SCMN 3710 Exam 1
Terms in this set (212)
SQ: The three fundamental forms of utility under capitalist economic theory are:
Possession, Form, and Time/Space
The "Infrastructure" zone on the TC/CSL tradeoff curve is characterized by what?
fixed costs rising more rapidly than output (service)
According to prediction, __________, __________ and _________ will all house so called Megacitites, whereas _________ will not have any cities of this size.
Asia, Latin America, and North America; Europe
Which of the following is NOT one of the the three main macroeconomic forces driving the explosive growth in international trade since 1944:
time and place utility
3 main: cheap/plentiful transportation, liberalization of trade rules/reduction of tariffs, & cheap/plentiful information
A critical outcome of the supply chain is to deliver what?
the right product to the right place
The three broad requirements for "market conditions" to exist in general include buyer and seller must be aware of each other, ______ , and _____ .
legal system of contract enforcement, means of exchange (currency)
When a specific point in time, or level of production, is chosen and costs are developed for the various logistics cost centers, it is called what?
short run analysis
These are designated by the U.S. secretary of the treasury for the purpose of storing, repacking, sorting or cleaning imported merchandise entered for warehousing without paying import duties while the goods are in storage.
Many organizations are working more closely with what?
customers, suppliers, & various types of logistics suppliers
Full collaboration is the dynamic combination of what?
both vertical and horizontal collaboration
A third-party logistics firm may be defined as what?
an external supplier that performs or manages all or part of a company's logistics functions
SQ: Scorecard and key performance indicators (KPIs) refer to what?
metrics to manage logistics operations
An important sustainability issue that has received much more security in recent years is the:
reduction in packaging waste by using alternative materials
The essence of demand management is to estimate and manage ___________ and use this information to make operating decisions.
SQ: An inbound-to-operations logistics system is also referred to as what?
One type of demand fluctuation is caused by random variation. What is random variation?
a development that cannot normally be anticipated
SQ: Traditional customer profitability analyses would start with ______ less returns and allowances (net sales) and subtract the cost of goods sold.
While interest has traditionally focused more on the overall length of the OTC cycle, recent attention has been centered on what?
variability or consistency of this process
Applying Internet technology to the order management process has allowed organizations to not only take time out of the process but also to what?
increase the velocity of cash back to the selling organization
SQ: Most retailers are essentially supply chain companies since when?
they buy products produced by others
It can be argued that this is the second language of logistics and supply chain management.
SQ: Logistics is the process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing the goods- or service-producing network to fulfill customer requests; and utilizing the network to fulfill customer requests in a timely manner. This is a what?
Which of these is NOT a trend in today's logistics environment that may have significant effects on decisions involving logistics facility location?
addition of many wholesaler/distributor operations
This type of fulfillment model has the manufacturer delivering its products directly to the retailers' stores.
None of the above
Which is correct regarding tapering rates?
the principle is based on the carrier's ability to spread certain fixed shipment costs over a greater number of miles
Identify the proper sequence of the three "flows" in the supply chain.
As the dollar value of a product increases, packaging costs will:
There are four strategies that firms can use to balance supply and demand; price, lead time, inventory, and ___
The global logistics channel intermediary that supervises the movement of goods through customs and ensures that the documentation accompanying a shipment is complete and accurate is known as what?
a customs house broker
SQ: In his book "The Wealth of Nations", Adam Smith stated that economies and companies could improve their wealth by what?
allowing specialization of tasks
Adam Smith in his renowned treatise, The Wealth of Nations, provided not only a rationale for a market economy based upon competition, but also advanced a rationale for trade among nations called the
Theory of Absolute Advantage
Gross margin equals what?
sales - COGS
SQ: The purpose of this chapter is to what?
develop quantitative tools to show how metrics can be linked to financial performance
SQ: An outbound-to-customer logistics system is also referred to as what?
