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301 > Week 5 Managing Suppliers, Customers and Inventory > Flashcards

Week 5 Managing Suppliers, Customers and Inventory Flashcards

1
Q

What is a Supply Chain?

A

Interlinked customers and suppliers that work together to convert, distribute and sell goods and services among themselves, leading to a specific end product

The network of retailers, distributors, transporters, storage facilities and suppliers that participate in the sale, delivery and production of a particular product

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2
Q

What is Supply Chain Management?

A

concerned with the efficient integration of customers, suppliers, warehouses and stores.

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3
Q

what is involved in supply chain management?

A
  • ensure correct quantity to right location at right time
  • accelerate time to market of new products
  • measure performance of activities
  • create rel/ship with customer and suppliers
  • improve performance
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4
Q

Benefits of Supply Chain Management

A
  • lower inventory
  • productivity
  • greater agility
  • shorter lead times
  • profit
  • customer loyalty
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5
Q

importance of managing suppliers?

A
  • Improved supplier relationships can

- reduce supplier and inventory-related costs

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6
Q

3 steps in managing suppliers?

A
  1. selecting suppliers - based on criteria e.g. price, quality, delivery, history, comm, location
  2. analysing supplier cost - total cost of ownership e.g. cost of purchasing/holding inventory/ poor quality/ delivery failure
  3. Evaluating supplier performance (index)
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7
Q

how do you analyse/calculate supplier costs?

A
  • Activity based costing = to estimate total cost of ownership
  • Hierarchy of supplier activities: unit-level, order-level, supplier-level
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8
Q

Supplier cost/activity based - what are the 3 hierarchy of supplier activities?

A

Unit Level Activities
• Rework product due to poor quality material
• Downtime due to poor quality material
• Machine setup

Order Level Activities
• Place purchase orders
• Receive orders
• Inspect material
• Invoicing suppliers for orders

Supplier Level Activities
• Manage the relationship with suppliers
• Quality audit
• Research and development

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9
Q

example of supplier performance measures criteria?

A

delivery, quality, cost, org change, rel/ship

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10
Q

supplier performance measures criteria: Delivery = example of measures and explanation?

A
  • percentage of order delivered on time, average lead time for deliveries
  • suppliers required to deliver within short timeframe
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11
Q

supplier performance measures criteria: Quality - example measure and explanation

A
  • percentage of order rejected; achieved of quality certification
  • quality inspection not undertaken; financial penalty for defective delivered
  • buying org require supplier to achieve certain quality accreditation
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12
Q

supplier performance measures criteria: Cost measure and explanation

A
  • success meeting cost-down target; achieving manufacturing cost reduction target
  • buying org set supplier targets for ‘cost downs’ (expected to reduce price each year); buying org assist in reducing manufacturing cost
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13
Q

supplier performance measures criteria: Org Change measure and explanation

A
  • implementation team structure; adoption EDI system

- buying org require suppliers to change production method and admin system with assistance

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14
Q

supplier performance measures criteria: Relationship measure and explanation

A
  • supplier satisfaction survey; disputes resolved within 7 days;days downtime due to industrial actions
  • measures developed to assess quality of rel/ship (survey employees); industrial actions at suppliers can lead to late or no supply to firm
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15
Q

Managing inventory

Why hold inventory?

A
  • Cope with uncertainties in customer demand and in production processes
  • Qualify for quantity discounts
  • Avoid future price increases in raw materials
  • Avoid the costs of placing numerous small orders
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16
Q

Three classes of inventory costs

A

Conventional approaches to inventory management focus on balancing:

  • Ordering costs : incremental costs of placing an order e.g. cost of finding suppliers, clerical cost, transportation
  • Carrying/holding costs: the costs of carrying inventory in stock e.g. storage, handling, insurance
  • Shortage (or out-of-stock costs) e.g. lost sales, cost of interrupted production, wages of idle workers
17
Q

Economic Order Quantity Assumptions

A
  • Demand is known and constant
  • Incremental ordering costs are known and constant per order
  • Acquisition cost per unit is constant
  • Entire order is delivered at one time
  • Carrying costs are known and constant per unit
  • On average, one-half of order is in stock at any time
18
Q

what is Safety stock?

A
  • The extra inventory kept on hand to cover any above-average usage or demand
  • May be costly to maintain extra inventory
19
Q

Inventory re-order point (ROP) is/

A
  • The level of inventory on hand that triggers the placement of a new order (or setup)
  • Lead time- the length of time between placing an order and receiving the order
20
Q

Just in time (JIT) inventory and production system is?

A

processing and movement of materials and goods occur just as they are needed, usually in small batches

  • can cover all aspects of production process
    = Inventory management is crucial
    = Inventory is a major cause of non-value-added activities and cost
21
Q

Key features of JIT production?

A
  • A pull method of coordinating production processes
  • Simplified production processes
  • Purchase of materials, and manufacture of sub-assemblies and products in small lots
  • Quick and inexpensive setups of production machinery
  • High-quality levels for raw materials, components and
    finished products
  • Effective preventative maintenance of equipment
  • Flexible work teams
22
Q

JIT purchasing involves?

A
  • The purchase of materials or goods so they are delivered just as needed for production or sales
  • Reduces the number of suppliers
  • Long-term contracts with suppliers
  • Specifies quality standards in supplier contracts to reduce need for inspection
  • Use of e-commerce to place orders, and provide supplier on-line access to inventory files
23
Q

Costs of JIT?

A
  • Substantial investment to change production facilities to minimise non-value-added activities
  • An increase in the risk of inventory shortages and the associated loss of production and sales
24
Q

Benefits of JIT

A
  • Savings in inventory-carrying and insurance costs
  • Fewer losses due to spoilage, obsolescence and theft
  • No opportunity costs of high inventory
  • Eliminates non-value-added activities
  • Meets customers’ needs more effectively
25
Q

What is Customer relationship management (CRM)?

A

is “the development and maintenance of mutually beneficial long-term relationships with strategically significant customers” (Buttle, 2000)

Collecting and analysing data to understand individual customers’ behaviour patterns and needs

26
Q

what does Customer relationship management (CRM) provide?

A

selling organisations with the platform to obtain a competitive advantage by embracing customer needs and building value-driven long-term relationships.

27
Q

benefits of Customer relationship management (CRM)?

A
  • Improved customer service
  • Customer retention
  • New customers
  • More effective and efficient marketing
  • Increased sales and customer profitability
28
Q

Why calculate customer profitability?

A

to know who generates most profit and how to keep
who generate least and how to increase
what type of customers should we focus on?

29
Q

How to Calculate Customer Profitability?

A

COMPARE

  • Costs of all activities used to support a customer or customer group
  • Revenue generated by that customer or customer group
30
Q

How To Analyse Customer Cost?

A

Customer Cost Analysis:

Analysis of cost of products purchased by customers and the costs of customer-driven activities

31
Q

Calculating Customer Cost: involves which 3 levels of activities?

A

order
customer
market

32
Q

Calculating Customer Cost: Order level activities involve?

A

Triggered when order is placed by a customer

For example:

  • Processing customer’s order
    • Packing ordered products
  • Delivering goods
33
Q

Calculating Customer Cost:

Customer level activities?

A

Related to acquiring new customers or retaining existing

For example:

  • Ongoing sales calls
  • Complaint handling
  • Technical support
  • Provision of samples
34
Q

Calculating Customer Cost: Market level activities?

A

Related to a particular market or class of customers

For example:
- Analyse customer
needs
- Maintain presence in particular market
- Develop technologies to satisfy customer needs

301 (12 decks)

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