Chapter 16 Objectives

1. What is a supply chain?

- Sequence of organizations (facilities/functions/activities) that are involved in producing and delivering a product or service.

2. What is the need to manage a supply chain and what are some of the benefits of doing so?

- Needs: need to improve operations, increasing levels of outsourcing, increasing transportation costs, competitive pressures, increasing globalization, increasing importance of e-commerce, complexity of supply chains and need to manage inventories

- Benefits: lower inventories, lower costs, higher productivity, greater agility, shorter lead times, higher profits and greater customer loyalty

3. What are some of the elements of supply chain management?

- Customers, Forecasting, Design, Capacity planning, Processing, Inventory, Purchasing, Suppliers, Location, Logistics

4. What is the bullwhip effect and why does it occur?

- Bullwhip effect: inventories become larger looking back through the chain from the final customer toward to beginning of the supply chain. * Increases inventory costs and final costs.

5. What is inventory velocity and why is it important and what is information velocity and why is it important?

- Inventory velocity is the rate at which inventory goes through the supply chain. It is important because the quicker materials pass through the supply chain, the lower the inventory costs will be and the quicker the products and services will be delivered to the customer.

- Information velocity is the rate at which information is communicated in a supply chain. The quicker the information is available to decision makers, the better their decisions will be in planning and coordinating their parts of the supply chain.

6. What is strategic partnering?

- Two or more business organizations that have complementary products or services join so that each may realize a strategic benefit.

7. What impact has e-commerce had on supply chain management and what are some of the advantages?

- Interaction of different business organizations as well as the interaction of individuals with business organizations.

- Internet buying and selling, e-mail, order and shipment tracking, electronic data interchange, promoting products and services

8. What are some of the trade-offs that might be factors in designing a supply chain?

- Lot size-inventory trade off, Inventory-transportation cost trade-off, Lead time-transportation trade-off, Product variety-inventory trade-off, Cost-customer service trade-off (details on page 711 and 712)

9. Why is supply chain visibility important?

- Def: a major trading partner can connect to its supply chain to access data in real time.

- Important for tracking inventory levels, shipment status and etc.

10. What is CPFR?

- A supply chain initiative that focuses on information sharing among supply chain trading partners in planning, forecasting and inventory development.

11. Describe how purchasing interacts with two other functional areas of an organization.

- Accounting: responsible for handling payments to suppliers and must be notified promptly when goods are received in order to take advantage of possible discounts.

- Operations: constitute the main source of requests for purchased materials. (Pg713)

12. Describe value analysis.

- Examination of the function of purchased parts and materials in an effort to reduce cost and/or improve performance.

13. Discuss centralization and decentralization in purchasing? What are some advantages of each?

- Centralization: purchasing is handled by one special department. It obtains lower prices, better service and closer attention to suppliers and enables companies to assign certain categories of items to specialists.

- Decentralization: individual departments or separate locations handle their own purchasing requirements. It has the advantage of awareness of differing “local” needs and being better able to respond to those needs. It also offers quicker response systems.

14. What is vendor analysis?

- Evaluating the sources of supply in terms of price, quality, reputation and service.

15. Describe supplier certification.

- It is a detailed examination of the policies and capabilities of a supplier. The process verifies that a supplier meets or exceeds the requirements of a buyer.