, the panel conducts a series of forecast meetings to discuss the forecast until the panel reaches a consensus agreement. Experts may introduce some bias Experts may become biased by their colleagues or a strongly opinionated leader

The Economic Order Quantity (EOQ) Model

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

ABC Inventory System

A separate inventory system which classifies inventory based the degree of importance: Groups inventory as A, B, or C based on a set criterion "A" items are given the highest priority. "80/20 rule" Generally, A items account for approximately 20% of the total number of items, but about 80% of the total inventory cost. B & C items account for the other 80% of the total number of items, but only 20% of total inventory cost. -B items require closer management since they are relatively more expensive (per unit), require more effort to purchase / make, & may be more prone to obsolescence. -C items have the lowest value, and hence the lowest priority

Capacity Requirement Planning (CRP)

A short-range capacity planning module used to check the feasibility of the Material Requirements Plan. Are there enough materials?

Tracking Signal

A simple indicator that forecast bias is present. ​ Determines if the forecast is within acceptable control limits and provides a warning when there are significant unexpected departures from the forecast.​

Responsive Model

A supply chain capability model Supply Chain designed to respond quickly to market demand​ Fast response​ Minimal stock outs​ Need flexible capacity (volume)​ Inventory of parts​ Minimize lead time​ Need to have a variety of products available for customers when they want to buy​ Ideal for innovative products

Efficient Model

A supply chain capability model. Supply Chain and processes are designed to minimize cost. Predictable supply and low cost​ Low cost production and highly utilized capacity​ High inventory turns​ Ideal for functional products

Distribution Requirements Planning (DRP)

A time-phased finished good inventory replenishment plan in a distribution network. The function of determining the need to replenish inventory at branch warehouses. is a logical extension of the MRP system and ties physical distribution to the manufacturing planning and control system

Naive Forecasting

A type of time series forecasting Sets the demand for the next time period to be exactly the same as the demand in the last time period Although this works well for mature products and is very easy to determine, it ONLY works for mature products and any variation in demand will create inventory issues

Simple Moving Average

A type of time series forecasting Uses a calculated average of historical demand during a specified number of the most recent time periods to generate the forecast Provides a very consistent demand over long periods of time and smooths out random variations. However, it fails to identify trends or seasonal effects. It will also create shortages when demand is increasing because it lags behind actual demand

Linear Trend Forecasting

A type of time series forecasting 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 can provide an accurate forecast into the future even if there is random variation However, seasonal and cyclical variations are softened, making this method more useful for annual forecasts than for monthly forecasts

Weighted Moving Average

A type of time series forecasting similar to a simple moving average except that not all historical time periods are valued equally, as a weight is given to each month. More accurate than a simple moving average if actual demand is increasing or decreasing However, this technique will still lag behind actual demand to some degree, and coming up with a proper weight is hard.

planned order release

An MRP term he amount of an item that is planned to be ordered in a period A specific order for a specific item and quantity to be released to the shop or to the supplier

Components

An MRP term parts demanded by a parent

Reasons companies implement Supply Chain Management

Achieve cost savings Better coordinate resources

Service Inventory

Activities carried out in advance of the customer's arrival

Single integrator solution

An ERP implementing system pick all the desired applications from a single vendor (Microsoft Office)

Best of Breed

An ERP implementing system pick the best application for each individual function A disadvantage is software may not integrate well but this may not be a major issue in future

Scheduled Receipt

An MRP term A committed order awaiting delivery for a specific period

Firmed Planned Order

An MRP term 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 planners working with MRP systems to respond to material and capacity problems by firming up selected planned orders.

