supply chain management exam 1
(3) steps in developing the aggregate production plan
1. determining the demand for each period covered by the aggregate planning horizon 2. determining the available capacity for each period covered by the aggregate planning horizon 3. identifying any constraints which may influence the plan 4. determining the direct labor and material costs and the indirect manufacturing costs for each product or product family covered by the aggregate produciton plan 5. identifying or developing strategies and contingency plans to manage the potential upside or downside in the market 6. agree on a plan that best meets the planning goals and objectives
(4) why hold inventory? (4 reasons)
1. meet customer demand 2. to buffer against uncertainty in demand and or supply 3. to decouple supply from demand 4. to decouple dependencies in the supply chain
(2) forecasting: there are two important considerations about a forecast
1. statistically speaking, the forecast will be inaccurate, and although it may be inaccurate, it is still useful 2. the forecast is the basis for most "downstream" supply chain planning decisions, so it is critical to be as accurate as possible
(3) MRP requires
1. the independent demand information, finished product forecast 2. parent-component relationships from BOM 3. inventory status of financial product and each of the components and materials 4. planned order releases
(2) fundamentals of forecasting
1. your forecast is most likely wrong 2. simple forecast methodologies trump complex ones 3. a correct forecast does not prove your forecast method is correct 4. if you don't use the data regularly, trust it less when forecasting 5. all trends will eventually end 6. its hard to eliminate bias, so most forecasts are biased 7. technology is not the solution to better forecasting
(1) What is a supply chain?
Any organization offering a product or service has a supply chain Products and services are created from materials, equipment, labor, time, money and other resources A supply chain can be very simple or very complex
(3) scheduled receipt
a committed order awaiting delivery for a specific period
(1) old paradigm
a company gained synergy as a vertically integrated firm encompassing the ownership and coordination of several supply chain activities organizational cultures emphasized short term, company focused performance
(1) new paradigm
a company in a supply chain focuses activities in its area of specialization and enters into voluntary and trust-based relationships with supplier and customer firms. "outsourcing non-core competencies" all participants in the supply chain benefit boundaries are dynamic and extend from the firms suppliers suppliers to its customers customers (end to end) supply chains also deal with reverse logistics to handle product returns, warranty repairs, and recycling
(3) Materials requirements planning
a computer based materials management system that calculates the exact quantities, need dates, and planned order releases for subassemblies, component parts and materials required to manufacture a final product
(3) manufacturing resource planning (MRPII)
a computer based system that can create detailed production schedules using real time data coordinates the arrival of materials with the availability of machine and labor mrp II is used widely by itself, but also as a module of more extensive enterprise resource planning (ERP) systems
(4) fixed order quantity system
a continuous inventory review system in which the same order quantity is used from order to order when the inventory position drops to a predetermined reorder point, a predetermined fixed order quantity is placed
(3) master production schedule
a detailed disaggregation of the aggregate production plan (app) listing the exact end items to be produced by a specific period
(3) multilevel bill of materials
a display of all the components directly or indirectly used in a parent, together with the quantity required of each component. if a component is a subassembly, blend, intermediate, etc, all its components and all their components also will be exhibited, down to purchased parts and raw materials
(3) firmed time period
a firm time fense is established at the outer limit of this period to signify when changes can no longer be made automatically by the planning system recommended changes must be reviewed and approved by the master production scheduler or an authorized person
(4) work in process
a good or goods in various stages of completion throughout the plant, spanning from raw material that has been released for intial processing up to fully processed material awaiting final inspection and acceptance as finished goods
(3) resource requirement planning
a long-range capacity planning module used to check whether aggregate resources are capable of satisfying the aggregate production plan
(3) rough-cut capacity planning
a medium-range capacity planning module used to check the feasibility of the master production schedule. converts mps from the production needed to the capacity required, then compares it to capacity available
(3) firmed planned order
a planned order than can be frozen in quantity and time so that the mrp computer logic cannot automatically change when conditions change. established by the planner or supply chain manager to prevent system nervousness this can aid planners working with mrp systems to respond to material and capacity problems by firming up selected planning orders
(3) sales and operations planning
a process that brings all the demand and supply plans for the business together to provide management with the ability to strategically direct the business to achieve a competitive advantage
(4) the economic order quantity model
a quantitative decision model based on the trade-off between annual inventory carrying costs and annual order costs the eqq model seeks to determine an optimal order quantity where the sum of the annual order costs and the annual inventory carrying costs is minimized
(3) safety stock
