Exam 1 Notes SCM 301 PDF

Chapter 1 Learning Objectives...

Chapter 1 Learning Objectives You should be able to Describe a supply chain and define supply chain management. Chapter 1 Describe the objectives and elements of supply chain management. Describe local, regional, and global supply chain management activities. INTRODUCTION TO SUPPLY Describe a brief history and current trends in supply chain management. Understand the bullwhip effect and how it impacts the supply chain. CHAIN MANAGEMENT Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6 th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 Chapter Outline What is a Supply Chain?, Part 1 A supply chain consists of the flow of products and services from: Introduction ⚫ Raw materials manufacturers Supply Chain Management Defined ⚫ Component and intermediate manufacturers The Importance of Supply Chain Management ⚫ Final product manufacturers The Origins of Supply Chain Management in the United States ⚫ Wholesalers and distributors and The Foundations of Supply Chain Management ⚫ Retailers Current Trends in Supply Chain Management (Warehousing) ⚫ Connected by transportation and storage activities, and Integrated through information, planning and integration activities. = high tech usage ⚫ Large firms are moving away from being Vertically Integrated due to high cost and difficulty managing diverse units. Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 Ex. One that does many things internally in their firm Now, what's consistent across these definitions is the idea of coordinating or integrating a number of goods related activities among supply chain participants to improve operating efficiencies, quality, and customer service. Thus, for supply chain management to be successful, firms must work together by sharing information on things like demand forecast, production plans, capacity changes, new marketing strategies, new product and service developments, new technologies employed, purchasing plans, delivery dates, and anything else impacting the other supply chain members purchasing, production, and distribution plans. What is a Supply Chain?, Part 2 What is Supply Chain Management?, Part 1 The planning and management of all activities involved in sourcing and procurement, Defects or not satisfied conversion, and all logistics management activities … includes coordination with channel Reverse flow partners, which can be suppliers, intermediaries, third-party service providers, and customers. Council of Supply Chain Management Professionals 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 Management of material and information flow in a supply chain to provide the highest degree of customer satisfaction at the lowest possible cost. Requires commitment of supply chain partners to work closely to coordinate order generation, order taking, and order fulfillment. Business Dictionary Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 Do not have to memorize definitions, but should understand main ideas they are different, but many supply chains are similar  What is Supply Chain Management?, Part 2 Importance of Supply Chain Management, Traditional organizational cultures that emphasized short-term, company Part 1 focused performance can conflict with the objectives of supply chain management Firms with large system inventories gain the most from successful SCM Successful supply chain management requires high levels of trust, Lower purchasing and carrying costs cooperation, collaboration, and honest, accurate communications Better product quality ⚫ All participants in the supply chain benefit. Higher customer service levels ⚫ Boundaries are dynamic and extend from “the firm’s suppliers’ suppliers to its Increased sales and profits customers’ customers (i.e., second-tier suppliers and customers).” Ex. Amazon, Walmart ⚫ Supply chains also include reverse logistics activities to handle returned products, warranty repairs, and recycling. need to have sophisticated supply chains to function Probably about 5-10 steps before getting into a store correctly Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8 Importance of Supply Chain Management, Importance of Supply Chain Management, Part 2 Part 3 Cost savings and better coordination of resources are reasons to employ Firms using Supply Chain Management: Supply Chain Management 1)Start with key suppliers Reduced Bullwhip Effect Ex. Paper products (COVID) 2)Move on to other suppliers, customers, and logistics services ⚫ Defined as erratic demand causing forecasts to include safety stock, 3)Integrate second-tier suppliers and customers (second tier refers to the which in turn magnify supplier forecasts and cause production planning customer’s customers and the supplier’s suppliers) problems. (as it goes outward) ⚫ SCM reduces safety stocks and costs due to coordinated planning and better sharing of information Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10 Origins of Supply Chain Management, Part 1 Origins of Supply Chain Management, Part 2 Increased supply chain capabilities 1950s-1960s Supply chain relationship formation, sustainability, social U.S. manufacturers focused on mass production techniques as their responsibility principal cost reduction