Gross Requirement

An MRP term A time-phased requirement prior to netting out on-hand inventory and lead-time

Projected On Hand Inventory

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

Pegging

An MRP term Relates the gross requirements for a component part to the planned order releases of the parent item, so as to identify the source(s) of the item's gross requirements. This can be thought of as active where-used information. tracing upward in the bill of material from the component to the parent item

Planning Factor

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

MRP explosion

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

Net Requirement

An MRP term The unsatisfied item requirement for a specific time period. Gross requirement for period minus current on-hand inventory

Counter-seasonal product mixing

An aggregate planning strategy Develop a product mix with antithetic (seasonal) trends that level the cumulative required production capacity (e.g., lawn mowers and snow blowers)

Change Capacity

An aggregate planning strategy Vary production output through overtime or idle time Vary work force size by hiring or layoff Using part-time workers Subcontracting

Backordering during high demand periods

An aggregate planning strategy accept demand greater than supply capabilities Ex: Airliners give people vouchers to give up their seats

Transportation Freight-Rate Discounts

An example of volume economies of scale Ordering a larger quantity may mean that you can take advantage of Transportation Freight-Rate Discounts which will lower the per unit costs

Just in time (JIT)

An inventory-management approach in which supplies arrive just when needed for production or resale is a philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement​

bullwhip effect

An overreaction due to uncertainty occurs throughout the entire supply chain.​ When the new demand reaches the material or components supplier at the other end of the supply chain, the magnitude of fluctuation becomes unrecognizable. (since the supplier is on the opposite side of the consumer) In the absence of any other information or visibility, individual supply chain participants are second guessing what is happening with ordering patterns, and potentially over-reacting

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. forecasts for future demand rely on understanding past demand (predict the future by understanding the past)

Supply Chain Management Today and Beyond

Companies are focusing on their own core competencies, outsourcing those things that are not their core competencies, using the expertise of their trading partners​ Companies will also continue to focus on:​ Building relationships​ Sustainability​ Corporate Social Responsibility (CSR)​ Improving supply chain capabilities

make to order

Companies can operate a __________ supply chain where the finished goods are not produced until a customer order is received, and the raw materials may not even be ordered from the supplier(s) in advance.

Capacity Planning

Determining the amount of capacity required to produce a good or service in the future. Organizations must balance the production plan with capacity. This directly impacts how effectively the organization deploys its resources in producing goods

Aggregate Production Plan (APP)

Hierarchical planning process that translates annual business, marketing plans, and demand forecasts into a production plan for a product family* in a plant or facility. Long-range materials plan that translates annual business plans marketing plans into production plan The planning horizon is at least one year and is usually rolled forward by three months every quarter. Includes those costs relevant to aggregate planning decisions: inventory, setup, machine operation, hiring, firing, training, and overtime costs

Disadvantages of SCM in the 1950s and 60s

High investment in facilities​ Overall cycle time limited by the slowest operation​ Breakdown of one machine will stop an entire production line.​

Advantages of SCM in the 1950s and 60s

Higher output and more productivity​ Reduced cycle times​ Lower in-process inventories​

maintain operations and ensure that products are available

Holding some inventory may be necessary to ________________ when customers demand them.

Falls outside

If the tracking signal ______ the pre-set control limits, there is a bias problem with the forecasting method and an evaluation of the way forecasts are generated is warranted.

Returns Flow

When a product is returned and needs to be repaired. The cost to inspect returned products is significant. Flow goes from right to left

Aggregate Planning Strategies - Demand Options

Influencing Demand Backordering during high demand periods Counter-seasonal product mixing

Random Variations

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, etc. (e.g., hurricane = wood for roof repair, tree clean up, water damage)

Supply Chain Management in the 1980s and 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. ​ Introduced JIT, Total Quality Management, and Business Process Reengineering

Supply Chain Management in the 1960s and 70s

Introduction of new computer technologies lead to development of Materials Requirements planning (MRP) and Manufacturing Resource Planning (MRP II) Material Requirements Planning (MRP) is a method of determining what materials are needed and when they are needed to support the production plan. Manufacturing Resource Planning (MRP II) helps to improve communication and operations.

unusable

Inventory can become a liability if it becomes ________ due to expiration, obsolescence, damage, or spoilage

