CPSM - Exam 2 - Supply Management Integration

Task 2-F-5 Perpetual inventory review

"continuous review system" status of inventory checked after every transaction. daily receipts batched and recorded one time each day, at same time each day. inventory records are always up to date and should agree w/ actual stock count in warehouse. perpetual inventory system checks status of inventory after each transaction to determine if level has fallen below reorder point. if so, a predetermined order size is placed.

Task 2-F-10 What are 4 items that should be comprehended in an expediting policy/procedure?

1. An approval process should be in place. 2. Process to expedite/de-expedite should be in writing 3. All expedited/de-expedited orders should be tracked to keep record of their occurance 4. Procurement should not authorize an event until the requester has been informed of the additional costs and approves them.

Task 2-D-1 Role of Supply Management in Product/Service design

1. R&D: Supply management professional's knowledge of supply markets allows the sharing of information about service, product or material availability, as well as information regarding new developments on the horizon. Working together improves speed of release, cost-effectiveness, and total quality for a new initiative. 2. Substitutions: Supply management may be able to recommend services, parts or materials that meet functional requirements at the lowest practicable cost. Often suppliers can recommend newer or alternative solutions that provide the same function. 3. Innovation: Supply management is responsible for maintaining and developing relationships with suppliers that result in their sharing information on innovations with the supply management professional's organization. Suppliers may recommend new products or services on the market that enable the designer or internal customer to make inventive or resourceful changes. 4. Contracting for Design Services: Supply management can contract with outside services to help ensure that each project stays on target. Design services that may be contracted include circuit design, software development and programming, proto-type machine and assembly, graphic design, technical writing, modeling, testing, and equipment rental. 5. Qualified Products List (QPL): It is advisable to avoid parts or processes that may impede the smooth flow of the operation. Supply management can assist design and engineering teams by calling attention to parts that are on a qualified products list and those that may have long or unstable lead times. 6. Sourcing and Cost Profitability Issues: With its knowledge of suppliers' products, services and know-how, supply management is in a position to enhance competition by suggesting materials and component substitutions, items ripe for standardization, how processes might be modified, and if specifications are clearly and effectively written. Use of such information, and the application of cost-saving concepts, ensures that supply management is adding value and contributing to the successful decision-making processes within the organization. 7. Target Costing: Starts with the selling price of the buyer's end product, or service for its end product, or service in the marketplace, and subtracting out the required profit. The amount remaining is the total that it can cost the organization to make a product or to perform a service, including materialsSupply management works with suppliers to ensure their prices come in at or below the target cost. Further analysis and negotiation is done to remove costs from the buyer's and the seller's operations to reduce the price to the acceptable target level 8. Product Standardization: Reduce variety among a family of products by using common parts as often as possible. This process results in easier production and lower costs because parts can be purchased in higher volumes at a discount. Supply management collaborates early in the design process with engineers and suppliers, who can study the designs and recommend which parts are the best candidates for standardization.

Task 2-D-2 How do contracts play a role in ramp up/ramp down

A variable contract (minimum order requirements) that allows procurement to increase or scale back quantity based on sales is recommended for ramp-up or ramp-down. For ramp-ups, this type of contract also gives suppliers the flexibility to perform longer production runs, store excess inventory, and deliver as needed.

Task 2-F-2 What is the impact of traffic patterns?

Congested airways, highways, and waterways are a factor in estimating delivery lead times.

Task 2-C-3 Dollar averaging

Decreases the difference between short-term price fluctuations and long-term averages. 10,000 lbs - $1.04 7,000 lbs - $1.07 13,000 lbs - $1.09 = $1.07/lb

Task 2-C-3 (Buying strategies) Forward buying

Delays the impact of rising prices due to shortages/strikes/price increase Supply pro must evaluate the trade-off between increased inventory costs and decrease in risk of supply constriction/price increases.

Task 2-G-1 Value Stream Mapping

How do we become more efficient in transactions to save money? VSM: Documents a process from end to end to look for value/non value added processes to make improvements to increase efficiency. Diagnose inefficiencies in processes. Must create cross-functional team to evaluate. If for supply chain management, they are from procurement, operations, finance/accounting. First step: Kaizen (Change for better) 1. Determine the focus of VSM. Be clear on Scope 2. Draw current state Map (as-is) 3. Review Map to ID wasteful activities/root cause 4. Draw the future state map (to be state) 5. Draft plan to get to future state. Ensure team is open and committed to change

Task 2-E-1 Identify the focus of ISO 9000

ISO 9000:2015 and ISO 9001:2015 perhaps most common supplier registration standards used worldwide. Goal: to develop a voluntary set of standards, useful for improving business operations, and meet market conditions. Its requirements provide a recognized international quality standard that businesses can follow to become more effective/efficient. Processes need to be first planned and followed. Organization must then correct deficiencies in current processes and strive to continually improve.

Task 2-B-2 Demand Planning is

Identifying demands for products/services to support the marketplace Encompasses activities of forecasting, order planning, determining warehouse requirements, production balancing, and spare parts.

Task 2-F-3 Name the common standard for specifying freight terms

Incoterms® rules are the common standard for specifying freight terms. When resolving delivery/receiving problems, the supply management professional should first refer to the Incoterm® rules used in the contract.

Task 2-F-8 How are stock keeping units (SKU) established

Individual unit/product that is stocked at a specific storage facility. Unique number/bar code that differentiates each SKU. Each SKU or individual item may have its own RFID tag to differentiate each item. First step in identifying and controlling inventory

Task 2-B-1 Define key factors for stakeholder forecasts

Key field sales associates/managers create initially, then adjust based on capacity, material, financial risks, and opportunities.

Task 2-C-1 Coincident indicator

Measure of economic activity that changes concurrently w/ a change in the business cycle. Ex) personal income, nonagricultural employment, industrial production.

Task 2-F-7 Name 2 national regulatory compliance organizations

OSHA (U.S.A) and EU-OSHA (European Union) Local include: city building departments (building permits, changes to storage systems), fire departments (perform safety inspections in accordance w/ local ordinances to ensure extinguishers, water sprinklers, density of inventory, rack layout, and may issue warnings/citations).

Task 2-F-5 5S meaning

Sort (essential items that can be stored efficiently, free of clutter) Set in order/arrange (focus on the concept of an orderly workplace, items kept where they will be used) Shine (keep neat/clean) Standardize (standardize work practices so that individuals know what their responsibilities are) Sustain (Continuously improve/train)

Task 2-C-3 JIT II

Supplier managed operations within buyer facility. Supplier implants perform same functions as supply pros, including scheduling manufacturing production/supplier deliveries, and management of product development projects. By outsourcing tactical functions, buying org supply pros are able to focus on strategic activities.

Task 2-E-1 Approved Suppliers

Supplier meets an organization's selection criteria. Process may include submission of samples for testing, or other steps to approve item/service for purchase. May also include inspection of supplier's quality systems.

Task 2-F-11 ABC Analysis

The application of Pareto's law or the 80/20 rule to define three categories: A, B, and C. Used to determine the relative ratios between the # of items and the dollar value of the items purchased repetitively for stock; # of purchase orders and dollar value; and the # of suppliers and % of spend. More emphasis placed on A items.

Inflation vs. Deflation

percentage rate of increase/decrease in the average price level. High signifies rapid price escalation and wage increases, while investment centers on tangible assets rather than financial markets. Persistent trend upward since end of WW2.

Taks 2-F-1 Key considerations when relocating or moving products

physical restrictions, warehousing, methods of transportation, and amount of material that needs to be relocated or moved.

Task 2-F-5 Labor intensive vs. mechanized warehouse

1. Automation: warehouse storage facility uses one or more automation technologies, such as automated storage/retrieval systems, automated guided vehicle systems, or radio frequency identification systems. Enables highly accurate, real-time management of inventories b/c of the capacity to keep precise records while ensuring security of material. 2. Picker-to-part vs. part to picker: Traditional approach to material handling/order picking requires the picker to travel to the storage location. W/O a stock location system, this involves searching/traveling. Picker to part: pick to pallet, pick to cart, pick to roller and man aboard storage/retrieval. Part to picker systems include carousels, storage conveyor and automated storage/retrieval systems (AS/RS).

Task 2-F-7 Name at least 3 areas that impact the environment in a warehouse that can be calculated

1. Calculate measure of carbon footprint, and implement initiatives to reduce the warehouse impact. 2. Use a carbon-footprint calculation to compare facilities. 3. Traditional forms of lighting (account for up to 70% of energy costs) can be replaced w/ low-voltage lighting like LEDs, and non-essential lighting can be turned off. 4. Solar panels can be used to offset impact of power plants. 5. Air conditioning/heating systems should be maintained for optimal efficiency and replaced with high Seasonal Energy Efficiency Ratio (SEER) units. 6. When roofing needs replaced, most environmentally-friendly materials should be used.

Task 2-F-5 3 types of inventory classification systems

1. Cost and demand patterns: High-value items in High demand: receive highest rating, require the most attention in terms of management. Low-value/high demand: do not require as much attention. 2. ABC Classification: 20% of items held in inventory for resale generate 80% of the sales revenue. 20% of items will generate 80% of the cost of items being used. Inventory items are sorted as to sales revenue generated (value of items used), and top 20% are "A" items. Next 30% are "B" (15% of revenue), and last 50% (5% of revenue) are "C". A items receive tight control, carefully forecasted, and safety stock levels should be analyzed to make sure not to high or low. Special attention to lead time. Criticism= a B or C part is not often used, but may stop operations if not in stock (identify items and have rapid replenishment plans in place.) 3. Type of material, characteristics, shelf life, size, methods of receiving/storing/issuing goods, goods that have a hazard, or require special method of movement/storing/handling must require special attention.

Task 2-F-5 Steps involved in improving logistical performance using a scorecard.

1. Define vision/goals. 2 Strategies should be operationalized into specific performance-driven activities. 3. Performance measures can then be developed for each activity.

Task 2-F-8 What are the objectives of warehouse facility design

1. Facilitate how goods are received/stored/issued 2. Ensure activities performed are adding value for customers. 3. Minimizing the non-value added activities 4. Facilitating a high level of efficiency, utilization of labor, equipment, and space.

Task 2-F-11 Two general strategies for replenishing inventory:

1. Fixed-order quantity (FOQ): Size of orders remain fixed, while time interval between orders changes, depending on how quickly the items are consumed. 1a. Economic order quantity (EOQ): Used to determine the quantity of item to be ordered/manufactured that minimizes total acquisition and inventory carrying costs. Often used for independent demand items managed in an order-point inventory management system 2: Fixed-order period: Inventory position reviewed on.a scheduled/periodic basis, rather than continuously. Order placed at end of each review, if needed, order qty varies.

Task 2-F-8 Describe types of storage location systems

1. Fixed: Stores inventory item in a set physical location, and it can always be found there. (Lower space utilization, with higher accuracy and simplified storing and record keeping) 2. Random: Store inventory in any available space. (Higher space utilization, lower accuracy). More analysis of real-time data is required to know if spaces are empty or can be consolidated, but higher utilization of cubic space. RFID increases advantages of random storage b/c accuracy of information system is improved.

Task 2-F-5 3 components of minimizing costs and optimizing materials handling

1. Facility: design/layout of warehouse must be orderly so that materials flow efficiently, locations are clearly identified, and space utilization is optimized. 2. Forklifts: have enabled significant productivity growth for the receiving, storing, picking, staging, and loading functions. 3. Pickers: Done by humans/mechanized. Human pickers must be familiar w/ material handling technology. Batch pick: combine order requirements into a single picking activity Case pick: select merchandise that can be packaged into shippable cartons from a pick location onto a pallet, cart, conveyor Case pick from pallet: items selected within a certain storage area (pallet/rack) Pick to customer label: The operator travels to the location code printed on the picking label and picks the product. The confirmation stage involves scanning the pick label (which links back to the product to be picked as well as the order number), followed by the product barcode. If the product barcode matches the product attached to the picking label, the operator applies the label to the carton, places the carton on to a conveyor or pallet jack for later consolidation or despatch. If the pick label does not match the product scanned, the operator is alerted to the error.The benefits of this approach are as follows: Efficiency. The picker is working on multiple orders in a single pass through the warehouse. This can result in a substantial reduction in the amount of walking or driving performed each day. Accuracy. The picker is confirming that each carton scanned is appropriate for the pick to be completed. The drawbacks of this approach are as follows: Pick consolidation. In the absence of an automated sorting / palletising system, the cartons must be handled a second time to place them on to pallets or in to additional packaging. This makes pick to label impractical for items which must be re-packed before they are shipped. This step may be bypassed by having the freight company perform consolidation of cartons.

Task 2-F-11 What are 3 main costs of inventory

1. Ordering costs 2. Holding costs (costly inventory) 3. Shortage costs (production downtime, idle workers, lost sales due to empty shelves, emergency shipments, dissatisfied customers) Maintaining correct inventory levels helps increase productivity/customer satisfaction. Holding too much is costly. Orgs should focus their efforts on reducing shortages on those items with the highest demand value (ABC/Pareto).

Task 2-F-5 Types of warehouse structures

1. Private Ownership 2. Lease/Outsourced warehousing services (public warehousing) Org may use both, depending on location, volume, product characteristics, and services desired. (I.e., private warehousing, but also leased warehouse space at peak times, or in locations where orgs product volume doesn't warrant its own warehouse.) Common to hire a separate org that specializes in warehousing/transportation to manage functions for an org, when warehousing/transportation are not core competencies (3PL). Customer service = KPI for 3PL and public warehousing. 3PL may also perform supplier managed inventory functions, and be held responsible for inventory replenishment. May also take inventory on consignment so it is on the balance sheet of the 3PL. When goods sold, 3PL forward payment from customer to mfg.

