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Operations Exam
| Question | Answer |
|---|---|
| What is Outsourcing? | Outsourcing is the act of moving a company’s internal process and activity responsibility to an external provider |
| Reasons for outsourcing | financial improvement process improvement organizational need |
| Outsourcing considerations | strategic control coordination intellectual property |
| The primary driver for outsourcing is | cost reduction |
| Three step process for outsourcing: | Formulate company’s outsourcing strategy (core competency) Conduct a total cost analysis of all options / alternatives Plan for and complete implementation of outsourcing initiative |
| Favoring “MAKE” | - Low cost - Uses plant in a productive way - Product design confidentiality - UNRELIABLE SUPPLIERS |
| Favoring “BUY” | - Limited facility - Low cost - Minimal Volume - Good supplier |
| Advantages - Outsourcing | Greater flexibility Lower investment risk Improved cash flow Lower potential labor costs |
| Disadvantages - Outsourcing | Risk of selecting wrong supplier Loss of control over process Longer lead-times Capacity shortages “Hollowing out” the corporation |
| Advantages - Insourcing | Increased process control Visibility over process Economies of scale |
| Disadvantages - Insourcing | Higher volumes required High investment needed Dedicated equipment limited uses Supply chain integration problems |
| Outsourcing Cost Factors: | Purchase Costs Inbound Freight / Delivery Space Utilization Administrative Control Costs Continuing Investment Costs of Inventories Working Capital Costs |
| Insourcing Cost Factors: | Direct Labor Direct Material Inbound Freight Facilities Depreciation Overhead Direct Management Costs Cost of Inventories Working Capital Costs |
| Outsourcing Implementation Activities | - Need correct supplier - Need transparent information flow - Allocate resources to manage process |
| Stages of Supply Chain Globalization | 1. International purchasing 2. Global Sourcing 3. Global Supply Chain |
| International Purchasing: | strategic focus on leveraging volumes, minimizing prices, managing inventory costs |
| Global Sourcing: | Strategic focus on global opportunities(production, suppliers) |
| Global Supply Chain Integration: | strategic focus on optimizing supply networks through effective logistics and capacity management |
| 3rd Party Service Provider Benefits: | Economies of scale and increased flexibility Improve service performance levels Release capital from sale of assets Release running costs Concentrate on core business activities |
| 3rd Party Service Provider Concerns: | Relinquish control, ownership, and expertise Loss of integration between sales and supply Changeover costs and operational problems Loss of dedicated staff Sacrifice key service differentiation |
| THIRD PARTY LOGISTICS is? | An industry where a shipper outsources elements of supply chain to perform logistic functions. |
| Transportation affects | Production & scheduling systems Inventory levels Inventory carrying costs Customer order management |
| Transportation performance variables: | Total cost, speed, reliability, capability, accessibility |
| Performance-Based Logistics | Collaborative business model based on meeting the mutual interests of both the buyer and logistics service provider |
| Sustainability in Supply Management | ISM Definition Sustainability is the ability to meet current needs without hindering the ability to meet the needs of future generations in terms of economic, environmental, social challenges |
| Supply Chain Operations | Resource planning Supply management Logistics management Outsourcing |
| Management System | Focuses on: Lean/Six-Sigma Leadership |
| Procurement Process: | Assembler->manufacturer->convertor->extractor |
| Order fulfillment process: | Assembler->distributor->retailer->consumer |
| Inbound Transportation | All inbound shipments moving from suppliers to the producer’s facility |
| Outbound Transportation | Provides linkage between producers and customers |
| Intra-Plant Movements | Movement of materials between production facilities Movement in and out of intermediate storage facilities -Focus on reduction(JIT) |
| Reverse Logistics | Determine innovative ways of recycling or recovering products and/or materials to minimize environmental impact |
| Basis of Competition | -Quality -Cost -Flexibility -Speed |
| Logistics Industry “Players” | Producer, Carrier, 3PL |
| Accessibility in transportation | Refers to whether the carrier is capable of picking up the shipment and delivering it door-to-door |
| Capability in transportation | Refers to the ability of the carrier to move the material, including special materials, hazardous materials, etc. |
| INternational COmmercial TERMS | Series of pre-defined commercial terms published by the International Chamber of Commerce and used in international commercial transactions. |