Pipeline Inventory

Inventory in transit held external to the company by downstream supply chain trading partners Inventory held / owned by suppliers, or by wholesalers, distributors, retailers, and customers

Fixed time period system

Inventory is checked in fixed time periods against a target inventory level. If the inventory is less than target, a quantity necessary to bring inventory back up to the target level is ordered. The amount of inventory ordered will potentially vary from period to period based on the remaining inventory at each time interval checked The order quantity is the difference between the on-hand stock on the review day, and the pre-determined target inventory level (Target inventory - On-hand stock)

Obsolete inventory

Inventory items that have met the obsolescence criteria established by the company. is stock that is expired, damaged, or no longer needed. will never be used or sold at full value Unusable inventory takes up space and costs money to maintain, so it may be better to absorb the loss as soon as an item has met the obsolescence criteria rather than delay and continue to lose money on storage and related fees There may be a cost associated with the actual disposal of the inventory Some companies may donate this inventory to a non-profit organization if it has any remaining value, which not only helps the non-profit but also avoids disposal costs and may result in a tax benefit for the company.

Continuous Review System

Inventory levels are continuously reviewed. As soon as inventory falls below a pre-determined level (i.e., a reorder point), a replenishment order is triggered. More costly to conduct, but it potentially requires less safety stock because inventory is constantly monitored, and replenishment actions are taken more quickly. Allows for real-time updates of inventory, which can make it easier to know when to replenish. Facilitates accurate accounting, since the inventory system can generate real-time costs of goods sold. The hardware and software necessary to run the system can be expensive to purchase, install, and maintain.

Periodic Review System

Inventory levels are reviewed at a set frequency, e.g., weekly, monthly At the time of review, if the stock levels are below the pre-determined level (i.e., a reorder point), an order for replenishment is placed, otherwise no action is taken until the next cycle. Since items are only reviewed periodically, there is a greater risk of inventory dropping well below the reorder point between reviews and, therefore, a greater potential need for safety stock, but is less expensive to implement Reduces the time spent analyzing inventory. May not provide accurate inventory counts for businesses with high sales. Can be difficult to determine the best review/reordering intervals. It also can make inventory accounting less accurate.

Bin System

Inventory system that uses either one or two bins to hold a quantity of the item being inventoried. It is mainly used for small or low value items When the inventory in the first bin has been depleted, an order is placed to refill or replace the inventory. The second bin is set up to hold enough inventory to cover demand during the replenishment lead time so as to last until the replacement order arrives.

cycle stock

Inventory that a company builds to satisfy its' immediate demand. depletes gradually as customer orders are received, and is replenished cyclically when supply orders are received The amount of_______ that a company holds is dependent on actual demand in the immediate time period, supply replenishment lead time and order quantities.

information flow

It is critical to know what people in the market want. That way, marketing efforts become more defined and better, and this information drives the consumer-centric market

finished product inventory

Maintaining adequate ________ allows a company to fill customer orders immediately

materials inventory

Maintaining adequate ________ allows a company to support manufacturing operations and the production plan while avoiding delays.

Integration

Managing all of the enabling systems necessary to facilitate the complete integration of the operations, supply, and logistics functions outlined above Enabling Systems​ Supply Chain Risk and Security Management​ Performance Measurement​ Project Management

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 resources Forecasting and Demand Planning ​ Planning Systems ​ Inventory Management​ Process Management

Naive Simple Moving Average Weighted Moving Average Exponential Smoothing Linear Trend

Methods of time series forecasting:

Trend Variations

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)

Chase production strategy

One of the 3 basic production strategies Adjusts capacity to match demand. Firm hires and lays off workers to match finished output to demand. Finished goods inventory remains constant. Works well for make-to-order firms

Mixed production strategy

One of the 3 basic production strategies Maintains stable core workforce while using other short-term means, such as overtime, subcontracting and part time helpers to manage short-term demand.

