SC Notes

Supply Chain:
A supply chain is a focus on the core activities within our organization required to convert
raw materials or component parts through to finished products or services. We look
upstream to our suppliers and their supply of raw materials or components into our own
organizations supply chain.
Aims:
1. To balance Demand and Supply
2. Maximize value from People, process, and system
Key stages in Supply Chain Management:
1. Logistics
2. Operations
3. Marketing and Sales
4. Services
Key Strategies to achieve Competitive Advantage:
1. Cost Leadership
2. Differentiation
3. Response
Manufacturing Strategies:
1. ETO
2. MTO
3. ATO
4. MTS
What is a Push System?

In a push-based supply chain, production happens based on the demand forecast.
Using a push system is preferable in instances where there is a high demand for a given
product and having large amounts of inventory in stock is beneficial for meeting consumer
demand.
What is a Pull System?

In a pull-based supply chain, procurement, production, and distribution are demand-driven
rather than based on predictions. Goods are produced in the amount and time needed.
Pull systems are often preferred in situations where there is limited demand for a specific
product, or when the cost of managing excess inventory outweighs the benefit of having a
surplus of product in stock.
Supply Chain Macro-Processes in a Firm
1. Customer Relationship Management (CRM):

All processes at the interface between the firm and its customers
2. Internal Supply Chain Management (ISCM):
All processes that are internal to the firm
3. Supplier Relationship Management (SRM):
All processes at the interface between the firm and its suppliers
Vertical Integration in SC
Vertical integration requires a company's direct ownership of suppliers, distributors, or
retail locations to obtain greater control of its supply chain.
Reverse Logistics
Reverse logistics is a type of supply chain management that moves goods from customers
back to the sellers or manufacturers. For products at the end of their life cycles, reverse
logistics extends their use through repairing, reshaping, or recycling.
Flows in SC:
 Product flow
 Information flow
 Finances flow
3rd vs 4th Party Logistics:

A 3PL (third-party logistics) provider manages all aspects of fulfillment, from warehousing to
shipping. A 4PL (fourth-party logistics) provider manages a 3PL (taking orders, making
improvements) on behalf of the customer and other aspects of the supply chain.
Inbound, Internal, Outbound Logistics:
Inbound logistics is the way materials and other goods are brought into a company. This
process includes the steps to order, receive, store, transport and manage incoming supplies.
Internal logistics is the area that covers the movement of materials and the support
operations that occur within a company. It comprises several processes, such as
warehousing, stock control, automation and storage systems, material handling.
Outbound logistics focuses on the demand side of the supply-demand equation. The process
involves storing and moving goods to the customer or end user. The steps include order
fulfillment, packing, shipping, delivery, and customer service related to delivery.
Last Mile Logistics:
Last mile logistics refers to the final step of the delivery process from a distribution centre or
facility to the end-user.
Risks in Logistics:
 Carrier delays and non-performance.
 Hijacking and theft.
 Lack of security procedures.
 Liability for loss or delays.
Bull-Whip Effect:
The bullwhip effect is a supply chain phenomenon where orders to suppliers tend to have a
larger variability than sales to buyers, which results in an amplified demand variability
upstream.
Business Process Re-Engineering (BPR):
Business Process Reengineering (BPR) is a business management strategy to recreate a core
business process to improve output, quality and to reduce costs.
Procurements vs Purchasing:
Procurement is the process of finding and agreeing to the terms of a purchase. It includes
identifying potential suppliers, negotiating contracts, and selecting the supplier that offers
the best value for money.
Purchasing is the actual act of buying goods and services.
Traditional vs. E-Procurement:
Traditional procurement is the age-old, conservative approach to procurement that relies on
manual functions, heavy paperwork, phone calls etc.
E-procurement represents a more strategic and digitalized approach.
Tender, Bid, Purchase Order:
The term tender refers to an invitation to bid for a project
A purchase order (PO) is an official document outlining expectations between the supplier
and buyer. A purchase order communicates exactly what you're buying, how you want it
produced, and how you want it shipped and handled.
Return on Assets:
Return on assets (ROA) measures how efficient a company's management is in generating
profit from their total assets on their balance sheet.
Profit
ROA=
Total Assets
Make or Buy in SCM:

