Chapter Nine Notes

Chapter Nine Notes - Chapter Nine Notes Supply Chain an...

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Chapter Nine Notes Supply Chain : an interrelated series of processes within a firm and across different firms that produces a service or product to the satisfaction of customers; network of service, material, monetary, and information flows linking customer relationship, order fulfillment, and supplier relationship processes Supply Chain Management : synchronization of a firm's processes with those of its suppliers and customers to match the flow of materials, services, and information with demand; one key component is developing strategy get all the resources along a supply chain needed to meet customer demand Supply Chain Design : essential aspect of a supply chain strategy, firms’ supply chains are designed to match firms’ operations strategies Firms chart cost and performance of their supply chain, comparing them to a supply chain efficiency curve, which shows the trade-off between costs and performance for the current chain when efficiency is optimized. Actual data is usually far off of the efficiency curve. Firms try to move their efficiency curve toward lower costs and higher performance with better forecasting, inventory management, operations planning and scheduling, and resource planning. The goal is simply to reduce costs while increasing performance. SCM becomes more valuable as SCs become more complex. The performance of numerous suppliers determines the inward flow of materials and services to a firm. The performance of the firm determines the outward flow of services or products to the next stage of the supply chain. The flow of materials, however, determines inventory levels. Improving forecasting processes, selective outsourcing of warehouse operations, and state-of-the-art automation and mechanization are several techniques to improve the flow of materials through a firm's facilities and can improve efficiency and performance of the supply chain. Inventory : - Stock of materials used to satisfy customer demand or to support the production of goods or services. - One important part of SCM is determining the amount of inventory to have Advantages of Small Inventory - Inventory represents a temporary monetary investment. When buying or producing inventory, the firm incurs opportunity cost in the cost of capital that could be used for other purposes. - Inventory holding cost , or carrying cost , is the sum of the cost of capital plus the variable costs of keeping items on hand, such as storage and handling costs and taxes, insurance and shrinkage costs. Holding costs changes with changes in the level of inventory within a firm.
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- The cost of capital is the opportunity cost of investing in an asset relative to the expected return on assets of similar risk. Inventory is an asset, and a cost measure that adequately reflects the firm's approach to financing assets should be used when accounting for the inventory on hand. Most firms use a measure called the weighted average cost of capital (WACC). This measure is the average of the required return on
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Chapter Nine Notes - Chapter Nine Notes Supply Chain an...

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