and productivity improvement strategies JIT, TQM, BPR, supplier and customer alliances 1960s-1970s Inventory management, MRP, Introduction of new computer technologies lead to development of MRPII and cost containment Materials Requirements Planning (MRP) and Manufacturing Resource Traditional mass manufacturing Planning (MRPII) to coordinate inventory management and improve internal communication 1950s 1960s 1970s 1980s 1990s 2000s Future Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12  Origins of Supply Chain Management, Part 3 Origins of Supply Chain Management, Part 4 2000s and Beyond 1980s-1990s Evolution along two parallel paths Intense global competition led U.S. manufacturers to adopt: 1. Supply management emphasis from industrial buyer 2. Logistics and customer service emphasis from wholesalers and retailers Supply Chain Management (SCM) Just-In-Time (JIT) Focus on improving supply chain capabilities with initiatives such as: Total Quality Management (TQM) Third-party service providers (3PLs) = firms that help with SC, like Business Process Reengineering (BPR) Integrating logistics outsourcing transportation Customer Relationship Management (CRM) Client/server SCM software - Enterprise Resource Planning Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 Origins of Supply Chain Management, Part 5 The Foundations of Supply Chain Management, Part 1 Supply Supply base reduction, supplier alliances, Today SRM, global sourcing, ethical and sustainable sourcing (Ch. 2-4) Emphasis is being placed on the environmental and social impacts of supply Operations Demand management, CPFR, inventory chains management, MRP, ERP, lean systems, Six Sigma quality systems (Ch. 5-8) Sustainability — ability to meet the needs of current supply chain members Logistics Logistics management, customer relationship management, network design, RFID, global without hindering the ability to meet the needs of future generations supply chains, sustainability, service response logistics (Ch. 9-12) Triple bottom line — taking care of people, planet, and profits Integration Barriers to integration, risk and security Ex. Wegmans (using hydrogen for machines) management, performance measurement, C green supply chains (Ch. 13,14) Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16 Ties things together to make wise Recycling= reverse flow > decisions (ex. Oracle) The Foundations of Supply Chain The Foundations of Supply Chain Management, Part 2 Management, Part 3 Supply Elements: Operations Elements: ⚫ Demand management - match demand to available capacity ⚫ Supplier management - improve performance through ⚫ Linking buyers and suppliers via MRP and ERP systems ⚫ Supplier evaluation (determining supplier capabilities) ⚫ Extending order communication and inventory visibility farther up the ⚫ Supplier certification (third party or internal certification to assure product quality and service requirements) supply chain ⚫ Radio frequency identification (RFID) systems scan cartons describing ⚫ Strategic partnerships - successful and trusting relationships with top- performing suppliers contents of the packages ⚫ Use lean systems to improve the flow of materials to reduce inventory ⚫ Ethics and sustainability - recognizing suppliers’ impact on reputation and carbon footprint levels ⚫ Employ Six Sigma to improve quality compliance among suppliers Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18  The Foundations of Supply Chain The Foundations of Supply Chain Management, Part 4 Management, Part 5 Logistics Elements: Integration Elements: ⚫ Transportation management - trade-off decisions between cost and ⚫ Supply Chain Process Integration - when supply chain participants work delivery timing considering modes of transportation and customer service for common goals. Requires intra-firm functional integration, with efforts to ⚫ Third party logistics providers (3PLs) - for hire outside agencies change attitudes & adversarial relationships providing transportation and other logistics services ⚫ Supply Chain Performance Measurement - Crucial for firms to know if ⚫ Creating distribution networks based on trade-off decisions between cost procedures are working as expected and sophistication of distribution system ⚫ High-level supply chain performance occurs when strategies at each firm fit well with overall supply chain strategies Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20 Current Trends in Supply Chain Management, Current Trends in Supply Chain Management, Part 1 Part 2 Supply Chain Analytics - examining raw supply chain data and reaching Most companies are trying to improve their supply chain sustainability conclusions or making predictions with the information performance ⚫ Possible benefits: Growth being pushed by the rise in computing capabilities and big data ⚫ enhance processes Huge volumes of data generated in business organizations including retail, ⚫ reduce costs healthcare, manufacturing, and electronics ⚫ increase productivity ⚫ uncover product innovation Using data analysis to manage the supply chains ⚫ achieve market differentiation ⚫ improve societal outcomes Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22 Current Trends in Supply Chain Management, End