a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply over planning supply versus demand can be used to create safety stock
(3) capacity requirement planning
a short-range capacity planning module used to check the feasibility of the material requirements plan
(3) planned order release
a specific order for a specific item and quantity to be released to the shop or to the supplier
(3) distribution requirements planning
a time phased finished good inventory replenishmentplan in a distribution network. the function of determining the need to replenish inventory at branch warehouses drp is a logical extension of the mrp system and ties physical distribution to the manufacturing planning and control system
(3) gross requirement
a time phased requirement prior to netting out on hand inventory and lead time
(4) single period model
a type of inventory system in which inventory is only ordered for a one time stocking the objective is to maximize profits
(4) base stock level system
a type of inventory system that issues an order whenever a withdrawl is made from inventory
(2) cyclical variations
a wavelike pattern that can extend over multiple years, and therefore, cannot be easily predicted
(1) the two main reasons that companies implement supply chain management are to
achieve cost savings better coordinate resources
(4) service inventory
activities carried out in advance of the customers arrival example; restaurants offer dining services, but cannot inventory the actual dining service; they can only begin the dining service when the customers arrive
(4) strategic stock
additional inventory beyond cycle and safety stock, generally used for a very specific purpose or future event, and for a defined period of time
(3) chase production strategy
adjusts capacity to match demand firm hires and lays off workers to match finished output to demand finished goods inventory remains constant works well for make to order firms
(3) advantage and disadvantage of mrp
advantage: provides planning information disadvantage: loss of visibility, ignores capacity and ignores shop floor conditions
(1) 1950s and 1960s advantages and drawbacks
advantages were higher output and more productivity, reduced cycle times, lower in process inventories drawbacks were high investment in facilities, overall cycle time limited by the slowest operation, and breakdown of one machine will stop an entire production line
(1) SCOR Model: return
also known as reverse logistics, this is the part of supply chain management that deals with planning and controlling the process of moving goods specifically from the point of consumption back to the point of origin for repair, reclamation, remanufacture, recycling, or disposal As this process quite literally goes against the normal outbound flow of products to the market, supply chain managers have to create a responsive and flexible network for receiving defective and excess products back from their customers, and also supporting customers who have questions and problems
(1) SCOR Model: deliver
also known as the logistics phase, this is the part of supply chain management that oversees the planning and execution of the forward flow of goods and related information between various points in the supply chain to meet customer requirements where companies coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to transport products to customers, and set up an invoicing system to receive payments, among other aspects
(3) planning bill of materials
an artificial grouping of items in BOM format, used to facilitate master scheduling and material planning
(2) forecast
an estimate of future demand
(2) regression uses the historical relationship between
an independent and dependent variable to predict the future values of the dependent variable
(4) order costs
are costs that are incurred each time an order is placed incurred each time an order is placed
(4) carrying costs
are costs that are incurred for holding inventory in storage
(2) simple linear regression
attempts to model the relationship between a single independent variable and a dependent variable (demand) by fitting a linear equation to the observed data
(2) multiple linear regression
attempts to model the relationship between two or more independent variables and a dependent variable (demand) by fitting a linear equation to the observed data depending on the data and the number of independent variables, the mathematics involved can be complex
(3) implementing erp systems: 2 ways
best of breed and single integrator solution
(3) available to promise (ATP)
business function that provides a response to customer order inquiries, based on resource availability. it generates available quantities of the requested product, and delivery due dates it represents the uncommited portion of a companys inventory and planned production maintained in the master schedule to support customer order promising
(4) indirect costs related to inventory
cannot be traced directly to the unit produced overhead, mro items, buildings, equipment
(3) aggregate planning strategies- supply options
change inventory levels change capacity
(4) abc system
classifies inventory based the degree of importance A. highest value B. moderate value C. least value
(2) how can a bullwhip effect be alleviated
collaboration, synchronizing the supply chain, reducing inventory
(4) inventory investment
common measures include: abolsute inventory value- the value of the inventory at either its cost or its market value inventory turnover- the number of times that an inventory cycles, or turns over during the year
(1) 1980s 1990s and 2000 instead of focusing only internally,
companies started to look beyond their four walls and incorporate their supply chain partners into their planning activities
(4) carrying costs related to inventory
costs for physically having inventory on site and for maintaining the infrastructure needed to store the inventory and to secure and insecure it over time
(2) forecasting and demand planning are crucial components of
customer satisfaction
(1) Current trends in SCM: sustainability and "greening" the supply chain