Task 2-F-7 Name 5 warehouse processes that require key KPIs

1. Receiving (Cost of receiving/receiving line, volume received/man hour, receiving dock door utilization/accurate receipts as a %, time taken to process a receipt) 2. Put-away (Cost/put-away line, put-away/man hour, utilization of labor and equipment as %, time taken for each put-away) 3. Storage (Storage cost/item, inventory/square foot, % location and cube occupied, % location w/o inventory errors, inventory - days on hand) 4. Pick-n-pack ( cost of picking/order line, order lines picked/hour, picking labor/equipment utilization as %, perfect picking lines as %, order pick cycle-time/order) 5. Shipping (Cost of shipping/order, order process for shipping/man hour, utilization of shipping docks as %, perfect shipping as %, shipping time (order pick to physical movement of truck)/order

Task 2-F-7 Define 4 options for excess/obsolete inventory disposition

1. Return stock to seller if allowed under contract. 2. Selling to the staff or external parties at discount 3. Donate 4. Disposal

Task 2-F-13 What options are available for disposal?

1. Return to supplier of origin 2. Sell on open market 3. Dispose as scrap OEM are becoming more accountable for products' disposal.

Task 2-F-1 Discuss considerations when selecting a transportation modality.

1. Types of goods to be transported, size, weight, density, packaging, and specific physical characteristics. 2. Which mode/combination of modes are best suited to meet the organization's needs. 3. Delivery requirements, including the time needed. 4. Organizational requirements.

Task 2-F-3 Accuracy of Documentation

Accurate documentation will help prevent delivery and receiving problems. Thus, contract terms and conditions, and the bill of lading should be checked to make sure all details of the shipment are correct. It helps to standardize these forms as much as possible to avoid human error. Contracts and bills of lading should be carefully reviewed before signing. Conditions can change once the contract is signed, but any changes should be minimized to avoid mistakes and confusion. Any changes should be implemented as soon as possible to the affected parties, and any conversations regarding shipment or receiving should be documented.

Task 2-G-1 Projects are typically created to meet at least one of five objectives. What are they?

All project life cycle activities typically fall into one of the five project management process groups 1. Initiation (needs identification or problem definition. define project feasibility, proposing a project solution, and obtaining project approval/authorization) 2. Planning (Define objectives, and plan the course to attain the Scope/Objectives. SM related include major procurement actions, Scope development, and solicitation planning) 3. Execution (implementing supply management plans developed during planning, I.e., solicitation, source selection) 4. Monitoring (measure/monitor project effort to identify variances from the project plan so that corrective actions can be implemented) 5. Controlling 6. Closing (formalizes acceptance of the project effort. For SM, involves formally closing the project activities and documenting the project/contract files to reflect results)

Task 2-F-2 Describe C-TPAT and tell how an organization can participate

Customs-Trade Partnership Against Terrorism is a joint government-business initiative to build cooperative relationships that strengthen overall supply chain and border security. US Customs and Border Protection asks that businesses ensure the integrity of their security practices, and communicate guidelines to their business partners within the supply chain. ISO 28000 organization may apply for independent certification of their supply chain security management system (SCSMS). ISO outlines requirements for setting up, implementing, operating, monitoring, reviewing, maintaining, and improving an SCSMS using CI process.

Task 2-F-5 DRP vs. Kanban

DRP (Distribution requirements planning) time-based demand from the distribution center to balance the customer fill rate against inventory investment. uses time-phased order point to determine when a qty of goods must be planned/received. Information system that takes customer demands on set of warehouses or distribution centers projected over next several periods of time, and uses that information to predict demand across the warehouses. links customers, distribution centers, warehouses, and manufacturing plants to help org plan flow of materials. Kanban: focuses on minimizing inventory/maximizing product flow. Materials replaced when there is a demand for those goods. Usually printed card calling out part name, description, qty, that signals a cycle of replenishment.

Task 2-F-3 Commonly used delivery performance measurements

Damages: Amount per vehicle. Damages: Amount to goods while in transit. Damages: Amount to goods during loading. Damages: Amount to goods while unloading. Late deliveries as a percent of all deliveries. Percent of orders delivered on time. Percent of deliveries outside preset delivery windows. Cost of damage claims.

Task 2-F-5 Describe the differences between Build-up and Build-out

Expand facility vertically = build up horizontally=build out height will dictate how shelving can be assembled, a key consideration in warehouse design. higher shelf racking = better space utilization. in addition to square footage/meters, it is important to consider cubic footage/meters. Consider type of equipment needed also.

Task 2-F-2 What practices lead to gains from managing shipping routes?

Good routing/scheduling can reduce transportation costs and increase productivity. The use of: 1. prescheduled shipments 2. management of pickup and delivery frequencies 3. use of fixed routes instead of variable routes 4. working with delivery time windows Routing and scheduling software packages can aid the process.

Task 2-G-1 Describe relationship between project management and supply management

Many projects managed by an organization typically require some supply management activities like sourcing in support of a larger enterprise wide project. Supply management activities are typically executed as projects (SM establishing a second source of supply for a critical commodity, material, service).

Task 2-F-4 List 4 modals of of transportation and cost elements of each.

Most expensive, to least: air motor rail water

Task 2-F-5 Define/describe order picking/stock replenishing.

Order picking: involves outbound flow of material from orgs warehouse to customer stock replenishment: inbound flow of materials from suppliers to the warehouse. replenishing is key to ensuring that the organization maintains the optimal level of stock that is cost effective and minimizes on-hand inventory. One method is based on independent or random demand (customer driven, high level of uncertainty). Independent demand uses reorder point/level system for inventory mgmt. Another method is dependent or predictive demand. Dependent demand derived from or contingent upon the demand for another component or a finished product. Driven by demand of supplier or customer order. Enables more anticipation/certainty than independent or random demand. Uses resource planning like MRP MRP II.

Task 2-E-3 Name 3 common process improvement metrics

Process management is the function of planning, organizing, controlling, and improving a process, and measuring its utility in providing the desired end result. It also includes measuring performance. Most common include productivity, efficiency, and cycle time.

Task 2-E-2 Define process capability and the general values associated with varying degrees of acceptability

Quality measurement. Compares existing processes, constraints in processes, and competitive technologies to upper/lower specification limits to determine if process consistently results in products that meet specifications. Two indices commonly used to measure process capability are Cp and CpK. Two purposes: 1. Determine if process consistently results in products that meet specs. 2. Determine if a process is in need of monitoring through use of permanent process charts. Help process managers understand whether the range over which natural variation of process occurs is result of system of common (or random) causes.

Task 2-F-3 What are delivery tracking systems?

Real-time tracking systems are typically used by large organizations to determine: 1.) shipment dates. 2.) determine where a shipment is at any given point in time. 3.) when delivery has taken place. These systems allow the shipper to take remedial action when necessary, redirect cargo to respond to a sudden need elsewhere. Technology has improved how supply management professionals can track products, and this trend will continue. The increased use of radio frequency identification (RFID) systems will add to the information provided in tracking systems. It will be able to provide real-time communication.

Task 2-F-9 SOX mandates for tracking fixed assets

Records/controls need to be documented, policies are imposed and need to be adhered to, physical asset inventories performed, and audit trails sustained.

Task 2-F-4 What are some purposes of Incoterms

Rules are structured so that the cost for one party increases as cost for other party decreases. 1. Who Responsibility for payment to carrier (cost of carriage) 2. Where the risk transfers to buyer. (responsibility for filing damage, loss, overcharge claims)

Task 2-G-1 Define project life cycle

Sequence of phases through which a project progresses. Initiating, Planning, Execution, Monitoring, Controlling, Closing.

Task 2-F-2 What are Incoterms? How are they used? What does the choice of Incoterm determine?

Set of standard delivery terms developed by the ICC (international chamber of commerce), primarily for use in international shipping contracts. Consist of 11 terms made for domestic/international use. Clarifies which party is responsible for: 1. inland freight (transportation within the origination country) 2. forwarder selection 3. export clearance 4. carrier selection/scheduling 5. international freight 6. import clearance 7. on-carriage (transportation within the destination country) Delivery occurs (and risk of loss transfers) at the point designated by the term selected.

Task 2-F-8 What is business continuity planning

Strategic guiding principles on how to ensure an org can maintain/continue operations in the face of unexpected crisis/disaster caused by human (arson/robbery/terrorism), nature (tsunami, hurricane, earthquake). Recovery is quicker if a recovery plan is in place. Business continuity is the sustaining of business operations in support of customer needs. Disaster recovery is being properly prepared for crisis that seriously affect the org. Both are plans that are enforced when a situation occurs that could affect the continuation of business. Supply continuity is the provision for continued receipt of supplies in the event of a disruption of normal supply chain activities, or plan to prevent such disruption from occurring. May include multiple production facilities, suppliers, effective production/quality systems, along with disaster recovery plans.

Task 2-E-1 Preferred Suppliers

Supplier meets the expectation for quality, delivery, and/or price, and is able to respond to unexpected changes. Org often establishes master price agreements w/ these suppliers. For items that these suppliers provide, the entire organization is required to buy from those suppliers.

Task 2-F-3 Define reverse logistics

Supply management professionals are increasingly concerned with product returns, packaging reuse, minimization of waste, and repairs that flow back into an outbound supply chain. The objectives of reverse logistics (RL) are cost reduction, environmental benefits, and source reductions (ISM Glossary 6th edition). Successful reverse logistics programs can improve customer service as well as financial performance.

Task 2-F-5 Virtual warehouse vs. physical warehouse

Virtual: Actual buildings/inventory still exist but inventory is not stored in organization's warehouse. Shipped directly from supplier's warehouse. "drop ship". Advantages: can offer a wider variety of products to customers without stocking them, potentially generating more revenue. Cost of maintaining a network of warehouses is reduced.

Task 2-F-4 3 benefits from minimizing lead times in relation to the cost of inventory.

1. Less inventory to offset long lead times. 2. Reduced inventory holding costs. 3. Less warehouse/inventory management labor, warehouse capital equipment, computer costs, and secondary quality costs (rein spection, rework, loss).

Task 2-A-3 Scheduling Processes

Flow Manufacturing: Continuous production, repetitive manufacturing. Implies pull production in conjunction with lean production methods. Even implies synchronous production methods - Think "Theory of Constraints", where every entity in a system is a constraint, but only one is defined as critical constrained resource (CCR). All others are noncriatically constrained (NCCR). CCR controls the system. Implication = product is made based on customer demand in daily schedules. Level Scheduling: Level use of capacity. Still meeting all or most customer demand, even if erratic. One approach uses inventory to absorb demand when it exceeds production allocated to a given product over set time. Other uses lean prod. methods to allow the organization to economically produce small lots of product using flexible capacity to accommodate production of a wide range of product.

Task 2-C-3 Consignment

Agreement w/ supplier to stock goods at customer location w/ goods remaining the property of supplier until used/sold. Even though inventory stored at buying org's warehouse, property is still owned by supplier, and supplier is free to remove items to sell to another customer. Supply management only pays for what is used, however, the buying org is still responsible for the remainder of the inventory carrying costs.

Task 2-A-4 Strategic Sourcing

Establish supply management strategy that is aligned w/ business strategy, perform market research to find the products and services that will meet needs, manage product/service categories, negotiate/finalize contracts, manage contracts, evaluate supplier performance, conduct periodic spend analysis.

Task 2-C-2 Implicit price deflator

GDP deflator. compares the average level of prices in a given year to those of a base year. broad measure of prices derived from separate estimates of real/nominal expenditures for the GDP or subcategory of GDP. index of prices for everything that a country produces (CPI=consumption only), and includes prices of imports. =current dollar GDP (Nominal)/Real GDP

Task 2-C-1 How do government policies, political instability/stability, world industrial migration, and environmental concerns affect economies?

Gov'ts are in unique position to influence economic activity through fiscal/monetary policies. Laws/regulations can change frequently as well. Political factors locally/abroad can affect demand. New administrations, shifts in political climates, gov't takeovers may alter demand projections. Potential supply interruptions due to political problems (I.e., plant/port closures) which can influence availability/price of a product/service. Differences in country labor, inflation, interest/currency rates cause shifts in manufacturing. Increasingly, organizations are moving to international sites to tap low cost production, and sales outlets in emerging economies. Environmental concerns include land use. Laws/regs and other decisions to address environmental matters can affect productivity, availability of natural resources, and cost to produce products.

Task 2-B-1 Forecast accuracy:

This should be a priority and tied to strategic objectives.

Task 2-C-1 Types of economies

centralized: business activities and allocation of resources determined by gov't rather than market forces. free-enterprise capitalistic: price bears little relationship to supply/demand, and can be influenced by market structure or set by regulation. pure market: labor, goods, services, capital are free from gov't restriction or trade barriers so they can move freely across national borders (most market economies operate with some form of restriction). closed: a country severely limits trade w/ outside world and relies on own resources to support production and trade (North Korea). mixed: mix of state-owned and private enterprises. (USA, France, Mexico).

Task 2-D-2 Ramp down

takes place because a product is approaching or has reached the decline stage in the product life cycle due to a decrease in sales or profit margins.

Task 2-C-4 Describe impact of the need for confidentiality on suppliers and Ways to manage this need

Basis for early supplier involvement = trust between parties. Part of trust is built on keeping information shared between organizations confidential, unless required by law to make public. One way to protect confidential information is to put it in writing and label all affected documentation "confidential". Can also use NDAs that clearly define acceptable/unacceptable uses of the information.

Task 2-C-3 (Buying strategies) Spot Buying

Practice of buying a commodity on the open market for immediate delivery.

Task 2-A-2 Add-on Modules for ERP

Processes such as forecasting, materials management, procurement, accounting, finance, engineering, customer service.

Task 2-A-4 Supply Chain Flexibility

Speed an organization can adapt and execute new strategies, programs, and processes to support overall strategies in marketplace due to swings in demand or supply, and assure continuity. Production processes may have to become more flexible to adjust to demand fluctuation. Manufacturing sites may have to be moved as shipping costs fluctuate. Direct/Indirect materials used in production may have to change to be able to adjust process yields. Requires collaboration w/ key suppliers, including transportation carriers, third parties, and information systems providers through joint forecasting processes. Also includes input from internal sources like planning, sourcing manufacturing, logistics to understand goals and deadlines.

