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SCM (Supply Chain Management) - is the planning and control of all activities across the supply chain

a network of companies that buy, produce, move store, and transform materials into finished products
and services for eventual consumption by the end-user (customer)
Supply Chain Core Processes
Plan-The strategic design (production process selection, location, staffing).
Source-Select suppliers (quantity, quality, cost and delivery).
Make-Transformation process optimization (resources, throughput, and schedule).
Deliver-Logistics optimization (transportation, distribution, and customer service).
Return- Reverse logistics/closed-loop supply chains (3Rs-recycle, remanufacture, and retire).
Competitive priorities (what can we do better than others)
Cost(price charged to customers)
Quality (High performance, Consistency, Durability, Reliability, Exceptional service)
Delivery (Fast, On time, Quick Response)
Flexibility (Volume Variety)
Supply Chain Network
Material Flows(Optimize material flow from raw material to final consumption)
Process Flows (By implementing best practices among member enterprises)
Information Flows (Supported with integrated and collaborative information)
Cash Flows (Resulting in improved cash flows)
ERP (Enterprise Resource Planning Systems) - is an accounting oriented information system for
identifying and planning the enterprise wide resources needed to manufacture and account for
customer orders.
CPM (Critical Path Method) - The length of time each activity in a project will take is known with
certainty. Therefore, the completion time of the entire project can be calculated with certainty. It is the
longest path.
PERT (Program Evaluation and Review Technique)- Is used when the length of each activity is not
known with certainty and is calculated with a probability distribution.
Outsourcing-Where the firm decides to have a function of the business handled outside of the firm.
They do not own the business they are outsourcing the function too.
Offshoring- Where the firm moves the function to a different country; however, they still maintain
ownership of the location where they are moving the function too.
Vertical Integration- When a company is making a make-or-buy they can decide to either outsource it
to another business (buy it) or they can choose to make it themselves. If the make it themselves they
are vertically integrating it.
Virtual or Hollow corporation- If a firm has outsourced most of their functions of their supply chain they
are known as Virtual or Hollow corporations.
Juran's cost of quality
Costs to Obtain Good Quality
o Prevention Costs: Costs associated with the planning and design phases of the product
and the production process to put quality into the product before its made also
includes costs for training personnel in quality control.
o Appraisal Costs: Costs associated with inspection, testing, and data gathering to
determine the actual quality of products throughout all phases of the production
Costs Resulting From Poor Quality
o Internal Failure Costs: Costs related to poor quality that result in scrap, rework, and
equipment downtime, and more hidden costs such as increased labor and machine
hours, increased machine failures and downtime, and customer delays.
o External Failure Costs: Costs related to poor quality products that reach the customer,
such as customer dissatisfaction, product returns, warranty claims, liability claims, and
lost sales.

ISO9000 (International Organization of Standards)- An international set of quality assurances that
applies to all types of companies.
1. Customer Focus: Organizations depend on their customers and therefore should understand
current and future customer needs, should meet customer requirements, and strive to exceed
customer expectations.
2. Leadership: Leaders establish unity of purpose and direction of the organization. They should
create and maintain the internal environment in which people can become fully involved in
achieving the organizations objectives.
3. Involvement of People: People at all levels are the essence of an organization and their full
involvement enables their abilities to be used for the organizations benefit/
4. Process Approach: A desired result is achieved more efficiently when activities and related
resources are managed as a process.
5. System Approach to Management: Identifying, understanding, and managing interrelated
processes as a system contributes to the organizations effectiveness and efficiency in achieving
its objectives.
6. Continual Improvement: Continual improvement of the organizations overall performance
should be a permanent objective of the organization.
7. Factual Approach to Decision Making: Effective decisions are based on the analysis of data and
8. Mutually Beneficial Supplier Relationships: An organization and its suppliers are
interdependent and mutually beneficial relationship enhances the ability of both to create
Malcome Baldrige National Quality Award (MBNQA)- A knock off of the ISO9000 but only available to
American Companies.
1. Leadership (125 points)
2. Strategic Planning (85 points)
3. Customer and Market Focus (85 points)
4. Information and Analysis (85 points)
5. Human Resource Focus (85 points)
6. Process Management (85 points)
7. Business Results (450 points)
SQC(Statistical Quality Control) refers to using statistical techniques for measuring and improving the
quality of process and includes SPC.
SPC (Statistical Process Control) involves using statistical techniques to measure and analyze the
variation in processes, in order to reduce cost and increase quality.
Two sources of Variability:
Common Cause- Natural variation
Assignable Cause-Variation due to specific reasons, like a mechanical malfunction.
Portfolio Matrix
Critical: a high value category that has few qualified supplies (normally specialized or customized
Leverage: also a high value category, but has many qualified suppliers (normally parts that are
used across the industry)
Market: a low value category, but with many qualified suppliers. Hard to differentiate one
brand from another.
Transactional: a low value category with few qualified suppliers. They are parts standardized
across the industry but it is normally procured locally. Normally purchased in bulk to limit the
number of transactions.
Direct Spend: Any cash directly used to manufacture the goods or service, such as parts and materials.
Indirect Spend: Cash spent that indirectly goes to producing the goods, such as advertising,
Time to Market: the amount of time necessary to take a product from conception to initial production.
First-Mover Advantage- the competitive advantage that can be gained by getting a new product to
market first.

Seven step strategic source process
1. Spend Analysis
a. Is detail analytical assessment of how much the company is spending in a particular
category or commodity classification
2. Supply Market Assessment
a. A detailed analysis of the current supply market to determine the competitive dynamics
that exist between the relevant suppliers.
3. Total Cost Analysis
a. A detailed analysis of how much it should cost the supplier to produce the desired
product or service.
4. Supplier Identification/Evaluation
a. A complied list of suitable suppliers who can provide the required products or services
5. Sourcing Strategy
a. This is the portfolio matrix
6. Supplier Negotiation/Selection
a. The holding of direct negotiations with the key suppliers. The criteria include: price,
availability, lead time, quality and total cost of ownership
7. Sourcing Strategy Implementation
a. The documentation of the potential savings that should result from implementation of
the supply contract
8. Compliance Assessment/Return to step 1 Periodically
Maverick Spend is a non-contract spending, normally prices are a lot higher than if they were
purchased with a contract.
Spend Leakage The failure of the supplier to adhere to the supply contract terms and conditions, for
example charging for shipping when the contracted stated that shipping would be covered.
TaGuchi- as Variability goes down, quality goes up and costs go down. As Variability goes up, quality
goes down and costs go up.
Control Charting: is the procedure used to show when the variation in the process is whining the limits
of the natural variation and when it goes out of control.
Project Crashing: Reducing the amount of time needed to complete the critical path, normally at a much
larger cost.

tools for continuous improvement
Employee Empowerment 85% of quality problems have to do with materials and processes,
not with employee performance. Therefore, bringing in the people who deal with the systems
on a regular basis will help find the flaws of a process faster.
Benchmarking Looking for process leaders (regardless of industries and learning from them)
Other tools