of Chapter 1 Part 3 Increasing Supply Chain Visibility ⚫ Knowing exactly where products are, at any point in the supply chain ⚫ Inventory visibility is made easier by technology ⚫ Sophisticated software applications for tracking orders, inventories, deliveries, returned goods, and even employee attendance Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24 1) What the advantages and risks associated with global supply chains? How do them compare to a domestic USA one? Advantages of Global Supply Chains: Cost Reduction: Sourcing materials from low-cost countries can save money. Market Access: Expands customer base to global markets. Risk Diversification: Reduces dependency on one region by sourcing from multiple countries. Innovation: Access to advanced technologies and materials (access to resources) Risks of Global Supply Chains: Political Instability: Vulnerable to changes in trade policies or tariffs. Longer Lead Times: Increased shipping times can delay deliveries. Complexity: Managing suppliers, regulations, and currencies across regions. Quality Control: Maintaining consistent quality across different countries. Environmental/Social Issues: Risk of unethical sourcing and reputational damage. Comparison to Domestic USA Supply Chains: Cost: Domestic supply chains are often more expensive due to higher labor costs but avoid international shipping fees. Risk: Domestic chains face fewer geopolitical risks but may be impacted by local disruptions. 2) What is supplier certification and what role does it have for firms? Supplier evaluation and certification ensure quality, reduce testing, and encourage performance improvement (e.g., John Deere's Achieving Excellence Program). = drive more business so more people will wanna work with you 3) What are 3PLs and what role do they play in SCM? Can you name a 3PL? DEFINITION: Companies that offer outsourced logistics services to businesses so companies can focus on their core competencies while outsourcing complex logistics tasks to specialists who have the resources, expertise, and infrastructure to handle them more efficiently. transportation, warehousing, distribution, inventory management, packaging, and other aspects of the supply chain Examples: Amazon, Penske Logistics, UPS, DHL, FedEX 4) How are production-based supply chains different vs service-based supply chains? How are they similar? Differences: Nature of Output: Production-Based Supply Chains: In these supply chains, the focus is on manufacturing physical goods. Products go through multiple stages, including sourcing raw materials, production, assembly, packaging, and distribution. Examples include electronics, automobiles, and clothing. Service-Based Supply Chains: These supply chains focus on the delivery of services rather than physical products. Services are intangible and typically involve activities such as consulting, healthcare, transportation, and education. The "product" is a service experience or outcome rather than a tangible good. Inventory: Production-Based Supply Chains: Goods are produced and stocked as inventory, which can be stored, distributed, and sold. The management of raw materials, work-in-progress, and finished goods is crucial. Service-Based Supply Chains: Since services are intangible and typically produced and consumed simultaneously, there is no physical inventory in the same sense as in production-based supply chains. Instead, the focus is on managing capacity and scheduling the delivery of services. Customer Interaction: Production-Based Supply Chains: Customer interaction generally occurs at the point of sale after the product is manufactured and distributed. Service-Based Supply Chains: Service delivery often involves direct interaction with customers during the production phase. For example, in healthcare, the service (medical care) is delivered to the patient at the same time it is produced. Supply Chain Complexity: Production-Based Supply Chains: These can be more complex due to the need for managing physical assets, machinery, and raw materials. Quality control, lead times, and production schedules play a critical role. Service-Based Supply Chains: These tend to have more variability in terms of customer demand and quality control, as services can be highly customized and influenced by human performance. Managing service delivery requires scheduling and workforce management. Similar: Goal of Efficiency, Focus on Coordination, Risk Management, Technology Integration 5) What role does information systems play in SCM? Give some examples to support your views. Data Integration and Visibility: Inventory Management: Demand Forecasting and Planning: Order Processing and Tracking: Collaboration and Communication: Performance Analytics and Reporting: Supply Chain Optimization: 6) What is supply chain visibility and how can firms increase or improve their levels of SC visibility? WHAT IS IT? = It is the enhanced ability to track products and inventory in real-time, improving efficiency and responsiveness to disruptions. HOW TO IMPROVE? = social media, Technology like RFID and tracking systems used to improve inventory accuracy, reduce stock-outs, and improve customer experience.  