Task 2-A-2 Considerations in Information Sharing

What is available? How is it accessed? Who should have access to what? What suppliers need access to what information, and what can be shared under what conditions? ___________________________ Data must be accurate and dependable (garbage in, garbage out). Poor data integrity = excess inventory, increasing part shortages, decline in on-time performance. Data cleanup is the first step when a new ERP system is implemented.

Task 2-E-3 Discuss steps involved in benchmarking

1. Identifying world-class organizations 2. Visiting them for information gathering/comparison 3. Responding to surveys from third-party independent research organizations that collect, aggregate, and disseminate benchmark data. 4. Timeline developed with milestones/target completion dates 5. Meet regularly to assess progress, determine if any corrective action required 6. Solution implemented and progress monitored, recalibrated as necessary. Organizations are moving beyond measurement and analysis of tactical benchmarks (cost savings/operating expenses). Now, examining strategic processes like risk management and sustainability efforts. They are also dynamically benchmarking processes. As new topics/trends emerge, organizations are incorporating them into benchmarking processes. Organizations are also realizing importance of collecting primary business research, and using the expertise of business practitioners in developing/refining benchmarks.

Task 2-F-8 Name 5 reasons customer requirements vary

1. Frequency of order placement 2. Size of orders in terms of qty, and in monetary terms 3. Variety of items in an order 4. Methods by which order may be shipped/delivered 5 Amount of processing required to prepare order 6. Special requirements (temperature, fragility, partial assembly) 7. Packaging requirements 8 Security requirements

Task 2-F-12 Name 3 requirements for packaging design

1. Functionality (fitness for use, preserve/protect materials from rough handling/weather/transit, to ensure items are in good condition for use. should also inform supply chain partners of the contents' intended use, and be user-friendly) 2. Meet marketing specifications (promote sales, make a significant impact on consumer. 70% of all brand/purchase decisions made in store. Must be visually appealing. 3. Regulatory (Must be in line with appropriate standards/rules. ie., hazardous materials, type of material used, labels

Task 2-F-10 What are 3 factors that drive expediting orders?

1. It may have become part of org culture 2. Supply chain partner may simple not be capable of meeting the delivery schedule requirements 3. SM org material release schedules may be unstable/unrealistic If occurs frequently, tracking all expedited orders and citing the rationale is important to reducing their occurrence. SM should then review these orders on a weekly/monthly basis, and determine the root cause for their occurrence. Analysis using a histogram/Pareto chart will visibly demonstrate why expediting is occurring. A fishbone diagram, affinity diagram or other tool can then be developed to determine why incidences occur, the corrective action can take place based on results of analysis, and reviewed to determine effectiveness.

Task 2-F-1 Describe how freight rates are determined and the basis for the rates.

1. Line-haul rates are charged for the movement of goods between 2 points that aren't in the same local pickup and delivery area. *Most rates today are negotiated and set into contract form among shippers, receivers, and carriers. Economic basis stems from former regulatory standards such as class/distance. 2. Class system categorized goods according to value, density, and susceptibility to damage and theft. Today, carrier evaluates a new shipper's goods according to those factors, and then applies a distance cost rate to them. *Shippers/receivers can negotiate better rates, typically through discounting, by using such things as total volume, favorable directional or seasonal flows, better packaging, faster loading/unloading, etc.

Task 2-F-5 Warehouse Management Systems (WMS) Objectives/Goals

1. Minimize stocking/picking costs. 2. Maximize space usage 3. Group similar items as closely together as possible. 4. Ensure that all constraints (safety, temp, security) are met. 5. Put away/pick on a timely basis 6. Good customer service.

Task 2-F-12 What are 3 goals for package cost optimization

1. Minimize waste 2. Cost savings in packaging materials 3. Save on shipping costs Balance use of packaging materials with the protection each material will provide Use lease amount of packaging that will provide adequate level of protection within the shipping environment and reduce need for landfills Understand product value, physical characteristics, and fragility. Have info on properties of all packaging material, and recommended application. Should be familiar with the acceptable level of damage to the package, modes of transportation used, whether package will be reused, possibly as a container.

Task 2-F-8 Identify 4 areas of costs involved in warehouse management in addition to customer requirements

1. Nature of customers 2. Products stored 3. Warehouse design, layout, structure 4. Equipment and personnel used/required 5. Size/weight of products 6. State of automation 7. Size/Location of warehouse 8. Quality standards 9. Safety, security, training requirements for warehouse personnel

Task 2-F-6 What items must be considered with geographic location?

1. Number and location of warehouses needed to support production/distribution. (wide geographic region, may consider multiple locations to save on transportation costs). Warehouses should be geographically located within org's supply/distribution channels so that they support strategies, maintain business continuity, and minimize the total cost of receiving, storing and transporting inventory. If supply chain has suboptimal cost structure, customer service will suffer.

Task 2-F-8 Describe the component and uses of RFID, bar coding, UID, and GPS

1. RFID - Radio frequency identification devices/systems. primary components = host computer, reader, interface transmitter, tag device. A passive/active radio data chip is attached to products to allow retailers to track, access, and compile data. May be used for individual items, entire cartons, and containers. maintains real-time communication on all inventory in the system within range of the RFID readers. The investment depends on application, size of the installation, and type of system. there is a cost for tags and readers, and orgs may need to upgrade their WMS and ERP system. Concerns are data security, invasion of privacy, lack of current agreement on single standard 2. Bar Code - Allows for easy identification of orgs inventory/assets. Uses pattern of parallel bars/spaces that represent specific characters/numbers. When barcode is read it interfaces with computerized records and allows for automatic updating of inventory records. Universal Product Code (UPC) is popular form of bar coding used by retailers in food and grocery industries. 3. Unique Device Identification (UDI) - System encodes data on an object in the form of an encoded data matrix and contains a unique identifier. Best known application is Department of Defense. Markings on items are labeled with an encoded data matrix. The data environment contains a unique item identifier. Usually are items of interest to national security. 4. Global Positioning System (GPS) - Track inventory during transport to warehouse, within warehouse, and as it is delivered to customer. Can be placed in each shipment, pallet, item. Locates and tracks movement of inventory. Can be integrated with Inventory Management System (IMS) or WMS, which can store the ID/location of each tagged inventory item, update inventory control records, monitor inventory movements. Enhances security.

Task 2-E-2: 5 steps of Process Capability

1. Select critical operation. May be bottlenecks, costly steps of process, or areas in the process where problems typically occur. 2. Take k samples of size n, where x is an individual observation: - Where 19 < k < 26 - If x is discrete n > 50 (as in the case of a binomial) - Or if x is a measurement 1 < n < 11 - Note that small sample sizes can lead to erroneous calculations - Use a trial control chart to see if process is stable - Use a chi-square goodness of fit test or kurtosis to see if process is normally distributed 3. Compare process natural tolerance limits with specification limits. *Note that natural tolerance limits are 3 standard deviation limits for the population distribution. This can be compared with the specification limits. As they are from a population distribution and not a sampling distribution, these are not process control limits 4. To compute process capability indices, compute an upper capability index (Cpu), a lower capability index (Cpi), and a capability index (Cpk). Cpu = (USL-Mean)/3s Cpl=(mean - LSL)/3s Cpk - min {cpu, cpi} Where: USL= Upper specification limit LSL= Lower specification limit mean = computed population process mean sigma = population process standard deviation 5. Make decision concerning whether process is capable. Most common benchmark for process capability is 1.25, 1.33, and 2.0. good, better, best. Anything lower than 1 indicates high degree of process variability risk of defective product.

Task 2-E-2 List various quality processes used in quality improvement methods

1. Six sigma: Well thought out packaging of quality tools/philosophies in effort to provide rigor and repeatability to quality improvement efforts. Reduce process variation. Y=f(X) Y (dependent variable) is a function of X (independent variable). To practitioners, output is a function of inputs and processes where: Y = output (key business objective/measures) f= function (interrelationships to be controlled/managed) X= controllable and non-controllable variables that affect Y Think: DMAIC (DEFINE, MEASURE, ANALYZE, IMPROVE, CONTROL) 2. Lean Six Sigma: Focuses on what orgs customer considers critical to quality of products/services. CTQs (critical to quality) must be defined. Then, value stream map is drawn to understand steps in each process/ID non-value adding steps, and remove or diminishing wasted steps. 3. Lean: Products, services, processes that contain little excess. ID value adding activities and eliminate all others that represent waste in systems, processes, procedures, and practices. 4. Kaizen: Organizations believe that process (and therefore product) quality can improve as the result of numerous small improvements made over time. 5. ISO 6. SPC (Statistical Process Control) 7. Process Capability (CpK)

Task 2-F-13 Identify/define categories of disposable goods

1. Surplus (Inventory > current/future demand) 2. Obsolete (no longer demand for items - sell back to supplier, salvage for scrap value, or scrap/write off the inventory asset) 3. Damaged (No longer fit for use and rework/repair impractical. Inventory adjustment needed, and disposition through rework/scrap, but if reworked, must have same form, fit, function) 4. Expired (Past the "use by" date no longer usable and must be disposed of) 5. Slow Moving (items wasting an orgs assets through lost opportunity costs and additional carrying costs. Still usable.

Task 2-F-12 Name reasons for packaging certification/evaluation/testing

1. To evaluate potential for damage during shipment 2. just the right amount is found to protect product at the lowest cost. 3. If a package must meet certain national/international standards 4. Industry specific certification or National/international standards

Task 2-F-2 Name 4 consideration in selecting mode of transportation

1. Transit time (length of time available, emergency) 2. Predictability (natural occurrences, weather, etc.) 3. Cost (must be justified) 4. Non-economic factors (gov't influence, required to use national carriers)

Task 2-F-1 Identify four groups of computerized transportation activities

1. Transportation analysis (monitor costs and service by providing historical reporting of key performance dimensions) 2. Traffic routing/scheduling (software provides features like sequencing/timing of vehicle stops, route determinations, shipping paperwork prep, vehicle availability) 3. Freight-rate maintenance/auditing (maintains databases of freight rates used to rate shipments or perform freight bill auditing) 4. Vehicle maintenance (maintains fleet maintenance schedules, inspections completed, and items repaired/replaced. Drives improved safety record and effective cost management.

Task 2-F-6 Define 3PL, 4PL, and 5PL logistics providers

3PL: A supplier of logistics services that is not part of either the purchaser's or supplier's organization. 4PL: Entity established to provide mgmt of both inbound and outbound materials, parts, suppliers, and finished goods for other organizations. Separate entity established as a joint venture or long-term contract between primary client and one ore more partners that acts as a single interface between the client/multiple logistics providers. 5PL: Guarantees the mgmt of networks of supply chains. Develops and implements, in close consultation with client, the best possible supply chains/networks. Often linked to e-business. Should consider: Inventory replenishment policies for client Inventory costs for each policy Shipping frequency for each item (days between shipments) Shipping capacity Lead time from hub to client's warehouse Logistics costs for each supplier Number of suppliers in the network Number of client warehouses to be served.

Task 2-F-5 3rd 4th 5th party logistics considerations 3PL, 4PL, 5PL

3PL: provides one or multiple services, such as warehousing/transportation. 4PL: entities established to provide management of both inbound and outbound materials, parts, supplies, and finished goods. Often separate entity established as a joint venture or long-term contract between a primary client and one or more partners. Ideally, all aspects of client's supply chain managed by the 4PL 5PL: perform highest/most complex level of outsourced services. non-asset based. tasked with managing all members of the outbound delivery supply chain, and connecting to each member using latest information technology. Demands of the 3PL are aggregated with other supply chain members into bulk volume in order to negotiate more favorable transportation rates.

Task 2-F-9 Define asset recovery and state its objective

After asset has exceeded its usefulness, the practice of asset recovery begins. Re-employment, reuse, recycling, or regeneration of something of value that is no longer necessary for original intent, or the return of environmental conditions to the state they were prior to an action. Finding a new use for an existing asset is a good practice that can minimize the environmental impacts and reduce disposal cost. Objective is to increase cash position of the organization by optimizing the return on assets.

Task 2-F-13 Discuss investment recovery and principles

After inventory is classified as obsolete/excessive, and the effective decision is made to dispose of the goods, a number of options are available. 1. Sell back to supplier (buy-back, may charge restocking fee based on certain %) 2. Broker: contract with a brokerage org that specializes in reselling goods on behalf of seller. Org may authorize broker to sell a certain amount of inventory at a target price. Has no ownership of goods. 3. Dealer: similar to a broker, except it usually takes possession of goods, dealer's fee is typically a commission calculated on total value of sale. 4. Third Party Specialist: org may contract w/ a service org to handle spare parts business of the organization. Can be considered a profit center or cost center depending on whether it is a stand-alone entity. Service org may be able to sell on open market, be classified as a profit center, and operate independent from parent org. Could also operate under a cost center at the direction of parent org. If org works independently, will be responsible for own profit/loss, inventory asset/operating costs, and will not have to report to the parent org. 5. Internal Reuse/Recycle: Org may look for ways to reuse them. Has become more common in IT w/ respect to cloud services, reusable code, and digital components. 6. Donations: benefits include goodwill/tax deductions 7. Sale to employees: Offer to employees a ta discount. Save org money associated with using 3rd party specialists, dealers/brokers.

Task 2-F-3 Maritime Law

An important principle of maritime law is known as the general average. In brief, should any cargo be thrown overboard or any expenses incurred because of an emergency situation while en route between ports, all losses will be split proportionally between the parties that hold a financial interest in the voyage. This principle is often referred to as the York Antwerp Rules, which provide the details for applying the general average.