Level production strategy

One of the 3 basic production strategies Relies on a constant output rate while varying inventory and backlog according to fluctuating demand. Firm relies on fluctuating finished goods and backlogs to meet demand. Works well for make-to-stock firms

Return

Part of the SCOR model 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. ​ As this process quite literally goes against the normal outbound flow of products to the market, supply chain managers have to create a responsive and flexible network for receiving defective and excess products back from their customers, and also supporting customers who have questions and problems​

Deliver

Part of the SCOR model also known as the logistics phase, this is the part of supply chain management that oversees the planning and execution of the forward and reverse flow of goods and related information between various points in the supply chain to meet customer requirements. ​ Where 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.

Plan

Part of the SCOR model 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. includes the determination of marketing and distribution channels, promotions, quantities, timing, inventory and replenishment policies, and production policies

Enable

Part of the SCOR model facilitates a company's ability to manage the supply chain and are spread throughout every stage. This is not a stage that occurs sequentially after all of the others. Examples include: Performance Measurement ​ Contract Management ​ Business Rules​ Standards​ Training and Education

Sourcing

Part of the SCOR model is the process of identifying the suppliers that provide the 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. ​ Supply chain managers must also develop pricing, shipping, delivery, and payment processes with suppliers and create metrics for monitoring and improving the performance​

Make

Part of the SCOR model the series of operations performed to convert materials into a finished product (manufacturing) Finished product is manufactured, tested, packaged, and scheduled for delivery. ​ Quality management is an important aspect of the manufacturing process. ​ This is the most metric-intensive portion of the supply chain, where companies are able to measure quality levels, production output, and worker productivity. ​

Push Business Model

Producing stock on the basis of anticipated demand. Demand forecasting can be done via a variety of sophisticated techniques.​

Product & Service Flows

Products and services are connected by transportation and storage activities. movement of goods from supplier to consumer (internal as well as external), as well as dealing with customer service needs such as input materials or consumables or services like housekeeping

Intangible Products

Products that cannot be physically touched

raw materials

Purchased items or extracted materials that are converted via the manufacturing process into components and products Every company that produces a product generally starts with these

Logistics

Refers to activities that occur within the purview of a single organization.​ An internal viewpoint. focuses on activities such as: ​ Inventory Management​ Warehousing (material handling and storage)​ Distribution (order fulfillment, pick, pack & ship)​ Transportation​

Historical Relationship

Regression uses the_______ between an independent and a dependent variable to predict the future values of the dependent variable, i.e., demand

Payment Flow

Revenue ONLY comes from consumers. The customer is the focus, even 1 customer lost means a loss of profits. Flow goes from right to left

Intermediate supply chain planning

Shows the quantity and timing of end items (ref., Master Production Schedule - MPS) Mid-level - Ford Motor Company wants to make 1,000 F-150 pick up trucks/week for the next 3-18 months

Radio Frequency Identification (RFID)

Successor to the barcode for tracking individual unit of goods does not require direct line of sight to read a tag, and the information on the tag is updatable. Automates the supply chain: Manufacturing - assembly instructions encoded on RFID tag provide information to computer controlled assembly devices Distribution Center - shipment leaving DC automatically updates ERP to trigger a replenishment order and notify customer for delivery tracking Retail Store - no check out lines as scanners link RFID tagged goods in shopping cart with buyers credit card Materials Management - goods automatically counted and logged as they enter the supply warehouse

end to end

Supply chains are generally described as spanning from _______, i.e., from your suppliers-suppliers on one end, through your internal operations, and out to your customers-customers on the other end.

False

T/F: A correct forecast means your forecasting technique is correct

False

T/F: A forecast is useless if it is inaccurate

True

T/F: Customers are also much more directly involved in the delivery of services than they are in the supply of a physical product.

True

T/F: It is important to identify your Tier 1 suppliers and customers because these are the partners with whom you will want to build a relationship and share information first.

