SCM MOD 1 Study Guide
1. Supply Chain Management (SCM)
a. Simple Supply Chain Illustration (Lecture)
i. Purchasing (supplier network) –> Production (assembly/manufacturing) –>
Distribution (warehousing/distributing) –> Retail Sales (retailers)
b. Definition of SCM
i. The Efficient Integration of:
1. Suppliers and Manufacturers
2. Transportation, Distribution Centers, Warehouses
3. Retailers and all other parties associated tasked with the successful
delivery of the final product and/or service
2. Procurement A.K.A. Purchasing
a. Step 1 of Key Supply Chain Concepts (KSCC)
i. Procurement: Materials Inventory MGT Resource
b. Procurement: the process of obtaining services, supplies, and equipment in
conformance with organizational regulations
i. Examples of duties:
1. Supplier selection
2. Purchasing negotiations
3. Managing supplier relationships – Motivation, Development
4. Materials/Inventory Management
3. Operations
a. Step 2 of KSCC
i. Operations and Logistics (Add Value)
1. Products/Services – Cost Quality, Speed Flexibility, (Sales, Support,
Returns)
2. Waste – Non-Valuable Outputs, Defects, Garbage, Emissions,
Resource Waste
b. Operations: design, operation, and improvement of the production systems that
efficiently transform INPUTS into Finished Goods and Services
i. Examples of duties:
1. Process management, Plant management
2. Capacity planning – resources, speed (How much, how fast?)
3. Scheduling jobs/people
4. Waiting line management
5. Process improvement projects
4. Logistics
a. Step 2 of KSCC
i. Operations and Logistics (Add Value)
1. Products/Services – Cost Quality, Speed Flexibility, (Sales, Support,
Returns)
2. Waste – Non-Valuable Outputs, Defects, Garbage, Emissions,
Resource Waste
b. Logistics: the coordinated planning and execution of the following:
i. Preparation of packaged product
ii. Movement itinerary (Transport)
iii. Storage Itinerary (Warehousing)
iv. Product Distribution throughout the Supply Chain – Who gets what? When?
How?
v. Example of duties:
1. Distribution/Warehousing, Infrastructure Mgmt.
2. packaging, containerization. transportation, documentation
3. Third party management and communication
5. Reverse Logistics
a. Last Step of KSCC
i. Waste –> Reverse Logistics
b. Responsible for movement of products and packaging that flow backward in the
supply chain, away from the consumer and back in the direction of the
manufacturers. (The management of materials moving upstream in the supply chain)
– Return Items
6. Global SCM
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a. When suppliers, manufacturers, transportation companies, warehouse and
distribution centers, retailers and other supply chain partners span across multiple
countries and/or continents, those are considered global supply chains.0
7. 1st-tier and 2nd-tier suppliers
a. 1st-tier supplier: a company’s direct supplier; typically, a firm that directly provides
goods and/or services to a company
b. 2nd-tier supplier: a firm that provides goods and/or services to a company’s 1st-tier
supplier
8. Upstream vs. Downstream
a. Downstream supply chain: the direction that points toward the end consumer
b. Upstream supply chain: the direction that points toward the suppliers
9. Three SCM Flows
a. In order for the supply chains to function and develop, three things must
continuously flow: materials, money, and information
10. Business Model
a. A company’s plan for how it will purchase items, transform them, deliver them and
sell them in an effort to produce a profit
11. Supply Chain Visibility A.K.A. Inventory Visibility
a. The ability to see what is happening with inventory upstream and downstream in a
supply chain
12. Profit and ROI’s relationship to SCM
a. How can Primary Goals be achieved
i. Make Money –> Profit = Revenue – Cost
ii. Be Efficient/Avoid Waste –> ROI Formula – Profit/Investment
iii. Be Different/Be Better –> Develop Core Competencies
b. Profit: Companies invest money to make and deliver products and/or services.
Materials, labor, real estate, machines, etc. these expenditures are called costs.
