SCM

Question 1

The supply chain of a manufacturing company is..

Answer 1

..the network of other businesses that provide it with
materials, energy, and outsourced services on one side, and arrange for its products to reach end users on
the other.

Question 2

Supply chain management (SCM) is the art of..

Answer 2

..designing, negotiating, and running these
external relationships that are vital as they are directly related to what a company spends and collects in
revenue.

Question 3

Definition:
SCM

Answer 3

SCM is the integration of key business processes from end-user through orig-
inal suppliers that provides products, services, and information that add value
for customers and other stakeholders.

the term SCM has been expanded to include the whole
“end-to-end” (E2E) chain from raw materials to consumption by end-users.

Recently, the term “closed-loop supply chains,” or the broader “circular economy,”
has been used to include the recycling or reuse of materials.

Question 4

The SCOR framework

Answer 4

The SCOR framework in Figure 14.1 separates supply chain partners and five generic processes:
* Plan. Balancing demand and supply. The aim is to develop a feasible plan to meet
sourcing, production, and delivery requirements.
* Source. Procurement of goods, parts, and services.
* Make. Manufacturing of goods, including internal logistics.
* Deliver. External logistics, including order management, transportation management,
and distribution management.
* Return. Returning upstream or receiving downstream returned products. These pro-
cesses extend into post-delivery customer support.
* Enable. “Managing” the supply chain, including agreeing on business rules, perfor-
mance management, data management, resources, facilities, contracts, supply chain
network management, managing regulatory compliance, and risk management.

For each of these processes, the SCOR frameworks include high-level standards and “best
practices” of conducting the processes. SCOR also offers suggestions for how to measure
and follow up processes in the supply chain. As any standard, SCOR often struggles to cope
with the complexity and variation at firm level. Yet, it offers a common vocabulary to discuss
supply chain issues across the tiers in a supply chain.

Question 5

Vertical disintegration

Answer 5

When an industry is new, vertical integration is the only option because there are no sup-
pliers available. As it grows, the managers in charge of the end products tend to assume control of the
company, leaving those in charge of components or equipment in a support position.

Question 6

At a point in the maturation of the company, either the company spins off its component divisions or
the managers and engineers of these component and equipment divisions may leave to start their own
companies. Beyond this point, the internal divisions, if they still exist, struggle to stay competitive with
external suppliers who have several advantages:

Answer 6

1 They spread the development costs of new technology over multiple customers.
2 They are run by managers who better understand and are focused on their specific business.
3 They are better able to attract new managerial and technical talent to this activity.
4 In many cases, like electronics, automotive, or aerospace parts, they have lower labor costs.

Question 7

multi-tiered supply chains have proven that they are more..

Answer 7

..flexible and
resilient than a vertically integrated company.
During booms, the customer company can grow without
investing in capacity for components and machinery. During recessions, companies in the different tiers
can adopt different survival strategies. To avoid layoffs, customer companies may bring some compo-
nent production back in-house, while suppliers may diversify and enter markets that are less affected by
the recession.

Question 8

Supply chain coordination and orchestration

Answer 8

In reality, SCM is not really management. No firm manages the whole end-to-end supply chain. They
manage their own activities within the supply network. The rest of management is really coordination
activities between the firms.

Question 9

Definition: supply chain orchestration

Answer 9

The task of coordinating
the whole supply chain, when left to one powerful partner, is called supply chain orchestration.

Question 10

Why is SCM such a difficult task? There are problems both upstream and downstream.

Answer 10

• Downstream. A manufacturer’s network of distributors and dealers often blocks the view of the
  market of end-users, which has driven the separation between a marketing function communicat-
  ing with end-users and sales that interacts with direct buyers.
• Upstream. Suppliers, on the other side, are generally not keen to grant their customers access to
  their own suppliers. The supply network has a tier structure. The manufacturer buys from tier-1
  suppliers, who buy from tier-2 suppliers, who buy from tier-3 suppliers, etc., all the way to a pri-
  mary supplier who mines, harvests, or recycles basic materials.

Question 11

global production and logistics

Answer 11

problems both upstream and downstream, Trade agreements,
corporate tax policies, dynamic political environments, weather, war, pandemics, strikes, material short-
age, and other local and global events add complexities to supply chain management.

Question 12

Manufacturers can use various strategies to better keep their fingers on the pulse of the market

Answer 12

including selling directly to end-users, using a pull system with dealers, or setting up online support resources for end-users. To gain more visibility into the upstream supply chain, manufacturers can use purchasing power, if they have it, or negotiate reciprocal transparency and cooperation.

Question 13

In order to understand the structure of supply chains, it is advisable to..

Answer 13

..map and visualize them.
Mapping a complete supply chain is a daunting task and often not necessary. Maps are summaries of a multidimensional reality drawn for a purpose, like navigating a road network or a subway system, and they omit the details.

Question 14

Focal plant/firm

Answer 14

The factory we are mapping for.

Question 15

Vertical structure

Answer 15

How “broad” the supply chain spans.

