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Flashcards in EXAM1 Deck (38):

Difference between Supply Chain, Operations, and Supply Chain and Operations

Supply chain management

    • Cooperation between different firms to create value for customers

Operations management

    • Administration of transformation processes that create value for customers by meeting their needs or enabling them to meet their own needs

Supply Chain and Operations (SC&O)

    • Emphasizes the linkages between firms that tie operations together with the goal of satisfying customers


Process design, management, control, and improvement


    • Means by which all work is performed

Process Design

    • Configuring inputs and resources in a way that provides value, enhances quality, and is productive

Process Management

    • The act of executing and controlling the productive functions of a firm

Process Control

    • The act of monitoring a process for its efficacy (Produce desired result), Process Improvement • Proactive effort to enhance process performance


Supply chain globalization strategies

Licensing – Sale of the same product with another trademark

Strategic Alliances – Forming business alliances with suppliers

Globalization – Establishing production and marketing facilities in foreign countries


Outsourcing and Nearsourcing


    • Process of moving the production of an item to another firm or producer


    • Production of a component or product is moved geographically closer to where it was originally produced




    • The proactive management of resources in an effort to be environmentally friendly


Difference between supply chain management and operations management

Supply Chain Management

    • Multiple firms working together to create value

Operations Management

    • Transformation of a single firm to create value


Primary flows of a supply chain

Upstream – Suppliers

Downstream – Consumers

Product Flows

    • Upstream to downstream

    • Reverse logistics – products move up the supply chain Monetary Flows

    • Downstream to upstream, unidirectional

Information Flows

    • Bidirectional, data flows


Service supply chain complexity

Many upstream suppliers and downstream consumers

Many to many relationship

Customers are also suppliers


Combining supply chain and operations

• Suppliers have transformation processes (operations) and the producing firm has transformation processes.

• Transformative processes of upstream suppliers are tied by supply chain and logistics activities to producers who have the same



• Effectively managing core processes that affect customers

• Managing core processes satisfy the customers



• The act of making processes, products, and people better

• A process, not a single event

• Result of effective process management and design



• Large-scale, sudden improvement, that has a dramatic effect on business results

• Incremental and continuous

• Necessary for firms to compete effectively



  • Collaboration and integration between all stakeholders in a supply chain
  • Includes suppliers, operations people planners, …
  • Results in streamlined communication, information sharing, and improved management outcomes
  • One of the best ways to manage complexity


Upstream vs Downstream Collaboration

Upstream – Strategic sourcing or purchasing, supplier selection and development, tco

Downstream – Customer relationship management


Porter’s Generic Strategies

Focus Strategy

    • Seek to service only select customers and provide these niche customers with a narrow range of unique products and services

    • Amazon

Differentiation Strategy

    • Seek to provide such distinctive products or services that competitors cannot compete with them

    • Apple


    • Seek ways to reduce costs and provide customers with lower prices than competitors

    • Walmart


Fischer’s Supply Chain Alignment Model

Efficient Supply Chains

    • Functional Products (Mass produced toaster) Responsive

Supply Chains

    • Interactive Products (Haircut)


Agility and adaptability


    • The ability of a supply chain to quickly respond to short-term changes in demand or supply



    • Capturing the value of long-term changes

    • Capability to adjust a supply chain’s design to meet major structural shifts in the market


Order winners and qualifiers

Order Winner

    • Those attributes that differentiate a company’s products

    • How the firm wins orders


Order Qualifiers

    • Those necessary attributes that allow a firm to enter into and compete in a market, and a firm’s strategy must account for these necessities


Resource-based view

Competitive advantage come from applying tangible and intangible resources to operate effectively

Capabilities’ Four Core Aspects

    • Four specific aspects to capability that provide a company with a core competency


    • 1 – Value – valuable to customers

    • 2 – Rarity – competitive advantage because competitors cannot utilize these resources

    • 3 – Imitation-proof – resources that cannot be recreated or reverse engineered because of uniqueness

    • 4 – Substitution-proof – resources cannot be easily replaced


Core competency

Core Competencies

    • Hone only those capabilities that tie most closely to their customer values and that provide companies with a unique competitive advantage