Task 2-F-2 Identify whether the following are import/export documents and describe the use of each: Arrival Notice Bill of Lading Carrier's certificate and release order Certificate of origin Commercial invoice Consular invoice Delivery instructions Delivery order

Arrival Notice: Declares a shipment's expected arrival time and relevant shipment details Bill of Lading: Cargo receipt and transportation contract between shipper and carrier. Equivalent documents are the air waybill, sea waybill, and multimodal bill of lading Carrier's Certificate and release Order: Certification of ownership of the cargo provided to customs. COI: Statement of precisely where the goods where produced CI: Commercial invoice bill for the goods to the buyer Consular Invoice: A control document to track and identify goods shipped to other countries Delivery instructions: Directives to an inland carrier for delivery Delivery Order: Authority from the consignee to the ocean carrier to release the cargo to a specified inland carrier.

Task 2-F-9 Define asset classification, current assets, fixed assets, intangible assets, investment assets

Asset Classification: Process of grouping economic resources under appropriate categories Current assets: short-term resources owned by a company (cash, inventory, accounts receivable). Have a life of one year or less, the normal operating cycle of an org. Fixed assets: Asset that lasts more than a year, with an impact on shareholder value, and considered by management to be worth controlling (property, plant, equipment). Depreciated when over a certain value (recovery of a capital investment over time by expensing a portion in each financial period). Depreciation = non-cash expense that reduces reported income. Amortization is similar treatment for intangible asset use, costing, control. Intangible asset: Brand name, goodwill, reputation, that have value but cannot be physically seen/touched. Life in excess of one year. goodwill from having purchased another organization for an amount greater than the sum of its net worth. Investment assets: use of capital to create more money through income producing vehicles or risk-oriented ventures designed to result in capital gains.

Task 2-A-3 Packaging Optimization

Attempts to minimize waste of packaging materials. Requires analysis of product/shipping environment to accommodate: product value, characteristics, safety, transportation mode, packaging reuse, availability

Task 2-E-3 How does each contribute to process improvement: Benchmarking Process Mapping Process Costing Maturity Models Supplier Workshops

Benchmarking: Once data collected, it can be collated and analyzed to determine long-term solutions for improvement. Solutions are then implemented and progress is monitored Process Mapping: Method of drawing pictorial representations of a process such as manufacturing a component or ordering a part, that breaks the process into key activities, transfers, decisions, and approvals. Enables analysis of inputs/outputs and interrelationships of each process to understand how processes interact in a system, locate process flaws that create problems, evaluate which activities add value for customer, improve processes, and identify processes that need to be re-engineered. Develops a baseline of the business process that can be used to measure results of process improvement initiatives. Value Stream Mapping: Lean manufacturing technique in which the transformation of materials is traced from beginning to end to determine if there is waste in the process in the form of a step where no value is added, or a point of "wait time". Process Costing:Accounting method to determine unit product costs in industries that produce homogenous products on a continuous basis, or by using assembly operations. Accumulates costs by department as opposed to job orders, and assigns costs uniformly to all units passing through that department. Focused on determining total cost of organizational process to analyze the cost of the process and find ways to reduce the costs. Maturity Models: Methodology to examine different stages and requirements of projects, software, or products to enable moving to the next step/level. Maturity, in this sense, is defined as measure of effectiveness in any specific process. Capability Maturity Model Integration (CMMI): Process improvement approach that provides organizations w/ essential elements of effective processes. Used as a guide for improvement of project and organizational processes, and includes appraisal method to diagnose the state of an organization's current practices. Contains five levels: Initial Managed Defined Quantitatively Managed, and Optimizing Contract Management Maturity Model (CMMM) Road map to help an organization assess, measure, improve its contract management processes and relationships, including roles, responsibilities timelines, performance management, and costs. Supplier Workshops: Buying organization and critical suppliers collaborate on process improvement opportunities that will result in a more streamlined supply chain, and thus benefit all supply chain partners.

Task 2-C-4 Examples of leading indicators

Business cycle forecasting models rely on these. Measure economic activity that changes before the business cycle changes, and indicate future direction. 1. Change in # of building permits issued in a given period. 2. Amount of cash/bank deposits held by organizations/households 3. Inventory level changes 4. Changes in stock prices 5. Unemployment claims 6. Avg hours worked/week 7. New orders received

Task 2-E-1 Partnered Suppliers

Can be of Operational or Strategic importance. long term, single source w/ office supplier, or long term, single source relationship with good/service of strategic importance. Built around long-term arrangements, large-volume commitments, and joint product/service process development. Generally work best when there is mutual benefit in forming a relationship (I.e., to compete with another set of organizations for the same customers). Terms such as strategic alliance and special relationship are used instead of "partnership" due to legal implications of word.

Task 2-F-11 Market Intelligence

Can be used as an input to reducing shortages. It is the process and result of gathering/analyzing information about the aggregate forces (including economics) at work in trade/commerce in a specific service or commodity. Market trends (up/down) can help org determine inventory order size. Info collected from suppliers, retailers, and others.

Task 2-F-5 Centralized vs. Decentralized structures in private/public warehousing

Centralized: order replenishment made in one location. The requirements of the entire distribution/warehouse network are combined. major benefits: 1. total customer service/demand needs are balanced through system 2. volume purchasing can be used to create larger cost savings. disadvantages: 1. decisions are sometimes delayed 2. do not always take into consideration the needs of one individual. 3. If inventory must be trans-shipped, transportation costs may be higher than in a decentralized system. Decentralized: each location functions independlty from others in the system. Advantages: 1. Faster decisions 2. Decisions closely matched to the customer demand from a given site. disadvantages: 1. higher cost associated w/ smaller orders. 2. More inventory in the system

Task 2-F-6 Centralized vs. Decentralized warehousing

Centralizing inventory advantages: costs of operations can be lower b/c less is invested in multiple buildings, equipment, technology. Inbound costs are lower, as transportation companies are able to consolidate shipments. As number of warehouses increase, each location concentrates on a small geographic area. Each warehouse manager is aware of local conditions and can more readily meet the customers' needs. Customer service levels increase, but warehousing operating costs, inventory carrying costs, and total transportation costs also increase. Optimal # is driven by company's strategic plan, needs of customers, and costs. Org should factor in how many customers, what locations, forecast their buying habits, and service levels needed to satisfy customers. Within that framework, they should determine the most cost effective way to meet the strategic plan, and satisfy customers.

Task 2-F-3 Define freight claims and describe how they are resolved

Claims against a carrier due to loss of, or damage to, goods transported by that carrier; and also for erroneous rates and weights in assessment of freight charges. The basis for filing a freight claim is a breach of contract. The claimant must initially prove its claim. Once it has been determined that the goods were undamaged at the point of shipment but arrived damaged, the burden of proof then shifts to the carrier. Procedures/forms are generally standardized across all modes A typical resolution process consists of at least two key components: escalation and corrective action. Initially, the supply management professional should contact the shipper or carrier to rectify the situation. If the shipper or carrier fails to rectify the situation, the supply management professional may take the next step and file a claim. To help determine whether responsibility lies with the shipper or the carrier, receiving personnel should strictly inspect incoming goods, and record any issues or problems, such as damaged boxes or short orders.Narrowing the differences in a dispute can allow both parties to give a little and arrive at a mutually agreeable resolution. When both parties end a negotiation feeling content with the outcome, it is a win-win proposition. In the event a claim cannot be settled amicably, litigation may be necessary. Litigation can be costly and time consuming for all involved. Although the judicial system is available to all, it is often preferable to resolve differences outside of the courts. To avoid escalation of claims and satisfy the customer, the carrier or shipper has the option to take corrective action before a claim is filed. For example, a carrier communicates to the shipper and receiver that the goods have been lost in transit. It then seeks to retrieve them. In the event the goods cannot be found, a claim is filed immediately by the receiving organization. If an overshipment has been made, the buying organization can either keep the additional goods and pay for them, or return them to the shipper for a refund. In the case of damaged goods, the responsible party may offer to replace or repair them, or the receiving organization may do the repairs and charge the party responsible for the damage.

Task 2-F-3 Contrast visible versus latent damage

Damage can be visible — sometimes called unconcealed loss or damage. Easy to detect. Goods visibly damaged can be refused by the organization or replaced at no additional cost to the org. The damage should be noted on the carrier's delivery receipt to substantiate the liability. The organization should keep a copy of the receipt. Latent — sometimes called concealed loss or damage. Hidden, therefore, unnoticed during inspection, and not easy to detect. Ex) air compressor w/ damaged electrical switch. A concealed loss or damage may be difficult to collect on because it is difficult to determine where the damage occurred. However, the supply management professional may still invoke warranty rights to replace or repair the item

Task 2-A-2 MRP, MRP II, ERP, and ERP II

Enterprise Resource Planning/ERP: Refers to a particular computer software package that integrates various functions like forecasting, materials management, procurement, accounting and finance, engineering, and customer service. Materials Requirements Planning/MRP: Basic system used to determine the quantity and timing requirements of dependent demand materials used in a manufacturing operations. Can be purchased in-house or externally. Uses master production schedule/bill of materials, and current inventory data to determine new requirements/timing. Need inventory records, existing orders (customer and purchase), bills of materials, accurate lead times. Manufacturing Resource Planning (MRP II): Next gen MRP, used to plant all resources used in a manufacturing org. Addresses operational planning in units and financial planning in dollars. Has simulation capacity to answer "what if" questions. Can be used to manage master schedules more effectively. MRP II does require additional information, and info must be accurate and maintained.

Task 2-F-10 What is the difference between expedited and de-expedited orders?

Expedite: Contact supplier and request that a previously placed order be placed on the fast track for delivery, when delivery is already or nearly past due (defective material delivered and needs to be replaced, meet a deadline, emergency, equipment breakdown, order never arrived). Procurement sends reminders of delivery dates, revising orders, working to get an earlier delivery date, get partial orders shipped to meet deadlines, communicating info to stakeholders. Will be a premium charged for transportation costs De-expedite: Supplier is instructed to place other orders to the side to handle expedited orders more quickly. Prioritizing orders that need expedite while de-expediting not important orders.

Task 2-E-1 GmP

Good manufacturing practices typically encouraged or required by regulatory agencies (I.e., US FDA publishes BMPs for food manufacturers, Medical instrument manufacturers follow FDA GMPs. Some of these practices require use of lean manufacturing or SPC

Task 2-E-1 Discuss methodologies and requirements that organizations use to certify their suppliers

In addition to ISO 9000, orgs examine: 1. Management responsibility: Supplier management responsible for defining/documenting policies for quality, objectives, and level of commitment. Policy must be documented/implemented at all levels within the organization. 2. Quality system: Must have a defined/documented system defining how quality objectives are met. Includes process for planning quality improvement. 3. Contract review: Involves steps associated w/ contracting with suppliers. Including acceptance of the contract/order, tender of a contract, and review. Contract requirements must be adequately documented. Records of contract reviews are maintained and procedures associated w/ contracts are documented. 4. Design control: Focused on designing processes to meet requirements of design control standards, suppliers establish and maintain procedures for controlling design of product (design/development planning). For example, suppliers to major automotive organizations must be qualified in skills like value engineering, geometric tolerancing/dimensioning, the Taguch method, and other approaches to design engineering. 5. Document/data control: Procedures or approvals in issuing documents and data, making changes to such data (engineering drawings/standards, inspection instructions, test procedures, etc.) 6. Procurement: Supplier must establish/maintain documents of procedures to ensure that purchased products conform to specified standards. Procedures must be in place for developing subcontractors, and scheduling production among subcontractors. Documents must contain data clearly describing product ordered, and characteristics. 7. Control of customer-supplied product: Supplier must establish and maintain documented procedures for control of verification, storage, and maintenance of customer-supplied product provided for incorporation into supplies or for related activities. 8. Product identification and traceability: Ability to trace product components important for legal, regulatory, or liability reasons (determine origin of mad cow disease). 9. Process control: Documented procedures defining the means of production, installation, and servicing, as well as how the lack of such procedures could adversely affect quality. Another condition is the use of suitable production, installation, and servicing equipment, as well as suitable working environment. These documents demonstrate how the organization conforms to all government safety/environmental regulations. Compliance w/ codes/standards/quality plans/procedures. 10. Inspection/Testing: To ensure processes are functioning properly to ensure specified requirements for products are met. Includes requirements for receiving inspection/testing to ensure incoming product quality, in-process inspection testing, and final inspection testing using Statistical Process Control (SPC). Inspection/test records must be maintained to provide evidence that products were inspected/tested. 11. Control of inspection, measuring, and test equipment: Must be kept in top condition to ensure accuracy of inspection. Suppliers must establish and maintain document procedures to control, calibrate, and maintain equipment used for inspection, measuring, and testing - including test software used by supplier. 12. Inspection and test status - maintain current inspection and test status to ensure all products have passed required inspection and testing. 13. Control of nonconforming product: Nonconforming product is produced, four things can happen: 1. Reworked to meet specified requirements. 2. Accepted with/without repair or concessions 3. Re-graded for alternative applications. 4. Rejected and scrapped 14. Corrective/preventative action: When problems occur, a standard process for addressing problems is needed for corrective and preventative actions. 15. Handling, storage, packaging, preservation, and delivery: Focus on logistics and inventory control. Include inventory control methods such as models, how inventory turnovers are optimized, and how inventory levels are minimized. Discussion of JIT methods used by supplier. Packaging standards are documented and labeling standards are discussed. Delivery performance monitoring, production scheduling, shipment notification systems documented. 16. Control of quality records: Must establish and hold documented procedures for identifying, collecting, indexing, accessing, filing, storing, maintaining, and disposing quality related records. Shows whether the quality system is achieving intended goals of ensuring quality. 17. Internal quality audits: Prioritized in relation to the importance of various quality-related functions that occur in the process. Individuals that do not have line authority in the organization must perform audits. Follow up audits verify that corrective action has taken place to address inadequacies in the quality delivery system. 18. Training: Documented procedures for assessing training needs and all personnel who affect quality. Records must be kept. 19. Servicing: meet customer's specified requirements 20. Statistical techniques: Chosen in advance quality planning, and are to be kept in control plan

Task 2-F-2 Define multimodal shipments

Intermodal shipments, those involving more than 1 mode of transportation for example, rail/motor, motor/air, rail/water, air/truck

Task 2-F-9 What are internal distribution and transportation

Internal distribution: Moving of materials (raw materials, parts, subassemblies) within the organization, whether to an internal customer or to the next stage of the manufacturing process.

