Supply chain management exam 1 study guide

Integration Elements

-Enabling Systems: support and facilitate a company's ability to manage the supply chain -Supply Chain Risk and Security : Monitoring risk and enhancing the security of the supply-chain -Performance Measurement: measure to a standard for specific criterion for an operation, item, service, etc Project Mngmt: ensure that the stated objectives of a project and are achieved

Which of the following forecasting methodologies is considered a qualitative forecasting technique? -Simple Linear Regression -Historical Analogy -Exponential Smoothing -Simple Moving Average

Historical Analogy

The top two primary functions of inventory are to meet customer demand, and to buffer against uncertainty in demand and/or supply. T or F

True

The Master Production Schedule represents? -What the company plans to produce -The maximum amount the company can produce in any time period -The component parts and materials required to manufacture a product -What the customer wants

What the company plans to produce

Enabling

process facilitate a company's ability to manage the supply chain and are spread throughout every stage

Cause and Effect Forecasting

-A statistical measure that determines the strength of the relationship between one dependent variable and a series of independent variables 1.) Simple Linear Regression attempts to model the relationship between a single independent variable and a dependent variable by fitting a linear equation to the observed data 2.) Multiple Linear Regression attempts to model the relationship between 2 or more independent variables and a dependent variable by fitting a linear equation to the observed data

2 Basic Supply Chain Capability Models

-Efficient Model: The supply chain is configured to produce a large volume of product, as quickly as possible, and at lowest possible cost -Responsive Model: Configured to be fast and flexible to respond quickly to dynamic market demand

Operations Management Elements

-Forecast & Demand Planning; the process of forecasting the demand for a product or service so it can be produced and delivered more efficiently -Planning Systems; the process and tools used to manage company resources to achieve the company's goals -Inventory Mgmt: : the activities and techniques used to plan and control the desired level of items needed to support production -Process Mgmt: Using lean manufacturing to improve the flow of materials and eliminate waste in the process of using G sigma to improve quality across all suppliers

Logistics V Supply Chain Mngmt

-Logistics to refers to activities that occur within scope of responsibilities of single organization -Supply Chain mgmt refers to a network of independent companies that work together and coordinate their actions to deliver to the markets for the benefit of all companies in the network

Supply Chain Planning

-Major principle of supply chain mngmt is the use of a standardized and stepwise approach -World class operational excellence begins with effective supply chain planning and control technique

Supply Management Elements

-Purchasing: responsible for acquiring materials, supplies, and services -Strategic Sourcing: locating & sensing key materials and service suppliers -Supplier Relationship Management: managing a company's long-term interactions.

Supply Chain in the Service Industry

-Service firms offer intangible products, meaning products cannot be touched. -What customers are actually paying for is the labor and the intellectual property of the service provider -Customer are also much more directly involved in the delivery of services than they are in supply of physical product - While the service itself is not tangible, it frequently involves work on a tangible item provided by customer

Logistics Management Elements

-Warehousing: the activities related to receiving, storing; and shipping materials to and from production or distribution location. -Distribution: movement of finished goods from the manufacturer to customer -Transportation:activities related to movement of inventories International Trade Mgmt: across international borders -Customer Relationship Mngmt: customer service -Service Response logistics: the mngmt of company's activities that occur while service is being performed

The goals of supply chain management

1.) Increase Customer Service: Getting the products and services that customers want to them, when and where they want them at the lowest possible cost 2.) Reducing Inventory and Operating Expense: Achieving the first goal while keeping your inventory as low as possible and also keeping your costs as low as possible

Measure of Forecasting Accuracy

1.) Mean absolute deviation: measure size of the forecast error in units ∑(1A-F1)/N A= actual F= forecast N= # of time period 2.) Mean Absolute % error : #1 in % form 3.) Mean Squared Error: magnifies error by squaring each one before adding them up ∑(A-F)^2/n

Forecasting Techniques (best use is for long range forecasts and for new products)