SQ: The term functional silos refers to:
lack of coordination between departments
Order management system represents the principal means by which?
buyers and sellers communicate information relating to individual orders of product
The term replenishment cycle refers to what?
the acquisition of additional inventory
SQ: The demographics of our society has changed because of what?
of the increase in two-career families and single-parent households
SQ: Outsourcing involves what?
obtaining materials, parts, and products from other companies
A maquiladora plant is what?
a U.S. plant performing manufacturing, processing, or assembly activity in Mexico
Many organizations are working more closely with who?
customers, suppliers, and various types of logistics suppliers
Exponential smoothing is what?
one of the most commonly used techniques
The SCOR model provides suggested metrics that?
across multiple dimensions for each of the five Level One processes
Which of the following is not part of the Supply Chain network?
As the weight density of a product decreases, transportation cost per pound will:
As the dollar value of a product decreases, its transportation cost:
An important sustainability issue that has received much more scrutiny in recent years is the:
reduction in packaging waste by using alternate materials
SQ: The Supply Chain should what?
manage materials and products, information, financials, and demand
Vertical collaboration refers to what?
collaboration among buyers and sellers in the supply chain
SQ: Which is true regarding the facility/supply chain network design decision?
it should be coordinated closely with the corporate and overall business strategies that may be in place
The weighted moving average method assigns what?
a weight to each previous period
The traditional role of customer service at the interface between marketing and logistics manifests itself through the ______ dimension of the marketing mix
Those customers who are in the "Danger Zone" segment are what?
the least profitable
The primary Key Performance Indicators (KPIs) for supply chain managers are what?
Total Cost, Customer Service Level, and CSL/TC
What activity is described as the movement of goods into a warehouse, the placement of goods in a warehouse, and the movement of goods from storage to order picking areas and eventually to dock areas for transportation out of the warehouse?
While available evidence supports the fact that the president or CEO and the finance executive are often involved with the identification of the need for logistic services...
executives from other areas in the company are also aware of such needs but to a lesser degree
Which is NOT part of dependability?
part of dependability: safe delivery, correct orders, & cycle time
SQ: Two primary economic elements driving the rapid increase in global trade over the last 50 years are which?
increased availability of information and reduced transportation costs
Performance measurement is important because of what?
lower-level metrics in an organization must connect directly to the high-level performance to achieve goals
SQ: Some individuals describe the current consumer as the "click here" generation because why?
we no longer wait for information to be "pushed out" to us
Goods can be stored in a bonded warehouse for?
up to 3 years
Approximately two-thirds of 3PL customers think their providers supply what?
Approximately two-thirds of 3PL customers think their providers supply what?
The internal balancing method deals with what?
inventory and production flexibility
SQ: Demand management includes what?
All of these
-flows of products
-flows of capital
-flows of services
SQ: Oversupply is created by what?
SQ: Which is NOT true regarding logistics network design?
"what-if" types of analysis can be conducted later, after the final network design has been established.
One of the major challenges of supply chain management is what?
maintaining the visibility of inventory
Focused production is what?
a strategy in which a given plant produces one or two items of the company's total product line
SQ: Customer relationship management is the art and science of what?
positioning customers to improve the profitability of the organization
SQ: A demand-driven system is also known as what?
a pull system
Which country is not one of the top three recipients of exports from the United States?
SQ: What are the steps in the CRM process?
segment customer base, identify service/package, then measure service and improve
SQ: Activity Based Costing can be?
combined with customer segmentation
Materials handling is concerned with what?
SQ: The logistics/supply chain network transformation team
must be aware of the firm's overall business and corporate strategies and the supply chain in which it participates.
Many industry initiatives have attempted to create efficiency and effectiveness through the integration of supply chain activities and processes. Among the various initiatives is/are what?
efficient consumer response (ECR), vendor-managed inventory (VMI), & quick response (QR)
Earnings before interest and taxes is calculated:
Sales - cost of goods sold - total operating cost
There are two parts to the order management process. The first is _______________ and the second is _________________________.
influencing how the customer orders, managing the order after it is received
Which of the following does a forecast always assume?
The past always repeats itself
Four Types of forecast error measures can be used. Which one of the following is not one of the four types?