Reverse logistics

Reverse Logistics

    • The ability of a company to move product upstream while managing waste streams in an effort to reduce the cost of the waste stream or make the waste stream profitable

    • Reduction, reuse, and recycling

    • Reduction – elimination of waste before waste occurs

    •   Reuse – reusing part or all of an object

    • Recycling – breaking down used items to reuse base materials


Dynamic capabilities

Dynamic Capabilities and Retaining Value

    • Capabilities that win customers one day may not win the same customers the next day

    • Dynamic Capabilities – firm’s ability to integrate, build, and reconfigure internal and external competencies to address rapidly change


Types of relationships: transactional, complementary, synergistic

Transactional Relationships

    • Firm that pursues a cost advantage through its supply chain partners, to find the lowest-cost providers for supplies

    • Arm’s length, bidding


Complementary Relationships

    • Occurs when a company that clearly understands its core competencies needs another firm’s competencies so as to maintain world-class service

    • Combining core competencies


Synergistic Relationship

    • Relationship between two companies that are committed to work together in a way that the result is greater than the sum of the individual parts

    • Sum


Calculate the “Economics of Purchasing” problem (pg 149-150)



Impact of quality on profitability

Higher Perceived Value

Increased Market Share

Lower Transformation and Defect Costs


Portfolio approach to strategic sourcing o How to identify portfolio types o Recommended management strategies

Routine Items

    • Low value, purchased in small volumes, individual transactions

    • Automate the purchasing process, Simplify process


Leverage Items

    • Potential to affect profit, High level of expenditures while having many suppliers

    • Contract with suppliers to maximize commercial advantage


Bottleneck Items

    • There are few alternate sources of supply (complexity, new technologies, untested process) and low profit impact

    • Ensure supply, Search for alternatives


Critical Items

    • Big effect on profitability with few qualified suppliers

    • Form alliances and prepare contingency plans


Portfolio Pic


Strategic Cost Management

• Involves four types of analyses: spend analysis, price analysis, cost analysis, and total cost of ownership analysis


Spend Analysis

• Review of a firm’s entire set of purchases

• Answers – What is the firm spending its money on?

• Done at both aggregate and detailed levels

• Spend is categorized as direct, indirect, and capital

• Useful in categorizing purchases into the portfolio model quadrants


WHEN TO USE - What is the firm spending money on?


Direct Spend Category

• Any material or service that is part of the final product


Indirect Spend Category

• All the spend that supports the operations of a firm

• Everything from cafeteria services to spare parts for factory equipment


Capital Spend

• All spend for buildings and large equipment anything that will be depreciated


Spend Analysis can be used to Determine

• If a firm received the correct number of products and services given, what if paid for them

• Which suppliers received the majority of the business and if they charged an accurate price across divisions

• If opportunities to combine volumes and spending for different business groups, standardize product requirements, reduce the number of suppliers, or take advantage of market conditions to receive better pricing


Price analysis

• Process of comparing supplier prices against one another or against external benchmarks

• Useful when there are many suppliers, purchases categorized as either routine or commodities

• Primary challenge – comparing items with the same specifications, quality levels, lead times, warranties, and so on

• Common difference comes in payment terms



WHEN TO USE - comparing suppliers


Cost analysis

• Analyzing each of the individual cost elements that make up the final price

• Use when price analysis is impractical or when price analysis alone does not allow a buyer to reach the conclusion that a price is fair and reasonable

• Use when there are few alternatives to sources of supply (Bottleneck/Critical categories)


WHEN TO USE - you can't use price analysis


Total Cost of Ownership Analysis

Total Cost of Ownerships (TCO)

    • Combination of all costs involved in a product

    • To include all costs in your analysis of a purchase, not just purchase price

    • Applies to all the quadrants of the portfolio model


TCO Cost Categories

    • Acquisition Costs: identifying, selecting, ordering

    • Ownership Costs: quality and maintenance

    • Postownership Costs: customer’s use and disposition of the purchased item


Calculate an effective price with differing payment windows (price analysis)

1. Calculate difference in days

2. Calculate daily cost of capital x%/365

3. Days * Daily Cost * Price

4. Price + 3


Profit Margin

Net Income / Sales