True

T/F: Most forecasts are biased

False

T/F: Services can be inventoried

True

T/F: Simple forecasting methodologies trump complex ones

True

T/F: The primary purpose of the APP is to establish production rates that will achieve management's objective of satisfying customer demand by maintaining, raising, or lowering inventories, while attempting to keep the workforce relatively stable. To meet demand and use capacity efficiently

True

T/F: Your forecast is most likely wrong

True

T/F: for companies that operate a make-to-order supply chain, little to no finished goods inventory is maintained.

True

T/F: for companies that operate a make-to-stock supply chain, significant amounts of finished goods inventory can sometimes be maintained.

True

T/F: the farther out into the future you forecast, the greater the deviation will likely be

facilitating goods

Tangible elements that are used along with the service provided. Services need these to provide the services they do. Without these, performing the service would be impossible These items need to be purchased, transported, received, and warehoused in order to provide the service activity, and each has a supply chain Examples: Tables, chairs, silverware, kitchen equipment in a restaurant

Balance supply and demand

The challenge of SCM is to

Supply Chain Management

The coordination of a network of otherwise independent trading partners creating a desired product or service, and moving it from suppliers, through manufacturing, and out to customers when and where they want it The way business gets done, the execution process of any business. Integrates all partners within the end-to-end supply chain Emphasizes collaboration and coordination

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

The five qualitative models used are

Assumptions of the EOQ Model

The following are assumptions for a specific model: The model must be calculated for one product at a time. The demand must be known and constant throughout the year. The delivery replenishment lead time is known and does not fluctuate. Replenishment is instantaneous. —There is no delay in the replenishment of the stock, and the order is delivered in the quantity that was demanded, i.e. in one whole delivery. The purchase price (i.e., unit cost) is constant and no discounts or price breaks are factored into the model. Carrying cost is known and constant. Order cost is known and constant. Stockouts are not allowed

Fixed order quantity system assumptions

The following are assumptions for a specific model: •A constant demand (d) rate, i.e., not erratic, seasonal, etc. •Inventory position (IP) is reduced (i.e., consumed/used) by a rate of (d). •Replenishment order placed when reorder point (ROP) is reached. •When inventory is received, (IP) increases by the order quantity (Q). •(Q) computed using the economic order quantity (EOQ) model. •Lead time (L), i.e., the time between placing an order and receiving delivery of the order, is known and constant. •Inventory position (IP) is reviewed on continual basis.

Inventory management

The function of planning and controlling inventories The goal is to help a company be more profitable by lowering the cost of goods sold and/or by increasing sales. Balances 2 competing considerations: reducing inventory and making sure there is enough to meet demand

Reorder Point (ROP)

The lowest inventory level at which a new order must be placed to avoid a stockout is known as the _________ is set at a level that provides enough inventory so demand is covered during the lead time (L) needed to replenish inventory.

Volume Economies of Scale

Where capacity increases in a greater proportion to costs, for example in storage containers or cargo ships. The EOQ model will be impacted by this.

Planned Time Period

This time fence is from the end of the Firmed Time Period to the end of the planning horizon. The planning system is free to create or make changes to planned orders in this time period based on the data and planning logic determined by the company

Finished Goods

Those items on which all manufacturing operations, including final testing, have been completed. These products are available for sale and/or shipment to the customer. usually worth much more than raw materials or WIP since all of the material, labor, and overhead costs are fully applied to finished goods.

Continuous Review System Periodic Review System

Two models for determining "When to Review" (a fundamental question from inventory policy)

Supply Chain Management in the 1950s and 60s

U.S. manufacturers maintained large material inventories to keep production running. The entire focus was on how to produce as much product as possible at the lowest possible cost. Manufactures were internally focused on maximizing their own internal operations. The focus was on mass production techniques as their principal cost reduction and productivity improvement strategies​ limited to materials management and logistics. ZERO external collaboration

Cyclical variations

Wavelike pattern that can extend over multiple years, and therefore, cannot be easily predicted. (e.g., business cycle, China growth, GDP, bull or bear markets)

Simple Linear Regression Multiple Linear Regression

What are the 2 basic cause and effect models?

level chase mixed

What are the 3 basic production strategies?