Task 2-E-2 Identify basic tools of quality and explain the uses.

Known as B7: 1. Histogram: diagram of values being measured vs. the frequency of occurrence. When process is running normally, the histogram is depicted by a bell shaped curve. 2. Pareto charts: frequency w/ which events occur, arranged in order of descending frequency. Used to rank issues so that resources can be applied first to those w/ the largest potential return. 80 percent of problems are created by 20 percent of causes. Few vitals create the most problems. By focusing on 20 percent of causes, 80 percent of problems are eliminated. 3. Cause/Effect diagrams: Too much time spent on focusing improvement efforts on symptom rather than cause. Fishbone chart captures all possible causes of a problem in a format designed to show their relationship to the problem (the effect) and to each other. Ask the five why's to move to root causes. 4. Check sheets: data gathering tools that can be used in forming a histogram. 5. Scatter diagram - Used to analyze the relationship between 2 variables. One variable is plotted on x-axis and other on y-axis. Graph shows possible relationship between them. Regression analysis and other statistical techniques can be used to quantify those relationships. 6. Flowchart/process map: Diagram of steps. Each step is identified in sequence along w/ its key characteristics, such as time involved. 7. Control charts - used in statistical process control (SPC) to record, measure, and analyze variations in processes to determine whether outside influences are causing a process to go out of control. Objective = identify/correct influences to keep process in control.

Task 2-F-8 Identify the objectives and key considerations when planning a warehouse management system

Minimizing inventory-related risks, ensuring smooth operations as the costs of ordering and carrying inventory are balanced against the costs of stockout. Key considerations include meeting customer requirements, cost considerations, and technologies available for WMS. Should fit with overall strategy of org, and integrated with each other. Goal is to add value for internal/external customer. Describe current state (process flow diagrams), then it should be easy to understand where changes should be made, and what priorities should be. Many functions may have shared objectives, so those objectives should be prioritized. Transition plan must be designed, milestones determined, and performance objectives set (availability, inventory turns, throughput, stockout) Budget should be considered as well as an important factor that will influence what can be accomplished. Overall goals of adding value for customers and eliminating non-value-added steps from process should be major objectives.

Task 2-F-2 Name 5 basic modes of transportation, their primary uses and advantages/disadvantages of each

Motor Carriage (Trucking/Highway): Highly competitive with a few large and many small carriers. Majority of shipments are semifinished or finished goods. Few goods are moved w/o highway transportation at some point. LTL: Less than Truckload, collect smaller shipments and consolidate them into full truckloads. Few large LTL carriers TL: Truckload, made up of many small carriers that own one or two trucks. Rail: Accounts for 40% of all freight movements, carrying primarily low-value bulk cargo, such as food/wood products, raw materials like lumber/coal. Guaranteed expedited service or stop-offs to load or unload. Rail service is often available at ocean ports to continue the movement of International shipments to their destination. Air: Major component of an organization's logistics program due to the increase in global manufacturing. There are constraints when using this mode, including physical characteristics, dimensions. Typically include replacement parts, small high-value items and mail. Water: Provides service where rail/truck is not feasible. low cost option for transporting large quantities of product globally or over inland waterways. At least one other mode is generally needed to complete the freight movement to final destination. Pipeline: Limited to the movement of crude oil, refined oil products, and coal slurry.

Task 2-E-2 Explain N7

New Tools for Management, or N7. Set of tools that focus more on group processes and decision making. Affinity diagram: Brings to the surface all issues associated with the problem. Total Quality Management (TQM) tool in which members of a team sort data in silence, looking for associations. After sorting, the team identifies the associations found, critical links, and issues that emerged. Interrelationship digraph: After completing affinity diagram, it might be useful to better understand casual relationships between the different issues surfaced. Tree diagram: Affinity diagram, teams identify the key issues relating to the problem. This is useful to identify the steps needed to address the given problem. Matrix diagram: Similar to QFD. Shows relationship between two, three, or four groups of information. Can also give information about the relationship, such as its strength, and roles played by various individuals/measurements. Prioritization matrices: Different priorities are obtained from the tree and matrix diagrams, weighted matrices are used to prioritize which variables or topic should be emphasized. Process decision program chart: Tool used to help brainstorm possible contingencies or problems associated with the implementation of a program/improvement. Activity network diagram: PERT diagram is used in controlling projects. Also known as Activity on Node Chart (AON).

Task 2-F-13 Why is security required in the disposal of inventory and what are some regulations that apply?

Numerous agencies/laws that hold individuals and businesses responsible when manufacturing/disposing of a product. Security of disposal = critical. Orgs must maintain records of ownership of the products they are producing during cradle to the grave life cycle. The originating business is ultimately accountable for any/all issues that may surface due to environmental policies. Controlling the security of the product during entire stage of manufacturing process through life cycle completion is CRITICAL. Documentation and ownership records must be maintained to ensure accountability for the proper handling of goods. ROHS (The Restriction of Hazardous Substances Directive): Electronic components that use lead-based solder, and are being replaced by lead free components. WEEE (Waste Electrical and Electronic Equipment) rules apply to goods sold in the free market. Strive to prevent products from going to a landfill.

Task 2-E-2 Explain acceptance testing

Procedures that lead to formal acceptance of a new or changed product, process, or system. Ex) overall condition of a given lot may be determined by inspecting a portion or sample of the lot. (100% inspection or inspecting a relative few to draw inferences about the entire shipment). Software system user acceptance testing plan is agreed to, then carried out, and results are compared to pre-established severity thresholds to determine corrective action. Some disagree w/ acceptance sampling because they are fundamentally opposed to the notion of an acceptable level of defects greater than zero. Also, many believe Acceptable Quality Level (AQL) is counter to Deming's concepts of continual improvement.

Task 2-E-2 Describe types of benchmarking

Process by which selected practices/results of one organization are compared to those of one or more other organizations to establish improvement targets. Process benchmarking - performance comparison of business processes against internal/external standard of recognized leaders. Comparison made against similar process in another organization considered "best-in-class". Can involve studying process flows, operating systems, process technologies, and the operations of target orgs/depts. Financial - Uses financial databases. Internet is important tool. Performance - Allows initiator organization to assess competitive position by comparing products/services w/ target orgs. Performance issues may include cost structure, various types of productivity, speed of concept to market, quality measures, and other performance evaluations. Product - When designing new products or upgrades to current products. Often includes reverse engineering or dismantling a competitors' products to understand the strengths/weaknesses of the design. Strategic - Observes how others compete. Rarely industry specific as orgs go outside their own industries to learn lessons. Involves target organizations that have been identified as world-class or high-performance. Functional - Ex) ISM provides a framework for the networking of SM professionals. Allows for functional sharing of information.

Task 2-F-9 What is asset management, and compare inventory of expendable goods vs. inventory of fixed assets

Process of tracking fixed assets that an org owns and has listed on the balance sheet. Use RFID, Inventory management software, bar coding. Purpose is to sustain accurate financial accounts to prevent theft, and manage movement of assets. Should have assigned responsibility of ownership and attention paid to financial reporting process for detail/accuracy. Aspiration to maximize ROI for each corporate asset, and used to the fullest potential, then evaluated for disposal. Expendable Goods Managed in Manufacturing Process: Raw materials, components, finished goods that are expended/replenished ongoing basis, and normally have staff focused on inventory control Fixed Assets: Usually IT and finance are the primary stakeholders in managing the asset tracking unless the organization has dedicated asset or facility management department. IT/Finance accountable for collecting, reporting, performing inventories of org assets.

Task 2-F-2 Describe the roles of shippers, customers, suppliers, freight forwarders

Shippers: sender of shipment, typically seller/supplier Customers: Acquirer/recipient of an organization's outputs Suppliers: Provides goods/services to SM organization Freight forwarders: 3rd party service that makes transportation arrangements and fills out forms under power of attorney. Combine small shipments from multiple shippers into full loads. B/c full loads are less costly, they receive a price discount from the carrier. Make profit on the difference between what they charge the shipper and the discounted price.

Task 2-F-6 Hub and Spoke warehouse structure

Refers to centralizing/integrating logistics activities from several warehouses (spokes) into one strategic location (hub). Combines benefits of cross-docking and consolidations. Items received from many locations, the spokes, consolidated, and then sent to their final destination. Hub does not hold any inventory, simply a conduit for sorting, repackaging, shipping to final destination. Also may make repairs to broken items, dispose of outdated product, or act as a factory outlet. Typically located at airports, harbors, highway intersections.

Task 2-E-2 Define SPC and purpose of its primary activities

Statistical Process Control: Technique using application of statistical control charts in measuring and analyzing the variation in processing operations. Methodology monitors the process to determine whether outside influences are causing process to go out of control. Objective: Identify/correct such influences before defective products are produced. Primary activities: 1.) defining process (using tools like data collection, histograms, run charts, and process capability) 2.) reducing variation (using cause and effect diagrams, Pareto charts, brainstorming, team-based problem solving)

Task 2-E-2 When Acceptance Sampling might be needed

Statistical quality control technique used in deciding to accept or reject a shipment of input/output. Can be in beginning of process when receiving components/parts/raw materials from supplier, or at end of production (final inspection). Dealing w/ new/unproven suppliers When building new products When product can be damaged in shipment Extremely sensitive products Product can spoil during shipment (agricultural seed) Problems w/ a certain supplier have been noticed in production process, bringing performance into question. Goal: To reduce producer's risk (Alpha) to low levels while maintaining consumer's risk (Beta) at acceptable levels Acceptance sampling plans are designed to give 2 things, n and c, in which: n= the sample size of a particular sampling plan c= the maximum number of defective pieces for a sample to be rejected. EX) if n=20 and c=5, if 20 items and five are defective, this means reject the lot of material. SM should always randomize when selecting product from a supplier to be inspected.

Task 2-F-7 Define at least 4 warehouse security issues beyond physical inventory

Stolen/copied data from Warehouse Management System. Protect the loss of data by: 1. Requiring passwords to access data 2. Change passwords frequently 3. Install security updates regularly 4. Require authorization for all dispatches 5. Keep real-time records of all inventory inbound or outbound. 6. Having accurate audit trails 7. Physical counts of inventory compared to computer records

Task 2-D-1 Describe the product/service development process.

Supply management plays a key role in a new product handover to production, or the selection and coordination of suppliers for a new service offering. 1. Customer Requirements: A customer requirement may present a problem to be solved. A needs analysis is important to understanding the customer's needs and wants. It is described in customer terms, and the organization then needs to develop a commercially viable solution. 2. Product development teams: are responsible for finding solutions for customers or generating new ideas. Generally, larger team = more inefficiencies, including communication problems and higher administrative costs. Team size should depend on the scope of the project. Teams should be cross-functional in nature to allow for a broader base of knowledge, contacts, and sources of information, which typically leads to greater innovation and solutions to potential design issues. Use of concurrent engineering to capture input and knowledge from key stakeholders, internal and external. Concurrent engineering, typically employed via cross-functional teams, has been shown to be faster, cheaper, and better for product and service development than serial alternatives. 3. Cost Management: When a product is developed, the new product development team needs to keep pricing in mind, and consider not only whether the customer will purchase this product but at what price. Target Cost = expected price - desired profit. To meet a target cost likely will require some cost management activities. Supply management organization may have to work with suppliers involved in the production of the product in an effort to reduce their prices to an acceptable level. 4. Early Purchasing Involvement (EPI): Even before using early supplier involvement (ESI), the procurement group should be involved in the product and service development and design process. Procurement brings insight into supply market conditions, availability of materials and services, and potential sources of supply. 5. Early Supplier Involvement (ESI): Brings together one or more selected suppliers with the organization's product or service design team early in the product development process. Involving key suppliers earlier and more extensively in the new product or service development process, and can generate significant gains in product design, service delivery, and customer satisfaction. 6. Process Design Integration: When a new product is planned for market launch, the processes required to make the new product should be simultaneously considered. This step requires integrating the new process for the product into existing operations. Design of products (materials, components) has considerable cost impact on making them fit with current equipment and setup process. 7. Design Process Execution: The design team completes the design. The supply management professional's role will be to begin the procurement of any materials and tooling needed for the design. 8. Validation/Testing: Once the design is fully developed, it should be validated and tested where it will typically be used to determine if it will perform as desired, and to verify customer interest.

Task 2-F-4 US transportation terms are determined by what organization

Terms of transportation and receipt of goods are based either on: UCC for U.S. domestic shipents Incoterms for international shipments. Cost of carriage will depend on the terms. Responsibility for filing damage, loss, and overcharge claims also vary depending on terms

Task 2-F-4 Benefits of freight audit procedures

To control transportation costs. Mistakes occur because of human error (I.e., rate variance, descriptions, weights, duplicate invoicing, wrong pay terms, routing). Many orgs outsource this function, including small orgs due to lack of staffing. Orgs that perform the auditing are Called freight bureaus.

Task 2-F-9 KPIs on how well an org is performing financially

Tracking value of an asset is required by all orgs. 1. Measuring net value 2. Reporting the value are key performance indicators of how well an org is performing financially.

Task 2-F-1 List 3 technology systems utilized in logistics

Transportation Management Systems - Applications that enable firms to track/capture transportation spending and costs, contracts, rank transportation options, clear customs, track movements in real time, carrier performance. Technologies used include: RFID tags GPS Bar Code Scanners to track product movements.

Task 2-F-8 What is the purpose of cycle counting

physical stock checking in which inventory is divided into groups that are physically counted at predetermined intervals, depending on ABC classification. Also referred to as continuous inventory. Primary goal is to identify error-causing effects on inventory inaccuracies. Measures level of inventory accuracy. A items - counted once a month B items - counted 4 times/year C items - counted once a year primary objective is to identify reasons/ find cause of inaccuracies, and correct the cause.

