Supply Chain Management test 1

Production units

: manufacture, assemble or process

Profit-Leverage effect

A decrease in purchase spend directly increases profits before taxes (assuming no decrease in quality or other expenditures)

Insufficient capacity

A reason for buying: A firm may be at or near capacity and subcontracting from a supplier may make better sense

Cost advantage

A reason for buying: Especially for components that are non-vital to the organization's operations, suppliers may have economies of scale

Lack of expertise

A reason for buying: Firm may not have the necessary technology and expertise

Quality

A reason for buying: Suppliers have better technology, process, skilled labor, and the advantage of economy of scale

Forward vertical integration

Acquiring customers

Backward vertical integration

Acquiring sources of supply

Purchasing contributes to these objectives by:

Actively seeking better materials and reliable suppliers, Working closely with and exploiting the expertise of strategic suppliers to improve quality and materials Involving suppliers and purchasing personnel in new product design and development efforts.

Who succeeds

All participants in the supply chain benefit

Boundaries

Boundaries are dynamic and extend from "the firm's suppliers' suppliers to its customers' customers (i.e., second tier suppliers and customers)."

Keys to Successful Partnerships

Building Trust, Shared Vision & Objectives, Personal Business Relationships, Mutual Benefits & Needs, Commitment & Top Management Support, Change Management

Outsourcing

Buying materials and components from suppliers instead of making them in-house. The trend has moved toward outsourcing

Supply Chain Managememt

Connected by transportation and storage activities, and Integrated through information, planning, and integration activities

Logistics element

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

Supply Chain Performance Measurement

Crucial for firms to know if procedures are working as expected

Descriptive

Describe/understand what happened in the past using descriptive statistics and visualization techniques

Today

Emphasis is being placed on the data-driven solutions, environmental and social impacts of supply chains

The primary goals of purchasing are

Ensure uninterrupted flows of raw materials at the lowest total cost, Improve quality of the finished goods produced, and Maximize customer satisfaction

2000s and Beyond

Evolution along 2 parallel paths 1. Supply management emphasis from industrial buyer 2. Logistics and customer service emphasis from wholesalers and retailers

inclue

Facilities,Inventory, Transportation, Sourcing, Pricing, Information

Players in agribusiness supply chain

Farmers, Input providers (seeks, chemicals, nutrients), Food producers and manufacturers, Transportation and logistics providers, Sales markets (wholesaler, retailer)

The Make-or-Buy Break-Even Analysis

Find break-even point Q by setting total cost of both options equal and solving for Q:

Strong supplier partnerships

Important to achieving win-win competitive performance for the buyer and supplier -- these require a strategic perspective as opposed to a tactical position

Reverse logistics

Includes product returns, recycling and material reuse, and waste disposal

Inventory Turnover Effect

Increased inventory turnovers indicate optimal utilization of space and inventory levels, increased sales, avoidance of inventory obsolesce

Return on Assets (ROA) Effect

Indicates how efficiently management is using its total assets to generate profits. A high ROA suggests that management is capable of generating large profits with relatively small investments.

1960s-1970s

Introduction of new computer technologies lead to development of Materials Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) to coordinate inventory management and improve internal communication

Inventory

Inventory encompasses every stage of agribusiness supply chain: farming, processing, manufacturing, warehousing, transportation and sales

Supply Chain Visibility

Knowing exactly where products are, at any point in the supply chain

Challenges in Agribusiness Supply Chains

Managing post-harvest losses due to the perishable nature of agricultural products, and poor planning of farming, production, and operations of processing, warehousing and transportation

Transportation

Moving agri-goods throughout the supply chain to customers. Choose best transportation option at each stage to balance cost efficiency and responsiveness

Reasons Favoring Two or More Suppliers

Need capacity, Reduce risk of supply disruption, Create competition, Information, Dealing with special kinds of business

Reasons for Global Sourcing

Opportunity to improve quality, cost, and delivery performance

Supplier selection (cont.)