SAP Oracle Microsoft

What are the 3 major ERP providers?

Raw Materials Work in Process (WIP) Finished Goods MRO supplies

What are the 4 main categories of inventory?

Forecast Customer Orders Beginning Inventory

What are the inputs of the MPS?

Order Cost Annual Demand Volume Annual Inventory Carrying Cost Unit Value at cost (purchase price)

What are the inputs to the EOQ model?

Cycle stock strategic stock safety stock

What are the three levels of internal inventory?

Qualitative and Quantitative

What are two basic forecasting techniques used in most businesses today?

labor and intellectual property

What customers are actually paying for in the service industry is the ____ and the ______ of the service provider

Single Period Model

a type of inventory system in which inventory is only ordered for a one-time stocking Objective is to maximize profits Christmas Trees

Base Stock Level System

a type of inventory system that issues an order whenever a withdrawal is made from inventory Replenishment order quantity is equal to the quantity withdrawn from inventory, maintaining inventory at a base stock level. Used primarily for very expensive items, e.g., airplane engine A form of JIT

Barcode reader (scanner)

an electronic device that can read barcodes and transmit the data to a computer. These might be handheld cordless devices, corded devices that attach directly to a PC's USB port, or computers with integrated laser scanners

Linear Bar Codes

are "a series of alternating bars and spaces printed or stamped on parts, containers, labels, or other media, representing encoded information that can be read by electronic read do have some limitations: they are one-dimensional, can only be read horizontally, and can only hold a maximum of 85 characters.

Cause and Effect

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

over or under

bias exists when the demand is consistently _____ or _____ forecast. A good forecast is not biased.

Short range supply chain planning

detailed planning process for components and parts to support the master production schedule (ref., Materials Requirement Planning - MRP) -Planner, 1st line Supervisor - 1,000 engines, 1,000 transmissions, seats, windows, etc. each week over the next 1-12 weeks. Oriented on dependent demand

Bill of Materials

document that shows an inclusive listing of all component parts and assemblies making up the final product

Strategic Stock

generally used for a very specific purpose or future event, and for a defined period of time A company may decide to have this type of stock to: take advantage of a price discount protect against a short-term disruptive event in supply take advantage of a business opportunity for life cycle changes: seasonal demand, new product launch, transition protection

Hidden Costs of Inventory

having too much or too little inventory on hand can sometimes build these costs that create a risk for a company Having too much inventory can result in effects like financial resources tied to inventory and no incentive for process payments Ex: Truckers that are always late to offload results in companies holding in more inventory to make up for the trucker's lateness, and there are costs with that inventory. Having too little inventory can result in effects like lost revenue, production disruptions, and reduced responsiveness

Supplier Management

improve performance through ​supplier evaluation (determining supplier capabilities)​ and supplier certification (third party or internal certification to assure product quality and service requirements)​

Closed Loop MRP

incorporates the aggregate production plan, the master production schedule material requirements plan, & capacity requirements plan. Synchronizes the purchasing or materials procurement plans with the master production schedule. The system feeds back information about completed manufacture and materials on hand into the MRP system, so that these plans can be adjusted according to capacity and other requirements.

Negative RSFE

indicates that the forecasts were generally too high, overestimating demand. In this situation, excess inventory and higher carrying costs are likely to occur.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

is a business practice that combines the intelligence of multiple trading partners who share their plans, forecasts, 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, as collaboration via electronic data and machines ensure smoother and faster communication Benefits include better customer service, better quality, lower inventory cost, better production methods, and reduced cycle times.