Companies then sell the products and/or services for money – this is revenue. The
difference between revenue and cost is profit.
i. Revenue – Cost = Profit
c. ROI (Return on Investment): An economic measure that helps evaluate the return of
an investment. In its most simple form, an ROI is a ratio of total profit to total
investment.
i. ROI = Total Profit / Total Investment
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13. Managing with Stakeholders in mind
14. Competitive priorities
a. Cost
i. When you buy a bottle of water don’t just consider the water!
1. Material Costs
2. Production Costs – Machine and Labor
3. Packaging, Transportation, Storage Costs
4. Quality Costs – Returns, Warranties, Repairs, Rework, Errors, Time
5. Customer Service Costs
6. Other Organizational Costs – Marketing, Finance, Technology, Waste
Disposal, Rent, Insurance, Legal, Human Resources…
ii. Materials, energy, wages, transportation, rent…
b. Quality
i. Design Quality – Product or Service. Good workers and materials can’t make-
up for bad design
ii. Materials & Production Quality – This requires well designed Production
System, good materials, labor, high performance, aesthetics, durability
iii. Quality Level Delivers – How does it look when the end-user finally gets it?
What it looks like off the assembly line isn’t the only thing that’s important.
iv. Consistent Quality – Same every time? Perfect every time? Having the ability
to be consistent is challenge for any company that wants a massive customer
base.
v. Service Quality – Sales, Support, Repairs, Maintenance, Assembly, Delivery
vi. Design, reliability, consistency, materials, and fabrics…
c. Speed/Time
i. Delivery Time – Lead Team (Pizza Delivery)
1. From Order Placement to Order Fulfillment
2. Includes supplier delivery times, manufacturing time, transport times
across supply chain, waiting time…
3. Consider importance of good inventory management, forecasting
ii. On-Time Delivery (Airline Industry)
1. Percentage of time delivered when promised
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2. Developing Schedules, Staying on Schedule
3. Who dictates promised date/time?
iii. Delivery, in-time, innovation time…
d. Flexibility
i. Companies typically offer you large quantities OR a large range of
customizable features. Both are considered a form of flexibility. Consider the
planning required to offer customer each (or both).
ii. Product or Customization Flexibility
1. Options Offered
2. Built to your Specifications
iii. Volume Flexibility
1. Coping with Demand Changes
2. Large and/or Small Orders (Timely)
iv. Some companies, through the use of good planning, good design, and
technology, can actually provide both
v. Mass Customization
1. Both Customization and Volume Flexibility
vi. Other types of flexibility modern organizations require
1. Design Flexibility – Consider the future of the product or service.
Modifications? Changes in market demand? Easy to change color, size,
features
2. Materials/Parts Flexibility – Can the material or component be used
for a number of different end items and in a number of different
ways?
3. Facility Flexibility – Producing Multiple items in a Single Plant
4. Tools/Machinery Flexibility – Can tools be used to make a number of
different end items or only one end item?
5. Employee Flexibility – Agile Employees – Good at everything?
Specialists? Competent/Intelligent employees
6. Service Flexibility – Repairs, Return, Assembly, Recycle; Suggestions,
Help Desk; Locally, Worldwide; On Site, In-Person
vii. Customization, size of order, design…
15. Core competencies
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a. The primary advantage a company has over its competitors. Typically, a core
competency would be difficult, if not impossible, to replicate
16. Productivity vs. Value
a. Value: the ratio of “output purchased” divided by “inputs used to purchase” the
product or service. Customers seek value. Value can be increased by giving the
customer more for the same price or by giving them the same amount at lower
price.
b. Productivity: the ratio of outputs to inputs. From a manufacturing perspective,
companies seek to maximize the amount of outputs that can be produced and
delivered to market, while minimizing the required inputs. Productivity is a relative
term, so typically it can only be compared to the productivity of periods that precede
the present productivity.