Order system & cycle time, Cost (Total cost of ownership or acquisition), Capacity, Communication capability, Location, Service

Perishability

Perishable nature of materials, semi-finished and finished foods must be considered. Both quality and value is a decreasing function of time

Predictive

Predict/forecast what will happen in the future using statistics, econometrics, machine learning techniques

Prescriptive

Prescribe/recommend what to do and act, and provide decision-support using optimization (math programming, metaheuristics)

Supplier selection

Product and process technologies, Willingness to share technologies & information (Early supplier involvement (ESI)), Quality, Reliability

Reasons for making

Protect proprietary technology , No competent supplier, Better quality control, Use existing idle capacity, Control of lead-time, transportation, and warehousing costs, lower cost

Industrial Buyers

Purchase raw materials for conversion, services, capital equipment, & MRO supplies

A supply chain management consists of

Raw materials manufacturers, Component and intermediate manufacturers, Final product manufacturers, Wholesalers and distributors, and Retailers

Global sourcing Potential Challenges

Requires additional skills and knowledge to deal with international suppliers, logistics, communication, political environment, and other issues

e-Procurement

Step 1- Material user enters a purchase request Step 2- Purchase requisition approved and transmitted electronically to buyer Step 3- Buyer reviews requisition, assigns qualified suppliers to bid (if over $50,000) Step 4- Buyer reviews closed bids & selects a supplier

Seasonal Supply

Supply is highly seasonal due to seasonal inputs Facility and process capacity needs to be high and the ability to carry large stocks is important

Foundations of Supply Chain Management

Supply, Operations, Logistics, integration

What is Supply Chain Management?

The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities ... also includes coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.

Focus on improving supply chain capabilities with initiatives such as

Third-party service providers (3PLs), Integrating logistics , Client/server SCM software - Enterprise Resource Planning

Reasons Favoring a Single Supplier

To establish a good relationship, Less quality variability, Lower cost, Transportation economies, Proprietary product or process purchases, Volume too small to split

1950s-1960s

U.S. manufacturers focused on mass production techniques as their principal cost reduction and productivity improvement strategies

Bulkiness

Wherever the material is of bulkiness in nature, it is often better to locate processes closer to the farm gates than to the consumption points

Merchants

Wholesalers and retailers who purchase for resale

Sustainability

ability to meet the needs of current supply chain members without hindering the ability to meet the needs of future generations

Warehouse-Stocking point (distribution center):

backward and forward linkages between pairs of nodes in the network

Purchasing process

begins with a request (or an order) for goods or services and ends with payments to the vendor.

Agribusiness

complex system that includes all the processes and activities needed to bring food to the customer

Supplier evaluation

determining supplier capabilities

Traditional organizational cultures

emphasized short-term, company focused performance can conflict with the objectives of supply chain management

sustainability performance

enhance processes reduce costs increase productivity uncover product innovation achieve market differentiation improve societal outcomes

Supply Chain Analytics

examining raw supply chain data and reaching conclusions or making predictions with the information

Third party logistics providers (3PLs)

for hire outside agencies providing transportation and services

Pricing

impacts both the demand in the food market, and the farmers' supply of agri-food

Supplier management

improve performance through Supplier evaluation and Supplier certification

Purchasing

key business function for acquiring materials, services, & equipment

Supply chain drivers

key to the performance of supply chain. They ensure a balance between responsiveness to customers and efficiency in the supply chain

Demand management

match demand to available capacity

Sourcing

plays a key role in agribusiness supply chains Including: Vendor selection, Engineering and configuring products with vendors, Strategic supplier relationship management

Successful supply chain management

requires high levels of trust, cooperation, collaboration, and honest, accurate communications

Strategic partnerships

successful and trusting relationships with top-performing suppliers

Triple bottom line

taking care of people, planet and profits

Contracting

term often used for the acquisition of services

Data-driven solutions

the use of various analytical methodologies and tools for making better supply chain decisions

Supplier certification

third party or internal certification to assure product quality and service requirements

Transportation management

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

Supply Chain Process Integration

when supply chain participants work for common goals. Requires intra-firm functional integration, with efforts to change attitudes & adversarial relationships