A make-or-buy decision is an act of choosing between manufacturing a product in-house or
purchasing it from an external supplier.
Breakeven Analysis:
A breakeven analysis is a calculation that tells small business owners what quantity of
product must be sold to be profitable.
Total Cost of Ownership (TCO):
Total Cost of Ownership (TCO) is a method for quantifying the costs for every activity along
the supply stream, including acquisition, transportation, storage, and selling of goods.
Centralized and De-Centralized Purchasing:
Centralized procurement means that purchasing is managed at the headquarters
level. Decentralized procurement means that purchasing happens in various business units
and locations.
Chapter:05
Forecasting
Forecasting is the process of making predictions based on past and present data.
2 Types:
 Qualitative
Qualitative techniques permit inclusion of soft information (e.g., human factors,
personal opinions, hunches) in the forecasting process. Those factors are often
omitted or downplayed when quantitative techniques are used because they are
difficult or impossible to quantify.
 Quantitative
Quantitative methods involve either the projection of historical data or the
development of associative models that attempt to utilize causal (explanatory)
variables to make a forecast.
Benefits:
 Reduced Inventories
 Reduced Stockout
 Smooth Production plans
 Reduced Cost
 Improved Customer Service levels
Steps in Forecasting:
 Determine the purpose of the forecast

 Establish a time horizon
 Obtain, clean, and analyze appropriate data
 Select a forecasting technique
 Make the forecast
 Monitor the forecast errors
Demand Shaping:
 Demand shaping involves finding ways to balance supply with demand and it can
take two basic forms: influencing demand and managing and prioritizing demand.
 Another way to distinguish among methods of demand shaping is called external
balancing versus internal balancing.
 External balancing works to change customer behavior while internal balancing
works to change organizational behavior.
Resource Planning:
Resource planning is the process of determining the production capacity required to meet
demand.
Aggregate production plan (APP):
Aggregate production plan (APP) is a long-range materials plan. The aggregate production
plan sets the aggregate output rate, workforce size, utilization, and inventory.
Master production schedule (MPS):
Master production schedule (MPS) is a medium-range plan and is more detailed than the
aggregate production plan. It shows the quantity and timing of the end items that will be
produced.
Material requirements planning (MRP):
Material requirements planning (MRP) is a short-range materials plan. MRP is the detailed
planning process for component parts to support the master production schedule.
Level Production Strategy:
 A pure level production strategy relies on a constant output rate and capacity while
varying inventory and backlog levels to handle the fluctuating demand pattern.
 Suitable for highly skilled labor.
Post-Mid
Need of Inventory:
 Cover process time and make process smooth.

 Inventory Buffers
 Anticipation of Demand
 Delayed differentiation
 Buffer against uncertainties
Types of Inventories:
 Raw materials and purchased parts

 Partially completed goods, called work-in-process (WIP)
 Finished-goods inventories (manufacturing firms) or merchandise (retail stores)
 Maintenance and repairs (MRO) inventory
 Goods-in-transit to warehouses, distributors, or customers (pipeline inventory)
Inventory Tracking Systems:
 Periodic Inventory system

 Perpetual inventory system
 2 Bin and 3 Bin Systems (3-bin includes supplier)
Cost of Inventory:
 Purchase
 Ordering
 Holding (Capital, Risk, service cost)
 Shortage (Disruption, Penalty, back-order cost)
Economic Order Quantity (EOQ):

Economic order quantity (EOQ) is a calculation companies perform that represents their
ideal order size, allowing them to meet demand without overspending. Inventory managers
calculate EOQ to minimize holding costs and excess inventory.
EOQ Assumptions and Replenishment Policy:
 Assumptions
– Demand is uniform and deterministic.
– Lead time is instantaneous (0)
– Total amount ordered is received.
 Inventory Replenishment Policy

– Order Q∗ units every T ∗ time periods.
– Order Q∗ units when inventory on hand (IOH) is zero.
4 Characteristics of Agile SCM:
 Market Sensitive
 Network Based
 Process Integration
 Virtual

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Supply Chain:

Key Strategies to achieve Competitive Advantage:

What is a Push System?

What is a Pull System?

1. Customer Relationship Management (CRM):

3rd vs 4th Party Logistics:

Make or Buy in SCM:

 Determine the purpose of the forecast

 Cover process time and make process smooth.

 Raw materials and purchased parts

Inventory Tracking Systems:

 Periodic Inventory system

Economic Order Quantity (EOQ):

EOQ Assumptions and Replenishment Policy:

 Inventory Replenishment Policy

4 Characteristics of Agile SCM:

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