customers increasingly prefer products that are made and sources in the right way, minimizing businesses social, economic, and environmental impact on society and enhancing positive effects
(4) what are the three levels of internal inventory
cycle stock, safety stock, and strategic stock
(4) variable costs related to inventory
dependent on the unit volume produced vary with output level materials, labor, utility power
(3) short range supply chain planning
detailed planning process for componenets and parts to support the master production schedule
(4) direct costs related to inventory
directly traceable to unit produced materials, labor
(3) single level bill of materials
display of components that are directly used in a parent item, together with the quantity required of each component shows only the relationships one level down
(3) bill of materials (BOM)
document that shows an inclusive listing of all component parts and assemblies making up the final product
(1) who coined the term scm
dr wolfgang partsch
(1) SCOR Model: enable
enabling processes facilitate a company ability to manage the supply chain and are spread throughout every stage in other words, we want to enable our capabilities as we plan, source, make, and deliver
(3) Enterprise requirements planning (ERP)
erp is an extension of MRPII and includes DRP which determines the need to replenish finished product inventory at branch warehouses, when there are multiple warehouses in the network it is typically implemented through a software platform of integrated functional modules facilitating the sharing of real time information and collaboration across multiple business functions necessary for the supply chain to operate efficiently and effectively
(1) Supply chain management is the way business gets done. it is the ___________ ________ of any business
execution process
(1) Current trends in SCM: Globalization
expanding the supply chain. international, mature and emerging markets have become a part of the overall business growth strategy for many companies. both breadth and depth of global operations
(4) having too much inventory can result in effects like
financial resourced tied up in inventory underlying problems being hidden rather than being exposed and solved, including quality problems not being immediately identified no incentive for process improvements
(1) Current trends in SCM: demand volatility and forecast inaccuracy
firms will increasingly need to be more flexible and responsive to customer needs, adapting to unexpected changes and circumstances. necessitating closer integration and collaboration
(1) operations management elements includes
forecasting and demand planning- match demand to available capacity planning systems- linking supply to demand via mrp and erp systems process management- using lean manufacturing to improve the flow of materials to reduce inventory levels, and using six sigma to improve quality compliance across all suppliers
(3) planned time period
from the end of the firmed time period to the end of the planning horizon the planning system is free to create or make changes to planned orders in this time period based on the data and planning logic determined by the company
(2) generally, the farther out into the future you forecast, the
greater the deviation will likely be
(4) hidden costs of inventory
having too much or too little inventory on hand can sometimes build hidden costs that create a risk for a company
(1) manufacturing resource planning (MRP II)
helps to improve internal communication and operations manufacturers extended their processes to include their own finance, marketing, sales, research and development, etc. functions to bring all their expertise into the process
(3) aggregate production plan
hierarchial planning process that translates annual business, marketing plans, and demand forecasts into a production plan for a product family in a plant or facility the planning horizon of app is at least one year and is usually rolled forward by three months every quarter
(3) supply chain planning is usually ________ and can be divided into ______
hierarchical, three broad categories
(1) the goal of supply chain management is to
increase customer service while simultaneously reducing both inventory investment and operating
(4) fixed costs related to inventory
independent of the unit volume buildings, equipment, rent, allocated overhead costs
(3) aggregate planning strategies- demand options
influencing demand0 so that it aligns to available production backordering during high demand periods- accept demand greater than supply capabilities counter-seasonal product mixing- develop a product mix with antithetic trends that level the cumulative required production capacity
(3) enterprise requirements planning systems
information system connecting all functional areas and operations of an organization, and in some cases suppliers and customers, via common software infrastructure and database erp provides a means for supply chain members to share information so that scarce resources can be fully utilized to meet demand, while minimizing supply chain inventories
(2) random variables
instability in the data caused by random occurences these random changes are generally very short-term and can be caused by unexpected or unpredictable events such as weather emergencies, natural disasters
(4) pipeline inventory
inventory in the transportation network and the distribution system inventory that is already out in the market being held by wholesalers, distributors, retailers, and even consumers the ownership of this inventory has been transferred to the trading partners, but may still influence decisions the company makes regarding how they manage and control their internal inventory, and how much safety stock and how much strategic stock to hold
(4) fixed time period system
inventory is checked in fixed time periods against a target inventory level if the inventory is less than target, a quantity necessary to bring inventory back up to the target level is ordered
(4) what is inventory?
