Supply Chain management 385 test 2

A transportation strategy should include consideration of:

A.safety on the ground, in the air and on water (all modes). B. environmental factors such as pollution. C. consolidation of freight. D. alternative transport modes. E. all of the above. -CORRECT ANSWER

Which of the following is the most tangible way to describe a need for an item to be purchased?

By specification

Logistics Costs•Three cost categories:

-Transportation (the bulk of the costs) -Inventory carrying costs -Administrative costs

Additional Current Criteria: Social

Corporate social responsibility (CSR): -recognize social responsibilities in the countries in which they operate -deal with socially responsible suppliers to improve image and reputation and to develop resilient and sustainable supply chains -promote opportunities for disadvantaged, minority, and small business suppliers

Four Contract Pricing Options

1.Firm-fixed-price (FFP)-Price not subject to change, under any circumstances 2.Cost-plus-fixed-fee (CPFF)-If the item is experimental and the specifications are not firm, or if future costs cannot be predicted-Buyer to reimburse supplier for all reasonable costs incurred (under a set of definite policies under which "reasonable" is determined) in doing the job or producing the required item or service, plus a specified dollar amount of profit-A maximum amount may be specified for the cost 3.Cost-no-fee (CNF)-Only costs are reimbursed-Buyer must persuade supplier that there will be enough subsidiary benefits from doing a particular job 4.Cost-plus-incentive-fee (CPIF)-Both buyer and seller agree on a target cost figure, a fixed fee, and a formula under which any cost over- or underruns are shared

Eight Dimensions of Quality

1.Performance: The primary function of the product or service 2.Features: The bells and whistles. 3.Reliability: The probability of failure within a specified time period. 4.Durability: The life expectancy. 5.Conformance: The meeting of specifications. 6.Serviceability: The maintainability and ease of fixing. 7.Aesthetics: The look, smell, feel, and sound. 8.Perceived quality: The image in the eyes of the customer.

Additional Current Criteria: Environmental

Reexamine total supply chain for environmental impact on supply chain design, movement, creation, and disposal to minimize the "footprint" -amount of energy, water, other scarce resources used -transportation and handling systems and distances -discharge of undesirable gases or substances -disposal of hazardous goods •"Best buy" includes environmental impact as a standard consideration

Standardization and Simplification

Standardization: Agreement on definite sizes, design, quality, or other aspects of the product or service. -A technical and engineering concept •Simplification: A reduction in the number of sizes, designs or other aspects of the product or service. -It is a selective and commercial problem -It may be applied to articles already standardized or as a step preliminary to standardization

Need Identification Criteria

Strategic -e.g., mission critical, total spend, risk reduction, access to new technology or new markets, assurance of supply in tight markets, etc. •Traditional supply criteria -quality, quantity, delivery, price and service •Additional current criteria -financial, risk, environmental, innovation, regulatory compliance and transparency, social and political factors

"C" items in ABC analysis will:

account for the smallest percentage of Annual Usage Dollars.

Which of the following is a critical factor for planning and inventory management when attempting to match supply with demand?

accurate forecasts

Transportation rates:

are established primarily through negotiation.

Costs associated with facilities and equipment for a manufacturing company are called:

fixed costs.

Packaging may be a difficult category to buy because

it has disposal, environmental and transportation implications.

Materials or items that do not become part of a manufactured product but are still necessary items to purchase to support the manufacturing process are called:

maintenance, repair, and operating (MRO) supplies.

A supplier certification program:

may enable the buyer and seller to lower costs and improve quality.

The cost approach to pricing:

means prices are set to cover direct costs, contribute to indirect costs, and attain profit.

One option to assure that a supplier has a well established quality program would be to

require suppliers to be certified under the ISO 9001 standard.

The real costs of quality:

rise significantly as defects increase in the finished product.

Capital assets make up one category of needs for purchasing in a manufacturing company. Which of the following characteristics are related to capital assets?

strategic considerations; high value purchases; infrequent purchases

With deregulation of the transportation industry and the development of intermodal service (and 3PL service), the focus on the transport buyer is:

the carrier's ability to handle mulitple parts of the logistics process.