| Incoterms | Rules intended to clearly communicate the tasks, costs and risks associated with transportation and delivery of goods. |
| Customs Trade Partnership Against Terrorism (C-TPAT) | seeks to safeguard global trade from terrorists and maintaining the economic health of USA. |
| Procurement Organizational Focus | Implement cost reduction initiatives Improve supply chain performance |
| Procure-to-Pay (P2P) Process | Select supplier->Requisition->Process-> Pay |
| Requisition from P2P | approval, ordering, and changes |
| Process FROM P2P | Verification, matching, and auditing |
| P2P Process Improvement | Procurement Cards (P-card) Travel Cards E-Procurement System |
| Resource Planning Process | The process calculates operational needs, and financial results providing simulation capabilities to answer "what-if" questions for managing the business. |
| Material Requirements Planning (MRP) | Computerized system for managing dependent-demand inventory, scheduling replenishment orders, and meeting demand for items in the master production schedule |
| MRP Inputs | Master production schedule Product structure Inventory levels |
| MRP Outputs | Production Orders Purchase Orders Rescheduling Notices |
| Procurement Leadership | CPO Understanding procurement best practices / metrics Using Lean procurement to remove barriers to innovation Building collaborative relationship with CFO |
| Supply Mgt Organization Options: | Operational, tactical, strategic(best option) |
| Operational | action orientation, decentralized design |
| Tactical | Process orientation, hybrid design |
| Strategic | Centralized design, directive orientation. This option maximizes cost savings! |
| STRATEGIC SOURCING PROCESS | Research and categorize->strategize and plan->select suppliers->negotiate contract->improve supplier perform |
| Oligopoly | A market condition in which sellers are few and the actions of any one of them will materially affect price and have a measurable impact on competitors |
| Strategic Cost Management | ongoing system that seeks to reduce costs across the entire supply chain (integration) |
| TACTICAL OBJECTIVE | Single company focused supply chain cost reduction efforts -reduce total landed cost |
| STRATEGIC OBJECTIVE | Collaborative approach focused on improving costs throughout supply chain -Reduce total cost of ownership |
| Total cost of ownership(TCO) is the net present value (NPV) of: | Acquisition + Ownership + Post-Ownership Costs |
| Supplier Evaluation Tool Development | 1. Identify supplier evaluation categories 2. Weight each evaluation category 3. Identify and weigh subcategories 4. Define scoring system for categories 5.Evaluate supplier directly 6.Review results, make selection decision |
| Supplier Negotiation | formal process, face-to-face (or electronic), where two or more people come together to seek mutual agreement about an issue or issues |
| Phases of contract negotiation | PHASE 1: Gain team agreement on what you want PHASE 2: Research to determine what they want PHASE 3: Develop / propose acceptable solutions |
| Advantages of an optimized supply base | -Improved costs, quality, delivery, & information sharing -Remaining suppliers are generally the best suppliers |
| 20 / 80 Rule (Supply reduction methods) | Identify the 20% of suppliers who receive 80% of the purchase dollars |
| Triage Approach (Supply reduction methods) | Supplier performance evaluated and categorized as to unacceptable, minimum threshold, or world-class |
| Competency Staircase (Supply reduction methods) | Suppliers required to pass a successive series of cuts to remain in the supply base |
| Improve or Else (Supply reduction methods) | Suppliers are given a period of time to meet new purchase performance requirements |
| PROJECT | produce one-of-a-kind product in response to a customer order |
| BATCH PRODUCTON | produce many different jobs through the production system in groups |
| MASS PRODUCTION | produce significant volume of a standard product for a mass market |
| CONTINUOUS FLOW | produce very-high volume of commodity products |
| PULL system | develop ability to respond to uncertainty in customer demand without creating costly excess inventory |
| “Bullwhip Effect” | A slight demand in variability at the customer is magnified as information moves back upstream through supply chain |
| The Goal: Ongoing Improvement Process | WHAT TO CHANGE WHAT TO CHANGE TO HOW TO CAUSE THE CHANGE |
| Theory of Constraints (TOC) | global system perspective identifying and prioritizing process improvement opportunities |
| key steps to Lean | Understand customer expectations Design / manage critical processes buffering variation in demand Create flow in the supply chain |
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