BAR CODING PREVALENT IN SUPPLY CHAIN MANAGEMENT Bar coding is one of the technologies in use in many frequent applications in BAR CODE PRIMER supply chain management as well as the general tracking and movement of materials, objects, etc Bar coding applications are very prevalent in material movements, warehousing, transportation, and virtually all aspects of the supply chain as well as other areas of business Manufacturing and inventory areas reply very heavily on materials tracking and accuracy for various purposes such as MRP status updates, inventory updates, inventory levels, etc BAR CODING BACKGROUND AND BENEFITS SOME BAR CODING BASICS The use of bar coding has been growing dramatically over the last 40 years. With the There are various types of bar code symbologies (types) that are in use today and vary adoption of UPC symbology as the standard for retail grocery stores in the late 1970’s primarily by industry type or general application need Bar codes are a fast, easy, and accurate data entry method. The correct use of bar codes Some common symbologies: UPC – Food/Consumer Stores, Code 39, Interleaved 2 of 5, can decrease employee time required, increase accuracy and increase an organization's Code 128 (one dimensional bar code listed above) efficiency There are also 2-Dimenional bar codes that can hold significantly more data than those The application software that accepts the bar code data is about 95% in control of the of above (Maxicode – UPS, PDF 417, Data Matrix) in a smaller space success or failure of an application. Bar codes are just another data input method Readers/Scanners/Wands are typically able to be configured to read multiple types of What you do with the data and its subsequent processing/handling is most important bar codes with various types of printers and label generators for labels/tags. BAR CODE EXAMPLES SOME BAR CODING BASICS (CONTINUED) (ONE DIMENSIONAL OR LINEAR TYPE ON LEFT WITH 2-D TYPE (PD417) ON RIGHT) The scanner or wand passes rays of light beams over the given bar code to decode the data embedded in the bar code and the feeds the applicable data to the software application using the input. Errors reading bar codes are extremely low (less than 1%) depending upon various parameters such as bar code type, density, etc Bar-coded labels usually have human readable components with the corresponding data embedded in the bar code plus more data embedded in bar code (in some cases) Warehouses and other similar logistics areas often use radio-frequency technology to wirelessly capture data on an on-going, real-time basis to enable work activities with pickers/packers/forklifts, etc to continuously flow BAR CODE EXAMPLES (COMPARE LINEAR VS 2-D BAR BAR CODE EXAMPLES (SAME DATA AS PRIOR SLIDE CODE) BUT IN 2-D FORMAT – DATA MATRIX) SOME COMMON BAR CODE SCANNING DEVICES  Chapter 2 Learning Objectives You should be able to Describe the role of purchasing and its strategic impact on an organization’s Chapter 2 competitive advantage. Describe the traditional purchasing process, e-procurement, public procurement, and green purchasing. PURCHASING MANAGEMENT Recognize and know how to handle small-value purchase orders. Analyze sourcing decisions and the factors impacting supplier selection and diversity. Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6 th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 Learning Objectives, Part 2 Chapter Outline Introduction You should be able to: A Brief History of Purchasing Terms Analyze total cost of ownership. The Role of Supply Management in an Organization Analyze the pros and cons of single sourcing versus multiple sourcing. The Purchasing Process Describe the key characteristics of centralized, decentralized, and hybrid Sourcing Decisions: The Make-or-Buy Decision purchasing organizations. Roles of the Supply Base Describe the opportunities and challenges of global sourcing. Supplier Selection Describe the basic international trade law and commercial terms. How Many Suppliers to Use Purchasing Organization Global Sourcing Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Procurement for Government and Nonprofit Agencies Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6 th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 A Brief History of Purchasing Terms, Part 1 A Brief History of Purchasing Terms, Part 2 Merchants – Wholesalers and retailers who purchase for resale Supply Management – a newer term to describe the expanded set of responsibilities of purchasing professionals Industrial Buyers – Purchase raw materials for conversion, services, capital equipment, and MRO supplies (Maintenance, Repair, and Operations) Act of identifying, acquiring, and managing resources and suppliers to meet the organization’s needs in the attainment of its strategic objectives. Purchasing – key business function for acquiring materials, services, and equipment Key activities beyond basic purchasing include negotiations, logistics, contract development and administration, inventory control and management, supply Contracting – term often used for the acquisition of services management, and other activities. Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6  The Role of Supply Management in an The Role of Supply Management in an Organization, Part 1 Organization, Part 2 The primary goals of purchasing are: The Financial Significance of Supply Management Ensure uninterrupted flows of raw materials at the lowest total cost, Profit-Leverage Effect: Measures the impact of a change in purchase spend on a firm’s Improve quality of the finished goods produced, and profits before taxes (assuming gross sales and other expenses remain unchanged) Maximize customer satisfaction. Return on Assets (ROA) Effect (also known as Return on Investment): Indicates how Purchasing contributes to these objectives by: efficiently management is using its total assets to generate profits. A high ROA suggests that management is capable of generating large profits with relatively small investments. Actively seeking better materials and reliable suppliers, Working closely with and exploiting the expertise of strategic suppliers to Inventory Turnover Effect: Increased inventory turnover indicates optimal utilization of improve the quality of raw materials, and space and inventory levels, increased sales, and avoidance of inventory obsolescence. Involving suppliers and purchasing personnel in product design and development efforts. Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8 ROA and Inventory Continued The Role of Supply Management in an Organization, Part 3 The Financial Significance of Supply Management ROA (Return on Assets) = Net Income / Total Assets Profit-Leverage Effect Inventory Turnover (Turns) = Cost of Goods Sold (COGS) / Average Inventory Value Average inventory can be found by taking (beginning year snapshot + ending year snapshot) / 2 or getting monthly actuals These are some measures that show why supply chain themes and functional areas are critical to corporate success and profits In general, firms want inventory to move quickly through their supply chains to maximize profits and avoid obsolescence and other potential issues with excess or old inventory Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10 The Purchasing Process – Manual The Purchasing Process – Manual Purchasing (older system) Purchasing, Part 1 Step 1 – Material Requisition/Purchase Requisition Stating product, quantity, and delivery date. May originate as a planned order release from the MRP system. Traveling requisition used for recurring orders. Step 2 – The Request for Quotation (RFQ) Buyer identifies suppliers & issues a Request for Quotation (RFQ) for routine items or a Request for Proposal (RFP) for highly technical products. Supplier Development is used to develop supplier capabilities. Step 3 – The Purchase Order (PO) Is the buyer’s offer & becomes a binding contract when accepted by supplier. When initiated by the supplier on their own terms, the document is a sales order. The Uniform Commercial Code (UCC) governs transactions in the U.S., except Louisiana which utilizes the Napoleonic Code. Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12  The Purchasing Process – Manual The Purchasing Process – Manual Purchasing, Part 3 Purchasing, Part 2 Embedded in an Person, where electronically they are, and system that most what they are companies use requesting to acquire = will then get approved or not Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 The Purchasing Process – The Purchasing Process – e-Procurement, Part 1 e-Procurement, Part 2 Step 1 – Material user enters a purchase request - Relevant information such as quantity and date needed. Step 2 – Purchase requisition approved and transmitted electronically to buyer - At purchasing department (hard copy or electronically). Step 3 – Buyer reviews requisition, assigns qualified suppliers to bid (if over $50,000) - Product description, closing date, and conditions are given. Step 4 – Buyer reviews closed bids and selects a supplier Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16 The Purchasing Process – Small-Value Purchase Orders e-Procurement, Part 3 Processing costs for small-value purchases are minimized through: Advantages of the e-Procurement System: Procurement Credit Card/Corporate Purchasing Card (P-card) Time savings Blanket or Open-End Purchase Orders Cost savings Most use electronic Blank Check Purchase Orders Accuracy systems to do the Stockless Buying or System Contracting Real-time use Petty Cash purchasing Mobility Standardization and Simplification of Materials and Components Trackability Accumulating Small Orders to Create a Large Order Management benefits Using a Fixed Order Interval Supplier benefits Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18 P-cards improve efficiency because risk and reward and practicality. This will allow for faster transactions and better spending control. do not have to wait for it to get approved all the time (ex. $25 dollar purchase)  Sourcing Decisions: The Make-or-Buy Sourcing Decisions: The Make-or-Buy Decision, Part 1 Decision, Part 2 Outsourcing – Buying materials and components from suppliers instead of Reasons for Buying or Outsourcing: making them in-house. The trend has moved toward outsourcing. Cost advantage – Especially for components that are nonvital to the Ex. Apple developing organization’s operations, suppliers may have economies of scale Backward vertical integration – Acquiring