inventory is the quantities of goods and materials that are held in stock
(4) obsolute inventory
inventory items that have met the obsolescence criteria established by the company obsolete inventory is stock that is expired, damaged, or no longer needed
(4) continuous review system
inventory levels are continuously review as soon as inventory falls below a predetermined level a replenishment order is triggered more costly to conduct than a periodic review ysstem, but it potentially requires less safety stock because inventory is constantly monitored and replenishment actions are taken more quickly
(4) periodic review system
inventory levels are reviewed at a set frequency (weekly, monthly) at the time of review, if the stock levels are below the pre-determined level, an order for replenishment is placed, otherwise no action is taken until the next cycle
(4) bin system
inventory system that uses either one or two bins to hold a quantity of the item being inventoried
(4) cycle stock
inventory that a company builds to satisfy its immediate demand cycle stock depletes gradually as customer orders are received, and is replenished cyclically when orders are received the amount of cycle stock that a company holds is dependent on actual demand in the immediate time period, supply replenishment lead time and order quantities
(3) long range supply chain planning
involves planning for actions such as the construction of facilities and major equipment purchase
(2) collaborative planning, forecasting, and replenishment
is a business practice that combines the intelligence of multiple trading partners who share their plans, forecasts, and deliver schedules with one another in an effort to ensure a smooth flow of goods and services across a supply chain
(2) forecast bias
is a consistent deviation from the mean in one direction; either high or low in other words, bias exists when the demand is consistently over or under forecast. a good forecast is not biased
(1) total quality management
is a management approach to long-term success through customer satisfaction based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work
(1) material requirements planning (MRP)
is a method of determining what materials are needed and when they are needed to support the production plan
(2) expodential smoothing
is a more sophisticated version of the weighted moving average. requires last periods forecast, last periods actual demand, and a smoothing factor, which is a number greater than 0 and less than 1
(1) just-in-time
is a philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement
(1) business process reengineering
is a procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed
(2) qualitative forecasting
is based on opinion and intuition generally, used when data are limited, unavailable, or not currently relevant forecast depends on skill and experience of forecasters and available information the five qualitative models are personal insight, jury of executive opinion, delphi method, sales force estimation, customer survey
(2) dependent demand
is demand for an item that is directly related to other items or finished products, such as a component or material used in making a finished product demand for these items is calculated
(2) independent demand
is demand for an item that is unrelated to the demand for other items such as a finished product, a spare part, or a service part demand for these items is forecasted
(2) linear trend forecasting
is imposing a best fit line across the demand data of an entire time series. used as the basis for forecasting future values by extending the line past the existing data and out into the future while maintaining the slope of the line
(3) supply chain planning
is the element of supply chain management responsible for determining how best to satisfy the requirements created by the demand plan its objective is to balance supply and demand in a way that realizes the financial and service objectives of the company
(2) demand
is the need for a particular product or component. the demand could come from various sources such as a customer order, a forecast, the manufacturing of another product, etc.