1.) Personal Insight: Based on the insight of the most experienced, knowledgable, or senior person available 2.) Jury of Executive Opinion: People who know the most about the product and the market would likely form a jury to discuss and determine the forecast 3.) Delphi Method: Basically #2 except that the input of each person is collected separately so that others don't influence 4.) Historical Analogy: A judgment forecasting technique based on identifying a sales history that is comparable to a present situation 5.) Customer Survey: Customers are directly approached and asked to give their opinions about the particular product

Fundamentals of Forecasting

1.) Your forecast is most likely wrong 2.) The "granular" the forecast, the less accurate it is 3.) It is easier to forecast next month accurately than it is to forecast next year 4.) Simple forecast methodologies trump complex ones 5.) A correct forecast does not prove your forecast method is correct 6.) If you don't use the data regularly, trust it less when when forecasting 7.) All trends end eventually 8.) It's hard to eliminate bias, so most forecast are biased 9.) Technology is not the solution to better forecasting 10.) Forecasting is really a blend of art and science

Forecast Bias

A consistent deviation from one direction; either high or low

Describe/Define a Bill of Materials (BOM)

A document that shows an inclusive listing of all raw materials, component parts, and assemblies making up the final product.

What is an Enterprise Requirements Planning (ERP) System?

An information system connecting all the functional areas and operations of an organization via common software infrastructure and database. -- AND/OR -- Provides real-time integrated management of the main business processes necessary to plan and control the organization.

In the absence of any other information or visibility, individual supply chain participants can begin second-guessing what is happening with ordering patterns, and potentially start over-reacting. This is known as? -Tracking Signal -Running Sum of Forecast Errors -Forecast Bias -Bullwhip Effect

Bullwhip Effect

The value of supply chain management

Creates value by managing the process of all those independent trading partners so that they can collaborate with one another in an efficient, effective, and cost conscious way

When creating a quantitative forecast, if you detect a pattern of demand data that shows a wavelike pattern that last longer than 1 year and can extend over multiple years. This is known as what type of variation? -Seasonal Variation -Cyclical Variation -Random Variation -Trend Variation

Cyclical Variation

A quantitative decision model based on the trade-off between annual inventory carrying costs and annual ordering costs is known as what? -Sales & Operations Planning (S&OP) -Economic Order Quantity (EOQ) -Finished Goods Inventory Management -Master Production Schedule (MPS)

Economic Order Quantity (EOQ)

What are the two basic Supply Chain Capability Models?

Efficient Model and Responsive Model

Companies in the Service Industry do not actually have a real supply chain because they offer intangible products. T or F

False

Costs which cannot be traced directly to the volume of units being produced are known as variable costs. T or F

False

Mean Absolute Deviation (MAD) is a measure of forecast bias. MAD indicates the tendency of a forecast to be consistently higher or lower than actual demand. T or F

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. T or F

False

The Supply Chain Capability Model designed to minimize cost is known as the Responsive model. T or F

False

To handle a fluctuating demand pattern, the Level Production Strategy adjusts the production rate and capacity to exactly match demand. T or F

False

Inventory costs which are independent of the output quantity are called? -Direct Costs -Fixed Costs -Carrying Costs -Variable Costs

Fixed Costs

Which type of demand is forecasted? Tentative Demand Conditional Demand Dependent Demand Independent Demand

Independent Demand

Sourcing

Is the process of identifying the suppliers that provide the materials and services needed for the supply chain to deliver the finished products desired by the customer

What is Supply Chain?

It is the coordination of the network of the 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

Make

Make or manufacturing is the series of operations performed to convert materials into finished product

Pull Business Model

Make-to-order: Producing finished products in response to actual demand

The business model that consists of producing finished products on the basis of anticipated demand is? Make-to-Stock Assemble-to-Order Just-in-Time Make-to-Order

Make-to-stock

As the supply chain continues to evolve, it's critical for companies to . . . ? - increase inventory levels throughout the supply chain. -Outsource their core competencies to trading partners that they can trust. -Outsource their non-core competencies to trading partners that they can trust

Outsource their non-core competencies to trading partners that they can trust

What is the term used to relate the requirements for a component part back to its parent item? It can be thought of as determining where a component item is used. -Pegging -Lot Size -Time Bucket -Planning Factor -Net Requirement

Pegging

What are the six (6) different functional areas of the Supply Chain Operations Research (SCOR) Model?

