Supply Chain Management and Purchasing Flashcards

Question

Explain the reason for value advantage

Answer 1

If can’t distinguish product from competitors => viewed as commodity => sale goes to cheapest supplier Therefore important to add additional value to your offering to distinguish it from the competition. The customer defines value.

Answer 2

Value advantage is based on Maslow’s pyramid of motivation (so customer needs). Basic needs => trust, security Security => technical support Social motives => customer club Myself-motives => after sales service, image Self-realisation => different products

Answer 3

Hybrid strategy = combine value advantage with cost advantage Ongoing and increasing competition => need to operate with low cost AND offer high value advantage. Low value advantage, low cost advantage = commodity market Low value advantage, high cost advantage = cost leader High value advantage, low cost advantage = service leader High value advantage, high cost advantage = cost and service leader (hybrid strategy)

Answer 4

Mass-customisation like dolzer suits or individual levi's jeans Platform-strategies like having the same platform for the Porsche Cayenne and Volkswagen Tuareg.

Answer 5

Depends on attributes: Q-PRIVS 1. Quantity needed in each lot: emergency orders have low volume 2. Price: emergency order is less sensitive to price 3. Response time that customers are willing to tolerate: Must be short for an emergency order 4. Desired rate of innovation in the product: customers at high-end department stores expect a lot of innovation and new designs in store apparel 5. Variety: wide range allows “one-stop shopping” 6. Service level required: Emergency order customer expects high availability

Answer 6

It is a good tool to identify success-potential of a company. ``` Secondary activities (ICHTP): • Infrastructure of the company ``` * Human Resources * Technology Development * Procurement Primary activities (IOMOS): Inbound logistics => Operations => Marketing and sales => Outbound logistics=> Service Right-hand side: Margin

Answer 7

SUROQ-SHILV * Handle supply uncertainty. * Respond to wide ranges of quantities demanded * Meet a very high service level * Build highly innovative products * Meet short lead times * Handle a large variety of products

Answer 8

High responsiveness generally means high cost. Questions: Can we improve responsiveness without cost-increase? Is an efficient supply chain sufficient?

Answer 9

Long lead time and predictable: LEAN (used to be the focus) Short lead time and predictable: continuous replenishment, Kanban Short lead time and unpredictable: Agile - quick response to customer needs (new focus) Long lead time and unpredictable: Hybrid - de-couple through postponenment (customise late). This is LEAN, then agile following order penetration.

Answer 10

Source - make - deliver - return Dimensions (SEF): Social: health (incl psychological), worker safety, training Environmental: CO2 footpring, scarce resources, dispose hazardous materials Financial: fair wages, fair tax, health insurance

Answer 11

* Customer markets: More and more marketplaces become “customer markets” – supply is higher than demand * Demanding quality and service: Customers are becoming more demanding, not just of product quality, but also of service. * Commodity markets: More and more markets become “commodity” markets, where the customer perceives little technical difference between competing offers. Differential advantage comes from customer service. * Price competitive markets: Most markets are more price competitive than a decade ago. Prices in shops fall, prices of components, raw materials and industrial products follow the same downward pattern. * Global competition: New global competitors with low-cost manufacturing bases entered the marketplace. * Removed trade barriers: Removal of barriers to trade enabled new players to rapidly gain ground, leading to overcapacity in many industries. * Price comparison with internet: Price comparison became much easier with the internet, driving down prices. The challenge to business is to find new opportunities for cost reduction and service improvement. The old cost cutting methods with not be able to solve this dilemma.

Answer 12

* Reaching the customers/preferred by customers * Low cost for the company * Low transaction cost * Low stock channels * Margin (profit) of the channel * Provides a competitive edge – e.g. Edeka – deliver groceries Today => multi-channel management

Answer 13

hp: Through re-sellers DELL: Direct sales Gateway: Gateway country store for customers to examine the goods, but direct shipping.