sources of supply its own processors Insufficient capacity – A firm may be at or near capacity and subcontracting Ex. Netflix making their own from a supplier may make better sense Forward vertical integration – Acquiring customers original movies ot get to their Lack of expertise – Firm may not have the necessary technology and watchers expertise The Make-or-Buy decision is a strategic decision = all firms have to make this Quality – Suppliers have better technology, process, skilled labor, and the advantage of economy of scale Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20 Sourcing Decisions: The Make-or-Buy Sourcing Decisions: The Make-or-Buy Decision, Part 3 Decision, Part 4 Reasons for Making: Protect proprietary technology No competent supplier Better quality control Use existing idle capacity Control of lead time, transportation, and warehousing costs Lower cost Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22 17 30,500 + 30 = 1 900 + , 8Q -90% = 4 , 800 Q = 960 Sourcing Decisions: The Make-or-Buy Sourcing Decisions: The Make-or-Buy Decision, Part 5 Decision, Part 6 The Make-or-Buy Break-Even Analysis Graph of previous slide Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24  Are they willing to get involved with our Beau new process or products early? Roles of Supply Base Supplier Selection, Part 1 Supply Base – list of suppliers a firm uses to acquire its materials, services, The process of selecting suppliers, is complex and should be based on supplies, and equipment multiple criteria: Emphasis on long-term strategic supplier alliances, consolidating volume into one or a few suppliers, resulting in a smaller supply base Preferred suppliers provide: Product and process technology & expertise to support buyer’s operations Information on latest trends in materials, processes, or designs Information on the supply market Capacity for meeting unexpected demand Cost savings due to economies of scale Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6 th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26 Supplier Selection, Part 2 How Many Suppliers to Use Total cost of ownership concept Single sourcing – a risky proposition. Current trends favor a few sources. Reasons Favoring a Single Reasons Favoring Two or Supplier More Suppliers ▪ To establish a good relationship ▪ Need capacity ▪ Less quality variability ▪ Spread risk of supply interruption ▪ Lower cost ▪ Create competition ▪ Transportation economies ▪ Information ▪ Proprietary product or process purchases ▪ Supplier diversity ▪ Volume too small to split Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28 We need this holistic view to not look at the products individually but the whole view of the suppliers Purchasing Organization , Part 1 Purchasing Organization, Part 2 Purchasing Organization is dependent on many factors, such as market conditions and types of materials required Centralized Purchasing – Single purchasing department located at the firm’s corporate office makes all the purchasing decisions Decentralized Purchasing – individual, local purchasing departments, such as plant level, make their own purchasing decisions Ex. Pharma = lots of centralized things, and some decentralized purchasing (usually use a mix as companies) Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30  Purchasing Organization, Part 3 Global Sourcing, Part 1 Import Broker – Sales agent who performs transactions for a fee that do not take A hybrid purchasing organization title to the goods Decentralized-centralized (large multi-unit org) – decentralized corporate Import Merchant – Buys and takes title to the goods and resells them to a buyer and centralized at business unit Tariff – An official list showing the duties, taxes, or customs imposed by the host Centralized-decentralized – (large organization w/centralized control) country on imports or exports centralized large national contracts at corporate level and decentralized items specific to business unit Non-tariff barriers – import quotas, licensing agreements, embargoes, laws and other regulations imposed on imports and exports Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32 Global Sourcing, Part 2 Global Sourcing, Part 3 Issues for Global Purchasers Reasons for Global Sourcing – United Nations: Contracts for the International Sale of Goods (CISG) Opportunity to improve quality, cost, and delivery performance Terms of acceptance cannot be modified Incoterms: commonly used term referring to the International Commercial Potential Challenges – Terms – uniform rules that simplify international transactions of goods with respect to shipping costs, risks, and responsibilities of buyer, seller, and Requires additional skills and knowledge to deal with international suppliers, shipper logistics, communication, political environment, and other issues Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 33 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 34 Global Sourcing, Part 4 Global Sourcing, Part 5 Countertrade – goods and/or services of domestic firms are exchanged for Countertrade can include: goods and/or services of equal value or in combination with currency from foreign firms Direct Offset – involves coproduction, or a