Task 2-D-3 Reasons for customer segmentation

Allows supply management professionals to: 1. Better understand the complete demand picture. 2. Better manage the supply base. 3. Form teams with suppliers to improve customer service or reduce the cost to deliver. This performance analysis requires a thorough segmentation of the current, and sometimes, potential customer base.

Task 2-C-1 Discuss transportation trends

Analyzing these are useful for understanding the impact of cost increases/decreases, capacity changes in various modes, and acquisition mergers (affect on the market).

Task 2-D-1 Life-cycle costing

Cost analysis tool that incorporates the purchase price of a piece of equipment, and all operating and related costs over the life of the item including, but not limited to, maintenance, downtime, energy costs and salvage value. Cost of ownership is often divided by expected lifetime production to determine cost per piece. Life-cycle costing is the concept of total cost of ownership applied to capital acquisitions.

Task 2-C-1 Lagging indicator

Measure of economic activity that tends to change after state of economy has changed. Ex) unemployment rate, labor costs, business spending, prime interest rates, inventory book value, outstanding bank loans confirms there has been a change in the economy. if economy is improving, lagging indicators will confirm that phenomenon.

Task 2-C-2 GDP

Measure of nation's domestic output, which is total value of all finished goods/services produced within a country within a given time period (typically one year). General measure of economic activity. Purchases by households and governments, not industry purchases.

Task 2-C-4 Role of ESI in Product life cycle

Pre-commercialization = suppliers may contribute by developing component specifications, recommending parts, new technologies/processes, or co-developing products. Introduction = can proactively monitor quality, correct problems before they reach customer organization, adjust production/delivery schedules based on demand, and collaborate with SM to make changes. Growth = SM may share forecast data with suppliers to ensure continuity of supply. Maturity = Supplier may manage inventory (SMI/VMI) Decline = Supplier may offer lower-cost solutions or parts to substitute for the initial product (standardize/simplify)

Task 2-C-2 PPI

Producer Price Index: Family of indices published by many national agencies, including Bureau of Labor Statistics. Measures average change over time in prices received by domestic producers of goods/services. based on selling price rather than actual cost to produce an item. may be used to analyze general price trends in economy.

Task 2-C-2 CPI

Published by US Department of Labor. One of the most popular measures of price inflation for retail goods/services. linked more closely to labor rates than PPI. reflects how much consumers pay for goods/services, cost of doing business, quality of life for those on fixed incomes. helps businesses negotiate labor contracts, gov'ts establish fiscal policy, however, does not reflect product/services substitutions that consumers might make. Not useful in predicting swings in the economy because it is a lagging indicator.

Task 2-D-3 Discuss supply management role in Product pricing strategy

SM is a key driver in enabling marketing product/service development to achieve targeted sales price and margin goals through the way it works w/ the supplier community to optimize costs versus product/service feature trade-offs. A) Margins: If a product or product line is suffering from low margins, for example, supply management can assist by sourcing the components, reducing product costs, and improving the margin to target levels. In some cases, the business may then decide to reduce the sales price in an effort to drive additional revenue activity. In effect, supply management is able to provide the business with options from which key pricing or margin decisions can then be made. B) Market share: Market share is a coveted measure, because it is associated with brand names or perhaps brand loyalty. When there is a squeeze for space in consumer items, the ones with higher market share are often retained by retailers. Thus, as with overall profits, an organization may adjust its pricing to remain a market leader.

Task 2-A-4 Why structure supply chain in support of Organizational strategy?

To be most effective, a supply chain should be designed as a natural extension of an organization's business strategy. Does organization place emphasis on product/service features? If so, this affects relationships w/ suppliers. Does org compete on price? If so, procurement focus on TCO approach to. reduce inventory and logistics costs. Emphasis on speed? Impact logistics and transportation processes.

Task 2-C-1 How does a supply management pro add value by using his/her analytical/financial skills?

Understanding and applying: Price indices Economic indicators Forecasting models Can minimize risks, maximize opportunities, and/or evaluate innovation technologies

Task 2-C-4 Role of ESI in Supplier Managed Inventory

Supplier has access to current inventory levels, historical usage, inventory policies, promotions, and sales forecasts. Makes planning easier, and inventory ordering more accurate.

Task 2-B-1 Current State of Forecast/Demand

-Current Organizations begin by looking at demand for current period, and compare it to demand from previous months to determine forecast accuracy. -Historical Past demand = Future demand prediction (if patterns are fairly stable/predictable). Need to consider business environment and value of historical data in predicting future demand. -Continuous Improvement Most organizations tend to react when performance varies from the forecast (reactive). Organizations should regularly track demand and make refinements as part of CI processes. Make refinements to forecast assumptions, level of forecasts (SKU), product family, and should be relevant to organizational goals. Could also develop a list of potential gaps for each product family, and a list of actions to take should gaps occur, test those outcomes, and agree to contingency plans should performance vary from forecast.

Task 2-C-3 Volume Forecasting Methods

1. Annual: Sales/marketing studies or volume forecasts, coupled with historical usage data, allow supply chain professionals to forecast needs from amount of raw materials/components, MRO, capital equipment, or service needs. 2. Part/Product Life Cycle: Not by month/year, but over entire life of product. Projection can form basis of life-of-product contracts. 3. Supply Markets relative to short/long term needs: Complex/critical needs = more thorough/complex forecast. Short-term needs may require nothing more than scan of market. Long term/critical need = more extensive studies on: 1. current/future/ technological impact assessment 2. possibility/availability of material substitutes 3. worldwide supply/demand 4. price analysis 5. development/use of other tracking mechanisms and information systems. 4. Available Capacity: Critical for supply pro to understand significance (tearing down a manufacturing plant vs. closing reduces available capacity). Agreements should be structured taking into consideration different levels of supply, to ensure sufficient supply at all times, while effectively managing inventory levels. 5. Order Placement: Is another consideration (low capacity utilization at supplier = favorable quote/more attention, higher capacity utilization = less attention/high price)

Task 2-B-1 Restricting factors in capacity planning

1. Cannot be stored. Wasted if not used. 2. Can only be added in discrete steps, such as one whole machine. Cannot purchase a part of a machine to add capacity. 3. Lead time to add must be considered (could take weeks) 4. Ramp-up period is required before any new equipment/labor is capable of performing due to testing/training.

Task 2-A-1 Sources of Standards

1. Internal Organization (work instructions, procedures, policies, quality manual, employee empowerment) 2. Government (domestic and international often create mandatory/voluntary standards based on perceived needs or outcomes. (NIST helps business develop/use standards in manufacturing, FDA, DOA, OSHA) 3. International (International Organization for Standardization ISO) (United Nations Standard Products and Services Code UNSPSC) 4. Industry 5. Trade Groups

Task 2-A-1 Procedures/Steps in Applying Standardization and Simplification

1. Committees (cross functional, with SMS, engineering, sales, operations, finance, and other appropriate representatives, including suppliers/customers): Objectives are simplification of design and reduction of TCO. Team should have sponsor to manage. 2. Involve Other Departments (primary stakeholders: Finance, Line of Business, Engineering, Support Functions) All stakeholders who have an interest or will be affected by standardization/simplification should have an opportunity to contribute. 3. Effects on Production Methods and Operations: In manufacturing, standardizing will almost always produce improvements in efficiency and lowering costs. In service environments, can reduce non-value added activities to the overall operations. 4. Effects of Global Operations: Consider global requirements. Failure to do so can have major implications on the business. (I.e., is the same part manufactured at multiple global locations? If so, may be difficult to ship parts) (in a service environment, certain variations in the process may serve cultural purposes).

Task 2-D-3 Define several supplier collaboration processes.

1. Create Collaborative Environment: Improving cooperation, understanding the interdependence of success between buyer and supplier, and communicating in a collaborative way. 2. Have High-Level Commitment: A collaborative environment begins at the top of the organization. Executive management team must clearly communicate to both the supplier/internal organization that both organizations are in full cooperation/integration mode, and ensure that no barriers exist in the relationship by: 2A) Creating a flexible statement/scope of work. 2B) Providing the supplier with the maximum opportunity to collaborate. 2C) Bringing innovative solutions to the table. 3. Avoid tying the supplier's hands with an overly restrictive agreement. 4. Get supplier input at the beginning: In some cases, you may want the supplier to assist in developing the specifications and statement/scope of work. 5. Identify and Mitigate Risk: A major risk in collaboration is that the parties merge too closely, and objectivity of the relationship becomes muted, which could cause an unnoticed drop in performance. Complacency tends to set in when risk is absent. That's why it is important the parties agree to periodically reassess the progress and build in the ability to walk away from the relationship if the desired results are not evident. 6. Provide Performance Rewards and Penalties: Just like parties are sharing the risk in collaboration, the contract can establish certain incentives for the supplier to meet or exceed KPIs, such as accelerating the product development time line or bringing a product to market that improves on minimum specifications. In general, penalties — aside of force majeure — are outside the bounds of a collaborative relationship

Task 2-C-3 5 key influences on selection of a procurement method

1. Degree of competition/market situation large # of suppliers = competitive bidding 2. Industry norms/standards products manufactured to the same general specifications = competitive bidding rather than negotiations. custom made/specialized services may not have sharply defined specifications = negotiation. 3.Urgency time available must be sufficient to allow for competitive bidding 4. Dollar value $ is low = time/expense of competitive bidding not justified for either side 5. Nature of product/service specifications clear to both sides = competitive bidding might be appropriate. If changes to specs are anticipated, or not clearly defined = negotiation 6. Type of contract desired Fixed-price contracts are good candidates for competitive bidding. Cost reimbursable and indefinite delivery quantity are better for negotiation because greater uncertainty around costs, and often need to change the terms after contract creation. 7. Frequency of purchases products/services frequently purchased are poor candidates for competitive bidding b/c of time requirements of process. May call for use of blanket order, p-card. 8. Risk goods/services categorized in 4 ways relevant to purchase volume/risk 8a. Low volume/low risk: noncritical. not practical to devote resources required to competitively bid Typically negotiation is used to purchase. 8b. Low volume/high risk: several options available. Can increase volume/use competitive bidding, or simplify/mitigate risk, and engage in negotiation. 8c. High volume/low risk: Competitive bidding 8d. High volume/high risk: Complex/expensive, limited supply base, unique to buying org. Use negotiation w/ focus on building strong supplier relationships.

Task 2-D-2 Key areas of concern during ramp up from a supply management perspective

1. Operations flexibility and response time: Ramp-up is characterized by high variability and uncertainty, with conflicts in managing short cycle times and fast throughput increases. Operations flexibility to achieve a fast entry strategy may be achieved through mechanisms such as computer-aided-design/computer-aided-manufacturing (CAD/CAM), design for manufacturing, and aggregate project planning. 2. Equipment and Labor capabilities: During ramp-up, new equipment needs to be delivered, hooked up, installed, and aligned with the right processes. Similarly, skilled labor in production engineering is required to undertake rapid problem-solving to build knowledge of the process and improve yield rates 3. Systems: new systems are configured or existing systems may be reconfiguring due to ramp-up. It is expected that during ramp-up, systems will not run optimally for a number of reasons. It will take some time to reach full-system capacity because of initial system breakdowns or adjustments to new tooling. Also, higher-than-usual levels of scrap are likely due to poor production techniques or faulty machinery, and a poor understanding of how to operate the system.

Task 2-C-2 Purpose of forecasting

1. QTY: Businesses need to predict sales quantities for new/existing products/services so they can develop demand forecasts. Demand must be predicted in terms of quantity b/c these numbers are needed for operational planning. Orgs need to estimate material, labor, transportation, distribution, space requirements. QTY demanded = stage of product lifecycle 2. Industry Capacity: Org also needs to understand if there will be enough industry capacity to meet overall customer demand, and whether it will have capacity to meet its share of market. Org evaluates competition in terms of overlapping product lines and market coverage, and expected effect on marketplace. If expanded capacity is needed, SM pro should be aware of the source of increased capacity. 3. Cost/Price: SM responsible for price forecasting. Commonly used for commodities (oil, metals, raw materials). Importance greater when industries/suppliers/customers changing rapidly. Volatile prices affect org and end customers, and can be driven by seasonality in demand and international conditions. Complex/challenging. 4. Technology: Typically done in uncertain environments. Tech can impact demand as products/services evolve, and can cut product life-cycle times. Must be aware of tech gaps and potential threats to revenue or market share. 5. Planning: Procurement history/economic review of key spending categories should represent a rigorous and comprehensive analysis of key commodity categories. (spend analysis, analysis of present competitive landscape, forecasts of supply, demand, and prices). All of these reviews should be cornerstone of planning activities for supply management. Forecasting w/o planning = less effective. 6. Ensuring Supply: forecasting supply conditions in critical markets is important to ensure supply of critical items.

Task 2-A-1 Applying Standardization/Simplification

1. Raw Materials and Finished Goods: Consider the business processes needed for standardization (Who, What, Where, When, Why, How). What is the rationale, who is involved, where will standardization take place? Procurement and its suppliers will typically be the primary stakeholders in raw material standardization. Engineering/operations oversee the standardization of finished goods. 2. High-use or High-volume Items: Good candidates for standardization, as well as parts with commonality. 3. Procurement of Facilities:Procurement can standardize design of facilities and reduce overall costs of design, construction, and training. 4. MRO (Maintenance, Repair, Operations) and Indirect Items: Standardized by nature, and could be further reviewed to further standardize. 5. Services: Review spend by service type, combine contracts to receive the same rates throughout organization, generate higher volume w/ fewer suppliers, and increase supplier awareness of the importance of the organization as its customer.