Question 16

Horizontal structure

Answer 16

The “length” of the supply chain from raw materials to consumption,
which can be measured on number of tiers.

Question 17

Horizontal position (of focal plant/firm)

Answer 17

The location of the focal plant in the horizontal net-
work structure.

Question 18

Downstream

Answer 18

Moving to the right in the map means moving “downstream” towards the
end-customer.

Question 19

Upstream

Answer 19

Moving to the left in the map means moving “upstream” towards the raw material.

Question 20

MIFA

Answer 20

Materials and Information Flow Analysis = represent flows of materials and data on the same map

In 1998’s rebranded the MIFA graphic convention as
“Value Stream Mapping” (VSM) and promoted it as a tool to apply to all the production activity of a factory as a way to identify improvement opportunities.

Question 21

If a
link in the supply chain is malfunctioning, with late deliveries of wrong items in wrong quantities, then..

Answer 21

..mapping the details of data exchanges and movements of materials provides a basis of discussion between supplier and customer, leading to a solution.
Use eKanban?

Question 22

Remedy/ Remedies

Answer 22

Abhilfe, Lösung, Gegenmittel

Question 23

The bullwhip effect

Answer 23

Small fluctuations in consumer demand cause increasingly larger variations in orders and inventory levels upstream.

Question 24

The bullwhip effect: A manufacturer can do the following

Answer 24

1 Find out from the customer what the underlying stable demand for finished goods is.
2 Produce at this rate.
3 Maintain a finished goods inventory to absorb the fluctuations in orders.
4 Make the customer aware of the savings that can be achieved by eliminating these artificial fluc-
tuations and the finishing goods stocks.

Question 25

VMI

Answer 25

Vendor-managed inventory

Question 26

What is Vendor-managed inventory?

Answer 26

Vendor-managed inventory (VMI) is a supply chain strategy where the supplier takes full responsibility for managing inventory levels at the customer’s location, using access to the customer’s inventory data to replenish stock as needed, often through consignment or pay-per-build arrangements. - it is not a zero-inventory system.

Question 27

The extent to which the vendor manages the inventory varies:

Answer 27

* The customer makes the data about the supplier’s products in the inventory database accessible. The supplier monitors the quantities on hand and makes deliveries as needed to keep it within agreed-upon bounds. The materials from this supplier are received like other materials by the customer, and the supplier issues invoices together with advanced shipping notices (ASN). * In addition to deciding when to replenish, the supplier takes charge of physically maintaining stores of the parts or materials on the customer’s shop floor. Like for food vending machines in factories, supplier representatives are allowed onto the shop floor. The supplier retains ownership of the materials until they are used.

Question 28

How technical are VMI (2 types)

Answer 28

VMI can range from high-tech systems with remote inventory monitoring and secure online databases to simpler consignment/pay-per-build setups that require minimal IT involvement, potentially saving customers significant costs

Question 29

JITD

Answer 29

ust-in-time distribution e.g. Barilla, so that Barilla would know in real time which products needed replenishment. Distributors were never happy to have others manage their stocks but accepted JITD because it was cost effective.

Question 30

Pull systems are about..

Answer 30

..replenishment, not order fulfillment. The signal to produce or deliver the amount of an item that has just been consumed is issued based on the assumption that the same amount will shortly be needed again, which is a naive, short-term forecast.

Question 31

naïve forecast

Answer 31

assumes that the future will be identical to the present, and, under the right cir- cumstances, cannot be substantially improved upon by more sophisticated methods. If the sun shines in a cloudless sky now, the naïve forecast that it will still do so in half an hour is about as accurate as a weather forecast can be. The accuracy of the naïve weather forecast, however, drops dramatically if the sky is not cloudless or the horizon lengthens to a day or a week. **short-term**

Question 32

replenishment lead time

Answer 32

In a pull system, the term of the implicit forecast is the replenishment lead time, which may range from 15 minutes to 1 week. This raises the following questions: 1 What are the constraints on the downstream process for the naïve forecast to be accurate? 2 Can more sophisticated forecasting methods improve the results?

Answer 33

pull systems go hand in hand with leveled sequencing.

Question 34

Definition: Pent-up demand

Answer 34

Pent-up demand occurs when consumers suddenly need a product they didn’t know they wanted until it becomes available, causing a demand surge that later levels off. This creates challenges for pull systems due to unpredictable and rapidly changing demand, which isn’t caused by poor scheduling but by market dynamics. To handle this, systems may need to adjust signal quantities dynamically based on recent trends, although this depends on the type of signaling used. While forecasting tools can help, understanding how to apply them is crucial. Experts warn against misapplying “dynamic pull” methods without deep knowledge of pull systems.

Question 35

Little’s law

Answer 35

from ChatGPT: Little’s Law states that the average number of items in a system (L) is equal to the average arrival rate (λ) multiplied by the average time an item spends in the system (W), or L = λ × W.

Question 36

Time-series analysis techniques

Answer 36

to forecast demand in the near future based on the recent past