Supply Chain Management Overview

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Questions and Answers

What is the primary purpose of Supply Chain Management (SCM)?

To maximize inventory holding costs

To ensure that only high-cost products are produced

To integrate activities that procure, transform, and deliver products (correct)

To manage employee performance within organizations

Which of the following is a critical activity in Supply Chain Management?

Establishing transportation vendors (correct)

Developing employee training programs

Increasing product pricing

Creating new marketing strategies

How should a supply chain be designed to support a low-cost provider strategy?

By maintaining high inventory levels

By prioritizing product customization

By focusing on high-quality raw materials only

By minimizing lead times and costs while meeting functional requirements (correct)

What is vital for successful management of a supply chain involving independent organizations?

Mutual agreement on goals and trust Signup and view all the answers

What aspect of a supply chain is crucial for fulfilling unique or customized products?

Emphasizing innovation and minimizing inventory obsolescence Signup and view all the answers

Which element is NOT typically included in the interactions of a supply chain?

Marketing strategies Signup and view all the answers

What is the primary advantage of vendor managed inventory (VMI) for retailers?

Direct deliveries to shelves without additional handling. Signup and view all the answers

Which factor is considered when calculating the order quantity (Q) in periodic review systems?

The average daily demand multiplied by the lead time. Signup and view all the answers

What is crucial for establishing a successful partnership in a supply chain?

Compatibility of organizational cultures Signup and view all the answers

What does the variable 'z' represent in the order quantity formula?

The value derived from a normal distribution table based on service level. Signup and view all the answers

What is a key characteristic of a periodic review system in VMI?

Vendors check inventory at predetermined intervals. Signup and view all the answers

What primarily causes the bullwhip effect in a supply chain?

Fluctuations in orders as they move through the supply chain Signup and view all the answers

How can accurate pull data be generated to reduce the bullwhip effect?

By sharing Point of Sales (POS) information Signup and view all the answers

What is the role of safety stock in the order quantity formula?

To account for unexpected shifts in demand. Signup and view all the answers

What is one advantage of forming long-term relationships with fewer suppliers?

Creation of value through economies of scale Signup and view all the answers

Which of the following activities can enhance mutual trust among supply chain partners?

Sharing risk and cost savings Signup and view all the answers

What is typically bundled in a vendor's order under a periodic review system?

Multiple small, low-cost items to optimize delivery costs. Signup and view all the answers

What is a recommended solution to manage inventory effectively in a supply chain?

Single stage control of replenishment Signup and view all the answers

Which option best describes the dynamic of the bullwhip effect illustrated with Proctor and Gamble's findings?

Increased orders occur at each step in the supply chain. Signup and view all the answers

Why is establishing mutual agreement on goals important in a supply chain?

It aligns organizations towards common outcomes. Signup and view all the answers

What is the primary benefit of collaborative planning, forecasting, and replenishment (CPFR)?

Enhances the flow of information among members Signup and view all the answers

How does drop shipping benefit suppliers like Dell?

Reduces the shipping time and costs for additional products Signup and view all the answers

What defines channel assembly in the supply chain?

Distributors assemble products from individual components Signup and view all the answers

What role does vendor managed inventory (VMI) play for manufacturers and retailers?

Suppliers maintain inventory on behalf of the retailer or manufacturer Signup and view all the answers

What effect does the bullwhip effect have on supply chain management?

It leads to distorted demand signals and inventory issues Signup and view all the answers

Which aspect is NOT included in the collaborative planning under CPFR?

Competitive pricing analysis Signup and view all the answers

In the context of drop shipping, what does the term 'core competence' refer to for Dell?

Assembling personal computers Signup and view all the answers

What is a key characteristic of maintaining inventory through vendor managed inventory (VMI)?

Retailers rely on accurate forecasting by suppliers Signup and view all the answers

Which statistical value corresponds to the 90% service level in this scenario?

1.285 Signup and view all the answers

In logistics management, what is a key benefit of using Third-Party Logistics (3PL)?

Reduced transportation losses Signup and view all the answers

What does the fill rate metric measure in supply chain delivery reliability?