Task 2-D-2 Areas of supply chain readiness that should be considered

1. Supplier capabilities and capacity: a supplier may have an innovative technology, but may not be able to meet the requirements for capacity, delivery, quality, and cost. Supply management professionals must be mindful of not only the technological aspects of product design, but also of commercial issues of capacity and ramp-up. (Tooling review, prototype qualification, material supply continuity) 2. Lead time and inventory planning: a key challenge of ramp-up is ensuring the supply chain maintains pace with volume growth. Particularly in a global production network, organizations may continue needing to source from existing suppliers with longer lead times to meet planned inventory levels. 3. Logistics/Distribution capabilities: efficient logistics networks are key to rapid ramp-up, and to ensure that materials arrive on production lines according to the desired schedule. Rapid logistics may also help organizations meet schedules when supplier shortages occur as components may be shifted from locations in surplus to one in deficit.

Task 2-A-3 Various Methods of Replenishing Inventory

1. Supplier-Managed/Vendor-Managed Inventory (SMI/VMI): Holds a supplyr responsible for ensuring stock is maintained at appropriate levels in the buying organization's facility, and for replenishing items when levels drop. (May have supplier on-site). 2. ABC Analysis (Pareto's Law, 80/20 rule): Determine relative ratios between # of POs and dollar value, and number of suppliers and % of spend. Helps indicate degree of effort needed for cycle counting, and degree of allowable error for inventory error. More emphasis on "A" items. "A" items can contain critical items as well regardless of low spend. "A" items = 10-20% of items = 70-80% of investment "B" items = 15-25% of items = 10-20% of investment "C" items = 65-76% of items = 5-10% of investment 3. Reorder Point Systems: Continuous inventory control system. Reorder point = demand during replenishment lead time. Order placed when a withdrawal brings inventory to predetermined level. 4. Fixed Order Period: Inventory position reviewed on a scheduled basis, rather than continuously. Order placed at end of each review, if needed, and quantities vary. Time between replenishment is trigger for reordering , rather than quantity. Advantage = not maintaining inventory records, but increase risk of stockout if demand is unusually high before replenishment time period. Allows for consolidated transportation if purchases focused w/ one supplier. 5. Fixed Order Quantity: Size of orders fixed, while time interval changes depending how quickly items are consumed. Often used with quantity-based reorder point system. 5a. Economic Order Quantity (EOQ): Model used to determine quantity of item to be ordered that minimizes total acquisition and inventory carrying costs. 6. Kanban: Think "JIT" and "Signal". Signal=specific info, such as printed card/bar code includes part name, description, qty, that signals a cycle of replenishment. Variation of quantity based reorder point system. 7. Buffer/Safety Stock: Additional inventory held to buffer against uncertainties in demand. =standard deviation demand during lead time x number of standard deviations that rep the desired percentage customer service level of the organization for the item.

Task 2 - C-3 What is hedging, the intent, and how it's used?

A "futures" purchase or sale entered into for the purpose of balancing a sale/purchase already made, or under contract, to offset the effect of potential market price fluctuations. May also involve the purchase of a futures contract to offset the price risk associated with selling or not owning a cash commodity. Intent is to offset/reduce price exposure in cash market.

Task 2-A-4 Supply Chain Integration

Alignment of supply chain goals and objectives between functions and enterprises, and the linkage of functions through information transparency, electronic, or people to people. Consistent vision, direction, and objectives for planning Communication and information sharing with all stakeholders to ensure sound decision making. Extends beyond organization's four walls to include external stakeholders. No longer do organizations simply look at joint improvement, but looks beyond to seek advantages of a well-managed supply chain.

Task 2-C-3 Life-of-Product supply

Buying organization may find it desirable to award contracts to suppliers of raw materials/components because: 1. Duration of need is limited (rebidding/renegotiating is not cost effective). 2. Supplier has familiarity w/ buying organization needs or uses for item/service. 3. Specialized supplier capabilities. 4. Requirements to obtain the best pricing for small quantities. Often developed between organizations and suppliers that have long, collaborative history. May include joint engineering.

Task 2-A-4 Supply Chain Processes

CRM (maintain relationships with customers) SRM (Procurement relationships with suppliers) Customer Service Management (face of org. from point of sale to after delivery of product/service) Demand Management (balance customer requirements with organizational supply chain capabilities) Order Fulfillment (on-time delivery of goods/services) Manufacturing/Service Flow Management (activities that assist in making products/services and managing inventories) Product Development (quickly developing and bringing products/services to market) Product Returns (Seek to decrease flow of returns and improve efficiency of container movement)

Tas 2-B-2 CPFR/Purpose

Collaborative Planning, Forecasting, and Replenishment Term commonly used to describe the information-sharing process. A collaborative process between buyer and seller involving the exchange of jointly developed sales forecasts, inventory replenishment schedules, and promotional plans to reduce supply chain costs and increase efficiency. An engaged supplier is better able to react to needs and knows how to deliver the response you want. Supplier will be more committed to a plan when there is a history of experiencing a reliable planning process and accurate forecasting.

Task 2-C-4 Role of ESI in CPFR

Collaborative Planning, Forecasting, and Replenishment. Joint deployment of best practices such as category mgmt, supply chain planning throughout the organization, including sales and supply management organizations. Driver for adoption is frequent misalignment in forecasts developed by different organizations in the supply chain, leading to problems such as misallocated inventory, which = excess inventory, holding costs, mark downs, and stockout, thus loss of sales. Extension of SMI/VMI w/ more collaboration between supplier/retailer in developing forecasts/managing exceptions.

Task 2-B-2 List key items required in execution of a demand plan w/ suppliers

Communication: Shared with suppliers and open to feedback on supplier constraints. Commitment: By sharing demand plan, suppliers more likely to feel they are part of the process, commit to plan, do what's necessary to meet needs over the life of the plan, and build for future needs. Feedback: Should be reviewed monthly (more frequent in "JIT" or volatile environments) to ensure alignment with actual market conditions.

Task 2-D-1 Factors that determine success of supplier collaboration

Create a collaborative environment. This entails improving cooperation, understanding the interdependence of success between the buyer and the supplier, and communicating in a collaborative way. Have high-level commitment. A collaborative environment begins at the top of the organization. The executive management team must clearly communicate to both the supplier and its own internal organization that both organizations are in full cooperation and integration mode, and ensure that no artificial barriers exist in the relationship by: Creating a flexible statement/scope of work. Providing the supplier with the maximum opportunity to collaborate. Bringing innovative solutions to the table. ——— The buyer needs to avoid tying the supplier's hands with an overly restrictive agreement. Get supplier input at the beginning — In some cases, you may want the supplier to assist in developing the specifications and statement/scope of work. Identify and mitigate risk — A major risk in collaboration is that the parties merge too closely, and the objectivity of the relationship becomes muted, which could cause an unnoticed drop in performance. Complacency tends to set in when risk is absent. That's why it is important the parties agree to periodically reassess the progress and build in the ability to walk away from the relationship if the desired results are not evident. Provide performance rewards and penalties — Just as the parties are sharing the risk in collaboration, the contract can establish certain incentives for the supplier to meet or exceed key performance metrics, such as accelerating the product development time line or bringing a product to market that improves on minimum specifications. In general, penalties — aside of force majeure — are outside the bounds of a collaborative relationship.

Task 2-C-2 Data sources in forecasting

Data sources: ISM Report on Business, Gov't publications (Gov't Printing Office - GPO), private publications (ISM), Commercial (Banks/Industry groups), Regional surveys (local ISM affiliates), Internal historical data (organization specific forecasts of standard costs, lead times, seasonality, employment levels, financials), industry sources, online indices.

Task 2-D-3 Discuss supply management role in Product and technology roadmap

Details high-level plans that an organization has for a product. Includes: A) Technologies B) Volumes C) Product proliferation D) Projected growth E) Other product-related issues throughout the life cycle. May be shared with key suppliers, and updated as needed so that the suppliers can plan appropriately. It is essential for supply management to be fully aware of the roadmap, share it with key suppliers in ways that helps suppliers: A) Use their own resources effectively. B) Be more responsive to the buying organization's needs, especially as those needs change. This reduces the risk that suppliers are caught by surprise due to product changes, and also reduces the risk of supply interruption. The product roadmap and specifications must be kept up-to-date over the life cycle of the product.

Task 2-B-2 Focus areas for demand management

Expected to work cross-functionally with sales, marketing, product development, finance, and in some instances, customers. May be weekly/monthly interactions depending on nature of business. 1. Proactive compilation of requirements' information regarding demand (customers, sales, marketing, finance) and firm's capabilities from supply side (operations, supply management, logistics) 2. Development of a consensus regarding the ability to match requirements and capabilities. 3. Agreement upon a plan that can most effectively meet customer requirements within constraints imposed by supply chain capabilities.

Task 2-B-1 Factors critical to Integrated Business Planning (IBP) success

Extends the principle of S&OP throughout the supply chain, product, and customer portfolios, customer demand, and strategic planning to deliver one seamless management process and improve performance. 1. Effective demand planning and forecasting. 2. Collaboration among key stakeholders. Keep current on economic geopolitical and supply trends. Also look at long-term impact to business. Develop "what if" scenarios and measure collected data with key stakeholders.

Task 2-C-2 Capacity utilization

Extent to which an organization, industry, or nation uses its installed facilities. Compares actual output to potential output using the available installed capacity. Calculated by US Federal Reserve Board (FRB).

Task 2-C-3 JIT

Focuses on elimination of waste and costs wherever it may be in the manufacturing system and supply chain. Quality must be impeccable. Frequent communication/forecasting is essential. Difficulties include: 1. Lack of cooperation from suppliers due to changes required in their systems (quality control processes, manufacturing outside normal plans, more frequent deliveries w/ precise timing, access to supplier production information/financial statements).

Task 2-A-4 Tactical Purchasing

Forecasting and planning internal customer requirements, identifying and preparing purchase requisitions and SOWs, selecting suppliers, reviewing supply forecasts and customer orders to ensure alignment, establishing reorder points system for inventory items, and performing stock checks to assure needs are met.

Task 2-B-1 Items that Sales and Operations Planning (S&OP) works with internal business units to forecast

Is a cross-functional process that works with internal stakeholders/business units to forecast anticipated: Demand Inventory Supply Customer lead times based on sales forecast Actual demand Capacity forecast Organizational business objectives Valuable in aligning forecasted demand w/ business planning. Can improve accuracy of planning process, thus reducing cost of inventory and improving cash flows.

Task 2-D-3 Why is point of sale info useful to supply management?

It is important for supply management professionals to monitor the organization's ongoing plan vs. actual sales to understand the appropriate supply chain capacity/capability adjustments that may be needed. In some cases, a good source of actual sales vs plan information is available through the reporting generated by the organization's point of sales system.

Task 2-C-3 (Buying strategies) Buying to requirements

Most common buying strategy. Ensures supply while avoiding excessive inventory carrying costs. Ex) Advance purchases for use in a 3 week to 3 month time frame. Even in JIT environment, supply pro should consider future requirements. To maintain flexibility, buying organizations often guarantee suppliers a % of forecasted requirements.

Task 2-C-2 Price index

Ratio expressing relationship between price of a commodity at a given point in time to its price during a specified base period. Can be used to chart price level changes (GDP, CPI) Custom indexing is a professional tool that organizations use to measure, investigate, and control price/cost changes within own organization. Especially useful for commodities that represent a large % of total purchases. SM pro may create a supplier price index and use it to compare against the producer price index to determine if supplier is asking for equitable price increase. Should identify any assumptions used to create index.

Task 2-C-2 GNP

Measure of a nation's total output, which is the total value of all finished goods/services produced anywhere in the world by its agencies and organizations during a certain time period ( generally one year) Importance is scope of production. Output anywhere in the world by citizens of one nation.

Task 2-C-1 Leading indicator

Measure of economic activity that changes before the business cycle does, and indicates future direction. Any statistic that precedes changes in the economic growth rates/business activity. Ex) bond yields often indicate direction of stock market Ex) building permits issued in a given period, inventory level changes, average weekly hours of production workers, stock prices changing, # of unemployment claims.

Task 2-A-2 What is a System Development Life Cycle (SDLC) and Phases

Methodology to develop, maintain, and replace information systems. Phases: 1. Analysis - Org should conduct a comprehensive analysis to determine the system(s) that will provide optimal level of support at the minimal costs. (level of detail, frequency of need, timing, extent of integration, capacity available both hardware and labor) 2. Design - After analysis, final system design parameters include integration plan, cost, responsibilities, timing, capacity requirements, training plans. 3. Development - Involves buying/writing the code for software designed for the organization. Oftentimes there are add on modules designed to meet needs of the organization. Customizations = higher costs. Also includes changes to support, including new measurement/evaluation programs to support the new system, developing/updating training. 4. Testing - Under expected operating conditions and against criteria. 5. Implementation - Once system is operating, software is put into operation and supports business activities. 6. Maintenance - Any upkeep involved and required to maintain the system (I.e., code changes, corrections, reviews).

Task 2-D-3 (Create systems and process improvements to help the organization meet sales goals) Describe the typical basis of an organization's supply chain strategy and economics.

Organizations tend to make choices around four primary factors: 1. Target market — Is the organization's target market a mass market versus a niche market, or perhaps a high-price and high-service market versus a low-price and discount market? The organization also has to determine whether it would like to develop products or service offerings in-house, or leverage products or services that already exist with other organizations (make versus buy). It also could decide to develop a joint venture relationship with one or more key suppliers. 2. Product features and technology — What type of product or service features and technology are needed to support the target market and product and service offerings? The organization may choose to have high-end features that require complex technology to support high-price and high-service markets. Or, it may choose to have a versatile product or service line that requires simple technology to produce, but offers many add-on options from which customers may choose. The choice of technology, product, and service features depends on the availability of research and development capabilities either in-house or with suppliers. 3. Customer selection and operational scale — Deciding to have one large customer or multiple small customers can determine completely different operational scale choices. For example, the selection of a large customer may mean a large-scale plant/field service or local office presence that focuses on minimizing the marginal cost. The selection of multiple small customers may require a smaller scale of operations that is more flexible to support the needs of different customers. The organization should collaborate with suppliers to ensure supply chain capacity is balanced, and the total system cost is low. 4. Customer service and inventory/staffing level alignment — Typically, a higher level of customer service requires higher inventory for product-based organizations and/or higher staffing level capacity for service-based organizations. A lower level of customer service could be managed with lower inventory and/or staffing levels. To be successful in its efforts, an organization should share its planning information with its suppliers to complement its decisions regarding customer service and staffing level choices. If an organization decides to maintain low inventory/staffing levels, it should share its demand information to allow its supplier to lower its own inventory/staffing levels, as well Supply management can have a direct or indirect effect on the organization's top-line revenue in a number of ways, including the following: Working with suppliers and internal operations to reduce product time to market so revenue is realized earlier, with more time before competitors enter the market. Helping bring new products and services to market on time and at the required capacity so that sales are not lost. Buying the required product and service inputs from a reliable, high-quality source to prevent supply interruption. Buying at the lowest TCO so the organization can sell at the most competitive price possible to increase sales and market share.