(2) demand planning
is the process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services
(3) parent
item generating demand for lower-level components
(4) maintenance, repair, and operating
items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations
(2) Forecasting and demand planning are the
key building blocks from which all supply chain planning activities are derived
(4) order costs related to inventory
labor costs associated with placing an order for inventory and the cost of receiving the order
(1) Supply chains exist in organizations that are
large or small, public or private, for profit or not for profit
(3) what are the 3 basic production strategies?
level production strategy chase production strategy mixed production strategy
(4) constraints of eqq
limited capital storage capacity transportation obsolescence production lot size unitization
(2) mean squared error
magnifies the errors by squaring each one before adding them up and dividing by the forecast
(1) in the 1950s and 1960s, US manufacturers
maintained large material inventories to keep production running. the entire focus was on how to produce as much product as possible at the lowest possible cost. manufacturers were internally focused on maximizing their own internal operations the focus was on mass production techniques as their principal cost reduction and productivity improvement strategies external collaboration and partnerships virtually nonexistent
(3) mixed production strategy
maintains stable core workforce while using other short term means, such as overtime, subcontracting and part time helpers to manage short-term demand
(1) SCOR Model: make
make or manufacturing is the series of operations performed to convert materials into a finished product the finished product is manufactured, tested, packaged, and scheduled for delivery quality management is an important aspect of the manufacturing process this is the most metric-intensive portion of the supply chain, where companies are able to measure quality levels, production output, and worker productivity
(1) integration
managing all of the enabling systems necessary to facilitate the complete integration of the operations, supply, and logistics functions outlined above
(1) logistics management
managing all of the movement and storage of products and materials within the supply chain, whether the flow is forward or reverse
(1) supply management
managing all of the supplies and suppliers that are needed to run the business
(1) operations management
managing internal resources
(1) the service supply chain is much more about __________________ than it is about managing the chain of supply
managing the relationships between the trading partners
(1) Current trends in SCM: risk management
many companies have started shifting supply chain risks such as holding inventory, upstream to their suppliers, and shipping finished products to customers immediately after production. supply chain risks can only be effectively mitigated by managing risk at each node in the supply chain.
(2) the factors that influence demand must also be considered when forecasting like
market changes, seasonality, competitive activity, pricing, changing customer preferences
(1) in the 1960s and 1970s, introduction of new computer technologies lead to development of
materials requirements planning (MRP) and manufacturing resource planning (MRPII)
(2) mean absolute error
measures the size of the error in percentage terms
(2) mean absolute deviation
measures the size of the forecast error in units
(2) the goal of forecasting and demand planning process is to
minimize forecast error
(2) trend variations
movement of a variable over time might be more easily observed by plotting actual demand on a graph over time to see whether there is an increase or decrease
(3) lot size
order size for mrp logic
(3) capacity planning
organizations must balance the production plan with capacity. this directly impacts how effectively the organization deploys its resources in producing goods there are three major capacity planning tools: resource requirement planning, rough-cut capacity planning, capacity requirement planning
(2) forecasting
organizations must have a formal forecasting process to develop an agreed upon set of numbers that becomes the driver for demand planning the business function that estimates future demand for products so that they can be purchased or manufactured in appropriate quantities in advance of need
(3) components
parts demanded by a parent
(3) single integrator solution
pick all the desired applications from a single vendor
(3) best of breed
pick the best application for each individual function
(1) SCOR Model: plan
planning establishes the parameters within which the supply chain will operate companies need a strategy for managing all of the resources necessary to address how a product or service will be created and delivered to meet the needs of their customers planning includes the determination of marketing and distribution channels, promotions, quantities, timing, inventory and replenishment policies, and production policies
(2) forecast error measurement
plays a critical role in tracking forecast accuracy, monitoring for exceptions, and benchmarking the forecasting process
(3) what is the purpose and goal of aggregate planning?
