Supply Chain Ch 1-4

A _____ consists of the flow of products and services from raw materials to end users
supply chain
Push or _________: Producing stock on the basis of anticipated demand. Demand forecasting can be done via a variety of sophisticated techniques.
make-to-stock
Pull or ________: Producing stock in response to actual demand
make-to-order
______: The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer
Institute for Supply Management
______: The coordinated set of techniques to plan and execute all steps in the global network used to acquire raw materials from vendors, transform them into finished goods, and deliver both goods and services to customers
Logistics and Supply Chain Management Society
The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities…also includes coordination with channel partners, which can be suppliers, intermediaries, third party service providers, and customers
Council of Supply Chain Management Professionals
Expanding the supply chain internationally, both mature and emerging markets have become a part of the overall business growth strategy for many companies
Globalization
Firms need to be more flexible and responsive to customer needs, adapting to unexpected changes. Necessitating closer integration and colalboration
Flexibility & Responsiveness
Reducing purchasing costs, waste, excess inventory & non-value added activities. Improving demand planning. Increased outsourcing of non-core competencies
Cost Reduction and continuous improvement
Societal pressures to make and source in ‘the right way’; minimizing social, economic and environmental impact. Developing positive impact.
Sustainability and “Greening” the supply chain
Obtaining merchandise, capital equipment; raw materials, services, or maintenance, repair and operating (MRO) supplies in exchange for money or its equivalent
Purchasing (aka Sourcing)
The term normally used for the acquisition of services
Contracting
The term used to encompass all activities in acquiring goods and services
Supply management
Wholesalers, distributors and retailers who purchase completed product for resale
merchant buyers
Purchase raw materials, services, capital equipment, & maintenance, repair and operation (MRO) supplies to produce another product or service
Industrial buyers
A decrease in purchasing expenditures directly increases profits before taxes, assuming no decrease in quality or other costs
Profit-leverage effect
Improving profit for a set of assets or reducing asset requirements to produce the profit both improve ROA (Return on assets)
Return on Assets (ROA) effect
Formula for Return on Assets (ROA) Effect
Profit/Assets
Increased inventory turnovers indicates improved utilization of space and inventory levels and reduced impact of inventory obsolescence
Inventory Turnover Effect
Formula for Inventory Turnover Effect
COGS/Inventory
A list of suppliers that a firm uses to acquire its materials, services, supplies, and equipment
Supply Base
Purchasing department located at the firm’s corporate office makes all the purchasing decisions
Centralized Purchasing
Individual, local purchasing departments, such as plant level, make their own purchasing decisions
Decentralized Purchasing
Centralize large national contracts at corporate level and decentralize items specific to business unit at the local level
Hybrid purchasing organization
Specializes in handling the steps needed to import, performs service for a fee
Import broker or sales agent
Buys the goods, imports and sells to buyers
Import merchant or Trading company
Tax (Duty) imposed by government on products imported
Tariff
Quotas, restrictions, embargos, laws, regulations
Non-Tariff barriers to international trade
The only international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.
World Trade Organization (WTO)
Implemented January 1, 1994 between US, Mexico and Canada; eliminated tariffs between the countries; currently the largest Trade organization by GDP
North America Free Trade Agreement (NAFTA)
Proposed expansion of ASEAN to include Australia, China, India, Japan, South Korea and New Zealand. Would form the largest trade organization.
Regional Comprehensive Economic Partnership (RCEP)
Created May 9. 1950; act as a single market to compete with larger economies. 28 member countries. Euro is used in 19 of the 28 EU members. BREXIT- Great Britain public has voted to exit
European Union (EU)
Contract is usually awarded to lowest priced responsive and responsible bidder
Competitive bidding
Used to ensure fairness and are opened in a public way
Sealed Bids
Incentive to fulfill contract
Performance bonds
Successful bidder will accept contract
Bid or surety bonds
Work will be on time and meet specificiations
Performance bonds
Protection against 3rd party liens not fulfilled by bidder
Payment bonds
(1994) Removed restrictions on purchases less than $100,000. <$2,500->no bid
Federal Acquisition Streamlining Act
Purchases between $2,500 and $100,000 are reserved for small business (<100 employees) and advantages are given to minority owned businesses
Small Business promotion
(1933) US government purchases and 3rd party purchases using federal funds must buy domestically produced good if the price is not more than a certain differential above the foreign good
Buy American Act
A variety of federal, state, and local statutes and executive orders require environmental and human health considerations when making purchases
Green Purchases
Establishes contracts for products purchased by government agencies. About 25% of government purchases.
General Services Administration (GSA)
Acquiring sources of supply
Backward vertical integration
Acquiring channel partner operations
Forward vertical integration
Taking in house activities/ operations and deciding to purchase from suppliers instead. This has become a key method to reduce costs and increase flexibility.
Outsourcing
Comparing what you do to other business that do it best and implementing changes to improve. Normally looking at statistics (TAT, cost, productivity measures)
Benchmarking
Copying what other businesses do best and implementing in your organization. Watch for culture and organizational fit
Best Practices
Managing the firm’s external resources to support a firm’s long term goals
Strategic sourcing
Greatest good for the greatest number of people
Utilitarianism
Recognize rights of others and duties those rights impose on your actions
Rights and Duties
The practice of business ethics in a corporation
Corporate Social Responsibility
Attempts to take into account the public consequences of organizational buying or bring about positive social change through organizational buying behavior
Ethical Sourcing
A process of purchasing goods and services that takes into account the long term impact on people, profits, and the planet
Sustainable sourcing
Aimed at ensuring products or materials meet environmental objectives
Green Purchasing
The ability to meet current needs of the supply chain without hindering the ability to meet future needs in terms of economic, environmental, and social challenges
Sustainability
MRO items and other commonly low profit margins with relatively stable demands and high levels of competition
Functional products
Characterized by short product life cycles, volatile demand, high profit margins, and relatively less competition
Innovative Products
Suppliers manage buyer inventories to reduce inventory carrying costs and avoid stock outs for buyer
Vendor managed inventory (VMI)
A buyer’s activities to improve a supplier’s performance and/or capabilities
Supplier development