Exponential smoothing for trends
An overall measure of logistics system performance that allows for better global decision making among various trade-offs is the "Bang/Buck" ratio or the
Customer Service Level per Total Logistics Cost
Logistics, in its simplest form,
combines inbound logistics with the outbound logistics of physical distribution.
Complexity in the supply chain is caused by
All of these answers (the number of SKUs, transportation requirements, locations of customers and suppliers)
Logistics creates which utility through production forecasting, production scheduling and inventory control?
SQ: The value that is added to goods through a manufacturing or assembly process is:
SQ: Which of the answers below is an example of the creation of form utility by a logistics activity?
the breaking bulk and repackaging at a distribution center
The utility that is created by moving goods from production points to market points where demand exists is referred to as:
Time utility depends on
having the product available when the user wants it.
Marketers have begun to recognize the strategic value of place in the marketing mix, as well as the benefits resulting from high-quality logistical services. As a result, which has been recognized as the interface activity between marketing and logistics?
Water Cruisers is located in Jacksonville, Florida, and makes small yachts and luxury pontoon boats for customers on the East coast of the United States. Each boat requires thousands of parts purchased from over 1,000 vendors. A number of boats are in production at any one time, so a large number of parts constantly arrive and are stored. Once a boat is finished, it is sailed up the coast to a convenient port for customer delivery. Which type of logistics system does Water Cruisers use?
Gemini products wishes to enter foreign markets but lacks the resources to do so. They evaluate their alternatives and approach Overseas Traders, LLC, a company that specializes in the foreign distribution of products of the type which Gemini manufacturers. Overseas purchases $50,000 of Gemini's products for sale on the international market. Overseas is which type of global logistics channel intermediary?
export trading company
What are fixed spatial points where goods stop for storage or processing?
Goods can be stored in a bonded warehouse
for up to 3 years
Which condition must be present before motor carriers and rail carriers can be used for international shipments?
the shipment must be between adjacent countries
Focused production is
a strategy in which a given plant produces one or two items of the company's total product line.
Which is a major category of ocean shipping?
Which category of ocean shipping offers set schedules over specified sea routes?
A third-party logistics firm may be defined as
an external supplier that performs or manages all or part of a company's logistics functions.
Horizontal collaboration refers to a relationship that is ___________ and/or ____________.
buyer to buyer and/or seller to seller
Vertical collaboration refers to
collaboration among buyers and sellers in the supply chain.
Approximately two-thirds of 3PL customers think their providers supply
tactical or operational services
There are four major categories that provide a useful way for examining logistics and supply chain performance: They are: time, ______, cost, and supporting metrics.
As the level of substitutability for a product increases, its stockout costs to the manufacturer:
allow the decision maker to test the effects of alternative locations.
have fallen from use because of SAILS.
The optimization model is based on
precise mathematical procedures.
Which chose is not one of the essential factors for economic growth and increased development of global trade flows.
The Trade Act of 2002 requires exporters to electronically submit shipping documents to U.S. Customs ___hours after delivery to a port.
When a blanket rate structure is used, which factor is eliminated as a locational determinant?
As a firm spends more on transportation service, cost of lost sales:
An advantage to dedicated fulfillment is:
No disruption to store operations
An "executive dashboard" is
a small number (usually less than five) of KPIs.
Application of the grid technique to the location of a city warehouse
accounts for information like highway access and facility availability within the grid coordinates.
Which of the following is not an external factor that is shaping the economic and political landscape?
Which is true regarding optimization models?
Optimization models are based on precise mathematical procedures that are guaranteed to find the "best" solution for the problem under evaluation.
Channel structure management includes decisions regarding the use of outsourcing,
channel inventories, ____________, and channel structure.
SQ: The current logistics management approach is supported by which performance measurement concepts?
least total cost
The desired outcome (focus) of decisions made about supply chain tradeoffs is to
drive the CSL/TC ratio higher
SQ: The fundamental role of a manager is the finite assignment of _____ to _____ .