Answer 14

Advantages: * Ability for customers to test and consult store personnel * No wait time to receive products * Customised price possible. Disadvantages: * Must share 20-50% of the profit with the resellers * Stock needed

Answer 15

Advantages: * No profit sharing * No stock needed Disadvantages: * Customers can’t test the product or consult. * Customer must wait to receive the product

Answer 16

Advantages: * No profit sharing * Limited stock needed for the Gateway store * Ability for customers to test the product and consult store personnel Disadvantages: • Customer must wait to receive the product

Answer 17

* Customer needs * Response time * Product variety * Product availability * Customer Experience (internet and in shop), e.g. Nespresso - exclusive * Order visibility (tracking and tracing, especially B2B) * Returnability (Aldi computer, internet business…) * Balanced with cost of meeting customers’ needs – more facilities means: o lower response time o higher inventory o decreasing, then increasing transport costs.

Answer 18

* Will product be delivered to the customer location or picked up from a preordained site? * Will product flow through an intermediary (or intermediate location)?

Answer 19

* Manufacturer storage with direct shipping (ebay) * Manufacturer storage with direct shipping and in-transit merge (Amazon) * Distributor storage with package carrier delivery (e.g. Rieger furniture) * Distributor storage with last mile delivery (e.g. food boxes, milk run) * Manufacturer/distributor storage with customer pick-up (Quelle) * Retail storage with customer pick-up (Ikea)

Answer 20

* Retailer only takes order. No inventory – e.g. virtual retailer ebay * Direct shipping from manufacturer warehouses to customer location * IT investment necessary for information flows * MTO possible e.g. ebay

Answer 21

* Virtual retailer only takes order * In-transit merge combines pieces of the order coming from different locations so customer gets a single delivery * Cheaper but slower * MTO possible e.g. Amazon

Answer 22

* Inventory is held by retailer, not manufacturer, for fast-moving parts * Retailer delivers to customer. * Higher level of inventory due to aggregated demand uncertainty e.g. Rieger - furniture

Answer 23

* Inventory held by distributors * More warehouses needed for last-mile delivery * Minimum order required E.g. vege boxes, milk run

Answer 24

* Inventory held at manufacturer/distributor warehouse * Customers order online/by phone * Customers come to designated pickup points to collect their orders e.g. Quelle shops

Answer 25

* Inventory held locally at retail stores * Customers place order in store / online / by phone * Customers pick up their orders at the retail store e.g. Ikea

Answer 26

TROCSIT * Keep transportation costs low * Provide desired response times of 1-2 days * Serve as one-stop shop for smaller OEMs (original equipment manufacturers) – by stocking goods from multiple suppliers * Hold centralised safety stock => channel can operate with much lower safety stock * Use in-transit merge to reduce transporting costs – when moving parts of 2 manufacturers to the customer in one load.

Answer 27

* Strategic factors: cost leadership, responsiveness, variety…define the strategic role of facilities! * Technological facts: characteristics and availability of technologies, fixed costs of technology, flexibility of production technology * Macroeconomic factors: tariffs and tax incentives, exchange rate and demand risk * Political factors: stability, rules of commerce well defined, clear and independent legal systems * Infrastructure factors: availability of sites and labor, airports, seaports, highways, railway * Competitive factors: positive externalities (locating together), locating to split the market * Customer response time: convenience * Logistics and facility costs: total logistics costs = inventory + transportation + facility costs

Answer 28

* Facilities have an enduring impact on a firm’s performance * Cultural implications: the distance between facilities has an impact on communication * Quality of life issues influence the availability and morale of the workforce * Tariffs and tax incentives often overcome all other cost factors combined (e.g. BMW and Mercedes facilities in the USA)

Answer 29

Supply-Chain Operations Reference-Model

Answer 30

SCOR supports the implementation of supply-chain improvements by: * Giving orientation to capture the “as-is” state of supply chain processes (checklist of what to look for) * Describing the desired “to-be” future state of supply chain processes * Preparing different companies for benchmarking activities (clear definitions) * Proposing supply chain metrics for performance measurement, MbO (clear definitions)

Answer 31

Left – Suppliers, Right - Customers Top (Plan): P1 Plan Supply Chain (top) Below top: P2 Plan Source, P3 Plan Make, P4 Plan Deliver, P0 Plan Infrastructure (arrows going up) Lower level: Source, Make, Deliver Source: S1 Source Stocked Products, S2 Source MTO Products, S3 Source ETO Products, S0 Source Infrastructure (arrows going up) Make: M1 Make to Stock, M2 Make-to-Order, M3 Engineer-to-Order, M0 Make Infrastructure (arrows going up) Deliver: D1 Deliver stocked products, D2 Deliver MTO Products, D3 Deliver ETO Products, D0 Deliver Infrastructure (arrows going up) Bottom right: R1 – Manage return NB: complexer as it goes down.