Plan, Source, Make, Deliver, Return, and Enable

Planning

Planning established the parameter within which the supply chain will operate

What is the difference between qualitative forecasting techniques and quantitative forecasting techniques?

Qualitative forecasting is based on opinion and intuition to make forecasts. Quantitative forecasting uses mathematical models and historical data to make forecasts

Which of the following would be considered an independent demand item(s)? -The mixed cake batter that is about to be baked -The ingredients ready to be made into a cake -The undecorated cake -The decorated birthday cake

The decorated birthday cake

time series forecasting

The main purpose of a time series model is to collect and study past data of a given time series in order to generate probable future values for the series. 1.) Naive Forecasting: Sets the demand for the next time period to be exactly the same as the demand in the last period 2.) Simple Moving Average: Uses calculated avg. of historical demand during a specified number of the most recent time periods to generate forecast Formula (m1+m2+m3+mn)/n 3.) Weighted Moving Average: Similar to #2 expect that not all time periods are valued/weight equally formula (m1+n1)+(m2+n2) 4.) Exponential Smoothing: A more sophisticated version of #3 Requires last period actual demand, last period's forecast, and a smoothing factor (A1+Sf)+ (F1-(1-sf)) 5.) Linear Trend Forecasting: Imposing a line of best fit across the demand data of an entire time series. Used as the basis for forecasting future values by extending line

In terms of forecasting, what does the Mean Absolute Deviation (MAD) measure?

The size of the forecast error in units.

Which one of the following is NOT one of the four reasons to hold inventory? -To decouple supply from demand -To decouple dependencies in the supply chain -To avoid obsolescence -To buffer against uncertainty in demand and/or supply

To avoid obsolescence

Which one of the following would be considered an inventory ordering cost? -Cost of capital -Insurance costs -Storage costs -Transportation costs

Transportation costs

What are the four (4) variations in Quantitative Forecasting?

Trend Variations, Random Variations, Seasonal Variations, and Cyclical Variations

Just-in-Time is a philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement. T or F

True

One of the main differences between Barcodes and RFID is that Barcodes require a direct line of sight to read the information, and RFID does not. T or F

True

Dependent Demand

demand for an item that is directly related to the other items or finished parts

Independent Demand

demand for an item that is unrelated to the demand for other items, such as finished products

Demand

is the need for a particular product or component

Forecasting

the business function that estimates future demand for product so that they can be purchased or manufactured in appropriate quantities in advance of needs

Forecasting

-statically speaking, the forecast will be inaccurate and although may be inaccurate, it is still useful -The forecast is the basis for most "downstream" supply chain planning decisions so it is critical to be accurate -The goal is minimize forcast error -The further out into the future you forecast, the greater deviation will likely be

Which of the following is NOT one of the basic types of forecasting? -Qualitative -Force Field Analysis -Time Series -Cause and Effect

Force Field Analysis

Organizations that choose to implement one single system with all of the desired applications from a single vendor is said to have chosen a? -Premier Application Solution -Best-of-Breed Solution -Single Integrator Solution -Elite Integrator Solution

Single Integrator Solution

Inventory is an asset that allows a company to support manufacturing operations and fill customer orders immediately, but too much inventory ties up capital and can become a significant liability. T or F

True

Forecasting Horizon

-Short Term: Forecasting less than 3 months (Tactical Decisions) -Medium Term: 6 month-2 years (develop a strategy) -Long term: >2 years (detect general trends and identify major turning points

Describe/Define Sales & Operations Planning (S&OP)

A process to develop tactical plans that provides management the ability to strategically direct the business to achieve a competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain.