Total Quality Management

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

Business Process Reengineering

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.​

Enterprise Requirements Planning (ERP)

is an extension MRPII and includes DRP which determines the need to replenish finished product inventory at branch warehouses, when there are multiple warehouses in the network. It is typically implemented through a software platform of integrated functional modules facilitating the sharing of real-time information and collaboration across multiple business functions necessary for the supply chain to operate efficiently and effectively. Information system connecting all functional areas and operations of an organization, and in some cases suppliers and customers, via common software infrastructure and database Provides great visibility, provides a means for supply chain members to share information so that scarce resources can be fully utilized to meet demand, while minimizing supply chain inventories

Dependent demand

is demand for an item that is directly related to other items or finished products, such as a component or material used in making a finished product Demand for these items are calculated rather than forecasted

Independent demand

is demand for an item that is unrelated to the demand for other items, such as a finished product, a spare part, or a service part. Demand for these items are forecasted

Forecasting

is the business function that estimates future demand for products so that they can be purchased or manufactured in appropriate quantities in advance of need.

Forecast error

is the difference between the actual demand and the forecast demand. The error can be quantified as an absolute value or as a percentage.

Supply Chain Planning

is the element of supply chain management responsible for determining how best to satisfy the requirements created by the Demand Plan Its objective is to balance supply and demand in a way that realizes the financial and service objectives of the company

Inventory

is the quantities of goods and materials that are held in stock Includes all of the raw materials and work-in-process items used to support production, all of the finished products needed to provide customer service, and all of the other materials and supplies needed to run a business, i.e., maintenance, repair, and operating supplies. One of a company's largest assets

Planning Systems

linking supply to demand via MRP and ERP systems

Mean Squared Error (MSE)

magnifies the errors by squaring each one before adding them up and dividing by the number of forecast periods. ​ Squaring errors effectively makes them absolute since multiplying two negative numbers results in a positive number.

MRP Inputs

master production schedule, bill of materials, inventory records, finished product forecast

Mean Absolute Percent Error (MAPE)

measures the size of the error in percentage terms. It is calculated as the average of the unsigned percentage error.​ Many companies use this as it is easier for most people to understand forecast error and forecast accuracy in percentage terms rather than in actual units. a useful variant of the MAD calculation because it shows the ratio, or percentage, of the absolute errors to the actual demand for a given number of periods.

Mean Absolute Deviation (MAD)

measures the size of the forecast error in units. It is calculated as the average of the unsigned, i.e., absolute, errors over a specified period of time. Whether the forecast is over or under the actual demand is irrelevant; only the magnitude of the deviation matters in this calculation

Running Sum of Forecast Errors (RSFE)

provides a measure of forecast bias. indicates the tendency of a forecast to be consistently higher or lower than actual demand

Ethics and Sustainability

recognizing suppliers' impact on reputation and carbon footprint

Purchasing

responsibility for procuring materials, supplies, and services

Customer Relationship Management

strategies to ensure deliveries, resolve complaints, improve communications, & determine service requirements.

Strategic Partnerships

successful and trusting relationships with top-performing suppliers

minimize forecast error

the goal of the forecasting and demand planning process is to _____

Forecasting and demand planning

the key building blocks from which all supply chain planning activities are derived

Demand

the need for a particular product or component. This could come from various sources such as a customer order, a forecast, the manufacturing of another product, etc.

Demand Planning

the process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services. review the forecast to ensure that it is aligned with the company's strategy, business policies, and business knowledge, and make adjustments if necessary

Transportation Management

tradeoff decisions between cost & timing of delivery / customer service via truck, rail, air, pipeline & water

Process Management

using LEAN manufacturing to improve the flow of materials to reduce inventory levels, and using Six Sigma to improve quality compliance across all suppliers (internal and external)

MPS, Bill of Materials, Inventory Records

what are the inputs to MRP?

Business Planning

with its long-term focus, provides the company's direction and objectives for the next two to ten years Management gathers input from the various organizational functions such as finance, marketing, operations, and engineering, to develop this It is then typically updated and reevaluated annually. It is also typically used as the starting point for developing the organization's Production Plan or Aggregate Production Plan.