Answer 32

Planning allows a supply chain manager to be proactive and manage demand and supply to ensure that profits are maximized.

Answer 33

Planning demand by forecast (often by sales and marketing) Aggregate planning • Plan production, plan distribution, plan allocation of resources o Capacity, inventory, back-logged orders

Answer 34

* past demand * product lead time * planned advertising or marketing efforts * state of the economy * planned price discounts * actions competitors have taken

Answer 35

1. Qualitative forecasting: primarily subjective, relies on human judgment. Good if no historical data, or if expert market intelligence is needed to define future demand 2. Time series forecasting: uses historical demand data. Good as starting point if demand pattern doesn’t vary significantly 3. Causal forecasting (with indicators): assumes demand forecast is highly correlated with certain factors in the environment (e.g. interest rates, economy growth) 4. Simulation forecasting: imitates consumer choices that give rise to demand to arrive at a forecast. Can be a combination of time series and causal methods, and allows what-if-analysis with different scenarios.

Answer 36

Each party forecasts demand one down the line. So: * Collaborate in building forecasts * Vale of data depends where you are in the supply chain * Distinguish between demand and sales * Forecasts are always wrong, so should include the expected value of the forecast and a measure of forecast error * Long-term forecasts are usually less accurate than short-term forecasts * Aggregate forecasts are usually more accurate than disaggregate forecasts * The further up the supply chain a company is (or the further they are from the customer), the greater the distortion of information they receive.

Answer 37

This occurs when parties don’t collaborate with their forecasting. * Exploding peaks in demand back down the supply chain * Difficult scheduling * Increasing safety inventory * Shortages in materials * Longer delivery times

Answer 38

Cycle inventory exists in a supply chain because different stages exploit economies of scale to lower total cost. The costs considered include material cost, fixed ordering cost, and holding cost.

Answer 39

When demand is steady: Lot size / 2

Answer 40

* Decreases working capital requirements for a firm | * Reduces large time lags, leaving the company vulnerable to demand changes

Answer 41

Average flow time = average time the material remains in inventory Cycle inventory / demand = batch size / 2 / demand per day

Answer 42

x axis: time y axis: number of inventory Equal triangles reducing to 0, then new batch.

Answer 43

* Purpose = satisfy demand that exceeds the amount forecasted for a given period (=> availability) * Why carried? Demand forecasts are uncertain, want to avoid product shortage. E.g. penalty (Daimler), lost customers * Is a trade-off between availability and inventory holding costs * Risky in industries where product life cycles are short and demand is very volatile * Increased ease of searching for product availability in the internet puts pressure on firms to improve product availability.

Answer 44

Same as cycle inventory, but instead of triangles going down to 0, it goes down to a line above 0 (the safety inventory)

Answer 45

Product demand satisfied / product demand Better for supplier to use this: maybe just one part is missing => not so bad

Answer 46

Orders satisfied / all orders Worse for supplier to use this: maybe just one part is missing => whole order is worth 0.

Answer 47

Replenishment cycles that end with all the customer demand being met / replenishment cycles

Answer 48

A replenishment policy consists of decisions regarding when to reorder and how much to reorder.

Answer 49

1. Continuous review 2. Periodic review 3.

Answer 50

Inventory is continuously tracked and an order for a defined lot size is placed when the inventory declines to the Reorder Point. X-axis: time Y-axis: inventory Dotted reorder line above 0 inventory. Triangles go below this line due to lead time, but don’t always go to 0.

