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STUDY OUTLINE FOR CHAPTER 11 - SUPPLY CHAIN MANAGEMENT 1. What is a supply chain? The sequence of organizations- their facilities, functions and activities-that are involved in producing and delivering a product or service. Facilities- warehouses, factories, processing centers, distribution centers, retail outlets, offices. Functions and activities- forecasting, purchasing, inventory management, quality assurance, scheduling, production and delivery, customer service. -can be few or many people (companies) involved in a company’s supply chain 2. What is a value chain? What are its two components? A value chain is a supply chain (interchangeable) because value chain reflects the concept that value is added as goods and services progress through the chain. Two components : supply component and demand component. Supply starts with the beginning of the value chain and ends with the internal operations of the organization.(Supply side might be the purchasing of raw materials, receiving of them and the assembly plant) Demand starts where the organization’s output is delivered to its immediate customer until it gets to the final customer (Demand side might be when it moves from the retail store it is delivered to until it gets to final customer) 3. What is the goal of supply chain management? SCM - strategic coordination of business functions within a business organization and through the supply chain with a goal of integrating supply and demand management . SCM is involved with planning and coordinating activities that include sourcing and procurement of materials and services, transformation activities and logistics. (SC goal to minimize uncertainties, keep a flow of information going in the supply chain) 4. List eight reasons for the need for supply chain management. 1) The need to improve operations 2) Because of increasing levels of outsourcing 3) Because of increasing transportation costs 4) Because of competitive pressures 5) Because of increasing globalization 6) Because of increasing importance of e-commerce 7) Because of the complexity of supply chain 8) To help manage inventories 5. Explain the bullwhip effect. Inventory oscillations become progressively large looking backward through the supply chain. Changes in the final customer’s demand (i.e. the customer orders in larger batches due to past shortages) is much more amplified by the time that it gets to the initial supplier. - A small change in consumer demand can result in large variations in orders placed upstream 16-1
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Ex: in traffic the guy at the front of a line of 10 cars changes his speed a little but by the time it gets to the last car the speed change is more drastic and amplified. Good SCM can overcome the bullwhip effect by strategic buffering of inventory and inventory replenishment based on
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