joint venture and exchange of related goods or services Countertrade can include: Indirect Offset – involves exchange of goods or services unrelated to the Barter – complete exchange of goods or services of equal value without the initial purchase. exchange of currency (Oil for other goods and services) Counterpurchase – the original exporter agrees to sell goods or services Offset – exchange agreement for industrial goods or services as a to a foreign importer and simultaneously agrees to buy specific goods or condition of military-related export services from the foreign importer Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 35 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 36  Procurement in Government & Procurement for Government & Non-Profit Agencies, Part 1 Non-Profit Agencies, Part 2 Public Procurement or Public Purchasing – purchasing and supply function for government and non-profit sector that is characterized by: Rules that often govern Government and Non-Profit Procurement: Competitive bidding – contract is usually awarded to lowest priced responsive Federal Acquisition Streamlining Act (1994) – Removed restrictions on bids & responsible bidder less than $100,000. Micro-purchases (less than $3,000) can be made without bidding Sealed Bids are used to satisfy the Invitation for Bid (IFB) and are opened in public display Buy American Act (1933) – US government purchases and 3rd party Bid Bonds – incentive to fulfill contract purchases using federal funds must buy if the US good is not more than a Bid or Surety Bonds – successful bidder will accept contract certain differential above the foreign good Performance Bonds – work will be on time and meet specifications Green Purchasing – Variety of federal, state, and local initiatives to include Payment Bonds – protection against 3rd party liens not fulfilled by bidder environmental and human health considerations when making purchases Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 37 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 38 End of Chapter 2 Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 39  INCOTERMS Unless a contract or other agreement is reached, Incoterms are important in supply chain management for domestic and international activity for freight movements as they: INCOTERMS Determine where the ownership of cargo transfers between buyer and seller Who pays for transportation to a given point and other items such as packing Who is responsible for insurance to a given point Overview The following website below is an excellent site to visually see various incoterms and how responsibilities transfer from buyer to seller. Incoterms impact pricing, transportation choices, and insurance coverages https://incodocs.com/blog/incoterms-2020-explained-the-complete-guide/ 2 Makes sure valuables will not Some examples be lost and will get to your hands Pricing and Other Impacts Most favorable for sellers EX-WORKS Bethlehem, PA – means that BUYER or their agent picks up cargo at SELLER’s The given contractual terms or INCOTERMS between BUYER and SELLER are important office/warehouse in Bethlehem, PA at their expense, ownership transfers when cargo is picked-up and BUYER is responsible for insurance once item is picked-up. Most favorable Incoterm for to determine responsibility and associated costs for transportation, ownership transfer, SELLER. and insurance coverage. FOB Port City or Point – means that BUYER is responsible for getting cargo to designated Reasons In many cases INCOTERMS are also risk management factors considered to help location and is responsible for insurance coverage to designated location and ownership control Reliable minimize risks where the firm may not have operational or other experiences in supply transfers from BUYER to SELLER at designated location. chain management or transportation. CIF City or Point – commonly used for international shipments (Cost, Insurance and Freight to point) If a seller is in New York and buyer in is Amsterdam, Netherlands then CIF Schiphol Airport means that the BUYER is responsible for getting freight to the airport in the Netherlands, ownership of cargo transfers at the airport and the BUYER is responsible for insurance cover until cargo arrived at the airport in Netherlands. = less responsibility, and good for buyers who do not want to arrange all those details themselves 3 4  Chapter 3 Learning Objectives You should be able to Explain the importance of supplier partnerships. Understand the key factors for developing successful partnerships. Chapter 3 Understand the impact of the COVID-19 pandemic on supplier relations. Develop a supplier evaluation and certification program. CREATING AND MANAGING Explain the importance of a supplier recognition program. SUPPLIER RELATIONSHIPS Understand how to manage supplier relationships during a pandemic. Understand the capabilities of supplier relationship management. Explain the benefits of using SRM software to manage suppliers. Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6 th Edition. © 2023 Cengage. All Rights Wisner | Tan | Leong, Principles of Supply Chain Management: A Balanced Approach, 6th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 Chapter Outline Devel