Answer 51

Inventory status is checked at regular periodic intervals and an order is placed to raise the inventory level to a specified threshold. The size of each order is variable. x-axis: time y-axis: inventory Equally spaced vertical dotted lines (review intervals). Triangles start shortly after the dotted lines. Danger of it falling to 0.

Answer 52

fast-moving items => stock at decentralised locations (regional warehouses) close to the customer slow-moving items => stock at centralised location (central warehouse). Purpose: reduce the safety invenotry carried without hurting customer response time or adding to transportation costs.

Answer 53

Use common components in a variety of products * exploit aggregation (experience curve) * reduce component inventories (demand is more predictable because it depends on a variety of products for which it is used). * cost reduction Major risk: supplier has a quality issue => VW had to call back millions of cars.

Answer 54

= the ability of a supply chain to delay product differentiation or customization until closer to the time the product is sold. Goal = have common components in the supply chain for most of the production push phase (production according to forecast, before order penetration point).

Answer 55

X-axis: steps in production process y-axis: number of variants Diamond shape: 1. rises steeply, then flattens (bad, early product differentiation) 2. Rises slowly, then steeply (good, uses postponement)

Answer 56

* Use the analytic framework to increase profits. Often, inventory levels are set without supporting analysis * Beware of preset levels of availability. Check regularly if it’s right. Nb if Daimler supplier, need high availability. * Use approximate costs – profit maximizing solutions are quite robust. * Estimate a range for the cost of stock running out – they are hard to quantify. * Ensure levels of product availability fit with strategy => if they aren’t there, will the customer want it even more? (Zara) * High inventory can be an indicator for bad performing processes.

Answer 57

High safety inventory => can't see the process obstacles it is hiding. So reduce inventory, see where the problems are, and fix them => don't need the high safety inventory any more.

Answer 58

The purchasing function is defined as obtaining from external sources all goods, services, capabilities and knowledge which are necessary for running, maintaining and managing the company’s primary and support activities at the most favourable conditions.

Answer 59

Targets in short, the purchasing function should obtain the proper equipment, material, supplies and services Traditional purchasing focus: * Of the right quality (not always the best quality) * In the right quantity * At the right price (not lowest) and * From the right supplier (image, reliable, good distance, solvent, CSR (fair wages, worker safety, pollution) Traditional logistics focus: * Right time * Right place

Answer 60

Closed four squares. X-axis: Impact on profitability (ABC-Analysis based on annual volume): Company – internal dimension. Labels: C-Part, B-Part, A-Part Y-axis: Supply risk (specifics, complexity, uncertainty): Source of supply – external dimension. Labels: low, medium, high C-Part, low supply risk: Standard parts, e.g. screws – cheap, can buy it anywhere => reduce effort C-Part, high supply risk: Bottleneck parts, e.g. raw materials, small copper parts – not many available to buy => more effort A-Part, low supply risk: Core parts, e.g. ABS system – high volume of money, but several suppliers => more effort A-Part, high supply risk: Strategic parts, e.g engine casting => high effort and resource allocation – update supplier scanning and assessment more often, negotiation, stock/inventory

Answer 61

X-axis: Chances for good collaboration. Labels: low, medium, high Y-axis: Power of the supplier. Labels: Low, medium, high Low chances for good collaboration, low power of supplier: Standard suppliers => not very personal Low chances for good collaboration, high power of supplier: Bottleneck suppliers – e.g. BASF for Daimler – BASF does chemistry – colour, varnishing => low volume for Daimler. High chances for good collaboration, low power of the supplier: Core suppliers – e.g. Visiocorp – small, family-owned business. High chances for good collaboration, high power of the supplier: Strategic suppliers – e.g. Bosch – biggest automotive supplier, monopoly on some parts.