Task 2-C-1 Types of analyses used in market analysis

Porter's 5 forces: 1.extent and intensity of direct competition, 2.threat of new entrants, 3.threat of substitute products/services, 4.power of buyers, 5. power of suppliers. SWOT: form of risk assessment, macro-level evaluation of internal/external forces to evaluate current business environment and trigger a new organizational direction, strategy, project. Industry benchmarks: standard/point of reference used in measuring organizational performance according to criteria. Organization may choose to evaluate itself against marketplace by accessing industry-collected benchmarks. Supplier research: suppliers can be valuable source regarding market conditions/trends. May be willing to disclose new developments in processes, products, technologies. SMS should gather information from suppliers. Third-party market intelligence: may decide to outsource market analysis to a third parties that collect data from variety of sources, develop strategic-level reports on market conditions, competition, potential threats, growth opportunities for new products/services. May also look at data related specifically to supply management (supplier capabilities, category level metrics, risk)

Task 2-B-2 Demand Management is

Proactive compilation of requirements' information regarding demand (customer sales, marketing, finance) and the firm's capabilities from the supply side (supply, ops, logistics); The development of a consensus regarding ability to match requirements and capabilities; Agreement upon a synthesized plan that can most effectively meet customer requirements within constraints from supply chain capabilities.

Task 2-C-3 (Buying strategies) Speculative buying

Purchasing in excess of current/future known requirements w/ the intention of profiting from price movement/resale. Goods may be same as those the organization typically purchases for consumptions, but qty purchased will be in excess of current/future needs. Intent is to take advantage of expected increases in price to profit from resale.

Task 2-A-1 Standardization and Simplification

Reduce complexity and # of required parts, operations, SKUs, specifications, work instructions, suppliers, and processes that an organization requires to produce its products and services and conduct business. Can result in reducing non-value-added activities and decrease TCO. Also, can increase profitability, decrease cycle time, improve quality, lower maintenance costs. May allow an organization to deal with fewer suppliers, purchase in larger quantities, lower inventory costs, and reduce training costs.

Task 2-D-1 Reasons why products reach end of their product lifecycle

Reduced sales, technology advances, changing consumer tastes, new trends, innovation. Organization is primarily concerned w/ end of life cycle of: 1. Purchased products/services — supply management concern is mitigating risk from supplier announcing a product/service is no longer going to be available in the future. Some suppliers have policies that provide for continued availability and/or support for a limited period of time after the announcement of product discontinuation. 2. Organization's own products/services — supply management concern is mitigating the risk of having stock/materials or supply commitments for materials or services that will no longer be needed. Risk can be mitigated by good/continuous internal communication among supply management, marketing, product development, and manufacturing/operations management to ensure that when products are discontinued, supply management has sufficient time to discontinue supply agreements and consume or dispose of related stocks.

Task 2-A-1 Disadvantages of Standardization and Simplification

Reliance on fewer suppliers, limited competition, customer choices, and opportunities for new products and services. May also require a new contract/relationship with new suppliers, costs of introduction, training, installation, and development of instructions, procedures and process associated with the change to standardized parts or processes as well as testing procedures to ensure quality.

Task 2-A-3 Capacity Utilization Techniques

Sales Forecasts: Inputting sales forecasts into a sales and operations plan to establish proper levels of resource commitment needed to meet plan/project demand. Implementation Schedule: Usually based on actual customer orders rather than forecast, organization must fine tune capacity utilization since forecasts are seldom absolute. Production may be ahead/behind schedule. Tracking order load on capacity and projected available capacity allows organization to adjust the use (Overtime) for short time periods in future. Supply management organizations must ensure that suppliers have enough capacity to meet their demands. The process begins by creating a supply forecast to determine if enough materials, parts and resources will be available to the buying organization in sufficient quantities to meet its production and service delivery requirements. At the same time, the organization needs to consider economic conditions and trends that could affect supplier capacity, such as uncertain labor conditions, restraint on capital, new environmental laws, inflation or changing trade rules or regulations.

Task 2-C-5 Define Bullwhip effect

Small downstream (customer) need can produce large fluctuations in need further upstream (distributor/manufacturer) due to timing of production and transportation. Supply chain visibility/synchronization minimizes the effect/impact.

Task 2-A-3 Bullwhip Effect

Small fluctuations in demand can cause progressively larger fluctuations at wholesale, distributor, manufacturer, and raw material supplier level.

Task 2-C-1 4 types of purchases

Strategic: High Impact/High Risk (reduce costs/ensure continuity of supply) Bottleneck: Low Impact/High Risk (relationship w/ supplier important, but SM pro will search for alternative suppliers to avoid risk of supply interruptions) Routine: Low Impact/Low Risk (P-card) Leverage: High Impact/Low Risk (large number of suppliers capable/available, high $ value and have major effect on organization's competitiveness)

Task 2-D-1 Quality Function Deployment (QFD)

Structured approach to defining customer needs or requirements and translating them into specific plans to produce products to meet those needs. The "voice of the customer" is the term to describe these stated and unstated customer needs or requirements.

Task 2-C-2 Economic indexing

Summarizes and examines changes in the direction and level of economic activity. Starts w/ a base period or year defined as 100, which is selected as a period when economy was relatively stable. All other comparison years or periods are represented as % differences from that base year. Ex) 1999 is base year (100) and 2017 index number was 130, then economic activity in 2017 would be 30% create than base period. FORMULA: current period value - prior period value/prior period value x 100 Ex) 2009: 105 and 2017: 130 comparing 2017 to 2009 [(130-105)/105] x 100 = 23.8 percent higher in 2009 in terms of 1999 (base year) units.

Task 2-E-1 Supplier Certification

Supplier's quality control system has proven highly reliable, thus eliminating the need for incoming inspection. Supplier is integrated with SM professional's enterprise wide quality control system. Total costs associated w/ quality are reduced through elimination of duplicate efforts, and use of Statistical Process Control (SPC) and other quality control processes and information sources. SM typically defines standards supplier must meet to become certified. In some industries, there are standards agreed upon by industry.

Task 2-D-3 Discuss supply management role in Customer service

Supply management should remain connected with the business on what the supply chain needs to have in place to minimize any "friction" between: 1A) the front-end sales delivery 1B) customer delivery/fulfillment processes 1C) customer support groups Ideal that all achieve their goals with the least amount of disruption. Think: Lead time, on-time delivery, fill rate, availability

Task 2-C-1 Key consideration in determining best sourcing strategy

Supply markets will vary in complexity. SM pros should evaluate each market in terms of degree of 1) competition 2) geographical dispersion 3) cooperation from suppliers As a result opportunities for collaboration/pricing concessions should be evident

Task 2-C-1 Business cycle and phases

Swings in the economy. 1. highest point of output b4 downturn. 2. recession or shrining of economy. 3. recession trough or lowest point in activity. 4. recovery or resuming growth path. 5. expansion (prosperity), beyond a previous high point. No two are the same in intensity or duration. Caused by political disturbances, war, population migration, natural disaster, harvesting conditions, and monetary/fiscal policies.

Task 2-C-2 Forecasting Methodologies/Techniques

Technique chosen = varies based on type of forecast. Short Term: Up to one year. used as an aid in the development and execution of short-term purchase plans, and operational/tactical activity. Long Term: Facilitate the evolution and development of strategic plans, and typically include in-depth commodity/industry studies. Macro: Project broad scale activities, such as nation's gross national product, or an industrial sector such as services or farm sector. Micro: Organization specific, or limited to small segments of larger issues. Macro/Micro are usually linked together. For example an organization might forecast prices paid for a specific, locally purchased product (micro), but that forecast is dependent on the status of that supply industry nationally and globally (macro). Delphi method: Opinion-based forecast when no factual data exists. Conducted individually, experts are asked a series of questions, then prepare a written statement to each question. Then receive anonymous copies of each other's statements and are allowed to revise/defend their responses. Revisions are then submitted, and that is repeated 3/4 times until a consensus develops. Regression Analyses/Correlation Time Series Central Tendency Trend analysis Decision-Tree Analysis Box-Jenkins Method

Task 2-D-1 House of Quality matrix

The house of quality process is a component of quality function deployment (QFD). The QFD method helps you assure quality when you develop products and deliver services. QFD uses various matrices for this purpose. The first and often most important matrix in QFD is called the house of quality because it's shaped like a house with a roof and body. In this matrix, you start by separating customer needs from technical requirements and evaluating the two factors independently of each other. You then correlate two types of requirements and start planning for implementation.

Task 2-C-5 Factors that can affect forecasts

War, threat of war, strikes, natural disasters, discoveries, depletions, change in technology, gov't, laws, population, or consumer tastes. Also track critical raw materials and components: fluctuating lead times (shortages/increased inventory, must assess probability of occurrence and work with supplier to decrease/eliminate where possible) changing labor conditions (labor negotiations, or lack of skilled labor may restrict output) financial markets (increased interest rates = increase in borrowing rate/cost of money and doing business. reduction in investments = reduction in income/employment geopolitical risks (politics, business law, environmental law, import/export law) technology shifts (rise of internet in the 90's and 2000's. impact difficult to predict, forecasters must be vigilant to include these possibilities in forecasts when appropriate) natural disasters changes in global trade economic conditions data integrity bullwhip effect

Task 2-B-1 What should be a priority when determining forecast accuracy?

This gives an organization an idea of future expectations, identify strengths/weakness before marketing plans/budgets are set, and allows organization to develop/optimize purchasing/expansion plans. Use past experiences to determine what has/hasn't worked, and make adjustments as necessary. This can increase organization's knowledge base. Risks = Could be wrong and lead to poor decision making, excess costs, poor customer service. Need to create multiple forecasts before finalizing predictions.

Task 2-C-5 Methods to forecast accuracy

Three commonly used measures: Standard error: Offers simple measure of uncertainty of a given forecast and can be used to create confidence intervals for the organization. = population standard deviation/square root of sample size Mean squared error (MSE): Measure of total error to be expected for a sample estimate. Actual demand for each time period - Forecast = given sample of data to determine error. MSE amplifies the effect of large errors, and can be used when such errors are costly to organization. Mean absolute percent error (MAPE): Gives forecaster good idea of true magnitude of forecast error because, similar to MSE, absolute values are used in formula. Providing outcome as a percentage enables organization to communicate more easily. EX) explaining forecast was missed by 10,000 units sounds bad, but if it is on 1 million units produced, the % miss is only 1%. = actual demand for each time period/absolute forecast error, summing %'s, and then dividing total number of time periods included in analysis

Task 2-C-2 Factors that affect forecasts

Trends, cyclical variations, seasonal fluctuations, and random influences. Reasons for variations must be determined.

Task 2-D-3 What is supplier collaboration?

also known as SRM. Learning to develop and exercise a new kind of power, not forcing compliance with procurement procedures and contracting processes. Instead, SM pros learn to build relational capital that inspires trust and commitment from stakeholders and suppliers.

Task 2-C-2 Interest rate

annual percentage of principle borrower must pay for use of funds. inhibit borrowing and investment, or trigger price inflation, which allows business to pass on the high cost of money.

Task 2-D-1 Marketing strategy vs. market intelligence

product marketing strategy in the decline phase of the product life cycle includes a number of factors that affect the product's supply management, all of which are motivated by the objective of preserving profit margins in a period of reduced demand for the product, and may include selling the product at a reduced price to reduce the rate of decline of demand for the product. The impact on supply management may include sourcing different and/or fewer components in reduced quantities or negotiating an outsourcing contract. Good communication between marketing/supply management is necessary to achieve the required changes at minimum risk of loss of supply, inadequate quality, or over commitment for materials and services required to make the product or provide the service. Market Intelligence: Gathering and analyzing information about the aggregate forces (including economics) at work in trade and commerce in a specific service or commodity. In general the types of information that should be collected and distributed in developing a supply market intelligence report include the following: Industry category overview. Description of the category. Total market value. Major applications. Product segmentation. Cost-management practices. Industry efforts and initiatives. Breakdown by major supplier/product/service. Industry structure and global reach. Some of the key tools employed in structuring this information in a useful format involve developing presentation slides and reports using the following: Supplier analysis — Performance scorecard, financial structure, profitability, growth, market share pie charts, etc. SWOT (Strength, Weakness, Opportunity, Threat) — A quick overview of the supply market, and the relative position of the buyer in negotiations with key suppliers. Value chain — A graphical depiction of the key value-added processes that occur from raw materials through to end-customer use. It may also include key cost drivers and total cost models associated with pricing materials and services. Risk analysis — Identification of major categories of risk associated with key suppliers, and the relative probability of a disruption with associated costs of disruption. Porter's Five Forces — A summary of key competitive forces in the industry, including bargaining power of buyers, bargaining power of suppliers, threat of new entrants, rivalry among existing competitors and threat of substitutes.

Task 2-D-2 Ramp up

the period during which the manufacturing process makes the transition from zero to full-scale production at targeted levels of cost and quality. It may take weeks or even months to reach this point as operators must learn the new process, and process problems are identified and fixed. occurs during the launch of a new product in preparation for introduction to the market. Also occurs because a previously discontinued product will be reintroduced into the market, before the start of a busy season such as the holidays, or a marketing promotion