primary purpose is to establish production rates that will achieve managements objective of satisfying customer demand by maintaining, raising, or lowering inventories, while attempting to keep the workforce relatively stable meet demand use capacity efficiently meet inventory policy minimize cost
(1) pull or make-to-order
producing stock in response to actual demand
(1) push or make-to-stock
producing stock on the basis of anticipated demand. demand forecasting can be done via a variety of sophisticated techniques
(4) having too little inventory can result in effects like
production disruptions longer delivery replenishment lead times reduced responsiveness
(3) projected on hand inventory
projected closing inventory at the end of a period beginning inventory minus gross requirements, plus scheduled receipts plus planned receipts from planned order releases
(2) running sum of forecast errors
provides a measure of forecast bias indicates the tendency of a forecast to be consistently higher or lower than actual demand positive-too low/underestimating the demand negative- too high, overstating demand
(3) business plan
provides the companys direction and objectives for the next two to ten years
(4) raw materials
purchased items or extracted materials that are converted via the manufacturing process into components and products
(1) supply management elements includes
purchasing- responsibility for procuring materials, supplies, and services supplier management- improve performance through supplier evaluation, supplier certification strategic partnerships- successful and trusting relationships with top performing suppliers ethics and sustainability- recognizing suppliers impact on reputation and carbon footprint
(2) sales force estimation
qualitative forecasting method, basically the same as jury of executive opinion except that it is performed specifically with a group of sales people individuals working in the sales function bring sepcial expertise to forecasting becasue they maintain the closest contact with customers
(2) delphi method
qualitative forecasting method, basically the same of the jury of executive opinion except that the input of each of the participants is collected separately so that people are not influenced by one another this is done in several rounds until a consensus forecast is achieved
(2) customer survey
qualitative forecasting method, customers are directly approached and asked to give their opinions about the particular product customer surveys can be done in person, over the phone, by mail, email, or online
(2) jury of executive opinion
qualitative forecasting method, people who know the most about the product and the marketplace would likely form a jury to discuss and determine the forecast generally, the panel conducts a series of forecasting meetings to discuss the forecast until the panel reaches a consensus agreement
(2) personal insight
qualitative forecasting method, the forecast is based on the insight of the most experienced, most knowledgeable, or most senior person available sometimes, this approach is the only option, but methods that include more people are generally more reliable
(2) time series
quantitative forecasting method based on the assumption that the future is an extension of the past historical data is used to predict the future the most frequently used among all forecasting models
(2) cause and effect
quantitative forecasting method, assumes that one of more factors predict future demand
(4) what are the four main categories of inventory
raw materials work in process finished goods maintenance, repair and operatng
(1) Current trends in SCM: supply chain cost optimization
reducing purchasing costs, waste, excess inventory, non-value added activities. improving demand planning. increased outsourcing of non-core competencies
(1) supply chain management (SCM)
refers to a network of independent companies that work together and coordinate their actions to deliver a product(s) or service(s) to market for the benefit of all companies in the network. scm acknowledges all of traditional logistics activities and also includes aspects of activities such as marketing, new product development, finance, and customer service
(1) logistics
refers to activities that occur within the purview of a single organization traditional logistics focuses on activities such as inventory management, warehousing, distribution, and transportation
(3) pegging
relates the gross requirements for a component part to the planned order releases of the parent item, so as to identify the sources of the items gross requirements. pegging can be thought of as active where used information
(3) level production strategy
relies on a constant output rate while varying inventory and backlog according to fluctuating demand. firm relies on fluctuating finished goods and backlogs to meet demand works well for make to stock firms
(2) seasonal variations
repeating pattern of demand from year to year, or over some other time interval with some periods of considerably higher demand than others
(4) safety stock
safety stock, also known as buffer stock, is inventory that is above and beyond what is actually needed to meet anticipated demand a quantity of stock planned to e in inventory to protect against fluctuations in demand or supply companies operating in a make to stock environment will genearlly maintain some amount of safety stock whether based on a management decision, or based on a safety stock determination formula
(2) naive forecasting
sets the demand for the next period to be exactly the same as the demand in the last time period
(3) intermediate range supply chain planning
shows the quantity and timing of the end items
(2) weighted moving average
similar to a simple moving average except that not all hisotircal time periods are valued equally
(2) the two basic cause and effect models are
simple linear regression and multiple linear regression
(1) SCOR Model: source
sourcing is the process of identifying the suppliers that provide the materials and services needed for the supply chain to deliver the finished product(s) desired by the customer(s). this phase involves not only identifying reliable suppliers but also building a strong relationship with those suppliers supply chain managers must also develop pricing, shipping, delivery, and payment processes with suppliers and create metrics for monitoring and improving the performance