Answer 62

X-axis: Standard suppliers, bottleneck suppliers, core suppliers, strategic suppliers Y-axis: Standard parts, Bottleneck parts, core parts, strategic parts Standard suppliers: • Standard parts: efficient supplier (e-supply). • Core parts or strategic parts: multiple sourcing Bottleneck suppliers: • Bottleneck parts: supply security • Core parts or strategic parts: in-sourcing Core suppliers and strategic suppliers: • Core parts: select partners, collaborate, select again • Strategic parts: Value-adding partnership – e.g. Daimler may design sth for the manufacturer

Answer 63

1. Key sourcing-related processes (preparatory, more strategic level) 2. Purchasing process (hands-on, more operational level) 3.

Answer 64

1. Identify markets/suppliers worldwide 2. Supplier scoring and assessment 3. Supplier selection and contract negotiation 4. Design collaboration 5. Purchasing 6. Sourcing planning and analysis 7.

Answer 65

1. Define specification 2. Select supplier 3. Contract agreement 4. Ordering 5. Expediting 6. Evaluation 7.

Answer 66

International commercial terms from the International Chamber of Commerce They define who has to pay for what, and who bears the risk.

Answer 67

* Ex Works * Free on Board * Cost and Freight

Answer 68

Supplier: produces, sets it outside the factory Customer: responsible for transport (payment, risk, insurance)

Answer 69

Supplier: produces, responsible for loading goods in transport vehicle Customer: responsible once goods are in transport vehicle (e.g. loaded onto the ship)

Answer 70

Supplier: responsible until goods are at customer’s factory Customer: take goods inside factory

Answer 71

* Use multifunctional teams: purchasing, manufacturing, engineering and planning should collaborate * Ensure appropriate coordination across regions and business units to maximize economies of scale * Always evaluate the total cost of ownership: identify all factors that influence the total cost of ownership, and use that for supplier selection – e.g. training cost, recycling cost * Build long-term relationships with key suppliers: especially important for direct materials (critical and strategic). This enables solid cooperation.

Answer 72

Purpose: tool to help focus on most important supply chain processes to start improving. Focus is on A products or A customers. Focus on important products => focus on important processes. Graph: x-axis – Revenue, y-axis – Product No. A: goods creating 80% of revenue, B: 95% of revenue, C: 100% of revenue

Answer 73

* Predictability of demand – X,Y, Z analysis: X is clear, Y need statistics, Z is chaotic * Replenishment lead time – U,V, W analysis: U in 1 day, V in 1 week, W don’t know. * Emergency parts d

Answer 74

To: • Discuss, define and understand the responsibility of organizational units in the supply chain * Define control points / points of measurement * Identify ways for optimisation

Answer 75

* Value performance: develop, make, sell (product in the hand) * Support performance: plan, advertise * Blind performance: transportation, double work – not necessary, customer can’t see benefit * Error performance: returns, sth breaks Blind performance and error performance should be 20% of overall performance together through process optimisation. NB: managers won’t do anything until they need to save 15-20%.

Answer 76

1. What is done in the process? – Task 2. Why is it done? – Intention, objective, is it necessary 3. How is it done? – Process, errors, can we do it more efficiently 4. Why is it done like this? – Process, any reasons for this inefficiency – e.g. legal 5. Who has to do it? – Responsibility, competence, salary 6. Which resources/means? – Tools, information, can’t we use better tools 7. How often? How much? – Frequency, is this too often 8. When is it done? – point of time, simultaneous 9. How long does it take? – duration, cycle time, any stoppers 10. Where is it done? – location, too many changes

Answer 77

* Give way to value creation (zero defect, no waiting time, data coverage only once) * Customer focus (external and internal customer focus) * Standardisation and modularization – do it the same way * Process focus first (function follows process) – look at the full process, not just at one function at a time, e.g. marketing * Flat hierarchy (no additional approval processes) * Self-responsibility (job, competencies and responsibilities must match) * Just-in-time (right time, right place, right volume, right quality, no stock) * Daily process finish (everything achieved until today) – need to finish what was planned for the day, not leave at close time.

Answer 78

* Cancel – don’t do it * Combine – one person does it => no waiting time * Parallelise => faster * Outsoucing => cheaper, higher quality * Compress – e.g. accelerate factory belt * Segmentation into standard (very efficient) and exotic (exotic/special products – take longer)

Supply Chain Management and Purchasing Flashcards

(102 cards)