One of the four supply chain flows in Figure 1 - 8 that has received increased attention from supply chain managers due to the growth in technology is:
SQ: Customer service can be defined as
Anything that touches the customer
The product's dollar value typically affects the cost of logistics activities. Which is not one of these costs?
SQ: All four subdivisions of logistics have some common characteristics. Which of the below does not belong in the list:
Which are the major modes of international transportation?
water and air
The top ten countries account for almost "X%" of the total world population.
Where is a megacity most likely to develop?
The most important trade-off in logistics is between:
Transportation and inventory
The grid technique
assumes that the raw materials sources and finished goods markets are fixed.
This type of forecast error measure is the only one to show if a stock out or overage occurred
Which of the following order cycle lengths would require the buyer to hold the most total inventory during lead time?
"10 days, +/- 4 days"
SQ: Globalization was initially driven by countries
seeking materials and goods not available in their own land.
America's ports are a key component of its global commerce. U.S. ports also play a vital role for the cruise industry. Which of these is not one of the top three departure ports for the cruise industry?
Cape Liberty, New Jersey
Full collaboration is the dynamic combination of
both vertical and horizontal collaboration.
A(n) _______ relationship exists between the cost of lost sales and inventory cost.
The grid technique is used to determine a fixed facility location that represents the least-cost center for moving incoming materials and outbound product within a geographic grid. This least cost center is also referred to as
a center of gravity.
What type of change may suggest a need to reevaluate and/or redesign a firm's logistics network?
All of these
-change in corporate ownership
-change in customer service requirements
-shifting locations of customer and/or supply markets
The classic objective of a network design model has been
to establish the number, location, and size of finished goods distribution centers and associated product flows.
Effective order management can have an impact on
all of these answers (improving ROA, increasing revenues, reducing supply chain costs)
The decision to alter the supply chain process is essentially ___________issue.
Which of the following is NOT an element of Order Management?
optimizing mode mix
The "product mix/assortment" problem refers to rapidly increasing costs as a result of
trying to serve the last 1-3 percent of customer demand with ever increasing inventory
Which country is not one of the three top recipients of exports from the United States
What is the effect of tapering rates on facility location?
pulls the location toward the source or the market
As the nuber of stocking points (DCs) is decreased in a distribution network, fixed costs will ______ and variable costs will _____.
The time that elapses from when a company receives an order until it gets paid for delivering the order is called the:
Order to cash cycle
Traditionally, information has been viewed as flowing in the opposite direction of products, that is, from the market/customer back to the wholesalers, manufacturers, and vendors.
None of these answers ( This is still true and has not changed, Computerization has greatly increased the flow of information from the source, The "Big Box" stores have developed their own sources)
The Supply Chain Concept
developed from the previous Physical Distribution concept
Which of these flows only one way as illustrated in Figure 1-4?
None of these answers (financials, products and services, information)
A(n) _______ relationship exists between the cost of lost sales and inventory cost
These are designated by the U.S. secretary of the treasury for the purpose of storing, repacking, sorting or cleaning imported merchandise entered for warehousing without paying import duties while the goods are in storage
SQ: In the short run, the firm's network is _________ while in the long run it is ________.
While available evidence supports the fact that the president or CEO and the finance executive are often involved with the identification of the need for logistic services,
executives from other areas in the company are also aware of such needs but to a lesser degree
The purpose of this chapter (Ch. 5) is to
all of these answers (discuss how supply chain metrics are developed, offer methods for classifying supply chain metrics, develop quantitative tools to show how metrics can be linked to financial performance)
The three prerequisites that must be satisfied for goods to move "naturally" from areas of surplus to areas of shortage are that the change in total value is greater than the change in total cost, ________ , and __________ .
market conditions exist, government does not prohibit
The challenge to develop and sustain an efficient and effective supply chain(s) requires organizations to address a number of issues. Which is not included?
inventory carrying costs
SQ: A critical ingredient for the Third Era of globalization is:
technological advances, especially in information technology and communications
In the SCOR Model there are five major categories of metrics that need to be used to measure the performance of Process D1: reliability, ___________, agility, costs, and asset management.