Percentage of orders delivered on time and in full Signup and view all the answers

What is the formula used to calculate inventory turnover?

Cost of goods sold / total inventory investment Signup and view all the answers

How many days does it take to achieve a 20% change in orders without a cost penalty as stated in supply chain flexibility?

Number not specified Signup and view all the answers

What percentage of total inventory investment indicates the percent invested in inventory?

It varies by company Signup and view all the answers

Which performance metric reflects the percentage of orders shipped within 24 hours of order receipt?

Delivery performance Signup and view all the answers

What is cash-to-cash cycle time in supply chain asset management efficiency?

Number of days cash is tied up as working capital Signup and view all the answers

Study Notes

Supply Chain Management (SCM)

SCM integrates activities to procure, transform, and deliver materials and services.
A supply chain includes interactions among suppliers, manufacturers, distributors, and customers. This chain involves transportation, information sharing, cash flow, and material flow.

Supply Chain for Beer Example

The example depicts the flow of materials and financial transactions from farm to customer for beer.
Key players: Farm, hops/grains suppliers, can manufacturers, bottle manufacturers, brewer, distributor, retailer (Sam's Grocery), and customer.
Costs are given at various stages in the supply chain.
Credit and cash flow are part of the supply chain.
Suppliers at different tiers exist, showing the complex supplier relationships involved.
Important activities include determining transportation vendors, credit, and accounts payable & receivable.

Supply Chain Decisions and Strategy

Supply chain decisions affect corporate strategy.
A responsive supply chain is needed for fresh products (for example, roses).
A low-cost provider needs a supply chain capable of low costs, low inventory, and short lead times for products.
A supply chain for unique/customized products supports innovation and minimizes obsolete inventory.
Management issues involve many independent organizations. Success begins with mutual agreement on goals, trust, and compatible cultures.

The Bullwhip Effect

Fluctuations in orders increase as they propagate through the supply chain.
This effect, also called the bullwhip effect, involves amplified variability in demand up the chain.
An example is the case of Pampers diapers where seemingly steady retail demand resulted in significant fluctuations in orders further up upstream.
Accurate "pull" data (demand/sales) helps manage the bullwhip effect and aids supply chain members in scheduling effectively. POS data sharing is useful.

Single-Stage Control of Replenishment

Assigning responsibility for inventory monitoring and management to a specific member of the chain eliminates distorted inventory information and multiple forecasts.
The focus is on obtaining proper, real-time, and accurate information from the end-user or consumer.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

In CPFR, members share planning, forecasting, and inventory information.
This involves promotions, advertising, timing, etc. in a coordinated effort to minimize inventory and costs.

Drop Shipping and Special Packing

Drop shipping cuts down on reshipping costs by having the supplier ship directly to the end customer.
Dell computers offer drop shipping, where the peripherals ship directly from vendor while the PC assembly is handled by Dell. This cuts down on Dell having to hold large inventories of peripherals.

Vendor Managed Inventory (VMI)

A supplier manages inventory on behalf of a retailer or manufacturer.
The supplier directly delivers goods to designated areas, rather than through stockrooms.

VMI -- Periodic Review Systems

Periodic (e.g., weekly) visits allow vendors to assess the retailer's inventory, reorder if needed, and keep amounts in line with a desired amount.
This results in streamlining ordering processes, reducing costs, and potentially improving inventory management.

Logistics Management and 3PL

Procurement activities, shipping, warehousing, and inventory can be combined into a logistics system.
Third-Party Logistics (3PL) companies provide logistics services to other businesses (e.g., warehousing, assembly, testing, shipping, customs clearance).
3PL companies may use tracking technology to improve delivery efficiency and improve delivery schedules.

Measuring Supply Chain Performance (SCOR)

Supply Chain Operations Reference (SCOR) is a framework for measuring supply chain performance.
SCOR uses metrics like fill rate, perfect order fulfillment, order fulfillment lead time, and supply chain response time to assess performance.

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Description

Explore the essential components and processes of Supply Chain Management (SCM), including the interactions among key players from suppliers to customers. This quiz delves into an example of a beer supply chain, highlighting the flow of materials and financial transactions. Learn about the strategic decisions that underpin an effective supply chain.