Anticipation inventories are carried:

to cover a well-defined future demand.

Lean Thinking

•A management philosophy focused on maximizing customer value while minimizing waste from: -Overproduction -Waiting -Transportation -Nonvalue-adding processes -Inventory -Motion -Costs of quality (scrap, rework, and inspection)

Total Quality Management

•A philosophy and system of management focused on long-term success through customer satisfaction. -Quality integrated throughout the organization's activities -Employee commitment to continuous improvement -Suppliers are partners in the TQM process -Uses tools including continuous improvement or kaizen, quality function deployment (QFD), and statistical process control (SPC) to achieve performance improvements

How Prices are Set

•Cost approach -Price is set greater than direct costs, allowing for sufficient contribution to cover indirect costs and overhead, and leaving a margin for profit •Market approach -Prices are set in the marketplace and may not be directly related to cost

Types of Demand

•Dependent or derived demand: -item is part of a larger component or product, and its use is dependent on the production schedule for the larger component -example: demand for bottles and caps for a drink •Independent demand: -usage is determined directly by customer orders, independent of production scheduling decisions -example: demand for an energy drink

Advantages of Buying with Specification

•Evidence exists that thought and careful study have been given to the need and the ways in which it may be satisfied •A standard is established for measuring and checking materials as supplied, preventing delay and waste that would occur with improper materials •An opportunity exists to purchase identical requirements from a number of different sources of supply •The potential exists for equitable competition •The seller will be responsible for performance when the buyer specifies performance

Factors Complicating Quantity Decisions

•Forecasts -Purchase decisions made a long time before actual requirements are known -Rely on forecasts of future demand, lead times, prices, and other costs -Forecasts are rarely, if ever, perfect •Costs -Costs associated with placing orders, holding inventory, running out of materials, and having a service unavailable when needed •Availability -Desired quantities may be unavailable without paying a higher price or delivery charge •Price -Volume Relationship -Reduced prices for larger quantities versus carrying costs •Shortages -May cause serious disruptions

Safety Stock

•Held because of uncertainty in supply and/or demand •Trade-off: cost of stocking out versus cost of holding inventory •Levels can be calculated using statistical techniques-e.g., take into account standard deviation of demand

Limitations in Using Specifications

•It is practically impossible to draw adequate specifications •Specifications add to the immediate cost •Specification may not be better than a standard product •Cost increase by testing to ensure that the specs have been met •Unduly elaborate specifications discourage potential suppliers from placing bids in response to inquiries •Unless the specifications are of the performance type, the responsibility for the adaptability of the item to the use intended rests wholly with the buying organization •Minimum specifications set by the buying organization may be the maximum furnished by the supplier

Five Major Cost of Quality Categories

•Prevention costs •Appraisal costs •Internal failure costs •External failure costs •Morale costs

Continuous Improvement or Kaizen

•Relentless pursuit of product and process improve-ment through a series of small, progressive steps •Follows a well-defined and structured approach like plan-do-check-act (the Deming Wheel) •Incorporates problem-solving tools: -Pareto analysis, histograms, scatter diagrams, check sheets, fishbone diagrams, control charts, run charts, and process flow diagrams

Logistics Definition

•The management of inventory in motion and at rest •"...that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin to the point of consumption in order to meet customers' requirements."

Modes of Transportation

•The means by which people, freight, or information gain mobility •Basic modes: -Land (road, rail, and pipeline)-Water-Air-Radio frequency (RF) waves •Transportation trends:-Integrating modes (intermodality) -Linking modes into supply chain activities

Conditions for Competitive Bidding

•There must be at least two, and preferably more, qualified bidders •The suppliers must want the business-a "buyer's market" •Specifications must be clear •No collusion between bidders

Why Inventory?

•To provide and maintain good customer service. •To smooth the flow of goods through the production process •To provide protection against the uncertainties of supply and demand •To obtain a reasonable utilization of people and equipment