A critical outcome of the supply chain is to deliver
the right product to the right place.
SQ: Which of the below is not one of the external forces driving the rate of change and shaping our economic and political landscape?
What is often the largest component of logistics costs?
A ______ analysis examines a logistics system over a long time period or range of output.
What technology has helped make the physical inventory-taking process more efficient and effective?
scanning of bar-coded RFID tags
As market forces continue to exert pressure on companies to improve profitability, the quest for lower-cost manufacturing has been a factor in the relocation of manufacturing from Mexico to ________ ?
SQ: What type of change may suggest a need to reevaluate and/or redesign a firm's logistics network
All of these
-change in customer service requirements
-change in corporate ownership
-shifting locations of customer and/or supply markets
The biggest and best known example of a regional trade agreement (RTA) is the:
European Union (EU)
Whether the relationship may or may not be with a provider of logistics services, today's supply chain relationships are most effective when collaboration occurs among the ____________ who are involved.
Many organizations are working more closely with
customers, suppliers, and various types of logistics suppliers.
Which of the following is NOT a supply chain decision area regarding ROA improvement?
SQ: The "Value Proposition" that must be satisfied for the "invisible hand" to move goods from areas of surplus to areas of shortage holds that the _____ must be _______ the _______ .
change in total value, greater than, change in total cost
Cost/Value refers to
the importance of cost and value at the very end of the supply chain.
SQ: Ensuring the availability of the right product, in the right quantity, and the right condition, at the right place, at the right time, for the right customer at the right cost, is which definition of logistics?
Which type of global logistics channel intermediary enables goods to move through customs more easily by consolidating small shipments into more economical sizes?
foreign freight forwarder
SQ: An index
combines two or more metrics into a single indicator.
What is the best financial metric to show the profit an organization generates in relationship to assets utilized?
The "most efficient frontier" on the TC-CSL graph is the line along which
costs are at the theoretical minimum for a given level of customer service
As suggested, the aging populations in these countries will result in __________ health care costs and/but __________ in the size of the working population or labor pool.
increased, a reduction
Demand for transportation at the microeconomic level is ___ while the demand for transportation at the macroeconomic level is ___?
The global logistics channel intermediary that supervises the movement of goods through customs and ensures that the documentation accompanying a shipment is complete and accurate is known as
a customs house broker
Which is the main advantage of international air transport?
The least-frequently used IT-based services by customers of 3PLs are:
strategic and customer-related
Which is not an important issue for economic development and vitality of the economy?
SQ: Another driving influence for supply chain reexamination has been the desire of organizations to change their supply chain focus from a __________to an "investment" center.
Which is an advantage of the grid technique for facility location?
computationally, it is relatively easy to use
In deploying supply chains across global markets, managers seek to identify opportunities where
differential value is high and total cost is low
A demand-driven system is also known as
a pull system.
SA: List and describe the three main macroeconomic factors that have led to the explosion in international trade since the Bretton Woods conference in 1944
rade; "make commerce, not war"; eliminate trade barriers
ransportation prices; frequently cheaper to ship something around the world than it is to make it locally
echnology; find vendors and customers anywhere
SA: List and describe the three fundamental forms of utility or value in modern capitalist economic theory.
-Possession-The value a person puts on a product when owning or using it
-Form-the value created as the product is manufactured or assembled, or as it physically changes
-Time/Place- Having the right product in the right place at the right time
SA: Describe and discuss the "Differential Value Proposition" model ("invisible hand") of modern supply chain management and how it provides for improved standards of living in the industrialized world today.
-goods move from an area of surplus to an area of shortage, and they will when the change in value is greater than the change in cost. Improved standards for everyone because it provides the higher profits for the seller all while providing necessary products for customers whether that be in everyday life or in case of an emergency.