The business practice that combines the intelligence of multiple trading partners in the planning and fulfillment of customer demands is known as... -Collaborative Planning, Forecasting, and Replenishment (CPFR) -Aggregate Production Planning (APP) -Sales & Operations Planning (S&OP) -Distribution Requirements Planning (DRP)

Collaborative Planning, Forecasting, and Replenishment (CPFR)

The planning function that determines the need to replenish finished product inventory at branch warehouses, when there are multiple warehouses in the network, is called what? -Sales & Operations Planning (S&OP) -Distribution Requirements Planning (DRP) -Collaborative Planning, Forecasting, and Replenishment (CPFR) -Material Requirements Planning (MRP)

Distribution Requirements Planning (DRP)

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. T or F

False

The Role of Forecasting

Finance: budgeting and cost control Marketing: new product planning and personal compensation Production: Select suppliers, determine capacity requirements and to drive decisions about purchasing, staffing, and inventory

Forecast Error Calculation

Forecast Error Value= A-F Forecast Error Value%= ((A-F)/A)X100 A= actual demand F= forecast demand

Running Sum of Forecast Errors

Indicates the tendency of a forecast to be consistently higher lower than actual demand

Push business model

Make-to-stock: Producing finished products on the basis of anticipated demand before receipt of an actual customer order

Cause and Effect Forecast models use the historical relationship between an independent variable(s) and a dependent variable to predict the future values of the dependent variable. T or F

True

Companies that adjust the production rate and capacity to exactly match demand by increasing or decreasing labor, materials, or necessary resources, is using the Chase Production Strategy. T or F

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. T or F

True

Strategic partnerships are seen as one of the foundations of supply chain management T or F

True

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

True

The goal of supply chain planning is to balance supply and demand in a way that realizes the financial and service objectives of the company. T or F

True

The lowest inventory level at which a new order must be placed to avoid a stockout is known as the Reorder Point. T or F

True

Collaborative Planning, Forecasting & Replenishment

Combines the intelligence of multiple trading partners who share info to ensure a smooth flow of goods and services across the supply chain

Deliver

also known as the logistics phase, this is the part of the supply chain management that oversees the planning and execution of the forward flow goods and related info between various points in the supply chain to meet customer requirements

Return

also known as, Reverse logistics, is the part of the supply. chain mngmt that deals with planning and controlling of moving specifically back to the point of origin

The Inventory Turnover Ratio shows how many times a firm turns over its inventory in an accounting period, and higher (i.e., more) inventory turnover is generally viewed as negative. T or F

False

Forecasting and Demand Planning

-Forecasting and Demand Planning are the key building blocks from which all supply chain planning activities are derived and are crucial components of customer satisfaction. -The first step is Forecasting: where the forecast is developed Through data analysis and judgment -The second step is demand planning which is the process of combining statistical forecasting techniques and or judgment to construct demand estimates for products or services

Variations in Quantitive Forecasting

-Trend Variation: is a movement of a variable over time -Random Variations: are instability in the data caused by random occurrences -Seasonal Variations: Are repeating patterns of demand -Cyclical Variations: are wavelike patterns that last longer than 1 yr and can extend over multiple yrs

Describe one action that supply chain participants can take to alleviate the Bullwhip Effect.

1. Collaboration: Sharing information through the use of electronic data interchange (EDI), point of sale (POS) data, and web-based systems can facilitate collaboration. 2. Synchronizing the supply chain: Supply chain participants coordinate planning and inventory management to minimize the need for reactionary corrections. 3. Reducing inventory: Through the use of just in time (JIT), vendor managed inventory (VMI), and quick response (QR)

Companies today are focused on vertical integration encompassing the ownership and coordination of all supply chain activities while also outsourcing their core competencies T or F

False

Service firms offer intangible products (meaning products that cannot be physically touched), therefore, they do not have a supply chain. T or F

False

What are the four foundational areas of Supply Chain Management?

Operations management, supply management, logistics management, and integration.

Supply Chain SCOR Model

Suppliers (External) Source -->Make-->Deliver Manufacturer (External) Source-->Make Deliver Customers (External) Source--> Make--> Deliver

A supply chain consists of . . . ? -Suppliers and Customers -Product flow and Payment flow -Suppliers, Manufacturers, and Customers -Suppliers, Manufacturers, and Customers facilitated through the use of Logistics

Suppliers, Manufacturers, and Customers facilitated through the use of Logistics