i. example: company makes 300 backpacks valued at $25 each. energy. labor,
and materials costs are $3,000. productivity is measured as (300 · $25) /
$3,000 = 2.50 Productivity
17. Primary Supply Chain Goals
a. Primary Goals – Sustainable Long-term Profits and/or Maximize Return on
Investment (ROI)
b. Effectiveness, efficiency, and adaptability – The ultimate goal of supply chain
management is to make high quality products and services in a timely fashion that
meet the changing needs of the customer and do so in a way that utilizes as few
resources as possible
i. Effectiveness: Are we getting the job done?
ii. Efficiency: Are we working too hard? Spending too much money?
iii. Adaptability: Can we deal with change? Are we flexible?
18. Seven types of waste
a. Defects: Poorly manufactured products are garbage
b. Overproduction: Making products no one needs is a waste of time, money, and effort
c. Transportation: Moving products does not make the products better, in fact, it
increases the possibility of theft, damage and loss
d. Motion: If employees move too much in a supply chain, they could get tired, injured
and may be wasting time
e. Waiting: Work-in-process waiting to be finished was made too early. Items should
not be produced too far in advance of their need
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f. Inventory: Items on the shelf are not providing an immediate return and could get
lost, broken or stolen
g. Over-Processing: Doing work that us unnecessary or undesired is a waste of time and
resources
h. It should be noted that often decreasing one of the seven wastes may increase
another
19. Keys to being a successful SC Manager
a. Satisfy the needs of the customer
i. Customers want a certain mix of cost, quality, speed, and flexibility. When
they get the right mic at the right place, customers feel like they are getting a
“value”
ii. A good supply chain manager works daily to have supplied, shippers,
manufacturing facilities, distribution centers and retailers give the customer
what they want, when they want it and at the right place
b. Satisfy the needs of the company
i. Companies need to make the very best products and services using the least
resources possible
ii. A good supply chain manager understands what the customer needs and
when they need it, but a supply chain manager also understands the
importance of controlling costs and resource usage at every level
c. Be prepared for the future
i. Things change. Customers want improved products and services, and they
want them faster. They want to buy them in different venues, want earth-
friendly products and want items at reasonable prices
ii. Suppliers want to raise the price of their raw materials and parts, New
technological innovations will become available, and employees want better
working conditions. The government may also seek to regulate your industry.
Even if a supply chain manager develops a strong supply chain, tomorrow will
demand that your supply chain evolve. A supply chain manager’s work is
never done.
20. SC Strategy – List of 3
a. Understanding the product/service and the market’s desires
i. Who’s the customer? What do they want? When do they want it? Where is
the customer?
b. Develop a business model
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i. Does the customer want to buy this online or in a store? Do they sometimes
want to buy it in a store and other time want to buy it online? Whatever the
customer wants will require suppliers, manufacturers, logistics partners and
retail partners to change how they work.
c. Organizing the right group of supply chain partners
i. You understand the market. You need to understand the appropriate business
model. Does your company have the right team of suppliers, manufacturers,
shippers, distribution centers and retail outlets?
21. SC Tools – List of 5
a. Supply Chain Metrics
i. Company needs to be able to report success and failure, and when to provide
help to their employees.
b. Information Technology Tools
i. Knowing what is happening in a global supply chain at any given moment
requires information technology tools that can collect, organize, and report
data to supply chain managers
c. Relationship Management Skills
i. A supply chain is a team of companies working together to satisfy an end-
consumer. Having the ability to work with executives and employees at other
companies is vital to developing focused and healthy supply chains
d. Financial Resources
i. Motivating employees and suppliers, investing in technology to help
companies track information and produce better products, purchasing higher
grade materials, shipping goods faster… this all costs money. In order to
improve supply chain performance, companies need to be willing to invest in
supply chains
e. Organizational Integration
i. Customers are identified, products are designed, financial plans developed,
products are advertised… All of these things are typically done by employees
outside of the supply chain management group
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