SA: Describe and discuss the "fundamental tradeoff" model of logistics/supply chain decision making. Recreate the trade-off graph and describe the three distinct zones.
as you go higher on the CSL, more inventory is required. There are many elements of tradeoff, all of which incurs cost, but not all provide value.
SA: List and describe the "five major external forces" driving the rate of change and shaping the economic and political landscape for business today.
1. Globalization (selling and sourcing materials anywhere)
2. Technology (communication of consumer to business & power)
3. Organizational consolidation & power shift (fewer companies supplying more product & variety)
4. Empowered Consumer (customer has influence over product)
5. Government Policy & Regulation (tariffs & commerce laws)
SA: Discuss the evolution of the "supply chain concept" from the 1960's up to today.
SA: It has been said that the modern integrated supply chain concept represents a radical departure from the traditional views of competition and the firm. Discuss how this could be true; and how is it relevant to businesses today?
competition requires more communication to be effective in today's markets
SA: Compare and contrast "Absolute" vs. "Relative" advantage in international commerce.
SA: Describe 3 of the "Contributing Factors for Global Flows/Trade" and discuss how they influence the flow of goods and services.
SA: Discuss how the concept of "Free Trade Agreements" stimulate international commerce.
SA: List and describe the four main types or categories of "logistics."
1. Business logistics - plans and controls the flow and storage of goods, service, and related info from point of use in order to meet requirements
2. Military logistics - design and integration of all aspects of support for the military
3. Event logistics - activities, facilities, and personnel required to organize resources for an event to take place
4. Service logistics - acquisition, scheduling, and management of the facilities and materials to support business
SA: What are the major ways in which a firms output add value utility to an economy? What specific value-added roles does logistics provide?
1. Form utility - value added to goods through a manufacturing process
2. Time/Place/Quantity Utility - value added through delivering on time, at the right place, and with the appropriate quantity
3. Possession Utility - value that markets add to product/service with each promotional activity
SA: Describe the major ways in which logistics systems can be viewed or analyzed and why/how each approach is legitimate or not
BEST WAY - logistics channels: companies compete with one another for entire supply chain channels
NEXT BEST - Nodes vs. Links: Nodes are fixed material management centers; Links connect the nodes logistics systems
WORST WAY - cost centers: focusing on cost minimization is ineffective
SA: Discuss the factors that cause a company to analyze the design of a logistics/supply chain network or reconsider the location of a particular facility.
The factors that cause a company to analyze the design of a logistics/supply chain network or to reconsider the location of a particular facility are related to the change in environment. Businesses assign its resources in anticipation of a changing environment. Changes in cost and regulations are a big part with the changing environment
SA: What are the major "locational determinants" and how does each affect the location decision?
-Cost and availability of labor
Transportation services and infrastructure.
-Depends on product and industry served.
-Proximity to markets and customers .
-Greater number of customer firms in the market area, the greater the competitive advantage.
-Quality of life.
-Well-being of employees and the quality of work.
-Taxes and industrial development incentives.
-Impact cost of operating a business.
-Availability and cost of raw materials plus the cost of transporting materials.
-Land costs and utilities.
-Local building codes and cost of construction.
-May prefer a certain area or region.
SA: Compare and contrast the three main modeling techniques that are applied to the task of network design and facility location. Include a discussion of the advantages/disadvantages of each.
-Precise mathematical procedures that are guaranteed to find the "best," or optimum, solution.
-Optimization approaches essentially select an optimal course of action from a number of feasible alternatives.
SA: Compare/contrast "Integrated" vs. "Dedicated" methods of fulfillment. Discuss the strengths and weaknesses of each.
Integrated - all channels are operated under one infrastructure - brick and mortar store and internet store
1) Adv - low start-up costs/existing network can service both
2) Disadv - order profile will change with addition of internet orders; conflict might arise between a store order and online order
Dedicated - different infrastructure for different channels (Amazon keeping popular textbook in-house and using other companies for rest)
1) Adv - separate distribution network for store delivery and consumer delivery while eliminates disadvantage of integrated fulfillment
2) Disadv - duplicate facilities and duplicate inventories
SA: Discuss the role of "Demand Management" in fulfillment operations. Compare/contrast the "External" and "Internal" approaches.
