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SCM Exam 2
Terms in this set (74)
How to structure the supply chain over the next several years
Supply chain strategy or design
supply chain decisions over the next quarter or year
supply chain planning
daily or weekly supply chain operational decisions
supply chain operation or execution
the steps taken to move and store a product from the supplier stage to the customer stage in a supply chain
What is SC surplus?
customer value - SC cost
4 supply chain costs affecting network structure
inventories, transportation, facilities and handling, information
As the number of facilities increases, what happens to response time?
response time decreases
As the number of facilities increases, what happens to inventory?
inventory costs increase
What are the 2 key decisions that must be made in creating the distribution network from manufacturer to end customer?
- will product be delivered to the customer location or picked up by the customer from a prearranged site
- will product flow through an intermediary (or intermediate location)
What is the best choice of distribution netowrk?
grows the supply chain surplus by satisfying customer needs at the lowest possible cost
Performance of a distribution network should be evaluated along which 2 dimensions
value provided to the customer; cost of meeting customer needs
What is total logistics cost?
sum of inventory, transportation, and facility costs
Which transportation costs are higher?
product is shipped directly from the manufacturer to the end customer, bypassing the retailer
manufacturer storage with direct shipping
What is the advantage to drop shipping?
centralize inventories at the manufacturer
Which costs are low and high with drop shipping?
inventory costs are low but transportation costs are high
combines pieces of the order coming from different locations so the customer gets a single delivery
direct shipping with in-transit merge
What is the advantage of in-transit merge over drop-shipping?
low transportation cost and improved customer experience
inventory is held by distributors/retailers in intermediate warehouses and package carriers are used to transport products
distributor storage with carrier delivery
distributor/retailer delivering the product to the customer's home instead of using a package carrier
Transportation costs are highest for what form of distribution network?
returnability is best with which distribution network?
lastmile delivery because trucks can pickup returns
inventory is stored at the manufacturer or distributor warehouse but customers place their orders online or on the phone and then travel to pick up points
manufacturer/distributor storage with customer pickup
2 basic types of facilities costs
costs related to the number and location of facilities in a network and costs associated with operations that take place in these facilities
Why do facility decisions have a long-term impact on a supply chain's performance?
because it is expensive to shut down a facility of to move it
what are macroeconomic factors?
tariffs and taxes, exchange rates, freight and fuel costs
any duties that must be paid when products are moved across borders
reduction in tariffs or taxes that governments offer
areas in which duties and tariffs are relaxed as long as production is used primarily for export
free trade zones
How can exchange rate risk be handled?
What is the GPRI?
Global Political Risk INdex
What is Phase I in the framework for Network Design Decisions?
define a supply chain strategy or design
What is Phase II in the framework for Network Design Decisions?
Define the regional facility configuration
What are positive externalities?
the collocation of multiple firms benefits all of them
What are total logistics costs?
inventory, transportation, and facility costs
What is Phase III in the Framework for Network Design Decisions?
Select a set of desirable potential sites
What is Phase IV in the Framework for Network Design Decisions?
What are hard infrastructure requirements?
availability of suppliers, transportation services, communication, utilities, and housing facilities
What are soft infrastructure requirements?
skilled workforce, turnover, community receptivity
When is the gravity location model used?
when identifying suitable geographic locations within a region
What book was written by Adam Smith?
Wealth of Nations
Adam Smith's thoughts on trade
if a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage
2 reasons companies have failed to gain from offshoring
- focusing on unit cost rather than total cost
- ignoring critical risk factors
A global supply chain with offshoring increases what?
the length and duration of information, product, and cash flows
3 flexibility configurations suggested by Chopra
New product flexibility, mix flexibility, volume flexibility
type of flexibility: ability to introduce new products into the market at a rapid rate
new product flexibility
type of flexibility: ability to produce a variety of products within a short period of time
type of flexibility: ability to operate profitably at different levels of output
evaluates the present value of any stream of future cash flows and allows management to compare two streams of cash flows in terms of their financial value
discounted cash flows
What is "k" in the DCF analysis?
discount rate, hurdle rate, opportunity cost of capital
What is a decision tree?
graphic device used to evaluate decisions under uncertainty
What is Bellman's principle?
for any choice of strategy in a given state, the optimal strategy in the next period is the one that is selected if the entire analysis is assumed to begin in the next period
if we do not take randomness (or uncertainty) into consideration when performing an analysis....
we are probably undervaluing the value of the added cost of flexibility
the probability of having a product in stock when a customer orders arrives is
costs incurred in bringing material into a facility
inbound transportation csots
as the number of facilities in a supply chain increase what happens to inventory?
the inventory and resulting inventory costs also increase
What is an advantage of manufacturer storage with direct shipping?
reduce cost of inventory by centralizing inventories at the manufacturer
brick and mortar sales outperform online sales along what dimension?
request fulfillment (because you can pick it up right there) and product returns
What product characteristics make a traditional retail store better than an online channel for hardware products?
high volume, low cost products
Which distribution network design is being used when inventory is stored at the manufacturer or distributor warehouse but customers place their orders online or on the phone and then come to designated pickup points to collect their orders?
manufacturer/distributor storage with customer pickup
SC network design decisions include what?
location of manufacturing, storage, or transportation facilities, and the allocation of capacity and roles to each facility
Why do facility location decisions have such a long-term impact?
very expensive to shut down or move a facility
When facilities have high fixed costs, what is preferred?
If production technology displays significant economies of scale, what is the most effective approach?
How many phases are in Chopra's framework for network design decisions?
A global supply chain with offshoring would tend to see what decrease?
supply chain visibility
the sum of all cash flows for all periods being considered discounted by the rate of return for each period
net present value
process of evaluating the present value of any stream of future cash flows so that management can compare two streams of cash flows in terms of their financial value
discounted cash flow analysis
4 main drivers considered by Chopra when comparing distribution network options
inventories, transportation, facilities, information
capacitated plant location model: n
number of potential plant locations/capacity
capacitated plant location model: number of markets or demand points
capacitated plant location model: Ki
potential capacity of plant
capacitated plant location model: fi
annualized fixed cost of keeping plant open
What is a mathematical model?
description of a system using mathematical concepts and language
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