(1) supply chains are generally described as
spanning from end to end from your suppliers suppliers on one end, through your internal operations, and out to your customers-customers on the other end plan-source-make-deliver(return) and enable throughout all of these
(1) 2 basic supply chain capability models: efficient
supply chain and processes are designed to minimize cost predictable supply and low cost low cost production and highly utilized capacity high inventory turns ideal for functional products 1. understand the requirements of your customers 2. define core competencies and the roles of your company will pay to serve your customers 3. develop supply chain capabilities to support the roles your company has chosen
(1) 2 basic supply chain capability models: responsive
supply chain designed to respond quickly to market demand fast response minimal stock outs need flexible capacity inventory of parts minimize lead time need to have a variety of products available for customers when they want to buy ideal for innovative products
(1) integration elements includes
supply chain process integration supply chain risk assessment and mitigation supply chain performance measurement
(3) closed loop mrp
synchronizes the purchasing or materials procurement plans with the master production schedule the system feeds back information about completed manufacture and materials on hand into the mrp system, so that these plans can be adjusted according to capacity and other requirements the system is called a closed loop mrp because of its feedback feature
(1) logistics
that part of supply chain management that plans, implements, and controls the flow and storage of goods, from point of origin to point of consumption
(2) forecast error
the difference between the actual demand and the forecast demand. the error can be quantified as an absolute value or as a percentage
(3) independent demand
the external demand for an item that is unrelated to the demand for other items the demand for these items is forecasted and can be affected by trends, seasonal patterns, and market conditions
(4) inventory management
the goal of inventory management is to help a company be more profitable by lowering the cost of goods sold and or by increasing sales in an effort to achieve this stated goal, effective inventory management balances reducing the amount of inventory held in stock while ensuring there is enough inventory to satisfy customer demand
(3) dependent demand
the internal demand for items that are assembled or combined to make up the final product. demand for these items is calculated based on the demand for the final product in which the parts are used, by using the planning factor
(2) time series forecasting
the main purpose of a time series model is to collect and study the past data of a given time series in order to generate probable future values for the series in other words, forecasts for future demand rely on understanding past demand accordingly, time series forecasting can be characterized as the act of predicting the future by understanding the past
(3) planning factor
the number/quantity of each component or material needed to produce a single unit of the parent item
(3) mrp explosion
the process of converting a parents items planned order releases into component gross requirements
(4) the lowest inventory level at which a new order must be placed to avoid a stockout is known as
the reorder point
(1) lead time
the time it takes to deliver a product
(3) net requirement
the unsatisfied item requirement for a specific time period. gross requirement for period minus current on hand inventory
(4) maintenance, repair and operating supplies
these are materials that you need to run the manufacturing operaton and the business, but do not end up as part of the finished product
(4) finished goods
those items on which all manufacturing operations, including final testing, have been completed these products are available for sale and or shipment to the customer
(1) logistics management elements includes
transportation management- tradeoff decisions between cost and timing of delivery/ customer service via truck, rail, air, pipeline and water customer relationship management- strategies to ensure deliveries, resolve complaints, improve communications, and determine service requirements network design- creating distribution networks based on tradeoff decisions between cost and sophistication of distribution system
(2) a quantitative forecast should detect
trend variations, random variations, seasonal variations, cyclical variations
(3) time bucket
unit of time / time period used in MRP
(2) simple moving averages
uses a calculated average of historical demand during a specified number of the most recent time periods to generate the forecast
(2) quantitative forecasting
uses mathematical models and historical models to make forecasts time series and cause and effect
(1) Supply chain management delivers _______ by managing the processes of all of those independent trading partners so that they ________ with another in an efficient, effective, and cost conscious way
value, collaborate
(1) Nodes or links in the supply chain are connected by
warehousing and transportation collectively, these are referred to as logistics
(1) a supply chain is only as good as its
weakest link
(2) bullwhip effect
when a small demand ripple in the market place is felt by the retailer at the end of the supply chain, the retailer will then start adjusting their orders to the wholesalers, and the wholesaler in turn will adjust its orders to the distributor, the distributor to the factory, and so on back up the supply chain when the new demand reaches the material or componenets supplier at the other end of the supply chain, the magnitude of fluctuation becomes unrecognizable an overreaction due to uncertainty occurs throughout the entire supply chain
(2) demand planning
where management and other experts within the company review the forecast to ensure that it is alligned with the companys strategy, business policies, and business knowledge, and make adjustments if necessary