Demand management is the ability of firms throughout the supply chain to collaborate on activities related to the flow of product services, info, and capital. "All about balancing supply with demand" - not matching!
External - try to influence demand directly
1) Change demand via price, selling in different segment, etc;
2) Change lead time.
1) Production flexibility - key to supply chain agility
2) Inventory - changing to avoid peeks and troughs in revenue. Used as a buffer.
SA: Compare/contrast "independent" vs. "dependent" demand. How are each modeled/forecast and why?
1) Unpredictable retail demand
2) requires forecasting to get idea of what consumers will want
1) b2b demand - ex: small tire business making wheels for cars for next year
2) depends on production schedule of end-of-manufacturing product
3) does not require to know any forecasting; manufacturer simply tells vendor what they need and vendor fulfills it.
SA: Compare/contrast the two main traditional "historical data" forecasting methods used for predicting independent demand. Discuss the strengths and weaknesses of each.
Moving Average [simple, weighted]:
1) Adv - easy to explain and simple
2) Disadv - have to keep a lot of historical data
1) Adv - Don't need to keep a lot of information/data
2) Disadv - harder to explain formula/method to upper management
Both forecasting methods can be adjusted to be more/less sensitive
SA: Discuss the two main areas of concern in forecast validity; how do they impact our ability to anticipate demand?
The two main areas of concern are bias and accuracy. If a forecast is continually biased (over forecasted to make company look better), we can account for that. However, if the forecast is wildly inaccurate, we are shit out of luck.
SA: Describe and discuss how "Customer Relationship Management" practices are used to influence and manage demand.
1) segment customer base by profitability - identify the "good, bad, and ugly" customers and try to eliminate the ugly ones.
2) Identify the product/service package for each customer segment - determine what package will satisfy each level of customer
3) Develop and execute the best processes
4) Measure performance and continuously improve.
CRM practices are used to segment customers into different groups based on expectations (platinum, gold, silver)
SA: Recreate and describe the "Customer Segmentation Matrix." How is this used in Customer Relationship Management?
1. Protect Zone: customers who are most profitable
2. Danger Zone: customers are least profitable and incur a loss
- Three alternatives for these customers
1) get them to move to another segment
2) charge customer actual cost of doing business
3) get customer to buy from competitors
3. Build Zone: these customers have low cost to serve, so firm should maintain the cost to serve and build net sales value to help drive customers to protect zone.
*It is used to transfer customer to most profitable zone and continue to separate the good customers from the bad.
SA: Discuss how order cycle time variability has an impact on customer service level achieved.
Making order cycle time faster does not necessarily mean higher customer service level. The focus should be on variability in order cycle time, even if order time is slower, so that you can have 100% of orders within the reduced variability.
SA: Describe and discuss the three dimensions of measuring supply chain performance.
1) Measures- no calculations and are uni-dimensional (only captures one thing) Ex. temperature would be a measure
2) Metric- requires calculation and contains several measures Ex. relative humidity (% of water vapor in air as a % of what air can hold)
3) Index- combines two metrics into a single valve Ex. "real feel" or heat index (temp + relative humidity)
SA: Describe 5 important characteristics of a "good" supply chain performance measure.
1) The most important characteristic is that a measure drives or incentivizes, the employees actions. "Does it drive the behavior you want?" Encourages appropriate behavior
2) Easy to understand-conveys at a glance what it is measuring
3) Is visible- effects of measure are reading apparent
4) Defined and Mutually Understand- measure is clearly explained and is agreed upon by all involved
5) Measures only what is important- measure focuses on KPI that is of value
SA: Describe the financial "leverage effect of logistics" and compare (use an example) of how logistics performance improvement compares to a performance improvement in sales
a small reduction in fixed costs increases profitability much more than an increase in sales. This is because when sales increase, we only earn a percentage due to the increased variable costs as well.
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